SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2004
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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)
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) had been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
--- ---
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 ISSUERS:
Number of shares of Common Stock outstanding at November 10, 2004:
96,147,395.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED BALANCE SHEET
September 30, 2004 December 31, 2003
------------------ -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 928 $ 147,841
Accounts receivable - 2,158,883
Inventory - 161,697
Prepaid expenses and other assets - 34,710
Current assets of subsidiary held for sale 1,014,469 -
------------- -------------
Total current assets 1,015,397 2,503,131
Property and equipment - held for sale, net of
accumulated depreciation and amortization - 70,625
Long term assets held for sale - 1,405,720
------------- -------------
$ 1,015,397 $ 3,979,476
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 70,694 $ 2,178,856
Credit facility - 1,044,285
Current portion of loan payable, bank - 113,523
Current liabilities of subsidiary held for sale 881,291 -
------------- -------------
Total current liabilities 951,985 3,336,664
Loan payable, bank, less current portion - 121,214
Long term note payable, related party 149,976 89,976
Deferred taxes - 86,800
Shareholders' equity:
Preferred stock; $0.001 par value, 5,000,000 authorized,
no shares issued and outstanding - -
Common stock; $.001 par value, 100,000,000 shares
authorized 96,147,396 shares 36,742 36,742
issued and outstanding
Additional paid in capital 10,362,233 10,362,233
Other comprehensive loss (189,259) (110,733)
Accumulated deficit (10,296,280) (9,943,420)
------------- -------------
Total shareholders' equity (86,564) 344,822
$ 1,015,396 $ 3,979,476
============= =============
0 $ -
-1-
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)
Three months ended Three months ended Nine months ended Nine months ended
September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue: $ - $ - $ - $ -
Cost of Revenue - - - -
-------------- -------------- -------------- --------------
Gross profit
- - - -
Operating expenses:
Distribution costs - - - -
General and adminstrative expenses 26,301 43,192 79,711 90,663
Depreciation - - - -
Amortization - - - -
Gain on sale of subsidiary - - - -
-------------- -------------- -------------- --------------
Total operating expenses 26,301 43,192 79,711 90,663
Loss from continuing operations
before interest expense (26,301) (43,192) (79,711) (90,663)
Interest expense - - - -
Loss from continuing operations
before provision for income taxes (26,301) (43,192) (79,711) (90,663)
Provision for income taxes - - - -
-------------- -------------- -------------- --------------
Loss from continuing operations (26,301) (43,192) (79,711) (90,663)
Loss from discontinued operations, net of taxes (162,765) (19,751) (273,150) (139,855)
Net income (loss) $ (189,066) $ (62,943) $ (352,861) $ (230,518)
==================================================================================
Net loss per share - continuing operations
basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
==================================================================================
Net loss per share - discontinued operations
basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
==================================================================================
Weighted average number of shares outstanding -
basic and diluted 96,147,396 85,493,352 96,147,396 85,493,352
==================================================================================
-2-
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Nine months ended Nine months ended
September 30, 2004 September 30, 2003
------------------ ------------------
(Unaudited) (Unaudited)
Cash flows provided by (used for) operating activities:
Net income (loss) $ (352,856) $ (230,518)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 49,827 59,200
Gain on sale of building (180,247) -
Foreign currency translation 8,786 24,979
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 1,665,451 (116,018)
Loans receivable, related party 60,000 -
Inventory 59,117 72,548
Prepaid expenses 12,066 45,582
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses (1,421,845) (862,711)
Income taxes payable 95,519 234
Deferred taxes (86,800) (1,800)
------------- -------------
Total adjustments 261,874 (777,987)
------------- -------------
Net cash used for operating activities (90,982) (1,008,504)
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment 1,569,032 (45,210)
Proceeds from short-term loans, related party - 69,988
------------- -------------
Net cash provided by (used for) investing activities 1,569,032 24,778
------------- -------------
Cash flows provided by (used for) financing activities:
Credit facility (1,048,017) 242,907
Payment on long-term debt, bank (235,576) (61,130)
------------- -------------
Net cash provided by (used for) financing activities (1,283,594) 181,777
------------- -------------
Net increase (decrease) in cash 194,456 (801,948)
Cash, beginning of period 147,841 802,091
------------- -------------
Cash, end of period $ 342,297 $ 143
============= =============
Supplemental disclosure of cash flow information:
Interest paid $ 516 $ 81,505
============= =============
Income taxes paid 0 -
============= =============
See accompanying notices to consolidated financial statements
-3-
24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(1) Description of Business:
Interim Financial Statements:
The accompanying financial statements include all adjustments
(consisting of only normal recurring accruals), which are, in the
opinion of management, necessary for a fair presentation of the
results of operations for the periods presented. Interim results are
not necessarily indicative of the results to be expected for a full
year. The financial statements should be read in conjunction with the
financial statements included in the annual report of 24Holdings Inc.
and subsidiary on Form 10-K for the year ended December 31, 2003.
