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================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                               ------------------
                                    FORM 10-K
                               ------------------
[X]               ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended: December 31, 2001
                                       OR
[ ]               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: 0-29413

                              STONEPATH GROUP, INC.
             (Exact Name of Registrant as Specified in Its Charter)

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                           Delaware                                               65-0867684
                           --------                                               ----------
                             <S>                                                      <C>
                  (State or Other Jurisdiction of                               (I.R.S. Employer
                  Incorporation or Organization)                                Identification No.)

                  Two Penn Center Plaza, Suite 605, Philadelphia, PA                  19102
                  --------------------------------------------------                  -----
                  (Address of principal executive offices)                          (Zip Code)

                  Registrant's telephone number: (215) 564-9193
           Securities registered pursuant to Section 12(b) of the Act:

                  Title of each class:                                 Name of Each Exchange on Which Registered:
                  Common Stock, par value $.001 per share              American Stock Exchange
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           Securities registered pursuant to Section 12(g) of the Act:
                                      None
                               ------------------

         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
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. []

         The aggregate market value of the Registrant's voting common stock held
by non-affiliates of the Registrant as of March 15, 2002 was $38,616,072 based
upon the closing sale price of the Registrant's Common Stock on the American
Stock Exchange of $1.89 on such date. See Footnote (1) below.

         The number of shares outstanding of the registrant's common stock as of
March 15, 2002 was 20,903,110.

                    Documents Incorporated by Reference: None

--------------
(1)  The information provided shall in no way be construed as an admission that
     any person whose holdings are excluded from the figure is not an affiliate
     or that any person whose holdings are included is an affiliate and any such
     admission is hereby disclaimed. The information provided is solely for
     recordkeeping purposes of the Securities and Exchange Commission.


<PAGE>

                              STONEPATH GROUP, INC.
                           ANNUAL REPORT ON FORM 10-K
                            FOR THE FISCAL YEAR ENDED
                                DECEMBER 31, 2001

                                TABLE OF CONTENTS

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<S>                     <C>                                                                                         <C>
PART I...............................................................................................................1
         Item 1.    Business.........................................................................................1
         Item 2.    Properties......................................................................................14
         Item 3.    Legal Proceedings...............................................................................15
         Item 4.    Submission of Matters to a Vote of Security Holders.............................................16

PART II.............................................................................................................16
         Item 5.    Market for Registrant's Common Stock and Related Stockholder Matters............................16
         Item 6.    Selected Consolidated Financial Data............................................................17
         Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations...........18
         Item 7A.   Quantitative and Qualitative Disclosures About Market Risk......................................26
         Item 8.    Financial Statements............................................................................26
         Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures...........26

PART III............................................................................................................26
         Item 10.   Directors and Executive Officers of the Registrant..............................................26
         Item 11.   Executive Compensation..........................................................................28
         Item 12.   Security Ownership of Executive Officers, Directors and Beneficial Owners of
                    Greater Than 5% of the Company's Voting Securities..............................................32
         Item 13.   Certain Relationships and Related Transactions..................................................34

PART IV.............................................................................................................36
         Item 14.   Exhibits, Financial Statement Schedules and Reports on Form 8-K.................................36

SIGNATURES..........................................................................................................40

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                                     PART I

         This Annual Report on Form 10-K 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. We have based
these forward-looking statements on our current expectations and projections
about future events. These forward-looking statements are subject to known and
unknown risks, uncertainties and assumptions about us and our subsidiaries, that
may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements 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. Factors that might cause or contribute to such a material
difference include, but are not limited to, those discussed elsewhere in this
Annual Report, including the sections entitled "Risks Particular to Our
Business" and the risks discussed in our other Securities and Exchange
Commission filings. The following discussion should be read in conjunction with
our audited Consolidated Financial Statements and related Notes thereto included
elsewhere in this report.

Item 1.  Business

Overview

         We are a non-asset based provider of third-party logistics services,
offering a full range of time-definite transportation and distribution
solutions. We manage and arrange the domestic movement of raw materials,
supplies, components and finished goods for our customers. These services are
offered through our domestic air and ground freight forwarding business. In


                                       1
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addition to our time-definite transportation services, we also provide a broad
range of value added supply chain management services including warehousing,
order fulfillment and inventory management. We service a customer base of
manufacturers, distributors and national retail chains through a network of
offices in 15 major metropolitan areas in North America and Puerto Rico and an
extensive network of over 200 independent carriers.

         Our strategic objective is to build a leading global logistics services
organization that integrates established logistics companies with innovative
technologies. We plan to achieve this objective by broadening our platform of
service offerings through a combination of synergistic acquisitions and the
organic expansion of our existing base of logistics operations.

         Our acquisition strategy is to target businesses that will expand the
platform of our current service offerings to include international freight
forwarding and customs brokerage services, as well as enhance our position in
current markets and generate opportunities in new markets. The focus of this
strategy is on acquiring and integrating logistics businesses that are likely to
benefit from our long-term growth strategy and status as a public company.
Acquisition targets will be selected based upon their ability to demonstrate 1)
historic levels of profitability; 2) a proven record of delivering superior
time-definite distribution and other value added services; 3) an established
customer base of large and mid-sized companies; and 4) opportunities for
significant growth within strategic segments of our business.

         Once acquisitions are completed, we intend to create additional
shareholder value by improving productivity through the implementation or
adoption of technologies and business processes, improving transportation
margins through the leverage of our growing purchasing power and enhancing the
opportunity for organic growth through cross-selling opportunities and expanded
services offerings.

         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, the
industry is positioned for further consolidation since it remains highly
fragmented, and since customers are demanding the types of sophisticated and
broad reaching service offerings that can more effectively be handled by larger
and more diverse organizations.

         We accomplished the first step in establishing our domestic service
platform on October 5, 2001, when we acquired M.G.R., Inc., d/b/a "Air Plus
Limited" and its operating affiliates, a group of Minneapolis-based privately
held companies that provide a full range of logistics and transportation
services (collectively, "Air Plus"). The total value of the transaction was
$34.5 million, consisting of cash of $17.5 million paid at closing and a four
year earn-out arrangement based on the future financial performance of Air Plus.

         We are also in the process of developing our international service
platform. On March 5, 2002, we agreed to acquire Global Transportation Services,
Inc. ("Global"), a Seattle-based privately held company that provides a full
range of international air and ocean logistics services. The total value of the
transaction is $12.0 million, consisting of cash of $5.0 million to be paid at
closing and up to an additional $7.0 million payable over a five year earn-out
period based upon the future financial performance of Global. The transaction is
expected to close by no later than May 2002, and is subject to customary closing
conditions, including the completion of audited financial statements for the
year ended December 31, 2001.

         We have also identified a number of additional companies that may be
suitable acquisition candidates and we are in preliminary discussions with a
select number of them.

Industry Overview

         As business requirements for efficient and cost-effective distribution
services have increased, so has the importance and complexity of effectively
managing freight transportation. Businesses increasingly strive to minimize
inventory levels, perform manufacturing and assembly operations in lowest cost
locations and distribute their products throughout global markets, often
requiring expedited or time-definite shipment services. To assist in
accomplishing these tasks, many businesses turn to organizations providing a
broad array of supply chain services. These service providers consist of freight


                                       2
<PAGE>

forwarders, customs brokers, warehouse operators and other value added logistics
service providers. We believe that these service providers must possess
state-of-the-art technology and the ability to provide global supply chain
management services to be responsive to the marketplace. Many logistics
providers are now providing their customers with customized solutions for the
planning and management of complex supply chains. The demand for these solutions
has risen as companies continue to outsource non-core competencies, globally
source goods and materials and focus on managing the overall cost of their
supply chain. These trends are further facilitated by the rapid growth of
technology including the development of the Internet, the growth of track and
trace technology, and the ability to create electronic interfaces between the
systems of service providers and their customers.

         Historically, customers have been required to purchase transportation
and other supply chain services on an unbundled basis both in terms of mode of
transportation as well as other complementary services. The Company believes it
can differentiate itself by focusing on time-definite supply chain solutions
with capabilities across virtually every mode of transportation, as well as
combining these services with other value-added logistics services, including
pick-and-pack services, merge-in-transit, inventory management, warehousing,
reverse logistics, dedicated trucking and regional and local distribution. The
Company's logistics managers have the ability to utilize a portfolio of
logistics services to design optimal supply chain solutions for its customers.
The Company believes that it has a competitive advantage resulting from the
experience and knowledge of its logistics managers and in the market information
it possesses from its diverse client base.

         According to industry sources, total revenue for the third party
logistics services in the U.S. rose 24% in 2000 to an estimated $56.4 billion.
The Company believes that the third party logistics industry in general, and
that time-definite distribution in particular, is poised for continued growth.
The growth in the use of third party logistics services is being driven by a
number of factors, including:

         o  Outsourcing of non-core activities. Companies are increasingly
            outsourcing freight forwarding, warehousing and other supply chain
            activities to allow them to focus on their respective core
            competencies. From managing purchase orders to the timely delivery
            of products, companies turn to third party logistics providers to
            manage these functions at a lower cost and more efficiently.

         o  Globalization of trade. As barriers to international trade are
            reduced or eliminated, companies are increasingly sourcing their
            parts, supplies and raw materials from the most cost competitive
            suppliers throughout the world, thus, placing a greater emphasis on
            international freight management and just-in-time delivery.
            Outsourcing of manufacturing functions to, or locating company-owned
            manufacturing facilities in, low cost areas of the world also
            results in increased volumes of world trade.

         o  Increased need for time-definite delivery. The need for just-in-time
            and other time-definite delivery has increased as a result of the
            globalization of manufacturing, greater implementation of
            demand-driven supply chains, the shortening of product cycles and
            the increasing value of individual shipments. Many businesses
            recognize that increased spending on time-definite supply chain
            management services can decrease overall manufacturing and
            distribution costs, reduce capital requirements and allow them to
            manage their working capital more efficiently by reducing inventory
            levels and inventory loss.

         o  Consolidation of logistics function. As companies try to develop
            "partnering" relationships with fewer suppliers, they are
            consolidating the number of freight forwarders and supply chain
            management providers they use. This trend places greater pressure on
            regional or local freight forwarders and supply chain management
            providers to grow or become aligned with a global network. Larger
            freight forwarders and supply chain management providers benefit
            from economies of scale which enable them to negotiate reduced
            transportation rates with the actual carriers providing the
            transportation services and to allocate their overhead over a larger
            volume of transactions. Globally integrated freight forwarders and
            supply chain management providers are better situated to provide a
            full complement of services, including pick-up and delivery,
            shipment via air, sea and/or road ground transport, warehousing and
            distribution, and customs brokerage.

                                       3
<PAGE>

         o  Increased significance of technology. Advances in technology are
            placing a premium on decreased transaction times and increased
            business-to-business activity. Companies have recognized the
            benefits of being able to transact business electronically.
            Accordingly, businesses increasingly are seeking the assistance of
            supply chain service providers with sophisticated information
            technology systems which facilitate real-time transaction processing
            and web-based shipment monitoring.

         According to a survey conducted by Dr. Lieb, Professor of Supply Chain
Management, Northeastern University and Accenture, 74% of the largest American
manufacturing companies in the U.S. currently use third-party logistics
providers, more than double the percentage a decade ago. In addition, corporate
logistics executives anticipate that they will increase their use of third party
logistics providers from 25% to over 34% over the next three years.

Most frequently used third party logistics services
-----------------------------------------------------
(% citing use)
                                                   2000              2001
                                                   ----              ----

Direct transportation services                     49%               63%
Warehouse management operations                    56%               60%
Shipment consolidation                             43%               48%
Freight forwarding                                 44%               46%
Carrier selection                                  29%               44%
Rate negotiation                                   29%               38%
Order fulfillment                                  24%               33%
Relabeling/repackaging                             21%               25%

         In addition, the growing emphasis on just-in-time inventory control
processes has added to the complexity and need for time-definite and other value
added supply-chain services. The Company believes that it can continue to
differentiate itself by combining its time-definite transportation solutions
with other complementary supply chain solutions including assembly,
pick-and-pack, fulfillment, warehousing and reverse logistics.

Our Strategic Objectives

         Our Business Strategy

         Our objective is to provide customers with comprehensive value-added
logistics solutions. We plan to achieve this goal through a combination of
growth through acquisition and accelerated internal growth. We intend to carry
out the following strategies.

         o  Expand New and Existing Markets through Acquisitions. We are
            pursuing an aggressive acquisition strategy to enhance our position
            in our current markets and acquire operations in new markets. We
            anticipate expanding into new and existing markets by acquiring
            well-established logistics organizations that are leaders in their
            regional markets. In particular, we intend to focus our acquisition
            strategy on candidates that have historic levels of profitability, a
            proven record of delivering superior time-definite distribution and
            other value added services, an established customer base of large
            and mid-sized companies and the potential to benefit from the
            synergies offered by our acquisition strategy.

         o  Accelerate Internal Growth. A key component of our strategy is to
            accelerate the internal growth of our existing business as well as
            the existing business of the companies we acquire. We expect that
            internal growth can be accelerated by cross-selling our domestic and
            international capabilities to our existing customer base and
            deploying supply chain technologies that will drive new customer
            acquisition.

         o  Development of Identity. We also intend to produce marketing
            materials and develop the market image and reputation of the Company
            as an "organization with global reach", with the goal of providing
            business opportunities which would not normally be available to a
            regionally oriented logistics company.

                                       4
<PAGE>

        Our Acquisition Strategy

         We believe there are many attractive acquisition candidates in our
industry because of the highly fragmented composition of the marketplace, the
industry participants' need for capital and their owners' desire for liquidity.

         Initially, we intend to expand our business through one or more
platform acquisitions to develop our international base of operations. We
believe that the domestic and international capabilities, when taken together,
will provide a significant competitive advantage in the marketplace. As part of
our overall strategy, we also expect to complete a number of "add-on"
acquisitions of other companies with complementary geographical and logistics
service offerings. These add-on acquisitions are generally expected to have
earnings of $1.0 to $5.0 million. Companies in this range of earnings may be
receptive to our acquisition program since they are often too small to be
identified as acquisition targets of larger public companies or to independently
attempt their own public offerings.

         We believe we can successfully implement our acquisition strategy due
to: (i) the highly fragmented composition of the market; (ii) our strategy for
creating an organization with global reach, which should enhance an acquired
company's ability to compete in its local and regional market through an
expansion of offered services and lower operating costs; (iii) the potential for
increased profitability as a result of our centralization of certain
administrative functions, greater purchasing power, and economies of scale; (iv)
our standing as a public corporation; (v) a decentralized management strategy,
which should, in most cases, enable the acquired company's management to remain
involved in the operation of the Company; and (vi) the ability to utilize our
experienced management in identifying acquisition opportunities.

         A "platform acquisition" is defined by us as one that creates a
significant new capability for the Company. Through an international platform we
plan to add international freight forwarding and customs brokerage capabilities.
We will retain the management as well as the operating, sales and technical
personnel of a platform acquisition to maintain continuity of operations and
customer service. The objective would be to increase an acquired company's
revenues and improve its profitability by implementing our operating strategies
for internal growth.

         An "add-on" acquisition on the other hand will more likely be regional
in nature, will be smaller than a platform acquisition and will enable us to
offer additional services or expand into new regional markets. When justified by
the size and service offerings of an add-on acquisition, we expect to retain the
management, along with the operating, sales and technical personnel of the
acquired company, while seeking to improve that company's profitability by
implementing our operating strategies. In most instances where there is overlap
of geographic coverage, operations acquired by add-on acquisitions can be
integrated into our existing operations in that market, resulting in elimination
of duplicative overhead and operating costs.

         Our Operating Strategy

         o  Foster a Decentralized Entrepreneurial Environment. A key element of
            our operating strategy is to foster a decentralized, entrepreneurial
            environment for our employees. We intend to foster this environment
            by continuing to build on the names, reputations and customer
            relationships of acquired companies and by sharing their operating
            policies, procedures and expertise across the organization to
            develop new ideas to best serve the prospects of the Company. An
            entrepreneurial business atmosphere is likely to allow our regional
            offices to quickly and creatively respond to local market demands
            and enhance our ability to motivate, attract and retain managers to
            maximize growth and profitability.

         o  Develop and Maintain Strong Customer Relationships. We seek to
            develop and maintain strong interactive customer relationships by
            anticipating and focusing on our customers' needs. We emphasize a
            relationship-oriented approach to business, rather than the
            transaction or assignment-oriented approach used by many of our
            competitors. To develop close customer relationships, we regularly
            meet with both existing and prospective clients to help design
            solutions for, and identify the resources needed to execute, their
            supply chain strategies. We believe that this relationship-oriented
            approach results in greater customer satisfaction and reduced
            business development expense.

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o                 Centralize Administrative Functions. We seek to maximize our
                  operational efficiencies by integrating general and
                  administrative functions at the corporate level, and reducing
                  or eliminating redundant functions and facilities at acquired
                  companies. This enables us to quickly realize potential
                  savings and synergies, efficiently control and monitor our
                  operations and allows acquired companies to focus on growing
                  their sales and operations.

Operations

         The Company is executing a plan to create one of the leading
non-asset-based providers of global logistics services headquartered in the
United States. Under this plan, the Company's primary business operations
involve obtaining shipment or material orders from customers, creating and
delivering a wide range of logistics solutions to meet customers' specific
requirements for transportation and related services, and arranging and
monitoring all aspects of material flow activity utilizing advanced information
technology systems. These logistics solutions will include domestic and
international freight forwarding and door-to-door delivery services using a wide
range of transportation modes, including air, ocean and truck. The Company also
provides warehousing and other value-added services such as inventory
management, assembly, distribution and installation for manufacturers and
retailers of commercial and consumer products. In addition, the Company plans to
provide customs brokerage and other related services when it establishes its
international platform.

         As a non-asset-based logistics provider, the Company arranges for and
subcontracts services on a non-committed basis to airlines, motor carriers,
express companies, steamship lines and warehousing and distribution operators.
By concentrating on network-based solutions, the Company avoids competition with
logistics providers that offer dedicated outsourcing solutions for single
elements of the supply chain. Such dedicated logistics companies typically
provide expensive, customized infrastructure and systems for a customer's
specific application and, as a result, dedicated solutions that are generally
asset-intensive, inflexible and invariably localized to address only one or two
steps in the supply chain. Conversely, network-based services leverage common
infrastructure and technology systems so that solutions are scaleable,
replicable and require a minimum amount of customization (typically only at the
interface with the customer). This non-asset ownership approach maximizes the
Company's flexibility in creating and delivering a wide range of end-to-end
logistics solutions on a global basis while simultaneously allowing the Company
to exercise significant control over the quality and cost of the transportation
services provided.

         Within the logistics industry, the Company targets specific markets in
which the Company believes it can achieve a competitive advantage. For example,
in the freight forwarding market, the Company arranges transportation for
shipments of cargo that are generally larger and more complex than shipments
handled by integrated carriers, such as United Parcel Service and Federal
Express Corporation. In addition, the Company provides specialized combinations
of services that traditional freight forwarders cannot cost-effectively provide,
including time-definite delivery requirements, direct-to-store distribution and
merge-in-transit movement of products from various vendors in a single
coordinated delivery and/or installation to the end-user.

         The Company's services can be broadly classified into the following
categories:

         o  Freight Forwarding Services. The Company offers domestic and
            international air, ocean and ground freight forwarding for shipments
            that are generally larger than shipments handled by integrated
            carriers of primarily small parcels such as Federal Express
            Corporation and United Parcel Service. The Company's basic freight
            forwarding business is complemented by customized and information
            technology-based options to meet customers' specific needs. Through
            its domestic platform, the Company offers same day, one, two, three
            to five day service along with expedited ground service within North
            America and Puerto Rico. The Company also offers property brokerage
            services to customers for domestic shipments within the 48
            contiguous states. As a property broker, the Company undertakes to
            arrange for the transportation of shipments by motor carrier. In
            addition, one of the Company's affiliates provides motor carrier
            services involving the transportation of property by motor vehicle.


                                       6
<PAGE>

         o  Customs Brokerage Services. Through the international platform we
            intend to develop, we will provide customs brokerage services in the
            United States and most other countries in which we choose to
            operate. Within each country, the rules and regulations vary along
            with the level of expertise that is required to perform the customs
            brokerage services. Our customs brokers and support staff will have
            substantial knowledge of the complex tariff laws and customs
            regulations governing the payment of duty, as well as valuation and
            import restrictions in their respective countries.

         o  Warehousing and Other Value Added Services. Our warehousing services
            primarily relate to storing goods and materials to meet our
            customers' production or distribution schedules. Our related
            services include receiving, deconsolidation and decontainerization,
            sorting, put away, consolidation, assembly, inspection services,
            cargo loading and unloading, assembly of freight, customer inventory
            management and protective packing and storage. We receive storage
            charges for use of our warehouses and fees for other services.

         Other value added services provided by the Company include:

         o  Direct to store logistics for retail clients involving coordination
            of product received directly from manufacturers and dividing large
            shipments from manufacturers into numerous smaller shipments for
            delivery directly to retail outlets or distribution centers to meet
            time-definite product launch dates.

         o  Merge-in-transit logistics involving movement of products from
            various vendors at multiple locations to a Company facility and the
            subsequent merger of the various deliveries into a single
            coordinated delivery to the final destination. For example, such
            services are useful to retailers where deliveries from diverse
            sources are organized and distributed to maximize efficiency of the
            customer's sales and marketing programs.

         o  Value-added, high-speed, time-definite, total-destination programs
            that include packaging, transportation, unpacking and placement of a
            new product. The Company also packages and removes old equipment
            that is being replaced by the equipment that the Company delivers.

         o  Packaging, transportation, unpacking and stand installation for
            domestic trade shows and major expositions.

         o  Reverse logistics involving the return of products from end users to
            manufacturers, retailers, resellers or remanufacturers, including
            verification of working order, defect analysis, serial number
            tracking, and inventory management. An example of such services is
            provided for a major music retailer who returns outdated, non or
            slow selling music CD's from their various stores on a weekly basis
            to a centralized music warehouse for evaluation, reprocessing and
            possible re-distribution to other markets within its network that
            may be more receptive to certain music labels. The Company
            coordinates the pickup at each store on a designated day each week.
            The Company verifies the product returns, and then consolidates all
            of the returned product and delivers it to the music distribution
            center on a weekly basis at a specified date and time for further
            processing.

Information Services

         The regular enhancement of the Company's information systems and
ultimate migration of its platform and add-on acquisition companies to a common
set of back-office and customer facing applications is a key component of its
acquisition and growth strategy. Management believes that the ability to provide
accurate real-time information on the status of shipments will become
increasingly important and that its efforts in this area will result in
competitive service advantages and that centralizing its transportation
management system (rating, routing, tender and financial settlement processes)
will drive significant productivity improvement across the Stonepath network.


                                       7
<PAGE>

         The Company has and will continue to assess technologies obtained
through its acquisition strategy and develop a "best-of-breed" solution set
using a combination of owned and licensed technologies. This strategy will
result in the investment of significant management and financial resources to
deliver these enabling technologies.

Sales and Marketing

         We market services on a global basis supported by the sales efforts of
senior management, regional managers, terminal managers and our national service
centers located strategically across the United States. Managers at each
terminal are responsible for customer service and coordinate reporting of
customers' requirements and expectations with the regional managers and sales
staff, as well as the financial performance of their terminals. Our employees
are available 24 hours a day to respond to customer inquiries.

         We have increased our emphasis on obtaining high-revenue national
accounts with multiple shipping locations. These accounts typically impose
numerous requirements on those competing for their freight business, including
electronic data interchange and proof of delivery capabilities, the ability to
generate customized shipping reports and a nationwide network of terminals.
These requirements often limit the competition for these accounts to a very
small number of logistics providers. This enables us to more effectively compete
for and obtain these accounts.

