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, 2004
-------------------
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.
[ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes [ ] No [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 12, 2005: $709,290. 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 12, 2005: 96,147,395
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 share
capital 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 24STORE Limited, (previously
known as Lapland U.K. Limited) a company registered in England in 1991, a
wholly-owned subsidiary of 24STORE, which 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 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.24Store.com. In October
2002, the company formed a new business unit, 24Solutions, operating from the
same executive offices. 24Solutions offers primarily accounting based, business
management software. Its services include the provision, customization,
installation and training on software products from leading business software
vendor Sage. The business is generated from an active sales team, working on
inquiries from the existing customer base, and from the company's web site,
www.24solutions.com.
Products and Services
The Company's primary products are computer and electronics products, and the
provision, customization, installation and training on software products from
leading business software vendors. 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 personal computers 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 sales of
computer and electronic equipment will be based on a combination of these three
sales methods. In 2002 the Company formed a new division, 24Solutions, offering
business management software. The Company will look to develop this division
further and, in particular, sell software and consulting services to its
existing customer base of computer users.
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.
The Company believes that the principal competitive factors affecting its
product supply 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.
The business management software markets also 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 business management software. Current and potential competitors of the
Company include, but are not limited to: (1) accounting firms, (2) system
integrators and value added resellers, (3) direct sales operations of software
vendors, and (4) ASPs (application service providers) offering business software
on a subscription basis.
The Company believes that the principal competitive factors affecting its
business management software business include: (1) its ability to recruit and
retain suitably qualified consultants, (2) its ability to maintain
authorization, and competitive pricing from software vendors, and (3) its
ability to attract new customers at a favorable customer acquisition cost.
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.
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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 April 12, 2005 the Company employed a total of 14 persons, including seven
in sales, one in marketing, two in operations and four 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.
Proposed Change in Control of the Company
On February 15, 2005, InfiniCom AB, the majority stockholder of the Company,
entered into a letter of intent to sell its shares of Common Stock in the
Company to a group of private investors. As part of the transaction, it is
contemplated that the Company will sell to InfiniCom all of the outstanding
share capital of 24STORE, resulting in the Company continuing its existence as a
shell company with no subsidiaries.
ITEM 2. PROPERTIES.
The Company's principal executive offices are located in Basingstoke,
United Kingdom, approximately forty miles west of London. In 2004, the Company
sold its freehold interest in its office and warehouse space in the United
Kingdom and entered into a lease to occupy the space for a period not to exceed
18 months. The property, which is approximately 7,800 square feet, was
constructed in 1959, and substantially refurbished in 1998.
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.
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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, as indicated below:
Bid
Quarter Ended High Low
------------- ---- ---
December 31, 2004 $0.0400 $0.0200
September 30, 2004 $0.0300 $0.0110
June 30, 2004 $0.0400 $0.0110
March 31, 2004 $0.0600 $0.0080
December 31, 2003 $0.0400 $0.0055
September 30, 2003 $0.0500 $0.0050
June 30, 2003 $0.0060 $0.0035
March 31, 2003 $0.0200 $0.0035
On April 12, 2005 the last reported sales price for the Company's Common
Stock on the OTC Bulletin Board was $0.0400 per share.
As of April 14, 2005, there were 233 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 six fiscal years ended December 31, 2004 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 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," including discussions concerning the presentation in the Company's
financial statements of the results of the Company's operating subsidiary as
discontinued operations.
Year Ended December 31,
2004 2003 2002 2001 2000
--------------------------------------------------------
Revenue - - - - -
Loss from Continuing (129,430) (95,434) (592,186) (132,544) (447,478)
Operations
Loss from Discontinued (356,968) 20,098 (235,093) (1,690,427)(1,375,684)
Operations
Net Loss (486,398) (75,336) (827,279) (1,822,971)(1,823,162)
Loss per share, (0.00) (0.00) (0.01) (0.00) (0.01)
continuing operations,
basic and diluted
Loss per share, (0.00) (0.00) (0.00) (0.02) (0.02)
discontinued
operations, basic
and diluted
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Weighted average 96,147,396 96,147,396 93,255,869 85,486,717 81,241,503
number of shares
outstanding
Working capital (62,652) (833,533) (730,479) (305,596) (884,270)
(deficit)
Total Assets 985,554 3,979,477 3,978,041 5,327,740 10,456,258
Long-term debt 149,976 89,976 212,414 780,632 381,396
Total shareholders (212,628) 344,822 336,249 509,392 2,431,526
equity (deficit)
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.
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 principal activity is that of a consulting 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").
Proposed Change in Control of the Company
On February 15, 2005, InfiniCom AB, the majority stockholder of the Company,
entered into a letter of intent to sell its shares of Common Stock in the
Company to a group of private investors. As part of the
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transaction, it is contemplated that the Company will sell to InfiniCom all of
the outstanding share capital of 24STORE, resulting in the Company continuing
its existence as a shell company with no subsidiaries.
RESULTS OF OPERATIONS
As it is management's intentions to sell the UK subsidiary, in accordance with
SFAS 144, the operations of the subsidiary have been presented in the
accompanying financial statements separate from continuing operations as
"discontinued operations" for all periods presented. The following discussion of
the Company's results of operations has therefore been grouped into a discussion
of continuing operations, which mainly represents the parent company's
operations, and discontinued operations, which represents the subsidiary's
operations.
Continuing Operations
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
Selling, General and Administrative Expenses--Selling, general and
administrative ("SG&A") expenses for the years ended December 31, 2004, 2003 and
2002 were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Selling, general and administrative $129,430 $95,434 $113,873
% decrease from the previous year 35.6% (16.2)% (34.0)%
SG&E expenses for the year ended December 31, 2004 increased by 35.6% from
$95,434 to $129,430. SG&A expenses for the year ended December 31, 2003
decreased by 16.2% from $113,873 to $95,434. The increase in SG&A for the year
2004 fiscal year came from increased audit and legal cost. The decrease in SG&A
for the 2003 fiscal year was a reduction in audit and legal cost.
Goodwill Amortization--Following the implementation of SFAS 142, "Goodwill and
Other Intangibles", there was no Goodwill amortization for the years ended
December 31, 2004, 2003 and 2002. SFAS 142 no longer requires goodwill to be
amortized, but periodically tested for impairment. The impairment charge in the
year ended December 31, 2002 arose from the write down of the remaining carrying
value of Goodwill.
