SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended DECEMBER 31, 2000
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from ______________ to
______________
COMMISSION FILE NUMBER 000-22281
24HOLDINGS INC.
(Exact name of registrant as specified in its charter)
(Formerly known as Scoop, Inc.)
DELAWARE 33-0726608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Cyberia House
Church Street, Basingstoke
Hampshire RG21 7QN
United Kingdom
(Address of Principal Executive Offices)
+44 1256 867 800
(Telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT:
Common Stock, Par Value $0.001 Per Share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) had 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.
[ ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 6, 2001: $1,030,487. The amount shown is based on the
closing price of the registrant's Common Stock on the National Quotation
Bureau's Pink Sheets on that date. Shares of Common Stock known by the
registrant to be beneficially owned by 10% shareholders, officers or directors
of the Registrant are not included in the computation. The Registrant, however,
has made no determination that such persons are "affiliates" within the meaning
of Rule 12b-2 under the Securities Exchange Act of 1934.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Number of shares of Common Stock outstanding at April 6, 2001: 85,486,716.
DOCUMENTS INCORPORATED BY REFERENCE
None.
24HOLDINGS INC.
As used in this report, the terms "24Holdings," "Company" and "Registrant"
mean 24Holdings Inc. and its subsidiaries.
PART I
ITEM 1. BUSINESS.
Introduction
24Holdings Inc., a Delaware corporation formerly known as Scoop, Inc.
("24Holdings" or the "Company"), is a holding company owning 100% of the Common
Stock of 24STORE (Europe) Limited, a Company incorporated under the laws of
England formerly known as 24STORE.com Limited and currently operating in the
United Kingdom ("24STORE").
The Company's History
The Company commenced business operations in May 1990. The Company's
original business operations focused on the sale of media products and business
information services.
Following an initial public offering, the Common Stock of the Company began
trading on the NASDAQ Small Cap Stock Exchange on April 9, 1997 under the symbol
"SCPI." During 1997 and 1998 the business failed to be profitable.
During the second quarter of 1998, the Company was informed that it no longer
met the minimum requirements for listing on the NASDAQ Small Cap Stock Exchange
and was subsequently de-listed from the exchange on June 24, 1998.
As previously reported by the Company in its Quarterly Report on Form 10QSB for
the quarterly period ended June 30, 1998 (filed August 14, 1998), on July 31,
1998 the Company filed a voluntary petition commencing a case under Chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for
the Central District of California (the "Bankruptcy Court") as Case No. SA
98-20799 RA.
As of December 7, 1999, in accordance with a Plan of Reorganization approved by
the Bankruptcy Court, InfiniCom AB, a company registered in Sweden, had acquired
a total of 60,783,219 shares of Common Stock of the Company (representing
approximately 90% of the outstanding shares of Common Stock of the Company) in
exchange for 100% of the Common Stock of 24STORE.
On April 2, 2001, the Company amended its Certificate of Incorporation to change
the Company's name from Scoop, Inc. to 24Holdings Inc. The Company believes that
the new name is more appropriate for the Company's present operations, which
consist solely of the ownership of 24STORE. All of the Company's operations
prior to its bankruptcy proceedings were discontinued.
The Business Today
24STORE's current business operations are held in the following two wholly-owned
subsidiaries of 24STORE:
o LapLand (UK) Limited, a company registered in England in 1991, supplies
primarily business customers with computer and electronics products.
Operating from the Company's executive offices based approximately forty
miles west of London, the company sells a wide range of mobile computing
and related products, sourced from major computer manufacturers. The
business is generated from an active telesales team, working on inquires
from the existing customer base, regular advertising in national computer
magazines, and from the company's web site, www.lapland.co.uk.
o Mobile Planet Limited, a company registered in England in 1992, is a
wholesaler of mobile computing and related products. The company acts as a
distributor in the United Kingdom for major brand name computer
manufacturers, and related peripheral products. Based from the same
facility as LapLand (UK) Limited, the business generates revenues from an
established base of trade accounts.
In addition to the foregoing two operating companies, 24STORE also holds 100% of
the outstanding capital stock of Cyberia (UK) Limited, a company registered in
England ("Cyberia"), whose sole purpose is to hold title to the real property on
which the Company's headquarters are located.
Products and Services
The Company's primary products are computer and electronics products. The
products are sourced either directly from the manufacturers or purchased from
national distributors. In both value and volume terms, the largest product line
today is the supply of mobile computers, although the company also supplies
"shrink-wrapped" computer software and other computer hardware including Desktop
PCs and File Servers.
Sales and Marketing Strategy
The Company's traditional sales methods consisted of mail-order catalogues and
telephone sales of computer and electronic equipment to business customers. In
recent years, these traditional sales methods have been complemented by steadily
increasing web based sales. The Company believes that its future is based on a
combination of these three sales methods.
In addition to its current operating businesses, 24STORE is the registrant and
owner of a unique group of over 200 internet domain names, all commencing with
the "24" prefix. The Company intends to develop its business using these domain
names to diversify the products and services that the Company offers. The
Company believes common usage of the "24" brand will allow synergistic cost
savings to be achieved in a wide range of product and service categories. The
domain names can each be categorized under a number of key areas; some of these
domains, together with their respective services categories, are listed below:
Retail Services Media Finance
------ -------- ----- -------
24STORE.COM 24SOLUTIONS.COM 24MEDIA.COM 24FINANCE.COM
24SHOPPING.COM 24SUPPORT.COM 24RADIO.COM 24BANK.COM
24MOBILE.COM 24HELP.COM 24TV.COM 24BID.COM
24FASHION.COM 24OFFICE.COM 24DAILY.COM 24CASH.COM
24WINE.COM 24PEOPLE.COM 24CHAT.COM 24LOAN.COM
24BOOKS.COM 24SERVICES.COM 24MAIL.COM 24TRADING.COM
Using these domain names, the Company's strategy is to:
o Expand its retail and product supply operations by organic and acquisitive
growth into new product categories and new geographies. The Company
currently supplies primarily computing and electronic products but believes
that organic growth can be achieved by utilizing existing supplier
relationships to move into new product categories. The Company will look to
acquire synergistic businesses to move into more diverse product categories
and new geographies.
o Develop service, support and solutions based businesses around the relevant
"24" domain names. The Company envisages that its initial ventures will be
in information technology consulting where it intends to maximize synergies
with its majority shareholder InfiniCom AB, which owns a number of
consulting companies in IT security, systems integration, logistics and
e-commerce sectors. In the longer term the Company intends to move into
other service and support businesses.
o Look to maximize the value of the domains in the media and financial
services sectors. Where the Company has limited relevant experience it will
explore joint venture or licensing opportunities.
Competition
The computer/electronic products markets continue to evolve rapidly and are
extremely competitive, and the Company expects competition to intensify in the
future. The Company competes with a significant number of other companies in the
sale of computer and electronics products. Current and potential competitors of
the Company include, but are not limited to: (1) online vendors of
computer/electronics products, (2) mail order vendors of computer/electronics
products, (3) system integrators and value added resellers, (4) direct sales
operations of computer/electronics manufacturers, and (5) retailers.
The Company believes that the principal competitive factors affecting its
business include its ability to secure merchandise for sale at favorable terms
and attract new customers at a favorable customer acquisition cost through its
mail order, telephonic, and internet sales channels. Although the Company
believes that it can compete favorably in such a competitive atmosphere, the
Company cannot be assured that it will be able to maintain a competitive
position against current and future competitors.
Trademarks and Proprietary Rights
The Company has relied, and intends to continue to rely, upon the protection of
trademark law. In addition, the Company relies on confidentiality agreements
with its employees to protect its proprietary rights. There can be no assurance
that the steps taken, and anticipated to be taken, by the Company to protect its
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate the Company's domain names, copyrights, trademarks,
trade names, trade secrets, patents (if any) and similar proprietary rights. In
addition, there can be no assurance that other parties will not assert
infringement claims against the Company.
Government Regulation
The Company is subject, both directly and indirectly, to various laws and
governmental regulations (primarily those imposed by the European Union)
relating to its business operations. There are currently few laws or regulations
directly applicable to commercial activities over the Internet. However, due to
increasing popularity and use of the Internet, it is possible that a number of
laws and regulations may be adopted with respect thereto. These laws and
regulations may cover issues such as user privacy, liability for information
retrieved from or transmitted over the Internet, online content regulation, user
privacy, taxation and domain name registration. Moreover, the applicability to
the Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, patent, trademark, trade secret and
personal privacy is uncertain and developing. Any new legislation or regulation
or the application of existing laws and regulations to the Internet could have a
material and adverse effect on the Company's business.
Employees
As of March 31, 2001 the Company employed a total of 44 persons, including 24 in
sales and marketing, 10 in operations and 10 in general and administrative
functions. None of the Company's employees is represented by a labor union or is
subject to a collective bargaining agreement. The Company has never experienced
a work stoppage and believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
The Company's principal executive offices are located in Basingstoke,
United Kingdom, approximately forty miles west of London. The Company, through a
wholly-owned subsidiary named Cyberia (UK) Limited, owns the freehold of its
office and warehouse space in the United Kingdom for use in the ordinary course
of its business. The property, which is approximately 7,800 square feet, was
constructed in 1959, and substantially refurbished in 1998.
ITEM 3. LEGAL PROCEEDINGS.
From time to time, the Company is subject to litigation in the ordinary
course of its business. In the opinion of management, none of the currently
pending litigation is likely to have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is currently quoted on the National Quotation
Bureau's Pink Sheets under the symbol "SCPI." The following table sets forth for
the periods indicated the high and low closing sale price for the Common Stock
as quoted on the NASDAQ Small Cap Stock Exchange, the OTC Bulletin Board and the
National Quotation Bureau's Pink Sheets, as indicated below:
Bid
Quarter Ended High Low
-------------- ------- -------
March 31, 2001 $0.8750 $0.0625
December 31, 2000 $1.5000 $0.0630
September 30, 2000 $1.3750 $0.5000
June 30, 2000 $2.6500 $0.6260
March 31, 2000 $3.6800 $0.8750
December 31, 1999 $1.6200 $0.6880
September 30, 1999 $1.3700 $0.5000
June 30, 1999 $0.5000 $2.0380
March 31, 1999 $0.9690 $0.4630
On April 6, 2001 the last reported sales price for the Company's Common
Stock on the National Quotation Bureau's Pink Sheets was $0.125 per share.
As of April 6, 2001, there were 189 shareholders of record.
