UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
47 SCHOOL AVENUE
CHATHAM, NEW JERSEY 07928
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 635-4047
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
(TITLE OF CLASS)
INDICATE BY CHECK MARK IF THE REGISTRANT IS A WELL-KNOWN SEASONED ISSUER,
AS DEFINED BY RULE 405 OF THE SECURITIES ACT. YES [_] NO [X]
INDICATE BY CHECK MARK IF THE REGISTRANT IS NOT REQUIRED TO FILE REPORTS
PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE EXCHANGE ACT. YES [_] NO [X]
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. [X]
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A LARGE ACCELERATED
FILER, AN ACCELERATED FILER, OR A NON-ACCELERATED FILER. SEE DEFINITION OF
"ACCELERATED FILER AND LARGE ACCELERATED FILER" IN RULE 12B-2 OF THE EXCHANGE
ACT. (CHECK ONE):
LARGE ACCELERATED FILER [_] ACCELERATED FILER [_] NON-ACCELERATED FILER [X]
INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS A SHELL COMPANY (AS
DEFINED IN RULE 12b-2 OF THE EXCHANGE ACT). YES [X] NO [_]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT AS OF MARCH 30, 2006 (BASED UPON THE CLOSING PRICE ON THE NASDAQ
OTC BULLETIN BOARD OF $0.011 PER SHARE) WAS APPROXIMATELY $235,792.
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, $.001
PAR VALUE, AS OF MARCH 30, 2006 WAS 96,147,396 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE
None.
24HOLDINGS, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I ...................................................................... 3
Item 1. Business ..................................................... 3
Item 1A. Risk Factors ................................................. 6
Item 2. Properties ................................................... 10
Item 3. Legal Proceedings ............................................ 10
Item 4. Submission of Matters to a Vote of Security Holders .......... 10
PART II ..................................................................... 11
Item 5. Market for our Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities .................... 11
Item 6. Selected Financial Data ...................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................... 13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ... 14
Item 8. Financial Statements and Supplementary Data .................. 14
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure ..................................... 14
Item 9A. Controls and Procedures ...................................... 15
PART III .................................................................... 15
Item 10. Directors and Executive Officers of the Registrant ........... 15
Item 11. Executive Compensation ....................................... 16
Item 12. Beneficial Ownership of Common Stock by Certain Beneficial
Owners and Mangement ......................................... 17
Item 13. Certain Relationships and Related Transactions ............... 18
Item 14. Principal Accountant Fees and Services ....................... 18
PART IV ..................................................................... 18
Item 15. Exhibits and Financial Statement Schedules and Reports
on Form 8-K .................................................. 19
FORWARD LOOKING STATEMENT INFORMATION
Various statements made in this Annual Report on Form 10-K are
"forward-looking statements" regarding the plans and objectives of management
for future operations. These 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 these forward-looking statements. The
forward-looking statements included in this report are based on current
expectations that involve numerous risks and uncertainties. Our plans and
objectives are based, in part, on assumptions involving judgments about, 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
these assumptions could prove inaccurate and, therefore, we cannot assure you
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 in this report, the inclusion of these
statements should not be interpreted by anyone that our objectives and plans
will be achieved. Factors that could cause actual results to differ materially
and adversely from those expressed or implied by forward-looking statements
include, but are not limited to, the factors, risks and uncertainties (i)
identified or discussed herein, (ii) set forth under the headings "Business" and
"Risk Factors" in Part 1, Item 1; "Legal Proceedings" in Part 1, Item 3; and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7, of this Annual Report on Form 10-K , and (iii)
set forth in our periodic reports on Forms 10-Q and 8-K as filed with the SEC.
We undertake no obligation to revise or update publicly any forward-looking
statements for any reason.
2
PART 1
ITEM 1. BUSINESS
THE COMPANY'S HISTORY
24Holdings, Inc., is a Delaware corporation formerly known as Scoop, Inc.
("24Holdings"). In April 2001 Scoop, Inc. amended its Certificate of
Incorporation to change its name to 24Holdings Inc. Prior to September 30, 2005,
24Holdings was a holding company which owned 100% of the capital stock of
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, 24Holdings 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 Swedish registered company ("Infinicom"),
acquired 91% of the outstanding stock of the 24Holdings 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
24Holding's operations, were devoted to supplying business customers with
computer and electronics products.
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 would pay us
$100,000 for our 24STORE shares and pursuant to the IP Assignment, we agreed to
be 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.
On May 26, 2005, we also entered a Preferred Stock Purchase Agreement with
Infinicom (the "Preferred Stock Agreement") pursuant to which we agreed to sell
to Infinicom 344,595 shares of our new series A convertible preferred stock, par
value $0.001 (the "Preferred Stock") in exchange for the discharge of $230,879
of outstanding debt owed to Infinicom. Each share of the Preferred Stock is
convertible into 100 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 109,171,181
shares of common stock of 24Holdings (which included shares issuable upon
conversion of the Preferred Stock) which would represent approximately 83.6% of
the then issued and outstanding shares of 24Holdings' common stock ("common
stock") (the "Infinicom Sale"). In return, the Purchasers would (i) pay to
Infinicom $500,000 in cash, and (ii) upon the occurrence of one of several
post-closing events, including a merger with one or more as yet unidentified
private unaffiliated operating companies subsequent to the closing of the
Infinicom Sale, 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.
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, agreed to forgive $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 74,711,681 shares of common stock (which
represented 77.7% of the 96,147,395 shares of
3
common stock then 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 34,459,500 shares of
common stock. As a result, the Purchasers acquired control of 24Holdings from
Infinicom, with R&R beneficially owning 87,336,945 shares of common stock
(assuming the conversion by R&R of 275,676 shares of Preferred Stock into
27,567,600 shares of common stock) constituting 66.9% of the then issued and
outstanding shares of common stock, and Moyo beneficially owning 21,834,236
(assuming the conversion by Moyo of 68,919 shares of Preferred Stock into
6,891,900 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 Kling and Kirk
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. As of that same date, 24Holdings relocated its
headquarters to Chatham, New Jersey.
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.
THE COMPANY TODAY
Since September 30, 2005, our purpose is to serve as a vehicle to acquire an
operating business and is currently considered a "shell" 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.
Commencing with the filing of our Form 10-Q for the quarter ended June 30, 2004,
all of our computer related business services activities have been accounted for
as Discontinued Operations. As such, all of the prior activity has been shown in
the financials as one line item that is labeled "Income (Loss) from Discontinued
Operations, net of taxes." Our activities since September 2005 are shown in the
Income Statement under the section labeled "Loss from Continuing Operations."
These amounts are for expenses incurred since September 30, 2005 and are of the
nature we expect to incur in the future, whereas the Income (loss) from
Discontinued Operations are from activities we are no longer engaged in.
We currently have no definitive plans, arrangements 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 has 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.
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, unless and until additional financing is
obtained 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
4
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. Our officers may be
entitled to receive compensation from a target company they identify or provide
services to in connection with a business combination. We expect to use outside
consultants, advisors, attorneys and accountants as necessary, none of which
will be hired on a retainer basis. We do not anticipate hiring any full-time
employees so long as we are seeking and evaluating business opportunities.
We do not expect our present management to play any managerial role for us
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.
In evaluating a prospective target business, we will consider several factors,
including the following:
- - experience and skill of management and availability of additional personnel
of the target business;
- - costs associated with effecting the business combination;
- - equity interest retained by our stockholders in the merged entity;
- - growth potential of the target business;
- - capital requirements of the target business;
- - capital available to the target business;
- - stage of development of the target business;
- - proprietary features and degree of intellectual property or other protection
of the target business;
- - the financial statements of the target business; and
- - the regulatory environment in which the target business operates.
The foregoing criteria are not intended to be exhaustive and any evaluation
relating to the merits of a particular target business will be based, to the
extent relevant, on the above factors, as well as other considerations we deem
relevant. In connection with our evaluation of a prospective target business, we
anticipate that we will conduct a due diligence review which will encompass,
among other things, meeting with incumbent management as well as a review of
financial, legal and other information.
The time and costs required to select and evaluate a target business (including
conducting a due diligence review) and to structure and consummate the business
combination (including negotiating and documenting relevant agreements and
preparing requisite documents for filing pursuant to applicable corporate and
securities laws) cannot be determined at this time. Our President intends to
devote only a very small portion of his time to our affairs, and, accordingly,
the consummation of a business combination may require a longer time than if he
devoted his full time to our affairs. However, he will devote such time as he
deems reasonably necessary to carry out the business and affairs of the company.
The amount of time devoted to our business and affairs may vary significantly
depending upon, among other things, whether we have identified a target business
or are engaged in active negotiation of a business combination.
