UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A

                                Amendment No. 2
                                  to Form 10-Q
(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the quarterly period ended March 31, 2004

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

For the transition period from ____________________ to ____________________.

                        Commission File number 001-16105

                              STONEPATH GROUP, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)


                                                   
               Delaware                                              65-0867684
-------------------------------------                  -------------------------------------
   (State or other jurisdiction of                      (I.R.S. Employer Identification No.)
    incorporation or organization)


                         1600 Market Street, Suite 1515
                             Philadelphia, PA 19103
       ------------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)
       Registrant's Telephone Number, Including Area Code: (215) 979-8370
                                                           --------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [X] No [_]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [_]

There were 41,199,102 issued and outstanding shares of the registrant's common
stock, par value $.001 per share, at May 5, 2004.




                              STONEPATH GROUP, INC.

                                      INDEX


                                                                                                                     Page
                                                                                                                     ----
                                                                                                                  
Part I.          FINANCIAL INFORMATION.................................................................................1

         Item 1. Financial Statements (Unaudited) .....................................................................1

                 Condensed Consolidated Balance Sheets
                 at March 31, 2004 (Restated) and December 31, 2003 ...................................................1

                 Consolidated Statements of Operations
                 Three months ended March 31, 2004 (Restated) and March 31, 2003 (Restated)............................2

                 Consolidated Statements of Cash Flows
                 Three months ended March 31, 2004 (Restated) and 2003 (Restated)......................................3

                 Notes to Unaudited Consolidated Financial Statements..................................................4

         Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................15

         Item 3. Quantitative and Qualitative Disclosures About Market Risk...........................................28

         Item 4. Controls and Procedures..............................................................................28


Part II.         OTHER INFORMATION....................................................................................31

         Item 1. Legal Proceedings....................................................................................31

         Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.....................33

         Item 3. Defaults Upon Senior Securities......................................................................33

         Item 4. Submission of Matters to a Vote of Security Holders..................................................33

         Item 5. Other Information....................................................................................33

         Item 6. Exhibits and Reports on Form 8-K.....................................................................34


         SIGNATURES...................................................................................................36


                                       i

                               Introductory Note

On September 20, 2004, Stonepath Group, Inc. ("Stonepath" or the "Company")
announced that its financial statements for the first quarter of 2004, among
others, needed to be restated and should not be relied upon. The Company has
restated its financial statements for the first quarter of 2004 and included
those restated financial statements in a draft of a Form 10-Q/A it provided to
its outside financial printer in preparation for filing with the Securities and
Exchange Commission (the "Commission"). However, the Company's printer
inadvertently and without authorization from the Company filed the Form 10-Q/A
with the Commission on March 16, 2005. KPMG, LLP ("KPMG"), the Company's auditor
at the time the financial statements for the first quarter of 2004 were
initially prepared, has not completed its review of the financial statements
included in that Form 10-Q/A. This Form 10-Q/A is being filed by the Company to
disclose the basis on which the March 16, 2005 filing was made. Readers are
cautioned that it may be necessary to further amend some of the financial
information and related disclosures contained in this report upon the completion
of KPMG's review.

This Form 10-Q/A reflects restated amounts for the first quarter of 2004 and
2003, together with a description of events occurring subsequent to the filing
of Form 10-Q for the first quarter of 2004 related to such restatement.
Accordingly, all notes to the financial statements are as of March 31, 2004
unless otherwise indicated. In addition, Item 2 of Part I, Management's
Discussion and Analysis of Financial Condition and Results of Operations, has
been updated to reflect the restated information as has Item 4 of Part I,
Controls and Procedures.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

                              STONEPATH GROUP, INC.
                      Condensed Consolidated Balance Sheets
                                   (UNAUDITED)


                                                                            March 31, 2004   December 31, 2003
                                                                            --------------   -----------------
                                                                               Restated          Restated
                                                                              (See Note 2)      (See Note 2)
                                                                                       
                                     Assets

Current assets:
  Cash and cash equivalents                                                 $   4,054,784     $    3,074,151
  Accounts receivable, net                                                     46,872,985         38,250,610
  Other current assets                                                          3,815,323          2,231,297
                                                                            -------------     --------------

    Total current assets                                                       54,743,092         43,556,058

Goodwill and acquired intangibles, net                                         40,609,682         38,284,824
Furniture and equipment, net                                                    8,293,749          7,062,956
Other assets                                                                    1,168,959          1,364,917
                                                                            -------------     --------------

                                                                            $ 104,815,482     $   90,268,755
                                                                            =============     ==============

                        Liabilities and Stockholders' Equity

Current liabilities:
  Line of credit-bank                                                       $   8,623,305     $           --
  Accounts payable                                                             30,480,881         22,412,287
  Accrued expenses                                                              7,326,644          3,797,530
  Earn-out payable                                                              1,157,738          3,548,534
  Capital lease obligation                                                        796,049            671,197
                                                                            -------------     --------------

    Total current liabilities                                                  48,384,617         30,429,548

Capital lease obligation, net of current portion                                1,225,335          1,134,815
Deferred tax liability                                                          1,156,600          1,035,600
                                                                            -------------     --------------

      Total liabilities                                                        50,766,552         32,599,963
                                                                            -------------     --------------

Minority interest                                                               2,087,100          1,345,790
                                                                            -------------     --------------

Commitments and contingencies (Note 6)

Stockholders' equity:
  Preferred stock, $.001 par value, 10,000,000 shares authorized;
    Series D Convertible, issued and outstanding: 192,807 and 310,480
    shares at 2004 and 2003, respectively                                             193                310
  Common stock, $.001 par value, 100,000,000 shares authorized; issued
    and outstanding: 39,943,477 and 37,449,944 shares at 2004 and 2003,
    respectively                                                                   39,943             37,450
  Additional paid-in capital                                                  221,347,937        220,067,956
  Accumulated deficit                                                        (169,463,983)      (163,763,537)
  Accumulated other comprehensive income                                           37,740              1,997
  Deferred compensation                                                                --            (21,174)
                                                                            -------------     --------------

      Total stockholders' equity                                               51,961,830         56,323,002
                                                                            -------------     --------------

 Total liabilities and stockholders' equity                                 $ 104,815,482     $   90,268,755
                                                                            =============     ==============

     See accompanying notes to unaudited consolidated financial statements.

                                       1

                              STONEPATH GROUP, INC.
                      Consolidated Statements of Operations
                                   (UNAUDITED)


                                                                                  Three months ended March 31,
                                                                                  ----------------------------
                                                                                    2004               2003
                                                                                    ----               ----
                                                                                  Restated           Restated
                                                                                (See Note 2)       (See Note 2)

                                                                                             
Total revenue                                                                   $  60,224,390      $  38,572,441
Cost of transportation                                                             43,472,712         26,634,489
                                                                                -------------      -------------

Net revenue                                                                        16,751,678         11,937,952


Personnel costs                                                                     9,897,742          6,563,080
Other selling, general and administrative costs                                     8,308,401          4,302,373
Depreciation and amortization                                                         850,836            589,778
Litigation settlement                                                                      --            750,000
                                                                                -------------      -------------

Loss from operations                                                               (2,305,301)          (267,279)

Other income (expense)
  Provision for excess earn-out payments                                           (3,075,190)        (1,270,141)
  Interest income (expense), net                                                      (35,739)            14,767
  Other income (expense), net                                                         (15,508)            14,740
                                                                                -------------      -------------

Loss before income tax expense and minority interest                               (5,431,738)        (1,507,913)
Income tax expense                                                                    199,100            149,021
                                                                                -------------      -------------
Loss before minority interest                                                      (5,630,838)        (1,656,934)
Minority interest                                                                      69,608                 --
                                                                                -------------      -------------

Net loss                                                                        $  (5,700,446)     $  (1,656,934)
                                                                                =============      =============

Basic and diluted loss per common share                                         $       (0.15)     $       (0.07)
                                                                                =============      =============

Basic and diluted weighted average common shares outstanding                       38,385,489         24,764,810
                                                                                =============      =============


     See accompanying notes to unaudited consolidated financial statements.

                                       2



                              STONEPATH GROUP, INC.
                      Consolidated Statements of Cash Flows
                                   (UNAUDITED)


                                                                                 Three months ended March 31,
                                                                                 ----------------------------
                                                                                    2004               2003
                                                                                    ----               ----
                                                                                  Restated           Restated
                                                                                (See Note 2)       (See Note 2)
                                                                                             
Cash flow from operating activities:
Net loss                                                                        $  (5,700,446)     $  (1,656,934)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Deferred income taxes                                                               121,000                 --
  Depreciation and amortization                                                       850,836            589,778
  Minority interest in income of subsidiaries                                          69,608                 --
  Stock-based compensation                                                             21,174             23,808
  Loss on disposal of furniture and equipment                                          10,450                 --
Changes in assets and liabilities, net of effect of acquisitions:
  Accounts receivable                                                               4,997,308          2,388,606
  Other assets                                                                         17,686             32,107
  Accounts payable and accrued expenses                                            (3,246,478)        (3,318,166)
                                                                                -------------      -------------

         Net cash used in operating activities                                     (2,858,862)        (1,940,801)
                                                                                -------------      -------------

Cash flows from investing activities:
  Purchases of furniture and equipment                                             (1,081,720)        (1,734,218)
  Acquisition of business, net of cash acquired                                    (2,334,012)           (70,000)
  Payment of earn-out                                                              (2,390,796)        (1,549,009)
  Loans made                                                                          (75,000)                --
                                                                                -------------      -------------

         Net cash used in investing activities                                     (5,881,528)        (3,353,227)
                                                                                -------------      -------------

Cash flows from financing activities:
  Proceeds from line of credit                                                      8,623,305                 --
  Issuance of common stock, net of costs                                                   --          5,674,473
  Issuance of common stock upon exercise of options and warrants                    1,237,357             22,500
  Principal payments on capital lease                                                (175,382)                --
                                                                                -------------      -------------

         Net cash provided by financing activities                                  9,685,280          5,696,973
                                                                                -------------      -------------

  Effect of foreign currency translation                                               35,743                 --
                                                                                -------------      -------------

         Net increase in cash and cash equivalents                                    980,633            402,945

Cash and cash equivalents at beginning of period                                    3,074,151          2,266,108
                                                                                -------------      -------------

Cash and cash equivalents at end of period                                      $   4,054,784      $   2,669,053
                                                                                =============      =============

Cash paid for interest                                                          $      45,256      $          --
                                                                                =============      =============

Cash paid for income taxes                                                      $      51,261      $      33,224
                                                                                =============      =============

Supplemental disclosure of non-cash investing and financing activities:
  Increase in furniture and equipment and capital lease obligation              $     390,754      $          --
  Increase in common stock from conversion of Series D preferred stock          $         117      $          --



     See accompanying notes to unaudited consolidated financial statements.

                                       3


                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

(1) Nature of Operations and Basis of Presentation

Stonepath Group, Inc. and subsidiaries (the "Company") is a non-asset based
third-party logistics services company providing supply chain solutions on a
global basis. A full range of time-definite transportation and distribution
solutions is offered through the Company's Domestic Services platform, where the
Company manages and arranges the movement of raw materials, supplies, components
and finished goods for its customers. A full range of international logistics
services including international air and ocean transportation as well as customs
house brokerage services is offered through the Company's International Services
platform. In addition to these core service offerings, the Company also provides
a broad range of value added supply chain management services, including
warehousing, order fulfillment and inventory management. The Company services a
customer base of manufacturers, distributors and national retail chains.

The accompanying unaudited consolidated financial statements were prepared in
accordance with generally accepted accounting principles for interim financial
information. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to the rules and
regulations of the U.S. Securities and Exchange Commission (the "SEC") relating
to interim financial statements. These statements reflect all adjustments,
consisting only of normal recurring accruals, necessary to present fairly the
Company's financial position, operations and cash flows for the periods
indicated. While the Company believes that the disclosures presented are
adequate to make the information not misleading, these unaudited consolidated
financial statements should be read in conjunction with the Company's Annual
Report on Form 10-K/A for the year ended December 31, 2003. Interim operating
results are not necessarily indicative of the results for a full year because
our operating results are subject to seasonal trends when measured on a
quarterly basis. Our first and second quarters are likely to be weaker as
compared with our other fiscal quarters, which we believe is consistent with the
operating results of other supply chain service providers.

