UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
for the quarterly period ended: June 30, 2015
| ¨ | TRANSITION REPORT UNDER 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 | (IRS Employer |
| incorporation or organization) | Identification No.) |
131 Columbia Turnpike, Suite 1
Florham Park, NJ 07932
(Address of principal executive offices)
973-635-4047
(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
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.
Yesx No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yesx No¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer ¨ Non-accelerated filer ¨ | Accelerated filer ¨ Smaller reporting companyx |
Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yesx No¨
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: There were a total of 2,071,544 shares of the issuer’s common stock, par value $.001 per share, outstanding as of August 7, 2015.
24HOLDINGS INC.
Quarterly Report on Form 10-Q
For the Period Ended June 30, 2015
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
FORWARD-LOOKING STATEMENTS
Certain statements made in this Quarterly Report on Form 10-Q are “forward-looking statements” regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the continued expansion of our business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. The terms “we”, “our”, “us”, or any derivative thereof, as used herein refer to 24Holdings Inc., a Delaware corporation, and its predecessors.
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PART I. – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
24HOLDINGS INC.
| ASSETS | June 30, 2015 | December 31, 2014 | ||||||
| (unaudited) | ||||||||
| Cash | $ | 29,315 | $ | 75,532 | ||||
| Prepaid assets | 2,167 | 5,292 | ||||||
| TOTAL CURRENT ASSETS | $ | 31,482 | $ | 80,824 | ||||
| LIABILITIES AND SHAREHOLDERS' (DEFICIT) | ||||||||
| Accrued expenses | $ | 7,083 | $ | 9,972 | ||||
| Convertible note payable – related party, net | 90,490 | 71,695 | ||||||
| TOTAL CURRENT LIABILITIES | 97,573 | 81,667 | ||||||
| COMMITMENTS AND CONTINGENCIES | 0 | 0 | ||||||
| SHAREHOLDERS’ (DEFICIT): | ||||||||
| Preferred stock; $0.001 par value, 5,000,000 authorized , none issued and outstanding | 0 | 0 | ||||||
| Common stock, $.001 par value; 100,000,000 shares authorized, 2,071,544 shares issued and outstanding, respectively | 2,072 | 2,072 | ||||||
| Additional paid-in capital | 11,048,481 | 11,048,481 | ||||||
| Accumulated deficit | (11,116,644 | ) | (11,051,396 | ) | ||||
| Total shareholders' (deficit) | (66,091 | ) | (843 | ) | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT) | $ | 31,482 | $ | 80,824 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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24HOLDINGS INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
| Expenses | ||||||||||||||||
| General and administrative | 21,077 | 18,100 | 43,718 | 43,100 | ||||||||||||
| Total operating expenses | 21,077 | 18,100 | 43,718 | 43,100 | ||||||||||||
| Other expense - interest | 10,825 | 0 | 21,530 | 0 | ||||||||||||
| Net loss before provision for income taxes | (31,902 | ) | (18,100 | ) | (65,248 | ) | (43,100 | ) | ||||||||
| Income taxes | 0 | 0 | 0 | 0 | ||||||||||||
| Net loss | $ | (31,902 | ) | $ | (18,100 | ) | $ | (65,248 | ) | $ | (43,100 | ) | ||||
| Weighted average number of common shares outstanding | 2,071,544 | 2,071,544 | 2,071,544 | 2,071,544 | ||||||||||||
| Basic and diluted net loss per share - basic and fully diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.02 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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24 HOLDINGS INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2015 | 2014 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | (65,248 | ) | $ | (43,100 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Debt discount | 18,795 | 0 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | 3,125 | 2,500 | ||||||
| Accrued expenses | (2,889 | ) | (477 | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | (46,217 | ) | (41,077 | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (46,217 | ) | (41,077 | ) | ||||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 75,532 | 47,165 | ||||||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 29,315 | $ | 6,088 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOWS | ||||||||
| INFORMATION | ||||||||
| Interest paid | $ | 0 | $ | 0 | ||||
| Income taxes | $ | 0 | $ | 0 | ||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
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24HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 1 - DESCRIPTION OF COMPANY
We are a Delaware corporation formerly known as Scoop, Inc. In April 2001, Scoop, Inc. amended its Certificate of Incorporation to change its name to 24Holdings Inc. (“we”, “our”, “us” or “24Holdings”). Prior to September 30, 2005, 24Holdings was a holding company that conducted its business operations through its wholly owned subsidiary 24STORE (Europe) Limited, a company incorporated under the laws of England formerly known as 24STORE.com Limited ("24STORE"). 24STORE commenced business operations in 1996 and focused on the sale of media products and business information services. Commencing in July 1998, we 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 (now known as Avalon Innovation AB), a Swedish registered company (“Infinicom”), acquired 91% of our outstanding stock in exchange for 100% of the stock of 24STORE. Subsequent to Infinicom’s acquisition in 1999 and until September 30, 2005, the business operations of 24STORE, which represented all of our operations, were devoted to supplying business customers with computer and electronics products.