The declaration of cash dividends is at the discretion of the Board of
Directors of the Company. No cash dividends on the Common Stock have been
declared or paid by the Company to date. The Company does not anticipate paying
cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data as of and for each
of the five fiscal years ended December 31, 2000 and is derived from the
Company's audited financial statements. The data set forth below should be read
in conjunction with the Consolidated Financial Statements and related Notes to
Consolidated Financial Statements appearing elsewhere herein and in "Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Year Ended December 31,
2000 1999 1998 1997 1996
---------------------------------------------------------------------------
Revenue $ 28,058,566 $ 22,070,173 $ 5,453,410 $ 4,102,762 $ 3,158,982
Operating Income/(Loss) $ (1,621,200) $ (4,921,367) $ 130,993 $ 162,882 $ 9,119
Net Income/Loss $ (1,823,162) $ (5,626,018) $ 112,774 $ 107,791 $ (2.960)
Income/(Loss) per share, basic and diluted $ (0.02) $ (0.09) $ - $ - $ -
Weighted average number of shares outstanding 81,241,503 64,703,528 60,783,219 60,783,219 60,783,219
Working capital (deficit) $ (884,270) $ (8,146,694) $ 65,794 $ $110,708 $ 8,714
Total Assets $ 10,456,258 $ 11,942,175 $ 1,012,940 $ 748,961 $ 814,800
Long-Term Debt $ 381,396 $ 2,261,520 $ - $ - $ -
Total Shareholders equity (deficit) $ 2,431,526 $ (5,579,076) $ 138,739 $ 117,495 $ 19,461
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Company Overview
24Holdings Inc. ("24Holdings" or the "Company") was incorporated in 1996 in the
state of Delaware under the name Scoop, Inc. and began operations as an online
news provider. In July 1998, the Company filed a petition for relief under
Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court
for the Central District of California. In September 1999, the Company filed a
Plan of Reorganization ("Plan") with the Bankruptcy Court. The Plan was
confirmed on October 5, 1999. Pursuant to the Plan, the Company was acquired in
a reverse merger with 24STORE (Europe) Limited, formerly known as 24STORE.com
Limited ("24STORE"), pursuant to which 24STORE's parent company acquired 91% of
the outstanding shares of the Company, or 60,783,219 of newly issued shares, in
exchange for all the outstanding shares of 24STORE. Since the shareholders of
24STORE became the controlling shareholders of the Company after the exchange,
24STORE is treated as the acquiree for accounting purposes. No value has been
assigned to the assets and liabilities of the acquired company, as it emerged
from a bankruptcy plan of reorganization. Proforma operating results as if the
acquisition had taken place at the beginning of the period have not been
presented as there are no operations of the acquiree. The financial position and
results of operations of the acquiree are included in the consolidated
statements of the Company.
24STORE was incorporated on July 28, 1998 in England and Wales, and was a wholly
owned subsidiary of InfiniCom AB, a publicly listed company on the SBI market in
Sweden, whose principal activity is that of a holding company. On April 9, 1999,
24STORE entered into a Share Purchase Agreement, whereby it acquired from its
parent company several companies registered in Sweden and Norway. All of the
Swedish entities either entered bankruptcy or ceased operations soon after the
transfer. The Norwegian entity, as the only ongoing concern, has been treated as
the predecessor company, and accordingly, its financial position and results of
operations have been presented for the periods preceding the reverse merger. On
May 6, 1999, 24STORE acquired three companies registered in the United Kingdom,
which companies were related through common ownership. On April 1, 2001 24STORE
sold all of the outstanding stock of the Norwegian entity (see discussion in
"Sale of Norwegian Subsidiary").
Reorganization
On April 9, 1999, 24STORE and its parent company, InfiniCom AB, entered into a
share purchase agreement, whereby 24STORE received all the outstanding shares of
several of InfiniCom's subsidiaries, in exchange for 9,999,980 newly issued
shares of 24STORE and a note payable of $2,368,000. The transaction was treated
as a reorganization, with the transfer of assets and liabilities accounted for
at historical cost, after adjustment to US generally accepted accounting
principles, in a manner similar to that in pooling of interests accounting, in
accordance with APB 16 paragraph 5. The historical costs transferred include
goodwill of approximately $2,312,960, which had been recognized upon the parent
company's original acquisition of the transferred subsidiaries. Included in this
transaction 24STORE issued a note payable to InfiniCom for $1,581,000 for the
costs incurred in the development of certain software by one of the transferred
subsidiaries. These costs were expensed as research and development during the
year ended December 31, 1999.
Acquisitions
On May 6, 1999, 24STORE purchased all the issued ordinary shares of Lapland U.K.
Limited, Mobile Planet and Cyberia (UK) Limited, each of which are companies
incorporated in England (collectively, the "UK Group"), in a share purchase
agreement with the shareholders of the acquired companies. The three acquired
entities were each owned by the same two shareholders, unrelated to 24STORE or
its parent company. As a part of the acquisition, 24STORE received all the
outstanding shares of stock of the three companies, for consideration of cash
and notes of approximately $3,420,000 and 700,000 shares of InfiniCom's
outstanding shares.
The acquisition has been accounted for using the purchase method of accounting,
and accordingly, the acquisition cost of approximately $4,760,000 has been
allocated to the assets acquired and liabilities assumed based on estimates of
their fair value. A total of approximately $3,616,000, representing the excess
of acquisition costs over the fair value of the UK Group's tangible net assets,
has been allocated to goodwill and is being amortized over 5 years.
Debt Restructuring
On May 6, 1999, Michael Neame ("Neame") and Martin Clarke ("Clarke") sold to
24STORE 100% of the outstanding capital stock of each of the UK Group companies.
In connection with, and as partial consideration for, the foregoing sale,
InfiniCom issued a promissory note in favor of Neame and Clarke which was
secured by a lien on the shares of LapLand, Mobile Planet and Cyberia.
On March 31, 2000, the Company, InfiniCom, 24STORE, Neame and Clarke agreed to
restructure the foregoing debt, along with certain other intercompany debt then
outstanding between InfiniCom and 24STORE. To effect the restructuring, the
Company issued to each of Neame and Clarke 4,953,455 shares of the Company's
Common Stock and 24STORE paid to each of Neame and Clarke the sum of 425,753
Pounds Sterling in cash in consideration for which (i) 24STORE issued to the
Company 4,200,000 additional shares of its capital stock and (ii) Neame and
Clarke released and discharged the obligations of 24STORE owed by 24STORE to
Neame and Clarke pursuant to a Loan Note Instrument executed by 24STORE and
InfiniCom dated 6 May 1999. The Company also assumed from 24STORE all of the
obligations of 24STORE under (a) a Loan Note issued by 24STORE in favor of
InfiniCom dated 9 April 1999 in the principal amount of $2,368,000, (b) a Loan
Note issued by 24STORE in favor of InfiniCom dated 9 April 1999 in the principal
amount of $1,581,000, (c) a Loan Note issued by 24STORE in favor of InfiniCom
dated 6 May 1999 in the principal amount of 16,300,000 SEK and (d) certain other
debt obligations ((a), (b), (c) and (d) above collectively, the "Debt
Obligations") in consideration for which 24STORE issued to the Corporation
16,142,972 additional shares of its capital stock. Following the foregoing
assumptions, InfiniCom released and discharged amounts (including, without
limitation, principal and interest) owing under the Debt Obligations in
consideration for which the Company issued to InfiniCom 7,819,217 shares of its
Common Stock.
Also as a part of the restructuring, (x) InfiniCom subscribed for and purchased
965,132 newly issued shares of Common Stock of the Company at a subscription
price of $1.938 per share and (y) the Company subscribed for and purchased
4,308,580 shares of the capital stock of 24STORE at a subscription price of 0.25
Pound Sterling per share (equivalent to an aggregate subscription price of
$1,695,426).
Sale of Norwegian Subsidiary
In order to dispose of operations that had become unprofitable, 24STORE and
Compo Consult AS, a Norwegian company, entered into a Share Purchase Agreement
dated March 29, 2001 pursuant to which 24STORE agreed to sell and Compo Consult
AS agreed to purchase all of the outstanding stock of the Company's Norwegian
subsidiary, 24STORE AS, for a total consideration of 1.00 Pound Sterling, or
approximately $1.45 (the "Disposal"). In addition, 24STORE agreed to make a
payment of 55,000 Swedish Kronor, or approximately $5,500, to a creditor of
24STORE AS for the creditor's agreement to reduce its claim against 24STORE AS.
The sale of 24STORE AS did not include the rights to the "24STORE" name, and the
Company believes that 24STORE AS will be renamed CompoData AS. The Disposal was
consummated on April 1, 2001. In the year ended December 31, 2000, 24STORE AS
incurred losses of $360,380, and due to low levels of demand the business had
continued to be loss-making in 2001. As of December 31, 2000, 24STORE AS had
negative stockholders equity of $164,007. The decision to sell 24STORE AS for a
nominal sum was made to prevent any further losses and liability to the Company.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial data
as a percentage of total net sales for the fiscal years ended December 31, 2000,
1999 and 1998. The operating results in any periods are not necessarily
indicative of the results to be expected for any future period.
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Net sales 100.0% 100.0% 100.0%
Cost of sales 89.4% 87.6% 80.6%
Gross profit 10.6% 12.4% 19.4%
Operating expenses:
Selling general and administrative 13.7% 21.9% 17.0%
Goodwill amortization 2.7% 3.8%
Impairment loss on investments 9.0%
Total operating expenses 16.4% 34.7% 17.0%
----- ----- -----
Net Income (Loss) from operations (5.8)% (22.3)% 2.4%
Net Interest expense 1.0% 2.7% 0.0%
Loss before provision for income taxes (6.7)% (25.0)% 2.4%
Provision for income taxes (0.2)% 0.5% 0.3%
Net Income (Loss) (6.5)% (25.5)% 2.1%
COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Net Sales -- Net sales for the years ended December 31, 2000, 1999, and 1998
were as follows:
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Net sales $28,058,566 $22,070,173 $5,453,410
% increase from 27.1% 304.7% 35.1%
the previous year
Net sales for the years ended December 31, 2000, 1999 and 1998 were all derived
from operations in Europe. The increase in net sales for the year ended December
31, 2000 is a result of a full year's results from the UK Group and organic
sales growth. The increase in net sales for the year ended December 31, 1999 is
a result of the acquisition of the UK Group, and the inclusion of their
operations in the consolidated financial statements. The UK Group's net sales
for the period from acquisition to December 31, 1999 amounted to approximately
$16,086,000.
Gross Profit -- Gross profit for the years ended December 31, 2000, 1999 and
1998 were as follows:
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Gross profit $2,981,942 $2,750,669 $1,061,596
% increase from 8.4% 159.1% 26.4%
the previous year
Gross margin 10.6% 12.4% 19.4%
Gross profit consists of net sales less the cost of sales, which consists of the
cost of merchandise sold to customers. Gross profits for the years ended
December 31, 2000, 1999 and 1998 have increased over the previous year due to a
higher level of sales. Gross margins have reduced in the years ended December
31, 2000 and 1999 reflecting the lower gross margins of the UK Group, and the
competitive pricing conditions in the market.