Discontinued Operations
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
Net Sales--Net sales for the years ended December 31, 2004, 2003 and 2002 were
as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Net sales $7,889,746 $14,562,402 $18,598,455
% increase (decrease) from (45.8)% (21.7)% (15.6)%
the previous year
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Net sales for the years ended December 31, 2004, 2003 and 2002 were all derived
from operations in Europe. The decrease in net sales for the year ended December
31, 2004 is attributable to increased competition from large retailers moving
from the home/domestic market into the SMA market. Also during 2004 key sales
personnel left the company with the company suffering a corresponding decline in
its customer base. The continued reduction in the unit cost of a laptop computer
also contributed to the decline in sales revenues. For the UK Group, net sales
decreased by 51% in local currency as compared to 2003.
Gross Profit--Gross profit for the years ended December 31, 2004, 2003 and 2002
were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Gross profit $1,048,854 $1,988,199 $1,937,009
% increase (decrease) from 47.2% (2.6%) (18.2)%
the previous year
Gross margin 13.3% 13.7% 10.4%
Gross profit consists of net sales less the cost of sales, which consists of the
cost of merchandise sold to customers. The decrease in Gross profit for the year
ended December 31, 2004 is the result of the lower sales level. Gross margin as
a percent of sales remained constant at over 13%. Gross profit for the year
ended December 31, 2002 and the year ended December 31, 2001 has decreased due
to a lower level of sales against the previous years. Gross margin percent
increased over the consistency on 2002 and 2001, this was because of a move away
from high volume low margin sales.
Selling, General and Administrative Expenses--Selling, general and
administrative ("SG&A") expenses for the years ended December 31, 2004, 2003 and
2002 were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Selling, general and administrative $1,575,686 $1,908,376 $2,562,992
% decrease from the previous year (17.4)% (25.5)% (34.0)%
% of net sales 20.0% 13.1% 13.8%
SG&A expenses for the year ended December 31,2004 decreased by 17.4% from
$1,908,376 to $1,575,686. SG&A expenses for the year ended December 31, 2003
decreased by 25.5% from $2,562,992 to $1,908,376. The decrease in SG&A for the
year 2004 fiscal year in local currency was 25.7%, which came from reductions in
staff cost and advertising. The decrease in SG&A for the 2002 fiscal year is the
result of a reduction in staff related costs.
Sale of Building--On April 14, 2004, the Company completed the sale of the
freehold property in which its operations are conducted, for a sale price of
approximately $1,523,000. The sale resulted in a gain on sale recognized in the
accompanying 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 discussion in "Proposed Change
in Control of the Company" above) 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 a
transitional period of 18 months.
Interest Expenses--Interest expenses, net of interest income for the years ended
December 31, 2004, 2003 and 2002, were as follows:
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YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Interest income $7,718 $3,147 $4,945
% change from the previous year 145.2% (36.4)% (80.0)%
Interest expenses $18,102 $65,302 $58,201
% change from the previous year (72.3)% 12.2% (52.9)%
Interest income represents interest received on cash deposits. Interest expenses
include interest payable on bank overdrafts, mortgages, receivables financing
arrangements and other loans. The favorable change in interest income and
expense for year ended December 31, 2004 is the result of the sale of the
Company's office building in April 2004, as the proceeds of such sale were
applied to repay both the Company's mortgage loan and other outstanding debt of
the Company. The increase in interest expenses in the year ended December 31,
2003 is the result of changes in the exchange rate in local currency the
interest expense has remained unchanged. The reduction of interest expense in
the years ended December 31, 2002 is attributable to the need for a lower rate
of borrowing to finance the lower sales levels, reduction in the building long
term loan and reduced bank rate in the UK.
Income Taxes--Income taxes, for the years ended December 31, 2004, 2003 and 2002
were as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2004 2003 2002
Income taxe $ - $ - $5,734
Income tax for the year ended December 31, 2002 is related to an under accrual
from the previous year.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion of liquidity and capital resources of the Company
includes discontinued operations.
Cash and cash equivalents at December 31, 2004 were $95,032 compared to $147,841
as of December 31, 2003, which includes cash held for sale. The increase came
from the sale of the building in April 2004.
Cash and cash equivalents at December 31, 2003 were $147,841 compared to
$802,091 as of December 31, 2002. The reduction in cash is the result of timing
of payment of accounts payable, which have declined from the December 31, 2002
balance.
Net cash used by operating activities was $220,635 in 2004 compared to net cash
used by operating activities of $677,297 in 2003. The reason of the decrease was
the lower level of working capital required to finance the reduced sales level
in Q4/04 compared to Q4/03.
As of December 31, 2004 the Company had a working capital deficit of $62,652
compared to a working capital deficit of $833,533 as of December 31, 2003. The
sale of the building, resulting in increased cash balance and elimination of
debt, was the reason for this change.
As of December 31, 2004 included in current assets were cash and cash
equivalents of $95,032 and receivables, net, expected to be collected within one
year of $503,140.
Cash provided by investing activities was $1,493,926 in 2004, compared to cash
used in investing activities of $44,347 in 2003. The cash proceeds from the sale
of the building accounted for the change.
-8-
The change in working capital is primarily attributable to the loss for the
year, and the reduction in cash due to payments made on long-term notes payable.
In its United Kingdom operating subsidiaries the Company has (1) a revolving
line of credit based on 70% of eligible receivables. The revolving line of
credit facility bear interest at the prime rate plus 2%. Other than through its
subsidiaries, the Company has no direct source of short-term funding. In
addition to the items above, certain trade suppliers of 24STORE extend credit to
24STORE.
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
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after September 30, 2003, except as stated below and for
hedging relationships designated after September 30, 2003. In addition, except
as stated below, all provisions of this Statement should be applied
prospectively. The provisions of this Statement that relate to Statement 133
Implementation Issues that have been effective for fiscal quarters that began
prior to June 15, 2003, should continue to be applied in accordance with their
respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate
to forward purchases or sales of when-issued securities or other securities that
do not yet exist, should be applied to both existing contracts and new contracts
entered into after September 30, 2003. The adoption of this Statement did not
have a material impact to the company's financial position or results of
operation.