On October 23, 2006 (the “Effective Date”), we implemented a 1 for 125 reverse stock split (the “Reverse Split”) of our common stock par value $.001 per share (“Common Stock”). Pursuant to the Reverse Split, each 125 shares of Common Stock issued and outstanding as of the Effective Date was converted into one (1) share of Common Stock. The Reverse Split also reduced the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock, par value $.001 per share (the “Preferred Stock”) could be converted from 100 shares to 0.8 shares. All per share data herein has been retroactively restated to reflect the Reverse Split.
The interim financial information as of June 30, 2015 and for the three and six month periods ended June 30, 2015 and 2014 have been prepared without audit, pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although we believe that the disclosures made are adequate to provide for fair presentation. These financial statements should be read in conjunction with the financial statements and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2014, previously filed with the SEC.
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of our financial position as of June 30, 2015, results of operations for the three and six months ended June 30, 2015 and 2014, and cash flows for the six months ended June 30, 2015 and 2014, have been made. The results of operations for the six months ended June 30, 2015 are not necessarily indicative of the operating results that may be expected for the full fiscal year or any future periods.
CHANGE OF OWNERSHIP TRANSACTIONS
On May 26, 2005, we entered into a series of agreements with Infinicom in connection with our sale of all of the outstanding stock of 24STORE (the “24STORE Sale”) and separately, the assignment of all rights and title to certain trademarks and domain names (the “IP Assets”) that we held (the “IP Assignment”). Pursuant to the terms of the 24STORE Sale, Infinicom paid us $100,000 for our 24STORE shares and pursuant to the IP Assignment, we paid for the IP Assets through a set-off against all outstanding and contingent liabilities we owed to Infinicom determined as of the closing date of the 24STORE Sale, which amounted to $603,830.
On May 26, 2005, we also entered into a Preferred Stock Purchase Agreement with Infinicom (the “Preferred Stock Agreement”) pursuant to which we sold to Infinicom 344,595 shares of our Preferred Stock in exchange for the discharge of $230,879 of outstanding debt owed to Infinicom. Each share of the Preferred Stock was convertible into 0.8 shares of our Common Stock at the holder’s option.
On May 26, 2005, Infinicom, 24Holdings, Moyo Partners, LLC (“Moyo”) and R&R Biotech Partners, LLC (“R&R”, and together with Moyo, the “Purchasers”) entered into a Common Stock Purchase Agreement (the “Infinicom Sale Agreement”) pursuant to which, Infinicom agreed to sell to the Purchasers an aggregate of 873,369 shares of Common Stock (which included shares issuable upon conversion of the Preferred Stock) which represented approximately 83.6% of the then issued and outstanding shares of Common Stock (the “Infinicom Sale”). In return, the Purchasers (i) paid to Infinicom $500,000 in cash, and (ii) agreed that upon the occurrence of one of several post-closing events, including a merger with one or more as yet unidentified private unaffiliated operating companies, to cause 24Holdings to issue to Infinicom shares of Common Stock representing 1% of the then issued and outstanding shares of Common Stock on a fully diluted basis (the “Infinicom Additional Shares”). The consummation of the Infinicom Sale was contingent on the contemporaneous closing of the 24STORE Sale and the IP Assignment.
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24HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 1 - DESCRIPTION OF COMPANY (continued):
On September 30, 2005, 24Holdings and Infinicom completed the transactions contemplated in the 24STORE Sale, the IP Assignment and the Preferred Stock Agreement as described above. Infinicom forgave the $603,830 of debt 24Holdings owed to them in consideration of the IP Assignment.