         Our customers include large manufacturers and distributors of computers
and other electronic and high-technology equipment, printed and publishing
materials, automotive and aerospace components, trade show exhibit materials,
telecommunications equipment, machinery and machine parts, apparel and
entertainment equipment. For the year ended December 31, 2001, our largest
customer, a national retail chain, accounted for 53.2% of our revenues. As we
continue our acquisition strategy, our exposure to customer and industry
concentrations should be significantly reduced. Adverse conditions in the
industries of our customers could cause us to lose a significant customer or
experience a decrease in shipment volume. Either of these events could
negatively impact us. We expect that demand for our services, and consequently
results of our operations, will continue to be sensitive to domestic and global
economic conditions and other factors beyond our control.

         A critical part of the Company's business strategy is the development
of a global brand platform. We expect our brand platform to be instrumental in
helping the Company successfully integrate acquisitions and drive organic
expansion goals. We recently introduced a new brand identity that reflects our
mission to become a global, integrated logistics organization. The new brand,
Stonepath Logistics, has been grouped into two key operating entities that
mirror our business goals: Stonepath Logistics Domestic Services, Inc., and
Stonepath Logistics International Services, Inc.

         We plan to co-brand the businesses we acquire as we have with Air Plus
("Air Plus Limited, A Stonepath Logistics Company") in order to take advantage
of existing brand equity and customer relationships while building awareness for
Stonepath Logistics in the marketplace. This strategy is designed to facilitate
a straightforward integration process while minimizing post-acquisition
marketing expenditures. Our longer-term marketing and growth strategy calls for
the Company to integrate our acquired businesses and services into a single
global brand, which the Company believes will result in long-term industry
growth.

Competition and Business Conditions

         The Company's business is directly impacted by the volume of domestic
and international trade. The volume of such trade is influenced by many factors,
including economic and political conditions in the United States and abroad,
major work stoppages, exchange controls, currency fluctuations, acts of war,
terrorism and other armed conflicts, and United States and international laws
relating to tariffs, trade restrictions, foreign investments and taxation.

         The global logistics services and transportation industries are
intensively competitive and are expected to remain so for the foreseeable
future. The Company competes against other integrated logistics companies, as
well as transportation services companies, consultants, information technology
vendors and shippers' transportation departments. This competition is based
primarily on rates, quality of service (such as damage-free shipments, on-time
delivery and consistent transit times), reliable pickup and delivery and scope
of operations.

                                       8
<PAGE>

         The Company encounters competition from a large number of firms with
respect to the services provided by the Company. Much of this competition comes
from local or regional firms which have only one or a small number of offices
and do not offer the breadth of services and integrated approach being developed
by the Company. However, some of this competition comes from major United States
and foreign-owned firms which have networks of offices and offer a wide variety
of services. The Company believes that quality of service, including information
systems capability, global network capacity, reliability, responsiveness,
expertise and convenience, scope of operations, customized program design and
implementation and price are important competitive factors in its industry.

         Competition within the domestic freight forwarding industry is intense.
Although the industry is highly fragmented with a large number of participants,
the Company competes most often with a relatively small number of freight
forwarders with nationwide networks and the capability to provide the breadth of
services offered by the Company. The Company also encounters competition from
passenger and cargo air carriers, trucking companies and others. As the Company
expands its international operations, it expects to encounter increased
competition from those freight forwarders that have a predominantly
international focus, including Air Express International Corporation, Expeditors
International of Washington, Inc., Fritz Companies, Inc., (a unit of United
Parcel Service) and Eagle Logistics, Inc. Many of the Company's competitors have
substantially greater financial resources than the Company.

         The Company also encounters competition from regional and local air
freight forwarders, cargo sales agents and brokers, surface freight forwarders
and carriers and associations of shippers organized for the purpose of
consolidating their members' shipments to obtain lower freight rates from
carriers. As an ocean freight forwarder, the Company will encounter strong
competition in every country in which it chooses to operate. This includes
competition from steamship companies and both large forwarders with multiple
offices and local and regional forwarders with one or a small number of offices.
As an air freight forwarder, the Company encounters strong competition from
other air freight forwarders in the United States and overseas. The Company
believes that quality of service, including reliability, responsiveness,
expertise and convenience, scope of operations, information technology and price
are the most important competitive factors in its industry.

Regulation

         We do not believe that transportation related regulatory compliance has
had a material adverse impact on operations to date. However, failure to comply
with the applicable regulations or to maintain required permits or licenses
could result in substantial fines or revocation of our operating permits or
authorities. We cannot give assurance as to the degree or cost of future
regulations on our business. Some of the regulations affecting our operations
are described below.

         Our air freight forwarding business is subject to regulation, as an
indirect air cargo carrier, under the Federal Aviation Act by the U.S.
Department of Transportation, although air freight forwarders are exempted from
most of the Federal Aviation Act's requirements by the Economic Aviation
Regulations. The air freight forwarding industry is subject to regulatory and
legislative changes that can affect the economics of the industry by requiring
changes in operating practices or influencing the demand for, and the costs of
providing, services to customers.

         Our surface freight forwarding operations are subject to various
federal statutes and are regulated by the Surface Transportation Board. This
federal agency has broad investigatory and regulatory powers, including the
power to issue a certificate of authority or license to engage in the business,
to approve specified mergers, consolidations and acquisitions, and to regulate
the delivery of some types of domestic shipments and operations within
particular geographic areas. The Surface Transportation Board and U.S.
Department of Transportation also have the authority to regulate interstate
motor carrier operations, including the regulation of certain rates, charges and
accounting systems, to require periodic financial reporting, and to regulate
insurance, driver qualifications, operation of motor vehicles, parts and
accessories for motor vehicle equipment, hours of service of drivers,
inspection, repair, maintenance standards and other safety related matters. The
federal laws governing interstate motor carriers have both direct and indirect
application to the Company. The breadth and scope of the federal regulations may
affect the operations of the Company and the motor carriers which are used in
the provisioning of the transportation services. In certain locations, state or
local permits or registrations may also be required to provide or obtain
intrastate motor carrier services for the Company. Our property brokerage
operations similarly subject us to various federal statutes and regulation as a
property broker by the Surface Transportation Board, and we have obtained a
property broker license and posted a surety bond as required by federal law.

                                       9
<PAGE>
         The Federal Maritime Commission, or FMC, regulates and licenses ocean
forwarding operations. Once we establish our international platform of
operations, we will be subject to regulation of the FMC. Indirect ocean carriers
(non-vessel operating common carriers) are subject to FMC regulation, under the
FMC tariff filing and surety bond requirements, and under the Shipping Act of
1984, particularly those terms proscribing rebating practices.

         United States customs brokerage operations are subject to the licensing
requirements of the U.S. Treasury and are regulated by the U.S. Customs Service.
Once we establish our international platform of operations, we will be subject
to regulation by the Customs Service. Foreign customs brokerage operations are
also licensed in and subject to the regulations of their respective countries.

         In the United States, we are also subject to federal, state and local
provisions relating to the discharge of materials into the environment or
otherwise for the protection of the environment. Similar laws apply in many
foreign jurisdictions in which we operate or may operate in the future. Although
current operations have not been significantly affected by compliance with these
environmental laws, governments are becoming increasingly sensitive to
environmental issues, and we cannot predict what impact future environmental
regulations may have on our business. We do not anticipate making any material
capital expenditures for environmental control purposes during the remainder of
the current or succeeding years.

Personnel

         At December 31, 2001, the Company had approximately 220 total
employees. Approximately 43 employees were engaged principally in sales,
marketing and customer service, 134 in operations and 43 in finance,
administration and management functions.

         None of the Company's employees is covered by collective bargaining
agreement, and management believes it has a good relationship with the Company's
employees.

Discontinued Operations

         Prior to the first quarter of 2001, our principal business strategy
focused on the development of early-stage technology businesses with significant
Internet features and applications. Largely as a result of the significant
correction in the global stock markets which began during 2000, and the
corresponding decrease in the valuation of technology businesses and contraction
in the availability of venture financing, we elected to shift our business
strategy to focus on the acquisition of operating businesses within a particular
industry segment.

         Our new business objective was to acquire a controlling interest in
established businesses that historically generated revenues and net income and
demonstrated a reasonable opportunity to achieve significant growth. We intended
to target those businesses whose enterprise value could be enhanced on a
long-term basis through the adoption of e-commerce strategies and other
technologies, the implementation of innovative business practices, the addition
of experienced industry-specific management, or through other traditional means
of increasing efficiency and profitability.

         After having evaluated a number of different industries, during the
second quarter of 2001 we focused our acquisition efforts specifically within
the transportation and logistics industry as it:

         o  demonstrates significant growth characteristics as an increasing
            number of businesses outsource their supply-chain management in
            order to achieve cost-effective logistics solutions;
         o  is positioned for further consolidation as many sectors of the
            industry remain fragmented; and
         o  is capable of achieving enhanced efficiencies through the adoption
            of e-commerce and other technologies.


                                       10
<PAGE>

         This decision occurred in conjunction with our June 21, 2001
appointment of Dennis L. Pelino as our Chairman and Chief Executive Officer. Mr.
Pelino brings to us over 25 years of logistics experience, including most
recently, as President and Chief Operating Officer of Fritz Companies, Inc.,
where he was employed from 1987 to 1999.

         To reflect the change in business model, our financial statements have
been presented in a manner in which the assets, liabilities, results of
operations and cash flows related to our former business have been segregated
from that of our continuing operations and are presented as discontinued
operations.

Risks Particular to our Business

         In addition to other information included in this report, the following
factors should be considered in evaluating our business and future prospects:

         We have a very limited operating history upon which you can evaluate
our prospects.

         During 2001 we discontinued our former business model involving the
development of early-stage technology businesses, and adopted a new model
involving the delivery of non-asset based third-party logistics services. The
first acquisition under our new business model occurred on October 5, 2001. As a
result, we have a very limited operating history under our current business
model. Even though we are being managed by senior executives with significant
experience in the industry, our limited operating history makes it difficult to
predict the longer-term success of our business model.

         Risks related to our acquisition strategy.

         We intend to grow primarily through the acquisition of additional
logistics businesses. Increased competition for acquisition candidates may
develop in which event there may be fewer acquisition opportunities available to
us as well as higher acquisition prices. There can be no assurance that we will
be able to identify, acquire or profitably manage additional businesses or
successfully integrate acquired businesses, if any, into the Company without
substantial costs, delays or other operational or financial problems. Further,
acquisitions involve a number of risks, including possible adverse effects on
our operating results, diversion of management resources, failure to retain key
personnel, and risks associated with unanticipated liabilities, some or all of
which could have a material adverse effect on our business, financial condition
and results of operations.

         Our present levels of capital may limit the implementation of our
business strategy.

         The objective of our business strategy is to build a global logistics
services organization. Critical to this strategy is an aggressive acquisition
program which will require the acquisition of a number of diverse companies
within the logistics industry covering a variety of geographic regions and
specialized service offerings. We acquired Air Plus and have agreed to acquire
Global for an upfront cash payment plus an earn-out arrangement. As a result,
after the Global acquisition is completed we will have on hand a limited amount
of cash resources and our ability to make additional cash acquisitions
thereafter without securing additional financing from outside sources will be
limited. This may limit or slow our ability to achieve the critical mass we may
need to achieve our strategic objectives.

         Risks related to acquisition financing.

         We believe the Company has sufficient capital to implement its
acquisition strategy in the short term. However, in order to pursue our
acquisition strategy in the longer term, we will require additional financing,
which we intend to obtain through a combination of traditional debt financing or
the placement of debt and equity securities. We may finance some portion of our
future acquisitions by either issuing equity or by using shares of our common
stock for all or a substantial portion of the consideration to be paid. In the
event that the common stock does not attain or maintain a sufficient market
value, or potential acquisition candidates are otherwise unwilling to accept
common stock as part of the consideration for the sale of their businesses, we
may be required to utilize more of our cash resources, if available, in order to
maintain our acquisition program. If we do not have sufficient cash resources,
our growth could be limited unless we are able to obtain additional capital
through debt or equity financings.


                                       11
<PAGE>
         Additional dilution associated with our acquisition strategy.

         We are likely to require additional financing to fund our acquisition
strategy. At some point this may entail the issuance of additional shares of
common stock or common stock equivalents, which would have the effect of further
increasing the number of shares outstanding. In connection with future
acquisitions, we may undertake the issuance of more shares of common stock
without notice to our then existing stockholders. This may be done in order to,
among other things, facilitate a business combination, acquire assets or stock
of another business, compensate employees or consultants or for other valid
business reasons in the discretion of the Company's Board of Directors, and
could have the result of diluting the interests of our existing stockholders.

         We are not obligated to follow any particular criteria or standards for
         identifying acquisition candidates.

         Even though we have developed general acquisition guidelines, we are
not obligated to follow any particular operating, financial, geographic or other
criteria in evaluating candidates for potential acquisitions or business
combinations. We will target companies which we believe will provide the best
potential long-term financial return for our stockholders and we will determine
the purchase price and other terms and conditions of acquisitions. Our
stockholders will not have the opportunity to evaluate the relevant economic,
financial and other information that our management team will use and consider
in deciding whether or not to enter into a particular transaction.

         There is a scarcity of and competition for acquisition opportunities.

         There are a limited number of operating companies available for
acquisition which we deem to be desirable targets. In addition, there is a very
high level of competition among companies seeking to acquire these operating
companies. We are and will continue to be a very minor participant in the
business of seeking acquisitions of these types of companies. A large number of
established and well-financed entities are active in acquiring interests in
companies which we may find to be desirable acquisition candidates. Many of
these entities have significantly greater financial resources, technical
expertise and managerial capabilities than us. Consequently, we will be at a
competitive disadvantage in negotiating and executing possible acquisitions of
these businesses. Even if we are able to successfully compete with these
entities, this competition may affect the terms of completed transactions and,
as a result, we may pay more than we expected for potential acquisitions. We may
not be able to identify operating companies that complement our strategy, and
even if we identify a company that complements our strategy, we may be unable to
complete an acquisition of such a company for many reasons, including:

         o  a failure to agree on the terms necessary for a transaction, such as
            the amount of the purchase price;
         o  incompatibility between our operational strategies and management
            philosophies and those of the potential acquiree;
         o  competition from other acquirers of operating companies;
         o  a lack of sufficient capital to acquire a profitable logistics
            company; and
         o  the unwillingness of a potential acquiree to work with the
            management of our corporation or our affiliate companies.

         If we are unable to successfully compete with other entities in
identifying and executing possible acquisitions of companies we target, then we
will not be able to successfully implement our business plan.

         We may be required to incur a significant amount of indebtedness in
         order to successfully implement our acquisition strategy.

         We may be required to incur a significant amount of indebtedness in
order to complete one or more acquisitions necessary for us to implement our
business strategy. If we are not able to generate sufficient cash flow from the
operations of acquired companies to make scheduled payments of principal and
interest on the indebtedness, then we will be required to use our capital for
such payments. This will restrict our ability to make additional acquisitions.
We may also be forced to sell an acquired company in order to satisfy
indebtedness. We cannot be certain that we will be able to operate profitably
once we incur this indebtedness or that we will be able to generate a sufficient
amount of proceeds from the ultimate disposition of such acquired companies to
repay the indebtedness incurred to make these acquisitions.

                                       12
<PAGE>
         Our existing stockholders may experience additional dilution of their
         ownership interests due to the issuance of shares of our common stock
         upon exercise or conversion of existing derivative securities, the
         future payment of dividends on issued and outstanding shares of our
         Series C Preferred Stock, the hiring of additional personnel, or in
         connection with future acquisitions of other companies.

         We may in the future issue our previously authorized and unissued
securities which will result in the dilution of the ownership interests of our
present stockholders. We currently have 100,000,000 shares of common stock that
are authorized for issuance, of which we have issued 20,903,110 shares as of
March 15, 2002. We may in the future issue up to 16,409,748 additional shares of
our common stock to holders of our convertible securities, resulting in the
receipt of proceeds of up to approximately $26.5 million, as follows:
<TABLE>
<CAPTION>
                                                                 Number of Shares      Proceeds
                                                                 ----------------    -----------
<S>                                                                 <C>              <C>
Common stock purchase warrants                                      2,956,386        $12,010,337
Series C Preferred Stock and related Warrants                       4,337,146          2,348,213
Series C Contingent Warrants                                        2,583,333          2,583,333
Options to purchase shares of common stock granted to
employees, consultants and advisory board members                   6,532,883          9,575,208
                                                                   ----------        -----------
                                                                   16,409,748        $26,517,091
                                                                   ==========        ===========
</TABLE>

         The forced conversion of our Series C Preferred Stock may cause an
         influx of additional shares of common stock onto the market, which may
         in turn create downward pressure on the trading price of our common
         stock.

         Our present arrangements with the holders of our Series C Preferred
Shares have been designed to economically compel the conversion of these shares
to common stock on or about July 18, 2002. Although these arrangements would not
necessarily compel these holders to dispose of their shares, there is a
possibility that the act of conversion would induce a certain number of our
Series C holders to sell their shares at or about this time. The resale of these
shares into the public market, or the mere perception that these resales could
occur, could adversely affect the market price of our common stock.

         Substantial reliance on key customers.

         Even though our customer base will likely diversify as we grow through
acquisitions, our customer base has been highly concentrated, with our largest
customer, a national retail chain, accounting for 53.8% of our net sales for the
full fiscal year ended December 31, 2001 (computed on a pro forma basis as if
the Air Plus acquisition occurred on January 1, 2001). We believe the risk posed
by the concentration issue is mitigated since we have had a long standing
relationship with this customer and in view of our current arrangements, we are
confident that the relationship will remain ongoing for the foreseeable future.
Notwithstanding our beliefs, a significant reduction in orders from this or any
of our other large customers could have a material adverse effect on our future
results of operations. We will continue to provide superior services to all of
our customers and have no expectation that sales to these customers will be
reduced by virtue of any factors within our control. Our immediate plans,
however, are to reduce our dependence on any particular customer or customers by
increasing our sales and customer base by, among other things, diversifying our
service offerings and continuing with our growth strategy.

                                       13
<PAGE>
         Dependence on key personnel.

         For the foreseeable future our success will depend largely on the
continued services of our Chief Executive Officer, Dennis L. Pelino, as well as
certain of the other key executives of Air Plus, because of their collective
industry knowledge, marketing skills and relationships with major vendors and
customers. The Company has employment agreements with each of these individuals,
which contain a non-competition covenant which survives their actual term of
employment. Nevertheless, should any of these individuals leave the Company, it
could have a material adverse effect on our future results of operations.

         We face intense competition in the freight forwarding, logistics and
supply chain management industry.

         The freight forwarding, logistics and supply chain management industry
is intensely competitive and is expected to remain so for the foreseeable
future. We face competition from a number of companies, including many that have
significantly greater financial, technical and marketing resources. There are a
large number of companies competing in one or more segments of the industry,
although the number of firms with a global network that offer a full complement
of freight forwarding and supply chain management services is more limited.
Depending on the location of the customer and the scope of services requested,
we must compete against both the niche players and larger entities. In addition,
customers increasingly are turning to competitive bidding situations involving
bids from a number of competitors, including competitors that are larger than
us.

         We expect that our effective tax rate will increase in the future as we
         consume our consolidated net operating loss.

         Due to the losses incurred by us in our former business model, we have
accumulated net operating loss carryforwards for federal and state income tax
purposes. Once these losses have been consumed, our effective tax rate will
increase and cash flows will be affected accordingly.

         If we fail to improve our management information and financial
         reporting systems, we may experience delays in receiving management and
         financial information at the consolidated level which could disrupt our
         operations or impair our ability to monitor our operations resulting in
         a negative effect on our operations and financial condition.

         We recognize the need to improve our management information and
financial reporting systems at the consolidated level. We may experience delays,
disruptions and unanticipated expenses in implementing, integrating and
operating our consolidated management information and financial reporting
systems. Failure to enhance such systems could delay our receipt of management
and financial information at the consolidated level which could disrupt our
operations or impair our ability to monitor our operations and have a negative
effect on our financial condition.

         Because we are a holding company, we are financially dependent on
         receiving distributions from our subsidiaries and we could be harmed if
         such distributions could not be made in the future.

         We are a holding company and all of our operations are conducted
through subsidiaries. Consequently, we rely on dividends or advances from our
subsidiaries (including ones that are wholly owned). The ability of such
subsidiaries to pay dividends and our ability to receive distributions on our
investments in other entities is subject to applicable local law and other
restrictions including, but not limited to, applicable tax laws and, often,
limitations of this nature are contained in bank credit facilities. Such laws
and restrictions could limit the payment of dividends and distributions to us
which would restrict our ability to continue operations.

         Our industry is consolidating and if we cannot gain sufficient market
         presence in our industry, we may not be able to compete successfully
         against larger, global companies in our industry.

         There currently is a marked trend within our industry toward
consolidation of the niche players into larger companies which are attempting to
increase global operations through the acquisition of regional and local freight
forwarders. If we cannot gain sufficient market presence or otherwise establish
a successful strategy in our industry, we may not be able to compete
successfully against larger companies in our industry with global operations.

                                       14
<PAGE>

         Provisions of our charter, Delaware law and the agreements with our
         Preferred Stockholders may make more difficult a contested takeover of
         our Company.

         Certain provisions of our certificate of incorporation and the General
Corporation Law of the State of Delaware (the "GCL") could deter a change in our
management or render more difficult an attempt to obtain control of us, even if
such a proposal is favored by a majority of our stockholders. For example, we
are subject to the provisions of the GCL that prohibit a public Delaware
corporation from engaging in a broad range of business combinations with a
person who, together with affiliates and associates, owns 15% or more of the
corporation's outstanding voting shares (an "interested stockholder") for three
years after the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. Furthermore, under certain
circumstances a change in control transaction could permit our Series C holders
to put to the Company the dollar amount of their Series C investment. Finally,
our certificate of incorporation includes undesignated preferred stock, which
may enable our Board of Directors to discourage an attempt to obtain control of
us by means of a tender offer, proxy contest, merger or otherwise.

Item 2.  Properties

         The Company does not own any real estate and currently leases all of
its facilities.

         Our corporate headquarters is located at Two Penn Center Plaza, Suite
605, Philadelphia, Pennsylvania where we lease approximately 3,000 square feet
of office space. We also lease a small marketing and communications office in
New York, New York.

         In addition, the Company leases and maintains 15 facilities throughout
the United States and one in Puerto Rico, each located close to an airport. The
majority of these locations are operating terminals that contain office space
and warehouse or cross-dock facilities and range in size from approximately
10,000 square feet to 160,000 square feet. A few of these facilities are limited
to a small sales and administrative office.

         Lease terms for our principal properties are generally five years and
terminate at various times through 2006, while a few of the smaller facilities
are leased on a month-to-month basis. The Company believes that current leases
can be extended and that suitable alternative facilities are available in the
vicinity of existing facilities should extensions be unavailable or undesirable
at the end of the current lease arrangements.

Item 3.  Legal Proceedings

         On October 12, 2000, Emergent Capital Investment Management, LLC (the
plaintiff) filed suit against the Company and two of its officers contending
that it was misled by statements made by the defendants in connection with the
offering of the Company's Series C Preferred Stock which closed in March 2000.
Specifically, the plaintiff alleges that it is entitled to rescind the
transaction because it was allegedly represented that the size of the offering
would be $20.0 million and the Company actually raised $50.0 million. The
plaintiff seeks a return of its $2.0 million purchase price of Series C shares
and damages in the amount of $1.7 million. In June of 2001, the Company moved
for summary judgment in this case.

         After the summary judgment motion was filed, the plaintiff filed a
second action against the Company and two of its officers alleging different
allegations of fraud in connection with the Series C offering. In the new
complaint, the plaintiff alleges that oral statements and written promotional
materials distributed by the Company at a meeting in connection with the Series
C offering were materially inaccurate with respect to the Company's investment
in Net Value, Inc., a wholly owned subsidiary of the Company. The plaintiff also
contends that the defendants failed to disclose certain allegedly material
transactions in which an officer was involved prior to his affiliation with the
Company. The Company filed a motion to dismiss this new action for failure to
state a claim upon which relief can be granted.