We anticipate that various prospective target businesses will be brought to our
attention from various sources, including securities broker-dealers, investment
bankers, venture capitalists, bankers and other members of the financial
community, including, possibly, the executive officers and our affiliates.
5
As a general rule, federal and state tax laws and regulations have a significant
impact upon the structuring of business combinations. We will evaluate the
possible tax consequences of any prospective business combination and will
endeavor to structure a business combination so as to achieve the most favorable
tax treatment to our company, the target business and our respective
stockholders. There can be no assurance that the Internal Revenue Service or
relevant state tax authorities will ultimately assent to our tax treatment of a
particular consummated business combination. To the extent the Internal Revenue
Service or any relevant state tax authorities ultimately prevail in
recharacterizing the tax treatment of a business combination, there may be
adverse tax consequences to our company, the target business, and our respective
stockholders.
We may acquire a company or business by purchasing the securities of such
company or business. However, we do not intend to engage primarily in such
activities. Specifically, we intend to conduct our activities so as to avoid
being classified as an "investment company" under the Investment Company Act of
1940, as amended (the "Investment Act") and therefore avoid application of the
costly and restrictive registration and other provisions of the Investment
Company Act and the regulations promulgated thereunder.
Section 3(a) of the Investment Company Act excepts from the definition of an
"investment company" an entity which does not engage primarily in the business
of investing, reinvesting or trading in securities, or which does not engage in
the business of investing, owning, holding or trading "investment securities"
(defined as "all securities other than government securities or securities of
majority-owned subsidiaries") the value of which exceed 40% of the value of its
total assets (excluding government securities, cash or cash items). We intend to
operate any business in the future in a manner which will result in the
availability of this exception from the definition of an investment company.
Consequently, our acquisition of a company or business through the purchase and
sale of investment securities will be limited. Although we intend to act to
avoid classification as an investment company, the provisions of the Investment
Company Act are extremely complex and it is possible that we may be classified
as an inadvertent investment company. We intend to vigorously resist
classification as an investment company, and to take advantage of any exemptions
or exceptions from application of the Investment Company Act, which allows an
entity a one-time option during any three-year period to claim an exemption as a
"transient" investment company. The necessity of asserting any such resistance,
or making any claim of exemption, could be time consuming and costly, or even
prohibitive, given our limited resources.
Various impediments to a business combination may arise, such as appraisal
rights afforded the stockholders of a target business under the laws of its
state of organization. This may prove to be deterrent to a particular
combination.
AVAILABLE INFORMATION
The public may read and copy any materials we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers such as us that file electronically with the SEC. The website
address is www.sec.gov.
ITEM 1A: RISK FACTORS
In addition to the other information provided in this report, you should
carefully consider the following factors in evaluating our business, operations
and financial condition. Additional risks and uncertainties not presently known
to us, that we currently deem immaterial or that are similar to those faced by
other companies in our industry or business in general, such as competitive
conditions, may also impair our business operations. The occurrence of any of
the following risks could have a material adverse effect on our business,
financial condition and results of operations.
6
WE HAVE NO OPERATING HISTORY OR BASIS FOR EVALUATING PROSPECTS
Since September 30, 2005, we have no operating business or plans to develop one.
We are currently seeking to enter into a merger or business combination with
another company. Our President, Arnold Kling, was appointed in November 2005 and
has had limited time to evaluate merger prospects and accordingly, only a
limited basis upon which to evaluate our prospects for achieving our intended
business objectives. To date, our efforts have been limited to meeting
regulatory requirements and searching for a merger target.
WE HAVE LIMITED RESOURCES AND NO REVENUES FROM OPERATIONS, AND WILL NEED
ADDITIONAL FINANCING IN ORDER TO EXECUTE ANY BUSINESS PLAN; OUR AUDITORS HAVE
EXPRESSED DOUBT AS TO OUR ABILITY TO CONTINUE BUSINESS AS A GOING CONCERN.
We have limited resources, no revenues from operations to date and our cash on
hand may not be sufficient to satisfy our cash requirements during the next
twelve months. In addition, we will not achieve any revenues (other than
insignificant investment income) until, at the earliest, the consummation of a
merger and we cannot ascertain our capital requirements until such time. Further
limiting our abilities to achieve revenues, in order to avoid status as an
"Investment Company" under the Investment Company Act, we can only invest our
funds prior to a merger in limited investments which do not invoke Investment
Company status. There can be no assurance that determinations ultimately made by
us will permit us to achieve our business objectives. Our auditors have included
an explanatory paragraph in their report for the year ended December 31, 2005,
indicating that certain conditions raise substantial doubt regarding our ability
to continue as a going concern. The financial statements included in this Form
10-K do not include any adjustment to asset values or recorded amounts of
liability that might be necessary in the event we are unable to continue as a
going concern. If we are in fact unable to continue as a going concern,
stockholders may lose their entire investment in our common stock.
WE WILL BE ABLE TO EFFECT AT MOST ONE MERGER, AND THUS MAY NOT HAVE A
DIVERSIFIED BUSINESS.
Our resources are limited and we will most likely have the ability to effect
only a single merger. This probable lack of diversification will subject us to
numerous economic, competitive and regulatory developments, any or all of which
may have a material adverse impact upon the particular industry in which we may
operate subsequent to the consummation of a merger. We will become dependent
upon the development or market acceptance of a single or limited number of
products, processes or services.
WE DEPEND SUBSTANTIALLY UPON A SINGLE EXECUTIVE OFFICER AND DIRECTOR, WHOSE
EXPERIENCE IS LIMITED, TO MAKE ALL MANAGEMENT DECISIONS.
Our ability to effect a merger will be dependent upon the efforts of our
President and director, Arnold Kling. Notwithstanding the importance of Mr.
Kling, we have not entered into any employment agreement or other understanding
with Mr. Kling concerning compensation or obtained any "key man" life insurance
on any of his life. The loss of the services of Mr. Kling will have a material
adverse effect on our business objectives. We will rely upon the expertise of
Mr. Kling and do not anticipate that we will hire additional personnel.
7
THERE MAY BE CONFLICTS OF INTEREST BETWEEN OUR MANAGEMENT AND OUR NON-MANAGEMENT
STOCKHOLDERS.
Conflicts of interest create the risk that management may have an incentive to
act adversely to the interests of other investors. Our officers may be entitled
to receive compensation from a target company they identify or provide services
to in connection with a business combination. A conflict of interest may arise
between our management's personal pecuniary interest and its fiduciary duty to
our stockholders. Further, our management's own pecuniary interest may at some
point compromise its fiduciary duty to our stockholders. In addition, Mr. Kling
and Mr. Warshaw, our officers and directors, are currently involved with other
blank check offerings and conflicts in the pursuit of business combinations with
such other blank check companies with which they and affiliates of our majority
stockholder are, and may in the future be affiliated with, may arise. If we and
the other blank check companies that our officers and directors are affiliated
with desire to take advantage of the same opportunity, then those officers and
directors that are affiliated with both companies would abstain from voting upon
the opportunity. Further, Rodman & Renshaw, LLC, a registered broker-dealer and
affiliate of our majority stockholder, may act as investment banker, placement
agent or financial consultant to us or an acquisition candidate in connection
with a potential business combination transaction and may receive a fee for such
services. We cannot assure you that conflicts of interest among us, Rodman &
Renshaw and our stockholders will not develop.
THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES SUITABLE FOR A MERGER
TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT.
We are in a highly competitive market for a small number of business
opportunities which could reduce the likelihood of consummating a successful
business combination. We are and will continue to be an insignificant
participant in the business of seeking mergers with, joint ventures with and
acquisitions of small private and public entities. A large number of established
and well-financed entities, including small public companies and venture capital
firms, are active in mergers and acquisitions of companies that may be desirable
target candidates for us. Nearly all these entities have significantly greater
financial resources, technical expertise and managerial capabilities than we do;
consequently, we will be at a competitive disadvantage in identifying possible
business opportunities and successfully completing a business combination. These
competitive factors may reduce the likelihood of our identifying and
consummating a successful business combination.
FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE ABILITY OF MANAGEMENT TO LOCATE AND
ATTRACT A SUITABLE ACQUISITION.
The nature of our operations is highly speculative. The success of our plan of
operation will depend to a great extent on the operations, financial condition
and management of the identified business opportunity. While management intends
to seek business combination(s) with entities having established operating
histories, we cannot assure you that we will be successful in locating
candidates meeting that criterion. In the event we complete a business
combination, the success of our operations may be dependent upon management of
the successor firm or venture partner firm and numerous other factors beyond our
control.
WE HAVE NO EXISTING AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION.