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective for public entities at the beginning of the first interim period
beginning after June 15, 2003. This Statement establishes standards for how an
issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a freestanding financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those instruments were
previously classified as equity. Some of the provisions of this Statement are
consistent with the current definition of liabilities in FASB Concepts Statement
No. 6, Elements of Financial Statements. The adoption of this Statement did not
have a material impact to the company's financial position or results of
operation.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" (an interpretation of Accounting Research Bulletin
(ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses
consolidation by business enterprises of entities to which the usual condition
of consolidation described in ARB-51 does not apply. The Interpretation changes
the criteria by which one company includes another entity in its consolidated
financial statements. The general requirement to consolidate under ARB-51 is
based on the presumption that an enterprise's financial statements should
include all of the entities in which it has a controlling financial interest
(i.e., majority voting interest). Interpretation 46 requires a variable interest
entity to be consolidated by a company that does not have a majority voting
interest, but nevertheless, is subject to a majority of the risk of loss from
the variable interest entity's activities or entitled to receive a majority of
the entity's residual returns or both. A company that consolidates a variable
interest entity is called the primary beneficiary of that entity.
In December 2003 the FASB concluded to revise certain elements of FIN 46,
primarily to clarify the required accounting for interests in variable interest
entities. FIN-46R replaces FIN-46,that was issued in January 2003. FIN-46R
exempts certain entities from its requirements and provides for special
effective
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dates for entities that have fully or partially applied FIN-46 as of December
24, 2003. In certain situations, entities have the option of applying or
continuing to apply FIN-46 for a short period of time before applying FIN-46R.
In general, for all entities that were previously considered special purpose
entities, FIN 46 should be applied in periods ending after December 15, 2003.
Otherwise, FIN 46 is to be applied for registrants who file under Regulation SX
in periods ending after March 15, 2004, and for registrants who file under
Regulation SB, in periods ending after December 15, 2004. The adoption of this
Statement did not have a material impact to the company's financial position or
results of operation.
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which replaces the
previously issued Statement. The revised Statement increases the existing
disclosures for defined benefit pension plans and other defined benefit
postretirement plans. However, it does not change the measurement or recognition
of those plans as required under SFAS No. 87, "Employers' Accounting for
Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments
of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
Specifically, the revised Statement requires companies to provide additional
disclosures about pension plan assets, benefit obligations, cash flows, and
benefit costs of defined benefit pension plans and other defined benefit
postretirement plans. Also, companies are required to provide a breakdown of
plan assets by category, such as debt, equity and real estate, and to provide
certain expected rates of return and target allocation percentages for these
asset categories. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial statements.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment
of ARB No. 43, Chapter 4". The amendments made by Statement 151 clarify that
abnormal amounts of idle facility expense, freight, handling costs, and wasted
materials (spoilage) should be recognized as current period charges and require
the allocation of fixed production overheads to inventory based on the normal
capacity of the production facilities. The guidance is effective for inventory
costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years
beginning after November 23, 2004. The Company has evaluated the impact of the
adoption of SFAS 151, and does not believe the impact will be significant to the
Company's overall results of operations or financial position.
In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets,
an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions."
The amendments made by Statement 153 are based on the principle that exchanges
of nonmonetary assets should be measured based on the fair value of the assets
exchanged. Further, the amendments eliminate the narrow exception for
nonmonetary exchanges of similar productive assets and replace it with a broader
exception for exchanges of nonmonetary assets that do not have commercial
substance. Previously, Opinion 29 required that the accounting for an exchange
of a productive asset for a similar productive asset or an equivalent interest
in the same or similar productive asset should be based on the recorded amount
of the asset relinquished. Opinion 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
The Board believes that exception required that some nonmonetary exchanges,
although commercially substantive, be recorded on a carryover basis. By focusing
the exception on exchanges that lack commercial substance, the Board believes
this Statement produces financial reporting that more faithfully represents the
economics of the transactions. The Statement is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
application is permitted for nonmonetary asset exchanges occurring in fiscal
periods beginning after the date of issuance. The provisions of this Statement
shall be applied prospectively. The Company has evaluated the impact of the
adoption of SFAS 152, and does not believe the impact will be significant to the
Company's overall results of operations or financial position.
In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based
Payment". Statement 123(R) will provide investors and other users of financial
statements with more complete and neutral financial information by requiring
that the compensation cost relating to share-based payment transactions be
recognized in financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. Statement 123(R) covers a
wide range of share-based compensation
-10-
arrangements including share options, restricted share plans, performance-based
awards, share appreciation rights, and employee share purchase plans. Statement
123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation,
and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.
Statement 123, as originally issued in 1995, established as preferable a
fair-value-based method of accounting for share-based payment transactions with
employees. However, that Statement permitted entities the option of continuing
to apply the guidance in Opinion 25, as long as the footnotes to financial
statements disclosed what net income would have been had the preferable
fair-value-based method been used. Public entities (other than those filing as
small business issuers) will be required to apply Statement 123(R) as of the
first interim or annual reporting period that begins after June 15, 2005. The
Company has evaluated the impact of the adoption of SFAS 123(R), and does not
believe the impact will be significant to the Company's overall results of
operations or financial position as the Company at this time does not plan to
grant stock based compensation.
CRITICAL ACCOUNTING POLICY AND ESTIMATES
Our Management's Discussion and Analysis of Financial Condition and Results of
Operations section discusses our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an on-going
basis, management evaluates its estimates and judgments, including those related
to revenue recognition, allowance for bad debt, accrued expenses, financing
operations, and contingencies and litigation. Management bases its estimates and
judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The most significant
accounting estimates inherent in the preparation of our financial statements
include estimates as to the appropriate carrying value of certain assets and
liabilities which are not readily apparent from other sources, such as allowance
for bad debt, goodwill, inventory valuation and the deferred tax asset. These
accounting policies are described at relevant sections in this discussion and
analysis and in the notes to the consolidated financial statements included in
this Annual Report.
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
-11-
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 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.
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
-12-
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.
Future Capital Needs; Uncertainty of Additional Financing
The Company's main sources of funds currently come through its operating
subsidiaries (see "Liquidity and Capital Resources" above). A reduction in
market demand for the Company's products and services could damage the Company's
ability to obtain short term funding from its current lenders and trade
suppliers. 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, take advantage of future
opportunities or respond to competitive pressures, which would likely have a
material adverse effect on the Company's business, results of operations and
financial condition. 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.
See also the discussions in "Reorganization" and "Proposed Change in Control of
the Company" below.
Control By Existing Stockholder
InfiniCom AB beneficially owns approximately 81.56% of the outstanding shares of
the Company's Common Stock. As a result, this stockholder is 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.
See also the discussion in "Proposed Change in Control of the Company" below.
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.
-13-
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.
See also the discussion in "Proposed Change in Control of the Company" below.
