##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|   |  | For the fiscal year ended December 31, 2005                                                 
|OR
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-16105


STONEPATH GROUP, INC.


(Exact name of registrant as specified in its charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 65-0867684                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|2200 Alaskan Way, Suite 200
     Seattle, Washington               |  | 98121(Zip Code)                         
|(Address of principal executive offices)                           |  |                                         

(206) 336-5400


(Registrants telephone number, including area code)


Securities registered pursuant to Section 12(b) of the
Act:


|                                         |  |                                          
|---------------------------------------- |  | -----------------------------------------
|Title of Each Class                      |  | Name of Each Exchange on Which Registered
|                                         |  |                                          
|Common Stock, $0.001 par value per share |  | American Stock Exchange                  

Securities registered pursuant to Section 12(g) of the
Act:


None


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


o o þ


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K







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









---



##### 










STONEPATH GROUP, INC.


ANNUAL REPORT ON
FORM 10-K


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005


Table of Contents


|              |  |                                                                                                                      |  |  |    |  |  | 
|------------- |  | -------------------------------------------------------------------------------------------------------------------- |  |  | -- |  |  | 
|PART I       
|Item 1.       |  | Business                                                                                                             |  |  | 1  | 
|Item 1A.      |  | Risk Factors                                                                                                         |  |  | 10 | 
|Item 2.       |  | Properties                                                                                                           |  |  | 16 | 
|Item 3.       |  | Legal Proceedings                                                                                                    |  |  | 16 | 
|Item 4.       |  | Submission Of Matters To A Vote Of Security
    Holders                                                              |  |  | 18 | 
|PART II      
|Item 5.       |  | Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |  | 19 | 
|Item 6.       |  | Selected Financial Data                                                                                              |  |  | 20 | 
|Item 7.       |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |  | 22 | 
|Item 7A.      |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  |  | 40 | 
|Item 8.       |  | Financial Statements and Supplementary
    Data                                                                      |  |  | 41 | 
|Item 9.       |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |  | 85 | 
|Item 9A.      |  | Controls and Procedures                                                                                              |  |  | 85 | 
|Item 9B.      |  | Other Information                                                                                                    |  |  | 85 | 
|             
|PART III     
|Item 10.      |  | Directors and Executive Officers of the
    Registrant                                                               |  |  | 86 | 
|Item 11.      |  | Executive Compensation                                                                                               |  |  | 86 | 
|Item 12.      |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |  | 86 | 
|Item 13.      |  | Certain Relationships and Related
    Transactions                                                                   |  |  | 86 | 
|Item 14.      |  | Principal Accountant Fees and Services                                                                               |  |  | 86 | 
|             
|PART IV      
|Item 15.      |  | Exhibits and Financial Statement
    Schedules                                                                       |  |  | 86 | 
|EXHIBIT 10.33
|EXHIBIT 10.34
|EXHIBIT 10.35
|EXHIBIT 12   
|EXHIBIT 14   
|EXHIBIT 23.1 
|EXHIBIT 23.2 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 







---



##### Table of Contents






PART I


Forward-looking Statements


10-K







|        |         
|------- | --------
|Item 1. | Business



| |         
| | --------
| | Overview













1



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U.S.-based




start-up






2



---



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Industry Overview


cash-to






state-of


merge-in






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Outsourcing of Non-Core Activities. Companies are
    increasingly outsourcing freight forwarding, warehousing and
    other supply chain activities to allow them to focus on their
    core competencies. From managing purchase orders to the timely
    delivery of products, companies turn to third-party logistics
    providers (3PLs) to manage these functions at a
    lower cost and more efficiently.
|
| |  | 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. This places a
    greater emphasis on international freight management and
    just-in-                                                                                

3



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | time delivery capabilities. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Increased Need for Time and Date Certain Delivery. The
    need for just-in-time
    and other time and date certain 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 and
    date certain supply chain management services can decrease
    overall manufacturing and distribution costs, reduce capital
    requirements, allow them to manage their working capital more
    efficiently by reducing inventory levels and inventory loss and
    improve service to their customers.                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Consolidation of Logistics Function. As companies try to
    develop partnering relationships with fewer
    suppliers, they are reducing 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
    carriers actually providing the transportation services, improve
    their mix of cargo to achieve desired densities 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 ground transport, warehousing and
    distribution, and customs brokerage.
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

just-in


Our Strategic Objectives




| |                      
| | ---------------------
| | Our Business Strategy





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Foster a Disciplined Entrepreneurial Environment. A key
    element of our operating strategy is to foster a disciplined
    environment while maintaining an entrepreneurial culture for our
    employees. We intend to foster this environment by continuing to
    build on the reputations and customer relationships of our
    companies. We are also implementing a global management
    reporting and control system requiring each business to
    implement Company-wide controls, policies and management
    accountabilities. A disciplined entrepreneurial business
    atmosphere should 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.
|
| |  | 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 commodity or
    assignment-oriented approach used by many of our competitors. To
    develop close customer relationships, we regularly meet                                                                                                                                                                                                                                                                                                                                                                                    

4



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | with existing and prospective customers to help design and
    execute solutions for their supply chain strategies. We believe
    that this relationship-oriented approach results in greater
    customer satisfaction and reduced business development expense.                                                                                                                                                                                                                
|
| |  | Centralize Administrative Functions. We seek to maximize
    our operational efficiencies by integrating general and
    administrative functions at the corporate level, thereby
    reducing or eliminating redundant functions and facilities at
    our companies. This should enable us to realize potential
    savings and synergies, efficiently control and monitor our
    operations and should allow our companies to focus on growing
    their sales and operations.
|
| |  | Enhance Our Capital Structure. We need to augment our
    capital structure. This may take the form of subordinated debt,
    convertible preferred stock and common stock, among others. Such
    an enhanced capital structure will permit continued expansion,
    but at a far slower pace than we have done in the past. This
    growth will expand our services in existing markets and expand
    our global reach.                                                       

Operations




door-to


end-to


direct-to merge-in


5



---



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Freight Forwarding Services. We offer domestic and
    international air, ocean and ground freight forwarding for
    shipments that require special handling or are generally larger
    than shipments handled by competing integrated carriers of
    primarily small parcels. Our basic freight forwarding business
    is complemented by customized and information technology-based
    options to meet customers specific needs. Our Domestic
    Services organization offers same day, one, two and three to
    five day service along with expedited ground service within
    North America through our network of asset-based carriers. On a
    limited basis, we also provide motor carrier services through
    one of our own affiliates. Internationally we offer a wide range
    of services from expedited air to multi-modal options through
    our network of owned or agent offices throughout the world. In a
    few markets in Asia, the Company offers co-loading services to
    the freight forwarding marketplace.
|
| |  | Customs Brokerage Services. Our International Services
    organization provides customs brokerage services. 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 have extensive
    knowledge of the complex tariff laws and customs regulations
    governing the payment of duty and taxes, as well as valuation
    and import restrictions in their respective countries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Warehousing and Other Services that Add Value for our
    Customers. Our warehousing services primarily relate to
    storing goods and materials to meet our customers
    production or distribution schedules. Other services include
    receiving, deconsolidation and decontainerization, sorting, put
    away, consolidation, assembly, inspection services, cargo
    loading and unloading, assembly of freight, customer inventory
    control and protective packing and storage, order processing and
    customer-directed invoicing. We receive storage charges for use
    of our warehouses and fees for our other services.                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Time and Date Certain Transportation. We specialize in
    complex, time and date certain delivery of product to many
    destinations around the world and all North American
    destinations. These include high-volume, complex
    multi-destination consolidation programs for catalog, retail and
    other shippers. We have special programs focused on high value
    and breakable freight utilizing all modes of transportation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Direct-to-store
    logistics for retail customers 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 and date certain product launch dates.                                                                                                  
|
| |  | Turn-key product management services for retailers 
    including comprehensive vendor compliance management, central
    delivery and distribution centers close to consumption,
    inventory forecasting, replenishment and management 
    all on the Web.                                                                                                                                                                               
|
| |  | 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. Such services are useful to
    retailers where deliveries from diverse sources are organized
    and distributed to maximize efficiency of their sales and
    marketing programs.
|
| |  | Web-based fulfillment solutions providing order management as
    well as the subsequent pick, pack and shipment for our customers.                                                                                                                                                                                                                                                                                                            
|
| |  | Turn-key supply chain and logistics outsourcing projects where
    we operate one or more warehouses or the entire
    end-to-end supply
    chain. We provide sophisticated systems that supply global
    location, status and ownership of parts/ SKUs and enable the
    timely cross border customs clearance and placement desired by
    the final consumer of the goods.                                                               
|
| |  | High-speed, time and date certain, total-destination programs
    that include packaging, transportation, unpacking and placement
    of new products and equipment.                                                                                                                                                                                                                                                                           

6



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| |   |                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Packaging, transportation, unpacking and stand installation for
    domestic trade shows and major expositions.                                                                                                                                 
|
| |  | 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 control.

Information Systems




best-of tm tm tm




Consolidation of Businesses




Sales and Marketing






7



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Competition and Business Conditions












8



---



##### Table of Contents





Regulation












Personnel




9



---



##### Table of Contents





Discontinued Operations








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





Corporate Information


10-K, 10-Q, 8-K


Segment Information









|         |             
|-------- | ------------
|Item 1A. | Risk Factors



| |                                                                      
| | ---------------------------------------------------------------------
| |  We have not been profitable in four out of the last
    five years.



10



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| |                                                                                                       
| | ------------------------------------------------------------------------------------------------------
| |  We need additional capital to meet our existing
    obligations and implement our business strategy.





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| |  The issuance of additional securities may cause
    additional dilution to the interests of our existing
    shareholders.







| |                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  The exercise or conversion of our outstanding
    options, warrants or other convertible securities or any
    derivative securities we issue in the future will result in the
    dilution of our existing shareholders and may create downward
    pressure on the trading price of our common stock.



|                                                             |  |           |            |     |          |   |            | 
|------------------------------------------------------------ |  | --------- | ---------- | --- | -------- | - | ---------- | 
|                                                             |  | Number of |            |     |         
|                                                             |  | Shares    |            |     | Proceeds |  
|                                                             |  |           |            |     |          |  
|Options outstanding under our stock option plan              |  |           | 12,126,784 |     |          | $ | 18,143,235 | 
|Shares issuable upon conversion of Convertible Note          |  |           | 9,382,623  | (1) |          |   |           | 
|Shares issuable upon exchange of subsidiary Preferred Shares |  |           | 3,444,445  | (2) |          |   |           | 
|Non-plan options                                             |  |           | 552,000    |     |          |   | 920,750    | 
|Warrants                                                     |  |           | 3,976,778  |     |          |   | 11,364,399 | 
|                                                             |  |           |            |     |          |  
|Total                                                        |  |           | 29,482,630 |     |          | $ | 30,428,384 | 
|                                                             |  |           |            |     |          |  






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include shares which may be issued upon conversion of
    accrued interest or fees payable under a convertible note in
    connection with our domestic credit facility (the
    Convertible Note). The holder of the Convertible
    Note has the right to convert any portion of such interest or
    fees not paid in cash into shares of common stock at a
    conversion price of $1.0658 per share, subject to
    anti-dilution adjustment. Although the holder has the right to
    exercise this conversion feature, it is our expectation that all
    such interest and fees will be paid in cash.
|   
|(2) | Includes 2,777,778 shares of common stock issuable upon
    exchange of preferred shares of Stonepath Holdings (Hong Kong)
    Limited (Preferred Shares) now outstanding and an
    additional 666,667 shares of common stock which may be
    issued upon exchange of additional Preferred Shares which may be
    issued as pay-in-kind
    dividends on the Preferred Shares for two years worth of
    such dividends. Does not                                                                                                                                                                                 

11



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| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | include 333,333 additional shares of common stock which may be
    issued in exchange for Preferred Shares issued as
    pay-in-kind dividends
    in each year after such two-year period.







| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| |  We are unable to make further acquisitions without
    the consent of the lender under our domestic credit
    facility.





| |                                                                                                
| | -----------------------------------------------------------------------------------------------
| |  Our earnings are subject to non-cash charges
    relating to the amortization of intangibles.





| |                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  If we are unable to profitably manage and integrate
    the companies we acquire, are unable to acquire additional
    companies, or are unable to grow our existing operations, we
    will not achieve our growth and profit objectives.



12



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##### Table of Contents





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| |  We rely on a small number of large customers, the
    loss of which would have a negative effect on our results of
    operations.





| |                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------
| |  The risks associated with international operations
    could adversely affect our operations and ability to
    grow.





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



| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  Terrorist attacks and other acts of violence or war
    may affect any market on which our shares trade, the markets in
    which we operate, our operations and our profitability.



13



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| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| |  We depend on the continued service of certain
    executive officers. We can not assure you that we will be able
    to retain these persons.





| |                                               
| | ----------------------------------------------
| |  We face intense competition in our industry.





| |                                                                                            
| | -------------------------------------------------------------------------------------------
| |  Our stock price may be volatile due to factors
    under, as well as out of, our control.





| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | actual or anticipated fluctuations in our operating results;                                                                                                                   
|
| |  | announcements of technological innovations or new commercial
    products or services by us or our competitors;                                                                
|
| |  | a continued weakening of general market conditions which in turn
    could have a depressive effect on the volume of goods shipped
    and shipments that we manage or arrange;
|
| |  | acts of global terrorism or armed conflicts; and                                                                                                                               
|
| |  | changes in recommendations or earnings estimates by securities
    analysts.                                                                                                   





| |                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  The accounting treatment that we must apply to the
    warrant and conversion features contained within the terms of
    our credit facility may result in periodic volatility of our
    earnings while these features of the facility are
    outstanding.



14



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##### Table of Contents







| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  Our cash flow will be adversely affected in the
    future once we make use of our consolidated net operating loss
    carryforward available to offset future taxable income.





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





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  We believe our industry is consolidating and if we
    cannot gain sufficient market presence, we may not be able to
    compete successfully against larger global companies.





| |                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  We may be required to incur material expenses in
    defending or resolving outstanding legal disputes which would
    adversely affect our results of operations.





| |                                                                                     
| | ------------------------------------------------------------------------------------
| |  We have a limited operating history upon which you
    can evaluate our prospects.



15



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##### Table of Contents







| |                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------
| |  Provisions of our charter and applicable Delaware
    law may make it more difficult to complete a contested takeover
    of our company.








|        |           
|------- | ----------
|Item 2. | Properties





month-to




|                      |  |                           |  |                        
|--------------------- |  | ------------------------- |  | -----------------------
|Atlanta               |  | Miami                     |  | St. Louis              
|Chicago (2 locations) |  | Milwaukee                 |  | Washington, D.C.       
|Columbus              |  | Minneapolis (2 locations) |  | Hong Kong              
|Dallas/Fort Worth     |  | New York (2 locations)    |  | PRC (10 locations)     
|Denver                |  | Orlando                   |  | Singapore (2 locations)
|Detroit               |  | Portland, ME              |  | Malaysia (3 locations) 
|El Paso               |  | Salt Lake City            |  | Cambodia               
|Houston               |  | San Francisco             |  | Brazil (3 locations)   
|Indianapolis          |  | Seattle                   |  | Germany                
|Los Angeles           |  |                           |  |                        






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



16



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17



---



##### Table of Contents
















|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission Of Matters To A Vote Of Security Holders





|                     |  |           |            |  |                |  |           | 
|-------------------- |  | --------- | ---------- |  | -------------- |  | --------- | 
|Director             |  | Votes For |            |  | Votes Withheld | 
|                     |  |           |            |  |                | 
|Dennis Pelino        |  |           | 31,367,170 |  |                |  | 2,770,005 | 
|Aloysius T. Lawn, IV |  |           | 32,305,483 |  |                |  | 1,831,692 | 
|David R. Jones       |  |           | 32,311,458 |  |                |  | 1,825,717 | 
|Robert McCord        |  |           | 32,323,284 |  |                |  | 1,813,891 | 
|J. Douglass Coates   |  |           | 32,318,609 |  |                |  | 1,818,566 | 
|John H. Springer     |  |           | 32,313,958 |  |                |  | 1,823,217 | 



18



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



|                             |                |      |   |      |     |  |   |      | 
|---------------------------- | -------------- | ---- | - | ---- | --- |  | - | ---- | 
|                             |                | High |   |      | Low | 
|                             |                |      |   |      |     | 
|Year ended December 31, 2005 |                |      |   |      |     |  |   |     
|                             | First quarter  |      | $ | 1.44 |     |  | $ | 0.88 | 
|                             | Second quarter |      |   | 1.08 |     |  |   | 0.67 | 
|                             | Third quarter  |      |   | 1.24 |     |  |   | 0.86 | 
|                             | Fourth quarter |      |   | 0.98 |     |  |   | 0.64 | 
|Year ended December 31, 2004 |                |      |   |      |     |  |   |     
|                             | First quarter  |      |   | 4.20 |     |  |   | 2.27 | 
|                             | Second quarter |      |   | 4.05 |     |  |   | 1.80 | 
|                             | Third quarter  |      |   | 2.10 |     |  |   | 0.86 | 
|                             | Fourth quarter |      |   | 1.28 |     |  |   | 0.60 | 



| |                  
| | -----------------
| | Share Information





| |                                     
| | ------------------------------------
| | Equity Compensation Plan Information



|                                                           |  |                   |            |  |                  |   |      |                         |  |  |           |    
|---------------------------------------------------------- |  | ----------------- | ---------- |  | ---------------- | - | ---- | ----------------------- |  |  | --------- | ---
|                                                           |  | (a)               |            |  | (b)              |   |      | (c)                     | 
|                                                           |  | Number of         |            |  | Weighted-        |   |      | Number of Securities    | 
|                                                           |  | Securities to be  |            |  | Average Exercise |   |      | Remaining Available for | 
|                                                           |  | Issued Upon       |            |  | Price of         |   |      | Future Issuance Under   | 
|                                                           |  | Exercise of       |            |  | Outstanding      |   |      | Equity Compensation     | 
|                                                           |  | Outstanding       |            |  | Options,         |   |      | Plan (Excluding         | 
|                                                           |  | Options, Warrants |            |  | Warrants and     |   |      | Securities Reflected in | 
|Plan Category                                              |  | and Rights        |            |  | Rights           |   |      | Column(a))              | 
|                                                           |  |                   |            |  |                  |   |      |                         | 
|Equity compensation plans approved by security holders     |  |                   | 12,126,784 |  |                  | $ | 1.50 |                         |  |  | 1,437,123 | (1)
|Equity compensation plans not approved by security holders |  |                   | 552,000    |  |                  | $ | 1.67 |                         |  |  |          |    
|                                                           |  |                   |            |  |                  |   |      |                         | 
|Total                                                      |  |                   | 12,678,784 |  |                  | $ | 1.50 |                         |  |  | 1,437,123 |    
|                                                           |  |                   |            |  |                  |   |      |                         | 






|    |                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Does not include options to purchase 1,436,093 shares
    of our common stock under the Companys stock option plan
    which have been exercised.