         On October 2, 2001, the Court entered an order granting summary
judgment to the defendants in the first case filed by the plaintiff and
dismissing the plaintiff's second complaint for failure to state a claim upon
which relief can be granted. The Court allowed the plaintiff 20 days to file a
second amended complaint as to the second action only. On October 21, 2001, the
plaintiff did file a second amended complaint in the second action. The second

                                       15
<PAGE>

amended complaint does not raise any new factual allegations regarding
plaintiff's participation in the offering. The Company intends to file a motion
to dismiss the second amended complaint. If the motion is not granted, the
Company believes that it has meritorious defenses to the plaintiff's claims and
intends to vigorously defend this action.

         On August 22, 2000, Austost Anstalt Schaan, Balmore Funds, S.A. and
Amro International, S.A., purchasers of the Company's convertible promissory
notes, filed suit against the Company in the United States District Court for
the District of Delaware. The plaintiffs allege that, contrary to the Company's
covenant in the subscription agreement they executed, which required Stonepath
to "use reasonable commercial efforts to register" the shares of its common
stock underlying the convertible promissory notes "at some future date," the
Company verbally agreed to register such shares in the first registration
statement it filed with the Securities and Exchange Commission subsequent to the
transaction. The plaintiffs assert claims for breach of contract and the duty of
good faith and fair dealing, fraud, violation of federal securities laws,
estoppel, and reformation and seek damages in excess of $20.0 million, plus
attorneys' fees and costs. In response to a motion to dismiss filed by the
Company, the Court dismissed the federal securities law and estoppel claims and
denied the motion as to all other claims. The Company believes it has
meritorious defenses to the remaining claims and intends to defend the matters
vigorously.

         The Company is 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.

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

         We held our Annual Meeting of Stockholders on October 9, 2001. At the
Annual Meeting our shareholders voted on the following proposals listed in our
Proxy Statement dated August 24, 2001, as supplemented September 26, 2001:

         (1)  Vote for the Election of Directors

                                               FOR                      WITHHELD
                                               ---                      --------
              Dennis L. Pelino                 13,347,444               191,825
              Andrew P. Panzo                  13,301,033               238,236
              Aloysius T. Lawn, III            13,363,333               175,936
              Robert McCord                    13,363,633               175,636
              J. Douglass Coates               13,363,633               175,636
              Frank Palma                      13,363,633               175,636
              David R. Jones                   13,380,044               159,225

         (2)  Ratification of appointment of KPMG LLP as independent auditors
              for the Company

                            FOR                    AGAINST            ABSTAIN
                            ---                    -------            -------
                        13,373,744                 152,925            12,700

         Proposals (1) and (2) were approved by the stockholders.

                                     PART II

Item 5.  Market for Registrant's Common Stock and Related Stockholder Matters

         Our common stock has been traded on The American Stock Exchange under
the symbol "STG" since September 28, 2000. Previously, our stock was traded on
the NASDAQ Over-the-Counter Bulletin Board Trading System under the symbol
"NETV". The table below sets forth the high and low sales prices for our common
stock, while traded on The American Stock Exchange, and the high and low bid for
our common stock while traded on the NASDAQ Over-the-Counter Bulletin Board
Trading System. The information is provided by The American Stock Exchange and


                                       16
<PAGE>


the NASDAQ Trading and Market Services, respectively. The high and low bids
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.

                                                               High        Low
                                                               ----        ---
                         Year ended December 31, 2000
                                First quarter                 $35.75      $7.12
                                Second quarter                 16.75       4.00
                                Third quarter                   4.93       1.87
                                Fourth quarter                  2.37       0.31

                         Year ended December 31, 2001
                                First quarter                   1.13       0.38
                                Second quarter                  1.33       0.57
                                Third quarter                   1.88       0.97
                                Fourth quarter                  2.10       0.90


         As of March 15, 2002, there were 392 registered holders of record of
our common stock. We have not paid cash dividends on our common stock and do not
anticipate or contemplate paying cash dividends in the foreseeable future. We
plan to retain any earnings for use in the operations of our business and to
fund our acquisition strategy.

Recent Sales of Unregistered Securities

         During 2001, we issued 77,916 shares of our common stock, cumulatively,
to a group of 16 former employees as severance and in exchange for the
cancellation of their options to purchase 1,309,917 shares of our common stock.
We issued these shares of common stock in a transaction exempt from the
registration requirements of the Securities Act of 1933, pursuant to Section
4(2) thereunder.

         In May 2000, we issued 113,214 shares of our common stock to Webmodal,
Inc. in conjunction with a cash investment, pursuant to which we purchased
563,000 shares of Series A Preferred Stock of Webmodal, Inc. We issued these
shares of common stock in a transaction exempt from the registration
requirements of the Securities Act of 1933, pursuant to Section 4(2) thereunder.

         During 2001, we issued options to purchase 245,000 shares of our common
stock in consideration for services provided. 50,000 options were issued on
March 7, 2001 at an exercise price of $0.70 per share, and 20,000 options were
issued on June 21, 2001 at an exercise price of $1.00 per share, to various
outside attorneys for services rendered. 75,000 options were issued in March
2001 to PMG Capital at an exercise price of $0.70 per share in consideration for
investment banking services. 100,000 options were issued on June 30, 2001 to
Brown Simpson Partners I, Ltd. at an exercise price of $0.82 per share in
consideration for advisory services. All of these options were issued in a
transaction exempt from the registration requirements of the Securities Act of
1933, pursuant to Section 4(2) thereunder.

Item 6.  Selected Consolidated Financial Data

         The following tables present portions of our financial statements and
are not complete. You should read the following selected consolidated financial
data together with the Company's consolidated financial statements and related
footnotes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." The selected historical consolidated statement of
operations data for each of the three years in the period ended December 31,
2001 and the balance sheet data as of December 31, 2001 and 2000 are derived
from the Company's consolidated financial statements that have been audited by
KPMG LLP. The selected historical consolidated statement of operations data for
each of the two years in the period ended December 31, 1998 and the balance
sheet data as of December 31, 1999, 1998 and 1997 are derived from the Company's
audited consolidated financial statements (after reclassification for
discontinued operations, as discussed below) which are not included in this
Annual Report on Form 10-K.


                                       17
<PAGE>


         From inception through the first quarter of 2001, the Company's
principal business strategy focused on the development of early-stage technology
businesses with significant Internet features and applications. In June 2001,
the Company adopted a new business strategy to build a global integrated
logistics services organization by identifying, acquiring and managing
controlling interests in profitable logistics businesses. On October 5, 2001,
the Company acquired all of the issued and outstanding common shares of the Air
Plus group of companies, which provide a variety of logistics services
throughout the United States, Canada and Puerto Rico. On December 28, 2001, the
Board of Directors approved a plan to dispose of all of the assets related to
the former business, since the investments were incompatible with the Company's
new business strategy. Accordingly, for financial reporting purposes, the
results of operations of the Company's former line of business have been
accounted for as a discontinued operation and have been reclassified and
reported as a separate line item in the statements of operations.

         Due to the significance of the effects on the consolidated financial
statements of (1) the change in business strategy, (2) the acquisition of Air
Plus and (3) the discontinuation of our former business, the Company has
presented below selected pro forma information, as if the Company had
discontinued its former line of business and the acquisition of Air Plus had
each occurred as of January 1, 2000. The pro forma financial data are not
necessarily indicative of results of operations that would have occurred had
this acquisition been consummated at the beginning of the periods presented or
that might be attained in the future.

Consolidated Statement of Operations Data:
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
                                                                                Historical
                                   Pro forma(1)           -------------------------------------------------------------
                               Year ended December 31,                      Year ended December 31,
                               -----------------------    -------------------------------------------------------------
                                  2001          2000         2001         2000         1999         1998         1997
                               -----------   ----------   ----------   ----------   ---------    ---------    ---------
<S>                              <C>         <C>          <C>          <C>          <C>          <C>          <C>
Revenues                         $ 56,821    $  56,201    $  15,598    $     -      $    -       $     -      $    -
Cost of purchased
  transportation                   32,661       31,856        8,819          -           -             -           -
                                 ---------   ----------   ----------   ----------   ---------    ---------    ---------
Net revenues                       24,160       24,345        6,779          -           -             -           -


Operating expenses                (22,610)     (23,946)     (11,068)      (7,419)     (2,761)          -           -
                                 ---------   ----------   ----------   ----------   ---------    ---------    ---------
Income (loss) from operations       1,550          399       (4,289)      (7,419)     (2,761)          -           -

Other income (expense)                511        1,014        1,295        2,064      (2,812)          -           -
                                 ---------   ----------   ----------   ----------   ---------    ---------    ---------
Income (loss) from
  continuing operations             2,061        1,413       (2,994)      (5,355)     (5,573)          -           -
Loss from discontinued
  operations                            -            -      (13,863)     (30,816)    (18,258)     (12,737)     (11,235)
                                 ---------   ----------   ----------   ----------   ---------    ---------    ---------
Net income (loss)                   2,061        1,413      (16,857)     (36,171)    (23,831)     (12,737)     (11,235)

Preferred stock dividends          (4,151)     (45,751)      (4,151)     (45,751)     (6,605)     (15,251)      (1,181)
                                 ---------   ----------   ----------   ----------   ---------    ---------    ---------
Net loss to common
  stockholders                  $  (2,090)    $(44,338)    $(21,008)    $(81,922)   $(30,436)    $(27,988)    $(12,416)
                                =========   ==========   ==========   ==========   =========    =========    =========
Basic and diluted net
  (loss)  per common share -
  continuing operations         $   (0.10)    $  (2.51)    $  (0.34)    $  (2.89)   $  (1.15)    $     -      $    -


Basic and diluted net loss
  per common share -
   discontinued operations                                 $  (0.68)    $  (1.75)   $  (1.73)    $  (5.94)    $  (6.88)

Basic and diluted weighted
  average common shares
  outstanding                      20,510       17,658       20,510       17,658      10,558        4,711        1,085

</TABLE>
                                       18
<PAGE>

Consolidated Balance Sheet Data:
(in thousands)
<TABLE>
<CAPTION>
                                                                                    Historical
                                                                              Year ended December 31
                                                            ------------------------------------------------------------
                                                              2001         2000         1999         1998         1997
                                                            --------     --------    ---------    ---------    ---------
<S>                                                           <C>          <C>          <C>          <C>          <C>
Cash and cash equivalents                                 $  15,228    $  29,100    $   3,127     $      1    $       -
Working capital (deficit)                                    15,259       27,713       (4,213)      (8,750)      (2,427)
Total assets                                                 41,066       44,911       13,989          372            -
Long-term debt and redeemable preferred stock                     -            -        4,516            -            -
Stockholders' equity (deficit)                               32,694       43,326        1,701       (8,750)      (2,427)
</TABLE>
----------------------
(1)  The pro forma income from operations information provided above includes
     the costs associated with the continuing operations of Stonepath
     (approximately $2.5 million for 2001 and $7.4 million for 2000), plus the
     historical results of Air Plus, adjusted to reflect contractual reduction
     of officers' compensation and to reflect amortization of acquired
     intangibles. The pro forma results presented exclude losses from
     discontinued operations.

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         This discussion is intended to further the reader's understanding of
our financial condition and results of operations and should be read in
conjunction with our consolidated financial statements and related notes
included elsewhere herein. This discussion also contains statements that are
forward-looking. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the risks and
uncertainties set forth elsewhere in this Annual Report and in our other SEC
filings. Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as of the date hereof.

Overview

         We are a non-asset based provider of third-party logistics services,
offering a full range of time-definite transportation and distribution
solutions. We manage and arrange the domestic movement of raw materials,
supplies, components and finished goods for our customers as their outsourced
logistics solution. These services are offered through our domestic air and
ground freight forwarding business. In addition to our time-definite
transportation services, we also provide a broad range of value added supply
chain management services including warehousing, order fulfillment and inventory
management. We service a customer base of manufacturers, distributors and
national retail chains through a network of offices in 15 major metropolitan
areas in North America and Puerto Rico and an extensive network of over 200
independent carriers.

         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 platform of
service offerings through a combination of synergistic acquisitions and the
organic expansion of our existing base of operations. We are currently pursuing
an aggressive acquisition strategy to enhance our position in our current
markets and to acquire operations in new markets. 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, 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.

         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, 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
capitalize on 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. 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 organic organizational growth. The
business risks associated with these factors are discussed at Item 1 of this
Report under the heading "Risks Particular to our Business."

                                       19
<PAGE>

         On October 5, 2001, we acquiredAir Plus, a group of Minneapolis-based
privately held companies that provide a full range of logistics and
transportation services. The Air Plus acquisition established our domestic
logistics platform. The total value of the transaction was $34.5 million,
consisting of cash of $17.5 million paid at closing and a four-year earn-out
arrangement based on the future financial performance of Air Plus. Since this
acquisition was accounted for using the purchase method of accounting for
business combinations, our financial statements for the year ended December 31,
2001 (for continuing operations) include only the results of operations of Air
Plus from October 5, 2001 through December 31, 2001.

         The next stage of our growth strategy continued on March 5, 2002 when
we agreed to acquire Global , a Seattle-based privately held company that
provides a full range of international air and ocean logistics services. The
Global acquisition, if completed, will establish our initial international
logistics platform. The total value of the transaction is $12.0 million,
consisting of cash of $5.0 million to be paid at closing and up to an additional
$7.0 million payable over a five year earn-out period based upon the future
financial performance of Global. The transaction is expected to close by no
later than May 2002, and is subject to customary closing conditions, including
the completion of audited financial statements for the year ended December 31,
2001.

         We have also identified a number of additional companies that may be
suitable acquisition candidates and are in preliminary discussions with a select
number of them.

         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 (first day through
fourth day delivery), special handling needs (heavy equipment, delicate items,
environmentally sensitive goods, electronic components, etc.) and the means of
transport (truck, rail, air or ocean). In turn, we assume the responsibility for
arranging, and the cost of, the underlying means of transportation.

         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 incentives with our transportation
providers.

         Our gross revenue, as it relates to our freight forwarding services,
includes the rate charged to our customer for the movement of the freight. Our
net revenue is the differential between the rate charged to our customer and our
direct cost of transportation. With respect to freight forwarding services,
gross revenues and applicable costs are recognized upon delivery.

         We also provide a range of other services, such as warehousing
services, customized distribution and inventory management services, fulfillment
services and other specific supply chain solutions. Our gross revenue in these
situations is recognized upon performance.

         Effective upon the closing of the Global acquisition, our mix of
service offerings will expand to include ocean freight forwarding and customs
brokerage.

         Our operating results are likely to be subject to seasonal trends when
measured on a quarterly basis. Our first quarter is likely to be weaker as
compared with our other fiscal quarters, which we believe is consistent with the
trends of 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. Because of
the wide 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.

                                       20
<PAGE>

Discontinued Operations

         Prior to the first quarter of 2001, our principal business strategy
focused on the development of early-stage technology businesses with significant
Internet features and applications. Largely as a result of the significant
correction in the global stock markets which began during 2000, and the
corresponding decrease in the valuation of technology businesses and contraction
in the availability of venture financing during 2001, we elected to shift our
business strategy to focus on the acquisition of operating businesses within a
particular industry segment. Following a wind down of the technology business,
during the second quarter of 2001 we focused our acquisition efforts
specifically within the transportation and logistics industry as it:

         o        demonstrates significant growth characteristics as an
                  increasing number of businesses outsource their supply-chain
                  management in order to achieve cost-effective logistics
                  solutions;

         o        is positioned for further consolidation as many sectors of the
                  industry remain fragmented; and

         o        is capable of achieving enhanced efficiencies through the
                  adoption of e-commerce and other technologies.

This decision occurred in conjunction with our June 21, 2001 appointment of
Dennis L. Pelino as our Chairman and Chief Executive Officer. Mr. Pelino brings
to us over 25 years of logistics experience, including most recently, as
President and Chief Operating Officer of Fritz Companies, Inc., where he was
employed from 1987 to 1999.

         To reflect the change in business model, our financial statements have
been presented in a manner in which the assets, liabilities, results of
operations and cash flows related to our former business have been segregated
from that of our continuing operations and are presented as discontinued
operations.

Results of Operations

         Basis of Presentation

         Our results of operations are presented in a manner that is intended to
provide meaningful data with respect to our ongoing operations. Accordingly, pro
forma results of operations for 2001 and 2000 are first presented, as if we had
discontinued our former business model and acquired Air Plus as of January 1,
2000. The pro forma results reflect a consolidation of the historical results of
operations of Air Plus and Stonepath for 2001 as adjusted to reflect contractual
reduction of officers' compensation at Air Plus and to reflect amortization of
acquired intangibles. The pro forma results exclude losses associated with the
discontinued operations of Stonepath. We have also presented our historical
results of operations for 2001. This includes the results of operations of the
Company for the full year and only the results of Air Plus from October 5
through December 31, 2001. No prior period analysis will be presented for
historical 2000, as it would provide no meaningful data with respect to ongoing
operations.

Year ended December 31, 2001 (pro forma and unaudited) compared to year ended
December 31, 2000 (pro forma and unaudited)

         Despite both a slower economy during 2001 and the negative impact of
the September 11, 2001 tragedy, pro forma gross revenues were $56.8 million in
2001, an increase of 1.1% over pro forma gross revenues of $56.2 million in
2000. Included in gross revenues is warehousing and other value-added services
income of $1.9 million in 2001 and $1.5 million in 2000. Net revenues (i.e.,
gross revenue less purchased transportation costs of $32.7 million in 2001 and
$31.9 million in 2000) remained steady at approximately 43% of gross revenue in
both years.

         Consolidated personnel costs were $9.7 million for 2001, a decrease of
21.5% from $12.3 million for 2000, and represent payroll, related benefits and
taxes and non-cash charges for Stonepath stand-alone stock-based compensation.
Stock-based compensation expenses amounted to $2.4 million in 2001 and $3.4
million in 2000. Excluding the impact of the year over year reduction for
stock-based compensation, there is a net decrease of $1.6 million. On a
stand-alone basis, Air Plus' personnel costs increased $0.9 million because of
staffing at six new terminals, other staff additions and normal pay increases.
Stonepath stand-alone costs decreased $2.6 million due to changes in management
personnel in connection with our new logistics strategy.




                                       21
<PAGE>

         Other selling, general and administrative costs include all other
operating expenses including, among other costs, equipment and facility rentals,
professional fees, insurance, travel, general office expenses and depreciation
and amortization. On a consolidated basis, these costs amounted to $12.9 million
in 2001, an increase of 11.1% over $11.6 million in 2000. This net increase in
costs was driven by $2.6 million of incremental expenses incurred at Air Plus
related to the expansion of its historic Air Plus operations with $1.3 million
in offsetting savings at Stonepath from reduced professional fees and travel
costs.

         Consolidated operating income was $1.6 million in 2001, an increase of
$1.2 million from $0.4 million in 2000. On a stand-alone basis, Air Plus
delivered $4.1 million in income from operations in 2001 compared to $7.8
million in 2000, a reduction of $3.7 million due primarily to increases in
certain selling, general and administrative expenses associated with the
expansion of its historic Air Plus operations. On a stand-alone basis Stonepath
generated an operating loss of $2.5 million for 2001 compared to an operating
loss of $7.4 million for 2000 reflecting its transition away from its strategy
to invest in early-stage technology companies. With the benefit of Air Plus'
expanded network and related earnings power, Air Plus' future income from
operations is expected to exceed the $6.0 million earnings hurdle contemplated
as part of the original earn-out structure.

         Other income, which is comprised principally of interest income,
declined in 2001 compared to 2000 due to a lower investment level as a result of
the purchase of Air Plus and continuing costs at Stonepath.

         Preferred stock dividends declined to $4.2 million in 2001 from $45.8
million in 2000 primarily as a result of the $42.6 million attributable to the
non-cash beneficial conversion feature on the Series C preferred shares issued
in 2000.

Summary/Outlook

         Stonepath accomplished the first step in establishing our domestic
service platform through the acquisition of Air Plus in October of 2001. On a
stand-alone basis, Air Plus contributed $1.7 million in earnings in the fourth
quarter of 2001 and is expected to contribute earnings in excess of $6.0 million
for 2002. This is consistent with the level of pre-tax income required of Air
Plus so that the former Air Plus shareholders can achieve the full earn-out
payments due to them under the October 5, 2001 stock purchase agreement.

         Stonepath is also working to develop its international service platform
and announced on March 5, 2002 the proposed acquisition of Global. This
transaction is expected to close by no later than May 2002, and is subject to
customary closing conditions, including the completion of audited financial
statements for the year ended December 31, 2001. Based upon its targeted
earn-out level, and historic "normalized" financial performance, Global is
expected to deliver another $2.0 million in operating income. We have also
identified a number of additional companies that may be suitable acquisition
candidates and we are in preliminary discussions with a select number of them.

         Assuming we can continue to identify and close these and other similar
transactions, it is our objective by the fourth quarter of 2002, to have
annualized revenues in the range of $125.0 million to $150.0 million.

         Notwithstanding our expectations regarding Air Plus and Global, we can
never be certain that future revenue or earnings will be achieved at any
particular level. Estimates of future finance performance are forward-looking
statements. Furthermore, even though we believe Air Plus will achieve a certain
level of earnings on an annual basis, its results are subject to seasonal
trends. Historically, the results of Air Plus have been seasonal with their
first quarter results lower than other quarters. For 2000 and 2001, Air Plus
recognized an average of approximately 18% of its annual revenues and a small
percentage of its annual income, in the first quarter. Thereafter, volume and
income accelerates for the remainder of the year, with the third and fourth
quarters showing the greatest improvement.





                                       22
<PAGE>

Year Ended December 31, 2001 compared to Year Ended December 31, 2000
(historical)

         Gross revenues for 2001 amounted to $15.6 million and represent
revenues generated by Air Plus for the approximate three-month period from
October 5, 2001 (date of acquisition) to December 31, 2001. No revenues were
recognized in the year ended December 31, 2000. Included in 2001 gross revenues
is warehousing and other services income of $0.4 million. Net revenues (i.e.,
gross revenue less purchased transportation costs of $8.8 million) were 43.5% of
gross revenue during this period.

         Consolidated personnel costs amounted to $6.4 million in 2001, a 49.7%
increase over $4.3 million for 2000 and represent payroll, related benefits and
taxes and non-cash charges for Stonepath stand-alone stock-based compensation.
Stock-based compensation expenses amounted to $2.4 million in 2001 and $3.4
million in 2000. Excluding the impact of the year over year reduction for
stock-based compensation, there was an increase of $2.1 million of additional
personnel costs attributable to Air Plus for the period from October 5, 2001 to
December 31, 2001 and $1.0 million attributable to changes in management
personnel at Stonepath in connection with our new business strategy.

         Other selling, general and administrative costs include all other
operating expenses including, among other costs, equipment and facility rentals,
legal costs, insurance, travel, general office expenses and depreciation and
amortization. For 2001, these costs amounted to $4.7 million, a 48.5% increase
over $3.2 million in 2000. In 2001, approximately $2.9 million of these costs
were attributable to the inclusion of Air Plus. Stonepath costs decreased by
approximately $1.3 million due to reduced legal and travel costs.

         Other income, which is comprised principally of interest income,
declined in 2001 compared to 2000 due to a lower investment level resulting from
the use of funds to purchase Air Plus and continued funding of costs incurred by
Stonepath.

         Loss from continuing operations was $3.0 million in 2001 as compared to
a loss of $5.4 million for 2000. This improvement is the result of $1.7 million
in income contributed by Air Plus for the period from October 5, 2001 (date of
acquisition) to December 31, 2001 and $0.6 million of net savings from Stonepath
as a result of the shift to its logistics strategy.

         Discontinued operations reflect the costs associated with our holdings
in early-stage technology businesses, including investment losses, personnel and
office costs. Losses amounted to $13.9 million in 2001 compared to $30.8 million
in 2000 reflecting the wind-down of these investments.

         As a result of historical losses related to investments in early-stage
technology business, the Company has accumulated a federal net operating loss
carryforward of $43.2 million. Although a portion of this loss maybe subject to
certain limitations, the Company expects it will be able to use approximately
$26.0 million of the loss to offset future federal taxable income.