Reorganization
On December 20, 2002, the Company's parent company, InfiniCom AB, emerged from
bankruptcy reorganization in accordance with Swedish law in a process similar to
a Chapter 11 filing in the United States bankruptcy system. InfiniCom's recent
reorganization may adversely affect a significant source of funding for the
Company's operations and regulatory compliance costs. The Company may explore
various options to address this contingency, including the possibility of
ceasing to be a public company in the United States or a transaction or series
of transactions involving the sale of the Company or the Company's operating
subsidiaries.
Proposed Change in Control of the Company
On February 15, 2005, InfiniCom AB, the majority stockholder of the Company,
entered into a letter of intent to sell its shares of Common Stock in the
Company to a group of private investors. As part of the transaction, it is
contemplated that the Company will sell to InfiniCom all of the outstanding
share capital of 24STORE, resulting in the Company continuing its existence as a
shell company with no subsidiaries. Although the Company believes that the
proposed purchaser of InfiniCom's majority interest in the Company intends to
cause the Company to merge with or acquire an existing business, there can be no
assurance that such a secondary transaction will occur. Moreover, if such
transaction were to occur, there can be no assurance that it would enhance the
Company's future operations and financial results.
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 subsidiaries,
including 24STORE and denominated in British pounds sterling 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 and the United States may give rise to material variances in
reported earnings of the Company.
-14-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
24Holdings Inc.
(Formerly Scoop, Inc.)
Consolidated Financial Statements
Years Ended December 31, 2004,2003 and 2002
Contents
Page
----
Report of Independent Registered Public Accounting Firm F-1
Financial Statements:
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statement of Shareholders' Equity (Deficit) F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6-F-17
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
24Holdings Inc.
Basingstoke, United Kingdom
We have audited the accompanying consolidated balance sheets of 24Holdings Inc.
(formerly Scoop, Inc.) and subsidiary at December 31, 2004 and 2003 and the
related consolidated statements of operations, shareholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31,
2004. 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 standards of the Public Companies
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatements. 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, 2004 and 2003 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2004, in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company's net losses of $456,398, $75,336
and $827,279 in the last three years and accumulated deficit of $10,429,818 at
December 31, 2004 raise substantial doubt about their ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 2. The financial statements do not include any adjustments to asset
carrying amounts or the amount and classification of liabilities that might
result from the outcome of this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
March 1, 2005
F-1
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED BALANCE SHEETS
December 31, 2004 December 31, 2003
----------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 928 $ 13,283
Current assets of subsidiary held for sale 984,626 2,489,849
---------------------- --------------------
Total current assets 985,554 2,503,132
Long term assets of subsidiary held for sale - 1,476,345
----------------------- --------------------
$ 985,554 $ 3,979,477
======================= ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 118,914 $ 82,888
Current liabilities of subsidiary held for sale 929,292 3,253,777
---------------------- --------------------
Total current liabilities 1,048,206 3,336,665
Long term note payable, related party 149,976 89,976
Long term liabilities of subsidiary held for sale - 208,014
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 (181,785) (110,733)
Accumulated deficit (10,429,818) (9,943,420)
---------------------- ---------------------
Total shareholders' equity (deficit) (212,628) 344,822
$ 985,554 $ 3,979,477
======================= ====================
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)
Year ended Year ended Year ended
December 31, 2004 December 31, 2003 December 31, 2002
----------------- ----------------- -----------------
Revenue:
$ - $ - $ -
Cost of Revenue - - -
----------------------- -------------------------- ------------------------
Gross profit - - -
Operating expenses:
General and administrative expenses 129,430 95,434 113,871
Goodwill amortization - - 450,844
--------------------------------------------------------------------------
Total operating expenses 129,430 95,434 564,715
Loss from continuing operations
before interest expense (129,430) (95,434) (564,715)
Interest expense - - 27,471
---------------------------------------------------------------------------
Loss from continuing operations
before provision for income taxes (129,430) (95,434) (592,186)
Provision for income taxes - - -
----------------------- -------------------------- ------------------------
Loss from continuing operations (129,430) (95,434) (592,186)
Loss from discontinued operations, net of taxes (356,968) 20,098 (235,093)
Net income (loss) $ (486,398) $ (75,336) $ (827,279)
===========================================================================
Net loss per share - continuing operations
basic and diluted $ (0.00) $ (0.00) $ (0.01)
===========================================================================
Net loss per share - discontinued operations
basic and diluted $ (0.00) $ (0.00) $ (0.01)
===========================================================================
Weighted average number of shares outstanding -
basic and diluted 96,147,396 96,147,396 96,147,396
===========================================================================
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Common Stock Additional Other
Comprehensive
Shares Amount Paid in Capital Income/loss
Balance at December 31, 2001 85,486,717 $ 26,081 $ 9,855,851 $ (331,735)
Shares issued upon conversion of debt on April 10, 2002 10,660,679 10,661 506,382
Foreign currency translation 137,093
Net loss for the year ended December 31, 2002
--------------------------------------------------------------
Balance at December 31, 2002 96,147,396 36,742 10,362,233 (194,642)
==============================================================
Foreign currency translation 83,909
Net loss for the year ended December 31, 2003
--------------------------------------------------------------
96,147,396 36,742 10,362,233 (110,733)
==============================================================
Foreign currency translation (71,052)
Net loss for the year ended December 31, 2004
--------------------------------------------------------------
96,147,396 $ 36,742 $ 10,362,233 $ (181,785)
==============================================================
Accumulated Total
Deficit Shareholders' Equity
(Deficit)
Balance at December 31, 2001 $ (9,040,805) $ 509,392
Shares issued upon conversion of debt on April 10, 2002 517,043
Foreign currency translation 137,093
Net loss for the year ended December 31, 2002 (827,279) (827,279)
------------------------------------------------------
Balance at December 31, 2002 (9,868,084) 336,249
======================================================
Foreign currency translation 83,909
Net loss for the year ended December 31, 2003 (75,336) (75,336)
------------------------------------------------------
(9,943,420) 344,822
Net loss for the year ended December 31, 2004 ======================================================
Foreign currency translation (71,052)
Net loss for the year ended December 31, 2004 (486,398) (486,398)
------------------------------------------------------
$ (10,429,818) $ (212,628)
======================================================
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended Year ended
December 31, 2004 December 31, 2003 December 31, 2002
----------------- ----------------- -----------------
Cash flows provided by (used for) operating activities:
Net income (loss) $ (486,398) $ (75,336) $ (827,279)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 63,590 80,835 67,330
Gain on sale of building, net of deferred taxes (92,751) - -
Loss on impairment of investments 450,844
Foreign currency translation 71,052 86,052 121,489
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 1,752,456 (550,734) 703,409
Loans receivable, related party 60,000 -
Inventory (111,508) 178,969 29,150
Prepaid expenses 7,104 36,994 (25,694)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses (1,397,380) (431,540) (584,524)
Income taxes payable - (137) 549
Deferred taxes (86,800) (2,400) (2,400)
------------------ -------------------------- ------------------
Total adjustments 265,763 (601,961) 760,153
------------------ -------------------------- ------------------
Net cash used for operating activities (220,635) (677,297) (67,126)
Cash flows provided by (used for) investing activities:
Sale of Building 1,523,000
Acquisition of property and equipment (29,074) (44,347) (35,484)
Proceeds from short-term loans, related party - - -
------------------ -------------------------- ------------------
Net cash provided by (used for) investing activities 1,493,926 (44,347) (35,484)
------------------ -------------------------- ------------------
Cash flows provided by (used for) financing activities:
Credit facility (1,082,723) 71,435 (353,766)
Proceeds from long-term debt, bank 89,976 -
Payment on long-term debt, bank (243,377) (94,017) (81,183)
------------------ -------------------------- ------------------
Net cash provided by (used for) financing activities (1,326,100) 67,394 (434,949)
------------------ -------------------------- ------------------
Net increase (decrease) in cash (52,809) (654,250) (537,559)
Cash, beginning of period 147,841 802,091 1,339,650
Cash, end of period $ 95,032 $ 147,841 $ 802,091
------------------ -------------------------- ------------------
Supplemental disclosure of cash flow information:
Interest paid $ 18,102 $ 67,290 $ 91,903
Income taxes paid - - -
------------------ -------------------------- ------------------
The accompanying notes from an integral part of these consolidated financial
statements.
