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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2005
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-22281
24HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0726608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Cyberia House
Church Street, Basingstoke
Hampshire RG21 7QN
United Kingdom
(Address of Principal Executive Offices)
+44 1256 867 800
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of Common Stock outstanding at May 18, 2005: 96,147,395.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED BALANCE SHEET
March 31, 2005 December 31, 2004
-------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,629 $ 928
Assets of subsidiary held for sale 670,747 984,626
----------------- -----------------
Total current assets 672,376 985,554
$ 672,376 $ 985,554
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 47,179 $ 118,914
Liabilities of subsidiary held for sale 812,403 929,292
----------------- -----------------
Total current liabilities 859,582 1,048,206
Long term loans, related party 230,879 149,976
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 issued and outstanding 36,742 36,742
Additional paid in capital 10,362,233 10,362,233
Accumulated other comprehensive loss (181,171) (181,785)
Accumulated deficit (10,635,889) (10,429,818)
----------------- -----------------
Total shareholders' equity (418,085) (212,628)
$ 672,375 $ 985,554
================= =================
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24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
March 31, 2005 March 31, 2004
-------------- --------------
(Unaudited) (Unaudited)
Revenue $ - $ -
Cost of Revenue - -
Gross profit - -
Operating expenses:
General and administrative 10,443 27,564
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Total operating expenses 10,443 27,564
Net loss before provision for income taxes (10,443) (27,564)
Provision for income taxes - -
------------------ ------------------
Loss from continuing operations (10,443) (27,564)
Loss from discontinued operations, net of taxes (195,629) (79,437)
------------------ ------------------
Net loss $ (206,072) $ (107,001)
================== ==================
Other comprehensive income/(loss):
Foreign currency translation 614 (28,167)
------------------ ------------------
Total comprehensive loss (205,458) (135,168)
Net loss per share - basic and diluted, continuing
operations and discontinued operations $ (0.00) $ (0.00)
================== ==================
Weighted average number of shares outstanding -
basic and diluted 96,147,396 96,147,396
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24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three months ended Three months ended
March 31, 2005 March 31, 2004
-------------- --------------
(Unaudited) (Unaudited)
Cash flows provided by (used for) operating activities:
Net loss $ (206,072) $ (107,001)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation (7,039) 24,257
Amortization of goodwill - -
Foreign currency translation (674) 16,069
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 26,017 834,654
Prepaid expenses (9,177) (20,774)
Inventory 150,044 86,262
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (206,384) (890,383)
Income taxes payable - -
Deferred taxes - (600)
------------------ ------------------
Total adjustments (47,213) 49,485
------------------ ------------------
Net cash provided by (used for) operating activities (253,285) (57,516)
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment (9,893)
Due to/from related party 80,903 60,000
------------------ ------------------
Net cash used for investing activities 80,903 50,107
Cash flows provided by (used for) financing activities:
Payments/advances on credit facility 79,935 (57,284)
Payments on long-term debt, bank - (25,806)
------------------ ------------------
Net cash provided by financing activities 79,935 (83,090)
Net decrease in cash (92,447) (90,499)
Cash, beginning of period 95,032 147,841
Cash, end of period $ 2,585 $ 57,341
------------------ ------------------
Supplemental disclosure of cash flow information:
Interest paid $ - $ 18,815
Income taxes paid $ - $ -
------------------ ------------------
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24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(1) Description of Business:
Interim Financial Statements:
The accompanying financial statements include all adjustments (consisting
of only normal recurring accruals), which are, in the opinion of
management, necessary for a fair presentation of the results of operations
for the periods presented. Interim results are not necessarily indicative
of the results to be expected for a full year. The financial statements
should be read in conjunction with the financial statements included in the
annual report of 24Holdings Inc. and subsidiary on Form 10-K for the year
ended December 31, 2003.
General:
24Holdings Inc., formerly known as Scoop, Inc. ("24Holdings" or the
"Company"), is a majority owned subsidiary of InfiniCom AB, a publicly
listed company on the SBI market in Sweden. 24Holdings has a wholly owned
subsidiary, 24Store Europe LTD, located in the United Kingdom, which is in
the business of selling and distributing consumer and commercial electronic
products in Europe.
Basis of Presentation:
The Company's financial statements have been presented on the basis that
the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal
course of business. The Company incurred net losses of $206,071 and
$486,398 during the three months ended March 30, 2005 and the year ended
December 31, 2004, respectively, and has an accumulated deficit of
$10,635,889 at March 31, 2005. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management is also
seeking to sell the UK operating subsidiary (see Note 3). The financial
statements do not include any adjustments that might be necessary if the
Company is unable to continue as a going concern.
-4-
24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 2004
(2) Principles of Consolidation:
The accompanying consolidated statements include the accounts of 24Holdings
Inc. and subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
The financial statements of subsidiaries outside the United States are
generally measured using the local currency as the functional currency.
Accordingly, assets and liabilities are translated at year-end exchange
rates, and operating statement items are translated at average exchange
rates prevailing during the year. The resulting translation adjustments are
recorded as other comprehensive income. Exchange adjustments resulting from
foreign currency transactions are included in the determination of net
income (loss).