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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data















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|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |  |   |         |        |  
|-------------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------------------- | ------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | - | ---- | ------- | ------ |  | - | ------- | ------ | -
|                                                                                             |                                          | Year Ended December 31,                  |        
|                                                                                             |                                          |                                          |        
|                                                                                             |                                          | 2005                                     |         |        | 2004 |   |         | 2003   |   |   | 2002    |        |   | 2001 |        
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|                                                                                             |                                          | (In Thousands, except per share amounts) |        
|Consolidated Statement Of Operations Data:                                                   |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |  |   |         |       
|Total revenue                                                                                |                                          | $                                        | 410,255 |        |      | $ | 367,081 |        |   | $ | 220,084 |        |   | $    | 122,788 |        |  | $ | 15,598  |       
|Cost of transportation                                                                       |                                          |                                          | 323,798 |        |      |   | 282,359 |        |   |   | 158,106 |        |   |      | 86,085  |        |  |   | 10,009  |       
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Net revenue                                                                                  |                                          |                                          | 86,457  |        |      |   | 84,722  |        |   |   | 61,978  |        |   |      | 36,703  |        |  |   | 5,589   |       
|Operating expenses                                                                           |                                          |                                          | 90,348  |        |      |   | 90,298  |        |   |   | 60,300  |        |   |      | 35,956  |        |  |   | 10,409  |       
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Income (loss) from operations                                                                |                                          |                                          | (3,891  | )      |      |   | (5,576  | )      |   |   | 1,678   |        |   |      | 747     |        |  |   | (4,820  | )     
|Other income (expense)                                                                       |                                          |                                          | (2,545  | )      |      |   | (3,652  | )      |   |   | (1,278  | )      |   |      | 128     |        |  |   | 1,295   |       
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Income (loss) from continuing operations before income tax
    expense and minority interest |                                          |                                          | (6,436  | )      |      |   | (9,228  | )      |   |   | 400     |        |   |      | 875     |        |  |   | (3,525  | )     
|Income tax expense                                                                           |                                          |                                          | 1,918   |        |      |   | 2,395   |        |   |   | 736     |        |   |      | 421     |        |  |   | 71      |       
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Income (loss) from continuing operations before minority interest                            |                                          |                                          | (8,354  | )      |      |   | (11,623 | )      |   |   | (336    | )      |   |      | 454     |        |  |   | (3,596  | )     
|Minority interest                                                                            |                                          |                                          | 1,384   |        |      |   | 1,395   |        |   |   | 187     |        |   |      |        |        |  |   |        |       
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Income (loss) from continuing operations                                                     |                                          |                                          | (9,738  | )      |      |   | (13,018 | )      |   |   | (523    | )      |   |      | 454     |        |  |   | (3,596  | )     
|Loss from discontinued operations                                                            |                                          |                                          |        |        |      |   | (25     | )      |   |   | (263    | )      |   |      |        |        |  |   | (13,863 | )     
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Net income (loss)                                                                            |                                          |                                          | (9,738  | )      |      |   | (13,043 | )      |   |   | (786    | )      |   |      | 454     |        |  |   | (17,459 | )     
|Preferred stock dividends                                                                    |                                          |                                          | (36     | )      |      |   |        |        |   |   |        |        |   |      | 15,020  |        |  |   | (4,151  | )     
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Net income (loss) attributable to common stockholders                                        |                                          | $                                        | (9,774  | )      |      | $ | (13,043 | )      |   | $ | (786    | )      |   | $    | 15,474  |        |  | $ | (21,610 | )     
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Basic earnings (loss) per common share:                                                      |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |  |   |         |       
|                                                                                             | Continuing operations                    |                                          | $       | (0.22  | )    |   | $       | (0.33  | ) |   | $       | (0.02  | ) |      | $       | 0.70   |  |   | $       | (0.38  | )
|                                                                                             | Discontinued operations                  |                                          |         |       |      |   |         |       |   |   |         | (0.01  | ) |      |         |       |  |   |         | (0.68  | )
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|                                                                                             | Basic earnings (loss) per common share   |                                          | $       | (0.22  | )    |   | $       | (0.33  | ) |   | $       | (0.03  | ) |      | $       | 0.70   |  |   | $       | (1.06  | )
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Diluted earnings (loss) per common share(1):                                                 |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |  |   |         |       
|                                                                                             | Continuing operations                    |                                          | $       | (0.23  | )    |   | $       | (0.33  | ) |   | $       | (0.02  | ) |      | $       | 0.02   |  |   | $       | (0.38  | )
|                                                                                             | Discontinued operations                  |                                          |         |       |      |   |         |       |   |   |         | (0.01  | ) |      |         |       |  |   |         | (0.68  | )
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|                                                                                             | Diluted earnings (loss) per common share |                                          | $       | (0.23  | )    |   | $       | (0.33  | ) |   | $       | (0.03  | ) |      | $       | 0.02   |  |   | $       | (1.06  | )
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|Weighted average common shares:                                                              |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |         |        |  |   |         |       
|                                                                                             | Basic                                    |                                          |         | 43,592 |      |   |         | 38,972 |   |   |         | 29,626 |   |      |         | 22,155 |  |   |         | 20,510 |  
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        
|                                                                                             | Diluted                                  |                                          |         | 46,758 |      |   |         | 38,972 |   |   |         | 29,626 |   |      |         | 29,233 |  |   |         | 20,510 |  
|                                                                                             |                                          |                                          |         |        |      |   |         |        |   |   |         |        |   |      |        






|    |                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Diluted earnings per common share for 2002 excludes the impact
    of the July 18, 2002 exchange transaction with the holders
    of the Companys Series C Preferred Stock.

|                                 |  |                |         |  |      |   |         |      |  |   |        |  |  |      |        |  |  |   |        | 
|-------------------------------- |  | -------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ------ | 
|                                 |  | December 31,   |        
|                                 |  |                |        
|                                 |  | 2005           |         |  | 2004 |   |         | 2003 |  |   | 2002   |  |  | 2001 |       
|                                 |  |                |         |  |      |   |         |      |  |   |        |  |  |      |       
|                                 |  | (In thousands) |        
|Consolidated Balance Sheet Data: |  |                |         |  |      |   |         |      |  |   |        |  |  |      |        |  |  |   |        | 
|Cash and cash equivalents        |  | $              | 4,601   |  |      | $ | 2,801   |      |  | $ | 3,074  |  |  | $    | 2,266  |  |  | $ | 15,228 | 
|Total assets                     |  |                | 135,282 |  |      |   | 122,946 |      |  |   | 90,269 |  |  |      | 53,985 |  |  |   | 40,714 | 
|Long-term debt                   |  |                | 1,137   |  |      |   | 2,134   |      |  |   | 1,135  |  |  |      |       |  |  |   |       | 
|Stockholders equity             |  |                | 36,500  |  |      |   | 44,969  |      |  |   | 56,323 |  |  |      | 33,165 |  |  |   | 32,092 | 

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



Overview














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just-in


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Critical Accounting Policies










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Discontinued Operations






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Results Of Operations




| |                                                                          
| | -------------------------------------------------------------------------
| | Year ended December 31, 2005 compared to year ended
    December 31, 2004



|                               |                           |      |         |        |      |        |         |        |   |   |         |       |  |  |      |     |  
|------------------------------ | ------------------------- | ---- | ------- | ------ | ---- | ------ | ------- | ------ | - | - | ------- | ----- |  |  | ---- | --- | -
|                               |                           |      |         |        |      | Change |        
|                               |                           |      |         |        |      |        |        
|                               |                           | 2005 |         |        | 2004 |        |         | Amount |   |   | Percent |      
|                               |                           |      |         |        |      |        |         |        |   |   |         |      
|Total revenue                  |                           | $    | 410,255 |        |      | $      | 367,081 |        |   | $ | 43,174  |       |  |  | 11.8 | %  
|                               |                           |      |         |        |      |        |         |        |   |   |         |      
|Transportation revenue         |                           | $    | 384,869 |        |      | $      | 343,460 |        |   | $ | 41,409  |       |  |  | 12.1 |    
|Cost of transportation         |                           |      | 323,798 |        |      |        | 282,359 |        |   |   | 41,439  |       |  |  | 14.7 |    
|                               |                           |      |         |        |      |        |         |        |   |   |         |      
|Net transportation revenue     |                           |      | 61,071  |        |      |        | 61,101  |        |   |   | (30     | )     |  |  |     |    
|                               | Net transportation margin |      |         | 15.9   | %    |        |         | 17.8   | % |   |         |       |  |  |      |     |  
|Customs brokerage              |                           |      | 8,623   |        |      |        | 9,393   |        |   |   | (770    | )     |  |  | (8.2 | )  
|Warehousing and other services |                           |      | 16,763  |        |      |        | 14,228  |        |   |   | 2,535   |       |  |  | 17.8 |    
|                               |                           |      |         |        |      |        |         |        |   |   |         |      
|                               | Net revenue               |      | $       | 86,457 |      |        | $       | 84,722 |   |   | $       | 1,735 |  |  |      | 2.0 | %
|                               |                           |      |         |        |      |        |         |        |   |   |         |      
|                               | Net revenue margin        |      |         | 21.1   | %    |        |         | 23.1   | % |   |         |       |  |  |      |     |  
|                               |                           |      |         |        |      |        |         |        |   |   |         |      







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|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |   |        |   |  |  |       |  
|----------------------------------------------------------------------------- |  | ------ | ------ | - | ------- |  | ----- | ------ |  | - | ------- | - |  | ------ | ----- | -- | ------- | - | ------ | - |  |  | ----- | -
|                                                                              |  | 2005   |        |   | 2004    |  |       | Change | 
|                                                                              |  |        |        |   |         |  |       |        | 
|                                                                              |  | Amount |        |   | Percent |  |       | Amount |  |   | Percent |   |  | Amount |       |    | Percent |  
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Net revenue                                                                   |  | $      | 86,457 |   |         |  | 100.0 | %      |  | $ | 84,722  |   |  |        | 100.0 | %  |         | $ | 1,735  |   |  |  | 2.0   | %
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Personnel costs                                                               |  |        | 46,310 |   |         |  | 53.6  |        |  |   | 49,057  |   |  |        | 57.9  |    |         |   | (2,747 | ) |  |  | (5.6  | )
|Other selling, general and administrative costs                               |  |        | 36,430 |   |         |  | 42.1  |        |  |   | 32,684  |   |  |        | 38.6  |    |         |   | 3,746  |   |  |  | 11.5  |  
|Depreciation and amortization                                                 |  |        | 4,323  |   |         |  | 5.0   |        |  |   | 4,189   |   |  |        | 4.9   |    |         |   | 134    |   |  |  | 3.2   |  
|Restructuring charges                                                         |  |        | 3,284  |   |         |  | 3.8   |        |  |   | 4,368   |   |  |        | 5.2   |    |         |   | (1,084 | ) |  |  | (24.8 | )
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Total operating costs                                                         |  |        | 90,347 |   |         |  | 104.5 |        |  |   | 90,298  |   |  |        | 106.6 |    |         |   | 49     |   |  |  | 0.1   |  
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from operations                                                          |  |        | (3,890 | ) |         |  | (4.5  | )      |  |   | (5,576  | ) |  |        | (6.6  | )  |         |   | 1,686  |   |  |  | 30.2  |  
|Loan refinancing costs                                                        |  |        | (912   | ) |         |  | (1.1  | )      |  |   |        |   |  |        |      |    |         |   | (912   | ) |  |  | NM    |  
|Change in fair value of derivatives                                           |  |        | 2,117  |   |         |  | 2.4   |        |  |   |        |   |  |        |      |    |         |   | 2,117  |   |  |  | NM    |  
|Provision for excess earn-out payments                                        |  |        |       |   |         |  |      |        |  |   | (3,075  | ) |  |        | (3.6  | )  |         |   | 3,075  |   |  |  | NM    |  
|Other income (expense), net                                                   |  |        | (3,751 | ) |         |  | (4.3  | )      |  |   | (577    | ) |  |        | (0.7  | )  |         |   | (3,174 | ) |  |  | 550.1 |  
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from continuing operations before income taxes and minority
    interest |  |        | (6,436 | ) |         |  | (7.4  | )      |  |   | (9,228  | ) |  |        | (10.9 | )  |         |   | 2,792  |   |  |  | 30.3  |  
|Income taxes                                                                  |  |        | 1,918  |   |         |  | 2.2   |        |  |   | 2,395   |   |  |        | 2.8   |    |         |   | (477   | ) |  |  | (19.9 | )
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from continuing operations before minority interest                      |  |        | (8,354 | ) |         |  | (9.7  | )      |  |   | (11,623 | ) |  |        | (13.7 | )  |         |   | 3,269  |   |  |  | 28.1  |  
|Minority interest                                                             |  |        | 1,384  |   |         |  | 1.6   |        |  |   | 1,395   |   |  |        | 1.6   |    |         |   | (11    | ) |  |  | (0.8  | )
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from continuing operations                                               |  |        | (9,738 | ) |         |  | (11.3 | )      |  |   | (13,018 | ) |  |        | (15.4 | )  |         |   | 3,280  |   |  |  | 25.2  |  
|Loss from discontinued operations                                             |  |        |       |   |         |  |      |        |  |   | (25     | ) |  |        | 0.0   |    |         |   | 25     |   |  |  | NM    |  
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Net loss                                                                      |  |        | (9,738 | ) |         |  | (11.3 | )      |  |   | (13,043 | ) |  |        | (15.4 | )  |         |   | 3,305  |   |  |  | 25.3  |  
|Preferred stock dividends                                                     |  |        | (36    | ) |         |  |      |        |  |   |        |   |  |        |      |    |         |   | (36    | ) |  |  | NM    |  
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss attributable to common stockholders                                      |  | $      | (9,774 | ) |         |  | (11.3 | )%     |  | $ | (13,043 | ) |  |        | (15.4 | )% |         | $ | 3,269  |   |  |  | 25.1  | %
|                                                                              |  |        |        |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  



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| |                                                                          
| | -------------------------------------------------------------------------
| | Year ended December 31, 2004 compared to year ended
    December 31, 2003



|                               |                           |      |         |        |      |        |         |        |   |   |         |        |  |  |       |      |  
|------------------------------ | ------------------------- | ---- | ------- | ------ | ---- | ------ | ------- | ------ | - | - | ------- | ------ |  |  | ----- | ---- | -
|                               |                           |      |         |        |      | Change |        
|                               |                           |      |         |        |      |        |        
|                               |                           | 2004 |         |        | 2003 |        |         | Amount |   |   | Percent |       
|                               |                           |      |         |        |      |        |         |        |   |   |         |       
|Total revenue                  |                           | $    | 367,081 |        |      | $      | 220,084 |        |   | $ | 146,997 |        |  |  | 66.8  | %   
|                               |                           |      |         |        |      |        |         |        |   |   |         |       
|Transportation revenue         |                           | $    | 343,460 |        |      | $      | 203,187 |        |   | $ | 140,273 |        |  |  | 69.0  |     
|Cost of transportation         |                           |      | 282,359 |        |      |        | 158,106 |        |   |   | 124,253 |        |  |  | 78.6  |     
|                               |                           |      |         |        |      |        |         |        |   |   |         |       
|Net transportation revenue     |                           |      | 61,101  |        |      |        | 45,081  |        |   |   | 16,020  |        |  |  | 35.5  |     
|                               | Net transportation margin |      |         | 17.8   | %    |        |         | 22.2   | % |   |         |        |  |  |       |      |  
|Customs brokerage              |                           |      | 9,393   |        |      |        | 10,027  |        |   |   | (634    | )      |  |  | (6.3  | )   
|Warehousing and other services |                           |      | 14,228  |        |      |        | 6,870   |        |   |   | 7,358   |        |  |  | 107.1 |     
|                               |                           |      |         |        |      |        |         |        |   |   |         |       
|                               | Net revenue               |      | $       | 84,722 |      |        | $       | 61,978 |   |   | $       | 22,744 |  |  |       | 36.7 | %
|                               |                           |      |         |        |      |        |         |        |   |   |         |       
|                               | Net revenue margin        |      |         | 23.1   | %    |        |         | 28.2   | % |   |         |        |  |  |       |      |  
|                               |                           |      |         |        |      |        |         |        |   |   |         |       





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start-up




start-up


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|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |   |         |   |  |  |        |  
|-------------------------------------------------------------------------------------- |  | ------ | ------- | - | ------- |  | ----- | ------ |  | - | ------- | - |  | ------ | ----- | -- | ------- | - | ------- | - |  |  | ------ | -
|                                                                                       |  | 2004   |         |   | 2003    |  |       | Change | 
|                                                                                       |  |        |         |   |         |  |       |        | 
|                                                                                       |  | Amount |         |   | Percent |  |       | Amount |  |   | Percent |   |  | Amount |       |    | Percent |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Net revenue                                                                            |  | $      | 84,722  |   |         |  | 100.0 | %      |  | $ | 61,978  |   |  |        | 100.0 | %  |         | $ | 22,744  |   |  |  | 36.7   | %
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Personnel costs                                                                        |  |        | 49,057  |   |         |  | 57.9  |        |  |   | 35,766  |   |  |        | 57.7  |    |         |   | 13,291  |   |  |  | 37.2   |  
|Other selling, general and administrative costs                                        |  |        | 32,684  |   |         |  | 38.6  |        |  |   | 20,705  |   |  |        | 33.4  |    |         |   | 11,979  |   |  |  | 57.9   |  
|Depreciation and amortization                                                          |  |        | 4,189   |   |         |  | 4.9   |        |  |   | 2,660   |   |  |        | 4.3   |    |         |   | 1,529   |   |  |  | 57.5   |  
|Restructuring charges                                                                  |  |        | 4,368   |   |         |  | 5.2   |        |  |   |        |   |  |        |      |    |         |   | 4,368   |   |  |  | NM     |  
|Litigation settlement and nonrecurring costs                                           |  |        |        |   |         |  |      |        |  |   | 1,169   |   |  |        | 1.9   |    |         |   | (1,169  | ) |  |  | (100.0 | )
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Total operating costs                                                                  |  |        | 90,298  |   |         |  | 106.6 |        |  |   | 60,300  |   |  |        | 97.3  |    |         |   | 29,998  |   |  |  | 49.7   |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Income (loss) from operations                                                          |  |        | (5,576  | ) |         |  | (6.6  | )      |  |   | 1,678   |   |  |        | 2.7   |    |         |   | (7,254  | ) |  |  | NM     |  
|Provisions for excess earn-out payments                                                |  |        | (3,075  | ) |         |  | (3.6  | )      |  |   | (1,270  | ) |  |        | (2.1  | )  |         |   | (1,805  | ) |  |  | (142.1 | )
|Other income (expense), net                                                            |  |        | (577    | ) |         |  | (0.7  | )      |  |   | (8      | ) |  |        |      |    |         |   | (569    | ) |  |  | NM     |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Income (loss) from continuing operations before income taxes and
    minority interest |  |        | (9,228  | ) |         |  | (10.9 | )      |  |   | 400     |   |  |        | 0.6   |    |         |   | (9,628  | ) |  |  | NM     |  
|Income tax expense                                                                     |  |        | 2,395   |   |         |  | 2.8   |        |  |   | 736     |   |  |        | 1.2   |    |         |   | 1,659   |   |  |  | 225.4  |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from continuing operations before minority interest                               |  |        | (11,623 | ) |         |  | (13.7 | )      |  |   | (336    | ) |  |        | (0.6  | )  |         |   | (11,287 | ) |  |  | NM     |  
|Minority interest                                                                      |  |        | 1,395   |   |         |  | 1.7   |        |  |   | 187     |   |  |        | 0.3   |    |         |   | 1,208   |   |  |  | 646.0  |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Loss from continuing operations                                                        |  |        | (13,018 | ) |         |  | (15.4 | )      |  |   | (523    | ) |  |        | (0.9  | )  |         |   | (12,495 | ) |  |  | NM     |  
|Loss from discontinued operations                                                      |  |        | (25     | ) |         |  |      |        |  |   | (263    | ) |  |        | (0.4  | )  |         |   | 238     |   |  |  | 90.5   |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  
|Net loss                                                                               |  | $      | (13,043 | ) |         |  | (15.4 | )%     |  | $ | (786    | ) |  |        | (1.3  | )% |         | $ | (12,257 | ) |  |  | NM     |  
|                                                                                       |  |        |         |   |         |  |       |        |  |   |         |   |  |        |       |    |         |  







31



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U.S.-based




32



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Disclosures About Contractual Obligations




|                                             |  |           |        |  |       |   |        |       |  |   |         |  |  |       |     |  |  |   |        | 
|-------------------------------------------- |  | --------- | ------ |  | ----- | - | ------ | ----- |  | - | ------- |  |  | ----- | --- |  |  | - | ------ | 
|                                             |  |           |        |  |       |   |        | More  |  |   |        
|                                             |  | Less Than |        |  | 1-3   |   |        | 3-5   |  |   | Than    |  |  |      
|Contractual Obligations                      |  | 1 Year    |        |  | Years |   |        | Years |  |   | 5 Years |  |  | Total |    
|                                             |  |           |        |  |       |   |        |       |  |   |         |  |  |       |    
|Operating lease obligations                  |  | $         | 5,757  |  |       | $ | 7,635  |       |  | $ | 3,321   |  |  | $     | 686 |  |  | $ | 17,399 | 
|Capital lease obligations                    |  |           | 216    |  |       |   | 132    |       |  |   | 6       |  |  |       |    |  |  |   | 354    | 
|Earn-outs payable                            |  |           | 3,513  |  |       |   | 2,255  |       |  |   |        |  |  |       |    |  |  |   | 5,768  | 
|Short-term debt                              |  |           | 1,898  |  |       |   | 16,045 |       |  |   |        |  |  |       |    |  |  |   | 17,943 | 
|Long-term debt                               |  |           |       |  |       |   | 1,000  |       |  |   |        |  |  |       |    |  |  |   | 1,000  | 
|                                             |  |           |        |  |       |   |        |       |  |   |         |  |  |       |    
|Total contractual obligations                |  |           | 11,384 |  |       |   | 27,067 |       |  |   | 3,327   |  |  |       | 686 |  |  |   | 42,464 | 
|Contingent earn-out obligations(a)(b)        |  |           |       |  |       |   | 14,272 |       |  |   | 3,235   |  |  |       |    |  |  |   | 17,507 | 
|                                             |  |           |        |  |       |   |        |       |  |   |         |  |  |       |    
|Total contractual and contingent obligations |  | $         | 11,384 |  |       | $ | 41,339 |       |  | $ | 6,562   |  |  | $     | 686 |  |  | $ | 59,971 | 
|                                             |  |           |        |  |       |   |        |       |  |   |         |  |  |       |    






|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Consists of potential obligations related to earn-out payments
    to the former owners of our existing subsidiaries, as discussed
    under Liquidity and Capital Resources.



|    |  |                                                                                                                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | During the 2006-2008 earn-out period, there is an additional
    contingent obligation related to tier-two earn-outs that could
    be as much as $10.0 million if certain of the acquired
    companies generate an incremental $20.0 million in pre-tax
    earnings.