(2) Restatement

On February 11, 2005, the Company filed its Form 10-K/A for the year ended
December 31, 2003 which included restated consolidated financial statements as
of December 31, 2003 and 2002 and for each of the years in the three-year period
ended December 31, 2003. Those restated consolidated financial statements
reflected adjustments to purchased transportation costs, certain revenue
transactions, earn-out costs and resultant income tax effects. Such items also
impacted the first quarter of 2004. In connection with the preparation of its
consolidated financial statements for the year ended December 31, 2004, the
Company also identified an understatement of certain claims expenses amounting
to $251,000 which pertained to the first quarter of 2004. The accompanying
consolidated financial statements as of March 31, 2004 and for the three-month
period then ended have been restated to reflect the effect of these adjustments.
The effects of these restatements on previously reported consolidated financial
statements as of December 31, 2003 and March 31, 2004 and for the three-month
periods ended March 31, 2004 and 2003 are summarized below.


                                       4


                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004




                                                                                December 31, 2003          
                                                                         -------------------------------
                                                                         As Previously
                                                                            Reported        As Restated
                                                                         -------------     -------------
                                                                                     
Select Balance Sheet Data:                                             
   Accounts receivable, net                                              $  38,470,366     $  38,250,610
   Total current assets                                                     43,775,834        43,556,058
   Goodwill and acquired intangibles, net                                   42,540,104        38,284,824
   Deferred taxes                                                            1,695,000            --
   Total assets                                                             96,438,811        90,269,755
   Accounts payable                                                         16,119,014        22,412,287
   Accrued expenses                                                          4,030,192         3,797,530
   Earn-out payable                                                          6,623,724         3,548,534
   Total current liabilities                                                27,444,127        30,429,548
   Deferred tax liability                                                          --          1,035,600
   Total liabilities                                                        28,578,942        32,599,963
   Accumulated deficit                                                    (153,572,460)     (163,763,537)
   Total stockholders' equity                                               66,514,079        56,323,002
   Total liabilities and stockholders' equity                               96,438,811        90,268,755 
                                                               
                                                                       
                                                                
                                                                                                
                                                                                                         
                                                                                  March 31, 2004
                                                                         ------------------------------- 
                                                                         As Previously                   
                                                                            Reported        As Restated  
                                                                         -------------     ------------- 
                                                                                                
Select Balance Sheet Data:                                                                               
   Accounts receivable, net                                              $  47,402,077     $  46,872,985 
   Other current assets                                                      4,432,223         3,815,323 
   Total current assets                                                     55,889,084        54,743,092
   Goodwill and acquired intangibles, net                                   44,864,962        40,609,682
   Deferred taxes                                                            1,574,000            --    
   Total assets                                                            111,790,754       104,815,482
   Accounts payable                                                         23,506,131        30,480,881
   Total current liabilities                                                41,409,867        48,384,617
   Deferred tax liability                                                          --          1,156,600 
   Total liabilities                                                        42,635,202        50,766,552 
   Accumulated deficit                                                    (154,357,361)     (169,463,983)
   Total stockholders' equity                                               67,068,452        51,961,830 
   Total liabilities and stockholders' equity                              111,790,754       104,815,482
                                                              
                                                              
                                                                                               
                                                                                          
                                                                         Three Months Ended March 31, 2004         
                                                                         ---------------------------------
                                                                          As Previously                   
                                                                             Reported       As Restated  
                                                                           -----------     -------------
                                                                                                  
Select Statement of Operations Data:
   Revenue                                                                 $60,533,707     $  60,224,390
   Cost of transportation                                                   42,809,574        43,472,712 
   Net revenue                                                              17,724,133        16,751,678
   Other selling, general and administrative costs                           8,057,401         8,308,401 
   Loss from operations                                                     (1,081,846)       (2,305,301)
   Provision for excess earn-out payments                                        --           (3,075,190) 
   Loss before income tax expense (benefit) and minority interest           (1,133,093)       (5,431,738) 
   Income tax expense (benefit)                                               (417,800)          199,100
   Loss before minority interest                                              (715,293)       (5,630,838)
   Net loss                                                                   (784,901)       (5,700,446)


   Basic and diluted loss per common share                                 $     (0.02)    $       (0.15)



                                       5





                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004


                                                                                 
                                                                                          
                                                                         Three Months Ended March 31, 2004
                                                                         --------------------------------- 
                                                                          As Previously                   
                                                                             Reported       As Restated  
                                                                          -------------    ------------- 
                                                                                                    
Select Statement of Cash Flows Data:
   Net loss                                                                $  (784,901)    $  (5,700,446) 
   Accounts receivable                                                       4,687,992         4,997,308
   Other assets                                                               (599,214)           17,686
   Accounts payable and accrued expenses                                    (4,160,617)       (3,246,882)
   Net cash provided by (used in) operating activities                         216,328        (2,858,862)
   Payment of earn-out                                                      (5,465,986)       (2,390,796)
   Net cash used in investing activities                                    (8,956,718)       (5,881,528)


                                                                                                 
                                                                                                          
                                                                         Three Months Ended March 31, 2003
                                                                         ---------------------------------
                                                                          As Previously                   
                                                                             Reported       As Restated   
                                                                          -------------    -------------  
                                                                                                 
Select Statement of Operations Data:
   Cost of transportation                                                  $26,388,801     $  26,634,489
   Net revenue                                                              12,183,640        11,937,952
   Loss from operations                                                        (21,591)         (267,279)
   Provision for excess earn-out payments                                         --          (1,270,141) 
   Income (loss) before income tax expense and minority interest                 7,916        (1,507,913)
   Income tax expense                                                           15,221           149,021 
   Loss before minority interest                                                (7,305)       (1,656,934)
   Net loss                                                                     (7,305)       (1,656,934)

   Basic and diluted loss per common share                                 $      --       $       (0.07)


                                                                                 
                                                                                          
                                                                         Three Months Ended March 31, 2003
                                                                         ---------------------------------
                                                                         As Previously                   
                                                                            Reported        As Restated  
                                                                         -------------     ------------- 
                                                                                                
Select Statement of Cash Flows Data:                                                                      
   Net loss                                                              $      (7,305)    $  (1,656,934) 
   Accounts payable and accrued expenses                                    (3,697,654)       (3,318,166) 
   Net cash used in operating activities                                      (670,660)       (1,940,801)
   Payment of earn-out                                                      (2,819,150)       (1,549,009)
   Net cash used in investing activities                                    (4,623,368)       (3,353,227)
                                                                
                                                         
                                      6


                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

(3) Stock-Based Compensation

In December 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amended the disclosure
requirements of SFAS No. 123, "Accounting and Disclosure of Stock-Based
Compensation" to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The Company
accounts for its employee stock option grants by applying the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.

The table below illustrates the effect on net loss attributable to common
stockholders and loss per common share as if the fair value of options granted
had been recognized as compensation expense in accordance with the provisions of
SFAS No. 123.


                                                    Three months ended March 31,
                                                    ----------------------------
                                                      Restated     Restated
                                                        2004         2003
                                                    ------------  -----------
Net loss:
As reported                                         $ (5,700,446) $(1,656,934)
Add: stock-based employee compensation expense
  included in reported net loss                           21,174       23,808
Deduct:  total stock-based compensation expense
  determined under fair value method for all awards   (2,154,238)    (941,387)
                                                    ------------  -----------

Pro forma net loss                                  $ (7,833,510) $(2,574,513)
                                                    ============  ===========

Basic and diluted loss per common share:
  As reported                                       $      (0.15) $     (0.07)
  Pro forma                                                (0.20)       (0.10)

(4) Recent Acquisitions

On February 9, 2004, the Company acquired, through its indirect wholly owned
subsidiary, Stonepath Holdings (Hong Kong) Limited, a 55% interest in Shaanxi
Sunshine Cargo Services International Co., Ltd. ("Shaanxi"). Shaanxi is a Class
A licensed freight forwarder headquartered in Shanghai, PRC and provides a wide
range of customized transportation and logistics services and supply chain
solutions, including global freight forwarding, warehousing and distribution,
shipping services and special freight handling. As consideration for the
purchase which was effective as of March 1, 2004, the Company paid $5,500,000
consisting of $3,500,000 in cash and $2,000,000 of the Company's common stock.
The seller may receive additional consideration of up to an additional
$5,500,000 under an earn-out arrangement payable at the rate of $1,100,000 per
year over a period of five years based on the future financial performance of
Shaanxi. The Company used funds from its credit facility with LaSalle Business
Credit, Inc. for the cash payment at the closing. The common shares issued in
the transaction are subject to a one year restriction on sale and are subject to
a pro rata forfeiture based upon a formula that compares the actual pre-tax
income of Shaanxi through December 31, 2004 with the targeted level of income of
$4,000,000 (on an annualized basis). Also, if the trading price of the Company's
common stock is less than $3.17 per share at the end of the one year
restriction, the Company will issue additional shares to the seller. Because the
common shares issued in connection with this transaction are subject to
forfeiture, they are accounted for as additional contingent consideration. When
the number of common shares to be retained by the seller is ultimately
determined, such shares will be valued at their then fair value and will result
in additional goodwill being recorded.

The acquisition, which significantly enhances the Company's presence in the
region, was accounted for as a purchase and accordingly, the results of
operations and cash flows of Shaanxi will be included in the Company's
consolidated financial statements prospectively from the date of acquisition.
Because the Company consolidates its foreign subsidiaries on a one month lag,
such information will not be reflected in the consolidated financial statements
until the second quarter of 2004. The total purchase price, including
acquisition expenses of $266,000, but excluding the contingent consideration,
was $3,766,000. The following table summarizes the preliminary allocation of the
purchase price based on estimated fair value of the assets acquired and
liabilities assumed at March 1, 2004 (in thousands):

                                       7

                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

              Current assets                                    $     16,691
              Furniture and equipment                                     89
              Goodwill and other intangible assets                     2,701
                                                                ------------
                     Total assets acquired                            19,481

              Current liabilities assumed                            (14,844)
              Minority interest                                         (871)
                                                                ------------
                      Net assets acquired                       $      3,766
                                                                ============

The following unaudited pro forma information is presented as if the acquisition
of Shaanxi had occurred on December 1, 2002, using the one month lag
consolidation policy:

                                   March 31, 2004   March 31, 2003
                                   --------------   --------------
                                      Restated         Restated

        Revenue                      $  80,221        $  51,806
        Net loss                        (5,136)          (1,907)
        Loss per share:
         Basic and diluted           $   (0.13)       $   (0.08)


(5) Revolving Credit Facility

To ensure adequate financial flexibility, the Company has a $20,000,000
revolving credit facility (the "Facility") collateralized by the accounts
receivable and the other assets of the Company and its subsidiaries. The
Facility requires the Company and its subsidiaries to meet certain financial
objectives and maintain certain financial covenants. Advances under the Facility
may be used to finance future acquisitions, capital expenditures or for other
corporate purposes. We expect that the cash flow from operations of our
subsidiaries will be sufficient to support the corporate overhead of the Company
and some portion, if not all, of the contingent earn-out payments and other cash
requirements associated with our acquisitions. Therefore, we anticipate that our
primary use of the Facility will be to finance the cost of new acquisitions and
to pay any portion of existing earn-out arrangements that cash flow from
operations is otherwise unable to fund. At March 31, 2004 we had advances of
$1,200,000 and approximately $7,400,000 in outstanding checks which have been
classified as incremental borrowings. Based upon available collateral and net of
$1,200,000 in advances under the Facility, outstanding letter of credit
commitments and funds reserved for off-shore investments, there was
approximately $12,200,000 available for borrowing under our Facility. In July
2004, the maximum availability under the Facility was increased to $25,000,000.

On July 28, 2004, the Company amended its Facility to provide a bridge loan with
a principal amount of $5,000,000, a term of 120 days and interest at 200 basis
points above the prime rate. The amendment modified certain financial covenants,
including but not limited to, cash flow coverage ratio test, funded debt
limitations and domestic and worldwide funded debt to consolidated EBITDA. The
Company borrowed the full $5,000,000 available for the bridge loan on August 24,
2004 and subsequently repaid the bridge loan facility on November 26, 2004.

As discussed in Note 2, the Company has restated its consolidated financial
statements. These restated amounts resulted in the technical default of certain
financial covenants of the Facility. These defaults have been waived and the
Company has entered into a further amended revolving credit facility dated
November 17, 2004. This amendment reduces the Facility term from May 15, 2007 to
January 31, 2006, reduces the maximum availability under the Facility from
$25,000,000 to $22,500,000, establishes minimum quarterly EBITDA targets
commencing in the quarter ending December 31, 2004, precludes acquisitions,
eliminates LIBOR based borrowings, fixes the interest rate at the lender's prime
rate plus 200 basis points and imposes semi-annual fees of $125,000 among other
changes to the Facility.


                                       8

                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

(6) Commitments and Contingencies

         On May 6, 2003, the Company elected to settle litigation instituted on
August 20, 2000 by Austost Anstalt Schaan, Balmore Funds, S.A. and Amro
International, S.A. Although the Company believed that the plaintiffs' claims
were without merit, the Company chose to settle the matter in order to avoid
future litigation costs and to mitigate the diversion of management's attention
from operations. The total settlement costs of $750,000, paid $400,000 in cash
and $350,000 in shares of the Company's common stock, are included in the
accompanying March 31, 2003 unaudited consolidated statement of operations.