Effective September 30, 2005, Infinicom completed the sale to the Purchasers, under the Infinicom Sale Agreement, of 597,693 shares of Common Stock (which represented 77.7% of the 769,226 shares of Common Stock then issued and outstanding) and 344,595 shares of Preferred Stock, constituting 83.6% in the aggregate of the then issued and outstanding Common Stock (assuming the conversion of the Preferred Stock into 275,676 shares of Common Stock). As a result, the Purchasers acquired control of 24Holdings from Infinicom, with R&R beneficially owning 698,696 shares of Common Stock (assuming the conversion by R&R of 275,676 shares of Preferred Stock into 220,541 shares of Common Stock) constituting 66.9% of the then issued and outstanding shares of Common Stock, and Moyo in the aggregate beneficially owning 174,674 shares of Common Stock (assuming the conversion by Moyo of 68,919 shares of Preferred Stock into 55,135 shares of Common Stock) constituting 16.7% of the then issued and outstanding shares of Common Stock.
Effective September 30, 2005 Urban von Euler resigned as our president and a director but remained our chief executive officer. Also, effective September 30, 2005, Larsake Sandin resigned as a director and each of Arnold P. Kling and Kirk M. Warshaw were appointed as directors of 24Holdings. On November 21, 2005, effective with the filing of our Form 10-Q for the quarter ended September 30, 2005, Mr. von Euler resigned as chief executive officer and Mr. Kling was appointed president and treasurer and Mr. Warshaw was appointed chief financial officer and secretary.
On November 25, 2005, the Infinicom Sale Agreement was amended to provide, among other criteria, that the fair market value of the Infinicom Additional Shares would be no less than $400,000 nor more than $600,000 at the time such shares are required to be issued to Infinicom.
On February 1, 2006, a total of 250,000 shares of Preferred Stock were authorized for issuance to two individuals who provided services to us. On May 12, 2006, we issued 150,000 and 100,000 shares, respectively, of Preferred Stock to Arnold P. Kling and Kirk M. Warshaw for their services as our president and chief financial officer, respectively. Each share of Preferred Stock is immediately convertible, at the holder's option, into 0.8 shares of Common Stock. Mr. Kling's services were valued at $11,250 and Mr. Warshaw's services were valued at $7,500.
On November 29, 2006, the holders of all the issued and outstanding shares of Preferred Stock elected to convert all of their Preferred Stock into shares of Common Stock. As a result, the 594,595 shares of Preferred Stock outstanding were exchanged for 475,676 shares of Common Stock.
On May 9, 2013, we entered into an amendment to the Infinicom Sale Agreement (the “Amendment”) pursuant to which Infinicom’s rights to the Infinicom Additional Shares was converted into 138,222 shares of Common Stock. We recognized non-cash expense of $26,924 associated with this conversion.
On May 9, 2013, we raised total gross proceeds of $134,000 from the sale of an aggregate of 688,420 shares of Common Stock at a price of $0.1946488 per share. 344,210 of these shares were sold to Hudson Bay Master Fund Ltd. (“Hudson”) and the other 344,210 shares were sold to Iroquois Master Fund Ltd. (“Iroquois”). The sale to Hudson and Iroquois was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”) pursuant to Sections 4(a)(2) and 4(a)(5) of the Act.
Prior to May 9, 2013, each of Hudson and Iroquois acquired 349,348 shares of Common Stock at a purchase price of $68,000, or $0.194648 per share, from the Chapter 7 Trustee of the Estates of Rodman & Renshaw, LLC (“Rodman”), Direct Markets, Inc., and Direct Markets Holdings, Corp. in Chapter 7 bankruptcy proceedings pending in the United States Bankruptcy Court for the Southern District of New York (Cases No. 13-10087, 13-10088 and 13-10089). These shares were all the shares of Common Stock beneficially owned by R&R, an affiliate of Rodman.
