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, 2003 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. [ ] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] Aggregate market value of the voting stock held by non-affiliates of the registrant as of April 6, 2004: $1,056,032. 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 6, 2004: 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 24STORE Limited, (previously known as Lapland U.K. 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 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.24Store.com. In October 2002, the company formed a new business unit, 24Solutions, operating from the same executive offices. 24Solutions offers primarily accounting based, business management software. Its services include the provision, customisation, installation and training on software products from leading business software vendor Sage. The business is generated from an active sales team, working on enquiries from the existing customer base, and from the company's web site, www.24solutions.com. o Mobile Planet Limited, a subsidiary of the Company, previously operated as a wholesaler of mobile computing and related products. During 2003, the Company caused Mobile Planet to discontinue operations. 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 (see ITEM 2. Properties). Products and Services The Company's primary products are computer and electronics products, and the provision, customisation, installation and training on software products from leading business software vendors. 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 sales of computer and electronic equipment will be based on a combination of these three sales methods. In 2002 the Company formed a new division, 24Solutions, offering business management software. The Company will look to develop this division further and, in particular, sell software and consulting services to its existing customer base of computer users. Competition The computer/electronic products markets continue to evolve rapidly and are extremely competitive, and the Company expects competition to intensify in the future. The Company competes with a significant number of other companies in the sale of computer and electronics products. Current and potential competitors of the Company include, but are not limited to: (1) online vendors of computer/electronics products, (2) mail order vendors of computer/electronics products, (3) system integrators and value added resellers, (4) direct sales operations of computer/electronics manufacturers, and (5) retailers. The Company believes that the principal competitive factors affecting its product supply 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. The business management software markets also 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 business management software. Current and potential competitors of the Company include, but are not limited to: (1) Accounting firms, (2) system integrators and value added resellers, (3) direct sales operations of software vendors, and (4) ASPs (application service providers) offering business software on a subscription basis. The Company believes that the principal competitive factors affecting its business management software business include: (1) its ability to recruit and retain suitably qualified consultants (2) its ability to maintain authorisation, and competitive pricing from software vendors (3) its ability to attract new customers at a favorable customer acquisition cost. Although the Company believes that it can compete -2- 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, 2004 the Company employed a total of 19 persons, including 11 in sales and marketing, two in operations and six 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. The Company has entered into agreements to sell its freehold interest in this real property and temporarily lease back its present office space to allow a transitional period for the Company to vacate the premises. The term of the temporary lease will be a period not to exceed 18 months. 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. -3- 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, as indicated below: Bid Quarter Ended High Low ------------- ---- --- December 31, 2003 $0.0400 $0.0055 September 30, 2003 $0.0500 $0.0050 June 30, 2003 $0.0060 $0.0035 March 31, 2003 $0.0200 $0.0035 December 31, 2002 $0.0050 $0.0050 September 30, 2002 $0.0200 $0.0200 June 30, 2002 $0.0210 $0.0210 March 31, 2002 $0.0800 $0.0410 On April 6, 2004 the last reported sales price for the Company's Common Stock on the OTC Bulletin Board was $0.04 per share. As of April 6, 2004, there were 233 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, 2003 and is derived from the Company's audited financial statements. The data set forth below should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements appearing elsewhere herein and in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations." Year Ended December 31, 2003 2002 2001 2000 1999 ---------------------------------------------------------------------------- Revenue $14,562,402 $18,598,455 $ 22,036,485 $28,058,566 $22,070,173 Operating Income/(Loss) $(13,181) $(768,290) $(1,726,533) $(1,621,200) $(4,921,367) Net Income/Loss $(75,336) $(827,279) $(1,822,971) $(1,823,162) $ (5,626,018) -4- Loss per share, basic and diluted $ (0.00) $ (0.01) $ (0.02) $ (0.02) $ (0.09) Weighted average number of shares 96,147,533 93,255,869 85,486,717 81,241,503 66,703,528 outstanding Working capital (deficit) $(833,533) $(730,479) $(305,596) $(884,270) $(8,146,694) Total Assets $3,979,476 $ 3,978,041 $5,327,740 $10,456,258 $11,942,175 Long-Term Debt $121,214 $212,414 $780,632 $381,396 $2,261,520 Total Shareholders equity (deficit) $344,822 $336,249 $509,392 $2,431,526 $(5,579,076) 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. 