SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended DECEMBER 31, 2001
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ______________ to
______________
COMMISSION FILE NUMBER 000-22281
24HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0726608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Cyberia House
Church Street, Basingstoke
Hampshire RG21 7QN
United Kingdom
(Address of Principal Executive Offices)
+44 1256 867 800
(Telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, Par Value $0.001 Per Share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
[ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 11, 2002: $329,756. The amount shown is based on the
closing price of the registrant's Common Stock on the OTC Bulletin Board on that
date. Shares of Common Stock known by the registrant to be beneficially owned by
10% shareholders, officers or directors of the Registrant are not included in
the computation. The Registrant, however, has made no determination that such
persons are "affiliates" within the meaning of Rule 405 under the Securities Act
of 1933.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Number of shares of Common Stock outstanding at April 11, 2002: 85,486,716.
DOCUMENTS INCORPORATED BY REFERENCE
None.
24HOLDINGS INC.
As used in this report, the terms "24Holdings," "Company" and "Registrant"
mean 24Holdings Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS.
Introduction
24Holdings Inc., a Delaware corporation formerly known as Scoop, Inc.
("24Holdings" or the "Company"), is a holding company owning 100% of the Common
Stock of 24STORE (Europe) Limited, a Company incorporated under the laws of
England formerly known as 24STORE.com Limited and currently operating in the
United Kingdom ("24STORE").
The Company's History
The Company commenced business operations in May 1996. The Company's original
business operations focused on the sale of media products and business
information services. Following an initial public offering, the Common Stock of
the Company began trading on the NASDAQ Small Cap Stock Exchange on April 9,
1997 under the symbol "SCPI." During 1997 and 1998 the business failed to be
profitable and in the second quarter of 1998, the Company was informed that it
no longer met the minimum requirements for listing on the NASDAQ Small Cap Stock
Exchange and was subsequently de-listed from the exchange on June 24, 1998.
Commencing in July 1998, the Company underwent voluntary reorganization under
Chapter 11 of the United States Bankruptcy Code. In accordance with the Plan of
Reorganization approved by the Bankruptcy Court, in December 1999, InfiniCom AB,
a company registered in Sweden, acquired a total of 60,783,219 shares of Common
Stock of the Company (representing approximately 91% of the outstanding shares
of Common Stock of the Company) in exchange for 100% of the Common Stock of
24STORE. On April 2, 2001, the Company amended its Certificate of Incorporation
to change the Company's name from Scoop, Inc. to 24Holdings Inc. All of the
Company's operations prior to its bankruptcy proceedings were discontinued.
The Business Today
24STORE's current business operations are held in the following two wholly-owned
subsidiaries of 24STORE:
o LapLand (UK) Limited, a company registered in England in 1991, supplies
primarily business customers with computer and electronics products.
Operating from the Company's executive offices based approximately forty
miles west of London, the company sells a wide range of mobile computing
and related products, sourced from major computer manufacturers. The
business is generated from an active telesales team, working on inquiries
from the existing customer base, regular advertising in national computer
magazines, and from the company's web site, www.lapland.co.uk.
o Mobile Planet Limited, a company registered in England in 1992, is a
wholesaler of mobile computing and related products. The company acts as a
distributor in the United Kingdom for major brand name computer
manufacturers, and related peripheral products. Based from the same
facility as LapLand (UK) Limited, the business generates revenues from an
established base of trade accounts.
In addition to the foregoing two operating companies, 24STORE also holds 100% of
the outstanding capital stock of Cyberia (UK) Limited, a company registered in
England ("Cyberia"), whose sole purpose is to hold title to the real property on
which the Company's headquarters are located.
Products and Services
The Company's primary products are computer and electronics products. The
products are sourced either directly from the manufacturers or purchased from
national distributors. In both value and volume terms, the largest product line
today is the supply of mobile computers, although the company also supplies
"shrink-wrapped" computer software and other computer hardware including Desktop
PCs and File Servers.
Sales and Marketing Strategy
The Company's traditional sales methods consisted of mail-order catalogues and
telephone sales of computer and electronic equipment to business customers. In
recent years, these traditional sales methods have been complemented by steadily
increasing web-based sales. The Company believes that its future is based on a
combination of these three sales methods.
In addition to its current operating businesses, 24STORE is the registrant and
owner of a unique group of over 200 internet domain names, all commencing with
the "24" prefix. The Company intends to develop its business using these domain
names to diversify the products and services that the Company offers. The
Company believes common usage of the "24" brand will allow synergistic cost
savings to be achieved in a wide range of product and service categories.
Using these domain names, the Company's strategy is to:
o Expand its retail and product supply operations by organic and acquisitive
growth into new product categories and new geographies. The Company
currently supplies primarily computing and electronic products but believes
that organic growth can be achieved by utilizing existing supplier
relationships to move into new product categories. The Company will look to
capitalize upon these trading relationships to move into more diverse
product categories and new geographies.
o Look to maximize the value of the domains in the media and financial
services sectors. Where the Company has limited relevant experience it will
explore joint venture or licensing opportunities.
Competition
The computer/electronic products markets continue to evolve rapidly and are
extremely competitive, and the Company expects competition to intensify in the
future. The Company competes with a significant number of other companies in the
sale of computer and electronics products. Current and potential competitors of
the Company include, but are not limited to: (1) online vendors of
computer/electronics products, (2) mail order vendors of computer/electronics
products, (3) system integrators and value added resellers, (4) direct sales
operations of computer/electronics manufacturers, and (5) retailers.
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The Company believes that the principal competitive factors affecting its
business include its ability to secure merchandise for sale at favorable terms
and attract new customers at a favorable customer acquisition cost through its
mail order, telephonic, and Internet sales channels. Although the Company
believes that it can compete favorably in such a competitive atmosphere, the
Company cannot be assured that it will be able to maintain a competitive
position against current and future competitors.
Trademarks and Proprietary Rights
The Company has relied, and intends to continue to rely, upon the protection of
trademark law. In addition, the Company relies on confidentiality agreements
with its employees to protect its proprietary rights. There can be no assurance
that the steps taken, and anticipated to be taken, by the Company to protect its
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate the Company's domain names, copyrights, trademarks,
trade names, trade secrets, patents (if any) and similar proprietary rights. In
addition, there can be no assurance that other parties will not assert
infringement claims against the Company.
Government Regulation
The Company is subject, both directly and indirectly, to various laws and
governmental regulations (primarily those imposed by the European Union)
relating to its business operations. There are currently few laws or regulations
directly applicable to commercial activities over the Internet. However, due to
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted with respect thereto. These laws and
regulations may cover issues such as user privacy, liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and domain name registration. Moreover, the applicability to
the Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, patent, trademark, trade secret and
personal privacy is uncertain and developing. Any new legislation or regulation
or the application of existing laws and regulations to the Internet could have a
material and adverse effect on the Company's business.
Employees
As of March 31, 2002 the Company employed a total of 25 persons, including 15 in
sales and marketing, three in operations and seven in general and administrative
functions. None of the Company's employees is represented by a labor union or is
subject to a collective bargaining agreement. The Company has never experienced
a work stoppage and believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
The Company's principal executive offices are located in Basingstoke, United
Kingdom, approximately forty miles west of London. The Company, through a wholly
owned subsidiary named Cyberia (UK) Limited, owns the freehold of its office and
warehouse space in the United Kingdom for use in the ordinary course of its
business. The property, which is approximately 7,800 square feet, was
constructed in 1959, and substantially refurbished in 1998.
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ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is subject to litigation in the ordinary
course of its business. In the opinion of management, none of the currently
pending litigation is likely to have a material adverse effect on the Company's
business, financial condition, or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is currently quoted on the OTC Bulletin Board
under the symbol "TFHD." The following table sets forth for the periods
indicated the high and low closing sale price for the Common Stock as quoted on
the OTC Bulletin Board and the National Quotation Bureau's Pink Sheets, as
indicated below:
Bid
Quarter Ended High Low
March 31, 2002 $0.0800 $0.0410
December 31, 2001 $0.1900 $0.0240
September 30, 2001 $0.1900 $0.0800
June 30, 2001 $0.5500 $0.1000
March 31, 2001 $0.8750 $0.0625
December 31, 2000 $1.5000 $0.0630
September 30, 2000 $1.3750 $0.5000
June 30, 2000 $2.6500 $0.6260
March 31, 2000 $3.6800 $0.8750
On April 11, 2002 the last reported sales price for the Company's Common
Stock on the OTC Bulletin Board was $0.04 per share.
As of April 11, 2002, there were 196 shareholders of record.
The declaration of cash dividends is at the discretion of the Board of
Directors of the Company. No cash dividends on the Common Stock have been
declared or paid by the Company to date. The Company does not anticipate paying
cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data as of and for each
of the five fiscal years ended December 31, 2001 and is derived from the
Company's audited financial statements. The data set forth below should be read
in conjunction with the Consolidated Financial Statements
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and related Notes to Consolidated Financial Statements appearing elsewhere
herein and in "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Year Ended December 31,
2001 2000 1999 1998 1997
------------------------------------------------------------------------------
Revenue $ 22,036,485 $ 28,058,566 $ 22,070,173 $ 5,453,410 $ 4,102,762
Operating Income/(Loss) $(1,726,533) $ (1,621,200) $ (4,921,367) $ 130,993 $ 162,882
Net Income/Loss $(1,822,971) $ (1,823,162) $ (5,626,018) $ 112,774 $ 107,791
Loss per share, basic and diluted $ (0.02) $ (0.02) $ (0.09) $ - $ -
Weighted average number of shares 85,486,717 81,241,503 64,703,528 60,783,219 60,783,219
outstanding
Working capital (deficit) $ (305,596) $ (884,270) $ (8,146,694) $ 65,794 $ 110,708
Total Assets $ 5,327,740 $ 10,456,258 $ 11,942,175 $ 1,012,940 $ 748,961
Long-Term Debt $ 780,632 $ 381,396 $ 2,261,520 $ - $ -
Total Shareholders equity (deficit) $ 509,392 $ 2,431,526 $ (5,579,076) $ 138,739 $ 117,495
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Company Overview
24Holdings Inc. ("24Holdings" or the "Company") was incorporated in 1996 in the
state of Delaware under the name Scoop, Inc. and began operations as an online
news provider. In July 1998, the Company filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Central District of California. In September 1999, the Company filed a
Plan of Reorganization ("Plan") with the Bankruptcy Court. The Plan was
confirmed on October 5, 1999. Pursuant to the Plan, the Company was acquired in
a reverse merger with 24STORE (Europe) Limited, formerly known as 24STORE.com
Limited ("24STORE"), pursuant to which 24STORE's parent company acquired 91% of
the outstanding shares of the Company, or 60,783,219 of newly issued shares, in
exchange for all the outstanding shares of 24STORE. Since the shareholders of
24STORE became the controlling shareholders of the Company after the exchange,
24STORE is treated as the acquiree for accounting purposes. No value was
assigned to the assets and liabilities of the acquired company, as it had
emerged from a bankruptcy plan of reorganization. The financial position and
results of operations of the acquiree are included in the consolidated
statements of the Company.