Liquidity and Capital Resources










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|                                                |  |           |            |  |          |   |            | 
|----------------------------------------------- |  | --------- | ---------- |  | -------- | - | ---------- | 
|                                                |  | Number of |            |  |         
|                                                |  | Shares    |            |  | Proceeds |  
|                                                |  |           |            |  |          |  
|Options outstanding under our stock option plan |  |           | 12,126,784 |  |          | $ | 18,143,235 | 
|Non-plan options                                |  |           | 552,000    |  |          |   | 920,750    | 
|Warrants                                        |  |           | 3,476,778  |  |          |   | 10,964,399 | 
|                                                |  |           |            |  |          |  
|Total                                           |  |           | 16,155,562 |  |          | $ | 30,028,384 | 
|                                                |  |           |            |  |          |  





| |                                           
| | ------------------------------------------
| | Secured Convertible Minimum Borrowing Note





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| |                       
| | ----------------------
| | Secured Revolving Note





| |                              
| | -----------------------------
| | Common Stock Purchase Warrant





| |                   
| | ------------------
| | Security Agreement





| |                              
| | -----------------------------
| | Registration Rights Agreement

S-1


35



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| |      
| | -----
| | Other





| |           
| | ----------
| | Other Debt





| |             
| | ------------
| | Acquisitions







36



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37



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12-month






38



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(1)(2)


|                                       |                        |      |        |        |      |   |        |       |   |   |       |       |   |   |        |        |  
|-------------------------------------- | ---------------------- | ---- | ------ | ------ | ---- | - | ------ | ----- | - | - | ----- | ----- | - | - | ------ | ------ | -
|                                       |                        | 2007 |        |        | 2008 |   |        | 2009  |   |   | Total |      
|                                       |                        |      |        |        |      |   |        |       |   |   |       |      
|Earn-Out Payments:                     |                        |      |        |        |      |   |        |       |   |   |       |       |   |   |        |       
|                                       | Domestic Services      |      | $      | 2,500  |      |   | $      | 2,500 |   |   | $     |      |   |   | $      | 5,000  |  
|                                       | International Services |      |        | 5,758  |      |   |        | 3,514 |   |   |       | 3,235 |   |   |        | 12,507 |  
|                                       |                        |      |        |        |      |   |        |       |   |   |       |      
|Total earn-out payments                |                        | $    | 8,258  |        |      | $ | 6,014  |       |   | $ | 3,235 |       |   | $ | 17,507 |       
|                                       |                        |      |        |        |      |   |        |       |   |   |       |      
|Prior year pre-tax earnings targets(3) |                        |      |        |        |      |   |        |       |   |   |       |       |   |   |        |       
|                                       | Domestic Services      |      | $      | 3,500  |      |   | $      | 3,500 |   |   | $     |      |   |   | $      | 7,000  |  
|                                       | International Services |      |        | 14,012 |      |   |        | 8,693 |   |   |       | 8,160 |   |   |        | 30,865 |  
|                                       |                        |      |        |        |      |   |        |       |   |   |       |      
|Total pre-tax earnings targets         |                        | $    | 17,512 |        |      | $ | 12,193 |       |   | $ | 8,160 |       |   | $ | 37,865 |       
|                                       |                        |      |        |        |      |   |        |       |   |   |       |      
|                                       | Domestic Services      |      |        | 71.4   | %    |   |        | 71.4  | % |   |       | N/A   |   |   |        | 71.4   | %
|                                       | International Services |      |        | 41.1   | %    |   |        | 40.4  | % |   |       | 39.6  | % |   |        | 40.5   | %
|                                       | Combined               |      |        | 47.2   | %    |   |        | 49.3  | % |   |       | 39.6  | % |   |        | 46.2   | %






|    |                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes the impact of prior years pre-tax earnings
    carryforwards (excess or shortfalls versus earnings targets).                                                                                                                                                 
|   
|(2) | During the 2006-2008 earn-out period, there is an additional
    contingent obligation related to tier-two earn-outs that could
    be as much as $10.0 million if certain of the acquired
    companies generate an incremental $20.0 million in pre-tax
    earnings.



| |                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Based on the cumulative performance of SLIS through the end of
    2005, the maximum $2.0 million tier-two opportunity was
    accrued as of December 31, 2005. Additionally,
    $1.3 million of remaining base earn-out opportunity was
    also accrued as available excess earnings carryforwards are
    likely to be sufficient to ensure an eventual payment.



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



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New Accounting Pronouncements









|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market
    Risk





40



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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Consolidated Financial Statements


|                                                                                |  |   
|------------------------------------------------------------------------------- |  | --
|Report of Grant Thornton LLP, Independent
    Registered Public Accounting Firm |  | 42
|Report of KPMG LLP, Independent Registered
    Public Accounting firm           |  | 43
|Consolidated Balance Sheets                                                     |  | 44
|Consolidated Statements of Operations                                           |  | 45
|Consolidated Statement of
    Stockholders Equity and Comprehensive Loss       |  | 46
|Consolidated Statements of Cash Flows                                           |  | 48
|Notes to Consolidated Financial
    Statements                                  |  | 49
|Supplementary Data                                                              |  |   
|Valuation and Qualifying Accounts                                               |  | 84

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Report of Grant Thornton LLP, Independent Registered Public
Accounting Firm






















42



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Report of KPMG LLP, Independent Registered Public Accounting
Firm





















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STONEPATH GROUP, INC.





Consolidated Balance Sheets


December 31, 2005 and 2004


|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |   |             |              |             | 
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------- | ------------ | ----------- | - | ----------- | ------------ | ----------- | 
|                                                                                                   |                                                                                                                                                               | 2005                                       |             |              | 2004        |  
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|ASSETS                                                                                            
|Current assets:                                                                                    |                                                                                                                                                               |                                            |             |              |             |   |             |             
|                                                                                                   | Cash and cash equivalents                                                                                                                                     |                                            | $           | 4,600,797    |             |   | $           | 2,800,645    |            
|                                                                                                   | Accounts receivable, less allowances for doubtful accounts of
    $1,805,529 and $1,872,277 at 2005 and 2004, respectively                                    |                                            |             | 69,836,168   |             |   |             | 64,064,382   |            
|                                                                                                   | Prepaid expenses and other current assets                                                                                                                     |                                            |             | 2,311,950    |             |   |             | 2,559,858    |            
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                   |                                                                                                                                                               | Total current assets                       |             |              | 76,748,915  |   |             |              | 69,424,885  | 
|Goodwill                                                                                           |                                                                                                                                                               |                                            | 43,762,197  |              |             |   | 37,278,661  |             
|Technology, furniture and equipment, net                                                           |                                                                                                                                                               |                                            | 6,856,352   |              |             |   | 7,595,859   |             
|Acquired intangibles, net                                                                          |                                                                                                                                                               |                                            | 5,211,488   |              |             |   | 7,079,986   |             
|Note receivable, related party                                                                     |                                                                                                                                                               |                                            |            |              |             |   | 87,500      |             
|Other assets                                                                                       |                                                                                                                                                               |                                            | 2,702,830   |              |             |   | 1,479,181   |             
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|Total assets                                                                                       |                                                                                                                                                               | $                                          | 135,281,782 |              |             | $ | 122,946,072 |             
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                              
|Current liabilities:                                                                               |                                                                                                                                                               |                                            |             |              |             |   |             |             
|                                                                                                   | Short-term debt                                                                                                                                               |                                            | $           | 14,039,165   |             |   | $           | 18,185,817   |            
|                                                                                                   | Accounts payable                                                                                                                                              |                                            |             | 50,054,265   |             |   |             | 38,537,750   |            
|                                                                                                   | Earn-outs payable                                                                                                                                             |                                            |             | 3,512,694    |             |   |             | 2,645,695    |            
|                                                                                                   | Accrued payroll and related expenses                                                                                                                          |                                            |             | 3,393,225    |             |   |             | 3,192,889    |            
|                                                                                                   | Accrued restructuring costs                                                                                                                                   |                                            |             | 1,484,484    |             |   |             | 741,637      |            
|                                                                                                   | Accrued expenses                                                                                                                                              |                                            |             | 7,516,249    |             |   |             | 5,627,276    |            
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                   |                                                                                                                                                               | Total current liabilities                  |             |              | 80,002,082  |   |             |              | 68,931,064  | 
|Long-term debt                                                                                     |                                                                                                                                                               |                                            | 1,137,088   |              |             |   | 2,133,833   |             
|Long-term earn-outs payable                                                                        |                                                                                                                                                               |                                            | 2,255,000   |              |             |   |            |             
|Other long-term liabilities                                                                        |                                                                                                                                                               |                                            | 4,209,777   |              |             |   | 166,589     |             
|Deferred tax liability                                                                             |                                                                                                                                                               |                                            | 2,897,835   |              |             |   | 1,650,900   |             
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                   |                                                                                                                                                               | Total liabilities                          |             |              | 90,499,782  |   |             |              | 72,882,436  | 
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|Minority interest                                                                                  |                                                                                                                                                               |                                            | 6,478,444   |              |             |   | 5,094,336   |             
|Convertible preferred stock, $100.00 par value,
    48,000 shares authorized, 30,000 shares issued |                                                                                                                                                               |                                            | 1,803,610   |              |             |   |            |             
|Commitments and contingencies (Notes 10 and 11)                                                    |                                                                                                                                                               |                                            |             |              |             |   |             |             
|Stockholders equity:                                                                              |                                                                                                                                                               |                                            |             |              |             |   |             |             
|                                                                                                   | Preferred stock, $.001 par value, 10,000,000 shares
    authorized; none issued                                                                               |                                            |             |             |             |   |             |             |            
|                                                                                                   | Common stock, $.001 par value, 100,000,000 shares
    authorized; issued and outstanding: 43,749,693 and
    42,839,795 shares at 2005 and 2004, respectively |                                            |             | 43,750       |             |   |             | 42,840       |            
|                                                                                                   | Additional paid-in capital                                                                                                                                    |                                            |             | 222,779,237  |             |   |             | 221,728,796  |            
|                                                                                                   | Accumulated deficit                                                                                                                                           |                                            |             | (186,580,588 | )           |   |             | (176,806,892 | )          
|                                                                                                   | Accumulated other comprehensive income                                                                                                                        |                                            |             | 257,547      |             |   |             | 35,856       |            
|                                                                                                   | Deferred compensation                                                                                                                                         |                                            |             |             |             |   |             | (31,300      | )          
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                   |                                                                                                                                                               | Total stockholders equity                 |             |              | 36,499,946  |   |             |              | 44,969,300  | 
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  
|                                                                                                   |                                                                                                                                                               | Total liabilities and stockholders equity |             | $            | 135,281,782 |   |             | $            | 122,946,072 | 
|                                                                                                   |                                                                                                                                                               |                                            |             |              |             |  



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STONEPATH GROUP, INC.





Consolidated Statements of Operations


Years ended December 31, 2005, 2004 and 2003


|                                                                                       |                                         |      |             |            |      |   |             |            |   |   |             |            |  
|-------------------------------------------------------------------------------------- | --------------------------------------- | ---- | ----------- | ---------- | ---- | - | ----------- | ---------- | - | - | ----------- | ---------- | -
|                                                                                       |                                         | 2005 |             |            | 2004 |   |             | 2003       |  
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Total revenue                                                                          |                                         | $    | 410,255,373 |            |      | $ | 367,080,665 |            |   | $ | 220,084,190 |           
|Cost of transportation                                                                 |                                         |      | 323,798,027 |            |      |   | 282,358,647 |            |   |   | 158,105,595 |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Net revenue                                                                            |                                         |      | 86,457,346  |            |      |   | 84,722,018  |            |   |   | 61,978,595  |           
|Personnel costs                                                                        |                                         |      | 46,310,318  |            |      |   | 49,056,857  |            |   |   | 35,766,389  |           
|Other selling, general and administrative costs                                        |                                         |      | 36,430,459  |            |      |   | 32,683,825  |            |   |   | 20,704,424  |           
|Depreciation and amortization                                                          |                                         |      | 4,322,863   |            |      |   | 4,189,040   |            |   |   | 2,659,882   |           
|Restructuring charges                                                                  |                                         |      | 3,284,208   |            |      |   | 4,368,250   |            |   |   |            |           
|Litigation settlement and nonrecurring costs                                           |                                         |      |            |            |      |   |            |            |   |   | 1,169,035   |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Income (loss) from operations                                                          |                                         |      | (3,890,502  | )          |      |   | (5,575,954  | )          |   |   | 1,678,865   |           
|Other income (expense):                                                                |                                         |      |             |            |      |   |             |            |   |   |             |           
|                                                                                       | Provisions for excess earn-out payments |      |             |           |      |   |             | (3,075,190 | ) |   |             | (1,270,141 | )
|                                                                                       | Interest income                         |      |             | 34,762     |      |   |             | 61,964     |   |   |             | 48,909     |  
|                                                                                       | Interest expense                        |      |             | (3,542,852 | )    |   |             | (639,491   | ) |   |             | (141,859   | )
|                                                                                       | Change in fair value of derivatives     |      |             | 2,116,581  |      |   |             |           |   |   |             |           |  
|                                                                                       | Loan refinancing costs                  |      |             | (911,998   | )    |   |             |           |   |   |             |           |  
|                                                                                       | Other                                   |      |             | (242,404   | )    |   |             | 1,024      |   |   |             | 84,850     |  
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Income (loss) from continuing operations before income taxes and
    minority interest |                                         |      | (6,436,413  | )          |      |   | (9,227,647  | )          |   |   | 400,624     |           
|Income tax expense                                                                     |                                         |      | 1,917,835   |            |      |   | 2,395,812   |            |   |   | 735,886     |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Loss from continuing operations before minority interest                               |                                         |      | (8,354,248  | )          |      |   | (11,623,459 | )          |   |   | (335,262    | )         
|Minority interest                                                                      |                                         |      | 1,383,530   |            |      |   | 1,394,896   |            |   |   | 187,310     |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Loss from continuing operations                                                        |                                         |      | (9,737,778  | )          |      |   | (13,018,355 | )          |   |   | (522,572    | )         
|Loss from discontinued operations, net of tax                                          |                                         |      |            |            |      |   | (25,000     | )          |   |   | (263,031    | )         
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Net loss                                                                               |                                         |      | (9,737,778  | )          |      |   | (13,043,355 | )          |   |   | (785,603    | )         
|Preferred stock dividends                                                              |                                         |      | (35,918     | )          |      |   |            |            |   |   |            |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Net loss attributable to common stockholders                                           |                                         | $    | (9,773,696  | )          |      | $ | (13,043,355 | )          |   | $ | (785,603    | )         
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Basic loss per common share                                                           |                                         |      |             |            |      |   |             |            |   |   |             |           
|                                                                                       | Continuing operations                   |      | $           | (0.22      | )    |   | $           | (0.33      | ) |   | $           | (0.02      | )
|                                                                                       | Discontinued operations                 |      |             |           |      |   |             |           |   |   |             | (0.01      | )
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|                                                                                       | Loss per common share                   |      | $           | (0.22      | )    |   | $           | (0.33      | ) |   | $           | (0.03      | )
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Diluted loss per common share                                                         |                                         |      |             |            |      |   |             |            |   |   |             |           
|                                                                                       | Continuing operations                   |      | $           | (0.23      | )    |   | $           | (0.33      | ) |   | $           | (0.02      | )
|                                                                                       | Discontinued operations                 |      |             |           |      |   |             |           |   |   |             | (0.01      | )
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|                                                                                       | Loss per common share                   |      | $           | (0.23      | )    |   | $           | (0.33      | ) |   | $           | (0.03      | )
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Basic weighted average common shares outstanding                                       |                                         |      | 43,591,855  |            |      |   | 38,971,526  |            |   |   | 29,625,585  |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  
|Diluted weighted average common shares outstanding                                     |                                         |      | 46,757,761  |            |      |   | 38,971,526  |            |   |   | 29,625,585  |           
|                                                                                       |                                         |      |             |            |      |   |             |            |  



45



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STONEPATH GROUP, INC.





Consolidated Statement of Stockholders Equity and
Comprehensive Loss


Years ended December 31, 2005, 2004 and 2003


|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |   | 
|------------------------------------------------------------- | --------------------------------------- | --------------- | -------- | - | ------------ | - | ---- | ---------- |  |  | ---------- | - |  | ------- | ------ | - |  | - | ----------- | - | 
|                                                              |                                         | Preferred Stock |          |   | Common Stock |   |      | Additional | 
|                                                              |                                         |                 |          |   |              |   |      | Paid-In    | 
|                                                              |                                         | Shares          |          |   | Amount       |   |      | Shares     |  |  | Amount     |   |  | Capital |       
|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |       
|Balances at January 1, 2003                                   |                                         |                 | 360,742  |   |              | $ | 361  |            |  |  | 23,453,414 |   |  | $       | 23,453 |   |  | $ | 196,235,064 |  
|Net loss                                                      |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|Other comprehensive income:                                   |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |  
|                                                              | Foreign currency translation adjustment |                 |          |  |              |   |      |           |  |  |            |  |  |         |        |  |  |   |             |  | 
|Comprehensive loss                                            |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |  
|Issuance of common stock, net of issuance costs               |                                         |                 |         |   |              |   |     |            |  |  | 10,453,500 |   |  |         | 10,454 |   |  |   | 18,054,961  |  
|Exercise of options and warrants                              |                                         |                 |         |   |              |   |     |            |  |  | 920,739    |   |  |         | 921    |   |  |   | 649,858     |  
|Series D Convertible Preferred Stock conversion               |                                         |                 | (50,265  | ) |              |   | (51  | )          |  |  | 502,650    |   |  |         | 503    |   |  |   | (452        | )
|Issuance of common stock in lieu of cash for earn-out         |                                         |                 |         |   |              |   |     |            |  |  | 254,825    |   |  |         | 255    |   |  |   | 402,745     |  
|Issuance of common stock in lieu of cash for legal settlement |                                         |                 |         |   |              |   |     |            |  |  | 271,339    |   |  |         | 271    |   |  |   | 583,279     |  
|Issuance of common stock for acquisitions                     |                                         |                 |         |   |              |   |     |            |  |  | 1,593,477  |   |  |         | 1,593  |   |  |   | 4,142,501   |  
|Amortization of deferred stock-based compensation             |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |       
|Balances at December 31, 2003                                 |                                         |                 | 310,477  |   |              |   | 310  |            |  |  | 37,449,944 |   |  |         | 37,450 |   |  |   | 220,067,956 |  
|Net loss                                                      |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |  
|Other comprehensive income:                                   |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|                                                              | Foreign currency translation adjustment |                 |          |  |              |   |      |           |  |  |            |  |  |         |        |  |  |   |             |  | 
|Comprehensive loss                                            |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |  
|Exercise of options and warrants                              |                                         |                 |         |   |              |   |     |            |  |  | 2,119,108  |   |  |         | 2,119  |   |  |   | 1,269,631   |  
|Series D Convertible Preferred Stock conversion               |                                         |                 | (310,477 | ) |              |   | (310 | )          |  |  | 3,104,770  |   |  |         | 3,105  |   |  |   | (2,795      | )
|Issuance of common stock to Employee Stock Purchase Plan      |                                         |                 |         |   |              |   |     |            |  |  | 123,238    |   |  |         | 123    |   |  |   | 224,047     |  
|Issuance of common stock for acquisitions                     |                                         |                 |         |   |              |   |     |            |  |  | 42,735     |   |  |         | 43     |   |  |   | 99,957      |  
|Options issued to consultant                                  |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   | 70,000      |  
|Amortization of deferred stock-based compensation             |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |       
|Balances at December 31, 2004                                 |                                         |                 |         |   |              |   |     |            |  |  | 42,839,795 |   |  |         | 42,840 |   |  |   | 221,728,796 |  
|Net loss                                                      |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|Other comprehensive income:                                   |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|                                                              | Foreign currency translation adjustment |                 |          |  |              |   |      |           |  |  |            |  |  |         |        |  |  |   |             |  | 
|Comprehensive loss                                            |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |        |   |  |   |             |  
|Issuance of common stock to Employee Stock Purchase Plan      |                                         |                 |         |   |              |   |     |            |  |  | 115,983    |   |  |         | 116    |   |  |   | 79,607      |  
|Preferred stock dividends                                     |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|Issuance of common stock for acquisitions                     |                                         |                 |         |   |              |   |     |            |  |  | 793,915    |   |  |         | 794    |   |  |   | 853,755     |  
|Issuance of warrants on debt extinguishment                   |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   | 117,079     |  
|Amortization of deferred stock-based compensation             |                                         |                 |         |   |              |   |     |            |  |  |           |   |  |         |       |   |  |   |            |  
|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |       
|Balances at December 31, 2005                                 |                                         |                 |         |   |              | $ |     |            |  |  | 43,749,693 |   |  | $       | 43,750 |   |  | $ | 222,779,237 |  
|                                                              |                                         |                 |          |   |              |   |      |            |  |  |            |   |  |         |       



46



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##### Table of Contents



STONEPATH GROUP, INC.