24STORE was incorporated on July 28, 1998 in England and Wales, and was a wholly owned subsidiary of InfiniCom AB, a publicly listed company on the SBI market in Sweden, whose principal activity is that of a consulting 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. -5- 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, 2003, 2002 and 2001. The operating results in any periods are not necessarily indicative of the results to be expected for any future period. YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Net sales 100.0% 100.0% 100.0% Cost of sales 86.3% 89.2% 89.2% Gross profit 13.6% 10.8% 10.8% Operating expenses: Selling general and administrative 13.8% 12.1% 11.5% Goodwill amortization 0.0% 0.0% 3.0% Impairment loss on investments 0.0% 2.4% 5.1% Gain on sales of subsidiary 0.0% 0.0% (1.0)% Total operating expenses 13.8% 14.5% 18.6% ----- ----- ----- Net Income (Loss) from operations (0.1)% (3.7)% (7.8)% Net Interest expense 0.4% 0.2% 0.4% Loss before provision for income taxes (0.5)% (3.9)% (8.2)% Provision for income taxes 0.0% 0.0% 0.0% Net Income (Loss) (0.5)% (8.2)% (8.2)% COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2003, 2001 AND 2001 Net Sales--Net sales for the years ended December 31, 2003, 2002 and 2001 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Net sales $14,562,402 $18,598,455 $22,036,485 % increase (decrease) from (21.7)% (15.6)% (21.5%)% the previous year Net sales for the years ended December 31, 2003, 2002 and 2001 were all derived from operations in Europe. The decrease in net sales for the year ended December 31, 2003 is primarily attributable to a reduction in sales in the high volume low margin distribution market and a reduction in the unit cost of a laptop computer. For the UK Group, net sales decreased by 28.7% in local currency as compared to 2002 The net sales reduction for the year ended December 31,2002 is primarily attributable to a drop in demand across the market and the disposal of the Norwegian subsidiary.. Gross Profit--Gross profit for the years ended December 31, 2003, 2002 and 2001 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Gross profit $1,988,199 $1,937,009 $2,370,225 % increase (decrease) from 2.6% (18.2%) (20.5)% the previous year Gross margin 13.7% 10.4% 10.8% -6- Gross profit consists of net sales less the cost of sales, which consists of the cost of merchandise sold to customers. The increase in Gross profit for the year ended December 31, 2003 is the result of sales at a higher margin than the previous year. Gross profit for the year ended December 31, 2002 and the year ended December 31, 2001 has decreased due to a lower level of sales against the previous years. Gross margin percent increased over the consistency on 2002 and 2001, this was because of a move away from high volume low margin sales. Selling, General and Administrative Expenses--Selling, general and administrative ("SG&A") expenses for the years ended December 31, 2003, 2002 and 2001 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Selling, general and administrative $2,001,380 $2,254,455 $2,535,957 % decrease from the previous year (11.1)% (11.1)% (34.0)% % of net sales 13.8% 12.1% 11.5% SG&A expenses for the year ended December 31,2003 decreased by 11.1% from $2,254,455 to $2,003,380. SG&A expenses for the year ended December 31, 2002 decreased by 11.1% from $2,535,457 to $2,254,455 .The decrease in SG&A for the 2003 fiscal year came from reductions in staff costs at the subsidiary level and advertising and professional costs in the parent company. The decrease in SG&A for the 2002 fiscal year is the result of a reduction in staff related costs within the operating subsidiaries and a reduction of legal and professional costs in the parent company. Goodwill Amortization--Following the implementation of SFAS 142, "Goodwill and Other Intangibles" on January 1, 2001, there was no Goodwill amortization for the year ended December 31, 2003 or 2002. SFAS 142 no longer requires goodwill to be amortized, but periodically tested for impairment. Impairment loss on investment--The impairment charges in the years ended December 31, 2002, and December 31, 2001 of $450,844 and $1,125,846, respectively, arose from the recognition of an impairment to Goodwill upon implementation of SFAS 142 in 2002, and as determined per the annual impairment test in 2003, in accordance with the guidelines of SFAS 142. 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, 2003, 2002 and 2001, were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Interest income $3,147 $4,945 $24,799 % change from the previous year (36.4)% (80.0)% 42.1% Interest expenses $65,302 $58,201 $123,637 % change from the previous year 12.2% (52.9)% (130.0)% 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 increase in interest expenses in the year ended December 31,2003 is the result of changes in the exchange rate in local currency the interest expense has remained unchanged. The reduction of interest expense in the years ended December 31, 2002 is primarily attributable to the Company now having lower interest bearing debts to related parties following the restructuring of debt -7- that occurred on March 31, 2000, and the conversion of interest bearing debts to related parties into the right to receive shares of common stock on April 10, 2002 (see ITEM 13. Certain Relationships and Related Transactions; see "Debt Restructuring" above). Income Taxes--Income taxes, for the years ended December 31, 2003, 2002 and 2001 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2003 2002 2001 Income taxes $ - $5,734 $(2,400) Income tax for the year ended December 31, 2002 is related to an under accrual from the previous year. Income tax for the year ended December 31, 2001 related to deferred tax accruals. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at December 31, 2003 were $147,841 compared to $802,091 as of December 31, 2002. The reduction in cash is the result of timing of payment of accounts payable, which have declined from the December 31, 2002 balance. Net cash used by operating activities was $677,297 in 2003 compared to net cash used by operating activities of $67,126 in 2002. The main reason of the increase was accounts receivable reflecting the higher level of sales in Q4/03 compared to Q4/02. As of December 31, 2003 the Company had a working capital deficit of $833,533 compared to a working capital deficit of $730,479 as of December 31, 2002. As of December 31, 2003 included in current assets were cash and cash equivalents of $147,841 and receivables, net, expected to be collected within one year of $2,158,883. Cash used by investing activities was $44,347 in 2003, compared to cash used in investing activities of $35,484 in 2002. The change in working capital is primarily attributable to the loss for the year, and the reduction in cash due to payments made on long-term notes payable. 