         Preferred stock dividends declined to $4.2 million in 2001 from $45.8
million in 2000 primarily as a result of the $42.6 million attributable to the
non-cash beneficial conversion feature on the Series C preferred shares issued
in 2000.

Liquidity and Capital Resources

         Prior to the adoption of our current business model, our operations
consisted of the development of early-stage technology businesses. These
operations did not generate sufficient operating funds to meet our cash needs,
and, as a result, we funded our historic operations with the proceeds from a
number of private placements of debt and equity securities. With the advent of
our new business model, we expect to be able to fund our operations with the
cash flow generated by the subsidiaries we acquire.




                                       23
<PAGE>

         Most recently, our funding needs have been provided by the proceeds
from the sale of 4,166,667 shares of our Series C Preferred Stock (sold as a
unit with warrants to purchase 416,667 shares of our common stock) completed
during March 2000. This offering yielded net proceeds of $48.3 million for the
Company, after the payment of offering costs. Each share of our Series C
Preferred Stock is convertible into one share of our common stock at any time at
the election of the shareholder. Our Series C Preferred Stock bears a cumulative
dividend of 8% per annum payable in kind on a quarterly basis and has a
liquidation preference of $12.00 per share.

         In February 2001, we agreed to modify the economic terms of the Series
C investment. This was done in return for securing the consent from the holders
of our Series C Preferred Stock to permit us to use the proceeds from the Series
C placement for the acquisition of third-party logistics businesses. Previously,
the Series C purchase documents limited the use of proceeds to investment in
early-stage internet businesses. In connection with this transaction, we agreed
to:

         (i) issue to the holders of our Series C Preferred Stock as of July 18,
2002, warrants to purchase up to a maximum of 3,000,000 shares of our common
stock at an exercise price of $1.00 per share if the then-effective conversion
price of the Series C Preferred Stock (the "Target Price") is greater than the
lesser of (a) $6.00 per share; or (b) the market price of our common stock at
such time (but not less than $5.00 per share). The number of such warrants to be
issued will be that number which, assuming all of the Series C Preferred Stock
is converted and all warrants to purchase 416,667 shares of Common Stock issued
in conjunction with the issuance of the Series C Preferred Stock and all Series
C Contingent Warrants are exercised, is sufficient to reduce the average cost of
the holders' investment in the Company to the Target Price; and

         (ii) reduce to $1.00 per share the exercise price of the Series C
warrants held by the holders of our Series C Preferred Stock as of July 18,
2002.

         In March 2001, we also received proceeds of approximately $7.0 million
from the sale of our interest in Webmodal, Inc. (including $1.0 million from the
repayment of prior advances).

         During 2001, operating activities consumed $503,000 of cash as we had
no source of revenue through October 5, 2001, and from October 5, 2001 through
December 31, 2001 the income generated through the operations of Air Plus was
insufficient to offset the operating expenses of the Company for the year.

         The Company's working capital was $15.3 million at December 31, 2001,
as compared to $27.7 million at December 31, 2000. The decrease in working
capital is principally attributable to the funds used to finance the acquisition
of Air Plus offset by the proceeds received from the sale of the Company's
interest in Webmodal.

         Investing activities utilized $18.0 million in 2001 for the acquisition
of Air Plus on October 5, 2001. The Company also expects to spend another $5.0
million in connection with the pending acquisition of Global.

         The Company believes that its current working capital and anticipated
cash flow from operations will be adequate to fund operations for the near term.
However, the Company has commenced an aggressive acquisition strategy which is
likely to require additional financing in the near term. The Company intends to
finance these acquisitions primarily through the use of cash, funds from debt
facilities, if and when available, and shares of its common stock or other
securities. In the event that the Company's common stock does not attain or
maintain a sufficient market value or potential acquisition candidates are
otherwise unwilling to accept the Company's securities as part of the purchase
price for the sale of their businesses, the Company may be required to utilize
more of its cash resources, if available, in order to continue its acquisition
program. If the Company does not have sufficient cash resources through either
operations or from debt facilities, its growth could be limited unless it is
able to obtain such additional capital.




                                       24
<PAGE>

         To address its near-term liquidity issues, we are currently in the
early stages of attempting to secure a revolving credit facility of
approximately $15.0 million (the "Facility") collateralized by the accounts
receivable and the other assets of the Company and its subsidiaries. The
Facility may require the Company and its subsidiaries to meet certain financial
objectives and maintain certain financial covenants. Until the arrangements are
finalized, however, we can not speculate as to the limitations, if any, that may
be imposed by the Facility. Advances under the Facility are intended to be used
to finance future acquisitions, capital expenditures or for other corporate
purposes. We expect that the cash flow from operations of Air Plus and any other
subsidiaries acquired during the year will be sufficient to support the
corporate overhead of Stonepath and some portion, if not all, of the contingent
earn-out payments or other cash requirements associated with our acquisitions.
Therefore, we anticipate that our primary uses of capital in the near term 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.

         The acquisition of Air Plus was completed subject to an earn-out
arrangement of $17.0 million. 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, each installment payable in full if Air Plus achieves
pre-tax net 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 net 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 net income in any other pay-out year exceeds the $6.0 million level.

         We are also in the process of developing our international service
platform. On March 5, 2002, we agreed to acquire Global, a Seattle-based
privately held company that provides a full range of international air and ocean
logistics services. The total value of the transaction is $12.0 million,
consisting of cash of $5.0 million to be paid at closing and up to an additional
$7.0 million payable over a five year earn-out period based upon the future
financial performance of Global. The transaction is expected to close no later
than May 2002, and is subject to customary closing conditions, including the
completion of audited financial statements for the year ended December 31, 2001.

         We will be required to make significant capital payments in the future
if the earn-out installments under our various acquisitions become due. While we
believe that a significant portion of the required capital 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 Company is also 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.

New Accounting Pronouncements

         In August 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144, Impairment
or Disposal of Long-Lived Assets, which supersedes both SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and the accounting and reporting provisions of APB No. 30, Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions, for the disposal of a segment of a business. SFAS No. 144 retains
the fundamental provisions of SFAS No. 121 for recognizing and measuring
impairment losses on long-lived assets held for use and long-lived assets to be
disposed of by sale, while also resolving significant implementation issues
associated with SFAS No. 121. For example, SFAS No. 144 provides guidance on how
a long-lived asset is held for sale, and prescribes the accounting for a
long-lived asset that will be disposed of other than by sale. SFAS No. 144
retains the basic provisions of APB No. 30 on how to present discontinued
operations in the income statement but broadens that presentation to include a
component of an entity (rather than a segment of a business). Unlike SFAS No.
121, an impairment assessment under SFAS No. 144 will never result in a
write-down of goodwill; rather, goodwill is evaluated for impairment under SFAS
No. 142, Goodwill and Other Intangible Assets.





                                       25
<PAGE>

         The Company plans to adopt SFAS No. 144 effective January 1, 2002. The
Company does not expect the adoption of SFAS No. 144 for long-lived assets held
for use to have a material effect on its consolidated financials statements
because the impairment assessment under SFAS No. 144 is largely unchanged from
SFAS No. 121. The provisions of the Statement for assets held for sale or other
disposal generally are required to be applied prospectively after the adoption
dated to newly initiated disposal activities.

Critical Accounting Policies

         Accounting policies, methods and estimates are an integral part of the
consolidated financial statements prepared by management and are based upon
management's current judgments. Those judgments are normally based on knowledge
and experience with regard to past and current events and assumptions about
future events. Certain accounting policies, methods and estimates are
particularly sensitive because of their significance to the consolidated
financial statements and because of the possibility that future events affecting
them may differ from management's current judgments. While there are a number of
accounting policies, methods and estimates that affect the Company's
consolidated financial statements as described in Note 2 to the consolidated
financial statements, areas that are particularly significant include the
assessment of the recoverability of long-lived assets, specifically goodwill,
acquired intangibles, and investments in early-stage technology companies, and
the establishment of the allowance for doubtful accounts.

         As discussed in Note 2 to the consolidated financial statements, the
goodwill arising from the Air Plus transaction is not amortized, but instead
will be tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. In addition, the acquired intangibles arising from
the Air Plus transaction are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the asset may not be
recoverable. The recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the asset to future net undiscounted cash
flows expected to be generated by the asset.

         As discussed in Note 3 to the consolidated financial statements, the
Company's prior business strategy focused on the development of early-stage
technology businesses with significant Internet features and applications
(referred to as affiliate companies). The Company continually evaluates the
carrying value of its ownership interests in and advances to the affiliate
companies for possible impairment based on achievement of business plan
objectives and milestones, the financial condition and prospects of the
affiliate companies and other relevant factors. The business plan objectives and
milestones considered by the Company include, among other things, those related
to financial performance such as achievement of planned financial results or
completion of capital raising activities, and those that are not primarily
financial in nature such as the bringing to market of a major product or
service. If impairment is determined, the carrying value of the investment is
adjusted to fair value. As of December 31, 2001, the carrying amount of the
Company's investments in its affiliated companies is $416,000.

         Management at the Company's Air Plus operation maintains reserves for
specific and general allowances against accounts receivable. The specific
reserves are established on a case-by-case basis by management and the credit
manager. A general reserve is established for all other accounts receivable,
based on a specified percentage of the accounts receivable balance. Management
continually assesses the adequacy of the recorded allowance for doubtful
accounts, based on its knowledge concerning the customer base.




                                       26
<PAGE>


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

         Our exposure to market risk relates primarily to changes in interest
rates and the resulting impact on our invested cash. We place our cash with high
credit quality financial institutions and invest that cash in money market funds
and investment grade securities with remaining maturities of less than 90 days.
We are averse to principal loss and ensure the safety and preservation of our
invested funds by investing in only highly rated investments and by limiting our
exposure in any one issuance. If market interest rates were to increase
immediately and uniformly by 10% from levels at December 31, 2001, the fair
value of our portfolio would decline by an immaterial amount. We do not invest
in derivative financial instruments.

Item 8.  Financial Statements

         Our financial statements as of December 31, 2001 and 2000 and for each
of the years in the three-year period ended December 31, 2001 and footnotes
related thereto are included within Item 14(a) of this Report and may be found
at pages F-1 through F-22.

Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosures

         None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

         Our directors, executive officers and significant employees as of March
15, 2002 were as follows:
<TABLE>
<CAPTION>
        Name                               Age    Position
        <S>                                <C>    <C>
        Dennis L. Pelino                    54    Chairman of the Board of Directors and Chief Executive Officer
        Gary Koch                           43    Significant Employee - Domestic Operations
        Bohn H. Crain                       38    Chief Financial Officer
        Stephen M. Cohen                    45    Senior Vice President, General Counsel and Secretary
        Thomas L. Scully                    52    Vice President - Finance and Treasurer/Principal Accounting Officer
        Douglass Coates                     59    Director
        Frank Palma (2)                     64    Director
        David R. Jones (1)(2)               53    Director
        Aloysius T. Lawn, IV (1)(2)         43    Director
        Robert McCord (1)                   43    Director
        Andrew Panzo                        37    Director
</TABLE>
-----------------
(1)      Member of Audit Committee
(2)      Member of Compensation Committee

         The following is a brief summary of the business experience of the
foregoing directors, executive officers and significant employees.

         Dennis L. Pelino has served as our Chairman of the Board of Directors
and Chief Executive Officer since June 21, 2001. Mr. Pelino has over two decades
of executive experience in the logistics industry. From 1986 to 1999, he was
employed by Fritz Companies, Inc., initially as director of International
Operations and Sales and Marketing, in 1993 as its Chief Operating Officer and
commencing in 1996, also as its President. Mr. Pelino was also a member of the
Board of Directors of Fritz Companies from 1991 to 1999. During Mr. Pelino's
tenure, he acquired or started over 50 companies for Fritz as it became one of
the leading global logistics companies. Prior to Fritz, Mr. Pelino held senior
executive positions in the container shipping industry and in the domestic
full-service truck leasing industry. Most recently, from 1999 through 2001, Mr.
Pelino has been involved as a director and principal of a number of private
ventures which explored opportunities in the logistics industry and which
provided consulting services relative to business opportunities in Latin
America, China and other Far Eastern regions.





                                       27
<PAGE>

         Gary Koch is a significant employee of the Company and serves as the
Chief Executive Officer of Air Plus and Stonepath Logistics Domestic Services,
Inc. Mr. Koch co-founded Air Plus in May 1990. In ten years, he built Air Plus
into a leading transportation logistics company serving a customer base of
manufacturing distributors and national retail chains with close to $60.0
million in annual revenues, over 200 employees and 16 offices in North American
cities. Mr. Koch has over twenty years of logistics experience in the U.S. and
Canadian markets with expertise in traditional airfreight and distribution
logistics. Mr. Koch received a B.S. in marketing from Purdue University.

         Bohn H. Crain has served as our Chief Financial Officer since January
10, 2002. Mr. Crain has over 15 years of experience in finance and accounting as
well as extensive knowledge of transportation and logistics. Prior to joining
Stonepath's executive team, from January 2001 to September 2001, he served as
Executive Vice President and Chief Financial Officer for Schneider Logistics,
Inc., a third party logistics company. Before Schneider, from May 2000 to
January 2001, Mr. Crain served as Vice President and Treasurer for Florida East
Coast Industries, Inc., and prior to that, from June 1989 to May 2000, he held
various Vice-President and treasury positions with CSX and various of its
subsidiaries. Mr. Crain holds a bachelor's degree in business administration -
accounting from the University of Texas.

         Stephen M. Cohen has served as the Company's Senior Vice President,
General Counsel and Secretary since April 2000. Since 1980, Mr. Cohen has been
engaged in the practice of law, having most recently been a shareholder of
Buchanan Ingersoll Professional Corporation from March 1996 to April 2000 and a
partner of Clark Ladner, Fortenbaugh & Young from March 1990 to March 1996. Mr.
Cohen's practice focused on corporate finance and federal securities matters.
Mr. Cohen received a B.S. from the School of Commerce and Finance of Villanova
University, a J.D. from Temple University and a L.L.M. in Taxation from
Villanova University School of Law.

         Thomas L. Scully has served as our Vice President - Finance and
Treasurer since November 19, 2001. Before joining Stonepath, Mr. Scully was
Senior Manager within the assurance and advisory services of Deloitte & Touche,
LLP from December 1996 to November 2001. Prior to Deloitte & Touche, from
October 1980 to June 1996, Mr. Scully was Audit Partner at BDO Seidman, LLP
where he led numerous accounting, auditing and tax engagements for publicly
traded and privately-held local, national, and international clients. Prior to
BDO, he held the position of Audit Supervisor at Coopers & Lybrand, LLP. Mr.
Scully is a certified public accountant and earned a B.S. from St. Joseph's
University, Philadelphia.

         J. Douglass Coates has served as a member of our Board of Directors
since August 2001. He has been Principal of Manalytics International, Inc., a
transportation, logistics and supply chain consulting firm based in San
Francisco, California, since 1992. He was previously president, ACS Logistics, a
division of American President Lines, and President of Milne Truck Lines, then a
subsidiary of the Sun Company. Mr. Coates holds a Bachelor of Science degree in
engineering from Pennsylvania State University and an MBA from the Wharton
School of the University of Pennsylvania.

         Frank Palma has served as a member of our Board of Directors since
August 2001. Mr. Palma has significant experience in the field of executive
search and human resources. Since August 2000, Mr. Palma has been the principal
and Chief Executive Officer of Frank Palma Associates, LLC, an executive
recruiting firm. Briefly before that, he was the Chief Operating Officer of
Global Sources, Inc., a human resources firm, and from 1985 to 2000, he was an
Executive Vice President with Goodrich & Sherwood Associates, Inc., a human
resource consulting services firm. Mr. Palma holds a Bachelor of Science degree
in Business Management from the City College of New York and has completed
graduate course work at Cornell University and New York University.

         David Jones has served as a member of our Board of Directors since
September 2000. Mr. Jones has been President of DR Jones Financial, Inc., a
privately-held consulting firm since its formation in September 1995. He is
presently a director of Financial Asset Securities Corporation, an affiliate of
Greenwich Capital Markets, Inc. Prior to forming DR Jones Financial, Inc., Mr.
Jones was Senior Vice President-Asset Backed Finance of Greenwich Capital
Markets, Inc. from 1989 to 1995. Mr. Jones served as a Vice President, and
subsequently as a Managing Director of The First Boston Corporation, an
investment banking firm, from 1982 to 1989 and as Manager-Product Development of
General Electric Credit Corp., an asset-based lender and financial services
company, from 1981 to 1982. Mr. Jones is a graduate of Harvard College and has a
Masters Degree in business administration from the Amos Tuck School of Business
Administration.




                                       28
<PAGE>

         Aloysius T. Lawn has served as a member of our Board of Directors since
February 2001. Mr. Lawn is the Executive Vice President - General Counsel and
Secretary of Talk America Holdings, Inc., an integrated communications service
provider with programs designed to benefit the residential and small business
markets. Prior to joining Talk America Holdings, Inc. in 1996, Mr. Lawn was an
attorney in private practice with extensive experience in private and public
financings, mergers and acquisitions, securities regulation and corporate
governance from 1985 through 1995. Mr. Lawn graduated from Yale University and
Temple University School of Law.

         Robert McCord has served as a member of our Board of Directors since
March 2001. He is also a Managing Director of PA Early Stage, an affiliated fund
of Safeguard Scientifics Inc. At PA Early Stage, which he co-founded in 1997,
Mr. McCord specializes in business development for their portfolio companies. He
also serves as President and CEO of the Eastern Technology Council, a consortium
of more than 1,200 technology-oriented companies. At the Technology Council he
provides contacts, capital and information for senior executives. Mr. McCord
co-founded and also serves as a principal of the Eastern Technology Fund, which
provides seed and early-stage funding for technology companies in the eastern
corridor. Previously, he served as Vice President of Safeguard Scientifics,
Inc., a leader in identifying, developing and operating premier technology
companies. Before joining Safeguard, Mr. McCord spent a decade on Capitol Hill
where he served as Chief of Staff, Speechwriter and Budget Analyst in a variety
of congressional offices. He specialized in budget and deregulatory issues and,
as CEO of the bipartisan Congressional Institute for the Future, he ran a staff
which tracked legislation and provided policy analyses and briefings. Mr. McCord
earned his Bachelor's degree, with high honors, from Harvard University and his
MBA from the Wharton School.

         Andrew P. Panzo is a member of our Board of Directors. He had been our
Chairman and Chief Executive Officer from January 1999 through June 21, 2001,
and our Vice-Chairman and President from June 22, 2001 until his resignation
from those positions on December 14, 2001. From October 1993 to June 1999, Mr.
Panzo was a managing director at American Maple Leaf Financial Corporation, a
boutique investment banking firm located in Philadelphia, Pennsylvania. Mr.
Panzo was one of the original founders of the Company under its former business
model in September 1996. Mr. Panzo received a B.S. in Finance from the
University of Connecticut and a Masters degree in Finance and International
Business from Temple University.

Compliance with Section 16(a) of The Securities Exchange Act

         Based solely on our review of copies of forms filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, as amended, and written
representations from certain reporting persons, we believe that during fiscal
2001 all reporting persons timely complied with all filing requirements
applicable to them.

Item 11. Executive Compensation

         The following table sets forth a summary of the compensation paid or
accrued for the three fiscal years ended December 31, 2001 to or for the benefit
of our Chief Executive Officer and our other executive officers whose cash
compensation exceeded $100,000 (the "Named Executive Officers").




                                       29
<PAGE>
<TABLE>
<CAPTION>
                                                Summary Compensation Table
                                              ----------------------------



                                                                            Long-Term Compensation
                                                                                    Awards
                                                                                    ------
                                            Annual Compensation           Restricted
                                            -------------------             Stock          Number             All Other
Name and Principal Position                  Salary       Bonus             Awards       of Options         Compensation(1)
---------------------------                 --------     --------         ----------    -----------         ------------
<S>                              <C>        <C>          <C>              <C>           <C>                  <C>
Dennis L. Pelino, Chairman       2001       $158,691     $180,000              --        1,800,000(2)
and Chief Executive Officer                                                                                         --

Stephen M. Cohen, Senior         2001       $227,884      $50,000              --          750,000(3)               --
Vice President, General          2000       $103,927           --              --          300,000(4)               --
Counsel and Secretary

James F. Elwell, former          2001       $201,537           --          22,000          100,000              34,615
Vice President-Finance(5)        2000        $98,307           --              --               --                  --

Andrew P. Panzo, director and    2001       $212,692      $55,000              --          250,000             575,000
former Chief Executive           2000       $148,147           --              --        1,020,000                  --
Officer(6)                       1999        $87,500           --              --               --                  --

Lee C. Hansen, former            2001       $161,730           --              --               --                  --
President and Director           2000       $150,000           --              --          900,000                  --
                                 1999        $34,615           --              --               --                  --
</TABLE>
(1)      During the periods reflected, certain of the officers named in this
         table received perquisites and other personal benefits not reflected in
         the amounts of their respective annual salaries or bonuses. The dollar
         amount of these benefits did not, for any individual in any year,
         exceed the lesser of $50,000 or 10% of the total annual salary and
         bonus reported for that individual in any year.

(2)      These options were granted in conjunction with Mr. Pelino's employment
         by the Company on June 21, 2001. Options to purchase 600,000 shares
         vested on October 5, 2001 in conjunction with our acquisition of Air
         Plus. The remaining 1,200,000 options vest to the extent of 400,000 per
         year on each of the first three (3) annual anniversaries of Mr.
         Pelino's employment by the Company, with 100% acceleration of vesting
         once our stock trades above $9.00 per share, upon his death or
         disability, or in the event of his termination following a change of
         control transaction.

(3)      These options were granted in conjunction with an amendment to Mr.
         Cohen's employment agreement during April 2001. They vest pro rata over
         the thirty-six (36) month period of his employment through April 2004.

(4)      These options were surrendered by Mr. Cohen during the fourth quarter
         of 2001.

(5)      Mr. Elwell resigned as an employee as of December 31, 2001. The "other
         compensation" indicated includes two (2) months of salary as severance.
         In addition, as part of his separation from the Company, Mr. Elwell
         agreed to surrender options to purchase 250,000 shares of our common
         stock in exchange for 22,000 shares.

(6)      Mr. Panzo resigned as an executive officer of the Company effective as
         of December 19, 2001. The "other compensation" indicated includes a
         severance benefit of $575,000, of which $275,000 was paid in January
         2002 and the balance is to be paid in January 2003. In conjunction with
         the terms of his separation agreement with the Company, Mr. Panzo fully
         vested in all of his options also as of December 19, 2001.

(7)      Mr. Hansen resigned as an executive officer of the Company effective as
         of June 22, 2001. The salary indicated includes a severance payment of
         $85,000. In conjunction with the terms of his agreement with the
         Company, Mr. Hansen vested as of June 22, 2001, in options to purchase
         697,500 shares of our common stock. The balance of his options were
         cancelled.



                                       30
<PAGE>

Employment Agreements

         Effective as of February 22, 2002, we entered into an amended
employment agreement with our Chief Executive Officer, Dennis L. Pelino. This
agreement amended and restated our prior agreement with Mr. Pelino dated June
21, 2001. Pursuant to this agreement, we have agreed to employ Mr. Pelino as a
Chief Executive Officer through June 2006 at an annual base salary of $360,000.
In addition to his base salary, Mr. Pelino is entitled to bonus compensation
based upon the achievement of certain target objectives, as well as
discretionary merit bonuses that can be awarded at the discretion of our Board
of Directors. Pursuant to the employment agreement, Mr. Pelino is also entitled
to fringe benefits including participation in pension, profit sharing and bonus
plans, as applicable, and life insurance, hospitalization, major medical, paid
vacation and expense reimbursement. In conjunction with his original employment
agreement, Mr. Pelino was issued options to purchase 1,800,000 shares of our
common stock at an exercise price of $.82 per share.