F-5
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(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, and
changed its name to 24Holdings Inc. on April 2, 2001. The Company
has a wholly owned subsidiary, 24Store, LTD, located in the UK.
The Company is a majority owned subsidiary of InfiniCom AB
("InfiniCom"), a publicly listed company on the SBI market in
Sweden.
24Store, LTD is in the wholesale and retail business of selling
and distributing consumer and commercial electronic products in
Europe.
(2) Summary of Significant Accounting Policies:
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 $486,398 $75,336 and $827,279 during 2004,
2003 and 2002, respectively, and has an accumulated deficit of
$10,429,818 at December 31, 2004. These factors raise substantial
doubt about the Company's ability to continue as a going concern.
Management's intentions as relate to this are as follows:
o Management made the determination to separately sell
the UK subsidiary, 24Store LTD, and the remaining
public shell to realize the value inherent in the
public vehicle and as there was more value to the two
halves as opposed to the whole. The subsidiary has been
presented as a discontinued operations.
o The Company recently entered into a non-binding Letter
of Intention for the sale of the public shell for
$500,000.
o Management during 2004 has decreased operating costs
and is increasing revenues through new sources of
revenue, including software sales and consulting.
The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a
going concern.
F-6
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(2) Summary of Significant Accounting Policies, Continued:
Principles of Consolidation:
The accompanying consolidated statements include the accounts of
24Holdings Inc. and subsidiary. All significant intercompany
transactions and accounts have been eliminated.
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:
All revenue is generated by 24Store, the UK subsidiary, and therefore
is included in Discontinued Operations.
Hardware and peripheral sales
-----------------------------
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.
Software support sales
----------------------
The Company recognizes revenue upon the installation of its product to
customers. Service contracts paid in advance are classified as
deferred income and recognized over the term as services are provided.
Deferred income is not material and is included in accounts payable
and accrued 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.
F-7
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(2) Summary of Significant Accounting Policies, Continued:
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 (sold in 2004) 50 years
Furniture and equipment 5 years
Computers 3-4 years
Software 3-4 years
Goodwill:
In connection with various acquisitions which were accounted for under
the purchase method of accounting, the Company recorded goodwill.
On January 1, 2002 the Company adopted SFAS No. 142, "Goodwill and
Other Intangibles" and accordingly has ceased amortizing Goodwill, the
expense for which would have been approximately $210,000, for the year
ended December 31, 2002. Pursuant to the standard, the Company
performed the first tier Goodwill impairment test based on criteria in
effect at date of adoption, January 1, 2002, and determined that there
was no indication of impairment. The Company has determined the date
of the annual impairment test will be the Company's fiscal year end of
December 31, and therefore performed the test again at December 31,
2002. Due to the decrease in the market value of the Company's
publicly traded common stock, the fair value of the reporting unit was
below the carrying value of the reporting unit, an indication of
impairment to the carrying value of the goodwill. Pursuant to SFAS
142, the second tier impairment test was conducted to measure the
amount of impairment loss, whereby the implied fair value of reporting
unit goodwill is compared with the carrying amount of that goodwill,
determined in the same manner as the amount of goodwill recognized in
a business combination is determined. The impairment test resulted in
the recognition of an impairment loss of approximately $451,000, the
carrying value of the goodwill, in the year ended December 31, 2002.
Long Lived Assets held for sale:
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. The
Company has followed the guidance of this pronouncement in the
accounting for, and financial statement presentation of, their UK
subsidiary, 24Store (Note 4).
Inventory:
Inventory is stated at the lower of cost or market using the FIFO
(first-in, first-out) cost method.
F-8
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(2) Summary of Significant Accounting Policies, Continued:
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, 2004, 2003, and 2002, advertising expenses amounted to
approximately $17,000, $26,000, and $125,000 respectively.
Concentration:
During the year ended December 31, 2004 the Companies largest customer
only accounted for 4.5% of total sales. During the year ended December
31, 2003, the Company had three major customers accounting for 23.1%
of their sales, or approximately $3,330,000. Approximately $472,000
due from these customers is included in accounts receivable at
December 31, 2003.
During the year ended December 31, 2002, the Company had one major
customer accounting for 13.8% of their sales, or approximately
$1,705,000. There were no amounts due from this customer included in
accounts receivable at December 31, 2002.
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, 2004, 2003 and 2002 because there were no dilutive securities
outstanding during those periods.
F-9
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(2) Summary of Significant Accounting Policies, Continued:
Segment:
During the year ended December 31, 2003 the Company started up a new
division, 24Solutions, which sells and supports business management
software. Based on Company's integration and management strategies the
Company has determined 24Solutions qualifies as a separate segment as
defined by SFAS 131. However, 24Solutions is not a reportable segment
as the segment does not yet meet the quantitative thresholds set in
SFAS 131 for financial disclosure, as neither it's revenues, profits
nor assets account for ten percent of the combined revenues, profits
nor assets of the Company.