         The Company was named as a defendant in eight purported class action
complaints filed in the United States Court for the Eastern District of
Pennsylvania between September 24, 2004 and November 19, 2004. Also named as
defendants in these actions were officers Dennis L. Pelino and Thomas L. Scully
and former officer Bohn Crain. These cases have now been consolidated for all
purposes in that Court under the caption In re Stonepath Group, Inc. Securities
Litigation, Civ. Action No. 04-4515. The plaintiffs initially sought to
represent a class of purchasers of the Company's shares between May 7, 2003 and
September 20, 2004, and allege claims for securities fraud under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934. These claims were based upon
the allegation that certain public statements made during the period from May 7,
2003 through August 9, 2004 were materially false and misleading because they
failed to disclose that the Company's Domestic Services operations had
improperly accounted for accrued purchased transportation costs. The plaintiffs
sought compensatory damages, attorneys' fees and costs, and further relief as
may be determined by the Court. The Court has consolidated the eight lawsuits
into a single action and the lead plaintiff has filed an amended complaint. The
amended complaint seeks to represent a class of purchasers of the Company's
shares between March 29, 2002 and September 20, 2004 based upon public
statements made during that period. The Company and the individual defendants
believe that the plaintiffs' claims are without merit and intend to vigorously
defend against them.

         The Company has been named as a nominal defendant in a shareholder
derivative action on behalf of the Company that was filed on October 12, 2004 in
the United States District Court for the Eastern District of Pennsylvania under
the caption Ronald Jeffrey Neer v. Dennis L. Pelino, et al., Civ. A. No.
04-cv-4971. Also named as defendants in the action are all of the individuals
who were serving as directors of the Company when the complaint was filed
(Dennis L. Pelino, J. Douglas Coates, Robert McCord, David R. Jones, Aloysius T.
Lawn and John H. Springer), former directors Andrew Panzo, Lee C. Hansen, Darr
Aley, Stephen George, Michela O'Connor-Abrams and Frank Palma, officer Thomas L.
Scully, and former officers Bohn H. Crain and Stephen M. Cohen. The derivative
action alleges breach of fiduciary duty, abuse of control and gross
mismanagement, waste of corporate assets, unjust enrichment and violations of
the Sarbanes-Oxley Act of 2002. These claims are based upon the allegation that
the defendants knew or should have known that the Company's public filings for
fiscal years 2001, 2002 and 2003 and for the first and second quarters of fiscal
year 2004, and certain press releases and public statements made during the
period from January 1, 2001 to the present, were materially misleading because
they failed to disclose that the Company's Domestic Services operations had
improperly accounted for accrued purchased transportation costs. The derivative
action seeks compensatory damages in favor of the Company, the recovery of
bonuses and incentive-based or equity-based compensation received by Mr. Pelino
and Mr. Crain from 2001 through 2004, restitution, attorneys' fees and costs,
and further relief as may be determined by the Court. The defendants believe
that this action is without merit, have filed a motion to dismiss this action,
and intend to vigorously defend themselves against the claims raised in this
action.

         The Company has received notice that the Securities and Exchange
Commission ("Commission") is conducting an informal inquiry to determine whether
certain provisions of the federal securities laws have been violated in
connection with the Company's accounting and financial reporting. As part of the
inquiry, the staff of the Commission has requested information relating to the
restatement amounts, personnel at the Air Plus subsidiary and Stonepath Group,
Inc. and additional background information for the period from October 5, 2001
to December 2, 2004. The Company is voluntarily cooperating with the staff.

                                       9




                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004


         The Company settled the suit brought by Emergent Capital Investment LLC
in the United States District Court for the Southern District of New York in
exchange for the payment by the Company of $50,000 in November 2004. 

         On October 22, 2004, Douglas Burke filed a two-count action against
United American Acquisitions, Inc. ("UAF"), Stonepath Logistics Domestic
Services, Inc., and the Company in the Circuit Court for Wayne County, Michigan.
Mr. Burke is the former President and Chief Executive Officer of UAF. The
Company purchased the stock of UAF from Mr. Burke on May 30, 2002 pursuant to a
Stock Purchase Agreement. At the closing of the transaction Mr. Burke received
$5,100,000 and received the right to receive an additional $11,000,000 in
four annual installments based upon UAF's performance in accordance with the
Stock Purchase Agreement. Subject to the purchase, Stonepath Logistics Domestic
Services, Inc. and Mr. Burke entered into an Employment Agreement. Mr. Burke's
complaint alleges that the defendants breached the terms of the Employment
Agreement and Stock Purchase Agreement and seeks, among other things, the
production of financial information, unspecified damages, attorney's fees and
interest. The defendants believe that Mr. Burke's claims are without merit and
intend to vigorously defend against them.

         Victoria Tkach, a former employee of UAF and Stonepath Logistics
Domestic Services, Inc. has filed a complaint against Stonepath Logistics
Domestic Services, Inc., the Company and UAF, seeking damages in excess of
$75,000 and relief from her covenant not to compete. The complaint alleges
sexual harassment and retaliation by the defendants. The defendants believe that
Ms. Tkach's claims are without merit and intend to vigorously defend against
them.

                                       10


                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

The Company may become involved in various other claims and legal actions
arising in the ordinary 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 consolidated financial position, results of operations or
liquidity.

(7) Stockholders' Equity

Common Stock

On March 6, 2003, the Company completed a private placement of 4,470,000 shares
of its common stock. The transaction consisted of the sale of 4,270,000 shares
at $1.35 per share and 200,000 shares at $1.54 per share. In connection with
this transaction, the Company realized gross proceeds of $6,072,500, paid a
brokerage fee consisting of cash commissions of $364,350, issued placement agent
warrants to purchase 297,000 shares of common stock at an exercise price of
$1.49 per share, and incurred other cash expenses of $33,677. In addition, the
Company had previously paid the placement agent $25,000 in cash and had issued
them warrants to purchase 150,000 shares of common stock at an exercise price of
$1.23 per share.

In connection with the Shaanxi acquisition, the Company issued 630,915 shares of
its common stock. Because these shares are subject to a pro rata forfeiture
based on the financial performance of Shaanxi through December 31, 2004, such
shares have not been reflected as outstanding securities in the accompanying
consolidated financial statements.

Series D Convertible Preferred Stock

There are 192,807 shares of Series D Preferred Stock outstanding as of March 31,
2004.

Each share of the Series D Convertible Preferred Stock is convertible into ten
shares of common stock of the Company. Subsequent to December 31, 2003, the
holders of the Series D Convertible Preferred Stock are entitled to participate
in all liquidation distributions made to the holders of the Company's common
stock on an as-if converted basis. The Series D Convertible Preferred Stock
carries no dividend, and, except under limited circumstances, has no voting
rights except as required by law. The Series D Convertible Preferred Stock
automatically converts into shares of the Company's common stock as of December
31, 2004.

During the three months ended March 31, 2004, 117,000 shares of the Company's
Series D Preferred Stock were converted into 1,170,000 shares of the Company's
common stock.

Stock Options

During the three months ended March 31, 2004, options on 2,045,200 shares were
granted. The range of exercises prices on granted options was $2.38 to $3.75 per
share and the weighted average exercise price was $3.02 per share.

                                       11

                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

Options on 45,417 shares expired during the three months ended March 31, 2004.
The range of exercise prices was $1.30 to $2.30 per share and the weighted
average exercise price was $1.66 per share.

During the three months ended March 31, 2004, options on 873,000 shares were
exercised. The range of exercise prices was $0.60 to $1.38 per share and the
weighted average exercise price was $0.97 per share.

During the three months ended March 31, 2004, non-employees exercised warrants
for the purchase of 443,833 shares of the Company's common stock. The exercise
price of all exercised warrants was $1.00 per share.

(8) Loss per Share

Basic loss per common share and diluted loss per common share are presented in
accordance with SFAS No. 128, "Earnings per Share." Basic loss per common share
has been computed using the weighted-average number of shares of common stock
outstanding during the period. Diluted loss per common share incorporates the
incremental shares issuable upon the assumed exercise of stock options and
warrants and upon the assumed conversion of the Company's preferred stock, if
dilutive. For the three months ended March 31, 2004 and 2003, all stock options,
stock warrants, and convertible securities were excluded because their effect
was antidilutive. The total numbers of such shares excluded from diluted loss
per common share are 10,821,405 and 8,666,447 at March 31, 2004 and 2003,
respectively. Also, the 630,915 shares of common stock issued in connection with
the Shaanxi acquisition are subject to pro rata forfeiture based upon the
financial performance of Shaanxi through December 31, 2004. Accordingly, such
shares have been excluded from the calculation of basic and diluted loss per
common share for the three months ended March 31, 2004.

(9) Income Taxes

The components of income tax expense consist of the following:

                                 Three Months Ended March 31,
                                 ----------------------------
                                   Restated         Restated
                                     2004              2003
                                 ----------        ----------
          U.S. federal           $  105,100        $  112,200
          State                      26,900            29,000
          Foreign                    67,100             7,821
                                 ----------        ----------
                                 $  199,100        $  149,021
                                 ==========        ==========

As a result of historical losses related to investments in early-stage
technology businesses which are unrelated to the Company's current activities
and the Company's rapid expansion, the Company has accumulated net operating
losses (NOLs). Due to the uncertainty surrounding the realization of the NOLs,
the Company has placed a valuation allowance on its deferred tax assets. Income
tax expense for the three-month periods ended March 31, 2004 and 2003 resulted
primarily from non-U.S.-based earnings, state income taxes and deferred income
taxes arising from the amortization of goodwill for income tax purposes.


(10) Segment Information

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," established standards for reporting information about operating
segments in financial statements. Operating segments are defined as components
of an enterprise engaging in business activities about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker or group in deciding how to allocate resources and in assessing
performance. The Company identifies operating segments based on the principal
service provided by the business unit. Each segment has a separate management
structure. The accounting policies of the reportable segments are the same as
described in our Annual Report on Form 10-K/A for the year ended December 31,
2003. Segment information, in which corporate expenses (other than the
litigation settlement in 2003) have been fully allocated to the operating
segments, is as follows (in thousands):

                                       12

                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004


                                                             Three months ended March 31, 2004
                                              -------------------------------------------------------------
                                               Restated
                                               Domestic       International                       Restated
                                               Services         Services          Corporate         Total
                                              ----------     ----------------    ------------     ---------
                                                                                      
Revenue from external customers                $ 34,695         $ 25,529          $    --         $  60,224
Intersegment revenue                                  8               12               --                20
Revenue from significant customer                11,761               --               --            11,761
Segment operating income (loss)                  (2,563)             258               --            (2,305)

Segment assets                                   42,948           57,059            4,808           104,815
Segment goodwill                                 19,551           12,366               --            31,917
Depreciation and amortization                       658              193               --               851
Capital additions                                   414              127              931             1,472

                                                             Three months ended March 31, 2003
                                              -------------------------------------------------------------
                                               Restated
                                               Domestic       International                       Restated
                                               Services         Services          Corporate         Total
                                              ----------     ----------------    ------------     ---------
Revenue from external customers               $  23,774         $ 14,798          $    --         $  38,572
Intersegment revenue                                 34               28               --                62
Revenue from significant customer                 9,835               --               --             9,835
Segment operating income (loss)                      17              466             (750)             (267)

Segment assets                                   37,269           14,056            1,809            53,134
Segment goodwill                                 14,039            5,002               --            19,041
Depreciation and amortization                       521               69               --               590
Capital additions                                   344               37            1,353             1,734


The revenue in the table below is allocated to geographic areas based upon the
location of the customer (in thousands):
                                                    Three months ended March 31,
                                                    ----------------------------
                                                     Restated
                                                       2004              2003
                                                     -------           -------
      Total revenue:

      United States                                  $52,936           $38,123
      Asia                                             6,071               449
      North America (excluding the
        United States)                                   124                --
      Europe                                             668                --
      Other                                              425                --
                                                     -------           -------
      Total                                          $60,224           $38,572
                                                     =======           =======

The following table presents long-lived assets by geographic area (in 
thousands):

                                                              March 31,
                                                    ----------------------------
                                                       2004              2003
                                                     -------           -------

      United States                                  $7,893            $4,731
      Asia                                              401                17
                                                     ------            ------
      Total long-lived assets                        $8,294            $4,748
                                                     ======            ======
                                                                
(11) Subsequent Events

Effective November 17, 2004, we amended our revolving credit facility (the
"Amended Facility") with LaSalle Business Credit, LLC in connection with
securing waivers to the technical default resulting from our restated financial
results. See Note 5 for a summary of changes in the Amended Facility.