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24HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 1 - DESCRIPTION OF COMPANY (continued):
On July 24, 2014, we issued convertible promissory notes (the “2014 Notes”) in the principal amount of $55,000 to each of Iroquois Master Fund Ltd and Hudson Bay Master Fund Ltd. (an aggregate of $110,000). The 2014 Notes have a maturity date of December 31, 2015 and bear interest at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest on the 2014 Notes are convertible at the “Conversion Price” (as defined in the 2014 Notes) into shares of Common Stock at the option of the holder, subject to the “Beneficial Ownership Cap” (as defined in the 2014 Notes), or upon the consummation of a “Fundamental Transaction” (as defined in the 2014 Notes). The proceeds of the 2014 Notes have been utilized by us to fund our working capital needs.
As of June 30, 2015, our authorized capital stock consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock of which 2,071,544 shares of Common Stock, and no shares of Preferred Stock, were issued and outstanding. All shares of Common Stock currently outstanding are validly issued, fully paid and non-assessable.
THE COMPANY TODAY
Since September 30, 2005, our purpose has been to serve as a vehicle to acquire an operating business and is currently considered a "shell" or blank check company inasmuch as we are not generating revenues, do not own an operating business, and have no specific plan other than to engage in a merger or acquisition transaction with a yet-to-be identified company or business. We have no employees and no material assets.
NOTE 2 – BASIS OF PRESENTATION
The condensed financial statements have been prepared by us, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying condensed financial statements include all adjustments (consisting of normal, recurring adjustments) necessary to make our, results of operations and cash flows not misleading as of June 30, 2015. The results of operations for the six months ended June 30, 2015 are not necessarily indicative of the results of operations for the full year or any other interim period. These condensed financial statements should be read in conjunction with the financial statements and the notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2014, previously filed with the SEC.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern -The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates that we will continue as a going concern. Our purpose has been to serve as a vehicle to acquire an operating business and we are currently considered a “shell” company inasmuch as we are not generating revenues, we do own an operating business, and have no specific plan other than to engage in a merger or acquisition transaction with a yet-to-be-identified operating company or business. We currently have no definitive agreements or understandings with any prospective business combination candidates and there are no assurances that we will find a suitable business with which to combine. The implementation of our business objectives is wholly contingent upon a business combination and/or the successful sale of our securities. We intend to utilize the proceeds of any offering, any sales of equity securities or debt securities, bank and other borrowings or a combination of those sources to effect a business combination with a target business which we believe may have significant growth potential. While we may, under certain circumstances, seek to effect business combinations with more than one target business, unless additional financing is obtained, we will not have sufficient proceeds remaining after an initial business combination to undertake additional business combinations. There is no assurance that these plans will be realized in whole or in part. The financial statements do not include any adjustments that might result from the outcome these uncertainties.
Since inception, we have incurred an accumulated deficit of $11,116,644 through June 30, 2015. For the years ended December 31, 2014 and 2013, we had net losses of $97,110 and $94,217, respectively. We have incurred negative cash flow from operating activities since inception. We have spent, and subject to obtaining additional financing, expects to continue to spend, substantial amounts in connection with executing our business strategy. These conditions raise substantial doubt about our ability to continue as a going concern.
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24HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
Use of Estimates - 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments - Pursuant to the accounting guidance, "Disclosures About Fair Value of Financial Instruments," we are required to estimate the fair value of all financial instruments included on our balance sheet as of June 30, 2015. We consider the carrying value of accrued expenses in the financial statements to approximate their face value.
Statements of Cash Flows - For purposes of the statements of cash flows we consider all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.
NOTE 4 – SHAREHOLDERS’ (DEFICIT)
On February 1, 2006, a total of 250,000 shares of Preferred Stock were authorized for issuance to two individuals who provided services to us. On May 12, 2006, we filed a Certificate of Amendment to the Certificate of Designation for the Preferred Stock with the Secretary of State of the State of Delaware, increasing the number of shares designated as Preferred Stock from 500,000 to 600,000 shares. As a result of this filing, we issued 150,000 and 100,000 shares of the Preferred Stock to Arnold Kling and Kirk Warshaw for their services as our president and chief financial officer, respectively. Each share of Preferred Stock is convertible, at the holder's option, into 100 shares of Common Stock. Mr. Kling's services were valued at $11,250 and Mr. Warshaw's services were valued at $7,500.
On October 23, 2006, we effected a reverse stock split of our Common Stock. Pursuant to this reverse stock split, each 125 shares of Common Stock issued and outstanding as of the date following the reverse stock split was converted into one (1) share of Common Stock. This reverse stock split reduced the number of shares of Common Stock into which each share of Preferred Stock could be converted from 100 shares to .8 shares. All per share data has been retroactively restated to reflect this reverse stock split.