Selling, General and Administrative Expenses -- Selling, general and
administrative ("SG&A") expenses for the years ended December 31, 2000, 1999 and
1998 were as follows:
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Selling, general and administrative $3,839,728 $4,826,875 $930,603
% increase from the previous year (20.5)% 418.7% 37.5%
% of net sales 13.7% 21.9% 17.0%
SG&A expenses for the year ended December 31, 2000 decreased by 20.5% to
$3,839,728 from $4,826,875 in the year ended December 31, 1999. The decrease in
SG&A for the 2000 fiscal year reflects an increase in general overhead
expenditures, offset by a reduction in Research and Development expenditure .
SG&A expenses for the year ended December 31, 1999 increased 418.7% from the
year before to $4,826,875. The increase in SG&A for the 1999 fiscal year was
primarily attributable to the inclusion of the SG&A expenses of the UK Group,
the legal and accounting fees and costs involved in the reorganization and
reverse merger between the Company and 24STORE, and Research and Development
expenditure related to the Company's web sites incurred in the Company's Swedish
subsidiaries. SG&A expenses for the year ended December 31, 1998 increased 37.5%
from the year before to $930,603. The increase in SG&A for the 1998 fiscal year
was primarily attributable to an increase in marketing expenses.
Goodwill Amortization -- Goodwill amortization for the year ended December 31,
2000 was $763,414, a reduction of 9% from the previous year. This reduction in
goodwill amortization reflects a full provision made by the Company against the
investment in its Norwegian subsidiary in the year ended December 31, 1999
resulting in a lower charge for goodwill amortization in the year ended December
31, 2000. Goodwill amortization for the year ended December 31, 1999 was
$839,087. The 1999 goodwill charge is attributable to the acquisition of the UK
Group. It is likely that the Company's business will continue to expand through
acquisitions, which would cause the amortization of goodwill and other
intangibles to increase. There was no goodwill amortization for the year ended
December 31, 1998.
Interest Expenses -- Interest expenses, net of interest income for the years
ended December 31, 2000, 1999 and 1998 were as follows:
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Interest income $ 14,364 $ 17,660 $ 10,660
% change from the previous year (18.6)% 65.7% 155.3%
Interest expenses $284,350 $617,231 $ 11,899
% change from the previous year (53.9)% 5087.3% (31.4)%
Interest income represents interest received on cash deposits. Interest expenses
include interest payable on bank overdrafts, mortgages, receivables financing
arrangements, and other loans. The reduction in interest expenses in the year
ended December 31, 2000 is primarily attributable to the reduction of interest
charges payable on loan notes due to related parties which were settled on March
31, 2000 (see "Debt Restructuring" above). The increase in interest expenses in
the year ended December 31, 1999 is primarily attributable to the acquisition of
the UK Group which has a bank loan and operates with receivables financing
arrangements, and interest on loan notes due to related parties as a result of
the reorganization and acquisitions. See discussion in "Item 13 - Certain
Relationships and Related Transactions."
Income Taxes -- Income taxes, for the years ended December 31, 2000, 1999 and
1998 were as follows:
YEAR ENDED DECEMBER 31
----------------------
2000 1999 1998
---- ---- ----
Income taxes $(68,024) $105,080 $16,980
Income taxes for the years ended December 31, 1999 and 1998 represent taxes
payable on profits of the operating subsidiaries. The income tax credit for the
year ended December 31, 2000 is an adjustment due to an over-accrual in prior
years.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 2000 were $2,261,181 compared to
$1,860,445 as of December 31, 1999. The reduction in cash at December 31, 2000
is primarily attributable to the cash provided by financing activities, offset
by a reduction in borrowings against the revolving line of credit against
eligible receivables in the United Kingdom operating subsidiaries, and funding
of the loss for the year before depreciation and amortization of goodwill.
Net cash used by operating activities was $688,058 in 2000 compared to net cash
provided by operating activities of $1,704,538 in 1999 and net cash provided by
operating activities of $84,513 in 1998.
As of December 31, 2000 the Company had a working capital deficit of $884,270
compared to a working capital deficit of $8,146,694 as of December 31, 1999. As
of December 31, 2000 included in current assets were cash and cash equivalents
of $2,261,181 and receivables, net, expected to be collected within one year of
$3,464,412.
Cash provided by investing activities was $6,700 in 2000, compared to $86,622
used by investing activities in 1999, and $15,738 cash provided by investing
activities in 1998. The Company also issued $8,008,441 in shares of its common
stock in a non-cash transaction to satisfy debt (see "Debt Restructuring"
above).
The change in working capital, and the cash provided by investing and financing
activities is primarily attributable to the reorganization that occurred on
March 24, 2000. See discussion in "Part II, Item 5 - Other Information" of the
Company's quarterly report on Form 10-Q for the quarterly period ended March 31,
2000, filed with the Securities and Exchange Commission.
Previous to its acquisition of the UK Group in May 1999, the Company did not
have any credit facilities, and was financed totally by operations, or loans
from its parent company. Also previous to the acquisitions which occurred in the
year ended December 31, 1999 (discussed below) the Company did not have any
major indebtedness to outside sources.
In its United Kingdom operating subsidiaries the Company has (1) a revolving
line of credit based on 70% of eligible receivables and (2) a ten year mortgage
expiring in 2008, secured by real property and (3) a $75,000 overdraft facility.
The mortgage, the revolving line of credit and the overdraft facility bear
interest at the prime rate plus 2%.
The Company believes its current resources of cash and cash equivalents,
accounts receivable and available credit line to be sufficient to meet cash
needs for working capital and capital expenditures for at least the next six
months. If available cash and cash generated from operations is insufficient to
satisfy liquidity requirements, selling additional equity or debt securities may
be required. The sale of additional equity or convertible debt securities could
result in dilution to the Company's stockholders. There can be no assurance that
financing will be available in amounts or on acceptable terms, if at all.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the United Stated Financial Accounting Standards Board (FASB)
issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," effective for fiscal years beginning after June 15, 1999. The
Company anticipates that due to its limited use of derivative instruments, the
adoption of SFAS No. 133 will not have a material effect on its financial
statements.
In December 1999, the Securities and Exchange Commission (the "Commission")
issued Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements, which is to be applied beginning with the fourth fiscal quarter of
fiscal years beginning after December 15, 1999, to provide guidance related to
recognizing revenue in circumstances in which no specific authoritative
literature exists. The Company is reviewing the application of the Staff
Accounting Bulletin to the Company's financial statements. However, any
potential accounting changes are not expected to result in a material change in
the amount of revenues we ultimately expect to realize.
In March 2000, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 44 (Interpretation 44), "Accounting for Certain Transactions
Involving Stock Compensation." Interpretation 44 provides criteria for the
recognition of compensation expense in certain stock-based compensation
arrangements that are accounted for under APB Opinion No. 25, Accounting for
Stock-Based Compensation. Interpretation 44 is effective July 1, 2000, with
certain provisions that are effective retroactively to December 15, 1998 and
January 12, 2000. The adoption of this statement did not have a material impact
on the Company's financial position, results of operations or liquidity.
RISK FACTORS
Some of the statements in "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Item 1 - Business" and
elsewhere in this report constitute forward-looking statements. These statements
involve known and unknown risks, uncertainties, and other factors that may cause
the Company's actual results, levels of activity, performance, or achievements
to be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by such forward-looking
statements. In some cases, forward-looking statements can be identified by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue" or the negative of
such terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. Although the
Company believes that the expectations reflected in the forward-looking
statements are reasonable, the Company cannot guarantee future results, levels
of activity, performance or achievements. Moreover, neither the Company nor any
other person assumes responsibility for the accuracy and completeness of such
statements. The Company is under no duty to update any of the forward-looking
statements after the date of this report to conform such statements to actual
results.
In addition to the factors discussed elsewhere in this report, the following
additional factors may affect the Company's future operations and financial
results.
Competition From Direct Sales
The Company may face increased competition from manufacturers that sell products
directly over the Internet or by telephone, such as Dell and Gateway. Many of
these companies have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial, marketing and other
resources. There can be no assurance that the Company will be able to compete
effectively against such companies and that the purchasing patterns of the
Company's customers will not increasingly shift to the direct sales channels of
distribution. Such increased competition and changes in purchasing patterns may
adversely affect the Company's future operations and financial results.
Protection of the Company's Domain Names
The Company currently holds various domain names commencing with the "24"
prefix. The acquisition and maintenance of domain names generally is regulated
by Internet regulatory bodies. The regulation of domain names in the United
States, the United Kingdom and in other countries is subject to change.
Governing bodies may establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. As a
result, the Company may be unable to acquire or maintain relevant domain names
in all countries in which it conducts business. Furthermore, the relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. Therefore, the Company may be unable to
prevent third parties from acquiring domain names that are similar to, infringe
upon or otherwise decrease the value of the Company's trademarks and other
proprietary rights. The Company may not successfully carry out its business
strategy of establishing a strong brand for the "24" prefix if the Company
cannot prevent others from using similar domain names or trademarks. This could
impair the Company's ability to increase market share and revenues.
Rapid Technological Change
The industry in which the Company competes is characterized by rapid
technological change, frequent introductions of new products and services,
changes in customer demands and evolving industry standards. The introduction or
announcement of new products or services by the Company or one or more of its
competitors embodying new technologies or changes in industry standards or
customer requirements could render the Company's existing products or services
obsolete or unmarketable. Accordingly, the life cycles of the Company's products
are difficult to estimate. The Company's future results of operations will
depend, in part, upon its ability to enhance its products and services and to
introduce new products and services on a timely and cost-effective basis that
will keep pace with technological developments and evolving industry standards,
as well as address the increasingly sophisticated needs of the Company's
customers. Failure of the Company to introduce, for technological or other
reasons, new products and services in a timely and cost-effective manner could
have a material adverse effect on the Company's business, results of operations
and financial condition. Furthermore, the introduction or announcement of new
product or service offerings or enhancements by the Company or the Company's
competitors may cause customers to defer or forgo purchases of the Company's
products or services, which could have a material adverse effect on the
Company's business, results of operations and financial condition.
