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, 2001 or [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________ to ______________ COMMISSION FILE NUMBER 000-22281 24HOLDINGS INC. (Exact name of registrant as specified in its charter) DELAWARE 33-0726608 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Cyberia House Church Street, Basingstoke Hampshire RG21 7QN United Kingdom (Address of Principal Executive Offices) +44 1256 867 800 (Telephone number) SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: Common Stock, Par Value $0.001 Per Share (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Aggregate market value of the voting stock held by non-affiliates of the registrant as of April 11, 2002: $329,756. The amount shown is based on the closing price of the registrant's Common Stock on the OTC Bulletin Board on that date. Shares of Common Stock known by the registrant to be beneficially owned by 10% shareholders, officers or directors of the Registrant are not included in the computation. The Registrant, however, has made no determination that such persons are "affiliates" within the meaning of Rule 405 under the Securities Act of 1933. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] APPLICABLE ONLY TO CORPORATE REGISTRANTS Number of shares of Common Stock outstanding at April 11, 2002: 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 1996. The Company's original business operations focused on the sale of media products and business information services. Following an initial public offering, the Common Stock of the Company began trading on the NASDAQ Small Cap Stock Exchange on April 9, 1997 under the symbol "SCPI." During 1997 and 1998 the business failed to be profitable and in the second quarter of 1998, the Company was informed that it no longer met the minimum requirements for listing on the NASDAQ Small Cap Stock Exchange and was subsequently de-listed from the exchange on June 24, 1998. Commencing in July 1998, the Company underwent voluntary reorganization under Chapter 11 of the United States Bankruptcy Code. In accordance with the Plan of Reorganization approved by the Bankruptcy Court, in December 1999, InfiniCom AB, a company registered in Sweden, acquired a total of 60,783,219 shares of Common Stock of the Company (representing approximately 91% of the outstanding shares of Common Stock of the Company) in exchange for 100% of the Common Stock of 24STORE. On April 2, 2001, the Company amended its Certificate of Incorporation to change the Company's name from Scoop, Inc. to 24Holdings Inc. All of the Company's operations prior to its bankruptcy proceedings were discontinued. The Business Today 24STORE's current business operations are held in 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 inquiries 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. 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 capitalize upon these trading relationships to move into more diverse product categories and new geographies. 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. -2- 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, 2002 the Company employed a total of 25 persons, including 15 in sales and marketing, three in operations and seven 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. -3- 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 OTC Bulletin Board under the symbol "TFHD." The following table sets forth for the periods indicated the high and low closing sale price for the Common Stock as quoted on the OTC Bulletin Board and the National Quotation Bureau's Pink Sheets, as indicated below: Bid Quarter Ended High Low March 31, 2002 $0.0800 $0.0410 December 31, 2001 $0.1900 $0.0240 September 30, 2001 $0.1900 $0.0800 June 30, 2001 $0.5500 $0.1000 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 On April 11, 2002 the last reported sales price for the Company's Common Stock on the OTC Bulletin Board was $0.04 per share. As of April 11, 2002, there were 196 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, 2001 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 -4- 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, 2001 2000 1999 1998 1997 ------------------------------------------------------------------------------ Revenue $ 22,036,485 $ 28,058,566 $ 22,070,173 $ 5,453,410 $ 4,102,762 Operating Income/(Loss) $(1,726,533) $ (1,621,200) $ (4,921,367) $ 130,993 $ 162,882 Net Income/Loss $(1,822,971) $ (1,823,162) $ (5,626,018) $ 112,774 $ 107,791 Loss per share, basic and diluted $ (0.02) $ (0.02) $ (0.09) $ - $ - Weighted average number of shares 85,486,717 81,241,503 64,703,528 60,783,219 60,783,219 outstanding Working capital (deficit) $ (305,596) $ (884,270) $ (8,146,694) $ 65,794 $ 110,708 Total Assets $ 5,327,740 $ 10,456,258 $ 11,942,175 $ 1,012,940 $ 748,961 Long-Term Debt $ 780,632 $ 381,396 $ 2,261,520 $ - $ - Total Shareholders equity (deficit) $ 509,392 $ 2,431,526 $ (5,579,076) $ 138,739 $ 117,495 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Company Overview 24Holdings Inc. ("24Holdings" or the "Company") was incorporated in 1996 in the state of Delaware under the name Scoop, Inc. and began operations as an online news provider. In July 1998, the Company filed a petition for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Central District of California. In September 1999, the Company filed a Plan of Reorganization ("Plan") with the Bankruptcy Court. The Plan was confirmed on October 5, 1999. Pursuant to the Plan, the Company was acquired in a reverse merger with 24STORE (Europe) Limited, formerly known as 24STORE.com Limited ("24STORE"), pursuant to which 24STORE's parent company acquired 91% of the outstanding shares of the Company, or 60,783,219 of newly issued shares, in exchange for all the outstanding shares of 24STORE. Since the shareholders of 24STORE became the controlling shareholders of the Company after the exchange, 24STORE is treated as the acquiree for accounting purposes. No value was assigned to the assets and liabilities of the acquired company, as it had emerged from a bankruptcy plan of reorganization. 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 -5- 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, was treated as the predecessor company, and accordingly, its financial position and results of operations have been presented for the periods preceding the reverse merger. On May 6, 1999, 24STORE acquired three companies registered in the United Kingdom, which companies were related through common ownership. On April 1, 2001, 24STORE sold all of the outstanding stock of the Norwegian entity (see discussion in "Sale of Norwegian Subsidiary"). Sale of Norwegian Subsidiary In order to dispose of operations that had become unprofitable, 24STORE and Compo Consult AS, a Norwegian company, entered into an Agreement on the Transfer of Shares dated March 29, 2001 pursuant to which 24STORE sold and Compo Consult purchased all of the outstanding stock of 24STORE's Norwegian subsidiary, 24STORE AS, for a total consideration of 1.00 Pound Sterling, or approximately $1.45. The transaction was consummated on April 1, 2001. 