                                       13


                              Stonepath Group, Inc.
              Notes to Unaudited Consolidated Financial Statements
                                 March 31, 2004

Effective October 27, 2004, Stonepath Holdings (Hong Kong) Limited ("Asia
Holdings") entered into a $10,000,000 term credit facility with Hong Kong League
Central Credit Union (the "Asia Facility") collateralized by the accounts
receivable of the Company's Hong Kong and Singapore operations and an unsecured
guarantee from Stonepath Group, Inc. The Asia Facility carries a term of one
year and an interest rate of 15% for amounts outstanding thereunder. On November
4, 2004, Asia Holdings borrowed $3,000,000 under the Asia Facility.

On November 5, 2004, Asia Holdings distributed $1,045,000 in satisfaction of
amounts due in connection with the working capital acquired in the Shaanxi
transaction and repaid $1,500,000 of intercompany loans to Stonepath Group, Inc.
which was applied to the $5,000,000 bridge loan facility. 

On December 8, 2004, the Company received acceptance of its plan to regain
compliance with the American Stock Exchange ("Amex") continued listing standards
so long as such compliance was achieved by January 6, 2005. Amex has continued
the Company's listing pursuant to the extension. Amex had previously notified
the Company that it was not in compliance with the requirements of Section 134
and 1101 of the Amex Company Guide as a result of its failure to timely file its
Form 10-Q for the period ended September 30, 2004. After consulting with its
outside auditors and counsel, the Company chose not to file Form 10-Q when due
until the Company had finalized its restatement process. This approach was
abandoned when it became evident that KPMG LLP could not complete its audit
within the time stipulated in the accepted plan to regain compliance. On January
6, 2005, the Company notified the Amex that completion of the audit by KPMG LLP
had been delayed, but that it expected KPMG LLP to finalize its audit within the
next few weeks. On January 28, 2005, the Company received notice from Amex that
it had accepted the Company's updated plan of compliance dated January 6, 2005
and that it would continue the Company's listing pursuant to an extension
until February 28, 2005. KPMG has completed its audit, and the Company filed its
Form 10-K/A for the year ended December 31, 2003 on February 11, 2005. On
February 25, 2005, the Company filed its Form 10-Q/A for the period ended
September 30, 2004. On February 28, 2005, Amex notified the Company that it had
regained compliance with the continued listing standards of Amex.

 
                                       14





Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations
 
Cautionary Statement For Forward-Looking Statements
 
This Quarterly Report on Form 10-Q/A includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, regarding future
results, levels of activity, events, trends or plans. We have based these
forward-looking statements on our current expectations and projections about
such future results, levels of activity, events, trends or plans. These
forward-looking statements are not guarantees and are subject to known and
unknown risks, uncertainties and assumptions about us that may cause our actual
results, levels of activity, events, trends or plans to be materially different
from any future results, levels of activity, events, trends or plans expressed
or implied by such forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "should,"
"could," "would," "expect," "plan," "anticipate," "believe," "estimate,"
"continue," or the negative of such terms or other similar expressions. While it
is impossible to identify all of the factors that may cause our actual results,
levels of activity, events, trends or plans to differ materially from those set
forth in such forward-looking statements, such factors include the inherent
risks associated with: (i) our ability to sustain an annual growth rate in
revenue consistent with recent results, (ii) our ability to achieve our targeted
operating margins, (iii) our ability to identify, acquire, integrate and manage
additional businesses in a manner which does not dilute our earnings per share,
(iv) our ability to obtain the capital necessary to make additional
acquisitions, (v) the uncertainty of future trading prices of our common stock
and the impact such trading prices may have upon our ability to utilize our
common stock to facilitate our capital raising efforts and associated
acquisition strategy, (vi) the uncertain effect on the future trading price of
our common stock associated with the possible additional issuance of securities
upon the conversion or exercise of outstanding convertible securities and to
satisfy existing contractual commitments, (vii) our dependence on certain large
customers, (viii) our dependence upon certain key personnel, (ix) an unexpected
adverse result in any legal proceeding, (x) the scarcity and competition for the
operating companies we need to acquire to implement our business strategy, (xi)
competition in the freight forwarding, logistics and supply chain management
industry, (xii) the impact of current and future laws affecting the Company's
operations, (xiii) adverse changes in general economic conditions as well as
economic conditions affecting the specific industries and customers we serve,
(xiv) regional disruptions in transportation, (xv) the risk that the actual
results of recently acquired businesses are not consistent with their historical
results and forward-looking guidance provided to us at the time of acquisition,
(xvi) the effect that the restatement of our consolidated financial statements
will have on the trading price of our common stock, (xvii) our ability to
replace our credit facility which restricts our ability to make any further
acquisitions and (xviii) other factors which are or may be identified from time
to time in our Securities and Exchange Commission filings and other public
announcements. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date made. We undertake
no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.


                                       15



OVERVIEW
 
        We are a non-asset based third-party logistics services company
providing supply chain solutions on a global basis. We offer a full range of
time-definite transportation and distribution solutions through the Domestic
Services platform, where we manage and arrange the movement of raw materials,
supplies, components and finished goods for our customers. We offer a full range
of international logistics services, including international air and ocean
transportation as well as customs house brokerage services, through the
International Services platform. In addition to these core service offerings, we
also provide a broad range of value added supply chain management services,
including warehousing, order fulfillment and inventory control solutions. We
service a diverse customer base including manufacturers, distributors and
national retail chains through a network of offices in 24 major metropolitan
areas in North America, Puerto Rico, ten locations in Asia and five locations in
South America, using an extensive network of independent carriers and service
partners strategically located around the world.
 
        As a non-asset based provider of third-party logistics services, we seek
to limit our investment in equipment, facilities and working capital through
contracts and preferred provider arrangements with various transportation
providers who generally provide us with favorable rates, minimum service levels,
capacity assurances and priority handling status. The volume of our flow of
freight enables us to negotiate attractive pricing with our transportation
providers.
 
        Our strategic objective is to build a leading global logistics services
organization that integrates established operating businesses and innovative
technologies. We plan to achieve this objective by broadening our network
through a combination of synergistic acquisitions and the organic expansion of
our existing base of operations. The focus of this strategy is on acquiring
businesses that have demonstrated historic levels of profitability, have a
proven record of delivering high quality services, have a customer base of large
and mid-sized companies and which otherwise may benefit from our long term
growth strategy and status as a public company. However, we have suspended our
acquisition strategy for the near term as a result of restrictions in our
amended credit facility, which prohibits further acquisitions.
 
        Our strategy has been designed to take advantage of shifting market
dynamics. The third-party logistics industry continues to grow as an increasing
number of businesses outsource their logistics functions to more cost
effectively manage and extract value from their supply chains. Also, we believe
the industry is positioned for further consolidation as it remains highly
fragmented, and as customers are demanding the types of sophisticated and
broad-reaching service offerings that can more effectively be handled by larger,
more diverse organizations. As a non-asset based provider of third-party
logistics services, we can focus on optimizing the transportation solution for
our customers, rather than on our own asset utilization. Our non-asset based
approach allows us to maintain a high level of operating flexibility and
leverage a cost structure that is highly variable in nature.
 
        Our acquisition strategy relies upon two primary factors: first, our
ability to identify and acquire target businesses that fit within our general
acquisition criteria and, second, the continued availability of capital and
financing resources sufficient to complete these acquisitions. Our growth
strategy relies upon a number of factors, including our ability to efficiently
integrate the businesses of the companies we acquire, generate the anticipated
economies of scale from the integration, and maintain the historic sales growth
of the acquired businesses so as to generate continued organic growth. There are
a variety of risks associated with our ability to achieve our strategic
objectives, including our present inability to make further acquisitions under
the terms of our amended credit facility, our current reliance on a small number
of key customers, the risks inherent in international operations, and the
intense competition in our industry for customers. The business risks associated
with these factors are identified or referred to above under our "Cautionary
Statement for Forward-Looking Statements."

                                       16

 
        Our principal source of income is derived from freight forwarding
services. As a freight forwarder, we arrange for the shipment of our customers'
freight from point of origin to point of destination. Generally, we quote our
customers a turn key cost for the movement of their freight. Our price quote
will often depend upon the customer's time-definite needs (next day through
fifth day delivery), special handling needs (heavy equipment, delicate items,
environmentally sensitive goods, electronic components, etc.) and the means of
transport (truck, air, ocean or rail). In turn, we assume the responsibility for
arranging and paying for the underlying means of transportation.
 
        We also provide a range of other services including customs brokerage,
warehousing and other value added services, which include customized
distribution, fulfillment, and other value added supply chain services.
 
        Total revenue represents the total dollar value of services we sell to
our customers. Our cost of transportation includes direct costs of
transportation, including motor carrier, air, ocean and rail services. We act
principally as the service provider to add value in the execution and
procurement of these services to our customers. Our net transportation revenue
(gross transportation revenue less the direct cost of transportation) is the
primary indicator of our ability to source, add value and resell services
provided by third parties, and is considered by management to be a key
performance measure. We believe that net revenue is also an important measure of
economic performance. Net revenue includes transportation revenue and our
fee-based activities, after giving effect to the cost of transportation. In
addition, management believes measuring its operating costs as a function of net
revenue provides a useful metric, as our ability to control costs as a function
of net revenue directly impacts operating earnings.
 
        A significant portion of our revenue is derived from our international
operations, and the growth of those operations is an important part of our
business strategy. Our current international operations are focused on the
shipment of goods into and out of the United States and are dependent on the
volume of international trade with the United States. Our strategic plan
contemplates the growth of those operations, as well as the expansion into the
transportation of goods wholly outside of the United States. The following
factors could adversely affect our current international operations, as well as
the growth of those operations:

  -   the political and economic systems in certain international markets are
      less stable than in the United States;
  -   wars, civil unrest, acts of terrorism and other conflicts exist in certain
      international markets;
  -   export restrictions, tariffs, licenses and other trade barriers can
      adversely affect the international trade serviced by our international
      operations;
  -   managing distant operations with different local market conditions and
      practices is more difficult than managing domestic operations;
  -   differing technology standards in other countries present difficulties and
      expense in integrating our services across international markets;
  -   complex foreign laws and treaties can adversely affect our ability to
      compete; and
  -   our ability to repatriate funds may be limited by foreign exchange
      controls.
 
                                       17

        Our operating results will be affected as acquisitions occur. Since all
acquisitions are made using the purchase method of accounting for business
combinations, our consolidated financial statements will only include the
results of operations and cash flows of acquired companies for periods
subsequent to the dates of acquisition. To help facilitate the consolidation,
analysis and public reporting process, our offshore operations are included
within our consolidated results on a one-month lag, or more specifically, our
calendar year results will include results from offshore operations for the
period December 1 through November 30. As a result of the one-month lag, the
earnings impact of the Shaanxi transaction was first reflected in our
consolidated results beginning in April 2004.
 
        Our net income will also be affected by non-cash charges relating to the
amortization of customer related intangible assets and other intangible assets
arising from our completed acquisitions. Under applicable accounting standards,
purchasers are required to allocate the total consideration in a business
combination to the identified assets acquired and liabilities assumed based on
their fair values at the time of acquisition. The excess of the consideration
paid over the fair value of the identifiable net assets acquired is to be
allocated to goodwill, which is tested at least annually for impairment.
Applicable accounting standards require the Company to separately account for
and value certain identifiable intangible assets based on the unique facts and
circumstances of each acquisition. As a result of the Company's acquisition
strategy, our net income will include material non-cash charges relating to the
amortization of customer related intangible assets and other intangible assets
acquired in our acquisitions. Although these charges may increase when, and if,
the Company completes more acquisitions, we believe we are actually growing the
value of our intangible assets (e.g., customer relationships). Thus, we believe
that earnings before interest, taxes, depreciation and amortization, or EBITDA,
is a useful financial measure for investors because it eliminates the effect of
these non-cash costs and provides an important metric for our business.
Accordingly, we employ EBITDA as a measure of our historical financial
performance.
 
        Our operating results are also subject to seasonal trends when measured
on a quarterly basis. Our first and second quarters are likely to be weaker as
compared with our other fiscal quarters, which we believe is consistent with the
operating results of other supply chain service providers. This trend is
dependent on numerous factors, including the markets in which we operate,
holiday seasons, consumer demand and economic conditions. Since our revenue is
largely derived from customers whose shipments are dependent upon consumer
demand and just-in-time production schedules, the timing of our revenue is often
beyond our control. Factors such as shifting demand for retail goods and/or
manufacturing production delays could unexpectedly affect the timing of our
revenue. As we increase the scale of our operations, seasonal trends in one area
may be offset to an extent by opposite trends in another area. We cannot
accurately predict the timing of these factors, nor can we accurately estimate
the impact of any particular factor, and thus we can give no assurance that
historical seasonal patterns will continue in future periods.
 