24STORE was incorporated on July 28, 1998 in England and Wales, and was a wholly
owned subsidiary of InfiniCom AB, a publicly listed company on the SBI market in
Sweden, whose
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principal activity is that of a holding company. On April 9, 1999, 24STORE
entered into a Share Purchase Agreement, whereby it acquired from its parent
company several companies registered in Sweden and Norway. All of the Swedish
entities either entered bankruptcy or ceased operations soon after the transfer.
The Norwegian entity, as the only ongoing concern, was treated as the
predecessor company, and accordingly, its financial position and results of
operations have been presented for the periods preceding the reverse merger. On
May 6, 1999, 24STORE acquired three companies registered in the United Kingdom,
which companies were related through common ownership. On April 1, 2001, 24STORE
sold all of the outstanding stock of the Norwegian entity (see discussion in
"Sale of Norwegian Subsidiary").
Sale of Norwegian Subsidiary
In order to dispose of operations that had become unprofitable, 24STORE and
Compo Consult AS, a Norwegian company, entered into an Agreement on the Transfer
of Shares dated March 29, 2001 pursuant to which 24STORE sold and Compo Consult
purchased all of the outstanding stock of 24STORE's Norwegian subsidiary,
24STORE AS, for a total consideration of 1.00 Pound Sterling, or approximately
$1.45. The transaction was consummated on April 1, 2001.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial data
as a percentage of total net sales for the fiscal years ended December 31, 2001,
2000 and 1999. The operating results in any periods are not necessarily
indicative of the results to be expected for any future period.
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Net sales 100.0% 100.0% 100.0%
Cost of sales 89.2% 89.4% 87.6%
Gross profit 10.8% 10.6% 12.4%
Operating expenses:
Selling general and administrative 11.5% 13.7% 21.9%
Goodwill amortization 3.0% 2.7% 3.8%
Impairment loss on investments 5.1% 9.0%
Gain on sales of subsidiary (1.0)%
Total operating expenses 18.6% 16.4% 34.7%
------ ------ ------
Net Income (Loss) from operations (7.8)% (5.8)% (22.3)%
Net Interest expense (0.6)% 1.0% 2.7%
Loss before provision for income taxes (8.3)% (6.7)% (25.0)%
Provision for income taxes 0.0% (0.2)% 0.5%
Net Income (Loss) (8.3)% (6.5)% (25.5)%
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
Net Sales--Net sales for the years ended December 31, 2001, 2000 and 1999 were
as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Net sales $22,036,485 $28,058,566 $22,070,173
% increase from (21.5%) 27.1% 304.7%
the previous year
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Net sales for the years ended December 31, 2001, 2000 and 1999 were all derived
from operations in Europe. The decrease in net sales for the year ended December
31, 2001 is primarily attributable to the disposal of the Norwegian subsidiary
(see "Sale of Norwegian Subsidiary" above). For the UK Group, net sales
decreased by 7.2% in local currency as compared to 2000 mainly due to market
conditions in the forth quarter. The increase in net sales for the year ended
December 31, 2000 is the result of a full year's results from the UK Group and
organic growth. The increase in net sales for the year ended December 31, 1999
is a result of the acquisition of the UK Group and the inclusion of their
operations in the consolidated financial statements.
Gross Profit--Gross profit for the years ended December 31, 2001, 2000 and 1999
were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Gross profit $2,370,225 $2,981,942 $2,750,669
% increase from (20.5%) 8.4% 159.1%
the previous year
Gross margin 10.8% 10.6% 12.4%
Gross profit consists of net sales less the cost of sales, which consists of the
cost of merchandise sold to customers. Gross profit for year ended December 31,
2001 have decreased due to a lower level of sales against the previous year.
Gross profit for the years ended December 31, 2000 and 1999 have increased over
the previous year due to a higher level of sales. Gross margin percent increased
in year ended December 31, 2001 because of improved sales mix. Gross margins
have decreased in the year ended December 31, 2000 reflecting the lower gross
margins of the UK Group, and the competitive pricing conditions in the market.
Selling, General and Administrative Expenses--Selling, general and
administrative ("SG&A") expenses for the years ended December 31, 2001, 2000 and
1999 were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Selling, general and administrative $2,534,957 $3,839,728 $4,826,875
% increase from the previous year (34.0)% (20.5)% 418.7%
% of net sales 11.5% 13.7% 21.9%
SG&A expenses for the year ended December 31, 2001 decreased by 31.0% to
$2,534,957 from $3,839,728 in the year ended December 31, 2000. The decrease in
SG&A for the 2001 fiscal year is the result of the elimination of some overhead
due to the disposal of the Norwegian subsidiary and reduced professional cost
associated with the Company's SEC filings in the United States. SG&A expenses
for the year ended December 31, 2000 decreased by 20.5% to $3,839,728 from
$4,826,875 in the year ended December 31, 1999. The decrease in SG&A for the
2000 fiscal year reflects an increase in general overhead expenditures, offset
by a reduction in research and development expenditure. SG&A expenses for the
year ended December 31, 1999 increased 418.7% from the year before to
$4,826,875. The increase in SG&A for the 1999 fiscal year was primarily
attributable to the inclusion of the SG&A expenses of the UK Group,
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the legal and accounting fees and costs involved in the reorganization and
reverse merger between the Company and 24STORE, and research and development
expenditure related to the Company's web sites incurred in the Company's Swedish
subsidiaries.
Goodwill Amortization--Goodwill amortization for the year ended December 31,
2001 was $666,277. The decrease over the previous year was the result of a write
down of the investment in the UK Group. Goodwill amortization for the year ended
December 31, 2000 was $763,414, a reduction of 9% from the previous year, in
which amortization was $839,087. This reduction in goodwill amortization
reflected a full provision made by the Company against the investment in its
Norwegian subsidiary in the year ended December 31, 1999 resulting in a lower
charge for goodwill amortization in the year ended December 31, 2000. It is
likely that the Company's business will continue to expand through acquisitions,
which would cause the amortization of goodwill and other intangibles to
increase.
Impairment loss on investment--The $1,125,846 impairment charge in the year
ended December 31, 2001 arose from the write down of the UK Group investment.
Gain on disposal of subsidiary--The $230,322 gain in the year ended December 31,
2001 was the result of the sale of the Norwegian subsidiary.
Interest Expenses--Interest expenses, net of interest income for the years ended
December 31, 2001, 2000 and 1999, were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Interest income $24,799 $14,364 $17,660
% change from the previous year 42.1% (18.6)% 65.7%
Interest expenses $123,637 $284,350 $617,231
% change from the previous year (130.0)% (53.9)% 5087.3%
Interest income represents interest received on cash deposits and interest
receivable on inter-company loans. Interest expenses include interest payable on
bank overdrafts, mortgages, receivables financing arrangements and other loans.
The reduction of interest expense in the year ended December 31, 2001 is
primarily attributable to the Company now having lower interest bearing debts to
related parties following the restructuring of debt that occurred on March 31,
2000. The reduction in interest expenses in the year ended December 31, 2000 is
also primarily attributable to this restructuring of debt (see "Debt
Restructuring" above). The increase in interest expenses in the year ended
December 31, 1999 is primarily attributable to the acquisition of the UK Group,
which has a bank loan and operates with receivables financing arrangements, and
interest on loan notes due to related parties as a result of the reorganization
and acquisitions. See discussion in "Item 13 - Certain Relationships and Related
Transactions."
Income Taxes--Income taxes, for the years ended December 31, 2001, 2000 and 1999
were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
Income taxes $(2,400) $(68,024) $105,080
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Income tax for the year ended December 31, 2001 related to deferred tax
accruals. The income tax credit for the year ended December 31, 2000 is an
adjustment due to an over-accrual in prior years. Income taxes for the year
ended December 31, 1999 represent taxes payable on profits of the operating
subsidiaries.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 2001 were $1,339,650 compared to
$2,261,181 as of December 31, 2000. The reduction in cash is the result of
timing of payment of accounts payable, which have declined from the December 31,
2000 balance.
Net cash used by operating activities was $163,843 in 2001 compared to net cash
used by operating activities of $688,058 in 2000.
As of December 31, 2001 the Company had a working capital deficit of $305,596
compared to a working capital deficit of $884,270 as of December 31, 2000.
As of December 31, 2001 included in current assets were cash and cash
equivalents of $1,339,650 and receivables, net, expected to be collected within
one year of $1,975,624.
Cash used by investing activities was $24,906 in 2001, compared to cash provided
by investing activities of $6,700 in 2000.
The change in working capital is primarily attributable to the conversion of a
short-term note payable to related parties, being converted to a long term note
payable. The note, which bears interest at 2.0% per annum, matures on December
31, 2007.