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, 2001, 2000 and 1999. The operating results in any periods are not necessarily indicative of the results to be expected for any future period. YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Net sales 100.0% 100.0% 100.0% Cost of sales 89.2% 89.4% 87.6% Gross profit 10.8% 10.6% 12.4% Operating expenses: Selling general and administrative 11.5% 13.7% 21.9% Goodwill amortization 3.0% 2.7% 3.8% Impairment loss on investments 5.1% 9.0% Gain on sales of subsidiary (1.0)% Total operating expenses 18.6% 16.4% 34.7% ------ ------ ------ Net Income (Loss) from operations (7.8)% (5.8)% (22.3)% Net Interest expense (0.6)% 1.0% 2.7% Loss before provision for income taxes (8.3)% (6.7)% (25.0)% Provision for income taxes 0.0% (0.2)% 0.5% Net Income (Loss) (8.3)% (6.5)% (25.5)% COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 Net Sales--Net sales for the years ended December 31, 2001, 2000 and 1999 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Net sales $22,036,485 $28,058,566 $22,070,173 % increase from (21.5%) 27.1% 304.7% the previous year -6- Net sales for the years ended December 31, 2001, 2000 and 1999 were all derived from operations in Europe. The decrease in net sales for the year ended December 31, 2001 is primarily attributable to the disposal of the Norwegian subsidiary (see "Sale of Norwegian Subsidiary" above). For the UK Group, net sales decreased by 7.2% in local currency as compared to 2000 mainly due to market conditions in the forth quarter. The increase in net sales for the year ended December 31, 2000 is the result of a full year's results from the UK Group and organic 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. Gross Profit--Gross profit for the years ended December 31, 2001, 2000 and 1999 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Gross profit $2,370,225 $2,981,942 $2,750,669 % increase from (20.5%) 8.4% 159.1% the previous year Gross margin 10.8% 10.6% 12.4% Gross profit consists of net sales less the cost of sales, which consists of the cost of merchandise sold to customers. Gross profit for year ended December 31, 2001 have decreased due to a lower level of sales against the previous year. Gross profit for the years ended December 31, 2000 and 1999 have increased over the previous year due to a higher level of sales. Gross margin percent increased in year ended December 31, 2001 because of improved sales mix. Gross margins have decreased in the year ended December 31, 2000 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, 2001, 2000 and 1999 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Selling, general and administrative $2,534,957 $3,839,728 $4,826,875 % increase from the previous year (34.0)% (20.5)% 418.7% % of net sales 11.5% 13.7% 21.9% SG&A expenses for the year ended December 31, 2001 decreased by 31.0% to $2,534,957 from $3,839,728 in the year ended December 31, 2000. The decrease in SG&A for the 2001 fiscal year is the result of the elimination of some overhead due to the disposal of the Norwegian subsidiary and reduced professional cost associated with the Company's SEC filings in the United States. 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, -7- 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. Goodwill Amortization--Goodwill amortization for the year ended December 31, 2001 was $666,277. The decrease over the previous year was the result of a write down of the investment in the UK Group. Goodwill amortization for the year ended December 31, 2000 was $763,414, a reduction of 9% from the previous year, in which amortization was $839,087. This reduction in goodwill amortization reflected 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. 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. Impairment loss on investment--The $1,125,846 impairment charge in the year ended December 31, 2001 arose from the write down of the UK Group investment. Gain on disposal of subsidiary--The $230,322 gain in the year ended December 31, 2001 was the result of the sale of the Norwegian subsidiary. Interest Expenses--Interest expenses, net of interest income for the years ended December 31, 2001, 2000 and 1999, were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Interest income $24,799 $14,364 $17,660 % change from the previous year 42.1% (18.6)% 65.7% Interest expenses $123,637 $284,350 $617,231 % change from the previous year (130.0)% (53.9)% 5087.3% Interest income represents interest received on cash deposits and interest receivable on inter-company loans. Interest expenses include interest payable on bank overdrafts, mortgages, receivables financing arrangements and other loans. The reduction of interest expense in the year ended December 31, 2001 is primarily attributable to the Company now having lower interest bearing debts to related parties following the restructuring of debt that occurred on March 31, 2000. The reduction in interest expenses in the year ended December 31, 2000 is also primarily attributable to this restructuring of debt (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, 2001, 2000 and 1999 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2001 2000 1999 Income taxes $(2,400) $(68,024) $105,080 -8- Income tax for the year ended December 31, 2001 related to deferred tax accruals. The income tax credit for the year ended December 31, 2000 is an adjustment due to an over-accrual in prior years. Income taxes for the year ended December 31, 1999 represent taxes payable on profits of the operating subsidiaries. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at December 31, 2001 were $1,339,650 compared to $2,261,181 as of December 31, 2000. The reduction in cash is the result of timing of payment of accounts payable, which have declined from the December 31, 2000 balance. Net cash used by operating activities was $163,843 in 2001 compared to net cash used by operating activities of $688,058 in 2000. As of December 31, 2001 the Company had a working capital deficit of $305,596 compared to a working capital deficit of $884,270 as of December 31, 2000. As of December 31, 2001 included in current assets were cash and cash equivalents of $1,339,650 and receivables, net, expected to be collected within one year of $1,975,624. Cash used by investing activities was $24,906 in 2001, compared to cash provided by investing activities of $6,700 in 2000. The change in working capital is primarily attributable to the conversion of a short-term note payable to related parties, being converted to a long term note payable. The note, which bears interest at 2.0% per annum, matures on December 31, 2007. In its United Kingdom operating subsidiaries the Company has (1) a revolving line of credit based on 70% of eligible receivables, (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 sufficient 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. -9- 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. In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS No. 141 supersedes Accounting Principles Board ("APB") No. 16 and requires that any business combinations initiated after June 30, 2001 be accounted for as a purchase; therefore, eliminating the pooling-of-interest method defined in APB 16. The statement is effective for any business combination initiated after June 30, 2001 and shall apply to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001 or later. The Company is evaluating any accounting effect, if any, arising from the recently issued SFAS No. 141, "Business Combinations" on the Company's financial position or results of operations. In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles." SFAS No. 142 addresses the initial recognition, measurement and amortization of intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) and addresses the amortization provisions for excess cost over fair value of net assets acquired or intangibles acquired in a business combination. The statement is effective for fiscal years beginning after December 15, 2001, and is effective July 1, 2001 for any intangibles acquired in a business combination initiated after June 30, 2001. The Company is evaluating any accounting effect, if any, arising from the recently issued SFAS No. 142, "Goodwill and Other Intangibles" on the Company's financial position or results of operations. In October 2001, the FASB recently issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires companies to record the fair value of a liability for asset retirement obligations in the period in which they are incurred. The statement applies to a company's legal obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, and development or through the normal operation of a long-lived asset. When a liability is initially recorded, the company would capitalize the cost, thereby increasing the carrying amount of the related asset. The capitalized asset retirement cost is depreciated over the life of the respective asset while the liability is accreted to its present value. Upon settlement of the liability, the obligation is settled at its recorded amount or the company incurs a gain or loss. The -10- statement is effective for fiscal years beginning after June 30, 2002. The Company does not expect the adoption to have a material impact to the Company's financial position or results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Statement 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a single accounting model for long-lived assets to be disposed of. New criteria must be met to classify the asset as an asset held-for-sale. This statement also focuses on reporting the effects of a disposal of a segment of a business. This statement is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption to have a material impact to the Company's financial position or results of operations. In January 2001, the Financial Accounting Standards Board Emerging Issues Task Force issued EITF 00-27 effective for convertible debt instruments issued after November 16, 2000. This pronouncement requires the use of the intrinsic value method for recognition of the detachable and imbedded equity features included with indebtedness, and requires amortization of the amount associated with the convertibility feature over the life of the debt instrument rather than the period for which the instrument first becomes convertible. Inasmuch as the Company had no convertible debt instruments outstanding during the two years ended December 31, 2001 there is no impact on the Company's financial position or results of operations. This EITF 00-27, could impact future financial statements, should the Company enter into such agreements. 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 -11- 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. -12- 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, -13- 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 Stockholder InfiniCom AB beneficially owns approximately 83% 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. Reorganization of Parent Company On January 28, 2002, the Company's parent company, InfiniCom AB, applied to the Stockholm District Council for reconstruction in accordance with Swedish law, similar to a Chapter 11 filing in the United States bankruptcy system. The parent company is attempting to restructure its debt and emerge from reconstruction. If the parent company is unable to successfully emerge from reconstruction, it may affect the Company's ability to get additional funding to put management's plans for future expansion into place. If this occurred, one of the resulting scenarios could be the Company's decision not to continue as a public entity in the United States. -14- 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. -15- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 CONTENTS Page Independent Auditors' Report F-1 Financial Statements: Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statement of Shareholders' Equity F-4 Consolidated Statements of Cash Flows F5-F6 Notes to Consolidated Financial Statements F7-F16 INDEPENDENT AUDITORS' REPORT Board of Directors 24Holdings Inc. Los Angeles, California We have audited the accompanying consolidated balance sheets of 24Holdings Inc. (formerly Scoop, Inc.) and subsidiary at December 31, 2001 and 2000 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2001. 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 auditing standards generally accepted in the United States of America. 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. (formerly Scoop, Inc.) and subsidiary at December 31, 2001 and 2000 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. /s/ Stonefield Josephson, Inc. CERTIFIED PUBLIC ACCOUNTANTS Santa Monica, California March 4, 2002 F-1 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED BALANCE SHEETS ASSETS December 31, December 31, 2001 2000 ------------ ------------ Current assets: Cash and cash equivalents $ 1,339,650 $ 2,261,181 Accounts receivable, less allowance for doubtful accounts of $16,687 and $46,179 at December 31, 2001 and 2000 1,958,937 3,464,412 Inventories 312,180 652,362 Prepaid and other current assets 29,752 43,111 ---------------- --------------- Total current assets 3,640,519 6,421,066 Loan receivable, related party 13,519 100,200 Property and equipment, net of accumulated depreciation 1,264,840 1,414,994 Goodwill, net of accumulated amortization 408,862 2,519,998 ---------------- --------------- $ 5,327,740 $ 10,456,258 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,745,435 $ 4,918,230 Credit facility 1,123,604 1,704,704 Income taxes payable - 10,773 Short-term notes payable, related parties - 617,406 Current maturities of notes payable, bank 77,077 54,223 ---------------- --------------- Total current liabilities 3,946,116 7,305,336 ---------------- --------------- Note payable, bank, less current maturities 271,196 381,396 ---------------- --------------- Deferred tax liability 91,600 338,000 ---------------- --------------- Long-term note payable, related party 509,436 - ---------------- --------------- 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, shares issued and outstanding at December 31, 2001 and 2000 26,081 26,081 Additional paid-in capital 9,855,851 9,855,851 Other comprehensive loss (331,735) (232,572) Accumulated deficit (9,040,805) (7,217,834) ---------------- --------------- Total shareholders' equity 509,392 2,431,526 ---------------- --------------- $ 5,327,740 $ 10,456,258 ================ =============== See accompanying independent auditors' report and notes to consolidated financial statements. F-2 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS Year ended Year ended Year ended December 31, 2001 December 31, 2000 December 31, 1999 ----------------- ----------------- ----------------- Revenue $ 22,036,485 $28,058,566 $22,070,173 Cost of Revenue 19,666,260 25,076,624 19,319,504 ------------ ------------ ----------- Gross profit 2,370,225 2,981,942 2,750,669 ------------ ------------ ----------- Operating expenses: Selling, general and administrative expenses 2,534,957 3,839,728 4,826,875 Goodwill amortization 666,277 763,414 839,087 Impairment loss on investments 1,125,846 - 2,006,074 ------------ ------------ ----------- 4,327,080 4,603,142 7,672,036 ------------ ------------ ----------- Loss from operations (1,956,855) (1,621,200) (4,921,367) ------------ ------------ ----------- Other: Gain on disposal of subsidiary (230,322) - - Interest income (24,799) (14,364) (17,660) Interest expense 123,637 284,350 617,231 ------------ ------------ ----------- (131,484) 269,986 599,571 ------------ ------------ ----------- Loss before income taxes (1,825,371) (1,891,186) (5,520,938) Income taxes, principally current (2,400) (68,024) 105,080 ------------ ------------ ----------- Net loss $ (1,822,971) $(1,823,162) $(5,626,018) ============ ============ ============ Net loss per share - basic and diluted $ (0.02) $ (0.02) $ (0.09) ============ ============ ============ Weighted average number of shares outstanding - basic and diluted 85,486,717 81,241,503 64,703,528 ============ ============ =========== See accompanying independent auditors' report and notes to consolidated financial statements. F-3 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Common stock Additional ------------ paid-in Shares Amount capital ------ ------ ------- Balance at January 1, 1999 60,783,219 $ 7,390 $ - Shares issued in connection with acquisition of 24STORE.com, LTD. 6,012,238 - - Foreign currency translation Net loss for the year ended December 31, 1999 -------------- --------------- -------------- Balance at December 31, 1999 66,795,457 7,390 - Shares issued in satisfaction of debt 17,726,127 17,726 7,986,390 Shares issued in sale to parent company 965,133 965 1,869,461 Foreign currency translation Net loss for the year ended December 31, 2000 -------------- --------------- -------------- Balance at December 31, 2000 85,486,717 26,081 9,855,851 Foreign currency translation Net loss for the year ended December 31, 2001 -------------- --------------- -------------- Balance at December 31, 2001 85,486,717 $ 26,081 $ 9,855,851 ============== =============== =============== See accompanying independent auditors' report and notes to consolidated financial statements. Retained Other earnings/ Total comprehensive accumulated shareholders' income/(loss) (deficit) equity/ (deficit) ------------ ------------ ------------------ Balance at January 1, 1999 $ (99,997) 231,346 $ 138,739 Shares issued in connection with acquisition of 24STORE.com, LTD. - Foreign currency translation (91,797) (91,797) Net loss for the year ended December 31, 1999 (5,626,018) (5,626,018) ---------------- --------------- -------------- Balance at December 31, 1999 (191,794) (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) (40,778) Net loss for the year ended December 31, 2000 (1,823,162) (1,823,162) ---------------- --------------- -------------- Balance at December 31, 2000 (232,572) (7,217,834) 2,431,526 Foreign currency translation (99,163) (99,163) Net loss for the year ended December 31, 2001 (1,822,971) (1,822,971) ---------------- ---------------- ------------------ Balance at December 31, 2001 $ (331,735) (9,040,804) $ 509,392 ================ ================ ================== See accompanying independent auditors' report and notes to consolidated financial statements. F-4 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Year ended Year ended Year ended December 31, 2001 December 31, 2000 December 31, 1999 ----------------- ----------------- ----------------- Cash flows provided by (used for) operating activities: Net loss $ (1,822,971) $ 1,823,162) $ (5,626,018) ------------------ ----------------- ----------------- Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation 93,923 129,091 127,751 Amortization of goodwill 666,277 763,414 839,087 Loss on impairment of assets - - 2,006,074 Loss on impairment of investments 1,125,846 - - Expense incurred in exchange for note payable - - 1,581,000 Gain on sale of subsidiary (230,322) - - Foreign currency translation (46,786) 510,025 (67,964) Provision for bad debts - - 155,994 Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable 1,103,316 846,081 (3,828,292) Inventories 266,701 289,736 (859,431) Prepaid and other current assets 9,261 (43,111) - Changes in assets and liabilities: (Increase) decrease in assets: Accounts payable and accrued expenses (1,315,662) (1,299,135) 7,321,258 Deferred taxes (2,400) - - Income taxes payable (11,026) (60,997) 55,079 ------------------ ----------------- ----------------- Total adjustments 1,659,128 1,135,104 7,330,559 ------------------ ----------------- ----------------- Net cash provided by (used for) operating activities (163,843) (688,058) 1,704,538 ------------------ ----------------- ----------------- (Continued) See accompanying independent auditors' report and notes to consolidated financial statements. F-5 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Year ended Year ended Year ended December 31, 2001 December 31, 2000 December 31, 1999 ----------------- ----------------- ----------------- Cash flows provided by (used for) investing activities: Acquisition of property and equipment 15,550 (30,136) - Due to/from related parties (40,456) 36,836 (1,165) Group distributions - - (85,457) ------------------ ----------------- ---------------- Net cash provided by (used for) investing activities (24,906) 6,700 (86,622) ------------------ ----------------- ---------------- Cash flows provided by (used for) financing activities: Payments on note payable, bank (76,044) (1,694) - Credit facility (550,860) - - Sale of subsidiary, net of cash acquired (105,879) - - Payments on notes payable, related parties - (1,354,044) - Proceeds from short-term loans, related parties - 567,406 - Proceeds from issuance of common stock - 1,870,426 - ------------------ ------------------ ----------------- Net cash provided by (used for) financing activities (732,783) 1,082,094 - ------------------ ------------------ ----------------- Net increase (decrease) in cash and cash equivalents (921,531) 400,736 1,617,916 Cash and cash equivalents, beginning of year 2,261,181 1,860,445 242,529 ------------------ ------------------ ----------------- Cash and cash equivalents, end of year $ 1,339,650 $ 2,261,181 $ 1,860,445 ================== ================== ================= Supplemental disclosure of cash flow information: Interest paid $ 91,903 $ 215,019 $ 178,694 ================== ================== ================= Income taxes paid $ 6,952 $ 34,368 $ 187,203 ================== ================== ================= 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-6 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (1) Description of Business: General: 24Holdings Inc. ("24Holdings" or the "Company") was incorporated in the name Scoop, Inc. in 1996, in the state of Delaware, 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, Scoop was acquired in a reverse merger with 24STORE.com, Ltd. ("24STORE"), whose parent company acquired 91% of the outstanding shares of Scoop, 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 Scoop after the exchange, 24STORE is treated as the acquirer for accounting purposes. No value was assigned to the assets and liabilities of the acquired company, as it was 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 ("InfiniCom"), a publicly listed company on the SBI market in Sweden, whose principal activity is that of a consulting company. On April 9, 1999 24STORE entered into a Share Purchase Agreement, whereby they acquired from their parent company several companies registered in Sweden and Norway. 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. Scoop, Inc changed its name to 24Holdings Inc. on April 2, 2001. 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 24Holdings Inc. and subsidiary. All significant intercompany transactions and accounts have been eliminated. See accompanying independent auditors' report. F-7 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (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 accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates. Revenue Recognition: The Company recognizes revenue upon the delivery of its product to customers. Shipping and handling charges are included in gross sales, with the related costs included in selling, general and administrative expenses. 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. Property and Equipment: Building, computers, software, furniture and equipment are valued at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows: Description Useful life ------------- ----------- Building 50 years Furniture and equipment 5 years Computers 3-4 years Software 3-4 years See accompanying independent auditors' report. F-8 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (2) Summary of Significant Accounting Policies, Continued: Goodwill: In connection with various acquisitions which were accounted for under the purchase method of accounting, the Company recorded goodwill. The remaining goodwill at December 31, 2001 and 2000 is being amortized using the straight-line method over the estimated useful lives of five years. Accumulated amortization on all goodwill was $2,265,828 and $1,602,501 at December 31, 2001 and 2000, respectively. In accordance with the provisions of SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of" the Company determined there had been an impairment loss of $1,125,846 for the year ended December 31, 2001. The impairment loss represents the excess of the carrying value over fair value, determined by the present value of estimated expected future cash flows of the UK Group for the remaining useful life of 3 years, discounted at 7%. 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 all reported assets and liabilities which represent financial instruments, none of which are held for trading purposes, approximate their carrying value because of the short term maturity of these instruments or the stated interest rates are indicative of market interest rates. Advertising Costs: Advertising costs are expensed as incurred. For the years ended December 31, 2001, 2000, and 1999, advertising expenses amounted to approximately $136,000, $262,000, and $355,000, respectively. Concentration: The Company has one major customer accounting for 10.7% of their sales, or approximately $1,580,000. Approximately $195,000 due from this customer is included in accounts receivable at December 31, 2001. See accompanying independent auditors' report. F-9 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (2) Summary of Significant Accounting Policies, Continued: Basic and Diluted Earnings (Loss) Per Share: Basic earnings (loss) per share are determined by dividing the net earnings (loss) by the weighted average shares of Common Stock outstanding during the period. Diluted earnings (loss) per share are determined by dividing the net earnings (loss) by the weighted average shares of Common Stock outstanding plus the dilutive effects of stock options, warrants, and other convertible securities. Basic and diluted earnings (loss) per share are the same for the years ended December 31, 2001, 2000 and 1999 because there were no dilutive securities outstanding during those periods. 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. Segment: Based on the Company's integration and management strategies, the Company operates in a single business segment. For the years ended December 31, 2001, 2000, and 1999 all revenues have been derived from European operations. Statement of Cash Flows: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 95, "Statement of Cash Flows," cash flows from the Company's operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Recent Accounting Pronouncements: In July 2001, the FASB issued SFAS No. 141 "Business Combinations." SFAS No. 141 supersedes Accounting Principles Board ("APB") No. 16 and requires that any business combinations initiated after June 30, 2001 be accounted for as a purchase; therefore, eliminating the pooling-of-interest method defined in APB 16. The statement was effective for any business combination initiated after June 30, 2001 and applies to all business combinations accounted for by the purchase method for which the date of acquisition is July 1, 2001 or later. The adoption did not have a material impact on the Company's financial position or results of operations as the Company has not participated in such activities covered under this pronouncement after the effective date. See accompanying independent auditors' report. F-10 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (2) Summary of Significant Accounting Policies, Continued: Recent Accounting Pronouncements, Continued: In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles." SFAS No. 142 addresses the initial recognition, measurement and amortization of intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) and addresses the amortization provisions for excess cost over fair value