         As of April 19, 2001, we entered into a three-year employment agreement
with our General Counsel, Stephen M. Cohen. This was further modified effective
December 27, 2001. This had the effect of amending and restating our prior
employment agreement with Mr. Cohen entered into in April 2000. In addition to
an annual salary of $200,000, Mr. Cohen is entitled to bonus compensation based
upon the achievement of certain target objectives, as well as discretionary
merit bonuses that can be awarded at the discretion of our Board of Directors.
Pursuant to his employment agreement, Mr. Cohen is entitled to fringe benefits
including participation in pension, profit sharing and bonus plans, as
applicable, and life insurance, hospitalization, major medical, paid vacation
and expense reimbursement. On April 19, 2001, we awarded Mr. Cohen options to
purchase 750,000 shares of common stock, at an exercise price of $.60.

         On January 10, 2002, we entered into a three-year employment agreement
with our Chief Financial Officer, Bohn H. Crain. In addition to an annual base
salary of $200,000, Mr. Crain's employment agreement provides for bonus
compensation based upon the achievement of certain target objectives, as well as
bonus compensation determined at the discretion of the Board of Directors.
Pursuant to his employment agreement, Mr. Crain is entitled to fringe benefits
including participation in pension, profit sharing and bonus plans, as
applicable, and life insurance, hospitalization, major medical, paid vacation
and expense reimbursement. We awarded Mr. Crain options to purchase 150,000
shares of common stock, as of January 10, 2002, at an exercise price of $1.78.

Change in Control Arrangements

         Our Chief Executive Officer and General Counsel are each employed under
agreements that contain change in control arrangements. If employment is
terminated following a change in control (other than for cause), then we must
pay the terminated employee a termination payment equal to 2.99 times his salary
and bonus, based upon the average annual bonus paid to him prior to termination
of his employment. In addition, all of their unvested stock options shall
immediately vest as of the termination date of their employment due to a change
in control.

         In each of these employment agreements, a change in control is defined
as the occurrence of any one of the following:





                                       31
<PAGE>

         [ ]  any "Person" (as the term "Person" is used in Section 13(d) and
              Section 14(d) of the Securities Exchange Act of 1934), except for
              the effected employee, becomes the beneficial owner, directly or
              indirectly, of our securities representing 50% or more of the
              combined voting power of our then outstanding securities;

         [ ]  there occurs a contested proxy solicitation of our stockholders
              that results in the contesting party obtaining the ability to vote
              securities representing 50% or more of the combined voting power
              of our then-outstanding securities;

         [ ]  there occurs a sale, exchange, transfer or other disposition of
              50% or more in value of our assets to another Person or entity,
              except to an entity controlled directly or indirectly by us;

         [ ]  there occurs a merger, consolidation or other reorganization
              involving us in which we are not the surviving entity and in which
              our stockholders prior to the transaction continue to own less
              than 50% of the outstanding securities of the acquiror immediately
              following the transaction, or a plan involving our liquidation or
              dissolution other than pursuant to bankruptcy or insolvency laws
              is adopted; or

         [ ]  during any period of twelve consecutive months, individuals who at
              the beginning of such period constituted the Board of Directors
              cease for any reason to constitute at least a majority of the
              Board of Directors unless the election, or the nomination for
              election by our stockholders, of each new director was approved by
              a vote of at least a majority of the directors then still in
              office who were directors at the beginning of the period.

         Notwithstanding the foregoing, a "change of control" is not be deemed
to have occurred (i) in the event of a sale, exchange, transfer or other
disposition of substantially all of our assets to, or a merger, consolidation or
other reorganization involving, us and any entity in which the effected employee
has, directly or indirectly, at least a 25% equity or ownership interest; or
(ii) in a transaction otherwise commonly referred to as a "management leveraged
buy-out".

Directors Compensation

         During 2001, Messrs. Pelino and Panzo received no compensation for
serving on the Board except for reimbursement of reasonable expenses incurred in
attending meetings. Non-employee directors are paid $1,250 per month, provided
that each member attends 75% of all meetings. In addition, an annual fee of
$10,000 is paid to the chairman of the audit and compensation committees. Each
of our non-employee directors received an option to purchase 50,000 shares of
our common stock with an exercise price equal to the closing price of our common
stock on the trading day prior to the date of grant. 50% of these options vest
on the first anniversary of the director's membership on the Board, and the
balance vest on the second anniversary of Board membership. In addition to his
compensation as a Director, during 2001 Mr. McCord received $40,000 cash
compensation and 50,000 options under a consulting agreement with the Company.
David Jones also received $15,000 during 2001 under a consulting arrangement
with the Company.

         The following table sets forth information on option grants in fiscal
2001 to the Named Executive Officers.
<TABLE>
<CAPTION>
                                                  Option Grants in Last Fiscal Year
                                                  ---------------------------------
                                   % of Total
                                     Options                                          Potential Realizable Value at
                                   Granted to              Market                     Assumed Annual Rates of Stock
                       Number of    Employees              Price on                Price Appreciation for Option Term
                        Options     in Fiscal   Exercise   Date of    Expiration   ----------------------------------
        Name            Granted       Year        Price     Grant        Date              5%               10%
        ----           ---------   ----------   --------   --------   ----------           --               ---
<S>                    <C>         <C>          <C>        <C>        <C>                  <C>              <C>
Dennis Pelino         1,800,000      54.88%      $0.82      $0.82     June 2011          $928,000        $2,352,000
Stephen M. Cohen        750,000      22.87%      $0.60      $0.60     April 2011          283,000           717,000
Andrew P. Panzo         250,000       7.62%      $0.60      $0.60     April 2011           94,000           239,000
James F. Elwell         100,000       3.05%      $0.60      $0.60     April 2011           38,000            96,000
</TABLE>
The following table sets forth information concerning year-end option values for
fiscal 2001 for the Named Executive Officers. All options were valued based on
the closing bid price of our common stock on December 31, 2001 of $1.85.




                                       32
<PAGE>
<TABLE>
<CAPTION>
                                               Fiscal Year End Option Values
                                               -----------------------------

                                                    Number of Unexercised Options     Value of Unexercised In-the-Money
                             Shares                       at Fiscal Year End              Options at Fiscal Year End
                          Acquired on      Value      ---------------------------      --------------------------------
          Name              Exercise     Realized     Exercisable   Unexercisable      Exercisable        Unexerciseble
          ----            -----------    --------     -----------   -------------      -----------        -------------
<S>                       <C>            <C>          <C>           <C>                <C>                <C>
Dennis Pelino                  -             -          600,000       1,200,000        $   618,000          $1,236,000
Stephen M. Cohen               -             -          166,667         583,333            208,334             729,166
Andrew P. Panzo                -             -        1,270,000            -             1,179,500               -
Lee C. Hansen                  -             -          697,500            -               592,875               -
</TABLE>

Stock Options

         Effective as of June 1, 2000 (with amendments effective as of July 31,
2000), the Company adopted and implemented the "Amended and Restated Stonepath
Group, Inc. 2000 Stock Incentive Plan," (the "Plan") which covers 5,000,000
shares of common stock. Under its terms, employees, officers and directors of
the Company and its subsidiaries are currently eligible to receive non-qualified
stock options, restricted stock awards, and, incentive stock options within the
meaning of Section 422 of the Code. In addition, advisors and consultants who
perform services for the Company or its subsidiaries are eligible to receive
non-qualified stock options under the Plan. The Plan is administered by the
Board of Directors or a committee designated by the Board of Directors.

         All stock options granted under the Plan are exercisable for a period
of up to ten (10) years from the date of grant. The Company may not grant
incentive stock options pursuant to the Plan at exercise prices which are less
than the fair market value of common stock on the date of grant. The term of an
incentive stock option granted under the Plan to a stockholder owning more than
10% of the issued and outstanding common stock may not exceed five years and the
exercise price of an incentive stock option granted to such stockholder may not
be less than 110% of the fair market value of common stock on the date of grant.

         The Plan contains certain limitations on the maximum number of shares
of common stock that may be awarded in any calendar year to any one individual
for the purposes of Section 162(m) of the Code. As of March 15, 2002, options to
purchase 2,052,250 shares of common stock were outstanding under the Plan. These
stock options have exercise prices ranging from $0.50 to $6.38 per share.

         In addition to the stock options covered by the Plan, the Company has
outstanding options to purchase 4,380,633 shares of common stock. At March 15,
2002, these options were outstanding at the following exercise prices:

               Number of Stock Options                Exercise Price
               -----------------------                --------------
                   3,875,833                           $.82  - $1.00
                     251,200                           $1.01 - $5.00
                     253,600                           $5.01 - $17.50
                   ---------
                   4,380,633
                   =========




                                       33
<PAGE>

Item 12.   Security Ownership of Executive  Officers,  Directors and Beneficial
           Owners of Greater Than 5% of the Company's Voting Securities

         The following tables set forth information with respect to the
beneficial ownership of common stock and Preferred Stock owned, as of March 15,
2002, by:

o      the holders of more than 5% of any class of the Company's voting
       securities;

o      each of the directors;

o      each of the executive officers; and

o      all directors and executives officers of the Company as a group.

         As of March 15, 2002, an aggregate of 20,903,110 shares of common stock
and 3,750,479 shares of Series C Preferred Stock were issued and outstanding.
For purposes of computing the percentages under the following tables, it is
assumed that all options and warrants to acquire common or preferred stock which
have been issued to the directors, executive officers and the holders of more
than 5% of common or preferred stock and are fully vested or will become fully
vested within 60 days from March 15, 2002 have been exercised by these
individuals and the appropriate number of shares of common and Preferred Stock
have been issued to these individuals.
<TABLE>
<CAPTION>
                                               COMMON STOCK
                                               ------------

                                                                Shares Owned Beneficially
Name of Beneficial Owner              Position                      and of Record (1)        Percentage of Class
------------------------              --------                      -----------------        -------------------
<S>                                   <C>                           <C>                      <C>
Dennis L. Pelino (2)                  Officer, Director                835,000                       3.8%
Stephen M. Cohen (3)                  Officer                          303,517                       1.4%
Bohn H. Crain (4)                     Officer                          --                            *
Thomas L. Scully(5)                   Officer                          --                            *
David R. Jones (6)                    Director                         95,000                        *
Aloysius T. Lawn, IV (7)              Director                         25,000                        *
Robert McCord (8)                     Director                         75,000                        *
Douglas Coates (9)                    Director                         --                            *
Frank Palma (9)                       Director                         --                            *
Michael Karp                          Beneficial Owner                 1,463,250                     6.8%
University City Housing
1062 Lancaster Avenue
Suite 30B
Rosemont, PA 19010
Andrew P. Panzo (10)                  Director                         1,424,476                     6.6%
All directors and executive
officers as a group (10 people)                                        2,757,993                     11.9%
</TABLE>
---------------------------------------
(*)      Less than one percent.

(1) Beneficial ownership has been determined in accordance with Rule 13d-3 under
    the Securities Exchange Act of 1934. Unless otherwise noted, the Company
    believes that all persons named in the table have sole voting and investment
    power with respect to all shares of common stock beneficially owned by them.




                                       34
<PAGE>

(2)  Includes 235,000 shares and 600,000 shares of common stock issuable upon
     exercise of vested options. Does not include 1,200,000 shares of common
     stock issuable pursuant to options not presently exercisable and not
     exercisable within 60 days of March 15, 2002.

(3)  Includes 11,850 shares and 291,667 shares of common stock issuable upon
     exercise of vested options and options which vest within 60 days of March
     15, 2002. Does not include 458,333 shares of common stock issuable pursuant
     to options not presently exercisable within 60 days of March 15, 2002.

(4)  Does not include 150,000 shares of common stock issuable pursuant to
     options not presently exercisable within 60 days of March 15, 2002.

(5)  Does not include 25,000 shares of common stock issuable pursuant to options
     not presently exercisable within 60 days of March 15, 2002.

(6)  Includes 70,000 shares and 25,000 shares of common stock issuable upon
     exercise of vested options and options which vest within 60 days of March
     15, 2002. Does not include 25,000 shares of common stock issuable pursuant
     to options not presently exercisable within 60 days of March 15, 2002.

(7)  Includes 25,000 shares of common stock issuable upon the exercise of vested
     options and options which vest within 60 days of March 15, 2002. Does not
     include 25,000 shares of common stock issuable pursuant to options not
     presently exercisable within 60 days of March 15, 2002.

(8)  Includes 75,000 shares of common stock issuable upon the exercise of vested
     options and options which vest within 60 days of March 15, 2002. Does not
     include 25,000 shares of common stock issuable pursuant to options not
     presently exercisable within 60 days of March 15, 2002.

(9)  Does not include 50,000 shares of common stock issuable pursuant to options
     not presently exercisable within 60 days of March 15, 2002.

(10) Includes 154,476 shares and 1,270,000 shares of common stock issuable upon
     exercise of vested options.

<TABLE>
<CAPTION>
                            SERIES C PREFERRED STOCK
                            ------------------------
                                                                       Shares of
                                                               Series C Preferred Stock
                                                                Owned Beneficially and
Name of Beneficial Owner                                             of Record (1)            Percentage of Class
------------------------                                             -------------            -------------------
<S>                                                                  <C>                      <C>
Brown Simpson Partners I, Ltd.                                            963,371                    25.69%
Carnegie Hall Tower
152 West 57th Street, 21st Fl.
New York, NY 10019

Montrose Investments Ltd.                                                 674,359                    17.98%
300 Crescent Ct., Suite 700
Dallas TX 75201

The Raptor Global Portfolio, Ltd.                                         479,567                    12.79%
40 Rowes Wharf, 2nd Fl.
Boston, MA 02110
</TABLE>
(1) Beneficial ownership has been determined in accordance with Rule 13d-3
    under the Securities Exchange Act of 1934. Unless otherwise noted, the
    Company believes that all persons named in the table have sole voting and
    investment power with respect to all shares of Series C Preferred Stock
    beneficially owned by them. These share amounts do not include the warrants
    to purchase up to 3,000,000 shares of Common Stock which the Company has
    agreed to issue to holders of the Company's Series C Preferred Stock as of
    July 18, 2002 as more fully discussed in Item 13, "Certain Relationships
    and Related Transactions - Contingent Warrants."




                                       35
<PAGE>

Item 13. Certain Relationships and Related Transactions

Contingent Warrants

         In February 2001, we received the consent from the holders of more than
two-thirds of our issued and outstanding shares of Series C Preferred Stock to
modify the use of proceeds provisions as originally defined within the Series C
Preferred Stock Purchase Agreement. As amended, we may now use the proceeds from
the sale of the preferred stock to make any investments in the ordinary course
of our business, as from time-to-time determined by our Board of Directors, or
for any other business purpose approved by the Board of Directors. Previously,
we were limited to use the proceeds for investments in early-stage Internet
companies.

         In exchange for this consent we agreed to:

(i)  issue to the holders of our Series C Preferred Stock as of July 18, 2002,
     warrants to purchase up to a maximum of 3,000,000 shares of our common
     stock at an exercise price of $1.00 per share if the then-effective
     conversion price of the Series C Preferred Stock (the "Target Price") is
     greater than the lesser of (a) $6.00 per share; or (b) the market price of
     our common stock at such time (but not less than $5.00 per share). The
     number of such warrants to be issued will be that number which, assuming
     all of the Series C Preferred Stock is converted and all warrants to
     purchase 416,667 shares of Common Stock issued in conjunction with the
     issuance of the Series C Preferred Stock and all Series C Contingent
     Warrants are exercised, is sufficient to reduce the average cost of the
     holders' investment in the Company to the Target Price; and

(ii) reduce to $1.00 per share the exercise price of the existing warrants held
     by the holders of our Series C Preferred Stock as of July 18, 2002.

         As a condition to receiving the new warrants and the reduction in the
exercise price of the existing warrants, the holders of the Series C Preferred
Stock will convert their shares of Preferred Stock into shares of our common
stock.

Agreement with Former Officers

         On December 14, 2001, we entered into a Separation Agreement with
Andrew P. Panzo, our former Chief Executive Officer (prior to our hiring of
Dennis L. Pelino), in which we agreed with Mr. Panzo to terminate his April 19,
2001 employment agreement with us. In this agreement, we agreed to make
severance payments to Mr. Panzo of $275,000 on or before January 2, 2002 and
$300,000 on or before January 2, 2003. We also agreed to continue Mr. Panzo and
his family on our medical plan for a period of one (1) year and to accelerate
the vesting associated with the balance of his options to purchase 1,270,000
shares of our common stock. At the time he was already vested in 1,102,500 of
his options. In connection with the agreement, Mr. Panzo resigned his position
as an officer of the Company, yet remained on our Board of Directors.

         On June 22, 2001, we entered into an agreement with Lee Hansen, our
former President, in which the parties agreed to terminate Mr. Hansen's
September 15, 1999 employment agreement with us. In the agreement, we agreed to
pay Mr. Hansen $85,000, to continue Mr. Hansen and his family on our medical
plan for an additional six (6) months and to accelerate the vesting of options
to purchase 135,000 shares of our common stock that otherwise would not have
vested as a result of the termination of his employment with us. As a result,
Mr. Hansen holds currently exercisable options to purchase 697,500 shares of our
common stock at an exercise price of $1.00 per share.




                                       36
<PAGE>

Amendment and Restatement of Employment Arrangements with Executive Officers

         Effective as of February 22, 2002, we entered into an amended
employment agreement with our Chief Executive Officer, Dennis L. Pelino. This
agreement amended and restated our prior agreement with Mr. Pelino dated June
21, 2001. A description of the terms of our new agreement with Mr. Pelino can be
found under Item 11, "Executive Compensation-Employment Agreements." Previously,
on October 18, 2001, we amended the terms of the options granted to Mr. Pelino
under his original employment agreement dated June 22, 2001. A description of
the terms of Mr. Pelino's options can be found under Item 11, "Executive
Compensation-Options Grants in Last Fiscal Year."

         Effective April 19, 2001, and again on December 27, 2001, we amended
the terms of our employment agreement with Stephen M. Cohen, our Senior Vice
President and General Counsel. The terms of our new agreement with Mr. Cohen are
provided under Item 11, "Execution Compensation-Employment Agreements."

Consulting Arrangement with Principal Stockholder of Series C Preferred Stock

         During June 2001 we entered into an arrangement with Brown Simpson
Partners I, Ltd. (the "Brown Simpson Fund") to provide advisory services for us
from time to time. Under the arrangement, the Brown Simpson Fund provided
ongoing advice regarding possible acquisition projects in which we may be
involved. Brown Simpson Fund is the beneficial owner of 963,371 shares of our
Series C Preferred Stock (25.7% of the Series C Preferred Stock outstanding as
of March 15, 2002). We issued to Brown Simpson Fund an option to purchase
100,000 shares of our Common Stock at an exercise price of $.82 per share (the
market value of our Common Stock on the date we entered our arrangement with the
Brown Simpson Fund) which vested once we completed the Air Plus acquisition.

Loans to Officers and Directors

         Under the terms of our employment agreement with Mr. Cohen, we provided
him with a loan in the principal amount of $100,000. The loan accrues interest
at the rate of 8% per annum and is due on April 17, 2004, or such earlier date
that Mr. Cohen shall have received aggregate proceeds of $5,000,000 from the
sale of his options or the shares of common stock underlying his options.
However, Mr. Cohen is not required to repay the loans if by April 17, 2004, the
sum of the proceeds which he has received from the sale of his options or the
shares of common stock underlying his options and the remaining equity in the
options as of April 17, 2004 does not equal or exceed $5,000,000.

         In June 1999, we extended a loan to Mr. Darr Aley in the principal
amount of $267,000 in connection with our acquisition of Strategicus Partners,
Inc. The loan was to be forgiven over a three year period during which Mr. Aley
was expected to provide consulting services to us. During March 2001, we
restructured the loan to provide for a maturity date of June 2002. However, Mr.
Aley is not required to repay the loan if by the maturity of June 2002, the sum
of the proceeds which he has received from the sale of his warrants or shares
received in connection with the Strategicus transaction, and the remaining value
of such warrants or shares as of the maturity date, does not equal or exceed
$5,000,000.

Consulting Agreement with Director

         In March 2001, we entered into a one-year consulting agreement with Mr.
McCord, a director, whereby Mr. McCord would provide services to us related to
our recently published change in business strategy and efforts to acquire
operating businesses. As compensation for his services, we agreed to pay Mr.
McCord a monthly fee of $8,750 and he received an option to purchase 50,000
shares of our common stock at an exercise price of $.70. During 2001, we paid
$40,000 to Mr. McCord for consulting services. The arrangement between the
Company and Mr. McCord lapsed during the third quarter of 2001.




                                       37
<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K
<TABLE>
<S>     <C>                                                                                                   <C>
(a)      Documents filed as part of this Report:

         1.    Consolidated Financial Statements:
         Independent Auditors' Report..........................................................................F-1
         Consolidated Balance Sheets as of December 31, 2001 and 2000..........................................F-2
         Consolidated Statements of Operations for the Years Ended
              December 31, 2001, 2000 and 1999.................................................................F-3
         Consolidated Statements of Stockholders' Equity and Comprehensive Loss
               for the Years Ended December 31, 2001, 2000 and 1999............................................F-4
         Consolidated Statements of Cash Flows for the Years Ended
               December 31, 2001, 2000 and 1999................................................................F-5
         Notes to Consolidated Financial Statements............................................................F-6

         2.     Consolidated Financial Statement Schedule:
         Schedule II - Valuation and Qualifying Accounts......................................................F-23
</TABLE>

(b)      Reports on Form 8-K:

         We filed three reports on Form 8-K during the fiscal quarter ended
December 31, 2001:

         (i)      Form 8-K filed on October 19, 2001 disclosing under Item 2 the
                  acquisition of Air Plus Limited on October 5, 2001.

         (ii)     Form 8-K/A filed on December 19, 2001 including under Item 7
                  the pro forma financial statements required with respect to
                  the Air Plus acquisition.

         (iii)    From 8-K filed on December 27, 2001 disclosing under Item 5
                  the resignation of Andrew P. Panzo and the entering into of a
                  Separation Agreement between the Company and Mr. Panzo.

(c)      Exhibit Listing:

         Exhibit
         Number       Document

        2.1 (1)       Stock Purchase Agreement by and among Stonepath Logistics,
                      Inc., Stonepath Group, Inc. and M.G.R., Inc, Distribution
                      Services, Inc., Contract Air, Inc., the Shareholders of
                      M.G.R., Inc., Distribution Services, Inc., Contract Air,
                      Inc. and Gary A. Koch (as Shareholders' Agent)

        2.2 (1)       First Amendment to Stock Purchase Agreement by and Among
                      Stonepath Logistics, Inc., Stonepath Group, Inc. and
                      M.G.R., Inc, Distribution Services, Inc., Contract Air,
                      Inc., the Shareholders of M.G.R., Inc., Distribution
                      Services, Inc., Contract Air, Inc. and Gary A. Koch (as
                      Shareholders' Agent)

        2.3 (2)       Agreement and Plan of Merger among Stonepath Group, Inc.
                      Net Value Acquisition, Inc. and Net Value, Inc.


        3.1 (3)       Amended and Restated Certificate of Incorporation

        3.2 (4)       Certificate of Amendment to the Certificate of
                      Incorporation

        3.3 (4)       Amended and Restated Bylaws

        4.1 (3)       Specimen Common Stock Certificate for Stonepath Group,
                      Inc.

        4.2 (6)       Certificate of Designations, Preferences and Rights of the
                      Series C Convertible Preferred Stock

        4.3 (6)       Form of Common Stock Purchase Warrant issued in connection
                      with the Series C Convertible Preferred Stock

        4.4 (6)       Form of Compensation Warrant to be issued in connection
                      with the Series C Convertible Preferred Stock







                                       38
<PAGE>

        4.5 (8)       Form of Letter Agreement with the holders of the Series C
                      Preferred Stock (relating to the issuance of the Series C
                      Contingent Warrants).

        4.6 (6)       Registration Rights Agreement, dated as of March 3, 2000,
                      by and among Net Value Holdings, Inc. and the holders of
                      the Series C Convertible Preferred Stock

        4.7 (6)       Series C Preferred Stock Agreement, dated as of March 3,
                      2000, among Net Value Holdings, Inc. and The Altar Rock
                      Fund, L.P., Raptor Global Portfolio, Ltd., Brown Simpson
                      Strategic Growth Fund, Ltd. and Brown Simpson Strategic
                      Growth Fund, L.P.