For the years ended December 31, 2004, 2003, and 2002 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:
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement
133 on Derivative Instruments and Hedging Activities", effective for
contracts entered into or modified after September 30, 2003, except as
stated below and for hedging relationships designated after September
30, 2003. In addition, except as stated below, all provisions of this
Statement should be applied prospectively. The provisions of this
Statement that relate to Statement 133 Implementation Issues that have
been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective
effective dates. In addition, paragraphs 7(a) and 23(a), which relate
to forward purchases or sales of when-issued securities or other
securities that do not yet exist, should be applied to both existing
contracts and new contracts entered into after September 30, 2003. The
adoption of this Statement did not have a material impact to the
company's financial position or results of operation.
F-10
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
(2) Summary of Significant Accounting Policies, Continued:
Recent Accounting Pronouncements, Continued:
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity", effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective for public entities at
the beginning of the first interim period beginning after June 15,
2003. This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a freestanding financial instrument that is within its
scope as a liability (or an asset in some circumstances). Many of
those instruments were previously classified as equity. Some of the
provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, Elements
of Financial Statements. The adoption of this Statement did not have a
material impact to the company's financial position or results of
operation.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities" (an interpretation of Accounting
Research Bulletin (ARB) No. 51, Consolidated Financial Statements).
Interpretation 46 addresses consolidation by business enterprises of
entities to which the usual condition of consolidation described in
ARB-51 does not apply. The Interpretation changes the criteria by
which one company includes another entity in its consolidated
financial statements. The general requirement to consolidate under
ARB-51 is based on the presumption that an enterprise's financial
statements should include all of the entities in which it has a
controlling financial interest (i.e., majority voting interest).
Interpretation 46 requires a variable interest entity to be
consolidated by a company that does not have a majority voting
interest, but nevertheless, is subject to a majority of the risk of
loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. A company
that consolidates a variable interest entity is called the primary
beneficiary of that entity.
F-11
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
(2) Summary of Significant Accounting Policies, Continued:
Recent Accounting Pronouncements, Continued:
In December 2003 the FASB concluded to revise certain elements of FIN
46, primarily to clarify the required accounting for interests in
variable interest entities. FIN-46R replaces FIN-46,that was issued in
January 2003. FIN-46R exempts certain entities from its requirements
and provides for special effective dates for entities that have fully
or partially applied FIN-46 as of December 24, 2003. In certain
situations, entities have the option of applying or continuing to
apply FIN-46 for a short period of time before applying FIN-46R. In
general, for all entities that were previously considered special
purpose entities, FIN 46 should be applied in periods ending after
December 15, 2003. Otherwise, FIN 46 is to be applied for registrants
who file under Regulation SX in periods ending after March 15, 2004,
and for registrants who file under Regulation SB, in periods ending
after December 15, 2004. The adoption of this Statement did not have a
material impact to the company's financial position or results of
operation.
In December 2003, the FASB issued a revised SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" which
replaces the previously issued Statement. The revised Statement
increases the existing disclosures for defined benefit pension plans
and other defined benefit postretirement plans. However, it does not
change the measurement or recognition of those plans as required under
SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." Specifically, the revised Statement requires companies to
provide additional disclosures about pension plan assets, benefit
obligations, cash flows, and benefit costs of defined benefit pension
plans and other defined benefit postretirement plans. Also, companies
are required to provide a breakdown of plan assets by category, such
as debt, equity and real estate, and to provide certain expected rates
of return and target allocation percentages for these asset
categories. The Company has implemented this pronouncement and has
concluded that the adoption has no material impact to the financial
statements.
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4". The amendments made by Statement
151 clarify that abnormal amounts of idle facility expense, freight,
handling costs, and wasted materials (spoilage) should be recognized
as current period charges and require the allocation of fixed
production overheads to inventory based on the normal capacity of the
production facilities. The guidance is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal
years beginning after November 23, 2004. The Company has evaluated the
impact of the adoption of SFAS 151, and does not believe the impact
will be significant to the Company's overall results of operations or
financial position.
F-12
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001
(2) Summary of Significant Accounting Policies, Continued:
Recent Accounting Pronouncements, Continued:
In December 2004, the FASB issued SFAS No.153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for
Nonmonetary Transactions." The amendments made by Statement 153 are
based on the principle that exchanges of nonmonetary assets should be
measured based on the fair value of the assets exchanged. Further, the
amendments eliminate the narrow exception for nonmonetary exchanges of
similar productive assets and replace it with a broader exception for
exchanges of nonmonetary assets that do not have commercial substance.
Previously, Opinion 29 required that the accounting for an exchange of
a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on
the recorded amount of the asset relinquished. Opinion 29 provided an
exception to its basic measurement principle (fair value) for
exchanges of similar productive assets. The Board believes that
exception required that some nonmonetary exchanges, although
commercially substantive, be recorded on a carryover basis. By
focusing the exception on exchanges that lack commercial substance,
the Board believes this Statement produces financial reporting that
more faithfully represents the economics of the transactions. The
Statement is effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. Earlier application is
permitted for nonmonetary asset exchanges occurring in fiscal periods
beginning after the date of issuance. The provisions of this Statement
shall be applied prospectively. The Company has evaluated the impact
of the adoption of SFAS 152, and does not believe the impact will be
significant to the Company's overall results of operations or
financial position.
In December 2004, the FASB issued SFAS No.123 (revised 2004),
"Share-Based Payment". Statement 123(R) will provide investors and
other users of financial statements with more complete and neutral
financial information by requiring that the compensation cost relating
to share-based payment transactions be recognized in financial
statements. That cost will be measured based on the fair value of the
equity or liability instruments issued. Statement 123(R) covers a wide
range of share-based compensation arrangements including share
options, restricted share plans, performance-based awards, share
appreciation rights, and employee share purchase plans. Statement
123(R) replaces FASB Statement No. 123, Accounting for Stock-Based
Compensation, and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees. Statement 123, as originally issued in 1995,
established as preferable a fair-value-based method of accounting for
share-based payment transactions with employees. However, that
Statement permitted entities the option of continuing to apply the
guidance in Opinion 25, as long as the footnotes to financial
statements disclosed what net income would have been had the
preferable fair-value-based method been used. Public entities (other
than those filing as small business issuers) will be required to apply
Statement 123(R) as of the first interim or annual reporting period
that begins after June 15, 2005. The Company has evaluated the impact
of the adoption of SFAS 123(R), and does not believe the impact will
be significant to the Company's overall results of operations or
financial position as the Company at this time does not plan to grant
stock based compensation.