of net assets acquired or intangibles acquired in a business combination. The statement is effective for fiscal years beginning after December 15, 2001, and is effective July 1, 2001 for any intangibles acquired in a business combination initiated after June 30, 2001. The Company is evaluating any accounting effect, if any, arising from the recently issued SFAS No. 142, "Goodwill and Other Intangibles" on the Company's financial position or results of operations. In October 2001, the FASB recently issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which requires companies to record the fair value of a liability for asset retirement obligations in the period in which they are incurred. The statement applies to a company's legal obligations associated with the retirement of a tangible long-lived asset that results from the acquisition, construction, and development or through the normal operation of a long-lived asset. When a liability is initially recorded, the company would capitalize the cost, thereby increasing the carrying amount of the related asset. The capitalized asset retirement cost is depreciated over the life of the respective asset while the liability is accreted to its present value. Upon settlement of the liability, the obligation is settled at its recorded amount or the company incurs a gain or loss. The statement is effective for fiscal years beginning after June 30, 2002. The Company does not expect the adoption to have a material impact to the Company's financial position or results of operations. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". Statement 144 addresses the accounting and reporting for the impairment or disposal of long-lived assets. The statement provides a single accounting model for long-lived assets to be disposed of. New criteria must be met to classify the asset as an asset held-for-sale. This statement also focuses on reporting the effects of a disposal of a segment of a business. This statement is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption to have a material impact to the Company's financial position or results of operations. In January 2001, the Financial Accounting Standards Board Emerging Issues Task Force issued EITF 00-27 effective for convertible debt instruments issued after November 16, 2000. This pronouncement requires the use of the intrinsic value method for recognition of the detachable and imbedded equity features included with indebtedness, and requires amortization of the amount associated with the convertibility feature over the life of the debt instrument rather than the period for which the instrument first becomes convertible. Inasmuch as the Company had no convertible debt instruments outstanding during the two years ended December 31, 2001 there is no impact on the Company's financial position or results of operations. This EITF 00-27, could impact future financial statements, should the Company enter into such agreements. See accompanying independent auditors' report. F-11 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (3) 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 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. 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 companies. 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. 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." See accompanying independent auditors' report. F-12 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (5) Property and Equipment: Property and equipment consist of the following: December 31, December 31, 2001 2000 ---- ---- Land and building $ 1,240,510 $ 1,276,888 Computer equipment 193,395 185,475 Vehicles 65,343 116,720 Office furniture and equipment 152,059 182,669 ---------------- --------------- 1,651,307 1,761,752 Less accumulated depreciation 386,467 346,758 ---------------- --------------- $ 1,264,840 $ 1,414,994 ================ =============== (6) Major Vendor: Included in accounts payable is approximately $1,036,000 and $678,000 owed to five and two suppliers, respectively, at December 31, 2001 and 2000, respectively. Purchases from these suppliers during 2001 and 2000 totaled approximately $9,347,500 and $8,268,000, 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, 5.25% and 8% at December 31, 2001 and 2000. The financing company holds as security interests all receivables as well as the personal guarantees of the officer-stockholders limited to anti-fraud. (8) Short-Term Notes Payable, Related Parties: Short-term notes payable, related parties, represented amounts owing to the Company's parent company, InfiniCom AB, at December 31, 2000. The notes accrued interest at 2% above base rate of National Westminster Bank, in the United Kingdom. At December 31, 2001 the short term notes were exchanged for a formal note, due December 31, 2007, with interest at 2% per annum. See accompanying independent auditors' report. F-13 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (9) 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 (5.25% and 8% at December 31, 2001 and 2000). The note is secured by the underlying building and the cross guarantee of the two other United Kingdom subsidiaries. A summary of the note payable is as follows: December 31, December 31, 2001 2000 ---- ---- Principal $ 348,273 $ 435,619 Less current maturities 77,077 54,223 -------------- ----------- $ 271,196 $ 381,396 ============== =========== The following summarizes the aggregate maturities of the note payable as of December 31, 2001: Year ended December 31, 2002 $ 77,077 2003 79,772 2004 82,713 2005 55,651 2006 53,060 -------------- $ 348,273 (10) Income Taxes: The Company accounts for income taxes under the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", under which the liability method is used to calculate deferred income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between financial reporting and income tax basis of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. The deferred tax liability at December 31, 2001 and 2000 relates to the step up basis of tangible assets acquired. The Company does not file consolidated tax returns in the United Kingdom. Tax expense for the year ended December 31, 1999 relates to entities within the consolidated group on which there was taxable income and tax expense was appropriate. December 31, 2000 reflects refunds and credits received on overpayments in previous years. No tax expense is due in December 31, 2001 due to group relief between the related entities under UK taxation rules. See accompanying independent auditors' report. F-14 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (10) 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, 2001 2000 1999 ---- ---- ---- 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 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) - --------- --------- -------- -% (3)% 2% ========= ========= ======== (11) Sale of Subsidiary: On April 1, 2001, the Company disposed of all of the issued shares of 24STORE AS, for (pound)1.00, or approximately $1.45. Included in