Consolidated Statement of Stockholders Equity and
Comprehensive Loss  (Continued)


|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  |   |             |         | 
|------------------------------------------------------------- | --------------------------------------- | ----------- | ------------ | ----------- | ------------- | - | ------- | ------------ |  | - | -------- | - | ------------- | ---- | ----------- | ------- |  | - | ----------- | ------- | 
|                                                              |                                         |             |              | Accumulated |               |   |         |              |  |   |         
|                                                              |                                         |             |              | Other       |               |   |         |              |  |   | Total    |  
|                                                              |                                         | Accumulated |              |             | Comprehensive |   |         | Deferred     |  |   |          |   | Comprehensive |     
|                                                              |                                         | Deficit     |              |             | Income        |   |         | Compensation |  |   | Total    |   |               | Loss |            
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Balances at January 1, 2003                                   |                                         | $           | (162,977,934 | )           |               | $ |        |              |  | $ | (116,406 | ) |               | $    | 33,164,538  |         |  |   |             |        
|Net loss                                                      |                                         |             | (785,603     | )           |               |   |        |              |  |   |         |   |               |      | (785,603    | )       |  | $ | (785,603    | )      
|Other comprehensive income:                                   |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  |   |             |        
|                                                              | Foreign currency translation adjustment |             |              |            |               |   |         | 1,997        |  |   |          |  |               |      |             | 1,997   |  |   |             | 1,997   | 
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Comprehensive loss                                            |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  | $ | (783,606    | )      
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Issuance of common stock, net of issuance costs               |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 18,065,415  |         |  |   |             |        
|Exercise of options and warrants                              |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 650,779     |         |  |   |             |        
|Series D Convertible Preferred Stock conversion               |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      |            |         |  |   |             |        
|Issuance of common stock in lieu of cash for earn-out         |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 403,000     |         |  |   |             |        
|Issuance of common stock in lieu of cash for legal settlement |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 583,550     |         |  |   |             |        
|Issuance of common stock for acquisitions                     |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 4,144,094   |         |  |   |             |        
|Amortization of deferred stock-based compensation             |                                         |             |             |             |               |   |        |              |  |   | 95,232   |   |               |      | 95,232      |         |  |   |             |        
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Balances at December 31, 2003                                 |                                         |             | (163,763,537 | )           |               |   | 1,997   |              |  |   | (21,174  | ) |               |      | 56,323,002  |         |  |   |             |        
|Net loss                                                      |                                         |             | (13,043,355  | )           |               |   |        |              |  |   |         |   |               |      | (13,043,355 | )       |  | $ | (13,043,355 | )      
|Other comprehensive income:                                   |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  |   |             |        
|                                                              | Foreign currency translation adjustment |             |              |            |               |   |         | 33,859       |  |   |          |  |               |      |             | 33,859  |  |   |             | 33,859  | 
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Comprehensive loss                                            |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  | $ | (13,009,496 | )      
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Exercise of options and warrants                              |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 1,271,750   |         |  |   |             |        
|Series D Convertible Preferred Stock conversion               |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      |            |         |  |   |             |        
|Issuance of common stock to Employee Stock Purchase Plan      |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 224,170     |         |  |   |             |        
|Issuance of common stock for acquisitions                     |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 100,000     |         |  |   |             |        
|Options issued to consultant                                  |                                         |             |             |             |               |   |        |              |  |   | (70,000  | ) |               |      |            |         |  |   |             |        
|Amortization of deferred stock-based compensation             |                                         |             |             |             |               |   |        |              |  |   | 59,874   |   |               |      | 59,874      |         |  |   |             |        
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Balances at December 31, 2004                                 |                                         |             | (176,806,892 | )           |               |   | 35,856  |              |  |   | (31,300  | ) |               |      | 44,969,300  |         |  |   |             |        
|Net loss                                                      |                                         |             | (9,737,778   | )           |               |   |        |              |  |   |         |   |               |      | (9,737,778  | )       |  | $ | (9,737,778  | )      
|Other comprehensive income:                                   |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  |   |             |        
|                                                              | Foreign currency translation adjustment |             |              |            |               |   |         | 221,691      |  |   |          |  |               |      |             | 221,691 |  |   |             | 221,691 | 
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Comprehensive loss                                            |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |             |         |  | $ | (9,516,087  | )      
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Issuance of common stock to Employee Stock Purchase Plan      |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 79,723      |         |  |   |             |        
|Preferred stock dividends                                     |                                         |             | (35,918      | )           |               |   |        |              |  |   |         |   |               |      | (35,918     | )       |  |   |             |        
|Issuance of common stock for acquisitions                     |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 854,549     |         |  |   |             |        
|Issuance of warrants on debt extinguishment                   |                                         |             |             |             |               |   |        |              |  |   |         |   |               |      | 117,079     |         |  |   |             |        
|Amortization of deferred stock-based compensation             |                                         |             |             |             |               |   |        |              |  |   | 31,300   |   |               |      | 31,300      |         |  |   |             |        
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            
|Balances at December 31, 2005                                 |                                         | $           | (186,580,588 | )           |               | $ | 257,547 |              |  | $ |         |   |               | $    | 36,499,946  |         |  |   |             |        
|                                                              |                                         |             |              |             |               |   |         |              |  |   |          |   |               |      |            



47



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##### Table of Contents



STONEPATH GROUP, INC.





Consolidated Statements of Cash Flows


Years ended December 31, 2005, 2004 and 2003


|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |            |             |             |  
|--------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------- | ---------------------------------------------------- | ---------- | ---------- | ---------- | ----------- | ---------- | ----------- | ----------- | --------- | ---------- | ----------- | ----------- | -
|                                                                                              |                                                                                      | 2005                                  |                                                      |            | 2004       |            |             | 2003       |            
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash flows from operating activities:                                                         |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|Net loss                                                                                      |                                                                                      | $                                     | (9,773,696                                           | )          |            | $          | (13,043,355 | )          |             | $           | (785,603  | )         
|Adjustments to reconcile net loss to net cash provided by (used
    in) operating activities: |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|                                                                                              | Deferred income taxes                                                                |                                       |                                                      | 1,246,935  |            |            |             | 615,300    |             |             |           | 574,800    |            
|                                                                                              | Depreciation and amortization                                                        |                                       |                                                      | 4,322,863  |            |            |             | 4,189,040  |             |             |           | 2,659,882  |            
|                                                                                              | Change in fair value of derivatives                                                  |                                       |                                                      | (2,116,581 | )          |            |             |           |             |             |           |           |            
|                                                                                              | Amortization of loan discount and fees                                               |                                       |                                                      | 967,166    |            |            |             |           |             |             |           |           |            
|                                                                                              | Stock-based compensation                                                             |                                       |                                                      | 31,300     |            |            |             | 59,874     |             |             |           | 95,232     |            
|                                                                                              | Loss on extinguishment of debt                                                       |                                       |                                                      | 117,079    |            |            |             |           |             |             |           |           |            
|                                                                                              | Minority interest in net income of subsidiaries                                      |                                       |                                                      | 1,383,530  |            |            |             | 1,394,896  |             |             |           | 187,310    |            
|                                                                                              | Loss on disposal of technology, furniture and equipment and other                    |                                       |                                                      | 242,854    |            |            |             | 8,349      |             |             |           |           |            
|                                                                                              | Non-cash restructuring charge                                                        |                                       |                                                      |           |            |            |             | 3,556,134  |             |             |           |           |            
|                                                                                              | Issuance of common stock in litigation settlement                                    |                                       |                                                      |           |            |            |             |           |             |             |           | 350,000    |            
|                                                                                              | Issuance of common stock to vendor of former business                                |                                       |                                                      |           |            |            |             |           |             |             |           | 135,000    |            
|                                                                                              | Issuance of common stock in offering penalty                                         |                                       |                                                      |           |            |            |             |           |             |             |           | 98,550     |            
|Changes in assets and liabilities, net of effect of acquisitions:                             |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|                                                                                              |                                                                                      | Accounts receivable                   |                                                      |            | (5,771,786 | )          |             |            | (11,957,872 | )           |           |            | (11,187,538 | )          
|                                                                                              |                                                                                      | Prepaid expenses and other assets     |                                                      |            | (46,765    | )          |             |            | 11,973      |             |           |            | (887,891    | )          
|                                                                                              |                                                                                      | Accounts payable and accrued expenses |                                                      |            | 14,398,132 |            |             |            | 13,587,422  |             |           |            | 4,771,653   |            
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|                                                                                              |                                                                                      |                                       | Net cash provided by (used in) operating activities  |            |            | 5,001,031  |             |            |             | (1,578,239  | )         |            |             | (3,988,605  | )
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash flows from investing activities:                                                         |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|                                                                                              | Purchases of technology, furniture and equipment                                     |                                       |                                                      | (1,600,800 | )          |            |             | (4,909,148 | )           |             |           | (4,183,201 | )          
|                                                                                              | Proceeds from sales of technology, furniture and equipment                           |                                       |                                                      | 146,514    |            |            |             |           |             |             |           |           |            
|                                                                                              | Payment of earn-out                                                                  |                                       |                                                      | (2,419,489 | )          |            |             | (3,431,285 | )           |             |           | (2,206,715 | )          
|                                                                                              | Acquisition of businesses, net of cash acquired                                      |                                       |                                                      |           |            |            |             | (8,004,253 | )           |             |           | (9,385,908 | )          
|                                                                                              | Loans made                                                                           |                                       |                                                      |           |            |            |             | (75,000    | )           |             |           | (130,000   | )          
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|                                                                                              |                                                                                      |                                       | Net cash used in investing activities                |            |            | (3,873,775 | )           |            |             | (16,419,686 | )         |            |             | (15,905,824 | )
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash flows from financing activities:                                                         |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|                                                                                              | Proceeds from credit facilities, net                                                 |                                       |                                                      | 3,133,594  |            |            |             | 16,911,700 |             |             |           |           |            
|                                                                                              | Payment of debt issuance costs                                                       |                                       |                                                      | (1,298,171 | )          |            |             | (250,000   | )           |             |           |           |            
|                                                                                              | Principal payments on capital lease                                                  |                                       |                                                      | (1,384,218 | )          |            |             | (753,959   | )           |             |           | (265,178   | )          
|                                                                                              | Proceeds from issuance of common stock upon exercise of options
    and warrants     |                                       |                                                      |           |            |            |             | 1,782,819  |             |             |           | 650,779    |            
|                                                                                              | Issuance of common stock                                                             |                                       |                                                      |           |            |            |             |           |             |             |           | 18,185,415 |            
|                                                                                              | Proceeds from financing of equipment                                                 |                                       |                                                      |           |            |            |             |           |             |             |           | 2,049,638  |            
|                                                                                              | Proceeds related to minority interest in subsidiary                                  |                                       |                                                      |           |            |            |             |           |             |             |           | 81,818     |            
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|                                                                                              |                                                                                      |                                       | Net cash provided by financing activities            |            |            | 451,205    |             |            |             | 17,690,560  |           |            |             | 20,702,472  |  
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Effect of foreign currency translation                                                        |                                                                                      |                                       | 221,691                                              |            |            |            | 33,859      |            |             |             |          |           
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|                                                                                              |                                                                                      |                                       | Net increase (decrease) in cash and cash equivalents |            |            | 1,800,152  |             |            |             | (273,506    | )         |            |             | 808,043     |  
|Cash and cash equivalents, beginning of year                                                  |                                                                                      |                                       | 2,800,645                                            |            |            |            | 3,074,151   |            |             |             | 2,266,108 |           
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash and cash equivalents, end of year                                                        |                                                                                      | $                                     | 4,600,797                                            |            |            | $          | 2,800,645   |            |             | $           | 3,074,151 |           
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash paid for interest                                                                        |                                                                                      | $                                     | 2,224,725                                            |            |            | $          | 617,007     |            |             | $           | 189,359   |           
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Cash paid for income taxes                                                                    |                                                                                      | $                                     | 462,388                                              |            |            | $          | 157,145     |            |             | $           | 373,832   |           
|                                                                                              |                                                                                      |                                       |                                                      |            |            |            |             |            |            
|Supplemental disclosure of non-cash investing and financing
    activities:                   |                                                                                      |                                       |                                                      |            |            |            |             |            |             |             |           |           
|                                                                                              | Recognition of loan discount on conversion option in connection
    loan financing   |                                       | $                                                    | 3,770,532  |            |            | $           |           |             |             | $         |           |            
|                                                                                              | Increase in goodwill related to accrued earn-out payments                            |                                       |                                                      | 5,482,513  |            |            |             | 2,615,946  |             |             |           | 3,636,034  |            
|                                                                                              | Issuance of warrants in connection with loan and preferred stock
    financings      |                                       |                                                      | 1,410,800  |            |            |             |           |             |             |           |           |            
|                                                                                              | Recognition of preferred stock discount in connection with loan
    financing        |                                       |                                                      | 1,196,390  |            |            |             |           |             |             |           |           |            
|                                                                                              | Issuance of common stock in connection with acquisitions                             |                                       |                                                      | 854,549    |            |            |             | 100,000    |             |             |           | 4,144,094  |            
|                                                                                              | Issuance of common stock in connection with Employee Stock
    Purchase Plan         |                                       |                                                      | 79,723     |            |            |             | 224,170    |             |             |           |           |            
|                                                                                              | Increase in technology, furniture and equipment from capital
    lease obligations   |                                       |                                                      | 112,193    |            |            |             | 458,408    |             |             |           |           |            
|                                                                                              | Issuance of common stock in connection with cashless exercise of
    options         |                                       |                                                      |           |            |            |             | 511,068    |             |             |           |           |            
|                                                                                              | Offset of related party loan against earn-out                                        |                                       |                                                      | 87,500     |            |            |             | 87,500     |             |             |           | 87,500     |            
|                                                                                              | Issuance of warrants in connection with consulting services                          |                                       |                                                      |           |            |            |             | 70,000     |             |             |           |           |            
|                                                                                              | Issuance of common stock from conversion of Series D
    Convertible Preferred Stock |                                       |                                                      |           |            |            |             | 310        |             |             |           | 51         |            
|                                                                                              | Issuance of common stock in satisfaction of earn-out                                 |                                       |                                                      |           |            |            |             |           |             |             |           | 403,000    |            



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STONEPATH GROUP, INC.





Notes to Consolidated Financial Statements


December 31, 2005, 2004 and 2003




|    |                     
|--- | --------------------
|(1) | Nature of Operations







|    |                                           
|--- | ------------------------------------------
|(2) | Summary of Significant Accounting Policies



| |                               
| | ------------------------------
| | a) Principles of Consolidation





| |                    
| | -------------------
| | b) Use of Estimates



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |                             
| | ----------------------------
| | c) Cash and Cash Equivalents





| |                                 
| | --------------------------------
| | d) Concentrations of Credit Risk



30-day




|                          |  |      |            |   |      |   |            |  
|------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | -
|                          |  | 2005 |            |   | 2004 |  
|                          |  |      |            |   |      |  
|Balance as of January 1   |  | $    | 1,872,277  |   |      | $ | 1,055,000  |  
|Bad debt expense          |  |      | 1,313,814  |   |      |   | 2,076,052  |  
|Accounts written-off      |  |      | (1,380,562 | ) |      |   | (1,258,775 | )
|                          |  |      |            |   |      |  
|Balance as of December 31 |  | $    | 1,805,529  |   |      | $ | 1,872,277  |  
|                          |  |      |            |   |      |  



| |                                       
| | --------------------------------------
| | e) Technology, Furniture and Equipment



Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use


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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)








| |            
| | -----------
| | f) Goodwill

Goodwill and Other
Intangible Assets.




| |                     
| | --------------------
| | g) Long-Lived Assets



Accounting for the Impairment or Disposal of Long-Lived
Assets




| |                
| | ---------------
| | h) Income Taxes

Accounting for Income
Taxes.


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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |                                                              
| | -------------------------------------------------------------
| | i) Revenue Recognition and Purchased Transportation
    Costs







| |                            
| | ---------------------------
| | j) Stock-Based Compensation

Accounting for
Stock-Based Compensation Accounting for
Stock Issued to Employees Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services.