On November 29, 2006, the holders of all the issued and outstanding shares of Preferred Stock elected to convert all of their Preferred Stock into shares of Common Stock. As a result, the 594,595 shares of Preferred Stock outstanding were exchanged for 475,676 shares of Common Stock.
As of June 30, 2015, our authorized capital stock consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock of which 2,071,544 shares of Common Stock, and no shares of Preferred Stock, are issued and outstanding. All shares of Common Stock currently outstanding are validly issued, fully paid and non-assessable.
On May 9, 2013, we entered into the Amendment pursuant to which Infinicom’s rights to the Infinicom Additional Shares was converted into 138,222 shares of Common Stock. We recognized non-cash expense of $26,924 associated with this conversion.
On May 9, 2013, we raised total gross proceeds of $134,000 from the sale of an aggregate of 688,420 shares of Common Stock at a price of $0.1946488 per share. Of these shares, 344,210 were sold to Hudson and the other 344,210 shares were sold to Iroquois. The sale to Hudson and Iroquois was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”) pursuant to Sections 4(a)(2) and 4(a)(5) of the Act.
Prior to May 9, 2013, each of Hudson and Iroquois acquired 349,348 shares of Common Stock at a purchase price of $68,000, or $0.194648 per share, from the Chapter 7 Trustee of the Estates of Rodman, Direct Markets, Inc., and Direct Markets Holdings, Corp. in Chapter 7 bankruptcy proceedings pending in the United States Bankruptcy Court for the Southern District of New York (Cases No. 13-10087, 13-10088 and 13-10089). These shares were all the shares of Common Stock beneficially owned by R&R, an affiliate of Rodman.
NOTE 5 – NOTE PAYABLE – RELATED PARTY
On July 24, 2014, we issued convertible promissory notes (the “2014 Notes”) in the principal amount of $55,000 to each of Iroquois Master Fund Ltd and Hudson Bay Master Fund Ltd. (an aggregate of $110,000). The 2014 Notes have a maturity date of December 31, 2015 and bear interest at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest on the 2014 Notes are convertible at $0.50 per share, into shares of our common stock at the option of the holder, subject to various capital transactions or ownership amounts. The proceeds of the 2014 Notes have been, and will continue to be, utilized by us to fund working capital needs. We have valued the beneficial conversion features of this note to be $55,000, which will be amortized ratably over the term of these two notes. The unamortized portion of the debt discount as of June 30, 2015 was $19,510.
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24HOLDINGS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 2015
(unaudited)
NOTE 6 – NEW ACCOUNTING PRONOUNCEMENTS
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation ( Topic 718 ); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”.The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities.
Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this ASU as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. We are currently reviewing the provisions of this ASU to determine if there will be any impact on its results of operations, cash flows or financial condition.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) –Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the termsubstantial doubt,(2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016.
Early adoption is permitted.
In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6,Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public business entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. We are currently evaluating the effects of adopting this ASU, if it is deemed to be applicable.
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NOTE 6 – NEW ACCOUNTING PRONOUNCEMENTS (continued)
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
NOTE 7 – COMMITMENTS AND CONTIGENCIES
As of June 30, 2015, we have no commitments or contingent liabilities that require disclosure.
NOTE 8 – SUBSEQUENT EVENTS
We have evaluated all subsequent events and have determined that there were no subsequent events to recognize or disclose in these financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Plan of Operation
Since September 30, 2005 our purpose is to effect a business combination with an operating business which we believe has significant growth potential. We are currently considered to be a “shell” company in as much as we have no operations, revenues or employees. We have no definitive agreements or understandings with any prospective business combination candidates and there are no assurances that we will find a suitable business with which to combine. The implementation of our business objectives is wholly contingent upon a business combination and/or the successful sale of securities in 24Holdings. We intend to utilize the proceeds of any offering, any sales of equity securities or debt securities, bank and other borrowings or a combination of those sources to effect a business combination with a target business which we believe has significant growth potential. While we may, under certain circumstances, seek to effect business combinations with more than one target business, unless and until additional financing is obtained, we will not have sufficient proceeds remaining after an initial business combination to undertake additional business combinations.