the sales agreement is a guarantee by the Company as to the known losses and liabilities of 24STORE AS. If, within one year, the purchaser discovers the losses or liabilities as of the date of disposal were understated, the Company will make whole the deficiency (unaudited, as of April 10, 2002, no deficiency has been claimed by the purchaser). Following this transaction the Company has no further rights, liabilities or obligations, aside from the guarantee, 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. No loss was recognized on this disposition; all goodwill associated with the subsidiary's acquisition was previously written off in recognition of an impairment loss on the investment. Furthermore, as a result of the subsidiary having negative net assets, the Company has recorded a gain on disposition of $230,322. See accompanying independent auditors' report. F-15 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999 (12) Subsequent Event: Parent Company On January 28, 2002, the Company's parent company, InfiniCom, applied to the Stockholm District Council for reconstruction in accordance with Swedish law, similar to a Chapter 11 filing in the United States bankruptcy system. The parent company is attempting to restructure their debt and emerge from reconstruction. If the parent company is unable to successfully emerge from reconstruction, it may affect the Company's ability to get additional funding to put managements' plans for future expansion into place. If this occurred, one of the resulting scenarios could be the Company's decision not to continue as a public entity in the United States. Long-Term Note Payable, Related Party On April 10, 2002, the Company and its parent company agreed to convert the long-term note payable, related party, into shares of the Company's common stock. The note payable was converted into 10,660,679 shares applying a conversion rate calculated as the weighted average stock price over the last 30 trading days, or $0.0485 per share. See accompanying independent auditors' report. F-16 24HOLDINGS INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS December 31, 2001 For Disposal of Norway Subsidiary Scoop Norway Pro forma Subsidiary (1) Adjustments Revenue $ 22,036,485 $ 1,061,818 $20,974,667 Cost of Revenue 19,666,260 928,799 18,737,461 ------------ ----------- ----------- Gross profit 2,370,225 133,020 2,237,205 Operating expenses: General and administrative expenses 2,534,957 204,037 2,330,920 Goodwill amortization 666,277 - 666,277 Impairment loss on investment 1,125,846 - 1,125,846 ------------ ----------- ----------- 4,327,080 204,037 4,123,043 ------------ ----------- ----------- Loss from operations (1,956,855) (71,018) (1,885,837) Gain on disposal of subsidiary (230,322) - (230,322) Interest income (24,799) (1,892) (22,907) Interest expense 123,637 2,783 120,854 ------------ ----------- ----------- (131,484) 891 (132,375) Net loss before taxes (1,825,371) (71,908) (1,753,463) ------------ ----------- ----------- Taxes (2,400) - (2,400) ------------ ----------- ----------- Net loss $ (1,822,971) $ (71,908) $(1,751,063) ================= ================ Net loss per share basic and diluted (0.02) (0.02) ================= ================ Weighted average number of shares outstanding - basic and diluted 85,486,717 85,486,717 ================= ================ F-17 24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC.) Note 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 Norweigian Kroner to British pounds at the rate of .076, and then translated from British pounds to U.S. dollars at the rate of 1.458 Note A - There are no pro forma adjustments to the condensed consolidated statements of income, other than the elimination of the 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 no amounts relating to the subsidiary remain. F-18 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 57 Director and Chairman of the Board 2000 Larsake Sandin 53 Director 2000 Akbar Seddigh 57 Director 2000 Martin Clarke 36 President and 2000 Chief Executive Officer Roger Woodward 56 Chief Financial Officer, 2001 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 24Holdings Inc. From 1976 until 1989, Mr. Sandin served as Business Manager of AB Programator, a company located in Stockholm. From 1989 until 1991, Mr. Sandin was the Managing Director of Philips Tele & Data Systems, a subsidiary of Philips Norden AB of Stockholm, in which capacity Mr. Sandin accomplished a significant restructuring of the company. From 1992 until 1995, Mr. Sandin was employed by Digital Equipment Corporation, where he was the Director of Retail Banking Worldwide in Boston, the Director of Financial Industry Expertise Center Europe in London, and the Director of Retail Banking Europe in Stockholm. In addition to his employment experience, Mr. Sandin has been and continues to be a director of many publicly and privately held companies in Sweden. In the past, Mr. Sandin was the Chairman of the Board of Philips Radio Communications AS, Digital Equipment BCFI AB, Rostvold AS and Ericsson-Programatic AB. 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 -16- 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. Roger Woodward, Chief Financial Officer, Chief Accounting Officer and Secretary. Mr. Woodward came to 24Holdings Inc. via the acquisition of LapLand (UK) Limited, where he had been Group Financial Controller since joining the company in 1997. Prior to this he held a number of senior financial positions within the manufacturing and service industries. As Financial Controller for the European subsidiary of ITW Inc., a NYSE-listed multi-national firm, Mr. Woodward was responsible for annual and monthly reporting and was a member of the senior management team. Mr. Woodward attended Kingston University gaining a Diploma in Business Studies and he is also a member of the Chartered Institute of Management Accountants. Each director of the Company will hold office until such director's successor is elected and qualified or until such director's earlier resignation or removal. Each executive officer of the Company will hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal in accordance with the Company's bylaws. There currently exists no arrangement or understanding between any 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 pending criminal proceeding; (3) been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction permanently or temporarily enjoining such person from participating, or otherwise limiting such person's right to engage, in any type of business, securities or banking activities; (4) been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any federal or state authority barring or suspending such -17- 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, 2001 the Reporting Persons complied with all applicable Section 16(a) reporting requirements, except that InfiniCom AB, an owner of more than ten percent of the Company's Common Stock, did not file a report on Form 4 or Form 5 reporting its acquisition of beneficial ownership of an additional 3,915,092 shares of the Company's Common Stock. 