In its United Kingdom operating subsidiaries the Company has (1) a revolving
line of credit based on 70% of eligible receivables, (2) a ten year mortgage
expiring in 2008, secured by real property and (3) a $75,000 overdraft facility.
The mortgage, the revolving line of credit and the overdraft facility bear
interest at the prime rate plus 2%.
The Company believes its current resources of cash and cash equivalents,
accounts receivable and available credit line to be sufficient to meet cash
needs for working capital and capital expenditures for at least the next six
months. If available cash and cash generated from operations is insufficient to
satisfy liquidity requirements, selling additional equity or debt securities may
be required. The sale of additional equity or convertible debt securities could
result in dilution to the Company's stockholders. There can be no assurance that
financing will be available in sufficient amounts or on acceptable terms, if at
all.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the United Stated Financial Accounting Standards Board (FASB)
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," effective for fiscal years beginning after June 15, 1999. The
Company anticipates that due to its limited use of derivative instruments, the
adoption of SFAS No. 133 will not have a material effect on its financial
statements.
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In December 1999, the Securities and Exchange Commission (the "Commission")
issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements, which is to be applied beginning with the fourth fiscal quarter of
fiscal years beginning after December 15, 1999, to provide guidance related to
recognizing revenue in circumstances in which no specific authoritative
literature exists. The Company is reviewing the application of the Staff
Accounting Bulletin to the Company's financial statements. However, any
potential accounting changes are not expected to result in a material change in
the amount of revenues we ultimately expect to realize.
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44 (Interpretation 44), "Accounting for Certain Transactions
Involving Stock Compensation." Interpretation 44 provides criteria for the
recognition of compensation expense in certain stock-based compensation
arrangements that are accounted for under APB Opinion No. 25, Accounting for
Stock-Based Compensation. Interpretation 44 is effective July 1, 2000, with
certain provisions that are effective retroactively to December 15, 1998 and
January 12, 2000. The adoption of this statement did not have a material impact
on the Company's financial position, results of operations or liquidity.
In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS No. 141
supersedes Accounting Principles Board ("APB") No. 16 and requires that any
business combinations initiated after June 30, 2001 be accounted for as a
purchase; therefore, eliminating the pooling-of-interest method defined in APB
16. The statement is effective for any business combination initiated after June
30, 2001 and shall apply to all business combinations accounted for by the
purchase method for which the date of acquisition is July 1, 2001 or later. The
Company is evaluating any accounting effect, if any, arising from the recently
issued SFAS No. 141, "Business Combinations" on the Company's financial position
or results of operations.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles."
SFAS No. 142 addresses the initial recognition, measurement and amortization of
intangible assets acquired individually or with a group of other assets (but not
those acquired in a business combination) and addresses the amortization
provisions for excess cost over fair value of net assets acquired or intangibles
acquired in a business combination. The statement is effective for fiscal years
beginning after December 15, 2001, and is effective July 1, 2001 for any
intangibles acquired in a business combination initiated after June 30, 2001.
The Company is evaluating any accounting effect, if any, arising from the
recently issued SFAS No. 142, "Goodwill and Other Intangibles" on the Company's
financial position or results of operations.
In October 2001, the FASB recently issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires companies to record the fair value of a
liability for asset retirement obligations in the period in which they are
incurred. The statement applies to a company's legal obligations associated with
the retirement of a tangible long-lived asset that results from the acquisition,
construction, and development or through the normal operation of a long-lived
asset. When a liability is initially recorded, the company would capitalize the
cost, thereby increasing the carrying amount of the related asset. The
capitalized asset retirement cost is depreciated over the life of the respective
asset while the liability is accreted to its present value. Upon settlement of
the liability, the obligation is settled at its recorded amount or the company
incurs a gain or loss. The
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statement is effective for fiscal years beginning after June 30, 2002. The
Company does not expect the adoption to have a material impact to the Company's
financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". Statement 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets. The statement
provides a single accounting model for long-lived assets to be disposed of. New
criteria must be met to classify the asset as an asset held-for-sale. This
statement also focuses on reporting the effects of a disposal of a segment of a
business. This statement is effective for fiscal years beginning after December
15, 2001. The Company does not expect the adoption to have a material impact to
the Company's financial position or results of operations.
In January 2001, the Financial Accounting Standards Board Emerging Issues Task
Force issued EITF 00-27 effective for convertible debt instruments issued after
November 16, 2000. This pronouncement requires the use of the intrinsic value
method for recognition of the detachable and imbedded equity features included
with indebtedness, and requires amortization of the amount associated with the
convertibility feature over the life of the debt instrument rather than the
period for which the instrument first becomes convertible. Inasmuch as the
Company had no convertible debt instruments outstanding during the two years
ended December 31, 2001 there is no impact on the Company's financial position
or results of operations. This EITF 00-27, could impact future financial
statements, should the Company enter into such agreements.
RISK FACTORS
Some of the statements in "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Item 1 - Business" and
elsewhere in this report constitute forward-looking statements. These statements
involve known and unknown risks, uncertainties and other factors that may cause
the Company's actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance
or achievements expressed or implied by such forward-looking statements. In some
cases, forward-looking statements can be identified by terminology such as
"may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue" or the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. Although the Company believes that the
expectations reflected in the forward-looking statements are reasonable, the
Company cannot guarantee future results, levels of activity, performance or
achievements. Moreover, neither the Company nor any other person assumes
responsibility for the accuracy and completeness of such statements. The Company
is under no duty to update any of the forward-looking statements after the date
of this report to conform such statements to actual results.
In addition to the factors discussed elsewhere in this report, the following
additional factors may affect the Company's future operations and financial
results.
Competition From Direct Sales
The Company may face increased competition from manufacturers that sell products
directly over the Internet or by telephone, such as Dell and Gateway. Many of
these companies have
-11-
longer operating histories, larger customer bases, greater brand recognition and
significantly greater financial, marketing and other resources. There can be no
assurance that the Company will be able to compete effectively against such
companies and that the purchasing patterns of the Company's customers will not
increasingly shift to the direct sales channels of distribution. Such increased
competition and changes in purchasing patterns may adversely affect the
Company's future operations and financial results.
Protection of the Company's Domain Names
The Company currently holds various domain names commencing with the "24"
prefix. The acquisition and maintenance of domain names generally is regulated
by Internet regulatory bodies. The regulation of domain names in the United
States, the United Kingdom and in other countries is subject to change.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, the Company may be unable to acquire or maintain relevant domain names
in all countries in which it conducts business. Furthermore, the relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. Therefore, the Company may be unable to
prevent third parties from acquiring domain names that are similar to, infringe
upon or otherwise decrease the value of the Company's trademarks and other
proprietary rights. The Company may not successfully carry out its business
strategy of establishing a strong brand for the "24" prefix if the Company
cannot prevent others from using similar domain names or trademarks. This could
impair the Company's ability to increase market share and revenues.
Rapid Technological Change
The industry in which the Company competes is characterized by rapid
technological change, frequent introductions of new products and services,
changes in customer demands and evolving industry standards. The introduction or
announcement of new products or services by the Company or one or more of its
competitors embodying new technologies or changes in industry standards or
customer requirements could render the Company's existing products or services
obsolete or unmarketable. Accordingly, the life cycles of the Company's products
are difficult to estimate. The Company's future results of operations will
depend, in part, upon its ability to enhance its products and services and to
introduce new products and services on a timely and cost-effective basis that
will keep pace with technological developments and evolving industry standards,
as well as address the increasingly sophisticated needs of the Company's
customers. Failure of the Company to introduce, for technological or other
reasons, new products and services in a timely and cost-effective manner could
have a material adverse effect on the Company's business, results of operations
and financial condition. Furthermore, the introduction or announcement of new
product or service offerings or enhancements by the Company or the Company's
competitors may cause customers to defer or forgo purchases of the Company's
products or services, which could have a material adverse effect on the
Company's business, results of operations and financial condition.
-12-
System Interruption and Security Risks
The Company's operations are dependent, in part, on its ability to protect its
systems from interruption by damage from fire, earthquake, power loss,
telecommunication failure, unauthorized entry or other events beyond the
Company's control. The Company's computer equipment constituting its central
computer systems, including its processing operations, are currently located in
Basingstoke, United Kingdom. The Company conducts system backups daily, which
are taken off site each evening. The Company's computer programs are password
protected and firewalls, anti-virus software and uninterruptable power supplies
are in place. However, there can be no assurance that damage to or failure of
any of the Company's central computer systems will not take place. Any such
damage or failure that causes interruptions in the Company's operations could
have a material adverse effect on the Company's business, results of operations
and financial condition. Persistent problems continue to affect public and
private data networks. Computer break-ins and other disruptions may jeopardize
the security of information stored in and transmitted through the computer
systems of the Company and the parties utilizing the Company's services, which
may result in significant liability to the Company and also may deter potential
customers from using the Company's services. In addition, while the Company
attempts to be careful with respect to the employees it hires and maintain
controls through software design and security systems to prevent unauthorized
employee access, it is possible that, despite such safeguards, an employee of
the Company could obtain access, which would also expose the Company to a risk
of loss or litigation and possible liability to customers or other users. There
can be no guarantee that the growth of the Company's customer base will not
strain or exceed the capacity of its computer and telecommunications systems and
lead to degradations in performance or system failure. Any damage, failure or
delay that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Limited Operating History
The Company has a limited operating history on which to base an evaluation of
its business and prospects. Accordingly, the Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets such as
computer and electronic products and online commerce. Because of the Company's
limited operating history, it is difficult to assess whether the Company will
succeed at executing on its business strategy, managing growth and addressing
the market risks that it faces in a rapidly developing market.