System Interruption and Security Risks
The Company's operations are dependent, in part, on its ability to protect its
systems from interruption by damage from fire, earthquake, power loss,
telecommunication failure, unauthorized entry or other events beyond the
Company's control. The Company's computer equipment constituting its central
computer systems, including its processing operations, are currently located in
Basingstoke, United Kingdom. The Company conducts system backups daily, which
are taken off site each evening. The Company's computer programs are password
protected and firewalls, anti-virus software and uninterruptable power supplies
are in place. However, there can be no assurance that damage to or failure of
any of the Company's central computer systems will not take place. Any such
damage or failure that causes interruptions in the Company's operations could
have a material adverse effect on the Company's business, results of operations
and financial condition. Persistent problems continue to affect public and
private data networks. Computer break-ins and other disruptions may jeopardize
the security of information stored in and transmitted through the computer
systems of the Company and the parties utilizing the Company's services, which
may result in significant liability to the Company and also may deter potential
customers from using the Company's services. In addition, while the Company
attempts to be careful with respect to the employees it hires and maintain
controls through software design and security systems to prevent unauthorized
employee access, it is possible that, despite such safeguards, an employee of
the Company could obtain access, which would also expose the Company to a risk
of loss or litigation and possible liability to customers or other users. There
can be no guarantee that the growth of the Company's customer base will not
strain or exceed the capacity of its computer and telecommunications systems and
lead to degradations in performance or system failure. Any damage, failure or
delay that causes interruptions in the Company's operations could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Limited Operating History
The Company has a limited operating history on which to base an evaluation of
its business and prospects. Accordingly, the Company's prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by early stage companies in new and rapidly evolving markets such as
computer and electronic products and online commerce. Because of the Company's
limited operating history, it is difficult to assess whether the Company will
succeed at executing on its business strategy, managing growth, and addressing
the market risks that it faces in a rapidly developing market.
Future Capital Needs; Uncertainty Of Additional Financing
The Company may need to raise additional funds in order to fund more rapid
expansion, to develop new or enhanced products and services, to respond to
competitive pressures or to acquire complimentary businesses or technologies. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the shareholders of the Company will be reduced,
shareholders may experience additional dilution, or such equity securities may
have rights, preferences or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available when needed on terms favorable to the Company or at all. If
adequate funds are not available or are not available on acceptable terms, the
Company may be unable to develop or enhance its products and services, take
advantage of future opportunities or respond to competitive pressures, which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Control By Existing Shareholder
InfiniCom AB beneficially owns approximately 79% of the outstanding shares of
the Company's Common Stock. As a result, this stockholder will be able to
exercise control over matters requiring shareholder approval, including the
election of directors, and the approval of mergers, consolidations and sales of
all or substantially all of the assets of the Company. This may prevent or
discourage tender offers for the Company's Common Stock unless the terms are
approved by InfiniCom.
Volatility of Stock Price
The trading price of the Company's Common Stock has in the past and may in the
future be subject to significant fluctuations. In addition, the stock market in
general has experienced extreme price and volume fluctuations that have affected
the market price for many companies in industries similar to or related to that
of the Company and which have been unrelated to the operating performance of
these companies. These market fluctuations may adversely affect the market price
of the Company's Common Stock.
Recent Significant Changes to Business
The Company has experienced significant changes in its business, including
changes resulting from recent acquisitions and other business combinations. Such
changes have placed and may continue to place a significant strain upon the
Company's management, systems and resources. The Company's ability to compete
effectively and to manage future changes will require the Company to continue to
improve its financial and management controls, reporting systems and procedures,
budgeting and forecasting capabilities on a timely basis and adequately train
and manage its employee work force. There can be no assurance that the Company,
or the Company's current management, will be able to manage such changes
successfully. The Company's failure to do so could have a material adverse
effect upon the Company's business, results of operations and financial
condition.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company does not hold any derivative financial instruments. However, the
Company is exposed to interest rate risk. The Company believes that the market
risk arising from holdings of its financial instruments is not material.
However, all of the Company's operations are conducted through its subsidiary
24STORE and denominated in either British pounds sterling or, prior to April 1,
2001, Norwegian Krona, and none of the Company's revenues are generated in U.S.
dollars. For consolidation purposes, the assets and liabilities of 24STORE are
converted to U.S. dollars using year-end exchange rates and results of
operations are converted using a monthly average rate during the year.
Fluctuations in the currency rates between the United Kingdom, Norway and the
United States may give rise to material variances in reported earnings of the
Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
CONTENTS
Page
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheets F-3
Consolidated Statements of Income (Operations) F-4
Consolidated Statement of Shareholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F-16
F-1
INDEPENDENT AUDITORS' REPORT
Board of Directors
24Holdings Inc.
Los Angeles, California
We have audited the accompanying consolidated balance sheets of 24Holdings Inc.
(formerly known as Scoop, Inc.) and subsidiary at December 31, 2000, 1999 and
1998 and the related consolidated statements of income (operations),
shareholders' equity (deficit) and cash flows for the three years then ended.
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 United States generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. 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. and
subsidiary at December 31, 2000, 1999 and 1998 and the results of its operations
and cash flows for each of the three years in the period ended December 31,
2000, in conformity with United States generally accepted accounting principles.
/s/ Stonefield Josephson, Inc.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
March 7, 2001
F-2
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, December 31,
2000 1999
------------ ------------
Current assets:
Cash and cash equivalents $ 2,261,181 $ 1,860,445
Accounts receivable, less allowance for doubtful
accounts of $46,179 and $155,994 at
December 31, 2000 and 1999 3,464,412 4,310,494
Inventories 652,362 942,098
Prepaid and other current assets 43,111 -
---------------- ---------------
Total current assets 6,421,066 7,113,037
Loan receivable, related party 100,200 63,364
Property and equipment, net of
accumulated depreciation 1,414,994 1,619,223
Goodwill, net of accumulated amortization 2,519,996 3,146,551
---------------- ----------------
$ 10,456,258 $ 11,942,175
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 4,918,230 $ 5,867,173
Credit facility 1,704,704 2,042,893
Income taxes payable 10,773 71,770
Short-term notes payable, related parties 617,406 7,174,297
Current maturities of notes payable, bank 54,223 103,598
---------------- ---------------
Total current liabilities 7,305,336 15,259,731
---------------- ---------------
Long-term note payable, related party - 1,927,805
---------------- ---------------
Note payable, bank, less current maturities 381,396 333,715
---------------- ---------------
Deferred tax liability 338,000 -
---------------- ---------------
Shareholders' equity:
Preferred stock $.001 par value; 5,000,000 shares
authorized; no shares issued or outstanding. - -
Common stock, $.001 par value; 100,000,000 shares
authorized; 85,486,717 and 66,795,458, shares issued
and outstanding, respectively 26,081 7,390
Additional paid-in capital 9,855,851 -
Other comprehensive loss (232,572) (191,794)
Accumulated deficit (7,217,834) (5,394,672)
---------------- ---------------
Total shareholders' equity (deficit) 2,431,526 (5,579,076)
---------------- ---------------
$ 10,456,258 $ 11,942,175
================ ===============
See accompanying independent auditors' report and notes to consolidated financial statements.
F-3
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)
Year ended Year ended Year ended
December 31, 2000 December 31, 1999 December 31, 1998
----------------- ----------------- -----------------
Revenue $ 28,058,566 $ 22,070,173 5,453,410
Cost of Revenue 25,076,624 19,319,504 4,391,814
------------------ ----------------- --------------
Gross profit 2,981,942 2,750,669 1,061,596
------------------ ----------------- --------------
Operating expenses:
Selling, general and administrative expenses 3,839,728 4,826,875 930,603
Goodwill amortization 763,414 839,087 -
Impairment loss on investments - 2,006,074 -
------------------ ----------------- --------------
4,603,142 7,672,036 930,603
------------------ ----------------- --------------
Income (loss) from operations (1,621,200) (4,921,367) 130,993
------------------ ----------------- --------------
Interest income (14,364) (17,660) (10,660)
Interest expense 284,350 617,231 11,899
------------------ ----------------- --------------
269,986 599,571 1,239
------------------ ----------------- --------------
Income (loss) before income taxes (1,891,186) (5,520,938) 129,754
Income taxes, principally current (68,024) 105,080 16,980
------------------ ----------------- --------------
Net income (loss) $ (1,823,162) $ (5,626,018) $ 112,774
================== ================= ==============
Net loss per share -
basic and diluted $ (0.02) $ (0.09) $ 0.00
================== ================= ==============
Weighted average number of shares outstanding -
basic and diluted 81,241,503 64,703,528 60,783,219
================== ================= ==============
See accompanying independent auditors' report and notes to consolidated financial statements.
F-4
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional Other
Common stock paid-in comprehensive
Shares Amount capital income/(loss)
------ ------ ---------- --------------
Balance at January 1, 1998 60,783,219 $ 7,390 $ $ (8,467)
Foreign currency translation (91,530)
Net income for the year ended
December 31, 1998 ----------- -------------- ---------------- ---------------
Balance at December 31, 1998 60,783,219 7,390 (99,997)
Shares issued in connection with
acquisition of 24STORE.com, LTD. 6,012,238 - -
Foreign currency translation (91,797)
Net loss for the year ended
December 31, 1999 ----------- -------------- ---------------- ---------------
Balance at December 31, 1999 66,795,457 7,390 - (191,794)
Shares issued in satisfaction of debt 17,726,127 17,726 7,986,390
Shares issued in sale to parent company 965,132 965 1,869,461
Foreign currency translation (40,778)
Net loss for the year ended
December 31, 2000 ----------- -------------- ---------------- ---------------
A
Balance at December 31, 2000 $85,486,717 $ 26,081 $ 9,855,851 $ (232,572)
=========== ============== ================ ===============
Retained
earnings/ Total
accumulated shareholders'
(deficit) equity/deficit)
------------ -----------------
Balance at January 1, 1998 $ 118,572 $ 117,495
$
Foreign currency translation (91,530)
Net income for the year ended
December 31, 1998 112,774 112,774
------------- ------------------
Balance at December 31, 1998 231,346 138,739
Shares issued in connection with
acquisition of 24STORE.com, LTD. -
Foreign currency translation (91,797)
Net loss for the year ended
December 31, 1999 (5,626,018) (5,626,018)
------------- ------------------
Balance at December 31, 1999 (5,394,672) (5,579,076)
Shares issued in satisfaction of debt 8,004,116
Shares issued in sale to parent company 1,870,426
Foreign currency translation (40,778)
Net loss for the year ended
December 31, 2000 (1,823,162) (1,823,162)
------------- ------------------
Balance at December 31, 2000 $ (7,217,834) $ 2,431,526
============= ==================
See accompanying independent auditors' report and notes to consolidated financial statements.