A common reason for a target company to enter into a merger with a shell company is the desire to establish a public trading market for its shares. Such a company would hope to avoid the perceived adverse consequences of undertaking a public offering itself, such as the time delays and significant expenses incurred to comply with the various Federal and state securities law that regulate initial public offerings.
As a result of our limited resources, we expect to have sufficient proceeds to effect only a single business combination. Accordingly, the prospects for our success will be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate several business combinations or entities operating in multiple industries or multiple segments of a single industry, we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. A target business may be dependent upon the development or market acceptance of a single or limited number of products, processes or services, in which case there will be an even higher risk that the target business will not prove to be commercially viable.
Our officers are only required to devote a small portion of their time (less than 10%) to our affairs on a part-time or as-needed basis. We expect to use outside consultants, advisors, attorneys and accountants as necessary. We do not anticipate hiring any full-time employees so long as we are seeking and evaluating business opportunities.
We expect our present management to play no managerial role in 24Holdings following a business combination. Although we intend to scrutinize closely the management of a prospective target business in connection with our evaluation of a business combination with a target business, our assessment of management may be incorrect. We cannot assure you that we will find a suitable business with which to combine.
On May 9, 2013, we restructured the Common Stock Purchase Agreement, dated May 26, 2005, as amended to date (the “Purchase Agreement”), among InfiniCom, AB (now known as Avalon Innovation AB), a Swedish registered company (“Infinicom”) 24Holdings, Moyo Partners, LLC and R&R Biotech Partners, LLC (“R&R”) (the “Amendment”). Pursuant to the Amendment, Infinicom’s right to receive $400,000 to $600,000 in equity value of 24Holdings upon the occurrence of one of several post-closing events, including a merger with one or more as yet unidentified private unaffiliated operating companies (the “Infinicom Additional Shares”), was converted into 138,222 shares of our common stock par value $.001 per share (“Common Stock”). We recognized non-cash expense of $26,924 associated with this conversion. The issuance to Infinicom was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”) pursuant to Section 4(a)(2) of the Act.
On May 9, 2013, we raised total gross proceeds of $134,000 from the sale of an aggregate of 688,420 shares of Common Stock at a price of $0.1946488 per share. Of these shares, 344,210 were sold to Hudson Bay Master Fund Ltd. (“Hudson”) and the other 344,210 shares were sold to Iroquois Master Fund Ltd. (“Iroquois”). The sale to Hudson and Iroquois was exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”) pursuant to Sections 4(a)(2) and 4(a)(5) of the Act.
Prior to May 9, 2013, each of Hudson and Iroquois acquired 349,348 shares of Common Stock at a purchase price of $68,000, or $0.194648 per share, from the Chapter 7 Trustee of the Estates of Rodman & Renshaw, LLC (“Rodman”), Direct Markets, Inc., and Direct Markets Holdings, Corp. in Chapter 7 bankruptcy proceedings pending in the United States Bankruptcy Court for the Southern District of New York (Cases No. 13-10087, 13-10088 and 13-10089). These shares were all the shares of Common Stock beneficially owned by R&R, an affiliate of Rodman.
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On July 24, 2014, we issued convertible promissory notes (the “2014 Notes”) in the principal amount of $55,000 to each of Iroquois Master Fund Ltd and Hudson Bay Master Fund Ltd. (an aggregate of $110,000). The 2014 Notes have a maturity date of December 31, 2015 and bear interest at the rate of 5.0% per annum, payable at maturity. The principal and accrued interest on the 2014 Notes are convertible at the “Conversion Price” (as defined in the 2014 Notes) into shares of Common Stock at the option of the holder, subject to the “Beneficial Ownership Cap” (as defined in the 2014 Notes), or upon the consummation of a “Fundamental Transaction” (as defined in the 2014 Notes). The proceeds of the 2014 Notes have been utilized to fund our working capital needs.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2015 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2014
We currently do not have any business operations and did not have any revenues during the three month periods ended June 30, 2015 and 2014.