Future Capital Needs; Uncertainty of Additional Financing
The Company may need to raise additional funds in order to fund more rapid
expansion, to develop new or enhanced products and services, to respond to
competitive pressures or to acquire complimentary businesses or technologies. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution, or such equity securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available when needed on terms favorable to the Company or at all. If
adequate funds are not available or are not available on acceptable terms, the
Company may be unable to develop or enhance its products and services,
-13-
take advantage of future opportunities or respond to competitive pressures,
which could have a material adverse effect on the Company's business, results of
operations and financial condition.
Control By Existing Stockholder
InfiniCom AB beneficially owns approximately 83% of the outstanding shares of
the Company's Common Stock. As a result, this stockholder will be able to
exercise control over matters requiring shareholder approval, including the
election of directors, and the approval of mergers, consolidations and sales of
all or substantially all of the assets of the Company. This may prevent or
discourage tender offers for the Company's Common Stock unless the terms are
approved by InfiniCom.
Volatility of Stock Price
The trading price of the Company's Common Stock has in the past and may in the
future be subject to significant fluctuations. In addition, the stock market in
general has experienced extreme price and volume fluctuations that have affected
the market price for many companies in industries similar to or related to that
of the Company and which have been unrelated to the operating performance of
these companies. These market fluctuations may adversely affect the market price
of the Company's Common Stock.
Recent Significant Changes to Business
The Company has experienced significant changes in its business, including
changes resulting from recent acquisitions and other business combinations. Such
changes have placed and may continue to place a significant strain upon the
Company's management, systems and resources. The Company's ability to compete
effectively and to manage future changes will require the Company to continue to
improve its financial and management controls, reporting systems and procedures,
budgeting and forecasting capabilities on a timely basis and adequately train
and manage its employee work force. There can be no assurance that the Company,
or the Company's current management, will be able to manage such changes
successfully. The Company's failure to do so could have a material adverse
effect upon the Company's business, results of operations and financial
condition.
Reorganization of Parent Company
On January 28, 2002, the Company's parent company, InfiniCom AB, applied to the
Stockholm District Council for reconstruction in accordance with Swedish law,
similar to a Chapter 11 filing in the United States bankruptcy system. The
parent company is attempting to restructure its debt and emerge from
reconstruction. If the parent company is unable to successfully emerge from
reconstruction, it may affect the Company's ability to get additional funding to
put management's plans for future expansion into place. If this occurred, one of
the resulting scenarios could be the Company's decision not to continue as a
public entity in the United States.
-14-
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company does not hold any derivative financial instruments. However, the
Company is exposed to interest rate risk. The Company believes that the market
risk arising from holdings of its financial instruments is not material.
However, all of the Company's operations are conducted through its subsidiary
24STORE and denominated in either British pounds sterling or, prior to April 1,
2001, Norwegian Krona, and none of the Company's revenues are generated in U.S.
Dollars. For consolidation purposes, the assets and liabilities of 24STORE are
converted to U.S. Dollars using year-end exchange rates and results of
operations are converted using a monthly average rate during the year.
Fluctuations in the currency rates between the United Kingdom, Norway and the
United States may give rise to material variances in reported earnings of the
Company.
-15-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
CONTENTS
Page
Independent Auditors' Report F-1
Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Shareholders' Equity F-4
Consolidated Statements of Cash Flows F5-F6
Notes to Consolidated Financial Statements F7-F16
INDEPENDENT AUDITORS' REPORT
Board of Directors
24Holdings Inc.
Los Angeles, California
We have audited the accompanying consolidated balance sheets of 24Holdings Inc.
(formerly Scoop, Inc.) and subsidiary at December 31, 2001 and 2000 and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of 24Holdings Inc.
(formerly Scoop, Inc.) and subsidiary at December 31, 2001 and 2000 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
March 4, 2002
F-1
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, December 31,
2001 2000
------------ ------------
Current assets:
Cash and cash equivalents $ 1,339,650 $ 2,261,181
Accounts receivable, less allowance for doubtful
accounts of $16,687 and $46,179 at
December 31, 2001 and 2000 1,958,937 3,464,412
Inventories 312,180 652,362
Prepaid and other current assets 29,752 43,111
---------------- ---------------
Total current assets 3,640,519 6,421,066
Loan receivable, related party 13,519 100,200
Property and equipment, net of accumulated depreciation 1,264,840 1,414,994
Goodwill, net of accumulated amortization 408,862 2,519,998
---------------- ---------------
$ 5,327,740 $ 10,456,258
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 2,745,435 $ 4,918,230
Credit facility 1,123,604 1,704,704
Income taxes payable - 10,773
Short-term notes payable, related parties - 617,406
Current maturities of notes payable, bank 77,077 54,223
---------------- ---------------
Total current liabilities 3,946,116 7,305,336
---------------- ---------------
Note payable, bank, less current maturities 271,196 381,396
---------------- ---------------
Deferred tax liability 91,600 338,000
---------------- ---------------
Long-term note payable, related party 509,436 -
---------------- ---------------
Shareholders' equity:
Preferred stock $.001 par value; 5,000,000 shares
authorized; no shares issued or outstanding. - -
Common stock, $.001 par value; 100,000,000 shares
authorized; 85,486,717, shares issued and outstanding
at December 31, 2001 and 2000 26,081 26,081
Additional paid-in capital 9,855,851 9,855,851
Other comprehensive loss (331,735) (232,572)
Accumulated deficit (9,040,805) (7,217,834)
---------------- ---------------
Total shareholders' equity 509,392 2,431,526
---------------- ---------------
$ 5,327,740 $ 10,456,258
================ ===============
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-2
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended Year ended Year ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------
Revenue $ 22,036,485 $28,058,566 $22,070,173
Cost of Revenue 19,666,260 25,076,624 19,319,504
------------ ------------ -----------
Gross profit 2,370,225 2,981,942 2,750,669
------------ ------------ -----------
Operating expenses:
Selling, general and administrative expenses 2,534,957 3,839,728 4,826,875
Goodwill amortization 666,277 763,414 839,087
Impairment loss on investments 1,125,846 - 2,006,074
------------ ------------ -----------
4,327,080 4,603,142 7,672,036
------------ ------------ -----------
Loss from operations (1,956,855) (1,621,200) (4,921,367)
------------ ------------ -----------
Other:
Gain on disposal of subsidiary (230,322) - -
Interest income (24,799) (14,364) (17,660)
Interest expense 123,637 284,350 617,231
------------ ------------ -----------
(131,484) 269,986 599,571
------------ ------------ -----------
Loss before income taxes (1,825,371) (1,891,186) (5,520,938)
Income taxes, principally current (2,400) (68,024) 105,080
------------ ------------ -----------
Net loss $ (1,822,971) $(1,823,162) $(5,626,018)
============ ============ ============
Net loss per share -
basic and diluted $ (0.02) $ (0.02) $ (0.09)
============ ============ ============
Weighted average number of shares outstanding -
basic and diluted 85,486,717 81,241,503 64,703,528
============ ============ ===========
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-3
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Common stock Additional
------------ paid-in
Shares Amount capital
------ ------ -------
Balance at January 1, 1999 60,783,219 $ 7,390 $ -
Shares issued in connection with
acquisition of 24STORE.com, LTD. 6,012,238 - -
Foreign currency translation
Net loss for the year ended
December 31, 1999
-------------- --------------- --------------
Balance at December 31, 1999 66,795,457 7,390 -
Shares issued in satisfaction of debt 17,726,127 17,726 7,986,390
Shares issued in sale to parent company 965,133 965 1,869,461
Foreign currency translation
Net loss for the year ended
December 31, 2000
-------------- --------------- --------------
Balance at December 31, 2000 85,486,717 26,081 9,855,851
Foreign currency translation
Net loss for the year ended
December 31, 2001
-------------- --------------- --------------
Balance at December 31, 2001 85,486,717 $ 26,081 $ 9,855,851
============== =============== ===============
See accompanying independent auditors' report and notes to consolidated
financial statements.