We have no agreement with respect to engaging in a merger with, joint venture
with or acquisition of, a private or public entity. No assurances can be given
that we will successfully identify and evaluate suitable business opportunities
or that we will conclude a business combination. Management has not identified
any particular industry or specific business within an industry for evaluation.
We cannot guarantee that we will be able to negotiate a business combination on
favorable terms, and there is consequently a risk that funds allocated to the
purchase of our shares will not be invested in a company with active business
operations.
8
MANAGEMENT WILL CHANGE UPON THE CONSUMMATION OF A MERGER
After the closing of a merger or business combination, it is likely our current
management will not retain any control or managerial responsibilities. Upon such
event, Mr. Kling and Mr. Warshaw intend to resign from their positions with us.
CURRENT STOCKHOLDERS WILL BE IMMEDIATELY AND SUBSTANTIALLY DILUTED UPON A MERGER
OR BUSINESS COMBINATION
Our Certificate of Incorporation authorized the issuance of 100,000,000 shares
of common stock. There are currently 96,147,396 authorized but unissued shares
of common stock available for issuance. To the extent that additional shares of
common stock are authorized and issued in connection with a merger or business
combination, our stockholders could experience significant dilution of their
respective ownership interests. Furthermore, the issuance of a substantial
number of shares of common stock may adversely affect prevailing market prices,
if any, for the common stock and could impair our ability to raise additional
capital through the sale of equity securities.
CONTROL BY EXISTING STOCKHOLDER
R&R beneficially owns over 56% of the outstanding shares of our common stock. As
a result, this stockholder is able to exercise control over matters requiring
stockholder approval, including the election of directors, and the approval of
mergers, consolidations and sales of all or substantially all of our assets.
OUR COMMON STOCK IS A "PENNY STOCK" WHICH MAY RESTRICT THE ABILITY OF
STOCKHOLDERS TO SELL OUR COMMON STOCK IN THE SECONDARY MARKET.
The SEC has adopted regulations which generally define "penny stock" to be an
equity security that has a market price, as defined, of less than $5.00 per
share, or an exercise price of less than $5.00 per share, subject to certain
exceptions, including an exception of an equity security that is quoted on a
national securities exchange. Our common stock is not now quoted on a national
exchange but is traded on Nasdaq's OTC Bulletin Board ("OTCBB"). Thus, they are
subject to rules that impose additional sales practice requirements on
broker-dealers who sell these securities. For example, the broker-dealer must
make a special suitability determination for the purchaser of such securities
and have received the purchaser's written consent to the transactions prior to
the purchase. Additionally, the rules require the delivery, prior to the
transaction, of a disclosure schedule prepared by the SEC relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered underwriter, and current quotations
for the securities, and, if the broker-dealer is the sole market maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, among other requirements, monthly statements must be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stocks. The "penny stock" rules,
may restrict the ability of our stockholders to sell our common stock and
warrants in the secondary market.
9
OUR COMMON STOCK HAS BEEN THINLY TRADED, LIQUIDITY IS LIMITED, AND WE MAY BE
UNABLE TO OBTAIN LISTING OF OUR COMMON STOCK ON A MORE LIQUID MARKET.
Our common stock is quoted on the NASDAQ OTC Bulletin Board ("OTCBB"), which
provides significantly less liquidity than a securities exchange (such as the
American or New York Stock Exchange) or an automated quotation system (such as
the Nasdaq National Market or SmallCap Market). There is uncertainty that we
will ever be accepted for a listing on an automated quotation system or
securities exchange.
Often there is currently a limited volume of trading in our common stock, and on
many days there has been no trading activity at all. The purchasers of shares of
our common stock may find it difficult to resell their shares at prices quoted
in the market or at all.
ITEM 2. PROPERTIES
During the first nine months of 2005, we operated from leased office facilities
in the United Kingdom. Since October 1, 2005, we have been operating from
offices located at 47 School Avenue, Chatham, New Jersey, which are owned by an
affiliated company of Kirk Warshaw, our Chief Financial Officer and Secretary,
for no rent, on a month to month basis. We do not own or intend to invest in any
real property, real estate mortgages, or any other real estate backed
securities. We have no formal policy with respect to investments in real estate
or investments with persons primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 25, 2005 our Board of Directors unanimously adopted a resolution
seeking stockholder approval to amend our Certificate of Incorporation to effect
a reverse stock split of our common stock at the Board's sole discretion at any
time prior to October 25, 2006. Thereafter, on October 26, 2005, pursuant to our
By-laws and Delaware General Corporation Law, certain of our principal
stockholders holding 74,711,681 shares of common stock, representing 77.7% of
the total issued and outstanding shares of our common stock, adopted a
resolution to authorize the Board of Directors, in its sole discretion, to
effect a reverse split of our common stock based upon a ratio of not less than
one-for-twenty nor more than one-for-one hundred fifty shares at any time prior
to October 25, 2006. Notwithstanding approval of this proposal by the
stockholders, the Board of Directors may in its sole discretion, determine not
to effect, and abandon, the reverse stock split without further action by
stockholders.
On October 27, 2005, we filed with the SEC a Preliminary Information Statement
pursuant to Section 14(C) of the Securities Exchange Act of 1934 (the "Exchange
Act") with respect to amending our Certificate of Incorporation as described
above. Thereafter, on November 22, 2005, we filed with the SEC a Definitive
Information Statement pursuant to Section 14(C) of the Exchange Act. A copy of
the Information Statement was mailed to all stockholders on November 25, 2005.
The actions detailed in the Information Statement became effective as of
December 15, 2005.
10
PART II
ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
(a) Market Information:
Our common stock has traded on the OTCBB since May 2000. Currently, our
common stock trades under the symbol "TFHD." The following table sets forth the
high and low bid quotations for our common stock for each quarterly period in
2005 and 2004. Such quotations reflect inter-dealer prices, without retail
mark-up, markdown or commission and may not necessarily represent actual
transactions.
BID PRICE
High Low
2005
First Quarter $0.040 $0.020
Second Quarter $0.070 $0.025
Third Quarter $0.050 $0.020
Fourth Quarter $0.037 $0.015
2004
First Quarter $ 0.040 $ 0.020
Second Quarter $ 0.030 $ 0.011
Third Quarter $ 0.040 $ 0.011
Fourth Quarter $ 0.060 $ 0.008
(b) Holders:
There were 233 stockholders of record of our common stock as of March 9,
2006.
(c) Dividend:
We have not declared any cash dividends and do not intend to declare or
pay any cash dividends in the foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
The following information relates to our sales of unregistered securities during
the fiscal year ended December 31, 2005. These sales of securities were made in
reliance upon an exemption from the registration provisions of the Securities
Act of 1933, as amended (the "Act") set forth in Sections 4(2) and 4(6) thereof
and the rules and regulations under the Act, including Regulation D, as a
transaction by an issuer not involving any public offering and/or sale to a
limited number of purchasers who were acquiring such securities for their own
account for investment purposes and not with a view to the resale or
distribution thereof.
On September 30, 2005, we sold 344,595 shares of the Preferred Stock to
Infinicom in consideration for the discharge of debt owed by us to Infinicom in
the amount of $230,879, in a private transaction We believe the issuance was
exempt from registration because Infinicom is an accredited investor and the
transaction otherwise meets the requirements for exemption from registration.
Each share of Preferred Stock is convertible into one hundred (100) shares of
our common stock immediately upon election and written notice to us by the
holder of the Preferred Stock
On November 25, 2005, in connection with the Infinicom Sale, the Infinicom Sale
Agreement was amended with regard to determining the amount of the Infinicom
Additional Shares to be issued by us to
11
provide for, among other criteria, that the fair market value of the Infinicom
Additional Shares would be no less than $400,000 or more than $600,000 upon the
occurrence of a post-closing event.
On February 1, 2006, a total of 250,000 shares of our Preferred Stock were
authorized for issuance to two individuals who provided services to us. We
issued 150,000 shares of Preferred Stock to Arnold Kling and 100,000 shares of
Preferred Stock to Kirk Warshaw for their work as our President and Chief
Financial Officer, respectively. We valued the services provided by Mr. Kling at
$11,250 and the services provided by Mr. Warshaw at $7,500.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes
appearing elsewhere in this Form 10-K. The consolidated statements of operations
data for the years ended December 31, 2005, 2004, and 2003 and the consolidated
balance data at December 31, 2005 and 2004 are derived from our audited
consolidated financial statements appearing elsewhere in this Form 10-K. The
consolidated statements of operations data for the years ended December 31, 2002
and 2001 and the consolidated balance data at December 31, 2003, 2002 and 2001
are derived from our audited consolidated financial statements that are not
included in this Form 10-K. The historical results are not necessary indicative
of the results to be expected in any future period.