F-5
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended Year ended
December 31, 2000 December 31, 1999 December 31, 1998
----------------- ----------------- -----------------
Cash flows provided by (used for) operating activities:
Net income (loss) $ (1,823,162) $ (5,626,018) $ 112,774
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 129,091 127,751 3,961
Amortization of goodwill 763,414 839,087 -
Impairment loss on investments - 2,006,074 -
Expense incurred in exchange for note payable - 1,581,000 -
Foreign currency translation 510,025 (67,964) (94,100)
Provision for bad debts - 155,994 -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 846,081 (3,828,292) (142,537)
Inventories 289,736 (859,431) 21,698
Prepaid and other current assets (43,111) - -
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses (1,299,135) 7,321,258 204,153
Income taxes payable (60,997) 55,079 (21,436)
--------------- ---------------- ---------------
Net cash provided by (used for) operating activities (688,058) 1,704,538 84,513
--------------- ---------------- ---------------
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment (30,136) - (7,922)
Due to/from related parties 36,836 (1,165) (63,275)
Group distributions - (85,457) 86,935
--------------- ---------------- ---------------
Net cash provided by (used for) investing activities 6,700 (86,622) 15,738
--------------- ---------------- ---------------
(Continued)
See accompanying independent auditors' report and notes to consolidated financial statements.
F-6
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Year ended Year ended Year ended
December 31, 2000 December 31, 1999 December 31, 1998
----------------- ----------------- ------------------
Cash flows provided by (used for) financing activities:
Payments on note payable, bank (1,694) - -
Payments on notes payable, related parties (1,354,044) - -
Proceeds from short-term loans, related parties 567,406 - -
Proceeds from issuance of stock 1,870,426 - -
--------------- --------------- ----------------
Net cash provided by financing activities 1,082,094 - -
--------------- --------------- ----------------
Net increase in cash 400,736 1,617,916 100,251
Cash, beginning of year 1,860,445 242,529 142,278
--------------- --------------- ----------------
Cash, end of year $ 2,261,181 $ 1,860,445 $ 242,529
=============== =============== ================
Supplemental disclosure of cash flow information:
Interest paid $ 215,019 $ 178,694 $ 9,971
=============== =============== ================
Income taxes paid $ 34,368 $ 187,203 $ 16,718
=============== =============== ================
Supplemental disclosure of non-cash investing and
financing activities:
Issuance of common stock in connection of acquisitions $ - $ 2,760,070 $ -
=============== =============== ================
Issuance of notes payable in connection with acquisitions $ - $ 9,102,102 $ -
=============== =============== ================
Issuance of shares in satisfaction of debt $ 8,008,441 $ - $ -
=============== =============== ================
See accompanying independent auditors' report and notes to consolidated financial statements.
F-7
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(1) Description of Business:
General:
24Holdings Inc., formerly known as Scoop, Inc. (the "Company")
was incorporated in 1996, in the state of Delaware, as an online
news provider. In July 1998, the Company filed a petition for
relief under Chapter 11 of the federal bankruptcy laws in the
United States Bankruptcy Court for the Central District of
California. In September 1999, the Company filed a Plan of
Reorganization ("Plan") with the Bankruptcy Court. The Plan was
confirmed on October 5, 1999. Pursuant to the Plan, the Company
was acquired in a reverse merger with 24STORE.com, LTD
("24STORE"), whose parent company acquired 91% of the outstanding
shares of the Company, or 60,783,219 of newly issued shares, in
exchange for all the outstanding shares of 24STORE. Since the
shareholders of 24STORE became the controlling shareholders of
the Company after the exchange, 24STORE is treated as the
acquirer for accounting purposes. No value has been assigned to
the assets and liabilities of the acquired company, as it is
emerging from a formal bankruptcy plan. Proforma operating
results as if the acquisition had taken place at the beginning of
the period have not been presented as there are no operations of
the acquiree.
24STORE was incorporated July 28, 1998 in England and Wales, and
was a wholly owned subsidiary of InfiniCom AB, a publicly listed
company on the SBI market in Sweden, whose principal activity is
that of a holding company. On April 9, 1999 24STORE entered into
a Share Purchase Agreement, whereby they acquired from their
parent company several companies registered in Sweden and Norway
(Note 4). All of the Swedish entities either entered bankruptcy
or ceased operations soon after transfer. The Norwegian entity,
as the only ongoing concern, has been treated as the predecessor,
and accordingly, its financial position and results of operations
have been presented for the periods preceding the reverse merger.
On May 6, 1999, 24STORE acquired three companies registered in
the United Kingdom, ("UK Group") related through common ownership
(Note 4).
The Company filed a certificate of amendment to its certificate
of incorporation on April 2, 2001 changing its name from Scoop,
Inc. to 24Holdings Inc.
All of the consolidated entities are in the wholesale and retail
business of selling and distributing consumer and commercial
electronic products in Europe.
(2) Summary of Significant Accounting Policies:
Principles of Consolidation:
The accompanying consolidated statements include the accounts of
Scoop, Inc. and subsidiary. All significant intercompany
transactions and accounts have been eliminated.
See accompanying independent auditors' report.
F-8
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(2) Summary of Significant Accounting Policies, Continued:
Principles of Consolidation, Continued:
The financial statements of the entities owned outside the United
States are generally measured using the local currency as the
functional currency. Accordingly, assets and liabilities are
translated at year-end exchange rates and operating statement
items are translated at average exchange rates prevailing during
the year. The resulting translation adjustments are recorded as
other comprehensive income. Exchange adjustments resulting from
foreign currency transactions are included in the determination
of net income (loss).
Estimates Used in the Preparation of Consolidated Financial Statements:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and the accompanying notes. Actual
results could differ from those estimates.
Revenue Recognition:
The Company recognizes revenue upon the delivery of its product.
Cash and Cash Equivalents:
The Company considers all highly liquid investments with a
maturity of three months or less when purchased, which are not
securing any corporate obligations, to be cash equivalents.
Fixed Assets:
Building, computers, software, furniture and equipment are valued
at cost and depreciated using the straight-line method over the
estimated useful lives of the assets as follows:
Description Useful life
----------- -----------
Building 50 years
Furniture and equipment 5 years
Computers 3-4 years
Software 3-4 years
Goodwill:
In connection with various acquisitions (Notes 1 and 4) which
were accounted for under the purchase method of accounting, the
Company recorded goodwill. The remaining goodwill at December 31,
2000 is being amortized using the straight-line method over the
estimated useful lives of five years. The Company will
continually evaluate the existence of goodwill impairment in
accordance with the provisions of SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be
disposed of."
See accompanying independent accountant's review report.
F-9
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(2) Summary of Significant Accounting Policies, Continued:
Inventory:
Inventory is stated at the lower of cost or market using the FIFO
(first-in, first-out) cost method.
Income Taxes:
Deferred tax assets and liabilities are recognized with respect
to the tax consequences attributable to the differences between
the financial statement carrying values and tax basis of assets
and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which these temporary differences are expected to be
recovered or settled. Further, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Financial Instruments:
The estimated fair values of cash, accounts receivable, accounts
payable, and accrued expenses, none of which are held for trading
purposes, approximate their carrying value because of the short
term maturity of these instruments or the stated interest rates
are indicative of market interest rates.
Advertising Costs:
Advertising costs are expensed as incurred. For the years ended
December 31, 2000, 1999 and 1998, advertising expenses amounted
to approximately $262,000, $355,000 and $172,000, respectively.
Basic and Diluted Earnings (Loss) Per Share:
Basic earnings (loss) per share are determined by dividing the
net earnings or (loss) by the weighted average shares of Common
Stock outstanding during the period. Diluted earnings or (loss)
per share are determined by dividing the net earnings or (loss)
by the weighted average shares of Common Stock outstanding plus
the dilutive effects of stock options, warrants, and other
convertible securities. Basic and diluted earnings (loss) per
share are the same for the years ended December 31, 2000, 1999
and 1998 because there were no dilutive securities outstanding
during those periods.
Segment:
Based on the Company's integration and management strategies, the
Company operates in a single business segment. For the years
ended December 31, 2000, 1999 and 1998 all revenues have been
derived from European operations.
See accompanying independent auditors' report.
F-10
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(2) Summary of Significant Accounting Policies, Continued:
Statement of Cash Flows:
In accordance with Statement of Financial Accounting Standards
No. 95, "Statement of Cash Flows," cash flows from the Company's
operations are calculated based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the
statement of cash flows will not necessarily agree with changes
in the corresponding balances on the balance sheet.
Recent Accounting Pronouncements:
In June 1998, the United Stated Financial Accounting Standards
Board (FASB) issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years
beginning after June 15, 1999. The Company anticipates that due
to its limited use of derivative instruments, the adoption of
SFAS No. 133 will not have a material effect on its financial
statements.
In December 1999, the Securities and Exchange Commission (the
"Commission") issued Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, which is to be applied
beginning with the fourth fiscal quarter of fiscal years
beginning after December 15, 1999, to provide guidance related to
recognizing revenue in circumstances in which no specific
authoritative literature exists. The adoption of this statement
did not have a material impact on the Company's financial
position, results of operations or liquidity.
In March 2000, the Financial Accounting Standards Board (FASB)
issued FASB Interpretation No. 44 (Interpretation 44),
"Accounting for Certain Transactions Involving Stock
Compensation." Interpretation 44 provides criteria for the
recognition of compensation expense in certain stock-based
compensation arrangements that are accounted for under APB
Opinion No. 25, Accounting for Stock-Based Compensation.
Interpretation 44 is effective July 1, 2000, with certain
provisions that are effective retroactively to December 15, 1998
and January 12, 2000. The adoption of this statement did not have
a material impact on the Company's financial position, results of
operations or liquidity.
(3) Reorganization:
On April 9, 1999 24STORE and its parent company, InfiniCom, entered into
a share purchase agreement, whereby 24STORE received all the outstanding
shares of several of InfiniCom's subsidiaries, in exchange for 9,999,980
newly issued shares of 24STORE and a note payable of $2,368,000. The
transaction was treated as a reorganization, with the transfer of assets
and liabilities accounted for at historical cost, after adjustment to
U.S. generally accepted accounting principles, in a manner similar to
that in pooling of interests accounting, in accordance with APB 16
paragraph 5. The historical costs transferred include goodwill of
approximately $2,312,960, which had been recognized upon the parent
company's original acquisition of the transferred subsidiaries.
See accompanying independent auditors' report.
F-11
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(3) Reorganization, Continued:
Included in this transaction 24STORE issued a note payable to InfiniCom
for $1,581,000 for the costs incurred in the development of certain
software by one of the transferred subsidiaries. These costs were
expensed as research and development during the year ended December 31,
1999.
(4) Acquisitions:
On May 6, 1999, 24STORE purchased all the issued ordinary shares of
Lapland UK, Mobile Planet and Cyberia ("UK Group") in a share purchase
agreement with the shareholders of the acquired company. The three
acquired entities were each owned by the same two shareholders,
unrelated to 24STORE or its parent company. 24STORE received all the
outstanding shares of the three companies, for consideration of cash and
notes of approximately $3,420,000 and 700,000 shares of InfiniCom's
outstanding shares (see Note 9).