        4.8 (6)       Series C Preferred Stock Purchase Agreement, dated as of
                      March 3, 2000, among Net Value Holdings, Inc. and the
                      remaining holders of the series C Convertible Preferred
                      Stock

        4.9(16)       Certificate of Increase of Shares Designated as Series C
                      Convertible Participating Preferred Stock.

        4.10(2)       Stonepath Group, Inc. Amended and Restated 2000 Stock
                      Incentive Plan (the "Plan")

        4.11(9)       Form of Stock Option Agreement under the Plan

        4.12(9)       Form of Non-Plan Option to Purchase Common Stock of the
                      Company

        4.13(16)      Amended and Restated Option Agreement between the Company
                      and Dennis L. Pelino effective as of February 22, 2002
                      ("Pelino Options")

        4.14(9)       Amendment No. 1 to Pelino Options effective as of October
                      18, 2001

        4.15(9)       Stock Option Agreement between the Company and Andrew P.
                      Panzo dated April 19, 2001

        4.16(9)       Stock Option Agreement between Net Value, Inc. and Andrew
                      P. Panzo dated December 4, 1999

        4.17(13)      Option to Purchase Common Stock of the Company granted to
                      Andrew P. Panzo effective as of June 1, 1999

        4.18(9)       Stock Option Agreement between the Company and Stephen M.
                      Cohen dated April 19, 2001

        4.19(13)      Option to Purchase Common Stock of Stonepath Group, Inc.
                      granted to Lee Hansen effective as of June 22, 2001

        4.20(7)       Amended and Restated Employment Agreement with Tom Aley
                      dated April 17, 2000

        4.21(7)       Common Stock Purchase Warrant issued to Darr Aley on May
                      8, 2000

        4.22(7)       Common Stock Purchase Warrant issued to Stephen George on
                      May 8, 2000

        4.23(7)       Common Stock Purchase Warrant issued to Barry Uphoff on
                      May 8, 2000

        4.24(12)      Incentive Stock Option Agreement between the Company and
                      Bohn H. Crain dated January 10, 2002

        4.25(16)      Option to Purchase Common Stock of the Company granted to
                      Brown Simpson Partners I, Ltd. Effective as of June 30,
                      2001

        10.1(10)      Employment Agreement between the Company and Dennis L.
                      Pelino dated June 21, 2001

        10.2(16)      Amended and Restated Employment Agreement between the
                      Company and Dennis L. Pelino dated February 22, 2002




                                       39
<PAGE>

        10.3(7)       Employment Agreement between the Company and with Stephen
                      M. Cohen dated April 17, 2000

        10.4(13)      Amended and Restated Employment Agreement between the
                      Company and Stephen M. Cohen dated April 19, 2001

        10.5(16)      Letter Agreement between the Company and Stephen M. Cohen
                      dated December 27, 2001

        10.6(12)      Employment Agreement between the Company and Bohn H. Crain
                      dated January 10, 2002

        10.7(11)      Separation Agreement between the Company and Andrew P.
                      Panzo dated December 11, 2001

        10.8(13)      Agreement between Stonepath Group, Inc. and Lee Hansen
                      dated June 22, 2001

        10.9 (3)      Promissory Note in the amount of $267,000 issued by Darr
                      Aley in favor of Net Value Holdings, Inc., dated June 16,
                      1999

        10.10 (4)     Consulting Agreement with Rob McCord, dated March 6, 2001

        10.11(1)      Executive Employment Agreement dated as of October 5, 2001
                      between M.G.R., Inc. and Gary Koch

        21.1 (16)     Subsidiaries of Stonepath Group, Inc.

        23.1(16)      Independent Auditors' Report and Consent
         ----------------------

         (1)      Incorporated by reference to the Company's Current Report on
                  Form 8-K dated October 5, 2001 filed October 19, 2001
         (2)      Incorporated by reference to Amendment No. 1 to the Company's
                  Registration Statement on Form S-4 (Reg. No. 333-45162) filed
                  October 4, 2000
         (3)      Incorporated by reference to the Company's Registration
                  Statement on Form S-1 (Reg. No. 333-88629) filed October 8,
                  1999
         (4)      Incorporated by reference to the Company's Annual Report on
                  Form 10-K for the year ended December 31, 2000, filed April 2,
                  2001
         (5)      Incorporated by reference to Amendment No. 1 to the Company's
                  Registration Statement on Form S-1 (Reg. No. 333-88629) filed
                  December 17, 1999
         (6)      Incorporated by reference to the Company's Current Report on
                  Form 8-K dated March 3, 2000 filed March 17, 2000
         (7)      Incorporated by reference to the Company's Annual Report on
                  Form 10-K for 1999 filed May 11, 2000
         (8)      Incorporated by reference to Registrant's Current Report on
                  Form 8-K dated February 8, 2001 filed February 22, 2001
         (9)      Incorporated by reference to the Company's Registration
                  Statement on Form S-8 filed December 11, 2001
         (10)     Incorporated by reference to the Company's Current Report on
                  Form 8-K dated June 21, 2001 filed July 2, 2002
         (11)     Incorporated by reference to the Company's Current Report on
                  Form 8-K dated December 14, 2001 filed December 27, 2001
         (12)     Incorporated by reference to the Company's Current Report on
                  Form 8-K dated January 15, 2002 filed January 25, 2002
         (13)     Incorporated by reference to the Company's Form 10-Q for the
                  second quarter ended June 30, 2001, filed August 13, 2001
         (14)     Incorporated by reference to the Company's Current Report on
                  Form 8-K dated August 23, 2000 filed September 1, 2000
         (15)     Incorporated by referenced to the Company's Current Report on
                  Form 8-K dated March 2, 2001 filed March 16, 2001
         (16)     Filed Herewith


                                       40
<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Philadelphia, Commonwealth of Pennsylvania, on March 29, 2002.

                                 STONEPATH GROUP, INC.

                             BY: /s/ Dennis L. Pelino
                                 ----------------------------------------------
                                 Dennis L. Pelino, (Chairman of the Board of
                                 Directors and Chief Executive Officer)

                             BY: /s/ Bohn H. Crain
                                 ---------------------------------------------
                                 Bohn H. Crain (Chief Financial Officer)

                             BY: /s/ Thomas L. Scully
                                 ---------------------------------------------
                                 Thomas L. Scully (Principal Accounting Officer)



         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Annual Report on Form 10-K has been signed by the following
persons in the capacities indicated:

<TABLE>
<CAPTION>
SIGNATURE                                                           TITLE                               DATE
<S>                                              <C>                                                <C>
/s/ Dennis L. Pelino                             Chairman of the Board of Directors and             March 29 2002
------------------------------------------       Chief Executive Officer
Dennis L. Pelino

/s/ J. Douglass Coates                           Director                                           March 29 2002
------------------------------------------
Douglass Coates

/s/ Frank Palma                                  Director                                           March 29 2002
------------------------------------------
Frank Palma

/s/ David R. Jones                               Director                                           March 29 2002
------------------------------------------
David R. Jones

/s/ Aloysius T. Lawn, IV                         Director                                           March 29 2002
------------------------------------------
Aloysius T. Lawn,  IV

/s/ Robert McCord                                Director                                           March 29 2002
------------------------------------------
Robert McCord

/s/ Andrew P. Panzo                              Director                                           March 29 2002
------------------------------------------
Andrew P. Panzo
</TABLE>






                                       41
<PAGE>





                          Independent Auditors' Report

Board of Directors and Stockholders of
Stonepath Group, Inc.:


We have audited the accompanying consolidated balance sheets of Stonepath Group,
Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity and
comprehensive loss and cash flows for each of the years in the three-year period
ended December 31, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Stonepath Group,
Inc. and subsidiaries as of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.


                                  /s/ KPMG LLP

Philadelphia, Pennsylvania
March 20, 2002





                                      F-1

<PAGE>
<TABLE>
<CAPTION>
                                                        STONEPATH GROUP, INC.
                                                     Consolidated Balance Sheets
                                                     December 31, 2001 and 2000
                                                 Assets                                               2001              2000
                                                                                                 -------------     -------------
<S>                                                                                              <C>               <C>
Current assets:
   Cash and cash equivalents                                                                     $  15,227,830     $  29,099,651
   Accounts receivable, less allowance for doubtful accounts of $167,000                             7,303,426                --
   Loans receivable from related parties                                                                64,589            91,668
   Prepaid expenses                                                                                    618,873            91,125
   Net assets of discontinued operations                                                               415,845                --
                                                                                                 -------------     -------------
                         Total current assets                                                       23,630,563        29,297,444
Goodwill                                                                                            14,437,816                --
Furniture and equipment, net                                                                         1,737,603           228,676
Acquired intangibles, net                                                                              970,000                --
Other assets                                                                                           289,574           127,655
Net assets of discontinued operations                                                                       --        15,256,728
                                                                                                 -------------     -------------
                                                                                                 $  41,065,556     $  44,910,503
                                                                                                 =============     =============
                                  Liabilities and Stockholders Equity
Current liabilities:
   Accounts payable                                                                              $   5,353,656     $          --
   Accrued payroll and related expenses                                                              1,427,315           171,584
   Accrued expenses                                                                                  1,590,272         1,413,314
                                                                                                 -------------     -------------
                         Total liabilities                                                           8,371,243         1,584,898
                                                                                                 -------------     -------------
Stockholders equity:
   Preferred stock, $.001par value, 10,000,000 shares authorized;
     Series C, convertible, issued and outstanding: 3,750,479 shares and 3,657,070 shares
     at 2001 and 2000, respectively (liquidation preference: $45,005,748 at 2001)                        3,750             3,657
   Common stock, $.001 par value, 100,000,000 shares authorized; issued and
     outstanding: 20,903,110 shares and 20,419,534 shares at 2001 and 2000, respectively                20,903            20,419
   Additional paid-in capital                                                                      210,730,999       210,923,329
   Accumulated deficit                                                                            (177,849,701)     (156,841,388)
   Deferred compensation                                                                              (211,638)      (10,771,724)
   Accumulated other comprehensive loss                                                                     --            (8,688)
                                                                                                 -------------     -------------
                           Total stockholders equity                                                32,694,313        43,325,605
                                                                                                 -------------     -------------
                                                                                                 $  41,065,556     $  44,910,503
                                                                                                 =============     =============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2

<PAGE>

                              STONEPATH GROUP, INC.
                      Consolidated Statements of Operations
                  Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
                                                                                2001                  2000                 1999
                                                                            ------------          ------------         ------------
<S>                                                                         <C>                   <C>                  <C>
Revenues                                                                    $ 15,597,889          $          -         $          -
Cost of purchased transportation                                               8,818,578
                                                                            ------------          ------------         ------------
Net revenues                                                                   6,779,311                     -                    -
Personnel costs                                                                6,379,090             4,262,646               84,185
Other selling, general
     and administrative costs                                                  4,689,331             3,157,204            2,677,002
                                                                            ------------          ------------         ------------
Loss from operations                                                          (4,289,110)           (7,419,850)          (2,761,187)
Other income (expense)
     Interest income                                                           1,285,657             2,080,140               60,526
     Interest expense                                                             (4,102)              (15,713)          (2,872,771)
     Other expense                                                                13,153                     -                    -
                                                                            ------------          ------------         ------------
Loss from continuing operations                                               (2,994,402)           (5,355,423)          (5,573,432)
Discontinued operations:
     Loss from discontinued operations                                       (14,729,193)          (30,815,850)         (24,760,327)
     Gain on disposal of discontinued operations                                 866,480                     -            6,502,663
                                                                            ------------          ------------         ------------
Net loss                                                                     (16,857,115)          (36,171,273)         (23,831,096)
Preferred stock dividends                                                      4,151,198            45,750,830            6,605,261
                                                                            ------------          ------------         ------------
Net loss to common stockholders                                             $(21,008,313)         $(81,922,103)        $(30,436,357)
                                                                            ============          ============         ============
Basic and diluted net loss per common share -
     Continuing operations                                                  $      (0.34)         $      (2.89)        $      (1.15)
     Discontinued operations                                                       (0.68)                (1.75)               (1.73)
                                                                            ------------          ------------         ------------
                                                                            $      (1.02)         $      (4.64)        $      (2.88)
                                                                            ============          ============         ============
Basic and diluted weighted average common shares outstanding                  20,510,345            17,657,913           10,557,953
                                                                            ============          ============         ============
</TABLE>

       See accompanying notes to consolidated financial statements.



                                      F-3


<PAGE>
<TABLE>
<CAPTION>
                                                       STONEPATH GROUP, INC.
                               Consolidated Statements of Stockholders' Equity and Comprehensive Loss
                                            Years ended December 31, 2001, 2000 and 1999

                                                                              Preferred stock
                                                                           -------------------


                                                                            Shares      Amount
                                                                           ---------   -------
<S>                                                                        <C>         <C>
Balances at December 31, 1998                                              2,519,852   $ 2,520

Net loss                                                                          --        --
Issuance of warrants                                                              --        --
Issuance of common stock, net                                                     --        --
Common stock issued in connection with conversion of convertible
     debentures and interest                                                      --        --
Common stock issued in connection with conversion of notes payable
     and interest                                                                 --        --
Common and preferred stock issued in connection with
     Strategicus merger                                                      184,627       185
Common stock issued for consulting services                                       --        --
Contributed capital                                                               --        --
Beneficial conversion features on convertible notes and debentures                --        --
Series A preferred stock conversion                                       (2,704,479)   (2,705)
Preferred stock dividend                                                          --        --
Compensatory common stock and common stock options
      issued, net of cancellations                                                --        --
Amortization of deferred stock based compensation                                 --        --
                                                                           ---------   -------
Balances at December 31, 1999                                                     --        --

Net loss                                                                          --        --
Other comprehensive loss:
     Unrealized loss on available-for-sale securities                             --        --
Comprehensive loss
Issuance of warrants                                                              --        --
Issuance of common stock, net of cancellations                                    --        --
Issuance of preferred stock, Series C, net                                 4,166,667     4,167
Completion of in-process merger with Net Value, Inc.                              --        --
Contributed capital                                                               --        --
Series B preferred stock conversion                                               --        --
Series C preferred stock conversion                                         (779,793)     (779)
Preferred stock dividends                                                    270,196       269
Treasury stock                                                                    --        --
Compensatory common stock, options and warrants
      issued, net of cancellations                                                --        --
Amortization of deferred stock based compensation                                 --        --
                                                                           ---------   -------
Balances at December 31, 2000                                              3,657,070     3,657

Net loss                                                                          --        --

Other comprehensive loss:
     Unrealized gain on available-for-sale securities                             --        --
Comprehensive loss
Issuance of contingent warrants                                                   --        --
Exercise of warrants                                                              --        --
Series C preferred stock conversion                                         (205,660)     (206)
Preferred stock dividends                                                    299,069       299
Compensatory common stock, options and warrants
      issued, net of cancellations                                                --        --
Amortization of deferred stock based compensation                                 --        --
                                                                           ---------   -------
Balances at December 31, 2001                                              3,750,479   $ 3,750
                                                                           =========   =======
</TABLE>




<PAGE>
<TABLE>
<CAPTION>
                                                         [RESTUBBED TABLE]

                                                                                   Common stock
                                                                   --------------------------------------------
                                                                      Net Value, Inc.     Stonepath Group, Inc.   Additional
                                                                   --------------------------------------------    paid-in
                                                                    Shares      Amount     Shares       Amount     capital
                                                                   ---------   -------    ---------    -------  ------------
<S>                                                                <C>         <C>        <C>          <C>      <C>
Balances at December 31, 1998                                      1,037,338   $ 1,038    6,969,852    $ 6,970  $ 39,005,768

Net loss                                                                  --        --           --         --            --
Issuance of warrants                                                      --        --           --         --       454,000
Issuance of common stock, net                                             --        --       80,388         80       356,536
Common stock issued in connection with conversion of convertible
     debentures and interest                                              --        --    2,076,589      2,077     4,774,444
Common stock issued in connection with conversion of notes payable
     and interest                                                         --        --    1,732,066      1,732     3,462,402
Common and preferred stock issued in connection with
     Strategicus merger                                                   --        --      601,029        601     3,637,298
Common stock issued for consulting services                               --        --      676,374        676     2,965,698
Contributed capital                                                       --        --           --         --       659,087
Beneficial conversion features on convertible notes and debentures        --        --           --         --    11,165,145
Series A preferred stock conversion                                       --        --    1,622,687      1,623         1,082
Preferred stock dividend                                                  --        --           --         --     6,605,261
Compensatory common stock and common stock options
      issued, net of cancellations                                        --        --    1,763,822      1,764    30,859,415
Amortization of deferred stock based compensation                         --        --           --         --            --
                                                                   ---------    ------   ----------     ------   -----------
Balances at December 31, 1999                                      1,037,338     1,038   15,522,807     15,523   103,946,136

Net loss                                                                  --        --           --         --            --

Other comprehensive loss:
     Unrealized loss on available-for-sale securities                     --        --           --         --            --
Comprehensive loss
Issuance of warrants                                                      --        --           --         --     7,391,691
Issuance of common stock, net of cancellations                        60,250        60    1,494,822      1,495    10,478,493
Issuance of preferred stock, Series C, net                                                       --         --    40,878,920
Completion of in-process merger with Net Value, Inc.              (1,092,588)   (1,093)   1,754,132      1,754          (661)
Contributed capital                                                       --        --           --         --       853,319
Series B preferred stock conversion                                       --        --    1,180,180      1,180     4,304,734
Series C preferred stock conversion                                       --        --      779,793        779            --
Preferred stock dividends                                                 --        --           --         --    45,642,097
Treasury stock                                                        (5,000)       (5)    (312,200)      (312)   (1,203,044)
Compensatory common stock, options and warrants
      issued, net of cancellations                                        --        --           --         --    (1,368,356)
Amortization of deferred stock based compensation                         --        --           --         --            --
                                                                   ---------    ------   ----------     ------   -----------
Balances at December 31, 2000                                             --        --   20,419,534     20,419   210,923,329

Net loss                                                                  --        --           --         --            --
Other comprehensive loss:
     Unrealized gain on available-for-sale securities                     --        --           --         --            --
Comprehensive loss
Issuance of contingent warrants                                           --        --           --         --       562,370
Exercise of warrants                                                      --        --      200,000        200       199,800
Series C preferred stock conversion                                       --        --      205,660        206            --
Preferred stock dividends                                                 --        --           --         --     3,588,529
Compensatory common stock, options and warrants
      issued, net of cancellations                                        --        --       77,916         78    (4,543,029)
Amortization of deferred stock based compensation                         --        --           --         --            --
                                                                   ---------   -------   ----------     ------   -----------
Balances at December 31, 2001                                             --   $    --   20,903,110    $20,903  $210,730,999
                                                                   =========   =======   ==========    =======  ============

</TABLE>

<PAGE>

                                                         [RESTUBBED TABLE]
<TABLE>
<CAPTION>

                                                                              Accumulated
                                                                                 other        Deferred                    Total
                                                              Accumulated    comprehensive  stock-based                Comprehensive
                                                                deficit          loss      compensation         Total      Loss
                                                            -------------    ------------  ------------   ------------ -------------
<S>                                                         <C>              <C>           <C>              <C>
Balances at December 31, 1998                            $ (44,482,928)     $     --    $ (3,283,532)    $ (8,750,164)
Net loss                                                   (23,831,096)           --              --      (23,831,096) $(23,831,096)
                                                                                                                         ==========
Issuance of warrants                                                --            --              --          454,000
Issuance of common stock, net                                       --            --              --          356,616
Common stock issued in connection with conversion of
     convertible  debentures and interest                          --            --              --        4,776,521
Common stock issued in connection with conversion of
     notes payable and interest                                    --            --              --        3,464,134
Common and preferred stock issued in connection with
     Strategicus merger                                            --            --              --        3,638,084
Common stock issued for consulting services                        --            --              --        2,966,374
Contributed capital                                                --            --              --          659,087
Beneficial conversion features on convertible notes
     and debentures                                                --            --              --       11,165,145
Series A preferred stock conversion                                --            --              --               --
Preferred stock dividend                                   (6,605,261)           --              --               --
Compensatory common stock and common stock options
      issued, net of cancellations                                 --            --     (30,861,179)              --
Amortization of deferred stock based compensation                  --            --       6,802,539        6,802,539
                                                        -------------      --------    ------------      -----------
Balances at December 31, 1999                             (74,919,285)           --     (27,342,172)       1,701,240

Net loss                                                  (36,171,273)           --              --      (36,171,273)   (36,171,273)
Other comprehensive loss:
     Unrealized loss on available-for-sale securities              --        (8,688)             --           (8,688)        (8,688)
                                                                                                                         ----------
Comprehensive loss                                                                                                     $(36,179,961)
                                                                                                                         ==========
Issuance of warrants                                               --            --                        7,391,691
Issuance of common stock, net of cancellations                     --            --              --       10,480,048
Issuance of preferred stock, Series C, net                         --            --              --       40,883,087
Completion of in-process merger with Net Value, Inc.               --            --              --               --
Contributed capital                                                --            --              --          853,319
Series B preferred stock conversion                                --            --              --        4,305,914
Series C preferred stock conversion                                --            --              --               --
Preferred stock dividends                                 (45,750,830)           --              --         (108,464)
Treasury stock                                                     --            --              --       (1,203,361)
Compensatory common stock, options and warrants
      issued, net of cancellations                                 --            --       1,368,356               --
Amortization of deferred stock based compensation                  --            --      15,202,092       15,202,092
                                                        -------------      --------    ------------      -----------
Balances at December 31, 2000                            (156,841,388)       (8,688)    (10,771,724)      43,325,605

Net loss                                                  (16,857,115)           --              --      (16,857,115)  $(16,857,115)
Other comprehensive loss:
     Unrealized gain on available-for-sale securities              --         8,688              --            8,688          8,688
                                                                                                                        ------------
Comprehensive loss                                                                                                     $(16,848,427)
                                                                                                                       ============
Issuance of contingent warrants                              (562,370)           --              --               --
Exercise of warrants                                               --            --              --          200,000
Series C preferred stock conversion                                --            --              --               --
Preferred stock dividends                                  (3,588,828)           --              --               --
Compensatory common stock, options and warrants                                                                   --
      issued, net of cancellations                                 --            --       4,845,297          302,346
Amortization of deferred stock based compensation                  --            --       5,714,789        5,714,789
                                                        -------------      --------    ------------      -----------
Balances at December 31, 2001                           $(177,849,701)     $     --    $   (211,638)    $ 32,694,313
                                                        =============      ========    ============     ============
</TABLE>

         See accompanying notes to consolidated financial statements.