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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                               |                                                                                                      |      |   |             |      |  |   |             |   |  |   |            |  
|------------------------------ | ---------------------------------------------------------------------------------------------------- | ---- | - | ----------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                               |                                                                                                      | 2005 |   |             | 2004 |  |   | 2003        |  
|                               |                                                                                                      |      |   |             |      |  |   |             |  
|Year ended December 31:        |                                                                                                      |      |   |             |      |  |   |             |   |  |   |           
|                               | Net loss attributable to common stockholders:                                                        |      |   |             |      |  |   |             |   |  |   |            |  
|                               | As reported                                                                                          |      | $ | (9,773,696  | )    |  | $ | (13,043,355 | ) |  | $ | (785,603   | )
|                               | Add: stock-based employee compensation expense included in
    reported net loss                     |      |   | 31,300      |      |  |   | 21,174      |   |  |   | 95,232     |  
|                               | Deduct: total stock-based compensation expense determined under
    fair value method for all awards |      |   | (2,913,491  | )    |  |   | (5,848,264  | ) |  |   | (2,306,736 | )
|                               |                                                                                                      |      |   |             |      |  |   |             |  
|                               | Pro forma                                                                                            |      | $ | (12,655,887 | )    |  | $ | (18,870,445 | ) |  | $ | (2,997,107 | )
|                               |                                                                                                      |      |   |             |      |  |   |             |  
|Basic loss per common share:   |                                                                                                      |      |   |             |      |  |   |             |   |  |   |           
|                               | As reported                                                                                          |      | $ | (0.22       | )    |  | $ | (0.33       | ) |  | $ | (0.03      | )
|                               | Pro forma                                                                                            |      |   | (0.29       | )    |  |   | (0.48       | ) |  |   | (0.10      | )
|Diluted loss per common share: |                                                                                                      |      |   |             |      |  |   |             |   |  |   |           
|                               | As reported                                                                                          |      | $ | (0.23       | )    |  | $ | (0.33       | ) |  | $ | (0.03      | )
|                               | Pro forma                                                                                            |      |   | (0.27       | )    |  |   | (0.48       | ) |  |   | (0.10      | )



|                                |  |      |           |   |      |  |           |      |  |  |           |  
|------------------------------- |  | ---- | --------- | - | ---- |  | --------- | ---- |  |  | --------- | -
|                                |  | 2005 |           |   | 2004 |  |           | 2003 | 
|                                |  |      |           |   |      |  |           |      | 
|Dividend yield                  |  |      | None      |   |      |  | None      |      |  |  | None      |  
|Expected volatility             |  |      | 91.0      | % |      |  | 83.8      | %    |  |  | 55.8      | %
|Average risk free interest rate |  |      | 4.24      | % |      |  | 4.25      | %    |  |  | 1.56      | %
|Average expected lives          |  |      | 6.0 years |   |      |  | 9.3 years |      |  |  | 6.9 years |  

Share-Based Payment


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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |                         
| | ------------------------
| | k) Restructuring Charges

Accounting for Costs
Associated with Exit or Disposal Activities




| |                  
| | -----------------
| | l) Loss Per Share

Earnings per Share




|                    |                                                                                                                   |                         |   |             |      |  |   |             |   |  |   |            |  
|------------------- | ----------------------------------------------------------------------------------------------------------------- | ----------------------- | - | ----------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                    |                                                                                                                   | Year Ended December 31, |  
|                    |                                                                                                                   |                         |  
|                    |                                                                                                                   | 2005                    |   |             | 2004 |  |   | 2003        |  
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|Net Loss:           |                                                                                                                   |                         |   |             |      |  |   |             |   |  |   |           
|                    | Net loss                                                                                                          |                         | $ | (9,737,778  | )    |  | $ | (13,043,355 | ) |  | $ | (785,603   | )
|                    | Less: Preferred stock dividends                                                                                   |                         |   | (35,918     | )    |  |   |            |   |  |   |           |  
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|                    | Basic net loss attributable to common stockholders                                                                |                         |   | (9,773,696  | )    |  |   | (13,043,355 | ) |  |   | (785,603   | )
|                    | Change in fair value of derivatives resulting from conversion
    feature on convertible debt and preferred stock |                         |   | (1,604,434  | )    |  |   |            |   |  |   |           |  
|                    | Interest expense on convertible debt                                                                              |                         |   | 586,571     |      |  |   |            |   |  |   |           |  
|                    | Preferred stock dividends                                                                                         |                         |   | 35,918      |      |  |   |            |   |  |   |           |  
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|                    | Diluted net loss attributable to common stockholders                                                              |                         | $ | (10,755,641 | )    |  | $ | (13,043,355 | ) |  | $ | (785,603   | )
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|Shares:             |                                                                                                                   |                         |   |             |      |  |   |             |   |  |   |           
|                    | Basic weighted average common shares outstanding                                                                  |                         |   | 43,591,855  |      |  |   | 38,971,526  |   |  |   | 29,625,585 |  
|                    | Convertible debt                                                                                                  |                         |   | 2,891,933   |      |  |   |            |   |  |   |           |  
|                    | Convertible preferred stock                                                                                       |                         |   | 273,973     |      |  |   |            |   |  |   |           |  
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|                    | Diluted weighted average common shares outstanding                                                                |                         |   | 46,757,761  |      |  |   | 38,971,526  |   |  |   | 29,625,585 |  
|                    |                                                                                                                   |                         |   |             |      |  |   |             |  
|Net Loss Per Share: |                                                                                                                   |                         |   |             |      |  |   |             |   |  |   |           
|                    | Basic                                                                                                             |                         | $ | (0.22       | )    |  | $ | (0.33       | ) |  | $ | (0.03      | )
|                    | Diluted                                                                                                           |                         | $ | (0.23       | )    |  | $ | (0.33       | ) |  | $ | (0.03      | )



| |                                 
| | --------------------------------
| | m) New Accounting Pronouncements



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)






| |                     
| | --------------------
| | n) Reclassifications





| |                                                             
| | ------------------------------------------------------------
| | o) Previously Restated Consolidated Financial
    Statements





|    |                      
|--- | ---------------------
|(3) | Restructuring Charges

day-to


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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |          |         |  |   |            |           | 
|-------------------------------------- | -------------------------- | ------- | ---------- | - | --------- | ------------------ | ---------- | -------- |  | - | --------- | --------- |  | ----- | -------- | ------- |  | - | ---------- | --------- | 
|                                       |                            |         |            |   |           | Lease Terminations |            |          | 
|                                       |                            |         |            |   |           |                    |            |          | 
|                                       |                            | Systems |            |   | Personnel |                    |            | Building |  |   | Equipment |           |  | Total |         
|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |         
|Liability balance at January 1, 2004   |                            | $       |           |   |           | $                  |           |          |  | $ |          |           |  | $     |         |         |  | $ |           |          
|Restructuring charges                  |                            |         | 3,556,134  |   |           |                    | 666,408    |          |  |   | 75,229    |           |  |       | 70,479   |         |  |   | 4,368,250  |          
|Non-cash charges                       |                            |         | (3,556,134 | ) |           |                    |           |          |  |   |          |           |  |       |         |         |  |   | (3,556,134 | )        
|Cash payments                          |                            |         |           |   |           |                    |           |          |  |   |          |           |  |       | (70,479  | )       |  |   | (70,479    | )        
|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |         
|Liability balance at December 31, 2004 |                            |         |           |   |           |                    | 666,408    |          |  |   | 75,229    |           |  |       |          |         |  |   | 741,637    |          
|Restructuring charges                  |                            |         |           |   |           |                    | 657,289    |          |  |   | 2,200,010 |           |  |       | 590,910  |         |  |   | 3,448,209  |          
|Adjustments to liabilities             |                            |         |           |   |           |                    | 11,767     |          |  |   | (175,768  | )         |  |       |         |         |  |   | (164,001   | )        
|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |         
|                                       | Restructuring charges, net |         |            |  |           |                    |            | 669,056  |  |   |           | 2,024,242 |  |       |          | 590,910 |  |   |            | 3,284,208 | 
|Cash payments                          |                            |         |           |   |           |                    | (1,175,907 | )        |  |   | (774,544  | )         |  |       | (590,910 | )       |  |   | (2,541,362 | )        
|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |         
|Liability balance at December 31, 2005 |                            | $       |           |   |           | $                  | 159,557    |          |  | $ | 1,324,927 |           |  | $     |         |         |  | $ | 1,484,484  |          
|                                       |                            |         |            |   |           |                    |            |          |  |   |           |           |  |       |         





|    |                        
|--- | -----------------------
|(4) | Discontinued Operations





|    |             
|--- | ------------
|(5) | Acquisitions



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                        |  |   |       | 
|----------------------- |  | - | ----- | 
|Furniture and equipment |  | $ | 50    | 
|Other intangible assets |  |   | 1,513 | 
|Goodwill                |  |   | 3,380 | 
|                        |  |   |      
|Net assets acquired     |  | $ | 4,943 | 
|                        |  |   |      

-not-to




57



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                            |                       |   |        |       | 
|--------------------------- | --------------------- | - | ------ | ----- | 
|Current assets              |                       | $ | 4,095  |      
|Furniture and equipment     |                       |   | 81     |      
|Other intangible assets     |                       |   | 994    |      
|Goodwill                    |                       |   | 3,065  |      
|                            |                       |   |       
|                            | Total assets acquired |   |        | 8,235 | 
|Current liabilities assumed |                       |   | (1,810 | )    
|Minority interest           |                       |   | (710   | )    
|                            |                       |   |       
|                            | Net assets acquired   |   | $      | 5,715 | 
|                            |                       |   |       

-not-to


U.S.-based U.S.-based




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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)








|                            |                       |   |        |        | 
|--------------------------- | --------------------- | - | ------ | ------ | 
|Current assets              |                       | $ | 15,090 |       
|Furniture and equipment     |                       |   | 157    |       
|Other intangible assets     |                       |   | 1,453  |       
|Goodwill                    |                       |   | 2,161  |       
|                            |                       |   |       
|                            | Total assets acquired |   |        | 18,861 | 
|Current liabilities assumed |                       |   | (9,727 | )     
|Minority interest           |                       |   | (2,484 | )     
|                            |                       |   |       
|                            | Net assets acquired   |   | $      | 6,650  | 
|                            |                       |   |       

-not-to


59



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                         |         |                         |         |       |      |   |         |      | 
|---------------------------------------- | ------- | ----------------------- | ------- | ----- | ---- | - | ------- | ---- | 
|                                         |         | Year Ended December 31, |        
|                                         |         |                         |        
|                                         |         | 2004                    |         |       | 2003 |  
|                                         |         |                         |         |       |      |  
|Total revenue                            |         | $                       | 391,637 |       |      | $ | 308,019 |     
|(Loss) income from continuing operations |         |                         | (12,245 | )     |      |   | 653     |     
|Net (loss) income                        |         |                         | (12,295 | )     |      |   | 653     |     
|(Loss) earnings per share:               |         |                         |         |       |      |   |         |     
|                                         | Basic   |                         | $       | (0.31 | )    |   | $       | 0.02 | 
|                                         | Diluted |                         | $       | (0.31 | )    |   | $       | 0.02 | 

U.S.-based




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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                       |  |                   |            |               |          |   |            |       |  |   |            |  
|-------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ------------- | -------- | - | ---------- | ----- |  | - | ---------- | -
|                                                                                       |  |                   |            | International |          |   |           
|                                                                                       |  | Domestic Services |            |               | Services |   |            | Total | 
|                                                                                       |  |                   |            |               |          |   |            |       | 
|Balance at January 1, 2003                                                             |  | $                 | 19,641,170 |               |          | $ | 11,867,761 |       |  | $ | 31,508,931 |  
|Acquisitions during the year                                                           |  |                   |           |               |          |   | 3,728,646  |       |  |   | 3,728,626  |  
|Earn-out accruals for current year performance                                         |  |                   |           |               |          |   | 2,615,946  |       |  |   | 2,615,946  |  
|Adjustments to preliminary estimates for December 2003
    acquisitions                |  |                   |           |               |          |   | (732,909   | )     |  |   | (732,909   | )
|Other acquisition adjustments                                                          |  |                   |           |               |          |   | 158,047    |       |  |   | 158,047    |  
|                                                                                       |  |                   |            |               |          |   |            |       | 
|Balance at December 31, 2004                                                           |  |                   | 19,641,170 |               |          |   | 17,637,491 |       |  |   | 37,278,661 |  
|Contingent common stock consideration issued in connection with
    prior acquisitions |  |                   |           |               |          |   | 854,549    |       |  |   | 854,549    |  
|Earn-out accruals for current year performance                                         |  |                   | 90,000     |               |          |   | 2,137,513  |       |  |   | 2,227,513  |  
|Adjustments to 2004 earn-out accruals                                                  |  |                   | 90,000     |               |          |   | 56,474     |       |  |   | 146,474    |  
|Earn-out accruals for cumulative performance                                           |  |                   |           |               |          |   | 3,255,000  |       |  |   | 3,255,000  |  
|                                                                                       |  |                   |            |               |          |   |            |       | 
|Balance at December 31, 2005                                                           |  | $                 | 19,821,170 |               |          | $ | 23,941,027 |       |  | $ | 43,762,197 |  
|                                                                                       |  |                   |            |               |          |   |            |       | 

 Acquisition
Agreements




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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|    |                           
|--- | --------------------------
|(6) | Acquired Intangible Assets



|                                                                              |                          |                |   |            |              |  |   |                |           |  |              |            |            |  |   |           |           | 
|----------------------------------------------------------------------------- | ------------------------ | -------------- | - | ---------- | ------------ |  | - | -------------- | --------- |  | ------------ | ---------- | ---------- |  | - | --------- | --------- | 
|                                                                              |                          | December 31,   |  
|                                                                              |                          |                |  
|                                                                              |                          | 2005           |   |            | 2004         | 
|                                                                              |                          |                |   |            |              | 
|                                                                              |                          | Gross Carrying |   |            | Accumulated  |  |   | Gross Carrying |           |  | Accumulated  |           
|                                                                              |                          | Amount         |   |            | Amortization |  |   | Amount         |           |  | Amortization |           
|                                                                              |                          |                |   |            |              |  |   |                |           |  |              |           
|Amortizable intangible assets:                                                |                          |                |   |            |              |  |   |                |           |  |              |            |            |  |   |          
|                                                                              | Customer related         |                | $ | 11,042,100 |              |  | $ | 6,421,779      |           |  | $            | 11,042,100 |            |  | $ | 4,813,229 |          
|                                                                              | Covenants-not-to-compete |                |   | 1,506,000  |              |  |   | 914,833        |           |  |              | 1,506,000  |            |  |   | 654,885   |          
|                                                                              |                          |                |   |            |              |  |   |                |           |  |              |           
|                                                                              |                          | Total          |   | $          | 12,548,100   |  |   | $              | 7,336,612 |  |              | $          | 12,548,100 |  |   | $         | 5,468,114 | 
|                                                                              |                          |                |   |            |              |  |   |                |           |  |              |           
|Aggregate amortization expense for the year ended
    December 31:            |                          |                |   |            |              |  |   |                |           |  |              |            |            |  |   |          
|                                                                              | 2005                     |                |   |            |              |  | $ | 1,868,498      |           |  |              |            |            |  |   |           |          
|                                                                              | 2004                     |                |   |            |              |  |   | 2,282,887      |           |  |              |            |            |  |   |           |          
|                                                                              | 2003                     |                |   |            |              |  |   | 1,615,662      |           |  |              |            |            |  |   |           |          
|Estimated aggregate amortization expense for the year ending
    December 31: |                          |                |   |            |              |  |   |                |           |  |              |            |            |  |   |          
|                                                                              | 2006                     |                |   |            |              |  | $ | 1,547,000      |           |  |              |            |            |  |   |           |          
|                                                                              | 2007                     |                |   |            |              |  |   | 1,254,000      |           |  |              |            |            |  |   |           |          
|                                                                              | 2008                     |                |   |            |              |  |   | 931,000        |           |  |              |            |            |  |   |           |          
|                                                                              | 2009                     |                |   |            |              |  |   | 607,000        |           |  |              |            |            |  |   |           |          
|                                                                              | 2010                     |                |   |            |              |  |   | 482,000        |           |  |              |            |            |  |   |           |          



|    |                                    
|--- | -----------------------------------
|(7) | Technology, Furniture and Equipment



|                               |  |              |            |   |      |   |            |  
|------------------------------ |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                               |  | December 31, |           
|                               |  |              |           
|                               |  | 2005         |            |   | 2004 |  
|                               |  |              |            |   |      |  
|Furniture and office equipment |  | $            | 6,045,009  |   |      | $ | 6,105,146  |  
|Computer software              |  |              | 4,885,990  |   |      |   | 3,845,479  |  
|Leasehold improvements         |  |              | 1,478,180  |   |      |   | 1,037,696  |  
|Vehicles                       |  |              | 353,541    |   |      |   | 241,179    |  
|                               |  |              |            |   |      |  
|                               |  |              | 12,762,720 |   |      |   | 11,229,500 |  
|Less: accumulated depreciation |  |              | (5,906,368 | ) |      |   | (3,633,641 | )
|                               |  |              |            |   |      |  
|                               |  | $            | 6,856,352  |   |      | $ | 7,595,859  |  
|                               |  |              |            |   |      |  

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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|    |                  
|--- | -----------------
|(8) | Credit Facilities



|                             |                                                                                                           |              |            |            |      |   |            |            | 
|---------------------------- | --------------------------------------------------------------------------------------------------------- | ------------ | ---------- | ---------- | ---- | - | ---------- | ---------- | 
|                             |                                                                                                           | December 31, |           
|                             |                                                                                                           |              |           
|                             |                                                                                                           | 2005         |            |            | 2004 |  
|                             |                                                                                                           |              |            |            |      |  
|Short-term debt             |                                                                                                           |              |            |            |      |   |            |           
|U.S. Facility:               |                                                                                                           |              |            |            |      |   |            |           
|                             | Revolving note                                                                                            |              | $          | 6,045,294  |      |   | $          | 13,911,700 | 
|                             | Convertible minimum borrowing note ($10,000,000 outstanding
    principal, net of discount of $4,075,629) |              |            | 5,924,371  |      |   |            |           | 
|                             |                                                                                                           |              |            |            |      |  
|                             | Total U.S. Facility                                                                                       |              |            | 11,969,665 |      |   |            | 13,911,700 | 
|Note payable  related party |                                                                                                           |              | 1,897,539  |            |      |   |           |           
|Capital lease obligation     |                                                                                                           |              | 171,961    |            |      |   | 1,274,117  |           
|Offshore credit facility     |                                                                                                           |              |           |            |      |   | 3,000,000  |           
|                             |                                                                                                           |              |            |            |      |  
|Total short-term debt        |                                                                                                           | $            | 14,039,165 |            |      | $ | 18,185,817 |           
|                             |                                                                                                           |              |            |            |      |  
|Long-term debt              |                                                                                                           |              |            |            |      |   |            |           
|Offshore credit facility     |                                                                                                           | $            | 1,000,000  |            |      | $ |           |           
|Capital lease obligations    |                                                                                                           |              | 137,088    |            |      |   | 236,344    |           
|Note payable  related party |                                                                                                           |              |           |            |      |   | 1,897,539  |           
|                             |                                                                                                           |              |            |            |      |  
|Total long-term debt         |                                                                                                           | $            | 1,137,088  |            |      | $ | 2,133,883  |           
|                             |                                                                                                           |              |            |            |      |  



| |                     
| | --------------------
| | U.S. Credit Facility







Secured Convertible Minimum Borrowing Note (Minimum
Borrowing Note)


63



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)






Secured Revolving Note (Revolving
Note)


Common Stock Purchase Warrants
(Warrant)


Registration Rights Agreement (Rights
Agreement)


00-19, Accounting for Derivative Financial Instruments Indexed
to, and Potentionally Settled in, a Companys Own
Stock Accounting for
Convertible Debt and Debt Issued with Stock Purchase
Warrants.


64



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)












Balance Sheet Classification of
Borrowings Outstanding under Revolving Credit Agreements that
Include Both a Subjective Acceleration Clause and a
Lock-Box Arrangement.




| |                         
| | ------------------------
| | Offshore Credit Facility





65



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




00-19.