Retained
Other earnings/ Total
comprehensive accumulated shareholders'
income/(loss) (deficit) equity/ (deficit)
------------ ------------ ------------------
Balance at January 1, 1999 $ (99,997) 231,346 $ 138,739
Shares issued in connection with
acquisition of 24STORE.com, LTD. -
Foreign currency translation (91,797) (91,797)
Net loss for the year ended
December 31, 1999 (5,626,018) (5,626,018)
---------------- --------------- --------------
Balance at December 31, 1999 (191,794) (5,394,672) (5,579,076)
Shares issued in satisfaction of debt 8,004,116
Shares issued in sale to parent company 1,870,426
Foreign currency translation (40,778) (40,778)
Net loss for the year ended
December 31, 2000 (1,823,162) (1,823,162)
---------------- --------------- --------------
Balance at December 31, 2000 (232,572) (7,217,834) 2,431,526
Foreign currency translation (99,163) (99,163)
Net loss for the year ended
December 31, 2001 (1,822,971) (1,822,971)
---------------- ---------------- ------------------
Balance at December 31, 2001 $ (331,735) (9,040,804) $ 509,392
================ ================ ==================
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-4
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended Year ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------
Cash flows provided by (used for) operating activities:
Net loss $ (1,822,971) $ 1,823,162) $ (5,626,018)
------------------ ----------------- -----------------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 93,923 129,091 127,751
Amortization of goodwill 666,277 763,414 839,087
Loss on impairment of assets - - 2,006,074
Loss on impairment of investments 1,125,846 - -
Expense incurred in exchange for note payable - - 1,581,000
Gain on sale of subsidiary (230,322) - -
Foreign currency translation (46,786) 510,025 (67,964)
Provision for bad debts - - 155,994
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 1,103,316 846,081 (3,828,292)
Inventories 266,701 289,736 (859,431)
Prepaid and other current assets 9,261 (43,111) -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses (1,315,662) (1,299,135) 7,321,258
Deferred taxes (2,400) - -
Income taxes payable (11,026) (60,997) 55,079
------------------ ----------------- -----------------
Total adjustments 1,659,128 1,135,104 7,330,559
------------------ ----------------- -----------------
Net cash provided by (used for) operating activities (163,843) (688,058) 1,704,538
------------------ ----------------- -----------------
(Continued)
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-5
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended Year ended
December 31, 2001 December 31, 2000 December 31, 1999
----------------- ----------------- -----------------
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment 15,550 (30,136) -
Due to/from related parties (40,456) 36,836 (1,165)
Group distributions - - (85,457)
------------------ ----------------- ----------------
Net cash provided by (used for) investing activities (24,906) 6,700 (86,622)
------------------ ----------------- ----------------
Cash flows provided by (used for) financing activities:
Payments on note payable, bank (76,044) (1,694) -
Credit facility (550,860) - -
Sale of subsidiary, net of cash acquired (105,879) - -
Payments on notes payable, related parties - (1,354,044) -
Proceeds from short-term loans, related parties - 567,406 -
Proceeds from issuance of common stock - 1,870,426 -
------------------ ------------------ -----------------
Net cash provided by (used for) financing activities (732,783) 1,082,094 -
------------------ ------------------ -----------------
Net increase (decrease) in cash and cash equivalents (921,531) 400,736 1,617,916
Cash and cash equivalents, beginning of year 2,261,181 1,860,445 242,529
------------------ ------------------ -----------------
Cash and cash equivalents, end of year $ 1,339,650 $ 2,261,181 $ 1,860,445
================== ================== =================
Supplemental disclosure of cash flow information:
Interest paid $ 91,903 $ 215,019 $ 178,694
================== ================== =================
Income taxes paid $ 6,952 $ 34,368 $ 187,203
================== ================== =================
Supplemental disclosure of non-cash investing and
financing activities:
Issuance of common stock in connection of acquisitions $ - $ - $ 2,760,070
================== ================== =================
Issuance of notes payable in connection with acquisitions $ - $ - $ 9,102,102
================== ================== =================
Issuance of shares in satisfaction of debt $ - $ 8,008,441 $ -
================== ================== =================
See accompanying independent auditors' report and notes to consolidated
financial statements.
F-6
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(1) Description of Business:
General:
24Holdings Inc. ("24Holdings" or the "Company") was incorporated in
the name Scoop, Inc. in 1996, in the state of Delaware, as an online
news provider. In July 1998, the Company filed a petition for relief
under Chapter 11 of the federal bankruptcy laws in the United States
Bankruptcy Court for the Central District of California. In September
1999, the Company filed a Plan of Reorganization ("Plan") with the
Bankruptcy Court. The Plan was confirmed on October 5, 1999. Pursuant
to the Plan, Scoop was acquired in a reverse merger with 24STORE.com,
Ltd. ("24STORE"), whose parent company acquired 91% of the outstanding
shares of Scoop, or 60,783,219 of newly issued shares, in exchange for
all the outstanding shares of 24STORE. Since the shareholders of
24STORE became the controlling shareholders of Scoop after the
exchange, 24STORE is treated as the acquirer for accounting purposes.
No value was assigned to the assets and liabilities of the acquired
company, as it was emerging from a formal bankruptcy plan. Proforma
operating results as if the acquisition had taken place at the
beginning of the period have not been presented as there are no
operations of the acquiree.
24STORE was incorporated July 28, 1998 in England and Wales, and was a
wholly owned subsidiary of InfiniCom AB ("InfiniCom"), a publicly
listed company on the SBI market in Sweden, whose principal activity
is that of a consulting company. On April 9, 1999 24STORE entered into
a Share Purchase Agreement, whereby they acquired from their parent
company several companies registered in Sweden and Norway. All of the
Swedish entities either entered bankruptcy or ceased operations soon
after transfer. The Norwegian entity, as the only ongoing concern, has
been treated as the predecessor, and accordingly, its financial
position and results of operations have been presented for the periods
preceding the reverse merger.
On May 6, 1999, 24STORE acquired three companies registered in the
United Kingdom, ("UK Group") related through common ownership.
Scoop, Inc changed its name to 24Holdings Inc. on April 2, 2001.
All of the consolidated entities are in the wholesale and retail
business of selling and distributing consumer and commercial
electronic products in Europe.
(2) Summary of Significant Accounting Policies:
Principles of Consolidation:
The accompanying consolidated statements include the accounts of
24Holdings Inc. and subsidiary. All significant intercompany
transactions and accounts have been eliminated.
See accompanying independent auditors' report.
F-7
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(2) Summary of Significant Accounting Policies, Continued:
Principles of Consolidation, Continued:
The financial statements of the entities owned outside the United
States are generally measured using the local currency as the
functional currency. Accordingly, assets and liabilities are
translated at year-end exchange rates and operating statement items
are translated at average exchange rates prevailing during the year.
The resulting translation adjustments are recorded as other
comprehensive income. Exchange adjustments resulting from foreign
currency transactions are included in the determination of net income
(loss).
Estimates Used in the Preparation of Consolidated Financial Statements:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and the accompanying notes.
Actual results could differ from those estimates.
Revenue Recognition:
The Company recognizes revenue upon the delivery of its product to
customers. Shipping and handling charges are included in gross sales,
with the related costs included in selling, general and administrative
expenses.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with a maturity of
three months or less when purchased, which are not securing any
corporate obligations, to be cash equivalents.
Property and Equipment:
Building, computers, software, furniture and equipment are valued at
cost and depreciated using the straight-line method over the estimated
useful lives of the assets as follows:
Description Useful life
------------- -----------
Building 50 years
Furniture and equipment 5 years
Computers 3-4 years
Software 3-4 years
See accompanying independent auditors' report.
F-8
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(2) Summary of Significant Accounting Policies, Continued:
Goodwill:
In connection with various acquisitions which were accounted for under
the purchase method of accounting, the Company recorded goodwill. The
remaining goodwill at December 31, 2001 and 2000 is being amortized
using the straight-line method over the estimated useful lives of five
years. Accumulated amortization on all goodwill was $2,265,828 and
$1,602,501 at December 31, 2001 and 2000, respectively.
In accordance with the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of" the Company determined there had been an impairment loss of
$1,125,846 for the year ended December 31, 2001. The impairment loss
represents the excess of the carrying value over fair value,
determined by the present value of estimated expected future cash
flows of the UK Group for the remaining useful life of 3 years,
discounted at 7%.
Inventory:
Inventory is stated at the lower of cost or market using the FIFO
(first-in, first-out) cost method.
Income Taxes:
Deferred tax assets and liabilities are recognized with respect to the
tax consequences attributable to the differences between the financial
statement carrying values and tax basis of assets and liabilities.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled.
Further, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
Financial Instruments:
The estimated fair values of all reported assets and liabilities which
represent financial instruments, none of which are held for trading
purposes, approximate their carrying value because of the short term
maturity of these instruments or the stated interest rates are
indicative of market interest rates.
Advertising Costs:
Advertising costs are expensed as incurred. For the years ended
December 31, 2001, 2000, and 1999, advertising expenses amounted to
approximately $136,000, $262,000, and $355,000, respectively.
Concentration:
The Company has one major customer accounting for 10.7% of their
sales, or approximately $1,580,000. Approximately $195,000 due from
this customer is included in accounts receivable at December 31, 2001.
See accompanying independent auditors' report.
F-9
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(2) Summary of Significant Accounting Policies, Continued:
Basic and Diluted Earnings (Loss) Per Share:
Basic earnings (loss) per share are determined by dividing the net
earnings (loss) by the weighted average shares of Common Stock
outstanding during the period. Diluted earnings (loss) per share are
determined by dividing the net earnings (loss) by the weighted average
shares of Common Stock outstanding plus the dilutive effects of stock
options, warrants, and other convertible securities. Basic and diluted
earnings (loss) per share are the same for the years ended December
31, 2001, 2000 and 1999 because there were no dilutive securities
outstanding during those periods.
In March 2000, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 44 ("Interpretation 44"), "Accounting
for Certain Transactions Involving Stock Compensation." Interpretation
44 provides criteria for the recognition of compensation expense in
certain stock-based compensation arrangements that are accounted for
under APB Opinion No. 25, Accounting for Stock-Based Compensation.
Interpretation 44 is effective July 1, 2000, with certain provisions
that are effective retroactively to December 15, 1998 and January 12,
2000. The adoption of this statement did not have a material impact on
the Company's financial position, results of operations or liquidity.
Segment:
Based on the Company's integration and management strategies, the
Company operates in a single business segment. For the years ended
December 31, 2001, 2000, and 1999 all revenues have been derived from
European operations.
Statement of Cash Flows:
In accordance with Statement of Financial Accounting Standards
("SFAS") No. 95, "Statement of Cash Flows," cash flows from the
Company's operations are calculated based upon the local currencies.
As a result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with changes in the
corresponding balances on the balance sheet.
Recent Accounting Pronouncements:
In July 2001, the FASB issued SFAS No. 141 "Business Combinations."
SFAS No. 141 supersedes Accounting Principles Board ("APB") No. 16 and
requires that any business combinations initiated after June 30, 2001
be accounted for as a purchase; therefore, eliminating the
pooling-of-interest method defined in APB 16. The statement was
effective for any business combination initiated after June 30, 2001
and applies to all business combinations accounted for by the purchase
method for which the date of acquisition is July 1, 2001 or later. The
adoption did not have a material impact on the Company's financial
position or results of operations as the Company has not participated
in such activities covered under this pronouncement after the
effective date.
See accompanying independent auditors' report.
F-10
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(2) Summary of Significant Accounting Policies, Continued:
Recent Accounting Pronouncements, Continued:
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangibles." SFAS No. 142 addresses the initial recognition,
measurement and amortization of intangible assets acquired
individually or with a group of other assets (but not those acquired
in a business combination) and addresses the amortization provisions
for excess cost over fair value of net assets acquired or intangibles
acquired in a business combination. The statement is effective for
fiscal years beginning after December 15, 2001, and is effective July
1, 2001 for any intangibles acquired in a business combination
initiated after June 30, 2001. The Company is evaluating any
accounting effect, if any, arising from the recently issued SFAS No.