                                      F-4

<PAGE>

                              STONEPATH GROUP, INC.
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2001, 2000 and 1999
<TABLE>
<CAPTION>
                                                                                       2001             2000           1999
                                                                                   ------------     ------------    ------------
<S>                                                                                <C>              <C>             <C>
Cash flows from operating activities:
     Net loss                                                                      $(16,857,115)    $(36,171,273)   $(23,831,096)
     Adjustments to reconcile net loss to net cash used in operating activities:
        Depreciation and amortization                                                   232,379        1,620,855       2,061,609
        Stock-based compensation - continuing operations                              2,394,106        3,395,755          44,150
        Interest paid with stock                                                             --          216,511         395,348
        Discontinued operations - working capital changes and non-cash items         13,025,075       25,166,329       2,624,609
        Loss from sale of furniture and equipment                                       101,126               --              --
        Beneficial conversion features on convertible notes and debentures                   --               --      11,165,145
     Changes in assets and liabilities, net of effect of acquisition:
        Accounts receivable                                                           1,205,807               --              --
        Other assets                                                                   (133,499)         (96,347)       (137,433)
        Accounts payable and accrued expenses                                          (470,871)          87,696         653,781
                                                                                   ------------      -----------     -----------
                 Net cash used in operating activities                                 (502,992)      (5,780,474)     (7,023,887)
                                                                                   ------------      -----------     -----------
Cash flows from investing activities:
     Acquisition of business, net of cash acquired                                  (18,011,262)              --              --
     Purchases of furniture and equipment                                              (280,670)        (232,488)        (74,977)
     Proceeds from sale of furniture and equipment                                       32,926               --              --
     Loans made                                                                              --         (350,000)     (1,164,000)
     Collections on loans                                                                    --               --         767,000
     Discontinued operations:
        Advances to affiliate companies                                                (552,000)      (2,004,841)        (50,000)
        Collections on advances to affiliate companies                                1,000,000          105,000              --
        Purchase of available for sale securities                                      (452,900)              --              --
        Proceeds from sale of available for sale securities                              57,910               --              --
        Acquisition of ownership interests in affiliate companies                      (200,000)     (13,820,000)     (2,500,000)
        Proceeds from sale of ownership interests in affiliate companies              6,285,953          100,000              --
        Proceeds from sale of assets                                                         --               --       2,000,000
                                                                                   ------------      -----------     -----------
                 Net cash used in investing activities                              (12,120,043)     (16,202,329)     (1,021,977)
                                                                                   ------------      -----------     -----------
Cash flows from financing activities:
     Net repayments on short-term debt                                               (1,448,786)         (28,281)       (228,000)
     Proceeds from long-term debt                                                            --               --       6,455,000
     Payment of long-term debt                                                               --          (79,034)        (35,675)
     Issuance of common stock                                                           200,000        1,099,602       1,032,910
     Issuance of preferred stock and warrants                                                --       48,274,760       4,448,872
     Purchase of treasury stock                                                              --       (1,203,361)             --
     Payment of preferred stock dividend, Series B                                           --         (108,464)             --
     Payment of financing fees                                                               --               --        (501,477)
                                                                                   ------------      -----------     -----------
                 Net cash provided by (used in) financing activities                 (1,248,786)      47,955,222      11,171,630
                                                                                   ------------      -----------     -----------
                 Net increase (decrease) in cash and cash equivalents               (13,871,821)      25,972,419       3,125,766
Cash and cash equivalents at beginning of year                                       29,099,651        3,127,232           1,466
                                                                                   ------------      -----------     -----------
Cash and cash equivalents at end of period                                         $ 15,227,830     $ 29,099,651    $  3,127,232
                                                                                   ============     ============    ============
Cash paid for interest                                                             $      4,102     $     29,153    $     76,974
                                                                                   ============     ============    ============
Cash paid for income taxes                                                         $         --     $      2,586    $         --
                                                                                   ============     ============    ============
Supplementary disclosure of non-cash investing and financing activities:
     Conversion of notes payable and long-term debt into common stock              $         --     $         --    $  8,240,655
                                                                                   ============     ============    ============

</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5



<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000



(1)    Nature of Operations and Basis of Presentation

       The principal business strategy of Stonepath Group, Inc. and subsidiaries
       (the "Company") is to build a global integrated logistics services
       organization by identifying, acquiring, and managing controlling
       interests in profitable logistics businesses.

       On October 5, 2001, the Company acquired all of the issued and
       outstanding common shares of M.G.R, Inc., d/b/a Air Plus Limited,
       Distribution Services, Inc. and Contract Air, Inc. (collectively referred
       to as "Air Plus") which provide a variety of logistics services
       throughout the United States, Canada and Puerto Rico (see Note 4). The
       acquisition has been of accounted for as a purchase and accordingly, the
       results of operations and cash flows of Air Plus are included in the
       accompanying consolidated financial statements prospectively from the
       date of acquisition.

       On March 6, 2002, the Company announced that it had agreed to acquire
       Global Transportation Services, Inc. ("Global"), a Seattle-based provider
       of international air and ocean logistics services, for $5,000,000 dollars
       in cash, plus contingent consideration of up to an additional $7,000,000
       payable over five years based on Global's future financial performance.
       With the closing of the transaction, which is expected to occur within 60
       days and is subject to customary closing conditions, the Company will
       establish its international platform for services between the Far East,
       the United States and Europe.

(2)    Summary of Significant Accounting Policies

         a)       Principles of Consolidation

                  The accompanying financial statements include the accounts of
                  the Company, a Delaware corporation, and its wholly owned
                  subsidiaries. All intercompany balances and transactions have
                  been eliminated in consolidation.

         b)       Use of Estimates

                  The presentation of financial statements in accordance with
                  accounting principles generally accepted in the United States
                  of America requires management to make estimates and
                  assumptions that affect the reported amounts of assets and
                  liabilities and disclosure of contingent assets and
                  liabilities at the date of the financial statements and the
                  reported amounts of revenues and expenses during the reporting
                  period. Such estimates include the allowance for doubtful
                  accounts, the valuation allowance for deferred income taxes,
                  the recoverability of goodwill and useful lives of acquired
                  intangibles and furniture and equipment. Actual results could
                  differ from those estimates.

         c)       Cash and Cash Equivalents

                  Cash and cash equivalents include cash on hand and investments
                  in money market funds and investment grade securities. The
                  Company considers all highly liquid instruments with a
                  remaining maturity of 90 days or less at the time of purchase
                  to be cash equivalents. Cash deposits and investments are held
                  with high quality financial institutions, corporations, and
                  government and government agencies thereby reducing credit
                  risk concentrations.


                                      F-6


<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


         d)       Furniture and Equipment

                  Furniture and equipment are stated at cost, less accumulated
                  depreciation computed on a straight-line basis over the
                  estimated useful lives of the respective assets. Depreciation
                  is computed using four- to ten-year lives for furniture and
                  office equipment, a three-year life for computer software, the
                  shorter of the lease term or useful life for leasehold
                  improvements and a three-year life for vehicles. Upon
                  retirement or other disposition of these assets, the cost and
                  related accumulated depreciation are removed from the accounts
                  and the resulting gain or loss, if any, is reflected in
                  results of operations. Expenditures for maintenance, repairs,
                  and renewals of minor items are charged to expense as
                  incurred. Major renewals and improvements are capitalized.

         e)       Goodwill and Acquired Intangibles

                  The Company accounts for goodwill and acquired intangible
                  assets in accordance with Statement of Financial Accounting
                  Standards ("SFAS") No. 142, Goodwill and Other Intangible
                  Assets. Accordingly, goodwill arising from the acquisition of
                  Air Plus is not amortized, but will be reviewed annually for
                  impairment.

                  Acquired intangibles are reviewed for impairment whenever
                  events or changes in circumstances indicate that the carrying
                  amount of an asset may not be recoverable. Recoverability of
                  assets to be held and used is measured by a comparison of the
                  carrying amount of the asset to future net undiscounted cash
                  flows expected to be generated by the asset. If such assets
                  are considered to be impaired, the impairment to be recognized
                  is measured by the amount by which the carrying amounts of the
                  assets exceed the fair value of the assets. Assets to be
                  disposed of are reported at the lower of the carrying amount
                  or fair value less costs to sell.

         f)       Income Taxes

                  Taxes on income are provided in accordance with SFAS No. 109,
                  Accounting for Income Taxes. Deferred income tax assets and
                  liabilities are recognized for the expected future tax
                  consequences of events that have been reflected in the
                  consolidated financial statements. Deferred tax assets and
                  liabilities are determined based on the differences between
                  the book values and the tax bases of particular assets and
                  liabilities and the tax effects of net operating loss
                  carryforwards. Deferred tax assets and liabilities are
                  measured using tax rates in effect for the years in which the
                  differences are expected to reverse. A valuation allowance is
                  provided to offset any net deferred tax assets if, based upon
                  the available evidence, it is more likely than not that some
                  or all of the deferred tax assets will not be realized.

         g)       Revenue Recognition

                  Revenues related to freight forwarding services are recognized
                  at the time the freight is delivered. All other revenues,
                  including storage, are recognized upon performance.

         h)       Major Customers

                  A single customer accounted for approximately 48% of accounts
                  receivable and 53% of revenues as of and for the year ended
                  December 31, 2001, respectively.


                                       F-7

<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000




         i)       Stock-Based Compensation

                  SFAS No. 123, Accounting for Stock-Based Compensation,
                  encourages, but does not require, companies to record
                  compensation cost for stock-based employee compensation plans
                  at fair value. The Company has chosen to account for
                  stock-based compensation using the intrinsic method prescribed
                  in Accounting Principles Board Opinion ("APB") No. 25,
                  Accounting for Stock Issued to Employees, and related
                  interpretations. Accordingly, compensation cost for stock
                  options issued to employees and members of the board of
                  directors is measured as the excess, if any, of the quoted
                  market price of the Company's stock at the date of the grant
                  over the amount the grantee must pay to acquire the stock. The
                  Company accounts for stock-based compensation issued to
                  non-employees (including directors who provide services
                  outside their capacity as members of the board) in accordance
                  with SFAS No. 123 and Emerging Issues Task Force ("EITF") No.
                  96-18, Accounting for Equity Instruments That Are Issued to
                  Other Than Employees for Acquiring, or in Conjunction with
                  Selling, Goods or Services.

         j)       Loss Per Share

                  Basic net loss per common share and diluted net loss per
                  common share are presented in accordance with SFAS No. 128,
                  Earnings Per Share. Basic and diluted net loss per common
                  share have been computed using the weighted-average number of
                  shares of common stock outstanding during the period. Shares
                  associated with stock options, convertible debt, stock
                  warrants, and convertible preferred stock are excluded because
                  their effect would be antidilutive. The total numbers of such
                  shares excluded from diluted net loss per common share are
                  9,755,934, 12,197,618 and 9,276,476 at December 31, 2001, 2000
                  and 1999, respectively.

         k)       Segment Information

                  SFAS No. 131, Disclosures About Segments of an Enterprise and
                  Related Information, establishes standards for the way public
                  companies report operating segments in annual financial
                  statements and interim reporting to shareholders. The Company
                  has determined that it had one operating and reportable
                  segment during 2001: providing a full range of domestic
                  logistics and transportation services. The chief operating
                  decision maker evaluates performance and makes decisions based
                  on financial data consistent with the presentation in the
                  accompanying financial statements.

         l)       New Accounting Pronouncements

                  In August 2001, the Financial Accounting Standards Board
                  issued SFAS No. 144, Impairment or Disposal of Long-Lived
                  Assets, which supersedes both SFAS No. 121, Accounting for the
                  Impairment of Long-Lived Assets and for Long-Lived Assets to
                  Be Disposed Of, and the accounting and reporting provisions of
                  APB No. 30, Reporting the Results of Operations - Reporting
                  the Effects of Disposal of a Segment of a Business, and
                  Extraordinary, Unusual and Infrequently Occurring Events and
                  Transactions, for the disposal of a segment of a business.
                  SFAS No. 144 retains the fundamental provisions of SFAS No.
                  121 for recognizing and measuring impairment losses on
                  long-lived assets held for use and long-lived assets to be
                  disposed of by sale, while also resolving significant
                  implementation issues associated with SFAS No. 121. For
                  example, SFAS No. 144 provides guidance on how a long-lived
                  asset is held for sale, and prescribes the accounting for a
                  long-lived asset that will be disposed of other than by sale.
                  SFAS No. 144 retains the basic provisions of APB No. 30 on how
                  to present discontinued operations in the income statement but
                  broadens that presentation to include a component of an entity
                  (rather than a segment of a business). Unlike SFAS No. 121, an
                  impairment assessment under SFAS No. 144 will never result in
                  a write-down of goodwill; rather, goodwill is evaluated for
                  impairment under SFAS No. 142.


                                        F-8
<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000




                  The Company plans to adopt SFAS No. 144 effective January 1,
                  2002. The Company does not expect the adoption of SFAS No. 144
                  for long-lived assets held for use to have a material effect
                  on its consolidated financials statements because the
                  impairment assessment under SFAS No. 144 is largely unchanged
                  from SFAS No. 121. The provision of the Statement for assets
                  held for sale or other disposal generally are required to be
                  applied prospectively after the adoption dated to newly
                  initiated disposal activities.


(3)    Discontinued Operations

       From inception through the first quarter of 2001, the Company's principal
       business strategy focused on the development of early-stage technology
       businesses with significant Internet features and applications. In
       October 1998, in the first stage of a two-step process the Company
       acquired a controlling interest in a developer and distributor of online
       promotional campaigns named Net Value, Inc. ("Net Value"). This
       acquisition was accounted for as a recapitalization of Net Value. In
       November 2000, the Company completed the merger with Net Value by issuing
       1,754,140 shares of its common stock for the remaining minority interest
       in Net Value.

       On December 28, 2001, the Board of Directors approved a plan to dispose
       of all of the assets related to the Company's former business of
       investing in early-stage technology companies, since these investments
       were incompatible with the Company's current strategy of building a
       global integrated logistics services organization. The Company intends to
       complete the plan within fiscal 2002. Therefore, for financial reporting
       purposes, the assets, liabilities, results of operations and cash flows
       of the former business have been segregated from those of the continuing
       operations and are presented in the Company's consolidated financial
       statements as discontinued operations. The financial statements of prior
       periods have been reclassified to reflect this presentation.

       The amounts attributable to discontinued operations in the accompanying
       consolidated balance sheets are as follows:
<TABLE>
<CAPTION>
                                                                    2001             2000
                                                                 ----------     -------------
                 <S>                                         <C>            <C>
                 Investments                                     $ 415,845      $ 15,130,651
                 Other assets                                       23,056           126,077
                 Accounts payable and accrued expenses             (23,056)            -
                                                                 ---------      ------------
                 Net assets of discontinued operations           $ 415,845      $ 15,256,728
                                                                 =========      ============
</TABLE>
(4)    Acquisitions

       On October 5, 2001, the Company acquired all of the outstanding shares
       of Air Plus, a group of Minneapolis-based privately held companies. The
       results of Air Plus' operations have been included in the consolidated
       financial statements since that date. Air Plus provides a full range of
       logistics and transportation services throughout North America. As a
       result of the acquisition, the Company completed the first step in its
       plan to become a leading provider of logistics and transportation
       services.



                                        F-9
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


         The acquisition was accounted for as a purchase in accordance with SFAS
         No. 141, Business Combinations. As consideration for the stock of Air
         Plus, the Company paid $17,500,000. In addition, contingent
         consideration in the amount of $17,000,000, which is payable in
         installments of $3,000,000 in 2003, $5,000,000 in 2004, $5,000,000 in
         2005 and $4,000,000 in 2006, will be paid if Air Plus achieves pre-tax
         income of $6,000,000 in each of the years preceding the year of
         payment. Such payments, if made, will be reflected as additional
         goodwill. In the event that there is a shortfall in pre-tax income in
         any year, such shortfall may be carried over to the succeeding year or
         carried back to the preceding year to the extent that the pre-tax
         income in those years exceeds the $6,000,000 level. Any remaining
         shortfall will reduce the contingent consideration on a
         dollar-for-dollar basis. The total purchase price, including
         acquisition expenses of $1,254,000 but excluding the contingent
         consideration described above, was $18,754,000. The Company has
         obtained an independent third-party appraisal of the fair value of the
         acquired intangible assets. The following table summarizes the
         estimated fair value of the assets acquired and liabilities assumed at
         the date of acquisition.



                                                                As of
                                                           October 5, 2001
                                                           ---------------
                                                            (in thousands)
                          Current Assets                       $ 9,651
                          Furniture and equipment                1,538
                          Other assets                             448
                          Intangible assets                      1,000
                          Goodwill                              14,438
                                                              --------
                            Total assets acquired               27,075
                                                              --------

                         Current liabilities                    8,321
                                                              --------
                            Total liabilities assumed           8,321
                                                              --------

                         Net assets acquired                  $18,754
                                                              ========

         The acquired intangible assets have a weighted average useful life of
         13 years. The intangible assets that make up that amount include the
         customer base of $800,000 with a fifteen-year life and a
         covenant-not-to-compete of $200,000 with a three-year life. The
         $14,438,000 of goodwill was assigned to the Company's domestic business
         unit and is expected to be deductible for income tax purposes.

         The following unaudited pro forma information is presented as if the
         acquisition of Air Plus had occurred on January 1, 2000:
<TABLE>
<CAPTION>
                                                                Years ended December 31,
                                                          ------------------------------------
                                                              2001                    2000
                                                          -----------             ------------
              <S>                                        <C>                    <C>
              Revenues                                    $ 56,821,000           $ 56,201,000
                                                          ============           ============
              Net revenues                                $ 24,160,000           $ 24,345,000
                                                          ============           ============
              Income from continuing operations           $  2,061,000           $  1,413,000
                                                          ============           ============
              Net loss                                    $(11,802,000)          $(29,403,000)
                                                          ============           ============
              Net loss to common stockholders             $(15,953,000)          $(75,154,000)
                                                          ============           ============
              Basic and diluted net loss per share        $      (0.78)          $      (4.26)
                                                          ============           ============
</TABLE>


                                        F-10
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


(5)      Acquired Intangible Assets

         Information with respect to acquired intangible assets as of December
         31, 2001 is as follows:

                                            Gross Carrying          Accumulated
                                                Amount              Amortization
                                           -------------------      ------------
         Amortizable intangible assets:
            Customer base                     $  800,000              $13,333
            Covenant-not-to-compete              200,000               16,667
                                              ----------              -------
         Total                                $1,000,000              $30,000
                                              ==========              =======

         Aggregate amortization expense:

                  For the year ended December 31, 2001        $ 30,000

                  Estimated aggregate amortization expense:

                        For the year ended December 31, 2002        $120,000
                        For the year ended December 31, 2003        $120,000
                        For the year ended December 31, 2004        $103,332
                        For the year ended December 31, 2005        $ 53,333
                        For the year ended December 31, 2006        $ 53,333




                                        F-11
<PAGE>

                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000



(6)      Furniture and Equipment

         Furniture and equipment consist of the following:
<TABLE>
<CAPTION>
                                                                           December 31
                                                           ---------------------------------------------
                                                                  2001                     2000
                                                           -------------------      --------------------
              <S>                                           <C>                      <C>
              Furniture and office equipment                   $1,290,469                 $215,862
              Computer software                                   512,593                        -
              Leasehold improvements                               95,419                   45,000
              Vehicles                                             21,697                        -
                                                               ----------                 --------
                                                                1,920,178                  260,862
              Less accumulated depreciation                      (182,575)                 (32,186)
                                                               ----------                 --------
                                                               $1,737,603                 $228,676
                                                               ==========                 ========
</TABLE>


(7)      Income Taxes

         The tax effects of temporary differences that give rise to the
         Company's deferred tax accounts are as follows:
<TABLE>
<CAPTION>
                                                                                       Years ended December 31
                                                                                --------------------------------------
                                                                                      2001                 2000
                                                                                ------------------    ----------------
        <S>                                                                   <C>                     <C>
        Deferred tax assets:
              Accruals                                                            $     141,000        $     512,000
              Equity in losses of affiliate companies                                   578,000            3,113,000
              Amortization and depreciation                                              13,000            1,383,000
              Deferred compensation and warrants                                     11,540,000            8,084,000
                Federal and state net operating loss carryforwards                   13,732,000            6,100,000
                                                                                  -------------        -------------
         Total                                                                       26,004,000           19,192,000
         Less valuation allowance                                                   (26,004,000)         (19,192,000)
                                                                                  -------------        -------------
         Net deferred taxes                                                       $         --         $          --
                                                                                  =============        =============
</TABLE>

         Due to the uncertainty surrounding the realization of the Company's tax
         attributes in future income tax returns, the Company has placed a
         valuation allowance against its otherwise recognizable deferred tax
         assets. The net change in total valuation allowance for the years ended
         December 31, 2001, 2000 and 1999 was an increase of $6,812,000,
         $10,639,000 and $1,295,000, respectively. The tax benefit assumed using
         the federal statutory tax rate of 35% has been reduced to zero due
         principally to the aforementioned increases in the valuation
         allowance.

         As of December 31, 2001, the Company had net operating loss
         carryforwards for federal and state income tax purposes amounting to
         approximately $43,200,000. The federal net operating loss carryforwards
         expire beginning 2018 through 2021, and the state net operating loss
         carryforwards expire beginning in 2004. The use of certain net
         operating losses may be subject to annual limitations based on changes
         in the ownership of the Company's common stock, as defined by Section
         382 of the Internal Revenue Code.



                                        F-12
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


(8)      Commitments

         Employment Agreements

         At December 31, 2001, the Company had employment agreements with two of
         its officers for an aggregate annual base salary of $560,000 plus bonus
         and increases in accordance with the terms of the agreements. The
         contracts are for three-year terms.

         Leases

         The Company leases office and warehouse space under operating leases
         expiring at various times through 2006. Total rent expense related to
         continuing operations for the years ended December 31, 2001, 2000 and
         1999 was $969,000, $72,000 and $18,000, respectively. Future minimum
         lease payments are as follows:
<TABLE>
<CAPTION>
             Year ending
            December 31:          Third Party       Related Party         Total         Subrentals          Net
         --------------------    --------------    ----------------    ------------    -------------    ------------
          <S>                    <C>               <C>                 <C>             <C>              <C>
                2002              $1,734,000        $  444,000        $2,178,000        $(152,000)       $2,026,000
                2003               1,092,000           349,000         1,441,000         (141,000)        1,300,000
                2004                 973,000           144,000         1,117,000         (141,000)          976,000
                2005                 831,000            72,000           903,000          (47,000)          856,000
                2006                 268,000           -                 268,000             -              268,000
             Thereafter              -                 -                   -                 -                -
                                  ----------        ----------        ----------        ---------        ----------

                Total             $4,898,000        $1,009,000        $5,907,000        $(481,000)       $5,426,000
                                  ==========        ==========        ==========        =========        ==========
</TABLE>
         Employee Benefit Plan

         The Company sponsors a voluntary defined contribution savings plan
         covering all U.S. employees. Company contributions are discretionary.
         For the year ended December 31, 2001, total Company contributions
         amounted to $37,500. No contributions were made in the prior years.

(9)      Contingencies

         Purchase Agreements

         Assuming minimum pre-tax income levels are achieved by Air Plus, the
         Company will be required to make contingent consideration payments
         totaling $3,000,000 in 2003, $5,000,000 in 2004, $5,000,000 in 2005 and
         $4,000,000 in 2006.

         Legal Proceedings

         On August 22, 2000, Austost Anstalt Schaan, Balmore Funds, S.A. and
         Amro International, S.A., purchasers of our convertible promissory
         notes, filed suit against the Company in the United States District
         Court for the District of Delaware. The plaintiffs allege that,
         contrary to a covenant in the subscription agreement they executed,
         which required the Company to "use reasonable commercial efforts to
         register" the shares of its common stock underlying the convertible
         promissory notes "at some future date," the Company verbally agreed to
         register such shares in the first registration statement filed with the
         Securities and Exchange Commission subsequent to the transaction. The
         plaintiffs assert claims for breach of contract and the duty of good
         faith and fair dealing, fraud, violation of federal securities laws,
         estoppel, and reformation and seek damages in excess of $20,000,000,
         plus attorneys' fees and costs. In response to a motion to dismiss
         filed by the Company, the Court dismissed the federal securities law
         and estoppel claims and denied the motion as to all other claims. The
         Company believes it has meritorious defenses to the remaining claims
         and intends to defend the matters vigorously.