CRITICAL ACCOUNTING POLICIES
 
        Our accounting policies, which are in compliance with accounting
principles generally accepted in the United States, require us to apply
methodologies, estimates and judgments that have a significant impact on the
results we report in our financial statements. In our Annual Report on Form
10-K/A for the year ended December 31, 2003 we have discussed those policies
that we believe are critical and require the use of complex judgment in their
application. Since December 31, 2003, there have been no material changes to our
critical accounting policies. In response to the purchased transportation issue
that resulted in the Company having to restate its financial results, in the
third quarter of 2004 the Company implemented a new process for purposes of
accruing for estimated purchased transportation costs for its Domestic Services
segment. We believe these changes will more accurately state the cost of
purchased transportation and any related unpaid amounts.

                                       18


RESULTS OF OPERATIONS

         Quarter ended March 31, 2004 compared to quarter ended March 31, 2003

         The following table summarizes our total revenue, net transportation
and other revenue (in thousands):


                                        Quarter ended March 31,
                                       ------------------------
                                                                          Change
                                                                    -------------------
                                          2004          2003         Amount    Percent
                                       ---------      ---------     --------- ---------
                                                                    
Total revenue                          $  60,224      $  38,572     $  21,652   56.1%
                                       =========      =========     =========


Transportation revenue                 $  55,045      $  35,780     $  19,265    53.8
Cost of transportation                    43,472         26,634        16,838    63.2
                                       ---------      ---------     ---------
Net transportation revenue                11,573          9,146         2,427    26.5
  Net transportation margin                21.0%          25.6%

Customs brokerage                          2,679          1,864           815    43.7
Warehousing and other
  value added services                     2,500            928         1,572   169.4
                                       ---------      ---------     ---------

              Total net revenue        $  16,752      $  11,938     $   4,814   40.3%
                                       =========      =========     =========
  Net revenue margin                       27.8%          30.9%
                                       =========      =========


         Total revenue was $60.2 million in the first quarter of 2004, an
increase of 56.1% over total revenue of $38.6 million in the first quarter of
2003. $13.3 million or 61.5% of the increase in total revenue was attributable
to organic growth with $8.3 million or 38.5% of the increase in total revenue
attributable to acquisitions. The Domestic Services platform delivered $34.7
million in total revenue for the first quarter of 2004, an improvement of $10.9
million and 45.9% over the same prior year period with $8.4 million of the
increase coming from same store growth and the remaining $2.5 million in revenue
growth coming from acquisitions. The International Services platform delivered
$25.5 million in total revenue for the first quarter of 2004, a year over year
improvement of $10.7 million or 72.3%, with $4.9 million of the increase coming
from same store growth and the remaining $5.8 million improvement attributed to
acquisitions.

         Net transportation revenue was $11.6 million in the first quarter of
2004, an increase of 26.5% over net transportation revenue of $9.1 million in
the first quarter of 2003. $0.8 million, or 34.2% of the increase in net
transportation revenue, was attributable to same store growth with $1.6 million,
or 65.8% of the increase, attributable to acquisitions. The Domestic Services
platform delivered $8.4 million in net transportation revenue for the first
quarter of 2004, an improvement of $1.2 million or 16.7% over the same prior
year period, with $0.6 million of the increase coming from same store growth and
the remaining $0.6 million in growth coming from acquisitions. The International
Services platform delivered $3.2 million in net transportation revenue for the
first quarter of 2004, a year over year improvement of $1.2 million or 60.0%,
with $0.2 million of the increase coming from same store growth and the
remaining $1.0 million improvement attributed to acquisitions.

                                       19


         Net transportation margins decreased to 21.0% for the first quarter of
2004 from 25.6% for the first quarter of 2003. For the first quarter of 2004,
net transportation margins for the Domestic Services platform declined to 25.7%
from 31.1% tied primarily to one piece of low-margin business that the Company
expects to discontinue by the end of the second quarter of 2004. For the
International Services platform, net transportation margins declined to 14.2%
from 15.5% driven primarily by general rate increases taken by the underlying
asset-based carriers that we have not been able to pass along to our customers.

         Net revenue was $16.8 million in the first quarter of 2004, an increase
of 40.3% over net revenue of $11.9 million in the first quarter of 2003. $2.9
million, or 60.8% of the increase in net revenue, was attributable to same store
growth, with $1.9 million, or 39.2% of the increase, attributable to
acquisitions. The Domestic Services platform delivered $10.6 million in net
revenue for the first quarter of 2004, an improvement of $2.6 million or 33.2%
over the same prior year period with $1.8 million of the increase coming from
same store growth with the remaining $0.8 million in growth coming from
acquisitions. The International Services platform delivered $6.2 million in net
revenue for the first quarter of 2004, a year over year improvement of $2.2
million or 55.0%, with $1.0 million of the increase coming from same store
growth and the remaining $1.2 million improvement attributed to acquisitions.

         Net revenue margins decreased to 27.8% for the first quarter of 2004
compared to 30.9% for the same prior year period. Net revenue margins at
Domestic Services declined to 30.4% from 33.3% driven primary from the low
margin business that will be winding down by the end of the second quarter of
2004. For the International Services platform, net transportation margins
declined to 24.4% from 27.2% driven primarily by general rate increases taken by
the underlying asset-based carriers that we have not been able to pass along to
our customers.

                                       20


      The following table compares certain consolidated statement of operations
data as a percentage of our net revenue (in thousands):


                                                               Quarter ended March 31,
                                                    ---------------------------------------------
                                                            2004                      2003                    Change
                                                    --------------------     --------------------      -------------------
                                                                                              
                                                    Amount       Percent      Amount      Percent      Amount      Percent
                                                                                                                   -------
Net revenue                                         $16,752       100.0%     $11,938       100.0%      $4,814         40.3%
                                                    -------      ------      -------      ------       ------
Personnel costs                                       9,898        59.1        6,563        55.0        3,335         50.8
Other selling, general and administrative             8,308        49.6        4,303        36.0        4,005         93.1
Depreciation and amortization                           851         5.1          590         4.9          261         44.2
Litigation settlement                                    --          --          750         6.3         (750)      (100.0)
                                                    -------      ------      -------      ------       ------
Total operating costs                                19,057       113.8       12,206       102.2        6,851         56.1
                                                    -------      ------      -------      ------       ------
Loss from operations                                 (2,305)      (13.8)        (268)       (2.2)      (2,037)        760.1
Provision for excess earn-out payments               (3,075)      (18.4)      (1,270)      (10.6)      (1,805)        142.1
Other income (expense), net                             (52)       (0.2)          30         0.2          (82)         NM
                                                    -------      ------      -------      ------       ------
Loss before income tax expense and
  minority interest                                  (5,432)      (32.4)      (1,508)      (12.6)      (3,924)       260.2
Income tax expense                                      199         1.2          149         1.3           50         33.6
                                                    -------      ------      -------      ------       ------
Loss before minority interest                        (5,631)      (33.6)      (1,657)      (13.9)      (3,974)       239.8
Minority interest                                        69         0.4           --          --           69          NM
                                                    -------      ------      -------      ------       ------
Net loss                                            $(5,700)      (34.0)%    $(1,657)      (13.9)%    $(4,043)       244.0% 
                                                    =======      ======      =======      ======      =======


         Personnel costs were $9.9 million for the first quarter of 2004, an
increase of 50.8% over $6.6 million for the first quarter of 2003. $0.8 million
or 24.2% of the increase in personnel costs is attributable to incremental costs
assumed as part of our acquisition program with $2.5 million or 75.8% of the
increase attributable to increased costs in the base business. Personnel costs
as a percentage of net revenue increased to 59.1% in the first quarter of 2004
from 55.0% in the first quarter of 2003. This increase was driven by hiring of
operations, sales and management personnel, particularly in our International
Services platform. Compared to March 31, 2003, headcount increased by 570 to a
total of 1,098 with 414 added in operations, 45 added in sales and marketing and
111 added in financial and administrative services.

         Other selling, general and administrative costs were $8.3 million for
the first quarter of 2004, an increase of 93.1% over $4.3 million for the first
quarter of 2003. $0.6 million or 14.6% of the increase is attributable to
incremental costs assumed as part of our acquisition program with $3.4 million
or 85.4% of the increase attributable to increased costs of the base business.
As a percentage of net revenue, other selling, general and administrative costs
increased to 49.6% in the first quarter of 2004 from 36.0% in the first quarter
of 2003. This increase is primarily due to spending related to facilities,
equipment and technology particularly in our Domestic Services platform.

         Depreciation and amortization was $0.9 million in the first quarter of
2004, an increase of 44.2% over $0.6 million in the first quarter of 2003. This
increase is primarily due to the amortization of intangible assets acquired in
transactions that closed after the first quarter of 2003. Depreciation and
amortization as a percentage of net revenue increased to 5.1% in the first
quarter of 2004 from 4.9% in the first quarter of 2003. This increase is
primarily due to the amortization of acquired intangible assets.

                                       21


         In the first quarter of 2003, litigation settlement charges resulted
from the settlement of litigation that arose prior to our transition to a
logistics business. Such settlement was ultimately paid using $400,000 in cash
and $350,000 in shares of the Company's common stock.

         Loss from operations was $2.3 million in the first quarter of 2004, as
compared to $0.3 million for the first quarter of 2003. Loss from operations as 
a percentage of net revenue was (13.8)% for the first quarter of 2004 compared 
to (2.2)% for the first quarter of 2003.

        Provision for excess earn-out payments represents a valuation adjustment
for amounts paid to former shareholders of acquired companies that, as a result
of the restatement of our financial performance for 2003, was in fact in excess
of the amount that would have been paid out based upon the restated financial
results for 2003. Due to differing interpretations by the Company and the
selling shareholders of the earn-out provisions of the purchase agreements, the
Company has determined that the resulting receivable from the former
shareholders should be fully reserved for. If in the future, excess amounts paid
are recovered, those proceeds would be reflected as other income on the
Company's statement of operations.
         
         As a result of historical losses related to investments in early-stage
technology businesses, which are unrelated to the Company's current activities
and the Company's rapid expansion, the Company has accumulated federal net
operating losses (NOLs). A portion of tax expense during the three months ended
March 31, 2004 resulted from increased earnings from overseas operations. The
foreign income tax provision amounted to 33.7% of the consolidated income tax
provisions and the balance is due to state income taxes and deferred income
taxes resulting from the amortization of goodwill for income tax purposes. At
December 31, 2003, the Company had a net operating loss for federal income taxes
of approximately $24.9 million.

         Net loss attributable to common stockholders was $5.7 million in the
first quarter of 2004, compared to a net loss of $1.7 million in the first
quarter of 2003. Basic and diluted loss per common share was $0.15 for the first
quarter of 2004 compared to a net loss of $0.07 per basic and diluted common
share for the first quarter of 2003.

FINANCIAL OUTLOOK

        Based upon our operating results through the first nine months of 2004,
we believe that gross revenues will be approximately $340 million in 2004 and
$375 million in 2005. Due to a number of factors, including the restated
financial performance of our Domestic Services operations, the Company's intent
to restructure its operations to realize synergies as part of the Company's
overall acquisition strategy and future efforts to realize efficiencies from a
newly developed operating system, we are not able to provide guidance at this
time about expected future performance beyond gross revenues.
         
         The restructuring initiative will include the rationalization of
facilities, systems and personnel within the U.S. Some of these initiatives have
been undertaken but much remains to be defined and implemented. This initiative
will result in a material charge which will negatively impact the Company's
financial results in the fourth quarter of 2004 and the first quarter of 2005.
We will provide guidance in the future, but only after our plan is fully
implemented and the newly streamlined operations have been functioning for a
reasonable period of time. This moratorium on financial performance guidance
will be in effect for 2005 and perhaps beyond. All previously issued financial
guidance did not reflect the impact of the restatement or restructuring
discussed above, nor was management aware of the issues giving rise to the
restatement at the time that the previously issued guidance was provided. For
these reasons, previously issued guidance relative to operating results for 2004
and 2005 is hereby withdrawn.

                                       22



SOURCES OF GROWTH

         Management believes that a comparison of "same store" growth is
critical in the evaluation of the quality and extent of the Company's internally
generated growth. This "same store" analysis isolates the financial
contributions from operations that have been included in the Company's operating
results for the full comparable prior year period. The table below presents
"same store" comparisons for the three-month period ended March 31, 2004 (which
is the measure of any increase from the same period of 2003).