142, "Goodwill and Other Intangibles" on the Company's financial
position or results of operations.
In October 2001, the FASB recently issued SFAS No. 143, "Accounting
for Asset Retirement Obligations," which requires companies to record
the fair value of a liability for asset retirement obligations in the
period in which they are incurred. The statement applies to a
company's legal obligations associated with the retirement of a
tangible long-lived asset that results from the acquisition,
construction, and development or through the normal operation of a
long-lived asset. When a liability is initially recorded, the company
would capitalize the cost, thereby increasing the carrying amount of
the related asset. The capitalized asset retirement cost is
depreciated over the life of the respective asset while the liability
is accreted to its present value. Upon settlement of the liability,
the obligation is settled at its recorded amount or the company incurs
a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002. The Company does not expect the adoption to have
a material impact to the Company's financial position or results of
operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Statement 144 addresses
the accounting and reporting for the impairment or disposal of
long-lived assets. The statement provides a single accounting model
for long-lived assets to be disposed of. New criteria must be met to
classify the asset as an asset held-for-sale. This statement also
focuses on reporting the effects of a disposal of a segment of a
business. This statement is effective for fiscal years beginning after
December 15, 2001. The Company does not expect the adoption to have a
material impact to the Company's financial position or results of
operations.
In January 2001, the Financial Accounting Standards Board Emerging
Issues Task Force issued EITF 00-27 effective for convertible debt
instruments issued after November 16, 2000. This pronouncement
requires the use of the intrinsic value method for recognition of the
detachable and imbedded equity features included with indebtedness,
and requires amortization of the amount associated with the
convertibility feature over the life of the debt instrument rather
than the period for which the instrument first becomes convertible.
Inasmuch as the Company had no convertible debt instruments
outstanding during the two years ended December 31, 2001 there is no
impact on the Company's financial position or results of operations.
This EITF 00-27, could impact future financial statements, should the
Company enter into such agreements.
See accompanying independent auditors' report.
F-11
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(3) Reorganization:
On April 9, 1999 24STORE and its parent company, InfiniCom AB, entered into
a share purchase agreement, whereby 24STORE received all the outstanding
shares of several of InfiniCom's subsidiaries, in exchange for 9,999,980
newly issued shares of 24STORE and a note payable of $2,368,000. The
transaction was treated as a reorganization, with the transfer of assets
and liabilities accounted for at historical cost, after adjustment to U.S.
generally accepted accounting principles, in a manner similar to that in
pooling of interests accounting, in accordance with APB 16 paragraph 5. The
historical costs transferred include goodwill of approximately $2,312,960,
which had been recognized upon the parent company's original acquisition of
the transferred subsidiaries.
Included in this transaction 24STORE issued a note payable to InfiniCom for
$1,581,000 for the costs incurred in the development of certain software by
one of the transferred subsidiaries. These costs were expensed as research
and development during the year ended December 31, 1999.
(4) Acquisitions:
On May 6, 1999, 24STORE purchased all the issued ordinary shares of Lapland
UK, Mobile Planet and Cyberia ("UK Group") in a share purchase agreement
with the shareholders of the acquired companies. The three acquired
entities were each owned by the same two shareholders, unrelated to 24STORE
or its parent company. 24STORE received all the outstanding shares of the
three companies, for consideration of cash and notes of approximately
$3,420,000 and 700,000 shares of InfiniCom's outstanding shares.
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the acquisition cost of approximately
$4,760,000 has been allocated to the assets acquired and liabilities
assumed based on estimates of their fair value. A total of approximately
$3,616,000, representing the excess of acquisition costs over the fair
value of the UK Group's tangible net assets, has been allocated to goodwill
and is being amortized over 5 years. The Company will continually evaluate
the existence, if any, of goodwill impairment in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of."
See accompanying independent auditors' report.
F-12
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(5) Property and Equipment:
Property and equipment consist of the following:
December 31, December 31,
2001 2000
---- ----
Land and building $ 1,240,510 $ 1,276,888
Computer equipment 193,395 185,475
Vehicles 65,343 116,720
Office furniture and equipment 152,059 182,669
---------------- ---------------
1,651,307 1,761,752
Less accumulated depreciation 386,467 346,758
---------------- ---------------
$ 1,264,840 $ 1,414,994
================ ===============
(6) Major Vendor:
Included in accounts payable is approximately $1,036,000 and $678,000 owed
to five and two suppliers, respectively, at December 31, 2001 and 2000,
respectively. Purchases from these suppliers during 2001 and 2000 totaled
approximately $9,347,500 and $8,268,000, respectively.
(7) Credit Facility:
Two of the Company's subsidiaries in the United Kingdom use a discount
financing company for credit administration and cash flow purposes. The
financing company purchases approved receivables, less a commission and
discounting charges. The discount rate is 2% above the base rate of
National Westminster Bank in the United Kingdom, 5.25% and 8% at December
31, 2001 and 2000.
The financing company holds as security interests all receivables as well
as the personal guarantees of the officer-stockholders limited to
anti-fraud.
(8) Short-Term Notes Payable, Related Parties:
Short-term notes payable, related parties, represented amounts owing to the
Company's parent company, InfiniCom AB, at December 31, 2000. The notes
accrued interest at 2% above base rate of National Westminster Bank, in the
United Kingdom. At December 31, 2001 the short term notes were exchanged
for a formal note, due December 31, 2007, with interest at 2% per annum.
See accompanying independent auditors' report.
F-13
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(9) Note Payable, Bank:
One of the Company's subsidiaries in the United Kingdom has a note payable
to its bank. The note is due November 14, 2007 and accrues interest at 2%
above the bank's current base rate (5.25% and 8% at December 31, 2001 and
2000). The note is secured by the underlying building and the cross
guarantee of the two other United Kingdom subsidiaries.
A summary of the note payable is as follows:
December 31, December 31,
2001 2000
---- ----
Principal $ 348,273 $ 435,619
Less current maturities 77,077 54,223
-------------- -----------
$ 271,196 $ 381,396
============== ===========
The following summarizes the aggregate maturities of the note payable as of
December 31, 2001:
Year ended December 31,
2002 $ 77,077
2003 79,772
2004 82,713
2005 55,651
2006 53,060
--------------
$ 348,273
(10) Income Taxes:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes",
under which the liability method is used to calculate deferred income
taxes. Under this method, deferred tax assets and liabilities are
determined based on the differences between financial reporting and income
tax basis of assets and liabilities and are measured using enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The deferred tax liability at December 31, 2001 and 2000 relates
to the step up basis of tangible assets acquired.
The Company does not file consolidated tax returns in the United Kingdom.
Tax expense for the year ended December 31, 1999 relates to entities within
the consolidated group on which there was taxable income and tax expense
was appropriate. December 31, 2000 reflects refunds and credits received on
overpayments in previous years. No tax expense is due in December 31, 2001
due to group relief between the related entities under UK taxation rules.
See accompanying independent auditors' report.
F-14
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(10) Income Taxes, Continued:
The provision for income taxes differs from the amount computed by applying
the U.S. statutory income tax rate as follows:
December 31, December 31, December 31,
2001 2000 1999
---- ---- ----
Provision at expected federal
statutory rate (35)% (35)% (35)%
Impairment loss for which no deduction
is allowable for UK income tax purposes - - 13
Loss for which no benefit is available 35 35 24
Overpayment of taxes in prior years - 5 -
Foreign federal and local taxes provided
on a separate return basis at rates lower
than statutory U.S. federal rate - (8) -
--------- --------- --------
-% (3)% 2%
========= ========= ========
(11) Sale of Subsidiary:
On April 1, 2001, the Company disposed of all of the issued shares of
24STORE AS, for (pound)1.00, or approximately $1.45. Included in the sales
agreement is a guarantee by the Company as to the known losses and
liabilities of 24STORE AS. If, within one year, the purchaser discovers the
losses or liabilities as of the date of disposal were understated, the
Company will make whole the deficiency (unaudited, as of April 10, 2002, no
deficiency has been claimed by the purchaser).
Following this transaction the Company has no further rights, liabilities
or obligations, aside from the guarantee, with regard to 24STORE AS. The
transaction does not qualify for accounting treatment as a discontinued
operation as the subsidiary is in the same line of business as the Company.
No loss was recognized on this disposition; all goodwill associated with
the subsidiary's acquisition was previously written off in recognition of
an impairment loss on the investment. Furthermore, as a result of the
subsidiary having negative net assets, the Company has recorded a gain on
disposition of $230,322.
See accompanying independent auditors' report.
F-15
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(12) Subsequent Event:
Parent Company
On January 28, 2002, the Company's parent company, InfiniCom, applied to
the Stockholm District Council for reconstruction in accordance with
Swedish law, similar to a Chapter 11 filing in the United States bankruptcy
system. The parent company is attempting to restructure their debt and
emerge from reconstruction. If the parent company is unable to successfully
emerge from reconstruction, it may affect the Company's ability to get
additional funding to put managements' plans for future expansion into
place. If this occurred, one of the resulting scenarios could be the
Company's decision not to continue as a public entity in the United States.
Long-Term Note Payable, Related Party
On April 10, 2002, the Company and its parent company agreed to convert the
long-term note payable, related party, into shares of the Company's common
stock. The note payable was converted into 10,660,679 shares applying a
conversion rate calculated as the weighted average stock price over the
last 30 trading days, or $0.0485 per share.
See accompanying independent auditors' report.