Year Ended December 31,
2005 2004 2003 2002 2001
----------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Revenue -- -- -- -- --
Loss from Continuing (28,140) (129,430) (95,434) (592,186) (132,544)
Operations
Loss from (100,035) (356,968) 20,098 (235,093) (1,690,427)
Discontinued
Operations
Net Loss (128,175) (486,398) (75,336) (827,279) (1,822,971)
Loss per share, (0.00) (0.00) (0.00) (0.01) (0.00)
continuing operations,
basic and diluted
Loss per share, (0.00) (0.00) (0.00) (0.00) (0.02)
discontinued
operations, basic
and diluted
Weighted average 96,147,396 96,147,396 96,147,396 93,255,869 85,486,717
number of shares
outstanding
Working capital 71,860 (62,652) (833,533) (730,479) (305,596)
(deficit)
Total Assets 107,500 985,554 3,979,477 3,978,041 5,327,740
Long-term debt 230,878 149,976 89,976 212,414 780,632
Total stockholders (159,018) (212,628) 344,822 336,249 509,392
equity (deficit)
12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENTS CONTAINED IN THIS PLAN OF OPERATION OF THIS ANNUAL REPORT ON FORM
10-K INCLUDE "FORWARD-LOOKING STATEMENTS". FORWARD-LOOKING STATEMENTS INVOLVE
KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE OUR
ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR ACHIEVEMENTS EXPRESSED
OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS NOT TO OCCUR OR BE REALIZED. SUCH
FORWARD-LOOKING STATEMENTS GENERALLY ARE BASED UPON OUR BEST ESTIMATES OF FUTURE
RESULTS, GENERAL MERGER AND ACQUISITION ACTIVITY IN THE MARKETPLACE, PERFORMANCE
OR ACHIEVEMENT, CURRENT CONDITIONS AND THE MOST RECENT RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "PROJECT," "EXPECT," "BELIEVE," "ESTIMATE,"
"ANTICIPATE," "INTENDS," "CONTINUE," "POTENTIAL," "OPPORTUNITY" OR SIMILAR
TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS OR OTHER
VARIATIONS OF THOSE TERMS OR COMPARABLE WORDS OR EXPRESSIONS.
PLAN OF OPERATION
GENERAL
Our plan is to seek, investigate, and consummate a merger or other business
combination, purchase of assets or other strategic transaction (i.e. a merger)
with a corporation, partnership, limited liability company or other business
entity (a "Merger Target") desiring the perceived advantages of becoming a
publicly reporting and publicly held corporation. We have no operating business,
and conduct minimal operations necessary to meet regulatory requirements. Our
ability to commence any operations is contingent upon obtaining adequate
financial resources.
We are not currently engaged in any business activities that provide cash flow.
The costs of investigating and analyzing business combinations for the next 12
months and beyond such time will be paid with money in our treasury.
During the next twelve months we anticipate incurring costs related to:
(i) filing of Exchange Act reports, and
(ii) costs relating to consummating transaction with a Merger Target.
We believe we will be able to meet these costs through use of funds in our
treasury and additional amounts, as necessary, to be loaned to or invested in us
by our stockholders, management or other investors.
We may consider a business which has recently commenced operations, is a
developing company in need of additional funds for expansion into new products
or markets, is seeking to develop a new product or service, or is an established
business which may be experiencing financial or operating difficulties and is in
need of additional capital. In the alternative, a business combination may
involve the acquisition of, or merger with, a company which does not need
substantial additional capital, but which desires to establish a public trading
market for its shares, while avoiding, among other things, the time delays,
significant expense, and loss of voting control which may occur in a public
offering.
On November 22, 2005, following the filing of our 10-Q for the quarter ended
September 30, 2005, Arnold P. Kling joined us as our President and Kirk M.
Warshaw joined us as our Chief Financial Officer and Secretary. Messrs. Kling
and Warshaw 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. No regular compensation
has or will be paid to any officer or director in their capacities as such. We
do not anticipate hiring any full-time employees as long as we are seeking and
evaluating business opportunities.
Since September 30, 2005, we had not incurred any material costs or expenses
other than those associated with our minimal operations necessary to meet
regulatory requirements. As of December 31, 2005 we had
13
cash on hand of $100,000. Since we have no revenue or plans to generate any
revenue, if our expenses exceed our cash currently on hand we will be dependent
upon loans to fund losses incurred in excess of our cash.
EQUIPMENT AND EMPLOYEES
As of December 31, 2005, we had no operating business, no equipment, and other
than Arnold Kling and Kirk Warshaw our President and Chief Financial Officer,
respectively, we had no employees. Neither of our officers receives any regular
compensation and each provides services on an "as needed basis". We do not
intend to develop our own operating business but instead plan to merge with
another operating company.
CONTINUING OPERATIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2005
As noted, all activity incurred prior to June 30, 2004 has been accounted for as
Discontinued Operations and as such is not evaluated in this report as it has
little relevance to our future operation.
We did not use any cash in our continuing operating activities for the three
month developmental period ended December 31, 2005. During the three months
ended December 31, 2005, we had no revenues. As a result, cash on hand at both
the beginning and end of the three month developmental period ended December 31,
2005 was $100,000.
The operating expenses of $28,140 for the three month developmental period ended
December 31, 2005 resulted primarily from accounting/auditing, legal and SEC
report filing expenses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Our financial statements and the required financial statement schedule are
included herein beginning on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Effective March 7, 2006, we dismissed Stonefield Josephson, Inc., ("Stonefield")
from serving as our independent accountants and engaged Sherb & Co.,LLP
("Sherb") as our new independent accountants.
We disclosed in our Form 10-K for the fiscal year ended December 31, 2004, that
in evaluating our internal controls, management considered certain items control
deficiencies that constituted a material weakness. The following weaknesses were
included in management's assessment:
Based on the evaluation of our Chief Executive Officer and Chief Financial
Officer they concluded that our failure 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 our
corporate governance structure. Accordingly, our controls and procedures as of
December 31, 2004 were not effective.
During the years ended December 31, 2004 and December 31, 2003 and through
September 30, 2005, there have been no reportable events, as defined in Item
304(a)(1)(v) of Regulation S-K, except as noted herein.
14
ITEM 9A. CONTROLS AND PROCEDURES.
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. 24Holdings' management, with
the participation of the President and the Chief Financial Officer, the sole
officers, directors and employees of 24Holdings, carried out an evaluation of
the effectiveness of the 24Holdings' "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, the President and the Chief Financial Officer concluded that, as of
the Evaluation Date, 24Holdings' disclosure controls and procedures are
effective to ensure that information required to be disclosed by 24Holdings in
the reports that it files or submits under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms. Information required to be disclosed by 24Holdings in the
reports it files or submits under the Exchange Act is accumulated and
communicated to its management, including its president and chief financial
officer, as appropriate to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There were no changes in
24Holdings' internal controls over financial reporting, which occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect 24Holdings' internal control over financial
reporting.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth information concerning our officers and directors
as of March 20, 2006:
Name Age Title
- ------- ----- -------
Arnold P. Kling 47 President, Treasurer and Director
Kirk M. Warshaw 48 Chief Financial Officer, Secretary and Director
ARNOLD P. KLING. Mr. Kling has served as a Director since September 2005 and as
our President and Treasurer since November, 2005. Mr. Kling is currently a
Managing Director of GH Venture Partners, LLC, a private equity and merchant
banking boutique for which he also served as a Managing Director and General
Counsel from 1995 to 1999. From 1999 through August 2005, Mr. Kling was the
President of Adelphia Holdings, LLC, a merchant-banking firm, as well as the
managing member of several private investment funds. From 1993 to 1995 he was a
senior executive and General Counsel of Buckeye Communications, Inc., a Nasdaq
listed licensing and multimedia company. From 1990 through 1993, Mr. Kling was
an associate and partner in the corporate and financial services department of
Tannenbaum, Helpern, Syracuse & Hirschtritt LLP, a mid-size New York law firm.
Mr. Kling received a Bachelor of Science degree from New York University in
International Business in 1980 and a Juris Doctor degree from Benjamin Cardozo
School of Law in 1983. Mr. Kling currently serves as a Director and President of
Twin Lakes, Inc., R&R Acquisition, I, Inc., R&R Acquisition, II, Inc., R&R
Acquisition, III, Inc., R&R Acquisition, IV, Inc., and R&R Acquisition, V, Inc.