                                             For the three months ended
                                                   March 31, 2004
                  Domestic                             36.7%
                  International                        33.6%

LIQUIDITY AND CAPITAL RESOURCES

         Cash and cash equivalents totaled $4.1 million and $3.1 million as of
March 31, 2004 and December 31, 2003, respectively. Working capital totaled
$6.4 million and $13.1 million at March 31, 2004 and December 31, 2003,
respectively.

         Cash used in operating activities was $2.9 million for the first
quarter of 2004 compared to $1.9 million used in the first quarter of 2003. The
change was driven principally by our net loss and the seasonal increase in our
collection of receivables.

         Net cash used in investing activities during the first quarter of 2004
was $5.9 million compared to $3.4 million in the first quarter of 2003.
Investing activities were driven principally by approximately $2.4 million in
earn-out payments made in relation to 2003 performance targets, $2.3 million
paid for acquisitions (net of cash acquired) and $0.7 million spent in
connection with the roll-out of Tech-Logis(TM), the Company's new web-based
technology platform.

         Net cash provided by financing activities during the first quarter of
2004 was $9.7 million compared to $5.7 million in the first quarter of 2003.
Financing activities consisted of $8.6 million in proceeds from the Company's
line of credit and $1.2 million from the issuance of common stock upon the
exercises of options and warrants, offset by principal payments of $0.2 million
for a capital lease. We may receive proceeds in the future from the exercise of
options and warrants that were outstanding as of the end of the first quarter.
As of March 31, 2004, approximately 13,170,000 options and warrants were
outstanding.


                                                                      Proceeds
                                                 Number of shares   if exercised

Options outstanding under our Stock Option Plan     10,684,217      $ 17,181,613
Non-Plan Options                                     1,046,700         2,494,250
Warrants                                             1,439,563         1,499,573
                                                    ----------      ------------

Total                                               13,170,480      $ 21,175,436
                                                    ==========      ============

         Effective November 17, 2004, we amended our revolving credit facility
with LaSalle Business Credit, LLC (the "U.S. Facility"). The U.S. Facility is
collateralized by accounts receivable and other assets of the Company and its
subsidiaries. The U.S. Facility requires the Company and its U.S. subsidiaries
to comply with certain financial covenants. Advances under the U. S. Facility
are available to fund future working capital and other corporate purposes. As of
January 31, 2005, we had advances of $13.9 million and we had eligible accounts
receivable sufficient to support $17.4 million in borrowings from our U.S.
Facility. This U.S. Facility also included a $5.0 million bridge loan facility
available to the Company at the rate of prime plus 2.00%. The Company borrowed
the full $5.0 million available for the bridge loan facility on August 24, 2004
and subsequently repaid the bridge loan facility by November 26, 2004.

         Under the terms of our amended U.S. Facility, we are not permitted to
make additional acquisitions without the lender's consent. In addition, as a
condition to the distribution of any earn-out payments for any of its U.S.-based
operations, the amended U.S. Facility requires that the Company maintain a 60
day average undrawn availability of at least $2.5 million after taking effect
for any such earn-out distribution.


                                       23



         Effective October 27, 2004, Stonepath Holdings (Hong Kong) Limited
("Asia Holdings") entered into a $10.0 million term credit facility with Hong
Kong League Central Credit Union (the "Asia Facility") collateralized by the
accounts receivable of the Company's Hong Kong and Singapore operations and an
unsecured subordinated guarantee from Stonepath Group, Inc. The Asia Facility
carries a term of one year and an interest rate of 15% for amounts outstanding
thereunder. On November 4, 2004, Asia Holdings borrowed $3.0 million under the
Asia Facility.

         Below are descriptions of material acquisitions made since 2001
including a breakdown of consideration paid at closing and future potential
earn-out payments. We define "material acquisitions" as those with aggregate
potential consideration of $5.0 million or more.

         On October 5, 2001, we acquired Air Plus, a group of Minneapolis-based
privately held companies that provide a full range of logistics and
transportation services. The transaction was valued at up to $34.5 million,
consisting of cash of $17.5 million paid at closing and a four-year earn-out
arrangement of up to $17.0 million. In the earn-out, we agreed to pay the former
Air Plus shareholders installments of $3.0 million in 2003, $5.0 million in
2004, $5.0 million in 2005 and $4.0 million in 2006, with each installment
payable in full if Air Plus achieves pre-tax income of $6.0 million in each of
the years preceding the year of payment. In the event there is a shortfall in
pre-tax income, the earn-out payment will be reduced on a dollar-for-dollar
basis to the extent of the shortfall. Shortfalls may be carried over or carried
back to the extent that pre-tax income in any other payout year exceeds the $6.0
million level. Based upon increased costs of purchased transportation as a
result of the restatement and the Company's interpretation of the underlying
purchase agreement language, the cumulative adjusted earnings for Air Plus from
date of acquisition through December 31, 2003 is $8.1 million compared to the
previously calculated amount of $12.7 million. As a result, the Company believes
that it has paid approximately $3.9 million to selling shareholders in excess of
amounts that should have been paid. As a consequence of these restatements, the
amounts paid in 2003 and 2004 in excess of earn-out payments due have been
reclassified from goodwill to advances due from shareholders. The excess
earn-out amounts applicable to 2003 earnings were previously recorded as
earn-out payable at December 31, 2003. Such excess applicable to 2003 has been
eliminated with a corresponding reduction in goodwill. At March 31, 2004 the
excess earn-out payments related to the 2002 and 2003 results of operations have
been fully reserved for because of differing interpretations, by the Company and
selling shareholders, of the earn-out provisions of the purchase agreement.
However, the Company will seek the refund of such excess payments.

         On April 4, 2002, we acquired Stonepath Logistics International
Services, Inc. ("SLIS") (f/k/a Global Transportation Services, Inc.), a
Seattle-based privately held company that provides a full range of international
air and ocean logistics services. The transaction was valued at up to $12.0
million, consisting of cash of $5.0 million paid at the closing and up to an
additional $7.0 million payable over a five year earn-out period based upon the
future financial performance of SLIS. We agreed to pay the former Global
shareholders a total of $5.0 million in base earn-out payments payable in
installments of $0.8 million in 2003, $1.0 million in 2004 through 2007 and $0.2
million in 2008, with each installment payable in full if SLIS achieves pre-tax
income of $2.0 million in each of the years preceding the year of payment (or
the pro rata portion thereof in 2002 and 2007). In the event there is a
shortfall in pre-tax income, the earn-out payment will be reduced on a pro-rata
basis. Shortfalls may be carried over or carried back to the extent that pre-tax
income in any other payout year exceeds the $2.0 million level. We also provided
the former Global shareholders with an additional incentive to generate earnings
in excess of the base $2.0 million annual earnings target ("SLIS' tier-two
earn-out"). Under SLIS' tier-two earn-out, the former Global shareholders are
also entitled to receive 40% of the cumulative pre-tax earnings in excess of
$10.0 million generated during the five-year earn-out period subject to a
maximum additional earn-out opportunity of $2.0 million. SLIS would need to
generate cumulative earnings of $15.0 million over the five-year earn-out period
to receive the full $7.0 million in contingent earn-out payments. Based upon
2003 performance, the former Global shareholders received $1.0 million on April
1, 2004. On a cumulative basis, SLIS has generated $9.3 million in adjusted
earnings, providing its former shareholders with a total of $1.8 million in cash
earn-out payments and excess earnings of $5.8 million to carryforward and apply
to future earnings targets.


                                       24


         On May 30, 2002, we acquired United American, a Detroit-based privately
held provider of expedited transportation services. The United American
transaction provided us with a new time-definite service offering focused on the
automotive industry. The transaction was valued at up to $16.1 million,
consisting of cash of $5.1 million paid at closing and a four-year earn-out
arrangement based upon the future financial performance of United American. We
agreed to pay the former United American shareholder a total of $5.0 million in
base earn-out payments payable in installments of $1.25 million in 2003 through
2006, with each installment payable in full if United American achieves pre-tax
income of $2.2 million in each of the years preceding the year of payment. In
the event there is a shortfall in pre-tax income, the earn-out payment will be
reduced on a dollar-for-dollar basis to the extent of the shortfall. Shortfalls
may be carried over or carried back to the extent that pre-tax income in any
other payout year exceeds the $2.2 million level. The Company has also provided
the former United American shareholder with an additional incentive to generate
earnings in excess of the base $2.2 million annual earnings target ("United
American's tier-two earn-out"). Under United American's tier-two earn-out, the
former United American shareholder is entitled to receive 50% of the cumulative
pre-tax earnings generated by a certain pre-acquisition customer in excess of
$8.8 million during the four-year earn-out period subject to a maximum
additional earn-out opportunity of $6.0 million. United American would need to
generate cumulative earnings of $20.8 million over the four-year earn-out period
to receive the full $11.0 million in contingent earn-out payments. Based upon
increased costs of purchased transportation as a result of the restatements and
the Company's interpretation of the underlying purchase agreement language, the
cumulative adjusted earnings for United American from the date of acquisition
through December 31, 2003 is $1.5 million compared to the previously calculated
amount of $2.4 million. The Company believes that it has paid approximately $0.5
million to the selling shareholder in excess of amounts due. As a consequence of
these restatements, the amounts paid in 2003 in excess of earn-out payments due
have been reclassified from goodwill to advances due from shareholders. The
excess earn-out amounts applicable to 2003 earnings were previously recorded as
earn-out payable at December 31, 2003. Such excess applicable to 2003 has been
eliminated with a corresponding reduction in goodwill. At December 31, 2003, the
excess earn-out payments related to the 2002 results of operations have been
fully reserved for because of differing interpretations by the Company and the
selling shareholders of the earn-out provisions of the purchase agreement.
However, the Company will seek the refund of such excess payments.

         On June 20, 2003, through our indirect wholly owned subsidiary,
Stonepath Logistics Government Services, we acquired the business of Regroup, a
Virginia limited liability company. The Regroup transaction enhanced our
presence in the Washington, D.C. market and provided a platform to focus on the
logistics needs of U.S. government agencies and contractors. The transaction was
valued at up to $27.2 million, consisting of cash of $3.7 million and $1.0
million of Company stock paid at closing, and a five-year earn-out arrangement.
The Company agreed to pay the members of Regroup a total of $10.0 million in
base earn-out payments payable in equal installments of $2.5 million in 2005
through 2008, if Regroup achieves pre-tax income of $3.5 million in each of the
years preceding the year of payment. In the event there is a shortfall in
pre-tax income, the earn-out payment will be reduced on a dollar-for-dollar
basis. Shortfalls may be carried over or carried back to the extent that pre-tax
income in any other payout year exceeds the $3.5 million level. The Company also
agreed to pay the former members of Regroup an additional $2.5 million if
Regroup earned $3.5 million in pre-tax income during the 12-month period
commencing July 1, 2003, however no payment was required based on Regroup's
actual results. In addition, the Company has also provided the former members of
Regroup with an additional incentive to generate earnings in excess of the base
$3.5 million annual earnings target ("Regroup's tier-two earn-out"). Under
Regroup's tier-two earn-out, the former members of Regroup are also entitled to
receive 50% of the cumulative pre-tax earnings in excess of $17.5 million
generated during the five-year earn-out period subject to a maximum additional
earn-out opportunity of $10.0 million. Regroup would need to generate cumulative
earnings of $37.5 million over the five-year earn-out period in order for the
former members to receive the full $22.5 million in contingent earn-out
payments.

         On August 8, 2003, through two indirect international subsidiaries, we
acquired a seventy (70%) percent interest in the assets and operations of the
Singapore and Cambodia based operations of the G-Link Group, which provide a
full range of international logistics services, including international air and
ocean transportation, to a worldwide customer base of manufacturers and
distributors. This transaction substantially increased our presence in Southeast
Asia and expanded our network of owned offices through which to deliver global
supply chain solutions. The transaction was valued at up to $6.2 million,
consisting of cash of $2.8 million, $0.9 million of the Company's common stock
paid at the closing and an additional $2.5 million payable over a four-year
earn-out period based upon the future financial performance of the acquired
operations. We agreed to pay $2.5 million in base earn-out payments payable in
installments of $0.3 million in 2004, $0.6 million in 2005 through 2006 and $1.0
million in 2007, with each installment payable in full if the acquired
operations achieve pre-tax income of $1.8 million in each of the years preceding
the year of payment (or the pro rata portion thereof in 2003 and 2006). In the
event there is a shortfall in pre-tax income, the earn-out payment will be
reduced on a dollar-for-dollar basis. Shortfalls may be carried over or carried
back to the extent that pre-tax income in any other payout year exceeds the $1.8
million level. As additional purchase price, the Company also agreed to pay
G-Link for excess net assets amounting to $1.5 million through the issuance of
Company common stock, on a post-closing basis. Based upon 2003 performance,
G-Link received an earn-out payment of $0.2 million on April 1, 2004.