F-13
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(3) Sale of Building:
During the first quarter of 2004, the Company completed it's negotiations
on the sale of the freehold property in which their operations are
conducted, for approximately $1,523,000. On March 25, 2004 contracts for
the sale of the building were exchanged with the completion of the sale
made on April 14, 2004. The sale resulted in a gain on sale recognized in
the accompanying 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
(Note 4) this gain on sale is included in discontinued operations in the
accompanying Statement of Operations.
24Store Ltd, a wholly owned subsidiary of 24Holdings 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, through September 2005 .
Total rent expense for the year ending December 31, 2004 amounted to
$56,700.
(4) Discontinued Operations :
The Company's management has committed to a plan to sell their UK
subsidiary, 24Europe, which presently is anticipated to occur within the
next six months. The Company is in discussions with their Parent company,
Infinicom, to acquire the subsidiary in exchange for a combination of cash
and a note payable. As the intended sale meets 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 anticipates 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 December
31, 2004, are as follows:
Cash and cash equivalents $ 94,104
Accounts receivable 503,140
Inventory 289,067
Prepaid expenses and other assets 29,908
Property and equipment - held for sale 68,407
-----------
Current assets held for sale $ 984,626
===========
Accounts payable and accrued expenses 929,292
Income taxes payable -
------------
Current liabilities held for sale $ 929,292
============
F-14
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(5) Major Vendor:
Included in accounts payable at December 31, 2004 is approximately $547,000
owed to three suppliers. Purchases from these suppliers during 2004 totaled
approximately $3,990,000.
(6) Credit Facility:
The Company's subsidiary in the United Kingdom uses a discount financing
company for credit administration and cash flow purposes. The financing
company purchases approved receivables, less a commission and discounting
charges. The financing company holds as security interests all receivables
and at times the facility was outstanding, certain guarantees of the
officer-shareholders. The related overdraft facility and the guarantees
were terminated in April, 2004.
The discount rate is 2% above the base rate of National Westminster Bank in
the United Kingdom, 6% and 5.5% at December 31, 2004 and 2003,
respectively.
(8) 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 $ 0.485 per share.
(9) Loan from Parent Company:
As of December 31, 2004 the Company's ultimate Parent company has advanced
them a total of approximately $150,000 for expenses associated with the
Company's public registrant filing requirements. The note is non-interest
bearing and due January 31, 2005. The note was not paid back, and is
therefore past due, but the parent company has not requested payment.
F-15
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
(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 Company does not file consolidated tax returns in the United Kingdom,
however, no tax expense is due in December 31, 2004 or 2003 due to group
relief between the related entities under UK taxation rules.
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,
2004 2003 2002
----------------------- ------------
Provision at expected federal
statutory rate (35)% (35)% (35)%
Loss for which no benefit is available 35 35 35
---------- --------- --------
-% -% - %
========== ========= ==========
(14) Subsequent Event:
In February 2005, the Company's ultimate parent company, Infinicom, entered into
a nonbinding Letter of Intent with an unrelated third party, to purchase all of
Infinicom's shares in 24Holdings Inc. The agreement is contingent on the
contemporaneous purchase by Infinicom of all the issued and outstanding capital
stock of 24Store (Europe) Ltd. Following the exchange, the party will use it's
best efforts, as soon as reasonably practical, to identify an operating company
to enter into an agreement to merge with the Company in exchange for shares of
the Company's stock.
F-16
24HOLDINGS INC.
(FORMERLY SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002
Dec-31 Sep-30 Jun-30 Mar-31 Total
Year Ended December 31, 2004:
Continued Operations
- --------------------
Net Revenues $ - $ - $ - $ - $ -
Gross Profit - - - - -
Loss from continuing operations (49,719) (26,301) (26,446) (26,964) (129,430)
Discontinued Operations
- -----------------------
Net Revenues 1,145,775 1,499,364 2,198,610 3,034,996 7,878,745
Gross Profit 208,654 205,876 256,214 378,110 1,048,854
Loss from discontinued operations (83,819) (162,765) (30,347) (80,037) (356,968)
Net loss (133,538) (189,066) (56,793) (107,001) (486,398)
Year Ended December 31, 2003:
Continued Operations
- --------------------
Net Revenues - - - - -
Gross Profit - - - - -
Loss from continuing operations (4,771) (43,192) (19,468) (28,003) (95,434)
Discontinued Operations
- -----------------------
Net Revenues 4,209,566 3,170,609 2,991,615 4,190,612 14,562,402
Gross Profit 615,515 437,670 368,086 566,928 1,988,199
Income(Loss) from discontinued operations 159,953 (19,751) (147,110) 27,006 20,098
Net Income(loss) 155,182 (62,943) (166,578) (997) (75,336)
F-17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
The Company maintains disclosure controls and procedures designed to ensure
that information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time periods. As of December 31, 2004, the
Company's Chief Executive Officer and Chief Financial Officer evaluated the
effectiveness of these controls and procedures. Based on the evaluation, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
failure of the Company to have an audit committee, and the failure of the Board
to assume the audit committee functions, results in the absence of an important
oversight, constituting a material weakness in the Company's corporate
governance structure. Accordingly, the Company's disclosure controls and
procedures are not effective.
There were no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the evaluation.
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
---- --- -------- -----
Urban von Euler 49 Director, Chairman of the Board and 2002
Chief Executive Officer
Larsake Sandin 55 Director 2000
Roger Woodward 59 Chief Financial Officer, 2001
Chief Accounting Officer
and Secretary
Urban von Euler, Director, Chairman of the Board and Chief Executive
Officer. Mr. von Euler is the Chief Executive Officer of Infinicom AB, the
majority shareholder of the Company. Mr. von Euler joined Infinicom in August
2000 and has been closely involved with the Company since then. Mr. von Euler
has long experience as an executive manager of several companies both in Sweden
and different countries in Europe as well as in the United States and has
extensive marketing and sales experience. Mr. von Euler is presently on the
board of directors of several companies and has specialized in working with
companies in strong development, change of management and in turn-around
situations. Mr. von Euler has a formal education and diploma in business
administration and a background in accounting from one of the leading
international accounting firms in Sweden, where he worked for 6 years. Prior to
joining Infinicom, Mr. von Euler was the president and Chief Executive Officer
of a private health care company.
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.