66



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |                       
| | ----------------------
| | Derivative Liabilities



|                                                                                                                   |                        |                   |            |      |         |   |           |                  |   |   |           |      |   |   |            |   | 
|------------------------------------------------------------------------------------------------------------------ | ---------------------- | ----------------- | ---------- | ---- | ------- | - | --------- | ---------------- | - | - | --------- | ---- | - | - | ---------- | - | 
|                                                                                                                   |                        | Minimum Borrowing |            |      |         |   |           |                  |  
|                                                                                                                   |                        | Note              |            |      | Warrant |   |           | Preferred Shares |   |   | Total     |     
|                                                                                                                   |                        |                   |            |      |         |   |           |                  |   |   |           |     
|Derivative liabilities recorded upon inception of contracts                                                        |                        | $                 | 3,770,532  |      |         | $ | 1,293,721 |                  |   | $ | 1,196,390 |      |   | $ | 6,260,643  |  
|Change in fair value of derivatives                                                                                |                        |                   | (1,331,344 | )    |         |   | (512,147  | )                |   |   | (273,090  | )    |   |   | (2,116,581 | )
|                                                                                                                   |                        |                   |            |      |         |   |           |                  |   |   |           |     
|Derivative liabilities as of December 31, 2005 and included
    in other liabilities on consolidated balance sheet |                        | $                 | 2,439,188  |      |         | $ | 781,574   |                  |   | $ | 923,300   |      |   | $ | 4,144,062  |  
|                                                                                                                   |                        |                   |            |      |         |   |           |                  |   |   |           |     
|Significant assumptions used in Black-Scholes initial fair value
    calculations:                                 |                        |                   |            |      |         |   |           |                  |   |   |           |      |   |   |            |  
|                                                                                                                   | Expected life in years |                   |            | 3.0  |         |   |           | 5.0              |   |   |           | 4.0  |   |   |            |   | 
|                                                                                                                   | Annualized volatility  |                   |            | 70.8 | %       |   |           | 89.8             | % |   |           | 70.5 | % |   |            |   | 
|                                                                                                                   | Discount rate          |                   |            | 4.2  | %       |   |           | 4.2              | % |   |           | 4.2  | % |   |            |   | 



| |                     
| | --------------------
| | Principal Repayments





| |               
| | --------------
| | Capital Leases





|    |             
|--- | ------------
|(9) | Income Taxes



67



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                     |                                                                                           |                              |             |            |            |   |             |            |            |  
|------------------------------------ | ----------------------------------------------------------------------------------------- | ---------------------------- | ----------- | ---------- | ---------- | - | ----------- | ---------- | ---------- | -
|                                     |                                                                                           | December 31,                 |            
|                                     |                                                                                           |                              |            
|                                     |                                                                                           | 2005                         |             |            | 2004       |  
|                                     |                                                                                           |                              |             |            |            |  
|Deferred tax assets:                 |                                                                                           |                              |             |            |            |   |             |           
|                                     | Accruals                                                                                  |                              | $           | 979,000    |            |   | $           | 527,000    |           
|                                     | Equity in losses of affiliate companies                                                   |                              |             | 485,000    |            |   |             | 373,000    |           
|                                     | Depreciation and amortization                                                             |                              |             | 1,028,000  |            |   |             | 422,000    |           
|                                     | Deferred compensation and warrants                                                        |                              |             | 779,000    |            |   |             | 1,403,000  |           
|                                     | Capital loss carryforward                                                                 |                              |             | 2,137,000  |            |   |             | 2,137,000  |           
|                                     | Federal and state deferred tax benefits arising from net
    operating loss carryforwards |                              |             | 17,819,000 |            |   |             | 18,220,000 |           
|                                     |                                                                                           |                              |             |            |            |  
|Total gross deferred tax assets      |                                                                                           |                              | 23,227,000  |            |            |   | 23,082,000  |           
|Less: valuation allowance            |                                                                                           |                              | (23,227,000 | )          |            |   | (23,082,000 | )         
|                                     |                                                                                           |                              |             |            |            |  
|Net total deferred tax assets        |                                                                                           |                              |            |            |            |   |            |           
|                                     |                                                                                           |                              |             |            |            |  
|Deferred tax liabilities:            |                                                                                           |                              |             |            |            |   |             |           
|                                     | Amortization of goodwill for tax purposes                                                 |                              |             | (2,547,800 | )          |   |             | (1,600,900 | )         
|                                     | Foreign taxes                                                                             |                              |             | (350,035   | )          |   |             | (50,000    | )         
|                                     |                                                                                           |                              |             |            |            |  
|Total gross deferred tax liabilities |                                                                                           |                              | (2,897,835  | )          |            |   | (1,650,900  | )         
|                                     |                                                                                           |                              |             |            |            |  
|                                     |                                                                                           | Net deferred tax liabilities |             | $          | (2,897,835 | ) |             | $          | (1,650,900 | )
|                                     |                                                                                           |                              |             |            |            |  







68



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|          |         |                         |           |         |      |   |           |           |  |   |         |         | 
|--------- | ------- | ----------------------- | --------- | ------- | ---- | - | --------- | --------- |  | - | ------- | ------- | 
|          |         | Year Ended December 31, |          
|          |         |                         |          
|          |         | 2005                    |           |         | 2004 |   |           | 2003      | 
|          |         |                         |           |         |      |   |           |           | 
|Current:  |         |                         |           |         |      |   |           |           |  |   |         |        
|          | Federal |                         | $         |        |      |   | $         |          |  |   | $       |        | 
|          | State   |                         |           | 120,000 |      |   |           | 109,337   |  |   |         | 40,000  | 
|          | Foreign |                         |           | 519,035 |      |   |           | 1,671,175 |  |   |         | 121,086 | 
|          |         |                         |           |         |      |   |           |           | 
|          |         |                         | 639,035   |         |      |   | 1,780,512 |           |  |   | 161,086 |        
|          |         |                         |           |         |      |   |           |           | 
|Deferred: |         |                         |           |         |      |   |           |           |  |   |         |        
|          | Federal |                         |           | 820,300 |      |   |           | 572,600   |  |   |         | 448,800 | 
|          | State   |                         |           | 126,500 |      |   |           | 42,700    |  |   |         | 76,000  | 
|          | Foreign |                         |           | 332,000 |      |   |           |          |  |   |         | 50,000  | 
|          |         |                         |           |         |      |   |           |           | 
|          |         |                         | 1,278,800 |         |      |   | 615,300   |           |  |   | 574,800 |        
|          |         |                         |           |         |      |   |           |           | 
|          |         | $                       | 1,917,835 |         |      | $ | 2,395,812 |           |  | $ | 735,886 |        
|          |         |                         |           |         |      |   |           |           | 





|                                            |  |                         |            |   |      |   |            |      |  |   |          |  
|------------------------------------------- |  | ----------------------- | ---------- | - | ---- | - | ---------- | ---- |  | - | -------- | -
|                                            |  | Year Ended December 31, |           
|                                            |  |                         |           
|                                            |  | 2005                    |            |   | 2004 |   |            | 2003 | 
|                                            |  |                         |            |   |      |   |            |      | 
|Tax at statutory rate                       |  | $                       | (2,188,300 | ) |      | $ | (3,145,900 | )    |  | $ | 136,200  |  
|Change in valuation allowance               |  |                         | 145,000    |   |      |   | 7,096,000  |      |  |   | 90,500   |  
|State taxes                                 |  |                         | 246,900    |   |      |   | 152,400    |      |  |   | 116,000  |  
|Effect of tax rates of foreign subsidiaries |  |                         | 1,382,000  |   |      |   | 64,200     |      |  |   | (156,800 | )
|Non-deductible expenses                     |  |                         | 492,800    |   |      |   | (1,217,600 | )    |  |   | 101,200  |  
|Goodwill amortization and other             |  |                         | 1,839,435  |   |      |   | (553,288   | )    |  |   | 448,786  |  
|                                            |  |                         |            |   |      |   |            |      | 
|Income tax expense                          |  | $                       | 1,917,835  |   |      | $ | 2,395,812  |      |  | $ | 735,886  |  
|                                            |  |                         |            |   |      |   |            |      | 

69



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|     |            
|---- | -----------
|(10) | Commitments



| |                 
| | ----------------
| | Operating Leases



|                             |  |             |            |  |               |   |         |       |  |   |            | 
|---------------------------- |  | ----------- | ---------- |  | ------------- | - | ------- | ----- |  | - | ---------- | 
|Year Ending December 31,     |  | Third Party |            |  | Related Party |   |         | Total | 
|                             |  |             |            |  |               |   |         |       | 
|2006                         |  | $           | 5,660,000  |  |               | $ | 97,000  |       |  | $ | 5,757,000  | 
|2007                         |  |             | 4,239,000  |  |               |   | 97,000  |       |  |   | 4,336,000  | 
|2008                         |  |             | 3,203,000  |  |               |   | 97,000  |       |  |   | 3,300,000  | 
|2009                         |  |             | 2,340,000  |  |               |   | 24,000  |       |  |   | 2,364,000  | 
|2010                         |  |             | 956,000    |  |               |   |        |       |  |   | 956,000    | 
|Thereafter                   |  |             | 686,000    |  |               |   |        |       |  |   | 686,000    | 
|                             |  |             |            |  |               |   |         |       | 
|Total minimum lease payments |  | $           | 17,084,000 |  |               | $ | 315,000 |       |  | $ | 17,399,000 | 
|                             |  |             |            |  |               |   |         |       | 



| |                      
| | ---------------------
| | Employee Benefit Plan





| |                      
| | ---------------------
| | Employment Agreements





|     |              
|---- | -------------
|(11) | Contingencies



| |                       
| | ----------------------
| | Acquisition Agreements

Business
Combinations,


70



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##### Table of Contents



STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                       |                              |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |        |        | 
|-------------------------------------- | ---------------------------- | ---------------- | ------ | ------ | ----- | - | ----- | ----- | ----- | - | ----- | ----- | ----- | - | ------ | ------ | ------ | 
|                                       |                              | 2007             |        |        | 2008  |   |       | 2009  |       |   | Total |      
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|Earn-out payments:                     |                              |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |       
|                                       | Domestic Services:           |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |        |       
|                                       |                              | Regroup          |        | $      | 2,500 |   |       | $     | 2,500 |   |       | $     |      |   |        | $      | 5,000  | 
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | Total Domestic Services      |                  |        | 2,500  |       |   |       | 2,500 |       |   |       |      |       |   |        | 5,000  |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | International Services:      |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |        |       
|                                       |                              | Shaanxi          |        |        | 1,130 |   |       |       | 1,130 |   |       |       | 1,130 |   |        |        | 3,390  | 
|                                       |                              | SLIS(3)          |        |        | 1,255 |   |       |       |      |   |       |       |      |   |        |        | 1,255  | 
|                                       |                              | G-Link Singapore |        |        | 989   |   |       |       |      |   |       |       |      |   |        |        | 989    | 
|                                       |                              | Other            |        |        | 2,384 |   |       |       | 2,384 |   |       |       | 2,105 |   |        |        | 6,873  | 
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | Total International Services |                  |        | 5,758  |       |   |       | 3,514 |       |   |       | 3,235 |       |   | $      | 12,507 |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|Total earn-out payments                |                              | $                | 8,258  |        |       | $ | 6,014 |       |       | $ | 3,235 |       |       | $ | 17,507 |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|Prior year pre-tax earnings targets(4) |                              |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |       
|                                       | Domestic Services:           |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |        |       
|                                       |                              | Regroup          |        | $      | 3,500 |   |       | $     | 3,500 |   |       | $     |      |   |        | $      | 7,000  | 
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | Total Domestic Services      |                  |        | 3,500  |       |   |       | 3,500 |       |   |       |      |       |   |        | 7,000  |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | International Services:      |                  |        |        |       |   |       |       |       |   |       |       |       |   |        |        |       
|                                       |                              | Shaanxi          |        |        | 4,000 |   |       |       | 4,000 |   |       |       | 4,000 |   |        |        | 12,000 | 
|                                       |                              | SLIS(3)          |        |        | 2,510 |   |       |       |      |   |       |       |      |   |        |        | 2,510  | 
|                                       |                              | G-Link Singapore |        |        | 2,809 |   |       |       |      |   |       |       |      |   |        |        | 2,809  | 
|                                       |                              | Other            |        |        | 4,693 |   |       |       | 4,693 |   |       |       | 4,160 |   |        |        | 13,546 | 
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|                                       | Total International Services |                  |        | 14,012 |       |   |       | 8,963 |       |   |       | 8,160 |       |   |        | 30,865 |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      
|Total pre-tax earnings targets         |                              | $                | 17,512 |        |       | $ | 8,693 |       |       | $ | 8,160 |       |       | $ | 37,865 |       
|                                       |                              |                  |        |        |       |   |       |       |       |   |       |      



|              |  |      |       |  |      |  |       |      |  |  |       |  |  |  |       | 
|------------- |  | ---- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|              |  | 2007 |       |  | 2008 |  |       | 2009 |  |  | Total | 
|              |  |      |       |  |      |  |       |      |  |  |       | 
|Domestic      |  |      | 71.4% |  |      |  | 71.4% |      |  |  |      |  |  |  | 71.4% | 
|International |  |      | 41.1% |  |      |  | 40.4% |      |  |  | 39.6% |  |  |  | 40.5% | 
|Combined      |  |      | 47.2% |  |      |  | 49.3% |      |  |  | 39.6% |  |  |  | 46.2% | 






|    |                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes the impact of prior years pre-tax earnings
    carryforwards (excess or shortfalls versus earnings targets).                                                                                                                                                                                                                                       
|   
|(2) | During the 2006-2008 earn-out period, there is an additional
    contingent obligation related to tier-two earn-outs that could
    be as much as $10,000,000 if certain of the acquired companies
    generate an incremental $20,000,000 in pre-tax earnings. These
    amounts exclude SLIS tier-two contingent obligations which are
    discussed below.
|   
|(3) | SLIS actual cumulative pre-tax earnings through the end of 2005
    has exceeded the maximum earnings necessary for the SLIS
    shareholders to receive the maximum additional tier-two earn-out
    opportunity of                                                                                                                                         

71



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | $2,000,000. Further, available excess earnings carryforwards are
    likely to be sufficient to ensure the eventual payment of the
    remaining base-earn-out opportunity of $1,255,000. Accordingly,
    as of December, 31, 2005, we have fully accrued for those
    obligations which are due in 2006 and 2007. Amounts are included
    in long-term earn-outs payable on the consolidated balance sheet.                                                                                       
|   
|(4) | Aggregate pre-tax earnings targets as presented here identify
    the uniquely defined earnings targets of each acquisition and
    should not be interpreted to be the consolidated pre-tax
    earnings of the Company which would give effect for, among other
    things, amortization or impairment of intangible assets created
    in connection with each acquisition or various other expenses
    which may not be charged to the operating groups for purposes of
    calculating earn-outs



| |                               
| | ------------------------------
| | Provision for Excess Earn-outs





| |                  
| | -----------------
| | Legal Proceedings





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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)












73



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)










|     |                     
|---- | --------------------
|(12) | Stockholders Equity





| |                
| | ---------------
| | a) Common Stock



out-of


out-of






| |                   
| | ------------------
| | b) Preferred Stock





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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |                                        
| | ---------------------------------------
| | c) Series D Convertible Preferred Stock







| |                                     
| | ------------------------------------
| | d) Deferred Stock-Based Compensation





|                                         |  |           |         |   |             |   |         |       |  |   |         |  
|---------------------------------------- |  | --------- | ------- | - | ----------- | - | ------- | ----- |  | - | ------- | -
|                                         |  | Employees |         |   | Consultants |   |         | Total | 
|                                         |  |           |         |   |             |   |         |       | 
|Balance at January 1, 2003               |  | $         | 116,406 |   |             | $ |        |       |  | $ | 116,406 |  
|Amortization to stock-based compensation |  |           | (95,232 | ) |             |   |        |       |  |   | (95,232 | )
|                                         |  |           |         |   |             |   |         |       | 
|Balance at December 31, 2003             |  |           | 21,174  |   |             |   |        |       |  |   | 21,174  |  
|Deferred compensation recorded           |  |           |        |   |             |   | 70,000  |       |  |   | 70,000  |  
|Amortization to stock-based compensation |  |           | (21,174 | ) |             |   | (38,700 | )     |  |   | (59,874 | )
|                                         |  |           |         |   |             |   |         |       | 
|Balance at December 31, 2004             |  |           |        |   |             |   | 31,300  |       |  |   | 31,300  |  
|Amortization to stock-based compensation |  |           |        |   |             |   | (31,300 | )     |  |   | (31,300 | )
|                                         |  |           |         |   |             |   |         |       | 
|Balance at December 31, 2005             |  | $         |        |   |             | $ |        |       |  | $ |        |  
|                                         |  |           |         |   |             |   |         |       | 





|     |                           
|---- | --------------------------
|(13) | Stock Options and Warrants



| |                 
| | ----------------
| | a) Stock Options



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                 |  |        |            |   |                          |                  |             |                |  |   |       | 
|-------------------------------- |  | ------ | ---------- | - | ------------------------ | ---------------- | ----------- | -------------- |  | - | ----- | 
|                                 |  |        |            |   |                          | Weighted Average |            
|                                 |  | Shares |            |   | Range of Exercise Prices |                  |             | Exercise Price | 
|                                 |  |        |            |   |                          |                  |             |                | 
|Outstanding at January 1, 2003   |  |        | 9,447,300  |   |                          |                  | $0.50-17.50 |                |  | $ | 1.46  | 
|Granted                          |  |        | 1,862,100  |   |                          |                  | 1.53-2.85   |                |  |   | 1.95  | 
|Exercised                        |  |        | (307,916   | ) |                          |                  | 0.70-1.30   |                |  |   | 1.04  | 
|Expired                          |  |        | (273,600   | ) |                          |                  | 9.27-10.00  |                |  |   | 9.27  | 
|Cancelled                        |  |        | (123,750   | ) |                          |                  | 1.21-2.00   |                |  |   | 1.34  | 
|                                 |  |        |            |   |                          |                  |             |                | 
|Outstanding at December 31, 2003 |  |        | 10,604,134 |   |                          |                  | 0.50-17.50  |                |  |   | 1.36  | 
|Granted                          |  |        | 3,774,700  |   |                          |                  | 0.75-3.75   |                |  |   | 2.25  | 
|Exercised                        |  |        | (2,089,094 | ) |                          |                  | 0.60-1.38   |                |  |   | 0.85  | 
|Expired                          |  |        | (24,000    | ) |                          |                  | 2.50        |                |  |   | 2.50  | 
|Cancelled                        |  |        | (859,556   | ) |                          |                  | 1.30-2.85   |                |  |   | 1.89  | 
|                                 |  |        |            |   |                          |                  |             |                | 
|Outstanding at December 31, 2004 |  |        | 11,406,184 |   |                          |                  | 0.50-17.50  |                |  |   | 1.70  | 
|Granted                          |  |        | 1,785,000  |   |                          |                  | 0.70-0.91   |                |  |   | 0.90  | 
|Expired                          |  |        | (63,200    | ) |                          |                  | 17.50       |                |  |   | 17.50 | 
|Cancelled                        |  |        | (449,200   | ) |                          |                  | 0.91-3.75   |                |  |   | 1.94  | 
|                                 |  |        |            |   |                          |                  |             |                | 
|Outstanding at December 31, 2005 |  |        | 12,678,784 |   |                          |                  | $0.50-6.38  |                |  | $ | 1.50  | 
|                                 |  |        |            |   |                          |                  |             |                | 



|                         |             |                     |             |                  |                     |                  |          |         |                |  |        |             |      |         |                |  |            |  |  |   |      | 
|------------------------ | ----------- | ------------------- | ----------- | ---------------- | ------------------- | ---------------- | -------- | ------- | -------------- |  | ------ | ----------- | ---- | ------- | -------------- |  | ---------- |  |  | - | ---- | 
|                         |             | Outstanding Options |             |                  | Exercisable Options |                 
|                         |             |                     |             |                  |                     |                 
|                         |             |                     |             | Weighted Average |                     |                  | Weighted |         |                |  |        | Weighted    |     
|                         |             | Number              |             |                  | Remaining           |                  |          | Average |                |  | Number |             |      | Average |               
|Range of Exercise Prices |             |                     | Outstanding |                  |                     | Contractual Life |          |         | Exercise Price |  |        | Exercisable |      |         | Exercise Price | 
|                         |             |                     |             |                  |                     |                  |          |         |                |  |        |             |      |         |                | 
|                         | $0.50-$1.00 |                     |             |                  | 5,625,334           |                  |          |         | 7.3 years      |  |        | $           | 0.82 |         |                |  | 4,268,945  |  |  | $ | 0.82 | 
|                         | $1.01-$2.00 |                     |             |                  | 3,987,950           |                  |          |         | 6.5 years      |  |        |             | 1.46 |         |                |  | 3,987,950  |  |  |   | 1.46 | 
|                         | $2.01-$4.00 |                     |             |                  | 3,055,500           |                  |          |         | 6.7 years      |  |        |             | 2.79 |         |                |  | 2,963,000  |  |  |   | 2.80 | 
|                         | $6.38       |                     |             |                  | 10,000              |                  |          |         | 3.5 years      |  |        |             | 6.38 |         |                |  | 10,000     |  |  |   | 6.38 | 
|                         |             |                     |             |                  |                     |                  |          |         |                |  |        |             |      |         |                | 
|                         | Total       |                     |             |                  | 12,678,784          |                  |          |         | 6.9 years      |  |        | $           | 1.50 |         |                |  | 11,229,895 |  |  | $ | 1.57 | 
|                         |             |                     |             |                  |                     |                  |          |         |                |  |        |             |      |         |                | 





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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




| |            
| | -----------
| | b) Warrants



|                                 |  |        |            |          |                 |   |                  |                |  |   |       | 
|-------------------------------- |  | ------ | ---------- | -------- | --------------- | - | ---------------- | -------------- |  | - | ----- | 
|                                 |  |        |            | Range of |                 |   | Weighted Average |               
|                                 |  | Shares |            |          | Exercise Prices |   |                  | Exercise Price | 
|                                 |  |        |            |          |                 |   |                  |                | 
|Outstanding at January 1, 2003   |  |        | 2,947,406  |          |                 | $ | 1.00-26.58       |                |  | $ | 2.51  | 
|Issued                           |  |        | 297,000    |          |                 |   | 1.49             |                |  |   | 1.49  | 
|Exercised                        |  |        | (923,040   | )        |                 |   | 1.00-1.49        |                |  |   | 1.13  | 
|Expired                          |  |        | (437,970   | )        |                 |   | 6.00-26.58       |                |  |   | 11.12 | 
|                                 |  |        |            |          |                 |   |                  |                | 
|Outstanding at December 31, 2003 |  |        | 1,883,396  |          |                 |   | 1.00-1.49        |                |  |   | 1.03  | 
|Issued                           |  |        | 600,000    |          |                 |   | 5.00             |                |  |   | 5.00  | 
|Exercised                        |  |        | (525,612   | )        |                 |   | 1.00             |                |  |   | 1.00  | 
|                                 |  |        |            |          |                 |   |                  |                | 
|Outstanding at December 31, 2004 |  |        | 1,957,784  |          |                 |   | 1.00-5.00        |                |  |   | 2.26  | 
|Issued                           |  |        | 2,777,778  |          |                 |   | 1.13-7.52        |                |  |   | 2.81  | 
|Expired                          |  |        | (1,258,784 | )        |                 |   | 1.00-1.23        |                |  |   | 1.01  | 
|                                 |  |        |            |          |                 |   |                  |                | 
|Outstanding at December 31, 2005 |  |        | 3,476,778  |          |                 | $ | 1.13-7.52        |                |  | $ | 3.15  | 
|                                 |  |        |            |          |                 |   |                  |                | 





|     |                                    
|---- | -----------------------------------
|(14) | Fair Value of Financial Instruments





|     |                           
|---- | --------------------------
|(15) | Related Party Transactions