General:
24Holdings Inc., formerly known as Scoop, Inc. ("24Holdings" or the
"Company"), is a majority owned subsidiary of InfiniCom AB, a publicly
listed company on the SBI market in Sweden. 24Holdings has a wholly
owned subsidiary, 24Store Europe LTD, located in the United Kingdom.
All the consolidated entities are in the business of selling and
distributing consumer and commercial electronic products in Europe.
Basis of Presentation:
The Company's financial statements have been presented on the basis
that the Company will continue as a going concern, which contemplates
the realization of assets and the satisfaction of liabilities in the
normal course of business. The Company incurred net losses of $352,861
and $107,001 during the nine months ended September 30, 2004 and the
year ended December 31, 2003, respectively, and has an accumulated
deficit of $10,296,280 at September 30, 2004. These factors raise
substantial doubt about the Company's ability to continue as a going
concern. The Company recently sold the building in which they operate,
which raised net proceeds of approximately $1,500,000. This money has
been used to pay down certain liabilities and for working capital.
Management is also seeking to sell the UK operating subsidiary (see
Note 3). The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going
concern.
-4-
24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(2) Principles of Consolidation:
The accompanying consolidated statements include the accounts of
24holdings Inc. and subsidiaries. All significant intercompany
transactions and accounts have been eliminated.
The financial statements of subsidiaries 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).
(3) Discontinued Operations:
The Company's management intends to dispose of the Company's UK
subsidiary, 24Europe, which presently is anticipated to occur within
the next six months. The Company is currently in discussions with its
Parent company, Infinicom, concerning Infinicom's possible acquisition
of 24Europe in exchange for a note payable. As the intended sale would
meet all the requirements of paragraph 30 of Statements of Financial
Accounting Standards ("SFAS") 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets", the assets and liabilities of the
subsidiary have been classified as Held for sale on the accompanying
balance sheet, while the results of operations have been presented as
discontinued operations for all periods presented. As the Company
would anticipate selling the subsidiary for an amount in excess of the
carrying value, no loss on disposal has been recognized and included
as a component of discontinued operations.
The carrying amounts of the major classes of assets and liabilities
included as part of the assets and liabilities held for sale at June
30, 2004, are as follows:
Cash and cash equivalents $ 341,367
Accounts receivable 502,932
Inventory 103,525
Prepaid expenses and other assets 22,850
----------
Current assets held for sale 970,674
Property and equipment - held for sale 43,795
Accounts payable and accrued expenses 785,306
Income taxes payable 95,985
----------
Current liabilities held for sale $ 881,291
(4) Sale of Building:
During the first quarter of 2004, the Company completed its
negotiations on the sale of the freehold property in which their
operations are conducted, for approximately $1,523,000. On March 25th
2004 contracts for the sale of the building were exchanged with the
completion of the sales was made on April 14th 2004. The sale resulted
in a gain on sale recognized in the accompanying
-5-
financial statements of approximately $180,000, which includes the
write off of the deferred tax liability which arose in relation to the
step up in basis upon acquisition of the UK subsidiary. As the
building was an asset of the UK subsidiary which is being disposed of
(see Note 3) this gain on sale is included in discontinued operations
in the accompanying Statement of Operations.
24Store Ltd, a wholly owned subsidiary of 24 Holdings Inc., entered
into a lease with the purchaser of the building on completion of the
sale to remain in the building for the next 18 months.
-6-
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's interim
results of operations and financial condition. This discussion should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2003, filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
For the Three Months ended September 30, 2004: Continuing Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended September 30, 2004
were $26,301 compared to $43,192 for the three months ended September 30, 2003.
The main areas of the decreases were Legal and Accountancy fees.
For the Three Months ended September 30, 2004: Discontinued Operations
NET SALES. Net sales for the three months ended September 30, 2004 were
$1,499,364 compared to $3,170,609 for the three months ended September 30, 2003
representing a decrease of 53%. The reduction is a result of 24Store Ltd failure
to make significant investment in a web trading combined with the loss of key
sales staff and the loss of some major accounts.