The acquisition has been accounted for using the purchase method of
accounting, and accordingly, the acquisition cost of approximately
$4,760,000 has been allocated to the assets acquired and liabilities
assumed based on estimates of their fair value. A total of approximately
$3,616,000, representing the excess of acquisition costs over the fair
value of the UK Group's tangible net assets, has been allocated to
goodwill and is being amortized over 5 years. The Company will
continually evaluate the existence, if any, of goodwill impairment in
accordance with the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Of." Accumulated amortization on all goodwill was $1,602,501 and
$839,087 at December 31, 2000 and 1999, respectively.
The Company's consolidated results of operations have incorporated the
UK Group's activity from the effective date of the acquisition. The
following unaudited pro forma information has been prepared assuming
that this acquisition had taken place at the beginning of the respective
periods. This pro forma information does not purport to be indicative of
future results or what would have occurred had the acquisition been made
as of those dates.
Acquisition Pro Forma - UK Group
(in Thousands, except per share amounts - unaudited)
Year ended Year ended
December 31, December 31,
1999 1998
------------ ------------
Revenue $ 30,854 $ 28,215
Operating income (loss) (4,695) 189
Net income (loss) (5,477) (520)
Basic and diluted earnings per share
Net income (loss) per share (0.08) (0.01)
See accompanying independent auditors' report.
F-12
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(5) Property and Equipment:
Property and equipment consist of the following:
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
Land and building $ 1,276,888 $ 1,356,063 $ -
Computer equipment 185,475 216,505 10,746
Vehicles 116,720 108,755 -
Office furniture and equipment 182,669 151,613 -
----------------- ---------------- ---------------
1,761,752 1,832,936 10,746
Less accumulated depreciation 346,758 213,713 -
----------------- ---------------- ---------------
$ 1,414,994 $ 1,619,223 $ 10,746
================= ================ ===============
(6) Major Vendor:
Included in accounts payable is approximately $678,293 and $1,159,000
owed to two and three suppliers at December 31, 2000 and 1999,
respectively. Purchases from these suppliers during 2000 and 1999
totaled approximately $8,267,731 and $13,432,000, respectively.
(7) Credit Facility:
Two of the Company's subsidiaries in the United Kingdom use a discount
financing company for credit administration and cash flow purposes. The
financing company purchases approved receivables, less a commission and
discounting charges. The discount rate is 2% above the base rate of
National Westminster Bank in the United Kingdom, 8% at December 31,
2000.
The financing company holds as security interests all receivables as
well as the personal guarantees of the officer-stockholders limited to
anti-fraud.
See accompanying independent auditors' report.
F-13
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(8) Short-Term Notes Payable, Related Parties:
A summary is as follows:
December 31, December 31,
2000 1999
------------ ------------
Notes payable, officers (Note 5) $ - $ 2,817,500
Note payable, InfiniCom (Note 4) - 2,368,000
Purchase of software from parent company (Note 4) - 1,581,000
Accrued interest on current notes - 210,500
Accrued interest on long term notes (Note 10) - 147,297
Loans payable, InfiniCom 617,406 50,000
---------------- --------------
$ 617,406 $ 7,174,297
================ ==============
All notes accrue interest at 2% above base rate of National Westminster
Bank, in the United Kingdom.
The notes payable, officers, including all accrued interest, were paid
off in March 2000, in cash of approximately $1,354,000 and the remainder
in 9,906,910 shares of the Company. The notes payable to the parent
company, Infinicom, including the long-term note payable (Note 9),
miscellaneous other amounts due and accrued interest, were satisfied in
March 2000, in consideration for which the Company issued to InfiniCom
7,819,217 shares of its common stock.
(9) Note Payable, Related Party:
Long-term note payable, related party at December 31, 1999, in the
amount of $ 1,927,805, represent amounts owing to InfiniCom, for the
value of InfiniCom's shares given as consideration in relation to the
acquisition of the UK Group (Note 4). The note accrues interest at 2%
above base rate of National Westminster Bank. At December 31, 1999 the
accrued interest is included in short-term notes payable, related party
(Note 8). This note was paid off in March 2000, in the same transaction
as the short term debt described above.
(10) Note Payable, Bank:
One of the Company's subsidiaries in the United Kingdom has a note
payable to its bank. The note is due November 14, 2007 and accrues
interest at 2% above the bank's current base rate (8% at December 31,
2000). The note is secured by the underlying building and the cross
guarantee of the two other United Kingdom subsidiaries.
See accompanying independent auditors' report.
F-14
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(10) Note Payable, Bank, Continued:
A summary of the note payable is as follows:
December 31, December 31,
2000 1999
------------ ------------
Principal $ 435,619 $ 437,313
Less current maturities 54,223 103,598
---------------- ---------------
$ 381,396 $ 333,715
================ ===============
The following summarizes the aggregate maturities of the note payable as
of December 31, 2000:
Year ended
2001 $ 54,223
2002 59,259
2003 64,763
2004 70,778
2005 77,354
Beyond five years 109,242
----------------
$ 435,619
================
(11) Income Taxes:
The Company accounts for income taxes under the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes", under which the liability method is used to calculate deferred
income taxes. Under this method, deferred tax assets and liabilities are
determined based on the differences between financial reporting and
income tax basis of assets and liabilities and are measured using
enacted tax rates and laws that will be in effect when the differences
are expected to reverse. Deferred tax assets and liabilities are
immaterial at December 31, 1998. As of December 31, 2000 and 1999, any
deferred tax asset recordable for the net operating loss carryforward is
completely offset by a valuation allowance. The deferred tax liability
at December 31, 2000 relates to the step up basis of tangible assets
acquired (Note 4).
The Company does not file consolidated tax returns in the United
Kingdom. Tax expense for the years ended December 31, 1999 relates to
entities within the consolidated group on which there is taxable income
and tax expense is appropriate. December 31, 2000 reflects refunds and
credits received on overpayments in previous years.
See accompanying independent auditors' report.
F-15
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(11) Income Taxes, Continued:
The provision for income taxes differs from the amount computed by
applying the U.S. statutory income tax rate as follows:
December 31, December 31, December 31,
2000 1999 1998
------------ ------------ ------------
Provision at expected federal
statutory rate (35)% (35)% 35%
Impairment loss for which no deduction
is allowable for UK income tax purposes - 13 -
Loss for which no benefit is available 35 24 -
Overpayment of taxes in prior years 5 - -
Foreign federal and local taxes provided
on a separate return basis at rates lower
than statutory U.S. federal rate (8) - (22)
---------- ---------- ---------
(3)% 2% 13%
========== ========== ==========
(12) Subsequent Event (Unaudited):
Due to the continued losses of the Company's Norwegian subsidiary, the
Company made a determination during March 2001 to divest itself of the
Norwegian subsidiary. The Company is in negotiations with a buyer for
the subsidiary and is planning to consummate the sale during early
April. The transaction does not qualify for treatment as discontinued
operation as the subsidiary is in the same line of business as the
Company.
See accompanying independent auditors' report.
F-16
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Statements of Operations
for the Disposal of "Norway Subsidiary"
On April 1, 2000, 24Holdings Inc., formerly known as Scoop, Inc. (the
"Company"), disposed of all of the issued shares of its Norwegian subsidiary,
24STORE AS, for 1.00 Pound Sterling, or approximately $1.45 (the "Disposal").
Following this transaction the Company has no further rights, liabilities or
obligations with regard to 24STORE AS. The transaction does not qualify for
accounting treatment as a discontinued operation as the subsidiary is in the
same line of business as the Company.
The following unaudited pro forma condensed consolidated balance sheet and
statements of operations of 24Holdings Inc., formerly known as Scoop, Inc., at
December 31, 2000 and for the year ended December 31, 2000, have been prepared
to illustrate the effect of the Disposal, as though it had occurred on January
1, 2000, for purposes of the pro forma statements of operations. The assumptions
are described in the accompanying Notes to the Unaudited Pro Forma Condensed
Consolidated Balance Sheet and Statements of Operations.
The pro forma condensed consolidated balance sheet and statements of operations
are presented for illustrative purposes only and are not necessarily indicative
of the results of operations of the Company that would have been reported had
the Disposal occurred on January 1, 2000, nor do they represent a forecast of
the results of operations for any future period. The unaudited pro forma
condensed consolidated statements, include the Notes thereto, should be read in
conjunction with the historical consolidated financial statements of the
Company, which are incorporated herein by reference.
F-17
24HOLDINGS, INC.
(FORMERLY KNOWN AS SCOOP, INC.)
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 2000
For Sale of Norway Subsidiary
24Holdings Norway
Consolidated Subsidiary(1) Pro forma
------------ ------------- ---------
ASSETS
Cash and cash equivalents $ 2,261,181 $142,052 $ 2,119,129
Accounts receivable 3,464,412 269,572 3,194,840
Inventory 652,362 75,327 577,035
Prepaids and other assets 43,111 - 43,111
----------- -------- -----------
Total current assets 6,421,066 486,951 5,934,115
----------- -------- -----------
Property and equipment, net of
accumulated depreciation and amortization 1,414,995 22,885 1,392,110
----------- -------- -----------
Loan receivable, related party 100,200 - 100,200
----------- -------- -----------
Goodwill, net of accumulated amortization 2,519,997 - 2,519,997
----------- -------- -----------
$10,456,258 $509,836 $ 9,946,422
=========== ======== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,929,003 $654,899 $ 4,274,104
Due under Credit Facility 1,704,704 - 1,704,704
Short-term notes payable, related parties 617,406 18,943 598,463
Current portion of loan payable, bank 95,021 - 95,021
----------- -------- -----------
Total current liabilities 7,346,135 673,842 6,672,292
----------- -------- -----------
Deferred taxes 338,000 - 338,000
----------- ------- -----------
Loan payable, bank, less current portion 340,598 - 340,598
----------- ------- -----------
Stockholders' equity 2,431,526 (164,007) 2,595,532
----------- -------- -----------
$10,456,258 $509,836 $ 9,946,422
=========== ======== ===========
F-18
24HOLDINGS, INC.
(FORMERLY KNOWN AS SCOOP, INC.)