(each a publicly reporting, non-trading company) and Entrust Financial Services,
Inc. (OTCBB:ENFN)
KIRK M. WARSHAW. Mr. Warshaw has served as a Director since September 2005 and
our Chief Financial Officer and Secretary, since November, 2005. Mr. Warshaw is
a financial professional who, since 1990, has provided clients in a multitude of
different industries with advice on accounting, corporate finance, and general
business matters. Prior to starting his own consulting firm, from 1983 to 1990,
he held the various titles of Controller, Chief Financial Officer, President,
and Chief Executive Officer at three separate financial institutions in New
Jersey. From 1980 through 1983, Mr. Warshaw was a Senior Accountant at the
public accounting firm of Deloitte, Haskins & Sells. Mr. Warshaw is a 1980
graduate of Lehigh University and has been a CPA in New Jersey since 1982. Mr.
Warshaw is currently the Chief Financial Officer of Twin Lakes, Inc., R&R
Acquisition, I, Inc., R&R Acquisition, II, Inc., R&R Acquisition, III,
15
Inc., R&R Acquisition, IV, Inc., and R&R Acquisition, V, Inc. (each a publicly
reporting, non-trading company), the Chief Financial Officer and a Director of
Entrust Financial Services, Inc. (OTCBB:ENFN), a Director of Empire Financial
Holding Company (AMEX:EFH), and a Director of two privately owned entities.
Mr. Kling and Mr. Warshaw are not required to commit their full time to our
business affairs and they will not devote a substantial amount of time to our
business affairs.
COMPENSATION AND AUDIT COMMITTEES
As we only have two board members and given our limited operations, we do not
have separate or independent audit or compensation committees. Our Board 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 Exchange Act requires our directors and executive officers
and persons who beneficially own more than ten percent of our common stock
(collectively, the "Reporting Persons") to report their ownership of and
transactions in our common stock to the SEC. Copies of these reports are also
required to be supplied to us. To our knowledge, during the fiscal year ending
December 31, 2005 the Reporting Persons complied with all applicable Section
16(a) reporting requirements.
CODE OF ETHICS
We have not adopted a Code of Ethics given our limited operations. We expect
that our Board of Directors following a merger or other acquisition transaction
will adopt a Code of Ethics.
ITEM 11. EXECUTIVE COMPENSATION.
During the last completed fiscal year, Urban von Euler served as our Chief
Executive Officer until November 21, 2005. On November 21, 2005, upon Mr. von
Euler's resignation, our Board appointed Arnold Kling as President, Treasurer
and Kirk Warshaw as Chief Financial Officer and Secretary, of 24Holdings. Mr.
Kling and Mr. Warshaw are our sole officers and directors. Neither receives any
regular compensation for their services rendered on our behalf.
Since September 30, 2005 we have paid no cash compensation to our officers or
directors. On February 1, 2006, our Board of Directors authorized the issuance
to Mr. Kling and Mr. Warshaw, an aggregate of 250,000 shares of our Preferred
Stock for services they provided to us. The Board granted to Mr. Kling 150,000
shares of Preferred Stock which was determined to be worth $11,250 and to Mr.
Warshaw 100,000 shares of Preferred Stock which was determined to be worth
$7,500. The expense will be recognized in our 2006 financial statements. No
officer or director is required to make any specific amount or percentage of his
business time available to us.
While we do not presently anticipate engaging the services of professional firms
that specialize in finding business acquisitions on any formal basis, we may
engage such firms in the future, in which event we may be required to pay a
finder's fee or other compensation. In no event, however, will the we pay a
finder's fee or commission to any of our officers and directors or any entity
with which an officer or director is. We do not have any incentive or stock
option plan in effect.
16
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As we only have two board members and given our limited operations, we do not
have a separate compensation committee. During the last completed fiscal year,
the only officers and former officers who may have participated in deliberations
concerning executive compensation are Arnold P. Kling and Kirk M. Warshaw, and
Urban von Euler and Larsake Sandin, respectively.
ITEM 12. BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information as of March 20, 2006
regarding the number and percentage of our common stock (being our only voting
securities) beneficially owned by each officer and director, each person
(including any "group" as that term is used in Section 13(d)(3) of the Exchange
Act) known by us to own 5% or more of our common stock, and all officers and
directors as a group.
SHARES OF COMMON PERCENTAGE
STOCK BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED (1) OWNERSHIP
- ----------------------------------------------- ------------------ ----------
R&R Biotech Partners, LLC
1270 Avenue of the Americas - 16th Floor
New York, NY 10020
Attention: Thomas Pinou, CFO 87,336,945(2) 56.1%
Moyo Partners, LLC (3)
c/o Arnold P. Kling
712 Fifth Avenue - 11th Floor
New York, NY 10019 21,834,236(4) 14.0%
Arnold P. Kling
712 Fifth Avenue - 11th Floor
New York, NY 10019 15,000,000(5) 9.6%
Kirk M. Warshaw
47 School Avenue
Chatham, NJ 07928 10,000,000(6) 6.4%
All Directors and Officers (2 persons) as a group 46,834,236 30.1%
(1) Unless otherwise indicated, we have been advised that all individuals or
entities listed have the sole power to vote and dispose of the number of shares
set forth opposite their names. For purposes of computing the number and
percentage of shares beneficially owned by a security holder, any shares which
such person has the right to acquire within 60 days or March 20, 2006 are deemed
to be outstanding, but those shares are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other security holder.
(2) Consists of 59,769,345 shares of common stock currently outstanding and
27,567,600 shares of common stock issuable upon conversion of 275,676 shares of
the Preferred Stock.
(3) Arnold P. Kling, our President and a Director, controls Moyo Partners, LLC
and therefore is the beneficial owner of the shares held by this entity.
(4) Consists of 14,942,336 shares of common stock currently outstanding and
6,891,900 shares of common stock issuable upon conversion of 68,919 shares of
the Preferred Stock.
17
(5) Consists of 15,000,000 shares of common stock issuable upon conversion of
150,000 shares of the Preferred Stock.
(6) Consists of 10,000,000 shares of common stock issuable upon conversion of
100,000 shares of the Preferred Stock.
We currently do not maintain any equity compensation plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
AUDIT FEES:
We paid audit and financial statement review fees totaling $8,500 to Sherb &
Co., LLP, our current independent accountants for the year ended December 31,
2005 and $44,000 for the year ended December 31, 2005 and $63,316 for the year
ended December 31, 2004 to our former independent accountants Stonefield
Josephson, Inc.
AUDIT-RELATED FEES:
None.
TAX FEES:
We paid tax preparation fees totaling $0 to Sherb & Co., LLP, our current
independent accountants for the year ended December 31, 2005 and $20,000 for the
year ended December 31, 2004 to our former independent accountants Stonefield
Josephson, Inc.
ALL OTHER FEES:
None.
AUDIT COMMITTEE POLICIES AND PROCEDURES:
We do not currently have a standing audit committee. The above services were
approved by our Board of Directors.
PART IV
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.
(i) Reports of Independent Registered Accounting Firms
(ii) Consolidated Balance Sheet at December 31, 2005 and December 31, 2004
(iii) Consolidated Statement of Income (Operations) for each of the three years
ended December 31, 2005
18
(iv) Consolidated Statement of Stockholders' Equity (Deficit) for each of the
three years ended December 31, 2005
(v) Consolidated Statement of Cash Flows for each of the three years ended
December 31, 2005
(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
---------
NO. DESCRIPTION
--------- ---------------
2.1 Second Amended Plan of Reorganization of Scoop, Inc. (1)
2.2 Stock Purchase Agreement, dated as of April 23, 1999, between
InfiniCom AB and Scoop, Inc. (1)
2.3 Agreement, dated as of November 1, 1999, between InfiniCom AB and
Scoop, Inc. (1)
2.4 Agreement on the Transfer of Shares dated March 29, 2001 between
24STORE (Europe) Limited and Compo Consult AS (English Translation)
(2)
3.1 Certificate of Designations, Rights and Preferences of Series A
Preferred Stock $.001 Par Value of 24Holdings Inc. (3)
3.2 Certificate of Incorporation (4)
3.3 Certificate of Amendment of the Certificate of Incorporation of the
Company dated October 20, 1999 (4)
3.4 Certificate of Amendment of the Certificate of Incorporation of the
Company dated April 1, 2001 (4)
3.5 By-Laws of the Company(5)
3.6 Certificate of Amendment of the Bylaws of the Company (5)
4.1 Form of Common Stock Certificate(6)
31.1 Chief Executive Officer Certification pursuant to section 302 of the
Sarbanes-Oxley Act of 2002*
31.2 Chief Financial Officer Certification pursuant to section 302 of the
Sarbanes-Oxley Act of 2002*
32.1 Chief Executive Officer Certification pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.*
32.2 Chief Financial Officer Certification pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.*
- ----------------------------
*Included herewith
(1) Previously filed as an Exhibit in the company's Current Report on Form
8-K, filed on April 5, 2000, and incorporated herein by reference.