                                       25


         On February 9, 2004, through a wholly-owned subsidiary, we acquired a
55% interest in Shanghai-based Shaanxi Sunshine Cargo Services International
Co., Ltd. ("Shaanxi"). Shaanxi provides a wide range of customized
transportation and logistics services and supply chain solutions. The
transaction is valued at up to $11.0 million, consisting of cash of $3.5 million
and $2.0 million of the Company's common stock paid at the closing, plus up to
an additional $5.5 million payable over a five-year period based upon the future
financial performance of Shaanxi. The earn-out payments are due in five
installments of $1.1 million beginning in 2005, with each installment payable in
full if Shaanxi achieves pre-tax income of at least $4.0 million in each of the
earn-out years. In the event there is a shortfall in pre-tax income, the
earn-out payment for that year will be reduced on a dollar-for-dollar basis by
the amount of the shortfall. Shortfalls may be carried over or back to the
extent that pre-tax income in any other payout year exceeds the $4.0 million
level. As additional purchase price, on a post-closing basis the Company has
agreed to pay Shaanxi for 55% of its closing date working capital. The common
shares issued in the transaction are subject to a one year restriction on sale
and are subject to a pro rata forfeiture based upon a formula that compares the
actual pre-tax income of Shaanxi through December 31, 2004 with the targeted
level of income of $4.0 million (on an annualized basis). Also, if the trading
price of the Company's common stock is less than $3.17 per share at the end of
the one-year restriction, the Company will issue up to 169,085 additional shares
to the seller. Effective September 20, 2004, the Company amended the purchase
agreement for a change in the settlement date for Shaanxi's closing date working
capital from August 2004 to $1.0 million on or before November 15, 2004, and an
additional $0.9 million on or before March 31, 2005. The amendment also fixed
the date of distribution for collections in cash after the initial 180 day
working capital assessment period from due when collected to March 31, 2005. As
of September 30, 2004, the residual distribution is estimated at $1.0 million
bringing the total estimated March 31, 2005 distribution to $1.9 million.

         We may be required to make significant payments in the future if the
earn-out installments under our various acquisitions become due subject to
limitations within the U. S. Facility. While we believe that a significant
portion of the required payments will be generated by the acquired subsidiaries,
we may have to secure additional sources of capital to fund some portion of the
earn-out payments as they become due. This presents us with certain business
risks relative to the availability and pricing of future fund raising, as well
as the potential dilution to our stockholders if the fund raising involves the
sale of equity.

         The following table summarizes our maximum possible contingent base
earn-out payments for the years indicated based on results of the prior year as
if pre-tax earning targets associated with each acquisition were achieved
although the Company does not expect the Domestic Services pre-tax earnings
levels to be fully achieved (in thousands)(1)(2):



                        2005           2006           2007           2008            2009           TOTAL
                     ----------------------------------------------------------------------------------------
                                                                              
Earn-out payments:
     Domestic        $     9,040    $      8,050   $      2,500   $      2,500    $         --   $     22,090
     International         3,904           3,904          4,276          2,542           2,010         16,636
                     -----------    ------------   ------------   ------------    ------------   ------------
Total earn-out
payments             $    12,944    $     11,954   $      6,776   $      5,042    $      2,010   $     38,726
                     ===========    ============   ============   ============    ============   ============

Prior year pre-tax earnings targets(3)
     Domestic        $    12,306    $     12,306   $      3,500   $      3,500    $         --   $     31,612
     International        10,546          10,546         11,602          6,940           5,823         45,457
                     -----------    ------------   ------------   ------------    ------------   ------------
Total pre-tax
earnings targets     $    22,852    $     22,852   $     15,102   $     10,440    $      5,823   $     77,069
                     ===========    ============   ============   ============    ============   ============

Earn-outs as a percentage of prior year pre-tax earnings targets:
     Domestic               73.5%           65.4%          71.4%          71.4%             --           69.9%
     International          37.0%           37.0%          36.9%          36.6%           34.5%          36.6%
     Combined               56.6%           52.3%          44.9%          48.3%           34.5%          50.2%


                                       26


----------------
(1) Excludes the impact of prior year's pre-tax earnings carryforwards (excess
    or shortfalls versus earnings targets).

(2) During the 2003-2007 earn-out period, there is an additional contingent
    obligation related to tier-two earn-outs that could be as much as $18.0
    million if certain of the acquired companies generate an incremental $37.0
    million in pre-tax earnings.

(3) Aggregate pre-tax earnings targets as presented here identify the uniquely
    defined earnings targets of each acquisition and should not be interpreted
    to be the consolidated pre-tax earnings of the Company which would give
    effect for, among other things, amortization or impairment of intangible
    assets created in connection with each acquisition or various other expenses
    which may not be charged to the operating groups for purposes of calculating
    earn-outs.

         The Company is a defendant in a number of legal proceedings. Although
we believe that the claims asserted in these proceedings are without merit, and
we intend to vigorously defend these matters, there is the possibility that the
Company could incur material expenses in the defense and resolution of these
matters. Furthermore, since the Company has not established any reserves in
connection with such claims, any such liability, if at all, would be recorded as
an expense in the period incurred or estimated. This amount, even if not
material to the Company's overall financial condition, could adversely affect
the Company's results of operations in the period recorded.

         One of the Company's customers which is the subject of a Chapter 11
proceeding under the Bankruptcy Code, paid to the Company approximately $1.3
million of pre-petition indebtedness for shipping and delivery charges pursuant
to an order of a United States Bankruptcy Court authorizing the payment of such
charges. One of the creditors in the Chapter 11 proceeding appealed other orders
of the Bankruptcy Court authorizing the payment of pre-petition indebtedness to
other creditors for other charges and those orders have been reversed by a court
proceeding. While no action has been taken in the Bankruptcy Court to challenge
the payment made to the Company, if such action were taken in the future and
that action were successful, the Company could be required to return all or a
substantial portion of the payments made by the customer.


                                       27

Item 3. Quantitative and Qualitative Disclosures About Market Risk

         The Company's exposure to market risk for changes in interest rates
relates primarily to the Company's investment portfolio and its line of credit.
The Company does not have any derivative financial instruments in its investment
portfolio. The Company is averse to principal loss and ensures the safety and
preservation of its invested funds by limiting default risk, market risk and
reinvestment risk. The Company invests its excess cash in institutional money
market accounts. The Company does not use interest rate derivative instruments
to manage its exposure to interest rate changes. If market interest rates were
to change by 10% from the levels at March 31, 2004, the change in interest
expense would have had an immaterial impact on the Company's results of
operations and cash flows.

         The Company also has exposure to foreign currency fluctuations with
respect to its offshore subsidiaries. The Company does not utilize derivative
instruments to manage such exposure. A hypothetical change of 10% in the value
of the U.S. dollar would have had an immaterial impact on the Company's results
of operations.

Item 4. Controls and Procedures

         In January 2004, the Company restated its consolidated statements of
operations for the last three quarters of fiscal 2002, the first three quarters
of fiscal 2003, and for the year ended December 31, 2002, as a result of an
error discovered in the legacy accounting processes of Stonepath Logistics
International Services, Inc. (f/k/a "Global Transportation Systems, Inc.") and
Global Container Line, Inc., its wholly owned subsidiary. The Company determined
that a process error existed which resulted in the failure to eliminate certain
intercompany transactions in consolidation. This process error was embedded in
the legacy accounting processes of Global Transportation Systems, Inc. for a
period which began substantially before its acquisition by the Company in April
2002. The Company believes that the presence of this error, in and of itself,
constitutes a reportable condition as defined under standards established by the
American Institute of Certified Public Accountants.

         In connection with the preparation of the Company's June 30, 2004
consolidated financial statements, the Company's management determined that
Stonepath Logistics Domestic Services, Inc. ("SLDS") did not follow the
Company's designed disclosure controls and procedures to report a potential
weakness in the methodology used by SLDS to estimate its accrued cost of
purchased transportation. Based on its initial analysis at that time, the
Company recorded an immaterial increase to SLDS' cost of transportation in the
second quarter of 2004. The Company's management believes that the failure of
SLDS to follow the designed disclosure and control procedures in and of itself
constitutes a material weakness as defined under standards established by the
American Institute of Certified Public Accountants. The Company has implemented
changes in its estimating procedures and its processes for recognizing
differences between actual and estimated costs to assure the proper recognition
of purchased transportation costs.

                                       28


         On September 20, 2004, the Company announced, after having performed
some additional analysis, that it had understated its accrued purchased
transportation liability and related costs of purchased transportation for
previously reported periods as a result of an error discovered in the accounting
processes within certain subsidiary operations of the Domestic Services segment.
The Company determined that the process error did not accurately account for the
differences between the estimates and the actual freight costs incurred. This
allowed for an accumulation of previously unrecorded purchased transportation
costs to build up (such amounts should have been reflected as purchased
transportation costs). In addition, the error resulted in the Company making
earn-out payments to selling shareholders in amounts greater than what otherwise
would have been owed. The Company believes that the presence of this error, in
and of itself, constitutes a material weakness in internal controls as defined
under standards established by the American Institute of Certified Public
Accountants.

         In the course of its review of the process error related to the under
accrual of purchased transportation, the Company also identified two additional
process errors related to revenue transactions and to the processing of loss and
damage claims, all within the Domestic Services segment. At its Detroit
location, the Company identified a billing error in which the operating unit was
invoicing one of its automotive customers at rates which had been approved by a
customer representative who did not have the authority to do so. This customer
billing error caused the Company to overstate its revenues. This location also
identified loss and damage claims in the fourth quarter of 2004 that related to
the first quarter of 2004 and accordingly restated for those claims. At its
Minneapolis location, the Company identified an accounting error related to
revenue recognition and depreciation that originated during the second quarter
of 2004. Upon billing to a customer for certain capital equipment purchased in
connection with the launch of a new distribution center for that customer, the
unit recognized the revenue immediately rather than over the two-year life of
the contract and had depreciated the capital equipment over its useful life
rather than matching it to the life of the contract. The Company believes that
the presence of the billing error, the accounting error, and the error related
to loss and damage claims each constitute a reportable condition as defined
under standards established by the American Institute of Certified Public
Accountants.

         In response to the reportable conditions and material weakness in the
preceding two paragraphs, the Company is taking the following actions. With
regards to the purchased transportation accrual issue, the Company has altered
its methods to recognize the difference between actual costs of transportation
and estimates for such costs on a timely basis. With respect to the errors
related to revenue recognition and loss and damage claims, management of the
units in question have been advised as to the proper treatment of similar
transactions in the future.

         The Company has restated its financial statements for the first quarter
of 2004, and years ended December 31, 2003, 2002 and 2001 to correct the
processing errors related to its purchased transportation accrual, the customer
billings, revenue recognition loss and damage claim costs and to reflect the
related income tax effects. In addition, the amounts owed as of December 31,
2003 and 2002 under various earn-out provisions have been changed to reflect the
impact of the restatement.

         A material weakness in internal accounting control is a condition in
which the specific control procedures or the degree of compliance with them do
not reduce to relatively low level the risk that errors or irregularities in
amounts that would be material in relation to the financial statements may occur
and not be detected within a timely period by employees in the normal course of
performing their assigned tasks. The Company has implemented changes in
procedures for the reporting of purchased transportation and believes that these
changes will assure the proper recognition of these costs. A reportable
condition is a significant deficiency in the design or operation of internal
controls, which could adversely affect an organization's ability to initiate,
record, process and report financial data consistent with the assertions of
management in the financial statements. To specifically respond to this matter,
and in general to meet our obligations under Section 404 of the Sarbanes-Oxley
Act of 2002, the Company commenced an overall review of its internal controls
over financial reporting. As part of the assessment of its internal controls
over financial reporting, the Company is focusing on its recent growth in terms
of both size and complexity, coupled with the fact that its finance and
accounting functions are largely decentralized. Although this review is not yet
completed, the Company has initiated immediate changes in processes at each of
these locations to correct the errors that occurred and to reduce the likelihood
that similar errors could occur in the future. In addition, the Company has
changed its organizational structure to require the senior financial
representatives within the Domestic Services and International Services
platforms to report directly to the Company's Chief Financial Officer.

         As of the date of this Report, the Company believes it has a plan that,
when completed, will eliminate the reportable conditions and material
weaknesses described above.