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, 2001, 2000 and 1999 by the Company's Chief Executive Officer and the Executive Officers of the Company whose compensation was $100,000 or greater during the fiscal year ended December 31, 2001. Annual Compensation Long-Term Compensation Restricted Securities All Other Principal Salary Bonus Stock Underlying Compensation Name Position Year ($) ($) Awards ($) Options (#) ($) - --------------------------------------------------------------------------------------------------------------- Martin Clarke (1) President and 2001 $ 137,085 $ -- $ -- -- $ 18,502 Chief Executive 2000 $ 149,465 $ -- $ -- -- $ 18,627 Officer 1999 $ 165,984 $ -- $ -- -- $ 19,672 Larsake Sandin (2) President and 2001 $ -- $ -- $ -- -- $ -- Chief Executive 2000 $ -- $ -- $ -- -- $ -- Officer 1999 $ -- $ -- $ -- -- $ -- Michael Neame (3) Chief Financial 2001 $ 137,085 $ -- $ -- -- $ 17,316 Officer, Chief 2000 $ 147,465 $ -- $ -- -- $ 18,627 Accounting 1999 $ 166,869 $ -- $ -- -- $ 19,672 Officer and Secretary -18- (1) Mr. Clarke was appointed as President and Chief Executive Officer of the Company on March 17, 2000. On October 16, 2001, Mr. Clarke resigned as President and Chief Executive Officer of the Company and was re-appointed to such offices on December 20, 2001. Some of 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. Sandin served, without remuneration, as President and Chief Executive Officer of the Company from October 16, 2001 to December 20, 2001. (3) Mr. Neame resigned as Chief Financial Officer, Chief Accounting Officer and Secretary on April 13, 2001. Some of 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 11, 2002, 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) Karlaplan 2 114 60 Stockholm Sweden...................................... 71,051,002 83.1 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 -19- Roger Woodward Zennor Cherry Tree Walk Rowledge Farnham Surrey GU10 4AD United Kingdom.............................. 0 0 All executive officers and directors as a group (5 persons)......................... 4,953,455 5.8 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On April 10, 2002, the Company and InfiniCom AB, the Company's parent, entered into a Capital Contribution Agreement pursuant the Company and InfiniCom agreed to convert a note payable by the Company to InfiniCom in the amount of $517,043 into Common Stock of the Company. The note payable was converted into InfiniCom's right to receive 10,660,679 newly issued shares of Common Stock, applying a conversion rate calculated as the weighted average stock price over the prior 30 trading days, or $0.0485 per share. -20- 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. (i) Independent Auditors' Report (ii) Consolidated Balance Sheet at December 31, 2001 and December 31, 2000 (iii)Consolidated Statement of Income (Operations) for each of the three years ended December 31, 2001 (iv) Consolidated Statement of Shareholders' Equity (Deficit) for each of the three years ended December 31, 2001 (v) Consolidated Statement of Cash Flows for each of the three years ended December 31, 2001 (vi) Notes to the Consolidated Financial Statements Unaudited Pro Forma Condensed Consolidated Statement of Operations of 24Holdings Inc. for the period ended December 31, 2001 (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* Agreement on the Transfer of Shares dated March 29, 2001 between 24STORE (Europe) Limited and Compo Consult AS (English Translation). 3.1 Certificate of Incorporation of the Company (Filed as Exhibit 3.1 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2000 (filed April 13, 2001) and incorporated herein by this reference). -21- 3.2 Certificate of Amendment of the Certificate of Incorporation of the Company dated October 20, 1999 (Filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2000 (filed April 13, 2001) and incorporated herein by this reference). 3.3 Certificate of Amendment of the Certificate of Incorporation of the Company dated April 1, 2001 (Filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2000 (filed April 13, 2001) and incorporated herein by this reference). 3.4 Bylaws of the Company (Filed as Exhibit 3.3 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 3.5 Certificate of Amendment of the Bylaws of the Company (Filed as Exhibit 3.4 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 4.1 Form of Common Stock Certificate (Filed as Exhibit 4.1 to the Company's Registration Statement on Form SB-2 (Registration No. 333-15129) and incorporated herein by this reference). 10.1 Service Agreement dated May 6, 1999 between 24STORE Limited and Martin Clarke (Filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 10.2 Service Agreement dated May 6, 1999 between 24STORE Limited and Michael John Neame (Filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 10.3 Invoice Discounting Agreement dated October 10, 1996 between Mobile Planet Limited and Lombard Natwest Discounting Limited (Filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 10.4 Invoice Discounting Agreement dated October 10, 1996 between Lapland U.K. Limited and Lombard Natwest Discounting Limited (Filed as Exhibit 10.5 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 10.5 Advice of Borrowing Terms dated September 25, 1997 between National Westminster Bank PLC and Cyberia (UK) Limited (Filed as Exhibit 10.6 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 1999 (filed February 21, 2001) and incorporated herein by this reference). 10.6 Deed of Subscription, Amendment and Release dated March 31, 2000 among Michael John Neame, Martin Clarke, 24STORE.com Limited, InfiniCom AB and Scoop, Inc. (Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 31, 2000 (filed March 6, 2001) and incorporated herein by this reference). 10.7 Subscription Agreement dated March 31, 2000 between InfiniCom AB and Scoop, Inc. (Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 31, 2000 (filed March 6, 2001) and incorporated herein by this reference). 10.8 Subscription Agreement dated March 31, 2000 between Michael John Neame and Scoop, Inc. (Filed as Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 31, 2000 (filed March 6, 2001) and incorporated herein by this reference). -22- 10.9 Subscription Agreement dated March 31, 2000 between Martin Clarke and Scoop, Inc. (Filed as Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the Period Ended March 31, 2000 (filed March 6, 2001) and incorporated herein by this reference). 10.10* Capital Contribution Agreement dated April 10, 2002 between InfiniCom AB (publ) and 24Holdings Inc. 21* List of Subsidiaries of the Company. * filed with this report (c) Current Reports on Form 8-K None. -23- 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 16, 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/ Roger Woodward ------------------------------ Name: Roger Woodward 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