F-16
24HOLDINGS INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
December 31, 2001
For Disposal of Norway Subsidiary
Scoop Norway Pro forma
Subsidiary (1) Adjustments
Revenue $ 22,036,485 $ 1,061,818 $20,974,667
Cost of Revenue 19,666,260 928,799 18,737,461
------------ ----------- -----------
Gross profit 2,370,225 133,020 2,237,205
Operating expenses:
General and administrative expenses 2,534,957 204,037 2,330,920
Goodwill amortization 666,277 - 666,277
Impairment loss on investment 1,125,846 - 1,125,846
------------ ----------- -----------
4,327,080 204,037 4,123,043
------------ ----------- -----------
Loss from operations (1,956,855) (71,018) (1,885,837)
Gain on disposal of subsidiary (230,322) - (230,322)
Interest income (24,799) (1,892) (22,907)
Interest expense 123,637 2,783 120,854
------------ ----------- -----------
(131,484) 891 (132,375)
Net loss before taxes (1,825,371) (71,908) (1,753,463)
------------ ----------- -----------
Taxes (2,400) - (2,400)
------------ ----------- -----------
Net loss $ (1,822,971) $ (71,908) $(1,751,063)
================= ================
Net loss per share
basic and diluted
(0.02) (0.02)
================= ================
Weighted average number of shares outstanding -
basic and diluted 85,486,717 85,486,717
================= ================
F-17
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
Note to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(1) The financial statements of the Norway subsidiary included in the
unaudited pro forma consolidated financial information were first
translated from Norweigian Kroner to British pounds at the rate of
.076, and then translated from British pounds to U.S. dollars at the
rate of 1.458
Note A - There are no pro forma adjustments to the condensed consolidated
statements of income, other than the elimination of the results of
operations. The Company disposed of the subsidiary for an
insignificant dollar amount, and all assets, liabilities and costs
related to the subsidiary were booked directly to the subsidiary, and
after elimination of the subsidiary financial position and results of
operations, no amounts relating to the subsidiary remain no amounts
relating to the subsidiary remain.
F-18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The name, position with the Company, age and tenure of each director and
executive officer are as follows:
Name Age Position Since
---- --- -------- -----
Lennart Orkan 57 Director and Chairman of the Board 2000
Larsake Sandin 53 Director 2000
Akbar Seddigh 57 Director 2000
Martin Clarke 36 President and 2000
Chief Executive Officer
Roger Woodward 56 Chief Financial Officer, 2001
Chief Accounting Officer
and Secretary
Lennart Orkan, Director and Chairman of the Board. Dr. Orkan has
approximately 25 years of experience in business and banking. Currently, Dr.
Orkan is the President and CEO of Strator B.D.N. International AB, a company
based in Sweden which provides consulting services to public and private
companies on mergers and acquisitions, recapitalization, and other forms of
corporate reorganization. The Strator Group has associated companies and
affiliates in a number of European countries and in North America. Dr. Orkan is
also the founder and the majority owner of the company. Since 1980, Dr. Orkan
has been the Chairman of the Board and/or a Board Member of many medium-sized
and large Scandinavian and foreign private corporations. From 1974 until 1980,
Dr. Orkan was the head of the two largest departments of the Swedish Savings
Bank Association in addition to being the General Manager of the Swedish Savings
Banks Institute and the vice-Chairman of the International Savings Bank
Institute in Geneva, Switzerland. From 1980 until 1984, Dr. Orkan was the
General Manager of Lantbrukets Utredningsinstitut, the Swedish Institute for
Agro-Business Development and Research, a highly respected research institute
and consulting group for economic studies and business development services.
From 1984 until 1985, Dr. Orkan served as the President and CEO of the
Cooperative Bank of Sweden West, the largest cooperative bank in Sweden. From
1985 until 1988, Dr. Orkan was the President and CEO of Praktikertjanst AB, the
dominating group in the areas of private health and dental care and medical
technical services in Scandinavia.
Larsake Sandin, Director. Mr. Sandin has approximately 25 years of
experience in the information technology field as founder, director and manager
of several companies in Sweden, the United Kingdom and the United States. Mr.
Sandin is currently the Founding Director and a Business Consultant of Acom CMC
Ltd in London, the Founding Director of The Server Group in Scandinavia
Stockholm, also located in London, the CEO and a director of InfiniCom AB, the
majority shareholder of 24Holdings Inc. From 1976 until 1989, Mr. Sandin served
as Business Manager of AB Programator, a company located in Stockholm. From 1989
until 1991, Mr. Sandin was the Managing Director of Philips Tele & Data Systems,
a subsidiary of Philips Norden AB of Stockholm, in which capacity Mr. Sandin
accomplished a significant restructuring of the company. From 1992 until 1995,
Mr. Sandin was employed by Digital Equipment Corporation, where he was the
Director of Retail Banking Worldwide in Boston, the Director of Financial
Industry Expertise Center Europe in London, and the Director of Retail Banking
Europe in Stockholm. In addition to his employment experience, Mr. Sandin has
been and continues to be a director of many publicly and privately held
companies in Sweden. In the past, Mr. Sandin was the Chairman of the Board of
Philips Radio Communications AS, Digital Equipment BCFI AB, Rostvold AS and
Ericsson-Programatic AB.
Akbar Seddigh, Director. Mr. Seddigh has approximately 25 years of
experience in the business field. Currently, Mr. Seddigh is the Chairman of the
Board and President of Ortivus US, Inc.; the Chairman of the Board
-16-
of ELEKTA AB, Cascade Computing AB, Neoventa AB and Samba Sensor AB; and Board
Member of Nordbanken, Taby, Affarsstrategerna AB, Artimplant AB, and Minidoc AB
in addition to other responsibilities. From 1976 through 1981, Mr. Seddigh
worked as the chief Executive Officer of a subsidiary of The Swedish Atomic
Energy. In 1985, Mr. Seddigh founded Ortivus AB and acted as Chief Executive
Officer of the company until November, 1999. Since November 1999, Mr. Seddigh
has acted as Vice Chairman in addition to his role on the Board of Directors of
the company. Ortivus AB was listed on the Stockholm Stock Exchange in January
1997 and deals in devising new medical concepts including Myocardial Ischemia
Dynamic Analysis (MIDA) and telemedicine (Mobimed).
Martin Clarke, President and Chief Executive Officer. Mr. Clarke came to
24STORE via the acquisition of LapLand (UK) Limited the company he co-founded
with Michael Neame in 1991. Responsible for Sales and Marketing, he was
instrumental in the growth which led to recognition of the company by the UK's
Sunday Times Newspaper as one of the UK's "Hot 100" fastest growing companies.
Prior to LapLand Mr. Clarke was European Sales and Marketing Director for Orchid
(Europe) Limited, the European subsidiary of a San Francisco based manufacturer
of computer peripherals and motherboards quoted on the London stock market.
Trained in aerospace and defense systems electronics, he moved on to a sales
career with a number of leading information technology companies. Mr. Clarke
joined Orchid (Europe) Limited in November 1988 with responsibility for UK
sales; promotion followed to European Sales Manager in March 1989 with
responsibility for all European distribution territories. Mr. Clarke was
appointed European Sales and Marketing Director in 1990.
Roger Woodward, Chief Financial Officer, Chief Accounting Officer and
Secretary. Mr. Woodward came to 24Holdings Inc. via the acquisition of LapLand
(UK) Limited, where he had been Group Financial Controller since joining the
company in 1997. Prior to this he held a number of senior financial positions
within the manufacturing and service industries. As Financial Controller for the
European subsidiary of ITW Inc., a NYSE-listed multi-national firm, Mr. Woodward
was responsible for annual and monthly reporting and was a member of the senior
management team. Mr. Woodward attended Kingston University gaining a Diploma in
Business Studies and he is also a member of the Chartered Institute of
Management Accountants.
Each director of the Company will hold office until such director's
successor is elected and qualified or until such director's earlier resignation
or removal. Each executive officer of the Company will hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal in accordance with the Company's bylaws.
There currently exists no arrangement or understanding between any
executive officer and between any other person pursuant to which any person is
to be selected as an executive officer. No family relationships exist between
any current or prospective executive officer or director.
During the last five (5) years, no director or officer of the Company has:
(1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the
time of the bankruptcy or within two (2) years prior to that time;
(2) been convicted in a criminal proceeding or is subject to a pending
criminal proceeding;
(3) been subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction
permanently or temporarily enjoining such person from participating,
or otherwise limiting such person's right to engage, in any type of
business, securities or banking activities;
(4) been subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any federal or state authority
barring or suspending such
-17-
person from participating, or otherwise limiting for more than 60 days
such person's right to engage, in any type of securities or banking
activities; or
(5) been found by a court of competent jurisdiction in a civil action, by
the Commission or by the Commodity Futures Trading Commission to have
violated a federal or state securities law or a federal commodities
law, and the judgment or finding has not been subsequently reversed,
suspended or vacated.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and executive officers of the Company and persons who beneficially
own more than ten percent of the Company's Common Stock (collectively, the
"Reporting Persons") to report their ownership of and transactions in the
Company's Common Stock to the Securities and Exchange Commission (the
"Commission"). Copies of these reports are also required to be supplied to the
Company. To the Company's knowledge, during the fiscal year ending December 31,
2001 the Reporting Persons complied with all applicable Section 16(a) reporting
requirements, except that InfiniCom AB, an owner of more than ten percent of the
Company's Common Stock, did not file a report on Form 4 or Form 5 reporting its
acquisition of beneficial ownership of an additional 3,915,092 shares of the
Company's Common Stock.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth compensation earned, whether paid or
deferred, during the fiscal years ended December 31, 2001, 2000 and 1999 by the
Company's Chief Executive Officer and the Executive Officers of the Company
whose compensation was $100,000 or greater during the fiscal year ended December
31, 2001.