(2) Previously filed as an Exhibit in the company's Annual Report on Form
10-K, filed on April 16, 2002, and incorporated herein by reference.
(3) Previously filed as an Exhibit in the company's Current Report on Form
8-K, filed on October 6, 2005, and incorporated herein by reference.
(4) Previously filed as an Exhibit in the company's Annual Report on Form
10-K, filed on April 13, 2001, and incorporated herein by reference.
(5) Previously filed as an Exhibit in the company's Annual Report on Form
10-K, filed on February 21, 2001, and incorporated herein by reference
(6) Previously filed as an Exhibit in the company's Registration Statement on
Form SB-2 (Registration No. 333-15129), filed on October 30, 1996 and
incorporated herein by reference.
19
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.
Date: March 31, 2006
By: /s/ Arnold P. Kling
----------------------------------
Arnold P. Kling, President
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.
Date: March 31, 2006
By: /s/ Arnold P. Kling
----------------------------------
Arnold P. Kling, President and Director
(Principal Executive Officer)
Date: March 31, 2006
By: /s/ Kirk M. Warshaw
----------------------------------
Kirk M. Warshaw, Chief Financial Officer and Director
(Principal Financial and Accounting Officer)
20
24HOLDINGS INC.
INDEX
- ----------------------------------------------------------------------- --------
Report of Independent Registered Accounting Firm - Sherb & Co., LLP F-2
- ----------------------------------------------------------------------- --------
Report of Independent Registered Accounting Firm - Stonefield
Josephson, Inc. F-3.
- ----------------------------------------------------------------------- --------
Financial Statements:
- ----------------------------------------------------------------------- --------
Consolidated Balance Sheets as of December 31, 2005 and 2004 F-4.
- ----------------------------------------------------------------------- --------
Consolidated Statements of Operations for Years Ended
December 31, 2005, 2004 and 2003 F-5.
- ----------------------------------------------------------------------- --------
Consolidated Statement of Shareholders' Equity Years Ended
December 31, 2005, 2004 and 2003 F-6.
- ----------------------------------------------------------------------- --------
Consolidated Statements of Cash Flows Years Ended
December 31, 2005, 2004 and 2003 F-7.
- ----------------------------------------------------------------------- --------
Notes to Consolidated Financial Statements F-8.
- ----------------------------------------------------------------------- --------
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and Directors
24Holdings, Inc.
Chatham, New Jersey
We have audited the accompanying consolidated balance sheet of 24Holdings, Inc.
as of December 31, 2005, and the related consolidated statements of operations,
shareholders' deficit, cash flows for the year then ended December 31, 2005.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides 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. as
of December 31, 2005, and the results of its operations and its cash flows for
the year then ended December 31, 2005, in conformity with accounting principles
generally accepted in the United States.
/s/ Sherb & Co., LLP
Certified Public Accountants
New York, New York
March 26, 2006
F-2
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 the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for each of the two 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 the results of
their operations and their cash flows for each of the two 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.
/s/ Stonefield Josephson, Inc.
- ------------------------------
Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
March 1, 2005
F-3
24HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
2005 2004
----------- -----------
- ASSETS -
CURRENT ASSETS:
Cash $ 100,000 $ 928
Other receivable - related party 7,500 --
Current Assets of subsidiary held for sale -- 984,626
----------- -----------
Total Current Assets 107,500 985,554
TOTAL ASSETS: $ 107,500 $ 985,554
=========== ===========
- LIABILITIES AND SHAREHOLDERS' (DEFICIT) -
CURRENT LIABILITIES:
Accounts Payable & accrued expenses $ 35,640 $ 118,914
Current Liabilities of subsidiary held for sale -- 929,292
----------- -----------
TOTAL CURRENT LIABILITIES 35,640 1,048,206
Long term note payable, related party -- 149,976
Convertible Preferred stock; $0.001 par value,
5,000,000 authorized, 344,879 shares issued
and outstanding 230,878 --
----------- -----------
Total liabilities 266,518 1,198,182
SHAREHOLDERS' (DEFICIT) (NOTE 4):
Common stock, $0.001 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
Other comprehensive income/loss -- (181,785)
Accumulated Deficit (10,557,994) (10,429,818)
----------- -----------
Total shareholders' deficit (159,018) (212,628)
----------- -----------
Total Liabilities and Shareholders' (Deficit) $ 107,500 $ 985,554
=========== ===========
The accompanying Notes form and integral part of these
consolidated financial statements.
F-4
24HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31,
------------------------------------
2005 2004 2003
--------- --------- ---------
REVENUES $ -- $ -- $ --
--------- --------- ---------
COSTS AND EXPENSES:
General and Administrative 28,140 129,430 95,434
--------- --------- ---------
Total Expenses 28,140 129,430 95,434
--------- --------- ---------
Net Loss from Continuing Operations
Before Income Taxes (28,140) (129,430) (95,434)
Provision for Income Taxes -- -- --
--------- --------- ---------
Loss from Continuing Operations (28,140) (129,430) (95,434)
Discontinued Operations-
Income (Loss) from Operations
(Net of Taxes) (839,001) (356,968) 20,098
Gain on Disposal (Net of Taxes) 738,966 -- --
--------- --------- ---------
NET LOSS $(128,175) $(486,398) $ (75,336)
========= ========= =========
BASIC AND DILUTED EARNINGS PER
SHARE FROM CONTINUING OPERATIONS $(0.00) $(0.00) $(0.00)
BASIC AND DILUTED EARNINGS PER
SHARE FROM DISCONTINUED OPERATIONS $(0.00) $(0.00) $(0.00)
BASIC AND DILUTED EARNINGS
PER SHARE $(0.00) $(0.00) $(0.00)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING - BASIC
AND DILUTED 96,147,396 96,147,396 96,147,396
The accompanying Notes form and integral part of these
consolidated financial statements.
F-5
24HOLDINGS, INC.
CONSOLDATED STATEMENT OF SHAREHOLDERS' (DEFICIT)
Years Ended December 31, 2005, 2004 and 2003
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
COMMON SHARES ADDITIONAL OTHER ACCUMULATED SHAREHOLDERS'
PAID IN COMPREHENSIVE DEFICIT EQUITY
CAPITAL INCOME/LOSS (DEFICIT)
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
NUMBER AMOUNT
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Balance at December 31, 2002 96,147,396 $ 36,742 $10,362,233 $(194,642) $(9,868,084) $ 336,249
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Net Loss for Year Ended
December 31, 2003 -- (75,336) (75,336)
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Foreign currency translation 83,909 83,909
------------ - ------------ ---------------- ----------- ----------- -----------
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Balance at December 31, 2003 96,147,396 $ 36,742 10,362,233 (110,733) (9,943,420) 344,822
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Net Loss for Year Ended
December 31, 2004 (486,398) (486,398)
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Foreign currency translation (71,052) (71,052)
-------------- ------------ ---------------- ----------- ------------ -----------
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Balance at December 31, 2004 96,147,396 $ 36,742 10,362,233 (181,785) (10,429,818) (212,628)
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Issuance of Preferred Shares
to retire debt --
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Other Comprehensive Income 181,785 181,785
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Net loss for Year Ended (128,175) (128,175)
December 31, 2005 ----------- -------- ----------- ----------- ------------- ----------
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
Balance at December 31, 2005 96,147,396 $ 36,742 $10,362,234 $ -- $(10,557,994) $(159,018)
========== ======== =========== =========== ============= ==========
- ------------------------------------ -------------- ------------ ----------------- ------------- ---------------- ------------------
The accompanying Notes form and integral part of these consolidated
financial statements.