(3) Discontinued Operations:
The Company's management has committed to a plan to sell their UK
subsidiary, 24Europe, which presently is anticipated to occur within the
next three months. The Company is in discussions with their Parent company,
Infinicom, to acquire the subsidiary in exchange for cash consideration. 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 March 31,
2005, are as follows:
Cash and cash equivalents $ 951
Accounts receivable 470,169
Inventory 135,994
Prepaid expenses and other assets 38,596
Property and equipment 25,037
Assets held for sale $ 670,747
Accounts payable and accrued expenses $ 733,039
Credit line 79,364
Current liabilities held for sale $812,403
(4) Sale of Infinicom's stockholding in 24Holdings Inc:
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 the Company. The agreement is
contingent on the contemporaneous purchase by Infinicom of all the issued
and outstanding capital stock of 24Store (Europe) Ltd., plus all trademarks
and domain names held by the Company. Following the sale, the buyer has
indicated that it will use its best efforts, as soon as
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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.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's interim
results of operations and financial condition. This discussion should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
For the Three Months ended March 31, 2005: Continuing Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended March 31, 2005, were
$10,442 compared to $27,564 for the three months ended March 31, 2004. The main
areas of the decreases were Legal and Accountancy fees.
For the Three Months ended March 31, 2005: Discontinued Operations
NET SALES. Net sales for the three months ended March 31, 2005 were $1,574,501
compared to $3,034,996 for the three months ended March 31, 2004 representing a
decrease of 48%. The reduction is the result of the loss of key sales staff and
the loss of some major accounts.
GROSS PROFIT. Gross profit for the three months ended March 31, 2005 was
$178,631 compared to $378,110 for the three months ended March 31, 2004
representing a decrease of 53%. Gross profits as a percentage of sales were
11.3% for the three months ended March 31, 2005 compared to 12.4% for the three
months ended March 31, 2004. The main reason for the decline in gross profit was
the decline in sales, the gross profit margin in three months ended March 31,
2004 was improved by high margin Panasonic sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended March 31, 2005 were
$373,731 compared to $445,190 for the three months ended March 31, 2004. The
decrease was mainly the result of reductions in salaries.
INTEREST EXPENSE. Interest expense, net of interest income for the three months
ended March 31, 2005 was a cost of $529 compared to a cost $12,957 for the three
months ended March 31, 2004, this reduction is the result of paying off the
mortgage on the building in April 2004, with the respective reduction in
mortgage interest.
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LIQUIDITY AND CAPITAL RESOURCES. Continuing Operations
Cash and cash equivalents at March 31, 2005 were $1,629 compared to $928 as of
December 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES. Discontinued Operations
Cash and cash equivalents at March 31, 2005 were $951 compared to $94,104 as of
December 31, 2004. This decrease is the result of payment timing of accounts
payable.
In its United Kingdom operating subsidiaries the Company has a revolving line of
credit based on 70% of eligible receivables. The revolving line of credit bears
interest at the prime rate (March 05 was 4.75 %) plus 2%.
PLAN OF OPERATIONS
It is the intention of 24Holdings Inc. to sell the UK operations, and in
accordance with SFAS 144 assets and liabilities of the units have been shown as
held for sale and operations as discontinued operations for all periods
presented.
CRITICAL ACCOUNTING POLICIES
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 Quarterly Report.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold any derivative financial instruments. However, the
Company is exposed to interest rate risk. The Company believes that the market
risk arising from holdings of its financial instruments is not material.
However, all of the Company's operations are conducted through its subsidiary
24STORE and denominated in British pounds sterling or, prior to the sale of its
Norwegian subsidiary, Norwegian Kroner, and none of the Company's revenues are
generated in US Dollars. For consolidation purposes, the assets and liabilities
of 24STORE are converted to US Dollars using year-end exchange rates and results
of operations are converted using a monthly average rate during the year.
Fluctuations in the currency rates between the United Kingdom, Norway and the
United States may give rise to material variances in reported earnings of the
Company.
Item 4. Controls and Procedures.
The Company 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 the end of the fiscal quarter
covered by this report on Form 10-Q, 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.
-9-
PART II
OTHER INFORMATION
Item 5. Other Information.
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 unrelated to Infinicom. As part of the
transaction, it is contemplated that the Company will sell to Infinicom all of
the outstanding share capital of 24STORE and certain intellectual property
rights, resulting in the Company continuing its existence as a shell company
with no subsidiaries and no operations. 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 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
31.1 Chief Executive Officer Certification pursuant to Rule 13a-14(a)
under the Securities Act of 1934
31.2 Chief Financial Officer Certification pursuant to Rule 13a-14(a)
under the Securities Act of 1934
32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350
32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K.
Current Report on Form 8-K filed March 9, 2005.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 23, 2005 24HOLDINGS INC.
By: /s/ Urban von Euler
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Urban von Euler
President and Chief Executive Officer
By: /s/ Roger Woodward
-----------------------------------------
Roger Woodward
Chief Financial Officer and Secretary
(Principal Accounting Officer)
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