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
December 31, 2000
For Sale of Norwegian Subsidiary
Norway
24Holdings Subsidiary(1) Pro forma
Revenue $28,058,566 $3,728,089 $24,330,477
Cost of Revenue 25,076,624 3,228,326 21,848,299
----------- ---------- -----------
Gross profit 2,981,942 499,764 2,482,178
Operating expenses:
General and administrative expenses 3,839,728 848,178 2,991,550
Goodwill amortization 763,414 - 763,414
----------- ---------- -----------
4,603,142 848,178 3,754,964
----------- ---------- ----------
Income from operations (1,621,200) (348,414) (1,272,785)
Interest income (14,364) (8,906) (5,458)
Interest expense, net 284,350 20,872 263,478
----------- ---------- -----------
269,986 11,966 258,021
----------- ---------- -----------
Net income before taxes (loss) (1,891,186) (360,380) (1,530,806)
----------- ---------- -----------
Taxes (68,024) - (68,024)
----------- ---------- -----------
Net income $(1,823,162) $ (360,380) $(1,462,782)
=========== ========== ===========
Net loss per share -
basic and diluted (0.02) (0.02)
=========== ===========
Weighted average number of shares outstanding -
basic and diluted 81,241,503 81,241,503
=========== ===========
F-19
24HOLDINGS, INC.
(FORMERLY KNOWN AS SCOOP, INC.)
Notes to Pro Forma Condensed Consolidated Financial Statements (unaudited)
(1) The financial statements of the Norway subsidiary included in the
unaudited pro forma, consolidated financial information were first
translated from Norwegian Kroner to British pounds at the rate of .076
and .119, and then statement was translated from British pounds to
U.S. dollars at the rate of 1.494 and 1.552 for the December 31, 2000
Unaudited Consolidated Balance Sheet and the December 31, 2000
Unaudited Statement of Operations, respectively.
Note A - There are no pro forma adjustments to the condensed consolidated
balance sheets and statements of income, other than the elimination of
the financial position and results of operations. The Company disposed
of the subsidiary for an insignificant dollar amount, and all assets,
liabilities and costs related to the subsidiary were booked directly
to the subsidiary, and after elimination of the subsidiary financial
position and results of operations, no amounts relating to the
subsidiary remain.
F-20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The name, position with the Company, age and tenure of each director and
executive officer are as follows:
Name Age Position Since
----- --- ---------- -----
Lennart Orkan 56 Director and Chairman of the Board 2000
Larsake Sandin 52 Director 2000
Akbar Seddigh 56 Director 2000
Martin Clarke 35 President and 2000
Chief Executive Officer
Michael Neame 39 Chief Financial Officer, 2000
Chief Accounting Officer
and Secretary
Lennart Orkan, Director and Chairman of the Board. Dr. Orkan has
approximately 25 years of experience in business and banking. Currently, Dr.
Orkan is the President and CEO of Strator B.D.N. International AB, a company
based in Sweden which provides consulting services to public and private
companies on mergers and acquisitions, recapitalization, and other forms of
corporate reorganization. The Strator Group has associated companies and
affiliates in a number of European countries and in North America. Dr. Orkan is
also the founder and the majority owner of the company. Since 1980, Dr. Orkan
has been the Chairman of the Board and/or a Board Member of many medium-sized
and large Scandinavian and foreign private corporations. From 1974 until 1980,
Dr. Orkan was the head of the two largest departments of the Swedish Savings
Bank Association in addition to being the General Manager of the Swedish Savings
Banks Institute and the vice-Chairman of the International Savings Bank
Institute in Geneva, Switzerland. From 1980 until 1984, Dr. Orkan was the
General Manager of Lantbrukets Utredningsinstitut, the Swedish Institute for
Agro-Business Development and Research, a highly respected research institute
and consulting group for economic studies and business development services.
From 1984 until 1985, Dr. Orkan served as the President and CEO of the
Cooperative Bank of Sweden West, the largest cooperative bank in Sweden. From
1985 until 1988, Dr. Orkan was the President and CEO of Praktikertjanst AB, the
dominating group in the areas of private health and dental care and medical
technical services in Scandinavia.
Larsake Sandin, Director. Mr. Sandin has approximately 25 years of
experience in the information technology field as founder, director and manager
of several companies in Sweden, the United Kingdom and the United States. Mr.
Sandin is currently the Founding Director and a Business Consultant of Acom CMC
Ltd in London, the Founding Director of The Server Group in Scandinavia
Stockholm, also located in London, the CEO and a director of InfiniCom AB, the
majority shareholder of Scoop, Inc. From 1976 until 1989, Mr. Sandin served as
Business Manager of AB Programator, a company located in Stockholm. From 1989
until 1991, Mr. Sandin was the Managing Director of Philips Tele & Data Systems,
a subsidiary of Philips Norden AB of Stockholm, in which capacity Mr. Sandin
accomplished a significant restructuring of the company. From 1992 until 1995,
Mr. Sandin was employed by Digital Equipment Corporation, where he was the
Director of Retail Banking Worldwide in Boston, the Director of Financial
Industry Expertise Center Europe in London, and the Director of Retail Banking
Europe in Stockholm. In addition to his employment experience, Mr. Sandin has
been and continues to be a director of many publicly and privately held
companies in Sweden. In the past, Mr. Sandin was the Chairman of the Board of
Philips Radio Communications AS, Digital Equipment BCFI AB, Rostvold AS and
Ericsson-Programatic AB.
Akbar Seddigh, Director. Mr. Seddigh has approximately 25 years of
experience in the business field. Currently, Mr. Seddigh is the Chairman of the
Board and President of Ortivus US, Inc.; the Chairman of the Board of ELEKTA AB,
Cascade Computing AB, Neoventa AB and Samba Sensor AB; and Board Member of
Nordbanken, Taby, Affarsstrategerna AB, Artimplant AB, and Minidoc AB in
addition to other responsibilities. From 1976 through 1981, Mr. Seddigh worked
as the chief Executive Officer of a subsidiary of The Swedish Atomic Energy. In
1985, Mr. Seddigh founded Ortivus AB and acted as Chief Executive Officer of the
company until November, 1999. Since November 1999, Mr. Seddigh has acted as Vice
Chairman in addition to his role on the Board of Directors of the company.
Ortivus AB was listed on the Stockholm Stock Exchange in January 1997 and deals
in devising new medical concepts including Myocardial Ischemia Dynamic Analysis
(MIDA) and telemedicine (Mobimed).
Martin Clarke, President and Chief Executive Officer. Mr. Clarke came to
24STORE via the acquisition of LapLand (UK) Limited the company he co-founded
with Michael Neame in 1991. Responsible for Sales and Marketing, he was
instrumental in the growth which led to recognition of the company by the UK's
Sunday Times Newspaper as one of the UK's "Hot 100" fastest growing companies.
Prior to LapLand Mr. Clarke was European Sales and Marketing Director for Orchid
(Europe) Limited, the European subsidiary of a San Francisco based manufacturer
of computer peripherals and motherboards quoted on the London stock market.
Trained in aerospace and defense systems electronics, he moved on to a sales
career with a number of leading information technology companies. Mr. Clarke
joined Orchid (Europe) Limited in November 1988 with responsibility for UK
sales; promotion followed to European Sales Manager in March 1989 with
responsibility for all European distribution territories. Mr. Clarke was
appointed European Sales and Marketing Director in 1990.
Michael Neame, Chief Financial Officer, Chief Accounting Officer and
Secretary. Mr. Neame came to 24STORE via the acquisition of LapLand (UK) Limited
the company for which he had been Managing Director since 1991. Mr. Neame was
responsible for the Finance and Logistics operations of the organization from
inception to date. Prior to LapLand he was Managing Director of Orchid (Europe)
Limited, the European subsidiary of a San Francisco based manufacturer of
computer peripherals and motherboards. Mr. Neame joined Orchid in May 1988 as
Financial Controller, promotion followed to Financial Director in March 1989 and
Managing Director in October 1989, with responsibility for all European
subsidiaries. Orchid Technology was quoted on the London stock market. Mr. Neame
is a Fellow of the Chartered Institute of Management Accountants, having trained
as an accountant with a number of Blue Chip UK & International companies
including Sainsbury's, GEC, and ITW Inc.
Each director of the Company will hold office until such director's
successor is elected and qualified or until such director's earlier resignation
or removal. Each executive officer of the Company will hold office until such
officer's successor is elected and qualified or until such officer's earlier
resignation or removal in accordance with the Company's bylaws.
There currently exists no arrangement or understanding between any
executive officer and between any other person pursuant to which any person is
to be selected as an executive officer. No family relationships exist between
any current or prospective executive officer or director.
During the last five (5) years, no director or officer of the Company has:
(1) had any bankruptcy petition filed by or against any business of which
such person was a general partner or executive officer either at the
time of the bankruptcy or within two (2) years prior to that time;
(2) been convicted in a criminal proceeding or is subject to a pend-
ing criminal proceeding;
(3) been subject to any order, judgment or decree, not subse-
quently reversed, suspended or vacated, of any court of competent
jurisdiction permanently or temporarily enjoining such person from
participating, or otherwise limiting such person's right to engage, in
any type of business, securities or banking activities;
(4) been subject to any order, judgment or decree, not subse-
quently reversed, suspended or vacated, of any federal or state
authority barring or suspending such person from participating, or
otherwise limiting for more than 60 days such person's right to
engage, in any type of securities or banking activities; or
(5) been found by a court of competent jurisdiction in a civil action,
by the Commission or by the Commodity Futures Trading Commission to
have violated a federal or state securities law or a federal
commodities law, and the judgment or finding has not been subsequently
reversed, suspended or vacated.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the directors and executive officers of the Company and persons who beneficially
own more than ten percent of the Company's Common Stock (collectively, the
"Reporting Persons") to report their ownership of and transactions in the
Company's Common Stock to the Securities and Exchange Commission (the
"Commission"). Copies of these reports are also required to be supplied to the
Company. To the Company's knowledge, during the fiscal year ending December 31,
2000 the Reporting Persons complied with all applicable Section 16(a) reporting
requirements.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth compensation earned, whether paid or
deferred, during the fiscal years ended December 31, 2000, 1999 and 1998 by the
Company's Chief Executive Officer and the Executive Officers of the Company
whose compensation was $100,000 or greater during the fiscal year ended December
31, 2000.
Annual
Compensation Long-Term Compensation
-------------------- ------------------------
Restricted Securities All Other
Principal Salary Bonus Stock Underlying Compensation
Name Position Year ($) ($) Awards ($) Options (#) ($)
- --------------------------------------------------------------------------------------------------------------------
Martin Clarke (1) President and 2000 $ 147,465 $ - $ - - $ 18,627
Chief Executive 1999 $ 165,984 $ - $ - - $ 19,672
Officer 1998 $ 143,105 $ - $ - - $ 30,437
Michael Neame (2) Chief Financial 2000 $ 147,465 $ - $ - - $ 18,627
Officer, Chief 1999 $ 166,869 $ - $ - - $ 19,672
Accounting 1998 $ 116,950 $ - $ - - $ 28,851
Officer and
Secretary
(1) Mr. Clarke was appointed as President and Chief Executive Officer of the
Company on March 17, 2000. Mr. Clarke's annual compensation amounts relate
to compensation paid by 24STORE and its subsidiaries for the periods
indicated prior to the reverse acquisition of the Company by InfiniCom AB.