F-6
24HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------------------------
2005 2004 2003
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (128,175) $ (486,398) $ (75,336)
Adjustments to reconcile net loss to net cash
utilized by operating activities:
Depreciation -- 63,590 80,835
Gain on sale of building, net of deferred taxes -- (92,751) --
Foreign currency translation 84,345 71,052 86,052
Realized exchange variances (76,490) -- --
Gain on Sale of Subsidiary - discontinued operations (391,358) -- --
Gain on Sale of Intellectual Properties (606,830) -- --
Write off of intercompany debt 364,139 -- --
(Increase) Decrease in
Accounts receivable 327,752 1,752,456 (550,734)
Loans receivable, related party 386,130 60,000 --
Inventory 195,409 (111,508) 178,969
Prepaid and other assets (91,094) 7,104 36,994
Increase (decrease) in accrued expenses (417,635) (1,397,380) (431,540)
Deferred taxes -- (86,800) (2,537)
----------- ----------- -----------
Net cash utilized by operating activities (353,806) (220,635) (677,297)
----------- ----------- -----------
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of building -- 1,523,000 --
(Purchase) of Property & Equipment -- (29,074) (44,347)
Due to/from related parties 258,773 -- --
Proceeds from sale of subsidiary 100,000 -- --
----------- ----------- -----------
Net cash provided (utilized) by investing activities 358,773 1,493,926 (44,347)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Credit facility -- (1,082,723) 71,435
Proceeds from long-term debt, bank -- -- 89,976
Repayment of long term debt, bank -- (243,377) (94,017)
----------- ----------- -----------
Net cash provided by (used for) financing activities -- (1,326,100) 67,394
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,968 (52,809) (654,250)
Cash and cash equivalents at beginning of year 95,032 147,841 802,091
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 100,000 $ 95,032 $ 147,841
=========== =========== ===========
Supplemental cash flow information
Cash paid for:
Interest $ -- $ 18,102 $ 67,290
Income taxes -- -- --
Non cash financing activities:
Debt converted to preferred stock $ 230,878 --
The accompanying Notes form and integral part
of these consolidated financial statements.
F-7
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF COMPANY:
24Holdings Inc., is a Delaware corporation formerly known as Scoop, Inc.
("24Holdings" or the "Company"). In April 2001 Scoop, Inc. amended its
Certificate of Incorporation to change its name to 24Holdings Inc. Prior to
September 30, 2005, 24Holdings was a holding company which owned 100% of the
capital stock of 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, 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 Swedish registered company, acquired 91% of
the outstanding stock of the Company in exchange for 100% of the stock of
24STORE. Subsequent to Infinicom, AB's acquisition in 1999 and until September
30, 2005, the business operations of 24STORE, which represented all of the
Company's operations, were devoted to supplying business customers with computer
and electronics products.
CHANGE OF OWNERSHIP TRANSACTIONS
On May 26, 2005, we entered into a series of agreements with Infinicom, AB in
connection with our sale of all of the outstanding stock of 24STORE (the
"24STORE Sale") and separately, the assignment and transfer 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, AB would
pay us $100,000 for our 24STORE shares and pursuant to the IP Assignment, we
agreed to be paid for the IP Assets through a set-off against all outstanding
and contingent liabilities we owed to Infinicom, AB, determined as of the
closing date of the 24STORE Sale.
On May 26, 2005, we also entered a Preferred Stock Purchase Agreement with
Infinicom AB, (the "Preferred Stock Agreement") pursuant to which we agreed to
sell to Infinicom, AB, 344,595 shares of our new series A convertible preferred
stock, par value $0.001 (the "Preferred Stock") in exchange for the discharge of
$230,879 of outstanding debt owed to Infinicom, AB. Each share of the Preferred
Stock is convertible into 100 shares of our common stock at the holder's option.
The authorized common shares are only 100,000,000 hence the conversion of such
preferred shares outstanding into 34,459,500 shares of common stock is not
possible since such conversion would exceed the authorized common shares by
30,606,896 shares. Since such conversion terms of the preferred stock will
require more common shares to be issued than authorized, the $230,879 of
indebtedness converted to preferred stock will be recorded as a long term
liability until the Company increases the authorized common shares pursuant to
EITF 00-19.
F-8
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF COMPANY (continued):
On May 26, 2005, Infinicom, AB, the Company, 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 "Common Stock Agreement") pursuant
to which, Infinicom agreed to sell to the Purchasers an aggregate of 109,171,181
shares of common stock of the Company (which included shares issuable of the
Preferred Stock) which would represent approximately 83.6% of the then issued
and outstanding shares of common stock of the Company (the "Infinicom Sale"). In
turn, the Purchasers would pay to Infinicom (i) $500,000 in cash, and (ii) cause
the issuance of shares of common stock of the Company which would represent 1%
of the issued and outstanding shares of common stock of the Company on a fully
diluted basis, upon the closing of a merger with one or more as yet unidentified
private unaffiliated operating companies that the Purchasers intended to cause
the Company to enter into subsequent to the closing of the Sale. The
consummation of the Infinicom Sale was contingent on the contemporaneous closing
of the 24STORE Sale and the IP Assignment.
On September 30, 2005, the Company and Infinicom AB completed the transactions
contemplated in the 24STORE Sale, the IP Assignment and the Preferred Stock
Agreement as described above. Infinicom, AB, agreed to forgive $603,830 of debt
the Company owed to them in consideration of the IP Assignment.
Effective September 30, 2005, Infinicom completed the sale to the Purchasers of
74,711,681 shares of common stock of the Company (which represented 77.7% of the
96,147,395 shares of common stock then outstanding) and 344,595 shares of
Preferred Stock, constituting 83.6% in the aggregate of the then issued and
outstanding common stock of the Company, assuming the conversion of the
Preferred Stock into 34,459,500 shares of common stock. As a result, the
Purchasers acquired control of the Company from Infinicom, with R&R beneficially
owning 87,336,945 shares of common stock (assuming the conversion by R&R of
275,676 shares of Preferred Stock into 27,567,600 shares of common stock)
constituting 66.9% of the then issued and outstanding shares of common stock of
the Company, and Moyo beneficially owning 21,834,236 (assuming the conversion by
Moyo of 68,919 shares of Preferred Stock into 6,891,900 shares of common stock)
constituting 16.7% of the then issued and outstanding shares of common stock of
the Company.
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 Kling and Kirk
Warshaw were appointed as Directors of the Company. On November 21, 2005,
effective with the filing of our September 30, 2005 Form 10Q, Mr. von Euler
resigned as Chief Executive Officer and Mr. Kling was appointed President and
Mr. Warshaw was appointed Chief Financial Officer and Secretary. As of that same
date, we relocated our headquarters to Chatham, New Jersey.
F-9
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 1 - DESCRIPTION OF COMPANY (continued):
THE COMPANY TODAY
Since September 30, 2005, our purpose is to serve as a vehicle to acquire an
operating business and is currently considered a "shell" 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.
Commencing with the filing of our June 30, 2004 Form 10-Q, all of the Company's
computer related business services activities have been accounted for as
Discontinued Operations. As such, all of the prior activity has been shown in
the financials as one line item that is labeled "Income (Loss) from Discontinued
Operations, net of taxes." The activities of the company since September 2005
are shown in the income statement under the section labeled "Loss from
Continuing Operations." These amounts are for expenses incurred since September
30, 2005 and are of the nature we expect to incur in the future, whereas the
Income (loss) from Discontinued Operations are from activities we are no longer
engaged in.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company's accounting policies are in accordance with accounting principles
generally accepted in the United States of America. Outlined below are those
policies considered particularly significant.
(a) Principles of Consolidation:
The accompanying consolidated financial 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 are included in the determination of net income (loss).
(b) Revenue Recognition
All revenue is generated by 24Store, the UK subsidiary, and
therefore is included in Discontinued Operations.
F-10
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(c) Use of Estimates:
In preparing financial statements in accordance with accounting
principles generally accepted in the United States of America,
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.
(d) Statements of Cash Flows:
For purposes of the statements of cash flows the Company considers
all highly liquid investments purchased with a remaining maturity of
three months or less to be cash equivalents.
(e) Earnings (Loss) Per Share:
Basic earnings (loss) per share has been computed on the basis of
the weighted average number of common shares outstanding during each
period presented according to the provisions of SFAS No. 128
"EARNINGS PER SHARE". Diluted earnings (loss) per share has not been
presented as the effect of the common stock purchase warrants
outstanding, on such calculation, would have been anti-dilutive.
Such securities could potentially dilute basic earnings per share in
the future.
(d) 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.
F-11
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(e) 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.
(f) New Accounting Pronouncements
FASB 154 - Accounting Changes and Error Corrections
In May 2005, the FASB issued FASB Statement No. 154, which replaces
APB Opinion No.20 and FASB No. 3. This Statement provides guidance
on the reporting of accounting changes and error corrections. It
established, unless impracticable retrospective application as the
required method for reporting a change in accounting principle in
the absence of explicit transition requirements to a newly adopted
accounting principle. The Statement also provides guidance when the
retrospective application for reporting of a change in accounting
principle is impracticable. The reporting of a correction of an
error by restating previously issued financial statements is also
addressed by this Statement. This Statement is effective for
financial statements for fiscal years beginning after December 15,
2005. Earlier application is permitted for accounting changes and
corrections of errors made in fiscal years beginning after the date
of this Statement is issued. Management believes this Statement will
have no impact on the financial statements of the Company once
adopted.