GROSS PROFIT. Gross profit for the three months ended September 30, 2004 was
$205,876 compared to $437,670 for the three months ended September 30, 2003
representing a decrease of 53%. Gross profits as a percentage of sales were
13.7% for the three months ended September 30, 2004 compared to 13.8% for the
three months ended September 30, 2003.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended September 30, 2004
were $373,836 compared to $445,764 for the three months ended September 30,
2003. The decrease was the result in reductions in salaries and marketing cost.
INTEREST EXPENSE. Interest expense, net of interest income for the three months
ended September 30, 2004 was on income of $5,188 compared to a cost $13,455 for
the three months ended September 30, 2003, this reduction is the result of
paying off the mortgage on the building, with the respective reduction in
mortgage interest.
LIQUIDITY AND CAPITAL RESOURCES Continuing Operations
Cash and cash equivalents at September 30, 2004 were $928 compared to $13,283 as
of December 31, 2003. This reduction in cash was from payments to Accounts
Payable.
LIQUIDITY AND CAPITAL RESOURCES Discontinued Operations
-7-
Cash and cash equivalents at September 30, 2004 were $341,369 compared to
$134,558 as of December 31, 2003. This increase is the result of the sale of the
building. The cash generated from the sale has been used to pay off the
long-term debt on the building and to reduce the borrowing on our credit
facility with Lombard.
In its United Kingdom operating subsidiaries the Company has a revolving line of
credit based on 70% of eligible receivables. The revolving line of credit bear
interest at the prime rate plus 2%.
For the Nine Months ended September 30, 2004: Continuing Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the nine months ended September 30, 2004
were $79,711 compared to $90,663 for the nine months ended September 30, 2003.
For the nine months ended September 30, 2004: Discontinued Operations
NET SALES. Net sales for the nine months ended September 30 , 2004 were
$6,732,970 compared to $10,352,835 for the nine months ended September 30, 2003
representing a decrease of 35%. The reduction in sales was primarily
attributable to a drop in demand across the market and a loss in our market
position because failure to invest in improved web marketing combined with a
weak third quarter the result of the loss of key sales personnel.
GROSS PROFIT. Gross profit for the nine months ended September 30, 2004 was
$840,200 compared to $1,372,683 for the nine months ended September 30, 2003
representing a decrease of 39%. Gross profit as a percentage of sales was 12.5%
for the nine months ended September 30, 2004 compared to 13.3% for the nine
months ended September 30, 2003. The main reason for the margin on sales decline
was a reduction in marketing funding from suppliers.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the nine months ended September 30, 2004
were $1,090,259 compared to $1,471,964 for the nine months ended September 30,
2003.
$180,288 of the decrease was the result of the profit on the sale of the
building and reduction of the deferred tax provision. The rest of the reduction
was primarily the result of savings in salaries and advertising cost.
INTEREST EXPENSE. Interest expense, net of interest income for the nine months
ended September 30, 2004 was $12,370 compared to $42,374 for the nine months
ended September 30, 2003.The reduction is the result of paying off the mortgage
on the property at the start of the second quarter.
PLAN of OPERATIONS
It is the intention of 24Holdings Inc to sell the UK operations and in
accordance with SFAS 144 assets and liabilities of the units have been shown as
held for sale and operations as discontinued operations for all periods
presented.
-8-
Item 3. Quantitative and Qualitative Disclosures 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 British pounds sterling or, prior to the sale of its
Norwegian subsidiary, Norwegian Kroner, and none of the Company's revenues are
generated in US Dollars. For consolidation purposes, the assets and liabilities
of 24STORE are converted to US 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.
Item 4. Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and
procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934,
as amended, have concluded that, as of the end of the fiscal quarter covered by
this report on Form 10-Q, the Company's disclosure controls and procedures were
effective to provide reasonable assurances that information required to be
disclosed in the reports filed or submitted under such Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
There was no change in the Company's internal control over financial reporting
during the quarter ended September 30, 2004 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
-9-
PART II
OTHER INFORMATION
Item 5. Other Information.
On April 14, 2004, the Company completed its sale of the building currently
occupied by the Company for a total cash purchase price of $1,523,220. The
purchase price was determined by appraisal and negotiation among the parties to
the sale. The purchasers were third parties with no prior relationship with the
Company or any of its officers and directors. As part of the sale transaction,
24Store Ltd, a wholly owned subsidiary of 24Holdings Inc., entered into a lease
with the purchaser of the building to remain in the building for an 18-month
transitional period.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
31.1 Chief Executive Officer Certification pursuant to Rule 13a-14(a)
under the Securities Act of 1934
31.2 Chief Financial Officer Certification pursuant to Rule 13a-14(a)
under the Securities Act of 1934
32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350
32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is filed.
-10-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 15, 2004 24HOLDINGS INC.
By: /s/ Urban von Euler
--------------------------------
Urban von Euler
President and Chief Executive Officer
By: /s/ Roger Woodward
--------------------------------
Roger Woodward
Chief Financial Officer and Secretary
(Principal Accounting Officer)