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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)








| |   |                                                                                                                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company has advances receivable of approximately $410,000 to
    the principal minority shareholder as of December 31, 2005.
    There is currently no repayment terms on this advance.                                                                                                    
|
| |  | The Company has a note payable for $1,897,539 and accrued
    interest of $173,638 due the principal minority shareholder as
    of December 31, 2005. The note was issued in connection
    with the acquisition of Shaanxi as discussed in Note 5.                                           
|
| |  | The Company pays rent for office space to a direct family member
    of the principal minority shareholder of Shaanxi. Monthly and
    annual rental payments are approximately $8,046 and $96,553,
    respectively. The rental payments are scheduled to continue
    through March 31, 2009.



|     |                    
|---- | -------------------
|(16) | Segment Information

Disclosures About Segments of an
Enterprise and Related Information


78



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|                                |  |                              |         |   |               |   |         |           |  |   |       |  |  |   |         |  
|------------------------------- |  | ---------------------------- | ------- | - | ------------- | - | ------- | --------- |  | - | ----- |  |  | - | ------- | -
|                                |  | Year Ended December 31, 2005 |        
|                                |  |                              |        
|                                |  | Domestic                     |         |   | International |   |         |          
|                                |  | Services                     |         |   | Services      |   |         | Corporate |  |   | Total | 
|                                |  |                              |         |   |               |   |         |           |  |   |       | 
|Revenue from external customers |  | $                            | 118,074 |   |               | $ | 292,181 |           |  | $ |      |  |  | $ | 410,255 |  
|Inter-segment revenue           |  |                              | 270     |   |               |   | 269     |           |  |   |      |  |  |   | 539     |  
|Segment operating loss          |  |                              | (5,669  | ) |               |   | 1,778   |           |  |   |      |  |  |   | (3,891  | )
|Segment assets                  |  |                              | 36,829  |   |               |   | 97,619  |           |  |   | 834   |  |  |   | 135,282 |  
|Segment goodwill                |  |                              | 19,821  |   |               |   | 23,941  |           |  |   |      |  |  |   | 43,762  |  
|Depreciation and amortization   |  |                              | 2,414   |   |               |   | 1,909   |           |  |   |      |  |  |   | 4,323   |  
|Capital expenditures            |  |                              | 97      |   |               |   | 520     |           |  |   | 1,096 |  |  |   | 1,713   |  

|                                  |  |                              |         |   |               |   |         |           |  |   |       |  |  |   |         |  
|--------------------------------- |  | ---------------------------- | ------- | - | ------------- | - | ------- | --------- |  | - | ----- |  |  | - | ------- | -
|                                  |  | Year Ended December 31, 2004 |        
|                                  |  |                              |        
|                                  |  | Domestic                     |         |   | International |   |         |          
|                                  |  | Services                     |         |   | Services      |   |         | Corporate |  |   | Total | 
|                                  |  |                              |         |   |               |   |         |           |  |   |       | 
|Revenue from external customers   |  | $                            | 145,172 |   |               | $ | 221,909 |           |  | $ |      |  |  | $ | 367,081 |  
|Inter-segment revenue             |  |                              | 18      |   |               |   | 350     |           |  |   |      |  |  |   | 368     |  
|Revenue from significant customer |  |                              | 46,998  |   |               |   |        |           |  |   |      |  |  |   | 46,998  |  
|Segment operating income (loss)   |  |                              | (9,879  | ) |               |   | 4,303   |           |  |   |      |  |  |   | (5,576  | )
|Segment assets                    |  |                              | 42,278  |   |               |   | 76,420  |           |  |   | 4,248 |  |  |   | 122,946 |  
|Segment goodwill                  |  |                              | 19,641  |   |               |   | 17,638  |           |  |   |      |  |  |   | 37,279  |  
|Depreciation and amortization     |  |                              | 2,551   |   |               |   | 1,638   |           |  |   |      |  |  |   | 4,189   |  
|Capital expenditures              |  |                              | 1,887   |   |               |   | 716     |           |  |   | 2,765 |  |  |   | 5,368   |  

|                                  |  |                              |         |   |               |   |        |           |  |   |        |   |  |   |         | 
|--------------------------------- |  | ---------------------------- | ------- | - | ------------- | - | ------ | --------- |  | - | ------ | - |  | - | ------- | 
|                                  |  | Year Ended December 31, 2003 |        
|                                  |  |                              |        
|                                  |  | Domestic                     |         |   | International |   |        |          
|                                  |  | Services                     |         |   | Services      |   |        | Corporate |  |   | Total  |  
|                                  |  |                              |         |   |               |   |        |           |  |   |        |  
|Revenue from external customers   |  | $                            | 129,474 |   |               | $ | 90,610 |           |  | $ |       |   |  | $ | 220,084 | 
|Inter-segment revenue             |  |                              | 56      |   |               |   | 124    |           |  |   |       |   |  |   | 180     | 
|Revenue from significant customer |  |                              | 53,582  |   |               |   |       |           |  |   |       |   |  |   | 53,852  | 
|Segment operating income (loss)   |  |                              | (1,464  | ) |               |   | 4,312  |           |  |   | (1,169 | ) |  |   | 1,679   | 
|Segment assets                    |  |                              | 49,780  |   |               |   | 36,577 |           |  |   | 3,912  |   |  |   | 90,269  | 
|Segment goodwill                  |  |                              | 19,641  |   |               |   | 11,868 |           |  |   |       |   |  |   | 31,509  | 
|Depreciation and amortization     |  |                              | 2,259   |   |               |   | 401    |           |  |   |       |   |  |   | 2,660   | 
|Capital expenditures              |  |                              | 643     |   |               |   | 140    |           |  |   | 3,400  |   |  |   | 4,183   | 

79



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




|               |                                             |                         |   |         |         |  |   |         |         |  |   |         |         | 
|-------------- | ------------------------------------------- | ----------------------- | - | ------- | ------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|               |                                             | Year Ended December 31, |  
|               |                                             |                         |  
|               |                                             | 2005                    |   |         | 2004    |  |   | 2003    |        
|               |                                             |                         |   |         |         |  |   |         |        
|Total revenue: |                                             |                         |   |         |         |  |   |         |         |  |   |        
|               | United States                               |                         | $ | 224,901 |         |  | $ | 239,389 |         |  | $ | 208,591 |        
|               | Asia                                        |                         |   | 169,355 |         |  |   | 116,388 |         |  |   | 8,003   |        
|               | North America (excluding the United States) |                         |   | 415     |         |  |   | 220     |         |  |   | 1,360   |        
|               | Europe                                      |                         |   | 8,286   |         |  |   | 6,507   |         |  |   | 1,287   |        
|               | South America                               |                         |   | 5,008   |         |  |   | 2,605   |         |  |   |        |        
|               | Other                                       |                         |   | 2,290   |         |  |   | 1,972   |         |  |   | 843     |        
|               |                                             |                         |   |         |         |  |   |         |        
|               |                                             | Total                   |   | $       | 410,255 |  |   | $       | 367,081 |  |   | $       | 220,084 | 
|               |                                             |                         |   |         |         |  |   |         |        



|              |  |              |       |  |      |   |       | 
|------------- |  | ------------ | ----- |  | ---- | - | ----- | 
|              |  | December 31, |      
|              |  |              |      
|              |  | 2005         |       |  | 2004 |  
|              |  |              |       |  |      |  
|United States |  | $            | 5,967 |  |      | $ | 6,797 | 
|Asia          |  |              | 780   |  |      |   | 691   | 
|South America |  |              | 92    |  |      |   | 108   | 
|Europe        |  |              | 17    |  |      |   |      | 
|              |  |              |       |  |      |  
|              |  | $            | 6,856 |  |      | $ | 7,596 | 
|              |  |              |       |  |      |  





|                                             |         |               |            |       |         |   |             |              |   |   |             |       |   |   |             |       |  
|-------------------------------------------- | ------- | ------------- | ---------- | ----- | ------- | - | ----------- | ------------ | - | - | ----------- | ----- | - | - | ----------- | ----- | -
|                                             |         | Quarter Ended |           
|                                             |         |               |           
|2005                                         |         | March 31      |            |       | June 30 |   |             | September 30 |   |   | December 31 |      
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|Total revenue                                |         | $             | 89,989,605 |       |         | $ | 100,026,995 |              |   | $ | 111,311,674 |       |   | $ | 108,927,099 |      
|Cost of transportation                       |         |               | 69,575,287 |       |         |   | 77,904,854  |              |   |   | 87,971,539  |       |   |   | 88,346,347  |      
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|Net revenue                                  |         | $             | 20,414,318 |       |         | $ | 22,122,141  |              |   | $ | 23,340,135  |       |   | $ | 20,580,752  |      
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|Loss from continuing operations              |         | $             | (7,563,099 | )     |         | $ | (383,126    | )            |   | $ | (1,001,814  | )     |   | $ | (789,739    | )    
|Preferred stock dividends                    |         |               |           |       |         |   |            |              |   |   |            |       |   |   | (35,918     | )    
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|Net loss attributable to common stockholders |         | $             | (7,563,099 | )     |         | $ | (383,126    | )            |   | $ | (1,001,814  | )     |   | $ | (825,657    | )    
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|Loss per common share                        |         |               |            |       |         |   |             |              |   |   |             |       |   |   |             |      
|                                             | Basic   |               | $          | (0.17 | )       |   | $           | (0.01        | ) |   | $           | (0.02 | ) |   | $           | (0.02 | )
|                                             |         |               |            |       |         |   |             |              |   |   |             |      
|                                             | Diluted |               | $          | (0.17 | )       |   | $           | (0.01        | ) |   | $           | (0.02 | ) |   | $           | (0.05 | )
|                                             |         |               |            |       |         |   |             |              |   |   |             |      

80



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)


|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |   |   |   |             |       |       |  
|----------------------------------------------------- | ------------------------- | ----------------------- | ---------- | ----- | ------- | - | ---------- | ------------ | ----- | - | ----------- | - | - | - | ----------- | ----- | ----- | -
|                                                      |                           | Quarter Ended           |           
|                                                      |                           |                         |           
|2004                                                  |                           | March 31                |            |       | June 30 |   |            | September 30 |       |   | December 31 |  
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|Total revenue                                         |                           | $                       | 60,224,390 |       |         | $ | 86,469,712 |              |       | $ | 109,711,414 |   |   | $ | 110,675,149 |      
|Cost of transportation                                |                           |                         | 43,472,712 |       |         |   | 67,404,844 |              |       |   | 84,638,366  |   |   |   | 86,842,725  |      
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|Net revenue                                           |                           | $                       | 16,751,678 |       |         | $ | 19,064,868 |              |       | $ | 25,073,048  |   |   | $ | 23,832,424  |      
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|Income (loss) from continuing operations              |                           | $                       | (5,700,446 | )     |         | $ | (1,368,806 | )            |       | $ | 105,767     |   |   | $ | (6,054,870  | )    
|Gain (loss) from discontinued operations              |                           |                         |           |       |         |   |           |              |       |   | (50,000     | ) |   |   | 25,000      |      
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|Net income (loss) attributable to common stockholders |                           | $                       | (5,700,446 | )     |         | $ | (1,368,806 | )            |       | $ | 55,767      |   |   | $ | (6,029,870  | )    
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|Loss per common share:                                |                           |                         |            |       |         |   |            |              |       |   |             |   |   |   |             |      
|                                                      | Basic                     |                         |            |       |         |   |            |              |       |   |             |   |   |   |             |       |      
|                                                      |                           | Continuing              |            | $     | (0.15   | ) |            | $            | (0.03 | ) |             | $ |  |   |             | $     | (0.15 | )
|                                                      |                           | Discontinued operations |            |       |        |   |            |              |      |   |             |   |  |   |             |       |      |  
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|                                                      | Earnings per common share |                         | $          | (0.15 | )       |   | $          | (0.03        | )     |   | $           |  |   |   | $           | (0.15 | )    
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|                                                      | Diluted                   |                         |            |       |         |   |            |              |       |   |             |   |   |   |             |       |      
|                                                      |                           | Continuing              |            | $     | (0.15   | ) |            | $            | (0.03 | ) |             | $ |  |   |             | $     | (0.15 | )
|                                                      |                           | Discontinued operations |            |       |        |   |            |              |      |   |             |   |  |   |             |       |      |  
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  
|                                                      | Earnings per common share |                         | $          | (0.15 | )       |   | $          | (0.03        | )     |   | $           |  |   |   | $           | (0.15 | )    
|                                                      |                           |                         |            |       |         |   |            |              |       |   |             |  



|     |                  
|---- | -----------------
|(18) | Subsequent Events







81



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STONEPATH GROUP, INC.


Notes to Consolidated Financial
Statements  (Continued)




82



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












| |             
| | ------------
| | /s/ KPMG LLP







83



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##### Table of Contents






SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


STONEPATH GROUP, INC. AND SUBSIDIARIES


|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |   |            |   |  |   |           | 
|------------------------------------- | ---------------------------- | ------------ | - | --------- | ---------- | ------------------ | - | ---------- |  | ----------- | - | -------- | ---------- |  | - | ---------- | - |  | - | --------- | 
|                                      |                              |              |   |           |            | Column C Additions |   |            | 
|                                      |                              |              |   |           |            |                    |   |            | 
|                                      |                              |              |   |           |            | (2)                |   |            |  |            
|                                      |                              | Column B     |   |           | (1)        |                    |   | Charged to |  |             |   | Column E |           
|                                      |                              | Balance at   |   |           | Charged to |                    |   | Other      |  | Column D    |   |          | Balance at | 
|                                      |                              | Beginning of |   |           | Costs and  |                    |   | aCcounts   |  | Deductions  |   |          | End of     | 
|Column A Description                  |                              | Period       |   |           | Expenses   |                    |   | Describe   |  | Describe(a) |   |          | Period     | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            | 
|Allowance for doubtful accounts:      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |   |            |   |  |   |          
|                                      | Year ended December 31, 2005 |              | $ | 1,872,277 |            |                    | $ | 1,313,814  |  |             | $ |         |            |  | $ | (1,380,562 | ) |  | $ | 1,805,529 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  
|                                      | Year ended December 31, 2004 |              | $ | 1,055,000 |            |                    | $ | 2,076,052  |  |             | $ |         |            |  | $ | (1,258,775 | ) |  | $ | 1,872,277 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  
|                                      | Year ended December 31, 2003 |              | $ | 320,000   |            |                    | $ | 771,000    |  |             | $ |         |            |  | $ | (36,000    | ) |  | $ | 1,055,000 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  
|Reserve for excess earn-out payments: |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |   |            |   |  |   |          
|                                      | Year ended December 31, 2005 |              | $ | 4,345,331 |            |                    | $ |           |  |             | $ |         |            |  | $ |           |   |  | $ | 4,345,331 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  
|                                      | Year ended December 31, 2004 |              | $ | 1,270,141 |            |                    | $ | 3,075,190  |  |             | $ |         |            |  | $ |           |   |  | $ | 4,345,331 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  
|                                      | Year ended December 31, 2003 |              | $ |          |            |                    | $ | 1,270,141  |  |             | $ |         |            |  | $ |           |   |  | $ | 1,270,141 | 
|                                      |                              |              |   |           |            |                    |   |            |  |             |   |          |            |  |  






|    |                                                           
|--- | ----------------------------------------------------------
|(a) | Represents write-off of uncollectible accounts receivable.

84



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure









S-K, 10-K







|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures



| |                                                
| | -----------------------------------------------
| | Evaluation of disclosure controls and procedure

10-K, 10-K, 13a-15(e) 15d-15(e)




| |                             
| | ----------------------------
| | Changes in internal controls








|         |                  
|-------- | -----------------
|Item 9B. | Other Information



85



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##### Table of Contents



10-K.





PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters








|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Consolidated Financial Statements:                                                                                                                                           
|
| | See Index to Consolidated Financial Statements included under
    Item 8 in Part II of this Annual Report on
    Form 10-K.                                                     
|
| | 2. Exhibits:                                                                                                                                                                    
|
| | The required exhibits are included at the end of this Annual
    Report on
    Form 10-K and are
    described in the Exhibit Index immediately preceding the
    first exhibit.

86



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SIGNATURES


10-K




| |                      
| | ---------------------
| | STONEPATH GROUP, INC.



| |     |                   
| | --- | ------------------
| | By: | /s/ Jason F. Totah

| |                        
| | -----------------------
| |                        
| | Jason F. Totah         
| | Chief Executive Officer



| |     |                  
| | --- | -----------------
| | By: | /s/ Robert Arovas

| |                                      
| | -------------------------------------
| |                                      
| | Robert Arovas                        
| | President and Chief Financial Officer



| |     |                          
| | --- | -------------------------
| | By: | /s/ Robert T. Christensen

| |                         
| | ------------------------
| |                         
| | Robert T. Christensen   
| | Chief Accounting Officer



10-K


|                                     |  |                       |  |                |  | 
|------------------------------------ |  | --------------------- |  | -------------- |  | 
|Signature                            |  | Title                 |  | Date          
|                                     |  |                       |  |               
|                                    
|/s/ Dennis L. PelinoDennis L. Pelino |  | Chairman and Director |  | March 31, 2006
|                                    
|J. Douglass Coates                   |  | Director              |  |               
|                                    
|/s/ David R. JonesDavid R. Jones     |  | Director              |  | March 31, 2006
|                                    
|Aloysius T. Lawn IV                  |  | Director              |  |               
|                                    
|/s/ Robert McCordRobert McCord       |  | Director              |  | March 31, 2006
|                                    
|/s/ John H. SpringerJohn H. Springer |  | Director              |  | March 31, 2006