-16-
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 director
or executive officer and any other person pursuant to which the director or
executive officer was or is to be selected as such. 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 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.
Audit Committee Financial Expert
As the Company does not have an audit committee, the Company's board of
directors has determined that it does not have an "audit committee financial
expert," as that term is defined in Item 401(h) of Regulation S-K.
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,
2003 the Reporting Persons complied with all applicable Section 16(a) reporting
requirements.
-17-
Code of Ethics
The Company has adopted a "code of ethics," as that term is defined in Item
406 of Regulation S-K.
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, 2004, 2003 and 2002 by the
Company's Chief Executive Officer and the Executive Officers of the Company
whose compensation was $100,000 or greater during the fiscal year ended December
31, 2004.
Annual
Compensation Long-Term Compensation
------------ ------------------------
Restricted Securities All Other
Principal Salary Bonus Stock Underlying Compensation
Name Position Year ($) ($) Awards ($) Options (#) ($)
- ----------------------------------------------------------------------------------------------------------------
Urban von Euler (1) President and 2004 $ -- $ -- $ -- -- $ --
Chief Executive 2003 $ -- $ -- $ -- -- $ --
Officer 2002 $ -- $ -- $ -- -- $ --
Michael Neame (1) President and 2004 $ 34,230 $ -- $ -- -- $ 24,900
Chief Executive 2003 $ 156,333 $ -- $ -- -- $ 19,773
Officer 2002 $ 142,500 $ -- $ -- -- $ 18,000
(1) Mr. Neame resigned as Director, President and Chief Executive Officer of
the Company on February 10, 2004, and Urban von Euler was subsequently
appointed as President and Chief Executive Officer of the Company.
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 12, 2005,
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. Other than the shares which may be acquired by
InfiniCom AB (see footnote 1 of the table), 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.
-18-
Beneficially Owned
Name and Address Shares Percent
---------------- ------ -------
InfiniCom AB (publ)
Karlaplan 2
114 60 Stockholm
Sweden........................................................ 86,665,136 81.56
Larsake Sandin
Frensham Court, Summerfield Lane
Surrey GU10 3AN
England....................................................... 0 0
Urban von Euler
Valhallavagen 108
Stockholm
Sweden........................................................ 0 0
Roger Woodward
Zennor
Cherry Tree Walk
Rowledge
Farnham
Surrey
GU10 4AD
United Kingdom................................................ 0 0
All executive officers and directors as a group (3 persons)... 0 0
The Company currently maintains no equity compensation plans.
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 to which 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. The shares
were issued to InfiniCom in April 2004.
On February 15, 2005, InfiniCom AB, the majority stockholder of the Company,
entered into a letter of intent to sell its shares of Common Stock in the
Company to a group of private investors. As part of the transaction, it is
contemplated that the Company will sell to InfiniCom all of the outstanding
share capital of 24STORE, resulting in the Company continuing its existence as a
shell company with no subsidiaries. Although the Company believes that the
proposed purchaser of InfiniCom's majority interest in the Company intends to
cause the Company to merge with or acquire an existing business, there can be no
assurance that such a secondary transaction will occur. Moreover, if such
transaction were to occur, there can be no assurance that it would enhance the
Company's future operations and financial results.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following is a summary of the fees billed to the Company by Stonefield
Josephson, Inc., the Company's independent auditors, for professional services
rendered for the years ended December 31, 2004 and 2003:
2003 2004
-------------------------------
Fee Category:
Audit fees (1) $34,686 $63,316
-19-
Audit-related fees -- --
Tax fees -- --
All other fees -- --
-------------------------------
Total Fees $34,686 $63,316
===============================
(1) Audit fees consist of aggregate fees billed for professional services
rendered for the audit of the Company's annual financial statements and review
of the interim financial statements included in quarterly reports or services
that are normally provided by the independent auditors in connection with
statutory and regulatory filings or engagements for the years ended December 31,
2004 and 2003.
All fees were pre-approved.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements and Financial Statement Schedules
(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, 2004 and December
31, 2003
(iii) Consolidated Statement of Income (Operations) for each of
the three years ended December 31, 2004
(iv) Consolidated Statement of Shareholders' Equity (Deficit) for
each of the three years ended December 31, 2004
(v) Consolidated Statement of Cash Flows for each of the three
years ended December 31, 2004
(vi) Notes to the Consolidated Financial Statements
(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).
-20-
Exhibit Number Description
- -------------- -----------
2.4 Agreement on the Transfer of Shares dated March 29,
2001 between 24STORE (Europe) Limited and Compo Consult
AS (English Translation) (Filed as Exhibit 2.4 to the
Company's Annual Report on Form 10-K for the Period
Ended December 31, 2001 (filed April 16, 2002) and
incorporated herein by this reference).
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).
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).
-21-
Exhibit Number Description
- -------------- -----------
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. (Filed
as Exhibit 10.10 to the Company's Annual Report on Form
10-K for the Period Ended December 31, 2001 (filed
April 16, 2002) and incorporated herein by this
reference).
10.11 Agreement dated March 21, 2003 among Lapland UK Ltd.,
Mobile Planet Ltd., Cyberia (UK) Ltd., 24Holdings Inc.,
Michael Neame, Larsake Sandin, Lennart Orkan, Roger
Woodward, Urban von Ueler, Akbar Seddigh, 24Store
(Europe) Ltd. and Martin Clarke (Filed as Exhibit 10.11
to the Company's Annual Report on Form 10-K for the
Period Ended December 31, 2002 (filed April 15, 2003)
and incorporated herein by this reference).
10.12 Agreement dated March 24, 2004 between Cyberia (UK)
Limited, as seller, and Stephen George Cranstone,
Anthony Robert Norris, Hugo James Bibby and Tenon
Pensioneer Trustee Limited, as trustees of the Link
Microtek Limited Executive Retirement Plan.
14.1 Code of Ethics.
21* List of Subsidiaries of the Company.
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.
* filed or furnished with this report
(c) Current Reports on Form 8-K
Current Report on Form 8-K filed March 9, 2005.
-22-
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/ Urban von Euler
---------------------------------
Name: Urban von Euler
Title: President and
Chief Executive Officer
Date: April 15, 2005
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/ Urban von Euler
------------------------------------
Name: Urban von Euler
Title: President, Chief Executive
Officer and Director
By: /s/ Roger Woodward
------------------------------------
Name: Roger Woodward
Title: Chief Financial Officer
(Principal Accounting Officer)
By: /s/ Larsake Sandin
------------------------------------
Name: Larsake Sandin
Title: Director