NEW YORK, Oct. 29, 2004 (PRIMEZONE) -- Murray, Frank & Sailer LLP has filed a class action lawsuit on behalf of all purchasers of Stonepath Group, Inc. securities ("Stonepath") (AMEX:STG) during the period between May 7, 2003 and September 20, 2004 (the "Class Period").
The complaint alleges that, throughout the Class Period, defendants issued numerous statements and filed quarterly and annual reports with the United States Securities and Exchange Commission regarding the Company's current financial performance and future earnings. As alleged in the complaint, these statements were materially false and misleading because defendants knew, but failed to disclose: (i) that Stonepath was materially overstating its financial results by engaging in improper accounting practices. As detailed herein, Stonepath has admitted that its prior financial reports are materially false and misleading as it announced that it is going to restate its results for 2003 and the first two quarters of 2004; (ii) that the Company lacked adequate internal controls and was therefore unable to ascertain its true financial condition; and (iii) that as a result of the foregoing, the values of the Company's net income and Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA") were materially overstated at all relevant times.
On September 20, 2004, Stonepath shocked the market when it issued a press release announcing its intention to restate 2003 and first and second quarter 2004 financial statements. The Company admitted that its Domestic Services division had understated its accrued purchased transportation liability and related costs of purchased transportation. The amount of the under accrual was estimated to be in the range of $4.0-$6.0 million for 2003 and in the range of $500,000 to $1.0 million for the first six months of 2004. After giving effect for these estimated incremental expenses, the Company's reported EBITDA would be reduced to the range of $2.6-$4.6 million for 2003 and reduced to the range of $200,000-$700,000 for the first six months of 2004. Upon this shocking news, shares of the Company's stock fell $0.73 per share or almost 50% to close at $0.86 per share, on unusually heavy trading volume.
Prior to disclosing these adverse facts to the investing public, Stonepath: (i) acquired several companies using its overvalued shares as consideration; (ii) increased its credit facilities by $10 million on more favorable terms; (iii) completed a private placement of its common stock for gross proceeds of approximately $13 million; and (iv) filed a shelf registration statement with the Securities and Exchange Commission for the potential offering of up to $50 million in equity securities.
If you purchased or acquired the shares of Stonepath, on any world exchange, between May 7, 2003 and September 20, 2004, and sustained damages, you may, no later than November 23, 2004, move the Court to serve as lead plaintiff of the class. Shareholders outside the United States may also join the action, regardless of where they live or which exchange was used to purchase the securities. To serve as lead plaintiff, however, you must meet certain legal requirements. You can join this class action online at http://www.murrayfrank.com/CM/NewCases/NewCases.asp. If you would like to discuss this action, this announcement, or your rights and interests, please contact plaintiff's counsel Eric J. Belfi or Aaron D. Patton of Murray, Frank & Sailer LLP.