(2) Mr. Neame's annual compensation amounts relate to compensation paid by
24STORE and its subsidiaries for the periods indicated prior to the reverse
acquisition of the Company by InfiniCom AB.
Option Grants in Last Fiscal Year
The Company did not grant any options during the last fiscal year.
ITEM 12. BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth information, as of April 6, 2001, concerning
the Common Stock of the Company beneficially owned (i) by each director and each
Named Executive Officer of the Company, (ii) by all directors and executive
officers of the Company as a group and (iii) by each stockholder known by the
Company to be the beneficial owner of more than 5% of the outstanding Common
Stock. The beneficial owners named have, to the knowledge of the Company, sole
voting and dispositive power with respect to the shares beneficially owned,
subject to community property laws where applicable.
Beneficially Owned
Name and Address Shares Percent
---------------- ------ -------
InfiniCom AB (publ)
Gustavslundsvagen 151A
S-16751 Bromma
Sweden........................................................ 67,335,910 78.8
Larsake Sandin
Frensham Court, Summerfield Lane
Surrey GU10 3AN
England....................................................... 0 0
Lennart Orkan
Foreningsvagen 2
SE-13237 Saltsjo-Boo
Sweden........................................................ 0 0
Akbar Seddigh
Centralvagen 18
18357 Taby
Sweden........................................................ 0 0
Martin Clarke
Kingston
Reading Road North
Fleet
Hampshire
GU13 8RR
United Kingdom................................................ 4,953,455 5.8
Michael Neame
21 Archery Fields
Odiham, Hook
Hampshire
RG29 1AE
United Kingdom................................................ 4,953,455 5.8
All executive officers and directors as a group (5 persons)... 9,906,910 11.6
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On May 6, 1999, Michael Neame ("Neame") and Martin Clarke ("Clarke") sold to
24STORE 100% of the outstanding capital stock of each of LapLand U.K. Limited,
Mobile Planet Limited and Cyberia (UK) Limited, each of which are companies
incorporated in England. In connection with, and as partial consideration for,
the foregoing sale, InfiniCom issued a promissory note in favor of Neame and
Clarke which was secured by a lien on the shares of LapLand, Mobile Planet and
Cyberia.
On March 31, 2000, the Company, InfiniCom, 24STORE, Neame and Clarke agreed to
restructure the foregoing debt, along with certain other intercompany debt then
outstanding between InfiniCom and 24STORE. To effect the restructuring, the
Company issued to each of Neame and Clarke 4,953,455 shares of the Company's
Common Stock and 24STORE paid to each of Neame and Clarke the sum of 425,753
Pounds Sterling, or approximately $675,627, in cash in consideration for which
(i) 24STORE issued to the Company 4,200,000 additional shares of its capital
stock and (ii) Neame and Clarke released and discharged the obligations of
24STORE owed by 24STORE to Neame and Clarke pursuant to a Loan Note Instrument
executed by 24STORE and InfiniCom dated May 6, 1999. The Company also assumed
from 24STORE all of the obligations of 24STORE under (a) a Loan Note issued by
24STORE in favor of InfiniCom dated April 9, 1999 in the principal amount of
$2,368,000, (b) a Loan Note issued by 24STORE in favor of InfiniCom dated April
9, 1999 in the principal amount of $1,581,000, (c) a Loan Note issued by 24STORE
in favor of InfiniCom dated May 6, 1999 in the principal amount of 16,300,000
SEK and (d) certain other debt obligations ((a), (b), (c) and (d) above
collectively, the "Debt Obligations") in consideration for which 24STORE issued
to the Corporation 16,142,972 additional shares of its capital stock. Following
the foregoing assumptions, InfiniCom released and discharged amounts (including
principal and interest) owing under the Debt Obligations in consideration for
which the Company issued to InfiniCom 7,819,217 shares of its Common Stock.
Also as a part of the restructuring, (x) InfiniCom subscribed for and purchased
965,132 newly issued shares of Common Stock of the Company at a subscription
price of $1.938 per share and (y) the Company subscribed for and purchased
4,308,580 shares of the capital stock of 24STORE at a subscription price of 0.25
Pound Sterling per share (equivalent to an aggregate subscription price of
$1,695,426).
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and Exhibits
(1) Financial Statements
The financial statements listed below and included under Item
8, are filed as part of this report.
Consolidated Financial Statements of 24Holdings Inc. (formerly
known as Scoop, Inc.)
(i) Independent Auditors' Report
(ii) Consolidated Balance Sheet at December 31, 2000 and
December 31, 1999
(iii) Consolidated Statement of Income (Operations) for each
of the three years ended December 31, 2000
(iv) Consolidated Statement of Shareholders' Equity (Deficit)
for each of the three years ended December 31, 2000
(v) Consolidated Statement of Cash Flows for each of the
three years ended December 31, 2000
(vi) Notes to the Conslidated Financial Statements
Unaudited Pro Forma Condensed Consolidated Financial
Information of 24Holdings Inc. (formerly known as Scoop, Inc.)
(i) Consolidated Balance Sheet at December 31, 2000 (For
Sale of Norway Subsidiary)
(ii) Consolidated Statement of Operations for the period
ended December 31, 2000 (For Sale of Norway Subsidiary)
(2) Financial Statement Schedules
All schedules have been omitted because either they are not
applicable, not required or because the information required
is included in the consolidated financial statements,
including the notes thereto.
(b) Exhibits
Exhibit
Number Description
------- -----------
2.1 Second Amended Plan of Reorganization of Scoop, Inc. (Filed as
Exhibit 2.1 to the Company's Current Report on Form 8-K (filed
April 5, 2000) and incorporated herein by this reference).
2.2 Stock Purchase Agreement, dated as of April 23, 1999, between
InfiniCom AB and Scoop, Inc. (Filed as Exhibit 2.2 to the
Company's Current Report on Form 8-K (filed April 5, 2000) and
incorporated herein by this reference).
2.3 Agreement, dated as of November 1, 1999, between InfiniCom AB
and Scoop, Inc. (Filed as Exhibit 2.3 to the Company's Current
Report on Form 8-K (filed April 5, 2000) and incorporated
herein by this reference).
2.4* Share Purchase Agreement dated March 29, 2001 between 24STORE
(Europe) Limited and Compo Consult AS (English Translation).
3.1** Certificate of Incorporation of the Company.
3.2** Certificate of Amendment of the Certificate of Incorporation
of the Company dated October 20, 1999.
3.3** Certificate of Amendment of the Certificate of Incorporation
of the Company dated April 1, 2001.
3.4 Bylaws of the Company (Filed as Exhibit 3.3 to the Company's
Annual Report on Form 10-K for the Period Ended December 31,
1999 (filed February 21, 2001) and incorporated herein by this
reference).
3.5 Certificate of Amendment of the Bylaws of the Company (Filed
as Exhibit 3.4 to the Company's Annual Report on Form 10-K for
the Period Ended December 31, 1999 (filed February 21, 2001)
and incorporated herein by this reference).
4.1 Form of Common Stock Certificate (Filed as Exhibit 4.1 to the
Company's Registration Statement on Form SB-2 (Registration
No. 333-15129) and incorporated herein by this reference).
10.1 Service Agreement dated May 6, 1999 between 24STORE Limited
and Martin Clarke (Filed as Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the Period Ended December 31,
1999 (filed February 21, 2001) and incorporated herein by this
reference).
10.2 Service Agreement dated May 6, 1999 between 24STORE Limited
and Michael John Neame (Filed as Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the Period Ended December 31,
1999 (filed February 21, 2001) and incorporated herein by this
reference).
10.3 Invoice Discounting Agreement dated October 10, 1996 between
Mobile Planet Limited and Lombard Natwest Discounting Limited
(Filed as Exhibit 10.4 to the Company's Annual Report on Form
10-K for the Period Ended December 31, 1999 (filed February
21, 2001) and incorporated herein by this reference).
10.4 Invoice Discounting Agreement dated October 10, 1996 between
Lapland U.K. Limited and Lombard Natwest Discounting Limited
(Filed as Exhibit 10.5 to the Company's Annual Report on Form
10-K for the Period Ended December 31, 1999 (filed February
21, 2001) and incorporated herein by this reference).
10.5 Advice of Borrowing Terms dated September 25, 1997 between
National Westminster Bank PLC and Cyberia (UK) Limited (Filed
as Exhibit 10.6 to the Company's Annual Report on Form 10-K
for the Period Ended December 31, 1999 (filed February 21,
2001) and incorporated herein by this reference).
10.6 Deed of Subscription, Amendment and Release dated March 31,
2000 among Michael John Neame, Martin Clarke, 24STORE.com
Limited, InfiniCom AB and Scoop, Inc. (Filed as Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the Period
Ended March 31, 2000 (filed March 6, 2001) and incorporated
herein by this reference).
10.7 Subscription Agreement dated March 31, 2000 between InfiniCom
AB and Scoop, Inc. (Filed as Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the Period Ended March 31,
2000 (filed March 6, 2001) and incorporated herein by this
reference).
10.8 Subscription Agreement dated March 31, 2000 between Michael
John Neame and Scoop, Inc. (Filed as Exhibit 10.3 to the
Company's Quarterly Report on Form 10-Q for the Period Ended
March 31, 2000 (filed March 6, 2001) and incorporated herein
by this reference).
10.9 Subscription Agreement dated March 31, 2000 between Martin
Clarke and Scoop, Inc. (Filed as Exhibit 10.4 to the Company's
Quarterly Report on Form 10-Q for the Period Ended March 31,
2000 (filed March 6, 2001) and incorporated herein by this
reference).
21** List of Subsidiaries of the Company.
* to be filed by amendment
** filed with this report
(c) Current Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
24HOLDINGS INC.
By: /s/ Lennart Orkan
-----------------------------------------
Name: Lennart Orkan
Title: Chairman of the Board
Date: April 13, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Martin Clarke
-----------------------------------------
Name: Martin Clarke
Title: President and
Chief Executive Officer
By: /s/ Michael Neame
-----------------------------------------
Name: Michael Neame
Title: Chief Financial Officer and
Principal Accounting Officer
By: /s/ Lennart Orkan
----------------------------------------
Name: Lennart Orkan
Title: Director, Chairman of
the Board
By: /s/ Larsake Sandin
-----------------------------------------
Name: Larsake Sandin
Title: Director
By: /s/ Akbar Seddigh
-----------------------------------------
Name: Akbar Seddigh
Title: Director