                                       29



        As of the end of the period covered by this report, the Company carried
out an evaluation of the effectiveness of the Company's disclosure controls and
procedures in connection with the filing of its initial Annual Report on Form
10-K based upon the information available at that time and concluded that the
Company's disclosure controls and procedures were effective. Subsequent to that
evaluation, the Company discovered the reportable conditions and material
weaknesses described above (other than the reportable condition described in the
first paragraph of this Item 4A which was discovered prior to December 31, 2003)
and has taken the remedial actions described above. In connection with the
preparation of this Form 10-Q/A, the Company has carried out an additional
evaluation of the effectiveness of the Company's disclosure controls and
procedures. This evaluation was carried out under the supervision and with the
participation of the Company's Chief Executive Officer and Chief Financial
Officer. Based on that evaluation, taking into account the reportable conditions
and material weaknesses described above, the Company's Chief Executive Officer
and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures were not effective as of the end of the period covered
by this report. However, the Company believes that as a result of the remedial
measures implemented by the Company, the Company's disclosure controls and
procedures are now effective.

        Disclosure controls and procedures are designed to ensure that
information required to be disclosed in Company reports filed or submitted under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
Company reports filed under the Exchange Act is accumulated and communicated to
management, including the Company's Chief Executive Officer and Chief Financial
Officer as appropriate, to allow timely decisions regarding required
disclosures.

        Other than as described above, there have been no changes in the
Company's internal control over financial reporting during the period covered by
this report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.


                                       30

Part II. OTHER INFORMATION

Item 1. Legal Proceedings

         The Company was named as a defendant in eight purported class action
complaints filed in the United States Court for the Eastern District of
Pennsylvania between September 24, 2004 and November 19, 2004. Also named as
defendants in these actions were officers Dennis L. Pelino and Thomas L. Scully
and former officer Bohn H. Crain. These cases have now been consolidated for all
purposes in that Court under the caption In re Stonepath Group, Inc. Securities
Litigation, Civ. Action No. 04-4515. The plaintiffs initially sought to
represent a class of purchasers of the Company's shares between May 7, 2003 and
September 20, 2004, and allege claims for securities fraud under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934. These claims were based upon
the allegation that certain public statements made during the period from May 7,
2003 through August 9, 2004 were materially false and misleading because they
failed to disclose that the Company's Domestic Services operations had
improperly accounted for accrued purchased transportation costs. The plaintiffs
sought compensatory damages, attorneys' fees and costs, and further relief as
may be determined by the Court. The Court has consolidated the eight lawsuits
into a single action and the lead plaintiff has filed an amended complaint. The
amended complaint seeks to represent a class of purchasers of the Company's
shares between March 29, 2002 and September 20, 2004 based upon public
statements made during that period. The Company and the individual defendants
believe that the plaintiffs' claims are without merit and intend to vigorously
defend against them.

         The Company has been named as a nominal defendant in a shareholder
derivative action on behalf of the Company that was filed on October 12, 2004 in
the United States District Court for the Eastern District of Pennsylvania under
the caption Ronald Jeffrey Neer v. Dennis L. Pelino, et al., Civ. A. No.
04-cv-4971. Also named as defendants in the action are all of the individuals
who were serving as directors of the Company when the complaint was filed
(Dennis L. Pelino, J. Douglas Coates, Robert McCord, David R. Jones, Aloysius T.
Lawn and John H. Springer), former directors Andrew Panzo, Lee C. Hansen, Darr
Aley, Stephen George, Michela O'Connor-Abrams, and Frank Palma, officer Thomas
L. Scully and former officers Bohn H. Crain and Stephen M. Cohen. The derivative
action alleges breach of fiduciary duty, abuse of control, gross mismanagement,
waste of corporate assets, unjust enrichment and violations of the
Sarbanes-Oxley Act of 2002. These claims are based upon the allegation that the
defendants knew or should have known that the Company's public filings for
fiscal years 2001, 2002 and 2003 and for the first and second quarters of fiscal
year 2004, and certain press releases and public statements made during the
period from January 1, 2001 to the present, were materially misleading because
they failed to disclose that the Company's Domestic Services operations had
improperly accounted for accrued purchased transportation costs. The derivative
action seeks compensatory damages in favor of the Company, the recovery of
bonuses and incentive-based or equity-based compensation received by Mr. Pelino
and Mr. Crain from 2001 through 2004, restitution, attorneys' fees and costs,
and further relief as may be determined by the Court. The defendants believe
that this action is without merit, have filed a motion to dismiss this action,
and intend to vigorously defend themselves against the claims raised in this
action.

         The Company has received notice that the Securities and Exchange
Commission ("Commission") is conducting an informal inquiry to determine whether
certain provisions of the federal securities laws have been violated in
connection with the Company's accounting and financial reporting. As part of the
inquiry, the staff of the Commission has requested information relative to the
restatement amounts, personnel at the Air Plus subsidiary and Stonepath Group,
Inc. and additional background information for the period from October 5, 2001
to December 2, 2004. The Company is voluntarily cooperating with the staff.

                                       31


         On October 22, 2004, Douglas Burke filed a two-count action against
United American Acquisitions, Inc. ("UAF"), Stonepath Logistics Domestic
Services, Inc., and the Company in the Circuit Court for Wayne County, Michigan.
Mr. Burke is the former President and Chief Executive Officer of UAF. The
Company purchased the stock of UAF from Mr. Burke on May 30, 2002 pursuant to a
Stock Purchase Agreement. At the closing of the transaction Mr. Burke received
$5.1 million and received the right to receive an additional $11.0 million in
four annual installments based upon UAF's performance in accordance with the
Stock Purchase Agreement. Subject to the purchase, Stonepath Logistics Domestic
Services, Inc. and Mr. Burke entered into an Employment Agreement. Mr. Burke's
complaint alleges that the defendants breached the terms of the Employment
Agreement and Stock Purchase Agreement and seeks, among other things, the
production of financial information, unspecified damages, attorney's fees and
interest. The defendants believe that Mr. Burke's claims are without merit and
intend to vigorously defend against them.

         Victoria Tkach, a former employee of UAF and Stonepath Logistics
Domestic Services, Inc. has filed a complaint against Stonepath Logistics
Domestic Services, Inc., the Company, and UAF seeking damages in excess of
$75,000 and relief from her covenant not to compete. The complaint alleges
sexual harassment and retaliation by the defendants. The defendants believe that
Ms. Tkach's claims are without merit and intend to vigorously defend against
them.

         The Company is not able to predict the outcome of any of the foregoing
litigation at this time, since each action is in an early stage. An adverse
determination in any of those actions could have a material and adverse effect
on the Company's financial position, results of operations and/or cash flows.

         The Company settled the suit brought by Emergent Capital Investment LLC
("Emergent") in the United States District Court for the Southern District of
New York in exchange for the payment by the Company of $50,000 in November 2004.

         The Company is also involved in various other claims and legal actions
arising in the ordinary 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 consolidated financial position, results of operations, or
liquidity. No accruals have been established for any legal proceedings.

                                       32

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
        Securities

        Effective as of February 9, 2004, we issued 630,915 shares of our common
        stock to Andy Tsai in partial consideration for the acquisition of a
        controlling interest in Shaanxi. The shares were valued, for purposes
        of the acquisition, at $2.0 million ($3.17 per share), and were issued
        in a private placement transaction exempt from the registration
        requirements of the Securities Act of 1933 pursuant to Section 4(2) and
        Rule 506 thereunder as an issuer transaction not involving a public
        offering.

Item 3. Defaults Upon Senior Securities

        None.

Item 4. Submission of Matters to a Vote of Security Holders

        None.

Item 5. Other Information


         Effective October 27, 2004, a subsidiary of the Company, Stonepath
         Holdings (Hong Kong) Limited ("Asia Holdings") entered into a Term
         Credit Agreement (the "Term Credit Agreement") with Hong Kong Central
         League Credit Union (the "Lender") and SBI Advisors, LLC, as agent for
         the Lender. The Term Credit Agreement provides Asia Holdings with the
         right to borrow an initial amount of $3.0 million and up to an
         additional $7.0 million upon the satisfaction of certain conditions.
         The obligations of Asia Holdings under the Term Credit Agreement are
         secured by floating charges on the foreign accounts receivable of three
         of its subsidiaries, Planet Logistics Express (Singapore) Pte. Ltd.,
         GLink Express (Singapore) Pte. Ltd., and Stonepath Logistics (Hong
         Kong) Limited. Asia Holdings borrowed $3.0 million on November 4, 2004
         and $2.0 million on February 16, 2005. There is no assurance that the
         remaining $5.0 million will be available to Asia Holdings under the
         Term Credit Agreement. All borrowings under the Term Credit Agreement
         bear interest at an annual rate of 15% and must be repaid on or before
         November 4, 2005. The obligation to repay the borrowings under the Term
         Credit Agreement may be accelerated by the Lender upon the occurrence
         of events of default customary for loan transactions. Stonepath Group,
         Inc. has guaranteed the obligations of Asia Holdings under the Term
         Credit Agreement pursuant to the terms of the Guaranty dated as of
         October 27, 2004 (the "Guaranty") by Stonepath Group, Inc. in favor of
         the Lender.

         On September 20, 2004, the Company announced that its financial
         statements for 2003 and the first and second quarters of 2004 needed to
         be restated and should not be relied upon. Since September 20, 2004,
         the Company has analyzed its costs of purchased transportation, certain
         revenue transactions, loss and damage claims and the resulting income
         tax and other effects. In addition, as described in the next paragraph,
         the amount actually owed for certain earn-out payments was impacted.
         The effects of the restatements have been reflected in this Form
         10-Q/A.

         As a result of the restatement process, the Company has determined that
         it made earn-out payments to the former owners of its Air Plus and
         United American subsidiaries in excess of amounts due. These amounts
         have been reflected in the accompanying financial statements as other
         assets. A full valuation allowance has been provided for those advances
         due to the differing interpretation of the stock purchase agreements by
         the Company and the selling shareholders. The affect of this change
         reduced net income by $3.1 million for the three-month period ended
         March 31, 2004 and $1.3 million for the three-month period ended March
         31, 2003. Goodwill has been reduced by similar amounts from that
         previously reported.

                                       33


Item 6. Exhibits and Reports on Form 8-K

        (a) The following exhibits are included herein:

     2.9    Amended and Restated Contract for the Sale of Assets by and between
            Stonepath Holdings (Hong Kong) Limited and Andy Tsai, dated November
            10, 2003.(1)

     2.10   Amendment Letter Agreement dated February 9, 2004, to the Amended
            and Restated Contract for the Sale of Assets by and between
            Stonepath Holdings (Hong Kong) Limited and Andy Tsai.(1)

     10.14  Amendment to Executive Employment Agreement between Stonepath
            Logistics International Services, Inc. and Jason Totah dated April
            1, 2004.(2)

     12     Calculation of Ratio of Earnings to Combined Fixed Charges and 
            Preferred Stock Dividends.

     31.1   Certification of Chief Executive Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

     31.2   Certification of Chief Financial Officer Pursuant to Section 302 of
            the Sarbanes-Oxley Act of 2002.

     32.1   Certification of Chief Executive Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed
            "filed" for purposes of Section 18 of the Securities Exchange Act of
            1934, as amended, or otherwise subject to the liability of that
            section. Further, this exhibit shall not be deemed to be
            incorporated by reference into any filing under the Securities Act
            of 1933, as amended, or the Securities Exchange Act of 1934, as
            amended.)

     32.2   Certification of Chief Financial Officer Pursuant to Section 906 of
            the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed
            "filed" for purposes of Section 18 of the Securities Exchange Act of
            1934, as amended, or otherwise subject to the liability of that
            section. Further, this exhibit shall not be deemed to be
            incorporated by reference into any filing under the Securities Act
            of 1933, as amended, or the Securities Exchange Act of 1934, as
            amended.)


(1) Incorporated by reference to the Company's Current Report on Form 8-K dated
    February 9, 2004.

(2) Incorporated by reference to the Company's Form 10-Q for the first quarter
    ended March 31, 2004, filed on May 10, 2004.  

                                       34




        (b) Reports on Form 8-K:

         On February 24, 2004, the Company filed a Current Report on Form 8-K
         dated February 9, 2004, reporting under Item 2 on the acquisition of a
         majority interest in Shaanxi Sunshine Cargo Services International Co.,
         Ltd.

         On February 26, 2004, the Company furnished under Items 9 and 12 of
         Form 8-K, a copy of its earnings release dated February 25, 2004.

         On February 27, 2004, the Company furnished an amendment to its 
         Form 8-K dated February 26, 2004, to correct certain typographical 
         errors inadvertently contained in the summary financial data tables 
         that accompanied the February 25, 2004 earnings release.


                                       35


                                   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: March 24, 2005                    /s/ Jason Totah     
                                        -------------------------------------
                                        Jason Totah
                                        Chief Executive Officer



Date: March 24, 2005                    /s/ Thomas L. Scully
                                        -------------------------------------
                                        Thomas L. Scully
                                        Chief Financial Officer,
                                        Vice President and Controller
                                        (Principal Financial and  
                                        Accounting Officer)



                                       36