FASB 155 - Accounting for Certain Hybrid Financial Instruments
In February 2006, the FASB issued FASB Statement No. 155, which is
an amendment of FASB Statements No. 133 and 140. This Statement; a)
permits fair value remeasurement for any hybrid financial instrument
that contains an embedded derivative that otherwise would require
bifurcation, b) clarifies which interest-only strip and
principal-only strip are not subject to the requirements of
Statement 133, c) establishes a requirement to evaluate interests in
securitized financial assets to identify interests that are
freestanding derivatives or that are hybrid financial instruments
that contain an embedded derivative requiring bifurcation, d)
clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives, e) amends Statement 140
to eliminate the prohibition on a qualifying special-purpose entity
from holding a derivative financial instrument that pertains to a
beneficial interest other than another derivative financial
instrument. This Statement is effective for financial
F-12
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
statements for fiscal years beginning after September 15, 2006.
Earlier adoption of this Statement is permitted as of the beginning
of an entity's fiscal year, provided the entity has not yet issued
any financial statements for that fiscal year. Management believes
this Statement will have no impact on the financial statements of
the Company once adopted.
FASB 156 - Accounting for Servicing of Financial Assets
In March 2006, the FASB issued FASB Statement No. 156, which amends
FASB Statement No. 140. This Statement establishes, among other
things, the accounting for all separately recognized servicing
assets and servicing liabilities. This Statement amends Statement
140 to require that all separately recognized servicing assets and
servicing liabilities be initially measured at fair value, if
practicable. This Statement permits, but does not require, the
subsequent measurement of separately recognized servicing assets and
servicing liabilities at fair value. An entity that uses derivative
instruments to mitigate the risks inherent in servicing assets and
servicing liabilities is required to account for those derivative
instruments at fair value. Under this Statement, an entity can elect
subsequent fair value measurement to account for its separately
recognized servicing assets and servicing liabilities. By electing
that option, an entity may simplify its accounting because this
Statement permits income statement recognition of the potential
offsetting changes in fair value of those servicing assets and
servicing liabilities and derivative instruments in the same
accounting period. This Statement is effective for financial
statements for fiscal years beginning after September 15, 2006.
Earlier adoption of this Statement is permitted as of the beginning
of an entity's fiscal year, provided the entity has not yet issued
any financial statements for that fiscal year. Management believes
this Statement will have no impact on the financial statements of
the Company once adopted.
NOTE 3 - OTHER RECEIVABLES - RELATED PARTY
An amount of $7,500 was agreed upon to be reimbursed to the Company by Infinicom
AB for certain post-closing expenses yet to be paid. Such monies were received
in March 2006.
F-13
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 and 2003
NOTE 4 - SHAREHOLDERS' DEFICIT:
The Company has authorized 5,000,000 shares of Preferred stock, par value
$0.001. There are issued and outstanding 344,595 shares of Preferred Stock. The
Company has authorized 100 million shares of common stock, par value $0.001 per
share. There are issued and outstanding, 96,147,396 shares of common stock. All
shares of preferred stock and common stock currently outstanding are validly
issued, fully paid and non-assessable.
On September 30, 2005, the Company sold 344,595 shares of Preferred Stock to
Infinicom in exchange for the discharge of debt owed by the Company to
Infinicom, AB in the amount of $230,879, in a private transaction in reliance
upon an exemption from registration available under Section 4(2) of the
Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. Each
share of Preferred Stock is convertible into one hundred (100) shares of common
stock of the Company immediately upon election and written notice to the Company
by the holder of the Preferred Stock.
The authorized common shares are only 100,000,000 hence the conversion of such
preferred shares outstanding into 34,459,500 shares of common stock is not
possible since such conversion would exceed the authorized common shares by
30,606,896 shares. Since such conversion terms of the preferred stock will
require more common shares to be issued than authorized, the $230,879 of
indebtedness converted to preferred stock will be recorded as a long term
liability until the Company increases the authorized common shares pursuant to
EITF 00-19.
On September 30, 2005, Moyo Partners, LLC and R&R Biotech Partners, LLC
purchased 74,711,681 shares of common stock of the Company and 344,595 shares of
preferred stock of the Companyfrom Infinicom, AB in exchange for aggregate gross
proceeds of $500,000 and 1% of our outstanding shares following the occurrence
of one of several possible post-closing events. The common stock acquired
represents 77.7% of the Company's common shares outstanding and the Preferred
shares constitute 83.6% in the aggregate of the Company's then issued and
outstanding common stock (assuming conversion of the Preferred into 34,459,500
shares of our common stock).
F-14
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 AND 2003
NOTE 5 - INCOME TAXES:
2005 2004
--------- ---------
Deferred tax assets and liabilities consist
of the following:
Deferred tax assets:
Net operating loss carry forwards $ 465,000 $ 455,000
Less valuation allowance (465,000) (455,000)
--------- ---------
$ -- $ --
========= =========
The Company does not file consolidated tax returns in the United Kingdom,
however, no tax expense is due on December 31, 2005 or 2004 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
US statutory income tax rate as follows:
- --------------------------------------------------------------------------------
December 31,
- --------------------------------------------------- ------------- --------------
2005 2004
- --------------------------------------------------- ------------- --------------
Provision for expected federal statutory rate (35)% (35)%
- --------------------------------------------------- ------------- --------------
Loss for which no benefit is available or a
valuation allowance has been recorded 35% 35%
- --------------------------------------------------- ------------- --------------
--% --%
- --------------------------------------------------------------------------------
At December 31, 2005, the Company had approximately $1,330,000 of net operating
loss carry forwards ("NOL's") available which expires in years beginning in
2026. The deferred tax asset and related valuation increased by $10,000 during
2005. The utilization of the net operating loss carryforward has been limited as
to its use pursuant to the Internal Revenue Code Section 382 due to the recent
change in ownership of the Company. The benefits of these NOL's may be reduced
in the future if the Company is successful in establishing a new business.
F-15
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 AND 2003
NOTE 6 - DISCONTINUED OPERATIONS
The Company's management has sold their UK subsidiary, 24Europe. The subsidiary
was sold to their Parent company, Infinicom, in exchange for a combination of
cash and a note payable. The sale met 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.
The subsidiary was sold for its 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
==========
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Currently the Company operates from the offices of its President and CFO on a
rent-free basis. No amounts have been recorded for the use of such office space
used since such rent expense is deemed to be insignificant.
F-16
24HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2005, 2004 AND 2003
NOTE 8 - Subsequent Event
On February 1, 2006, a total of 250,000 shares of the Company's Preferred Stock
were authorized for issuance to two individuals who provided services to the
Company. The Company issued 150,000 shares to Arnold Kling and 100,000 shares of
Preferred Stock to Kirk Warshaw for their work as the Company's President and
Chief Financial Officer, respectively. Each share of Preferred Stock is
convertible, at the holder's option, into 100 shares of our common stock. Mr.
Kling's services were valued at $11,250 and Mr. Warshaw's services were valued
at $7,500. Such preferred shares will also be recorded as a liability pursuant
to EITF 00-19 until the Company increases the authorized shares of common stock.
NOTE 9 - Selected Quarterly Financial Data - (UNAUDITED)
Year Ended December 31, 2005:
- -------------------------------------------------------------------------------------------------------------------------
December 31 September 30 June 30 March 31
- -------------------------------------------------------------------------------------------------------------------------
Continuing Operations
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 97,698 (72,098) (43,297) (10,443)
- -------------------------------------------------------------------------------------------------------------------------
Discontinued Operations
- -------------------------------------------------------------------------------------------------------------------------
Net Revenues -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations 307,513 354,816 (566,735) (195,629)
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 405,211 $ 282,718 $ (610,032) $ (206,072)
- -------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 2004:
- -------------------------------------------------------------------------------------------------------------------------
December 31 September 30 June 30 March 31
- -------------------------------------------------------------------------------------------------------------------------
Continuing Operations
- -------------------------------------------------------------------------------------------------------------------------
Net Revenues $ -- $ -- $ -- $ --
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (49,719) (26,301) (26,446) (26,964)
- -------------------------------------------------------------------------------------------------------------------------
Discontinued Operations
- -------------------------------------------------------------------------------------------------------------------------
Net Revenues 1,145,775 1,499,364 2,198,610 3,034,996
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit 208,654 205,876 256,214 378,110
- -------------------------------------------------------------------------------------------------------------------------
Loss from discontinued operations (83,819) (162,765) (30,347) (80,037)
- -------------------------------------------------------------------------------------------------------------------------
Net Loss $ (133,538) $ (189,066) $ (56,793) $ (107,001)
- -------------------------------------------------------------------------------------------------------------------------
F-17