87



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EXHIBIT INDEX


10-K


|        |   |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------- | - | -------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |         
|Number  |   | Document
|        |   |         
|        | 2 | .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) (incorporated by reference to
    Exhibit 2.5 to the Current Report on Form 8-K filed on
    October 19, 2001)                   
|        | 2 | .2       |  | 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) (incorporated by reference to Exhibit 2.6 to the
    Current Report on Form 8-K filed on October 19, 2001)
|        | 2 | .3       |  | Stock Purchase Agreement dated March 5, 2002 by and among
    Stonepath Group, Inc., Stonepath Logistics International
    Services, Inc. and Global Transportation Services, Inc. and the
    Shareholders of Global Transportation Services, Inc. and Jason
    F. Totah (as shareholders agent) (incorporated by
    reference to Exhibit 2.4 to the Current Report on
    Form 8-K filed on April 19, 2002)                      
|        | 2 | .4       |  | Stock Purchase Agreement dated April 9, 2002 by and among
    Stonepath Logistics Domestic Services, Inc. and United American
    Acquisitions and Management, Inc., d/b/a United American Freight
    Services, Inc. and Douglas Burke (incorporated by reference to
    Exhibit 2.5 to the Current Report on Form 8-K filed on
    June 12, 2002)                                                                                   
|        | 2 | .5       |  | Amendment to Stock Purchase Agreement dated May 30, 2002 by
    and among Stonepath Logistics Domestic Services, Inc., and
    United American Acquisitions and Management, Inc., d/b/a United
    Freight Services, Inc. and Douglas Burke (incorporated by
    reference to Exhibit 2.6 to the Current Report on
    Form 8-K filed on June 12, 2002)                                                                               
|        | 2 | .6       |  | Asset Purchase Agreement by and among Stonepath Logistics
    Government Services, Inc. (f/k/a Transport Specialists,
    Inc.), Regroup Express L.L.C. and Jed J. Shapiro and
    Charles R. Cain, the sole members of Regroup Express LLC, dated
    June 4, 2003 (incorporated by reference to Exhibit 2.6
    to the Current Report on Form 8-K filed on July 7,
    2003)                                                      
|        | 2 | .7       |  | Asset Purchase Agreement by and among Stonepath Holdings (Hong
    Kong) Limited, G Link Express Logistics (Singapore) Pte. Ltd, G
    Link Express Pte. Ltd and the shareholders of G Link Express
    Pte. Ltd, dated August 8, 2003 (incorporated by reference
    to Exhibit 2.7 to the Current Report on Form 8-K filed
    on August 13, 2003)                                                                                  
|        | 2 | .8       |  | Asset Purchase Agreement by and among Stonepath Holdings (Hong
    Kong) Limited, G Link Express (Cambodia) Pte. Ltd and the
    shareholders of G Link Express (Cambodia) Pte. Ltd. dated
    August 8, 2003 (incorporated by reference to
    Exhibit 2.8 to the Current Report on Form 8-K filed on
    August 13, 2003)                                                                                                           
|        | 2 | .9       |  | Amended and Restated Contract for the Sale of Assets by and
    between Stonepath Holdings (Hong Kong) Limited and Andy Tsai
    dated November 10, 2003 (incorporated by reference to
    Exhibit 2.9 to the Current Report on Form 8-K filed on
    February 24, 2004)                                                                                                                                                              
|        | 2 | .10      |  | Letter Agreement dated February 9, 2004 amending the
    Amended and Restated Contract for the Sale of Assets by and
    between Stonepath Holdings (Hong Kong) Limited and Andy Tsai
    dated November 10, 2003 (incorporated by reference to
    Exhibit 2.10 to the Current Report on Form 8-K filed
    on February 24, 2004)                                                                                                    
|        | 3 | .1       |  | Amended and Restated Certificate of Incorporation of Stonepath
    Group, Inc. (incorporated by reference to Exhibit 3.1 to
    the Registration Statement on Form S-1 (Registration
    No. 333-88629) filed on October 8, 1999)                                                                                                                                                                                                     
|        | 3 | .2       |  | Certificate of Amendment to the Certificate of Incorporation of
    Stonepath Group, Inc. (incorporated by reference to
    Exhibit 3.2 to the Annual Report on Form 10-K filed on
    April 2, 2001)                                                                                                                                                                                                                                 
|        | 3 | .3       |  | Amended and Restated Bylaws of Stonepath Group, Inc.
    (incorporated by reference to Exhibit 3.3 to the Annual
    Report on Form 10-K filed on April 2, 2001)                                                                                                                                                                                                                                                                      

88



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|        |    |          |  |                                                                                                                                                                                                                                                                                                                          
|------- | -- | -------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 4  | .1       |  | Specimen Common Stock Certificate for Stonepath Group, Inc.
    (incorporated by reference to Exhibit 4.25 to Amendment
    No. 1 to the Registration Statement on Form S-3
    (Registration No. 333-91240) filed on July 31, 2002)                                                                                     
|        | 4  | .2       |  | Form of Common Stock Purchase Warrant issued in connection with
    the Series C Convertible Preferred Stock (incorporated by
    reference to Exhibit 4.2 to the Current Report on
    Form 8-K filed on March 17, 2000)                                                                                                
|        | 4  | .3       |  | Form of Amendment to Common Stock Purchase Warrant issued upon
    conversion of the Series C Convertible Preferred Stock
    effective as of July 19, 2002 (incorporated by reference to
    Exhibit 4.30 to the Quarterly Report on Form 10-Q
    filed on November 14, 2002)                                          
|        | 4  | .4       |  | Form of Contingent Warrant issued upon conversion of the
    Series C Convertible Preferred Stock effective as of
    July 19, 2002 (incorporated by reference to
    Exhibit 4.29 to the Quarterly Report on Form 10-Q
    filed on November 14, 2002)                                                                  
|        | 4  | .5       |  | Form of Exchange Agreement by and between the Company and
    certain holders of the Companys Series C Convertible
    Preferred Stock (incorporated by reference to Exhibit 4.26
    to Amendment No. 1 to the Registration Statement on
    Form S-3 (Registration No. 333-91240) filed on
    July 31, 2002)         
|        | 4  | .6*      |  | Stonepath Group, Inc. Amended and Restated 2000 Stock Incentive
    Plan (incorporated by reference to Exhibit A to the
    Schedule 14A Proxy Statement filed on April 8, 2004)                                                                                                                                         
|        | 4  | .7*      |  | Form of Stock Option Agreement under the Plan (incorporated by
    reference to Exhibit 4.2 to the Registration Statement on
    Form S-8 (Registration No. 333-74918) filed on
    December 11, 2001).                                                                                                                  
|        | 4  | .8*      |  | Form of Non-Plan Option to Purchase Common Stock of the Company
    (incorporated by reference to Exhibit 4.3 to the
    Registration Statement on Form S-8 (Registration
    No. 333-74918) filed on December 11, 2001)                                                                                                 
|        | 4  | .9       |  | Form of Subscription Agreement by and between the Company and
    certain purchasers of common shares (including exhibit providing
    for registration rights) (incorporated by reference to
    Exhibit 4.19 to the Annual Report on Form 10-K filed
    on March 31, 2003)                                            
|        | 4  | .10      |  | Placement Agency Agreement between the Company and Stonegate
    Securities, Inc. dated October 16, 2002 (incorporated by
    reference to Exhibit 4.20 to the Annual Report on
    Form 10-K filed on March 31, 2003)                                                                                                   
|        | 4  | .11*     |  | 2003 Employee Stock Purchase Plan (incorporated by reference to
    Exhibit 99.1 to the Registration Statement on Form S-8
    (Registration No. 333-109249) filed on September 29,
    2003)                                                                                                                            
|        | 4  | .12      |  | Form of Initial Warrants issued to Stonegate Securities, Inc. as
    of October 16, 2002 (incorporated by reference to
    Exhibit 4.24 to the Registration Statement on Form S-3
    (Registration No. 333-104228) filed on April 1, 2003)                                                                              
|        | 4  | .13      |  | Form of Representatives Warrants issued to Stonegate
    Securities, Inc. as of March 6, 2003 (incorporated by
    reference to Exhibit 4.25 to the Registration Statement on
    Form S-3 (Registration No. 333-104228) filed on
    April 1, 2003)                                                                    
|        | 4  | .14      |  | Form of subscription agreement by and between the Company and
    certain holders of common stock (including the exhibit providing
    for registration rights) (incorporated by reference to
    Exhibit 4.27 to the Registration Statement on Form S-3
    (Registration No. 333-110231) filed on November 4,
    2003)
|        | 4  | .15      |  | Amendment to Placement Agency Agreement between the Company and
    Stonegate Securities, Inc. dated as of July 29, 2003
    (incorporated by reference to Exhibit 4.28 to the
    Registration Statement on Form S-3 (Registration
    No. 333-110231) filed on November 4, 2003)                                       
|        | 4  | .16      |  | Form of subscription agreement by and between the Company and
    the holders of 41,408 common shares (including exhibit providing
    for registration rights) (incorporated by reference to
    Exhibit 4.29 to the Registration Statement on Form S-3
    (Registration No. 333-110231) filed on November 4,
    2003)
|        | 10 | .1*      |  | Amended and Restated Employment Agreement between the Company
    and Dennis L. Pelino dated February 22, 2002 (incorporated
    by reference to Exhibit 10.2 to the Annual Report on
    Form 10-K filed on March 29, 2002)                                                                                             

89



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|        |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------- | -- | -------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 10 | .2*      |  | Modification to Employment Agreement of Dennis L. Pelino dated
    March 11, 2004 (incorporated by reference to
    Exhibit 10.14 of the Annual Report on Form 10-K filed
    on March 15, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10 | .3*      |  | Executive Employment Agreement between Global Transportation
    Services, Inc. and Jason F. Totah dated April 4, 2002
    (incorporated by reference to Exhibit 10.7 to the Annual
    Report on Form 10-K filed on March 31, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .4*      |  | Amendment to Executive Employment Agreement of Jason F. Totah
    dated April 1, 2004 (incorporated by reference to
    Exhibit 10.14 to the Quarterly Report on Form 10-Q
    filed on May 10, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .5*      |  | Employment Agreement dated February 2, 2005 by and between
    Stonepath Group, Inc. and Robert Arovas (incorporated by
    reference to Exhibit 10.22 to the Current Report on
    Form 8-K/ A filed on February 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .6*      |  | Amended and Restated Employment Agreement between the Company
    and Bohn H. Crain dated February 24, 2003 (incorporated by
    reference to Exhibit 10.4 to the Annual Report on
    Form 10-K filed on March 31, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 10 | .7*      |  | Letter Agreement dated November 12, 2004 between the
    Company and Bohn H. Crain (incorporated by reference to
    Exhibit 10.18 to the Current Report on Form 8-K filed
    on November 18, 2004)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .8*      |  | Stonepath Group, Inc. 401(k) Profit Sharing Plan (incorporated
    by reference to Exhibit 10.12 to the Registration Statement
    on Form S-8 (Registration No. 333-103439) filed on
    February 25, 2003)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 10 | .9       |  | Loan and Security Agreement dated as of May 15, 2002
    between LaSalle Business Credit, Inc. and Stonepath Group, Inc.,
    Contract Air, Inc., Distribution Services, Inc., Global
    Transportation Services, Inc., Global Container Line, Inc.,
    M.G.R., Inc., d/b/a Air Plus Limited, Net Value, Inc., Stonepath
    Logistics Domestic Services, Inc., Stonepath Logistics
    International Services, Inc. and Stonepath Operations, Inc.
    (incorporated by reference to Exhibit 10.2 to the Current
    Report on Form 8-K filed on May 20, 2002)                                                                                                                                          
|        | 10 | .10      |  | Amendment to Loan and Security Agreement dated May 15, 2003
    by and among LaSalle Business Credit, LLC, Stonepath Group,
    Inc., Contract Air, Inc., Distribution Services, Inc., Global
    Container Line, Inc., M.G.R., Inc., Net Value, Inc., Stonepath
    Logistics Domestic Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc., and Transport
    Specialists, Inc. (incorporated by reference to
    Exhibit 10.10 to the Annual Report on Form 10-K filed
    on March 15, 2004)                                                                                                     
|        | 10 | .11      |  | Second Amendment to Loan and Security Agreement dated
    September 5, 2003 by and among LaSalle Business Credit,
    LLC, Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc., Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc. (incorporated
    by reference to Exhibit 10.10 to the Current Report on
    Form 8-K filed on September 9, 2003)                  
|        | 10 | .12      |  | Third Amendment to Loan and Security Agreement dated
    December 23, 2003 by and among LaSalle Business Credit,
    LLC, Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc., Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc. (incorporated
    by reference to Exhibit 10.12 to the Annual Report on
    Form 10-K filed on March 15, 2004)                      
|        | 10 | .13      |  | Fourth Amendment and Consent Agreement to Loan and Security
    Agreement dated January 30, 2004 by and among LaSalle
    Business Credit, LLC, Stonepath Group, Inc., Contract Air, Inc.,
    Distribution Services, Inc., Global Container Line, Inc.,
    M.G.R., Inc., Net Value, Inc., Stonepath Logistics Domestic
    Services, Inc., Stonepath Logistics Government Services, Inc.,
    Stonepath Logistics International Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Operations
    Inc., and United American Acquisitions and Management, Inc.
    (incorporated by reference to Exhibit 10.13 to the Annual
    Report on Form 10-K filed on March 15, 2004)

90



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|        |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|------- | -- | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 10 | .14      |  | Fifth Amendment and Joinder to Loan and Security Agreement dated
    April 6, 2004 by and among LaSalle Business Credit, LLC,
    Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc., Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc. D/ B/ A United
    American Freight Services, Inc., and Stonepath Offshore
    Holdings, Inc. (incorporated by reference to Exhibit 10.16
    to the Quarterly Report on Form 10-Q filed on
    August 9, 2004)                                                                                    
|        | 10 | .15      |  | Sixth Amendment to Loan and Security Agreement dated
    July 28, 2004 by and among LaSalle Business Credit, LLC,
    Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc., Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc. D/ B/ A United
    American Freight Services, Inc., and Stonepath Offshore
    Holdings, Inc. (incorporated by reference to Exhibit 10.17
    to the Quarterly Report on Form 10-Q filed on
    August 9, 2004)                                                                                                
|        | 10 | .16      |  | Seventh Amendment to Loan and Security Agreement dated
    November 17, 2004 by and among LaSalle Business Credit,
    LLC, Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc., Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc., Stonepath Operations Inc., and
    United American Acquisitions and Management, Inc. D/ B/ A United
    American Freight Services, Inc., and Stonepath Offshore
    Holdings, Inc. (incorporated by reference to Exhibit 10.19
    to the Current Report on Form 8-K filed on
    November 18, 2004)                                                                                          
|        | 10 | .17      |  | Term Credit Agreement Dated October 27, 2004 By And Between
    Stonepath Holdings, (Hong Kong) Limited, Hong Kong League
    Central Credit Union, and SBI Advisors, LLC (incorporated by
    reference to Exhibit 10.20 to the Quarterly Report on
    Form 10-Q filed on January 6, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|        | 10 | .18      |  | Guaranty of Stonepath Group, Inc., in favor of Hong Kong League
    Central Credit Union (incorporated by reference to
    Exhibit 10.21 to the Quarterly Report on Form 10-Q
    filed on January 6, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .19      |  | Waiver and Rider No. 7 to Equipment Lease Agreement dated
    as of March 30, 2005 between Stonepath Group, Inc., MGR,
    Inc. d/b/a Air Plus Limited, Stonepath Logistics Domestic
    Services, Inc. and LaSalle National Leasing Corporation
    (incorporated by reference to Exhibit 10.19 to the Annual
    Report on Form 10-K filed on April 1, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .20      |  | Eighth Amendment to Loan and Security Agreement dated
    March 30, 2005 by and among LaSalle Business Credit, LLC,
    Stonepath Group, Inc., Contract Air, Inc., Distribution
    Services, Inc., Global Container Line, Inc., M.G.R., Inc. d/b/a
    Air Plus Limited, Net Value, Inc., Stonepath Logistics Domestic
    Services, Inc., Stonepath Logistics Government Services, Inc.,
    Stonepath Logistics International Services, Inc., Stonepath
    Logistics International Services, Inc. f/k/a Global
    Transportation Services, Inc., Stonepath Offshore Holding, Inc.,
    Stonepath Operations Inc., and United American Acquisitions and
    Management, Inc. d/b/a United American Freight Services, Inc.
    (incorporated by reference to Exhibit 10.20 to the Annual
    Report on Form 10-K filed on April 1, 2005)                                       
|        | 10 | .21      |  | Ninth Amendment to Loan and Security Agreement dated
    April 6, 2005 by and among Zohar II 2005-1, Limited,
    Patriarch Partners Agency Services, LLC, Stonepath Group, Inc.,
    Contract Air, Inc., Distribution Services, Inc., Global
    Container Line, Inc., M.G.R., Inc. d/b/a Air Plus Limited, Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc. f/k/a Global Transportation
    Services, Inc., Stonepath Offshore Holding, Inc., Stonepath
    Operations Inc., and United American Acquisitions and
    Management, Inc. d/b/a United American Freight Services, Inc.
    (incorporated by reference to Exhibit 10.21 to the Current
    Report on Form 8-K filed on April 8, 2005)

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##### Table of Contents



|        |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | -- | -------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 10 | .22      |  | Tenth Amendment to Loan and Security Agreement dated
    May 12, 2005 by and among Zohar II 2005-1, Limited,
    Patriarch Partners Agency Services, LLC, Stonepath Group, Inc.,
    Contract Air, Inc., Distribution Services, Inc., Global
    Container Line, Inc., M.G.R., Inc. d/b/a Air Plus Limited, Net
    Value, Inc., Stonepath Logistics Domestic Services, Inc.,
    Stonepath Logistics Government Services, Inc., Stonepath
    Logistics International Services, Inc., Stonepath Logistics
    International Services, Inc. f/k/a Global Transportation
    Services, Inc., Stonepath Offshore Holding, Inc., Stonepath
    Operations Inc., and United American Acquisitions and
    Management, Inc. d/b/a United American Freight Services, Inc.
    (incorporated by reference to Exhibit 10.22 to the
    Quarterly Report on Form 10-Q filed on August 9, 2005)
|        | 10 | .23      |  | Security Agreement dated August 31, 2005 by and among
    Laurus Master Fund, Ltd, the Company, and the subsidiaries
    identified therein (incorporated by reference to
    Exhibit 10.23 to the Current Report on Form 8-K filed
    on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .24      |  | Secured Convertible Minimum Borrowing Note dated August 31,
    2005 (incorporated by reference to Exhibit 10.24 to the
    Current Report on Form 8-K filed on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10 | .25      |  | Secured Revolving Note dated August 31, 2005 (incorporated
    by reference to Exhibit 10.25 to the Current Report on
    Form 8-K filed on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 10 | .26      |  | Common Stock Purchase Warrant dated August 31, 2005
    (incorporated by reference to Exhibit 10.26 to the Current
    Report on Form 8-K filed on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .27      |  | Minimum Borrowing Note Registration Rights Agreement dated
    August 31, 2005 by and among the Company and Laurus Master
    Fund (incorporated by reference to Exhibit 10.27 to the
    Current Report on Form 8-K filed on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .28      |  | Escrow Letter dated August 31, 2005 (incorporated by
    reference to Exhibit 10.28 to the Current Report on
    Form 8-K filed on September 7, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .29      |  | Exchange Agreement dated October 20, 2005 by and among the
    Company, Stonepath Holdings (Hong Kong) Limited, Hong Kong
    League Central Credit Union and SBI Advisors, LLC (incorporated
    by reference to Exhibit 10.29 to the Current Report on
    Form 8-K filed on October 26, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .30      |  | Preferred Shares Exchange Agreement dated October 26, 2005
    by and among the Company, Stonepath Holdings (Hong Kong)
    Limited, Hong Kong League Central Credit Union and SBI Advisors,
    LLC (incorporated by reference to Exhibit 10.30 to the
    Current Report on Form 8-K filed on October 27, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10 | .31      |  | Common Stock Purchase Warrant dated October 26, 2005
    (incorporated by reference to Exhibit 10.31 to the Current
    Report on Form 8-K filed on October 27, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10 | .32      |  | Amendment to Term Credit Agreement dated October 26, 2005
    by and among Stonepath Holdings (Hong Kong) Limited, Hong Kong
    League Central Credit Union, and SBI Advisors, LLC (incorporated
    by reference to Exhibit 10.32 to the Current Report on
    Form 8-K filed on October 27, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10 | .33*     |  | Executive Employment Agreement dated December 1, 2004, by
    and between Stonepath Logistics International Services, Inc. and
    Sarah Dorscht                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10 | .34*     |  | Executive Employment Agreement dated December 1, 2004, by
    and between Stonepath Logistics Domestic Services, Inc and Rick
    Manner                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10 | .35      |  | Letter Agreement dated March 30, 2006, amending the Stock
    Purchase Agreement dated March 5, 2002 by and among
    Stonepath Group, Inc., Stonepath Logistics International
    Services, Inc. and Global Transportation Services, Inc. and the
    Shareholders of Global Transportation Services, Inc. and Jason
    F. Totah (as shareholders agent)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 12 |          |  | Computation of Ratio of Earnings to Fixed Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 14 |          |  | Code of Ethics                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        | 21 | .1       |  | Subsidiaries of Stonepath Group, Inc. (incorporated by reference
    to Exhibit 21.1 to the Annual Report on Form 10-K
    filed on April 1, 2005)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 23 | .1       |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



|        |    |          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | -------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         
|Number  |    | Document
|        |    |         
|        | 23 | .2       |  | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 31 | .1       |  | Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                           
|        | 31 | .2       |  | Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                           
|        | 32 | .1       |  | Certification Pursuant to Section 906 of the Sarbanes-Oxley
    Act of 2002. (This exhibit shall not be deemed filed
    for purposes of Section 18 of the Securities Exchange Act
    of 1934, as amended, or otherwise subject to the liability of
    that section. Further, this exhibit shall not be deemed to be
    incorporated by reference into any filing under the Securities
    Act of 1933, as amended, or the Securities Exchange Act of 1934,
    as amended.)






|  |                                                                          
|- | -------------------------------------------------------------------------
|* | Constitutes a management contract or compensatory plan or
    arrangement

93