                                        F-13
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


         On October 12, 2000, Emergent Capital Investment Management, LLC filed
         suit against the Company and two of its officers in the United States
         District Court for the Southern District of New York contending that it
         was misled by statements made in connection with the offering of the
         Company's Series C Preferred Stock which closed in March 2000.
         Specifically, the plaintiff alleges that it is entitled to rescind the
         transaction because it was allegedly represented that the size of the
         offering would be $20,000,000 million and the Company actually raised
         $50,000,000. The plaintiff seeks a return of the $2,000,000 purchase
         price for its shares of Series C Preferred Stock and damages in the
         amount of $1.7 million. In June 2001, the Company moved for summary
         judgment in this case. After the summary judgment motion was filed, the
         plaintiff filed a second action against the Company and two of its
         officers alleging different allegations of fraud in connection with the
         Series C offering. In the new complaint, the plaintiff alleges that
         oral statements and written promotional materials distributed by the
         Company at a meeting in connection with the Series C offering were
         materially inaccurate with respect to the Company's investment in Net
         Value, a wholly owned subsidiary of the Company. The plaintiff also
         contends that the defendants failed to disclose certain allegedly
         material transactions in which an officer was involved prior to his
         affiliation with the Company. The Company filed a motion to dismiss
         this new action for failure to state a claim upon which relief can be
         granted. On October 2, 2001, the Court entered an order granting
         summary judgment to the defendants in the first case filed by the
         plaintiff and dismissing the plaintiff's second complaint for failure
         to state a claim upon which relief can be granted. The Court allowed
         the plaintiff 20 days to file a second amended complaint as to the
         second action only. On October 21, 2001, the plaintiff did file a
         second amended complaint in the second action. The second amended
         complaint does not raise any new factual allegations regarding the
         plaintiff's participation in the offering. The Company intends to file
         a motion to dismiss the second amended complaint. If the motion is not
         granted, the Company believes that it has meritorious defenses to the
         plaintiff's claims and intends to vigorously defend this action.
         Management believes that this action will not have a material adverse
         effect on the Company's financial position or results of operations.

         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.

(10)     Stockholders' Equity

         The Company has two classes of authorized stock: common stock and
         preferred stock.

         (a)      Common Stock

         The Company is authorized to issue 100,000,000 shares of common stock,
         par value $.001 per share. The holders of common stock are entitled to
         one vote per share and are entitled to dividends as declared. Dividends
         are subject to the preferential rights of the holders of the Company's
         preferred stock. The Company has never declared dividends on its common
         stock.

         (b)      Preferred Stock

         The Company's Board of Directors has the authority, without further
         action by the stockholders, to issue up to 10,000,000 shares of
         preferred stock, par value $.001 per share, that may be issued in one
         or more series and with such terms as may be determined by the Board of
         Directors.

         Series B Preferred Stock

         In September 1999, the Company issued 4,824 shares of Series B
         Preferred Stock (Series B Shares) for aggregate proceeds of $4,824,000.
         These Series B Shares were subsequently converted into 1,180,180 shares
         of common stock in February 2000 pursuant to the original terms of the
         issuance.


                                        F-14
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000

         In connection with the issuance of the Series B Shares, The Company
         issued warrants to purchase 295,040 shares of common stock (Series B
         Warrants). These warrants were exercisable at prices ranging from 110%
         to 140% of the conversion price of the Series B Shares. The Company
         allocated $650,000 of the net proceeds received from this offering to
         the cost of the Series B Warrants based on an independent valuation.
         During 2000, the warrant holders exercised 210,944 Series B Warrants
         with cash proceeds to the Company of $1,077,792. The remaining 84,096
         Series B Warrants expired on August 1, 2000.

         Series C Preferred Stock

         In March 2000, the Company sold 4,166,667 shares of its Convertible
         Series C Preferred Stock (Series C Shares) at $12 per share for net
         proceeds of $48,274,760 after payment of issuing costs of $1,305,240.
         The Series C Shares are convertible into one share of the Company's
         common stock at any time at the election of the shareholder. This
         conversion ratio is subject to adjustment under certain circumstances
         to protect the holders of the Series C Shares against future dilutive
         transactions. The Series C Shares bear a cumulative dividend of 8% per
         annum payable in kind on a quarterly basis, have a liquidation
         preference of $12 per share, and require the Company to reserve 200% of
         the aggregate number of common shares issuable upon conversion of the
         Series C Shares and warrants. The Series C Shares obligate the Company
         to redeem the issued and outstanding Series C Shares within 60 days of
         receiving written notice from holders of at least 80% of the then
         issued and outstanding Series C Shares upon: (i) any voluntary or
         involuntary bankruptcy or receivership, and (ii) any payment default
         continuing for at least 120 days where the amount in default is greater
         than $750,000.

         During 2001 and 2000, the Series C holders earned 299,069 and 270,197
         shares from payment of dividends and converted 205,660 and 779,794
         Series C Shares into an equivalent number of shares of common stock,
         resulting in 3,750,479 Series C Shares outstanding at December 31,
         2001.

         The Company issued warrants to purchase an aggregate of 416,667 shares
         of common stock (Series C Warrants) in connection with the issuance of
         the Series C Shares. The Series C Warrants are exercisable until March
         2, 2003 at an exercise price of $26.58 per share of common stock. The
         Company allocated $7,391,671 of the net proceeds received from this
         offering to the Series C Warrants based on a Black-Scholes
         option-pricing model.

         In February 2001, the Company received the consent from the holders of
         more than two thirds of its then outstanding shares of Series C Shares
         to modify the use of proceeds provisions as originally defined within
         the Series C Preferred Stock Purchase Agreement. As amended, the
         Company may now use the proceeds from the sale of the Series C Shares
         to make any investments in the ordinary course of our business, as from
         time-to-time determined by the Company's Board of Directors, or for any
         other business purpose approved by the Board of Directors. Previously,
         the Company was required to use the proceeds for investments in
         early-stage Internet companies.

         In exchange for this consent, and subject to the condition described
         below, the Company agreed that it would, as of July 18, 2002:

         (i)      issue to the holders of the then-outstanding Series C Shares,
                  warrants to purchase up to a maximum of 3,000,000 shares of
                  the Company's common stock at an exercise price of $1.00 per
                  share if the then-effective conversion price of the Series C
                  Shares is greater than the lesser of (a) $6.00 per share; or
                  (b) the market price of the Company's common stock at such
                  time (but not less than $5.00 per share). The number of such
                  warrants issued is to be reduced by the number of outstanding
                  warrants described below; and

         (ii)     reduce to $1.00 per share the exercise price of the Series C
                  Warrants held by the holders of the Company's then-outstanding
                  Series C Preferred Shares.



                                       F-15
<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000

         As a condition to receiving the new warrants and the reduction in the
         exercise price of the Series C Warrants, the holders of the Series C
         Shares must convert their Series C Shares into shares of the Company's
         common stock on July 18, 2002.

         Preferred Stock Dividends

         The components of the preferred stock dividends are as follows:
<TABLE>
<CAPTION>
                                                                 2001                 2000                 1999
                                                             -------------       ---------------     -----------------
         <S>                                                 <C>                 <C>                 <C>
         Series C Preferred Stock dividend payable in
         kind                                                  $3,588,828          $3,034,039             $       -

         Non-cash charge: issuance of contingent warrants         562,370                   -                     -

         Series B Preferred Stock cash dividend                         -             108,464                     -

         Non-cash charge: beneficial conversion feature                 -                   -
         on Series A Preferred Stock                                                                       5,955,261
         Non-cash charge:  beneficial conversion feature
         on Series B Preferred Stock                                    -                   -                650,000

         Non-cash charge: beneficial conversion feature                 -                                          -
         on Series C Preferred Stock                                               42,608,327
                                                               ----------         -----------             ----------
                                                               $4,151,198         $45,750,830             $6,605,261
                                                               ==========         ===========             ==========
</TABLE>
         The Company paid the Series B Preferred Stock dividend in cash as the
         holders converted their Series B Shares into shares of the Company's
         common stock. The Series C Preferred Stock dividend is payable in
         additional Series C Shares on a quarterly basis and therefore does not
         represent a cash obligation of the Company.

         At the time of issuance of the Series C Shares, the quoted market value
         of the Company's common stock was higher than the Series C Shares sales
         price of $12 per share. As the Series C Shares were immediately
         convertible into shares of the Company's common stock, the differential
         in price constituted a beneficial conversion feature as defined in the
         EITF No. 98-5, "Accounting for Convertible Securities with Beneficial
         Conversion Features or Contingently Adjustable Conversion Ratios."
         Accordingly, the Company recorded $42,608,327 as additional paid in
         capital for the discount deemed related to a preferential dividend for
         the beneficial conversion feature. In accordance with EITF No. 98-5,
         this discount was limited to the proceeds allocated to the Series C
         Shares and was recognized immediately as a preferred stock dividend as
         the Series C Shares are immediately convertible.

         During the year ended December 31, 1999, the Company recorded
         beneficial conversion features of $5,955,261, representing the excess
         of the fair value of the common stock issued over the fair value of the
         Series A Preferred Stock redeemed and $650,000, representing the fair
         value of the Series B Warrants issued.



                                       F-16
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000




         (c)      Deferred Stock-Based Compensation

         The Company records deferred compensation when it makes restricted
         stock awards or compensatory stock option grants to employees,
         consultants or advisory board members. In the case of stock option
         grants to employees, the amount of deferred compensation initially
         recorded is the difference, if any, between the exercise price and
         quoted market value of the common stock on the date of grant. Such
         deferred compensation is fixed and remains unchanged for subsequent
         increases or decreases in the market value of our common stock. In the
         case of options granted to consultants or advisory board members, the
         amount of deferred compensation recorded is the fair value of the stock
         options on the grant date as determined using a Black-Scholes valuation
         model. The Company records deferred compensation as a reduction to
         stockholders' equity and an offsetting increase to additional paid-in
         capital. The Company then amortizes deferred compensation into
         stock-based compensation over the performance period, which typically
         coincides with the vesting period of the stock-based award of 3 to 4
         years.

         The components of deferred compensation are as follows:
<TABLE>
<CAPTION>
                                                                                       Consultants
                                                                                      and Advisory
                                                                     Employees             Board                Total
                                                                     ---------        -------------          -----------
       <S>                                                           <C>                <C>                   <C>
        Balance at December 31, 1998                                 $ 3,283,532        $         --          $ 3,283,532
          Deferred compensation recorded                               9,428,084          21,433,095           30,861,179
          Amortization to stock-based compensation                    (5,549,616)         (1,252,923)          (6,802,539)
                                                                     -----------        ------------          -----------
        Balance at December 31, 1999                                   7,162,000          20,180,172           27,342,172
          Deferred compensation recorded                              20,325,684           4,195,356           24,521,040
          Cancellations and fair value adjustments                    (9,223,100)        (16,666,296)         (25,889,396)
          Amortization to stock-based compensation                    (7,584,654)         (7,617,438)         (15,202,092)
                                                                     -----------        ------------          -----------
        Balance at December 31, 2000                                  10,679,930              91,794           10,771,724
          Deferred compensation recorded                                   1,207              19,450               20,657
          Cancellations and fair value adjustments                    (4,756,331)           (109,623)          (4,865,954)
          Amortization to stock-based compensation                    (5,713,168)             (1,621)          (5,714,789)
                                                                     -----------        ------------          -----------
        Balance at December 31, 2001                                 $   211,638        $         --          $   211,638
                                                                     ===========        ============          ===========
</TABLE>
         For the year ended December 31, 2000, the Company also recorded
         stock-based compensation of $709,375 relating to investment banking
         services that were paid via the issuance of 25,000 shares of its common
         stock, valued based on the closing stock market price of $28.375 on the
         date of issuance.

         In October 1999, the Company entered into a consulting agreement with
         an Advisory Board member. Under the terms of the consulting agreement,
         an affiliated company of the Advisory Board member was granted and
         exercised the right to purchase 676,374 shares of the Company's common
         stock at a discount to its then fair market value. The Company recorded
         consulting expense of $2,289,324 equal to the difference between the
         exercise price and the quoted market price of those shares on the date
         of grant.


                                       F-17
<PAGE>


                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000



         Stock-based compensation is reflected in the accompanying consolidated
         financial statements as follows:
<TABLE>
<CAPTION>
                                                                 Years ended December 31,
                                                     -------------------------------------------------
                                                         2001             2000               1999
                                                     -------------    --------------     -------------
        <S>                                          <C>              <C>                <C>
        Personnel costs                                $2,394,106     $ 3,395,755          $   44,150
        Loss from discontinued operations               3,320,683      12,515,712           9,047,713
                                                       ----------     -----------          ----------
        Total                                          $5,714,789     $15,911,467          $9,091,863
                                                       ==========     ===========          ==========
</TABLE>

(11)     Stock Options and Warrants

         (a)      Stock Options

         Under the stock option plan adopted by the Company's Board of Directors
         in June 2000, up to five million non-qualified and incentive stock
         options and stock awards may be granted to officers, directors,
         employees, consultants and independent contractors. Options granted
         generally vest over three to four years and expire ten years following
         the date of grant. The Board of Directors or a committee thereof
         determines the exercise price of options granted.

         As part of a merger with Net Value, the Company converted the
         outstanding options under the existing Net Value stock option plan into
         options to purchase the Company's common stock using a conversion ratio
         of 0.4 Company options for every one Net Value option. On an
         "as-converted" basis, Net Value had 490,900 options converted at the
         effective merger date in November 2000.




                                       F-18
<PAGE>




         The following summarizes the Company's stock option activity and
related information:
<TABLE>
<CAPTION>
                                                                                                           Weighted
                                                                                  Range of exercise         average
                                                                  Shares                prices          exercise price
                                                              ----------------    -------------------   ----------------
         <S>                                                  <C>                 <C>                   <C>
         Outstanding at December 31, 1998                                --                     --                --
         Granted                                                  8,650,876          $1.00 - 10.13            $ 1.14
         Cancelled                                               (4,373,628)                  1.00              1.00
                                                                -----------

         Outstanding at December 31, 1999                         4,277,248           1.00 - 10.13              1.28
         Granted                                                  3,223,000           0.50 - 19.69              7.08
         Net Value, Inc. options assumed                            490,900           1.00 - 17.50              8.84
         Cancelled                                               (3,440,318)          1.00 - 16.38              4.16
                                                                -----------

         Outstanding at December 31, 2000                         4,550,830           0.50 - 19.69              4.03
         Granted                                                  3,725,000           0.50 -  1.60              0.76
         Cancelled                                               (1,992,947)          0.50 - 19.69              5.99
                                                                -----------
         Outstanding at December 31, 2001                         6,282,883           0.50 - 17.50              1.47
                                                                ===========
</TABLE>

         The following table summarizes information about options outstanding
         and exercisable as of December 31, 2001:
<TABLE>
<CAPTION>
                                               Outstanding Options                          Exercisable Options
                                 -------------------------------------------------   -----------------------------------
               Range of                             Remaining         Weighted                             Weighted
           Exercise prices          Shares         Life (Years)    Average Price         Shares         Average Price
        -----------------------  --------------   ---------------  ---------------   ----------------  -----------------
        <S>                      <C>              <C>              <C>               <C>               <C>
            $ 0.50 - $ 1.97         5,776,083       8.7 years          $ 0.85           3,079,416          $  0.92
            $ 1.98 - $ 3.94           207,200       7.2 years            3.07             152,200             2.83
            $ 3.95 - $ 5.91            36,000       8.4 years            4.00              13,500             4.00
            $ 5.92 - $ 7.88            10,000       7.5 years            6.38               6,250             6.38
            $ 7.89 - $11.81            64,000       5.7 years           10.00              64,000            10.00
            $11.82 - $13.78            63,200       5.7 years           12.50              63,200            12.50
            $13.79 - $15.75            63,200       5.7 years           15.00              63,200            15.00
            $15.76 - $17.50            63,200       5.7 years           17.50              63,200            17.50
                                    ---------                                           ---------
                 Total              6,282,883       8.6 years            1.47           3,504,966             1.95
                                    =========                                           =========
</TABLE>

         The Company accounts for options issued to employees in accordance with
         APB No. 25, under which no compensation cost has been recognized for
         awards granted at an exercise price equal to or greater than the quoted
         market value on the date of grant. Had compensation cost for the
         Company's employee stock option awards been determined consistent with
         SFAS No. 123, the Company's pro forma net loss to common shareholders
         for 2001, 2000 and 1999 would have been as follows:



                                       F-19
<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


<TABLE>
<CAPTION>
        Year ended December 31:                    2001                2000                1999
                                            -------------------    -------------       -------------
         <S>                                <C>                    <C>                 <C>
         Net loss to common shareholders:
            As reported                         $21,008,313         $81,922,103         $30,436,357
            Pro forma                            25,335,461          80,855,188         $32,149,155

         Basic and diluted net loss per common share:
            As reported                            $1.02                $4.64              $2.89
            Pro forma                               1.24                 4.58              $3.05
</TABLE>

         The weighted average fair value of employee options granted during
         2001, 2000 and 1999 was $0.53, $6.58 and $5.17 per share, respectively.
         The fair value of options granted were estimated on the date of grant
         using the Black-Scholes option pricing model, with the following
         assumptions:
<TABLE>
<CAPTION>
        Assumption                                 2001           2000           1999
        ------------------------------------    -----------    -----------    -----------
        <S>                                     <C>            <C>            <C>
        Dividend yield                          None           None           None
        Expected volatility                     106.7%         134.6%         87.00%
        Average risk free interest rate         3.99%          4.99%          6.30%
        Average expected lives                  4.3 years      5.0 years      5.0 years
</TABLE>

         (b)      Warrants

         The Company had outstanding the following warrants to purchase its
         securities as of December 31, 2001:
<TABLE>
<CAPTION>
                                                      Number of          Exercise price
                        Description of series      warrants issued         per share
                     ----------------------------  -----------------   -------------------
                     <S>                           <C>                 <C>
                            Common stock                3,473,051       $1.00 - $26.58
                                                   =================   =================
</TABLE>
         These warrants were issued primarily in connection with former
         borrowing arrangements, the Series C Preferred Stock issuance, and
         consulting services received. Additionally, as part of a merger with
         Net Value., the Company assumed the existing Net Value warrants
         totaling 675,089 on an "as-converted" basis. The Company recorded
         interest expense on warrants issued in connection with borrowing
         arrangements equal to the warrants then fair value as determined by
         independent valuations. The Company allocated a portion of the net
         proceeds received from the Series C Preferred Stock issuance to the
         cost of the Series C Warrants as determined using the Black-Scholes
         valuation model. The Company recorded stock-based compensation of
         $2,799,028 on warrants' issued to consultants equal to the warrants'
         then fair value as determined using the Black-Scholes valuation model.





                                       F-20
<PAGE>
                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


(12)     Fair Value of Financial Instruments

         At December 31, 2001 and 2000, the carrying values of cash and cash
         equivalents, accounts receivable, loans receivable, accounts payable
         and accrued expenses approximated their fair values as they are short
         term and are generally receivable or payable on demand.

(13)     Related Party Transactions

         Included in operating leases are two buildings leased from the former
         principal shareholder of Air Plus. Rent under these leases was
         determined by a survey of comparable building rents and totaled
         $110,000 for the period from October 5, 2001 to December 31, 2001.

         At December 31, 2001, an officer was indebted to the Company for a loan
         with an aggregate unamortized balance of $64,589. This loan is
         generally forgivable over a 3-year term and for accounting purposes is
         amortized evenly to expense over the term.

         In March 2000, an officer contributed shares of an affiliated company
         to the Company. The Company recorded the shares as contributed capital
         equal to their estimated fair value of $853,319.

         In October 1999, a former officer and director agreed to sell his
         shares of an affiliated company to the Company at a price which was
         less than the estimated fair value of the stock on the date of the
         transaction. Accordingly, the Company recorded contributed capital of
         $659,087 for the difference.

         In October 1999, the Company entered into a consulting agreement with
         an Advisory Board member. Under the terms of the consulting agreement,
         an affiliated company of the Advisory Board member was granted and
         exercised the right to purchase 676,374 shares of the Company's common
         stock at a discount to its then fair market value. The Company recorded
         consulting expense of $2,289,324 equal to the difference between the
         exercise price and the quoted market price of those shares on the date
         of grant.


                                       F-21
<PAGE>

                              Stonepath Group, Inc.

                   Notes to Consolidated Financial Statements

                           December 31, 2001 and 2000


(14)   Quarterly Information (Unaudited)

         The following is a summary of certain unaudited quarterly information
for fiscal 2001 and 2000:

<TABLE>
<CAPTION>
                                                                      Quarter ended
                                            ------------------------------------------------------------------
                      2001                    March 31         June 30        September 30      December 31
        ----------------------------------  --------------   -------------   ---------------   ---------------
        <S>                                 <C>              <C>             <C>               <C>
        Revenues                            $         --     $        --       $        --       $15,597,889
        Cost of purchased transportation              --              --                --         8,818,578
                                            ------------     -----------       -----------       -----------
        Net revenues                        $         --     $        --       $        --       $ 6,779,311
                                            ============     ===========       ===========       ===========
        Income (loss) from continuing       $ (1,241,281)    $(2,036,713)      $  (677,031)      $   960,623
          operations
        Loss from discontinued operations     (7,483,862)       (245,513)       (1,845,232)       (5,154,586)
        Gain on disposal of
          discontinued operations                     --              --                --           866,480
                                            ------------     -----------       -----------       -----------
        Net loss                              (8,725,143)     (2,282,226)       (2,522,263)       (3,327,483)
        Preferred stock dividends             (1,428,038)       (891,804)         (918,660)         (912,696)
                                            ------------     -----------       -----------       -----------
        Net loss to common shareholders     $(10,153,181)    $(3,174,030)      $(3,440,923)      $(4,240,179)
                                            ============     ===========       ===========       ===========
        Loss per share - basic and diluted:
          Continuing operations (1)         $      (0.13)    $     (0.14)      $     (0.08)      $         -
          Discontinued operations                  (0.37)          (0.01)            (0.09)            (0.21)
                                            ------------     -----------       -----------       -----------
          Net loss to common shareholders   $      (0.50)    $     (0.15)      $     (0.17)      $    (0.21)
                                            ============     ===========       ===========       ===========


                                                                     Quarter ended
                                            ------------------------------------------------------------------
                      2000                    March 31         June 30        September 30      December 31
        ----------------------------------  --------------   -------------   ---------------   ---------------
        Revenue                             $         --    $         --       $        --       $        --
                                            ============    ============       ===========       ===========
        Income (loss) from continuing       $ (1,658,273)   $   (931,550)      $(1,718,494)      $(1,047,106)
          operations
        Loss from discontinued operations     (6,500,062)    (12,040,281)       (4,985,818)       (7,289,689)
                                            ------------    ------------       -----------       -----------
        Net loss                              (8,158,335)    (12,971,831)       (6,704,312)       (8,336,795)
        Preferred stock dividends            (43,052,686)       (959,939)       (1,026,905)         (711,300)
                                            ------------    ------------       -----------       -----------
        Net loss to common shareholders     $(51,211,021)   $(13,931,770)      $(7,731,217)      $(9,048,095)
                                            ============    ============       ===========       ===========
        Loss per share - basic and diluted:
          Continuing operations(1)          $      (2.63)   $      (0.11)      $     (0.15)      $     (0.08)
          Discontinued operations                  (0.38)          (0.68)            (0.28)            (0.38)
                                            ------------    ------------       -----------       -----------
          Net loss to common shareholders   $      (3.01)   $      (0.79)      $     (0.43)      $     (0.46)
                                            ============    ============       ===========       ===========
</TABLE>
--------------------
(1) Includes effect of preferred stock dividends


         The amounts above reflect the Company's former business of investing in
early-stage technology companies as discontinued operations.





                                       F-22
<PAGE>


SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS


                             STONEPATH GROUP, INC.


<TABLE>
<CAPTION>
                                                          Column C - Additions
                                                        ------------------------
                                                                        (2)
                                       Column B -          (1)        Charged
                                       Balance at       Charged to    to other      Column D       Column E -
        Column A -                    beginning of      costs and     accounts -   Deductions-     Balance at
        Description                      period          expenses     describe      describe      end of period
        -----------                   ------------      ----------    ----------   -----------    -------------
<S>                                     <C>              <C>           <C>           <C>            <C>
Allowance for doubtful accounts:

  Year ended December 31, 2001           $    --         $ 167,000      $   --       $   --        $ 167,000
                                         =======         =========      ======       ======        =========

  Year ended December 31, 2000           $    --         $      --      $   --       $   --        $      --
                                         =======         =========      ======       ======        =========

  Year ended December 31, 1999           $    --         $      --      $   --       $   --        $      --
                                         =======         =========      ======       ======        =========



</TABLE>








                                      F-23