Annual
Compensation Long-Term Compensation
Restricted Securities All Other
Principal Salary Bonus Stock Underlying Compensation
Name Position Year ($) ($) Awards ($) Options (#) ($)
- ---------------------------------------------------------------------------------------------------------------
Martin Clarke (1) President and 2001 $ 137,085 $ -- $ -- -- $ 18,502
Chief Executive 2000 $ 149,465 $ -- $ -- -- $ 18,627
Officer 1999 $ 165,984 $ -- $ -- -- $ 19,672
Larsake Sandin (2) President and 2001 $ -- $ -- $ -- -- $ --
Chief Executive 2000 $ -- $ -- $ -- -- $ --
Officer 1999 $ -- $ -- $ -- -- $ --
Michael Neame (3) Chief Financial 2001 $ 137,085 $ -- $ -- -- $ 17,316
Officer, Chief 2000 $ 147,465 $ -- $ -- -- $ 18,627
Accounting 1999 $ 166,869 $ -- $ -- -- $ 19,672
Officer and
Secretary
-18-
(1) Mr. Clarke was appointed as President and Chief Executive Officer of the Company on March 17, 2000. On
October 16, 2001, Mr. Clarke resigned as President and Chief Executive Officer of the Company and was
re-appointed to such offices on December 20, 2001. Some of Mr. Clarke's annual compensation amounts
relate to compensation paid by 24STORE and its subsidiaries for the periods indicated prior to the
reverse acquisition of the Company by InfiniCom AB.
(2) Mr. Sandin served, without remuneration, as President and Chief Executive Officer of the Company from
October 16, 2001 to December 20, 2001.
(3) Mr. Neame resigned as Chief Financial Officer, Chief Accounting Officer and Secretary on April 13, 2001.
Some of Mr. Neame's annual compensation amounts relate to compensation paid by 24STORE and its
subsidiaries for the periods indicated prior to the reverse acquisition of the Company by InfiniCom AB.
Option Grants in Last Fiscal Year
The Company did not grant any options during the last fiscal year.
ITEM 12. BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information, as of April 11, 2002,
concerning the Common Stock of the Company beneficially owned (i) by each
director and each Named Executive Officer of the Company, (ii) by all directors
and executive officers of the Company as a group and (iii) by each stockholder
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock. The beneficial owners named have, to the knowledge of
the Company, sole voting and dispositive power with respect to the shares
beneficially owned, subject to community property laws where applicable.
Beneficially Owned
Name and Address Shares Percent
InfiniCom AB (publ)
Karlaplan 2
114 60 Stockholm
Sweden...................................... 71,051,002 83.1
Larsake Sandin
Frensham Court, Summerfield Lane
Surrey GU10 3AN
England..................................... 0 0
Lennart Orkan
Foreningsvagen 2
SE-13237 Saltsjo-Boo
Sweden...................................... 0 0
Akbar Seddigh
Centralvagen 18
18357 Taby
Sweden...................................... 0 0
Martin Clarke
Kingston
Reading Road North
Fleet
Hampshire
GU13 8RR
United Kingdom.............................. 4,953,455 5.8
-19-
Roger Woodward
Zennor
Cherry Tree Walk
Rowledge
Farnham
Surrey
GU10 4AD
United Kingdom.............................. 0 0
All executive officers and directors as a
group (5 persons)......................... 4,953,455 5.8
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On April 10, 2002, the Company and InfiniCom AB, the Company's parent, entered
into a Capital Contribution Agreement pursuant the Company and InfiniCom agreed
to convert a note payable by the Company to InfiniCom in the amount of $517,043
into Common Stock of the Company. The note payable was converted into
InfiniCom's right to receive 10,660,679 newly issued shares of Common Stock,
applying a conversion rate calculated as the weighted average stock price over
the prior 30 trading days, or $0.0485 per share.
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ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
The financial statements listed below and included under Item 8, are
filed as part of this report.
Consolidated Financial Statements of 24Holdings Inc.
(i) Independent Auditors' Report
(ii) Consolidated Balance Sheet at December 31, 2001 and December 31,
2000
(iii)Consolidated Statement of Income (Operations) for each of the
three years ended December 31, 2001
(iv) Consolidated Statement of Shareholders' Equity (Deficit) for each
of the three years ended December 31, 2001
(v) Consolidated Statement of Cash Flows for each of the three years
ended December 31, 2001
(vi) Notes to the Consolidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Statement of Operations of
24Holdings Inc. for the period ended December 31, 2001 (For Sale of
Norway Subsidiary)
(2) Financial Statement Schedules
All schedules have been omitted because either they are not
applicable, not required or because the information required is
included in the consolidated financial statements, including the notes
thereto.
(b) Exhibits
Exhibit Number Description
2.1 Second Amended Plan of Reorganization of Scoop, Inc. (Filed
as Exhibit 2.1 to the Company's Current Report on Form 8-K
(filed April 5, 2000) and incorporated herein by this
reference).
2.2 Stock Purchase Agreement, dated as of April 23, 1999,
between InfiniCom AB and Scoop, Inc. (Filed as Exhibit 2.2
to the Company's Current Report on Form 8-K (filed April 5,
2000) and incorporated herein by this reference).
2.3 Agreement, dated as of November 1, 1999, between InfiniCom
AB and Scoop, Inc. (Filed as Exhibit 2.3 to the Company's
Current Report on Form 8-K (filed April 5, 2000) and
incorporated herein by this reference).
2.4* Agreement on the Transfer of Shares dated March 29, 2001
between 24STORE (Europe) Limited and Compo Consult AS
(English Translation).
3.1 Certificate of Incorporation of the Company (Filed as
Exhibit 3.1 to the Company's Annual Report on Form 10-K for
the Period Ended December 31, 2000 (filed April 13, 2001)
and incorporated herein by this reference).
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3.2 Certificate of Amendment of the Certificate of Incorporation
of the Company dated October 20, 1999 (Filed as Exhibit 3.2
to the Company's Annual Report on Form 10-K for the Period
Ended December 31, 2000 (filed April 13, 2001) and
incorporated herein by this reference).
3.3 Certificate of Amendment of the Certificate of Incorporation
of the Company dated April 1, 2001 (Filed as Exhibit 3.3 to
the Company's Annual Report on Form 10-K for the Period
Ended December 31, 2000 (filed April 13, 2001) and
incorporated herein by this reference).
3.4 Bylaws of the Company (Filed as Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the Period Ended December 31,
1999 (filed February 21, 2001) and incorporated herein by
this reference).
3.5 Certificate of Amendment of the Bylaws of the Company (Filed
as Exhibit 3.4 to the Company's Annual Report on Form 10-K
for the Period Ended December 31, 1999 (filed February 21,
2001) and incorporated herein by this reference).
4.1 Form of Common Stock Certificate (Filed as Exhibit 4.1 to
the Company's Registration Statement on Form SB-2
(Registration No. 333-15129) and incorporated herein by this
reference).
10.1 Service Agreement dated May 6, 1999 between 24STORE Limited
and Martin Clarke (Filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the Period Ended December 31,
1999 (filed February 21, 2001) and incorporated herein by
this reference).
10.2 Service Agreement dated May 6, 1999 between 24STORE Limited
and Michael John Neame (Filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the Period Ended
December 31, 1999 (filed February 21, 2001) and incorporated
herein by this reference).
10.3 Invoice Discounting Agreement dated October 10, 1996 between
Mobile Planet Limited and Lombard Natwest Discounting
Limited (Filed as Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the Period Ended December 31, 1999
(filed February 21, 2001) and incorporated herein by this
reference).
10.4 Invoice Discounting Agreement dated October 10, 1996 between
Lapland U.K. Limited and Lombard Natwest Discounting Limited
(Filed as Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the Period Ended December 31, 1999 (filed
February 21, 2001) and incorporated herein by this
reference).
10.5 Advice of Borrowing Terms dated September 25, 1997 between
National Westminster Bank PLC and Cyberia (UK) Limited
(Filed as Exhibit 10.6 to the Company's Annual Report on
Form 10-K for the Period Ended December 31, 1999 (filed
February 21, 2001) and incorporated herein by this
reference).
10.6 Deed of Subscription, Amendment and Release dated March 31,
2000 among Michael John Neame, Martin Clarke, 24STORE.com
Limited, InfiniCom AB and Scoop, Inc. (Filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
Period Ended March 31, 2000 (filed March 6, 2001) and
incorporated herein by this reference).
10.7 Subscription Agreement dated March 31, 2000 between
InfiniCom AB and Scoop, Inc. (Filed as Exhibit 10.2 to the
Company's Quarterly Report on Form 10-Q for the Period Ended
March 31, 2000 (filed March 6, 2001) and incorporated herein
by this reference).
10.8 Subscription Agreement dated March 31, 2000 between Michael
John Neame and Scoop, Inc. (Filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the Period Ended
March 31, 2000 (filed March 6, 2001) and incorporated herein
by this reference).
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10.9 Subscription Agreement dated March 31, 2000 between Martin
Clarke and Scoop, Inc. (Filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q for the Period Ended
March 31, 2000 (filed March 6, 2001) and incorporated herein
by this reference).
10.10* Capital Contribution Agreement dated April 10, 2002 between
InfiniCom AB (publ) and 24Holdings Inc.
21* List of Subsidiaries of the Company.
* filed with this report
(c) Current Reports on Form 8-K
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
24HOLDINGS INC.
By: /s/ Lennart Orkan
--------------------------------------
Name: Lennart Orkan
Title: Chairman of the Board
Date: April 16, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Martin Clarke
--------------------------------------
Name: Martin Clarke
Title: President and
Chief Executive Officer
By: /s/ Roger Woodward
------------------------------
Name: Roger Woodward
Title: Chief Financial Officer and
Principal Accounting Officer
By: /s/ Lennart Orkan
--------------------------------------
Name: Lennart Orkan
Title: Director, Chairman of
the Board
By: /s/ Larsake Sandin
------------------------------
Name: Larsake Sandin
Title: Director
By: /s/ Akbar Seddigh
------------------------------
Name: Akbar Seddigh
Title: Director