Total expenses from continuing operations for the three months ended June 30, 2015 and 2014 were $31,902 and $18,100, respectively. For the three month periods ended June 30, 2015 and 2014, the majority of these expenses primarily constituted general and administrative expenses related to accounting and compliance with the Securities Exchange Act of 1934, as amended (“Exchange Act”). The increase in expenses from 2014 to 2015 is almost completely related to the interest expense associated with the 2014 Notes.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2015 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2014
We currently do not have any business operations and did not have any revenues during the six month periods ended June 30, 2015 and 2014.
Total expenses from continuing operations for the six months ended June 30, 2015 and 2014 were $65,248 and $43,100, respectively. For the three month periods ended June 30, 2015 and 2014, the majority of these expenses primarily constituted general and administrative expenses related to accounting and compliance with the Securities Exchange Act of 1934, as amended (“Exchange Act”). The increase in expenses from 2014 to 2015 is almost completely related to the interest expense associated with the 2014 Notes.
Liquidity and Capital Resources
At June 30, 2015, we did not have any revenues from operations. Absent a merger or other combination with an operating company, we do not expect to have any revenues from operations. No assurance can be given that such a merger or other combination will occur or that we can engage in any public or private sales of our equity or debt securities to raise working capital. We are dependent upon future loans or capital contributions from our present stockholders and/or management and there can be no assurances that our present stockholders or management will make any loans or capital contributions to us.
At June 30, 2015, we had cash of $29,315 and negative net working capital of $66,091.
Our present material commitments are professional and administrative fees and expenses associated with the preparation of our filings with the SEC and other regulatory requirements. In the event that we engage in any merger or other combination with an operating company, we will have additional material professional commitments.
Critical Accounting Policies
Our unaudited financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the amounts reported in such financial statements and related notes. Actual results can and will differ from estimates. These differences could be material to the financial statements. We believe our application of accounting policies and the estimates required therein are reasonable. Outlined below are those policies considered particularly significant.
Use of Estimates
In preparing financial statements in accordance with GAAP, management makes certain estimates and assumptions, where applicable, that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. While actual results could differ from those estimates, management does not expect such variances, if any, to have a material effect on the financial statements.
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Income Taxes
The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.
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.
Equity Based Compensation
The accounting guidance for “Share Based Payments” requires the recognition of the fair value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards. In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating our forfeiture rate, we analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If our actual forfeiture rate is materially different from its estimate, or if we reevaluate the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The last equity based compensation issued by us was more than two years ago and such shares were fully vested upon issuance, hence an expense was recorded at that time.
New Accounting Pronouncements
In June 2014, FASB issued Accounting Standards Update (“ASU”) No. 2014-12, “Compensation – Stock Compensation (Topic 718); Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in this ASU apply to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. For all entities, the amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities.
Entities may apply the amendments in this ASU either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying this ASU as of the beginning of the earliest annual period presented in the financial statements should be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, an entity may use hindsight in measuring and recognizing the compensation cost. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.
In August 2014, the FASB issued ASU 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) –Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this ASU provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the termsubstantial doubt,(2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted.
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In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards (IFRS), which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6,Elements of Financial Statements, which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. Concepts Statement 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. For public business entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this ASU are effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within fiscal years beginning after December 15, 2016. We are currently evaluating the effects of adopting this ASU, if it is deemed to be applicable.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Off-Balance Sheet Arrangements
As of June 30, 2015, we have no off-balance sheet arrangements such as guarantees, retained or contingent interest in assets transferred, obligation under a derivative instrument and obligation arising out of or a variable interest in an unconsolidated entity.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of both of our president and chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, both of our president and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our president and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred duringthe quarter covered by this reportthat has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. - OTHER INFORMATION
| Exhibit No. | Description | |
| 31.1 | Certification of the President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* | |
| 32.1 | Certification of the President pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.** | |
| 101.INS | XBRL Instance Document.* | |
| 101.SCH | XBRL Taxonomy Extension Schema Document.* | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document.* | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document.* | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.* | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.* |
*Filed herewith.
**Furnished, not filed, in accordance with Item 601(32)(ii) of Regulation S-K.
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In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| 24Holdings Inc. | ||
| Dated: August 7, 2015 | /s/ Arnold P. Kling | |
| Arnold P. Kling, President | ||
| (Principal Executive Officer) | ||
| Dated: August 7, 2015 | /s/ Kirk M. Warshaw | |
| Kirk M. Warshaw, Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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