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%. Other than through its subsidiaries, the Company has no direct source of short-term funding. In addition to the items above, certain trade suppliers of 24STORE extend credit to 24STORE. The Company is in the process of selling its freehold interest in its real property and entering into a temporary lease to allow a transitional period for the Company to vacate the premises. The Company believes this transaction will have the effect of improving net current assets by approximately $1,355,000 during the second quarter of 2004. 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, the Company may need to raise additional capital. The sale of additional equity or -8- convertible debt securities to raise capital 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 April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain Financial Institutions--an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", which removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. The requirements relating to acquisitions of financial institutions is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. The adoption of this Statement did not have a material impact to the Company's financial position or results of operations as the Company has not engaged in either of these activities. In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure", which amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of Statement 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a material impact on the Company's financial position or results of operations as the Company has not elected to change to the fair value based method of accounting for stock-based employee compensation. During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", effective for contracts entered into or modified after September 30, 2003, except as stated below and for hedging relationships designated after September 30, 2003. In -9- addition, except as stated below, all provisions of this Statement should be applied prospectively. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after September 30, 2003. The adoption of this statement did not have a material impact on the Company's financial position or results of operations as the Company does not participate in such transactions. During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for public entities at the beginning of the first interim period beginning after June 15, 2003. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Some of the provisions of this Statement are consistent with the current definition of liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB-51 does not apply. The Interpretation changes the criteria by which one company includes another entity in its consolidated financial statements. The general requirement to consolidate under ARB-51 is based on the presumption that an enterprise's financial statements should include all of the entities in which it has a controlling financial interest (i.e., majority voting interest). Interpretation 46 requires a variable interest entity to be consolidated by a company that does not have a majority voting interest, but nevertheless, is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. In December 2003 the FASB concluded to revise certain elements of FIN 46, primarily to clarify the required accounting for interests in variable interest entities. FIN-46R replaces FIN-46,that was issued in January 2003. FIN-46R exempts certain entities from its requirements and provides for special effective dates for entities that have fully or partially applied FIN-46 as of December 24, 2003. In certain situations, entities have the option of applying or continuing to apply FIN-46 for a short period of time before applying FIN-46R. In general, for all entities that were previously considered special purpose entities, FIN 46 should be applied in periods ending after December 15, 2003. Otherwise, FIN 46 is to be applied for registrants who file under Regulation SX in periods ending after March 15, 2004, and for registrants who file under Regulation SB, in periods ending after December 15, 2004. The Company does not expect the adoption to have a material impact on the Company's financial position or results of operations. In December 2003, the FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" which replaces the previously issued Statement. The revised Statement increases the existing disclosures for defined benefit pension plans and other defined benefit postretirement plans. However, it does not change the measurement or recognition of those plans as required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Specifically, the revised Statement requires companies to provide additional disclosures about pension plan assets, benefit obligations, cash flows, and benefit costs of defined benefit pension plans and other defined benefit postretirement plans. Also, companies are required to provide a breakdown of plan assets by category, such as debt, equity and real estate, and to provide certain expected rates of return and target -10- allocation percentages for these asset categories. The Company has implemented this pronouncement and has concluded that the adoption has no material impact to the financial statements. CRITICAL ACCOUNTING POLICY AND ESTIMATES Our Management's Discussion and Analysis of Financial Condition and Results of Operations section discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for bad debt, accrued expenses, financing operations, and contingencies and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The most significant accounting estimates inherent in the preparation of our financial statements include estimates as to the appropriate carrying value of certain assets and liabilities which are not readily apparent from other sources, such as allowance for bad debt, goodwill, inventory valuation and the deferred tax asset. These accounting policies are described at relevant sections in this discussion and analysis and in the notes to the consolidated financial statements included in this Annual Report. RISK FACTORS Some of the statements in "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations," "Item 1 - Business" and elsewhere in this report constitute forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, forward-looking statements can be identified by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue" or the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of such statements. The Company is under no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results. In addition to the factors discussed elsewhere in this report, the following additional factors may affect the Company's future operations and financial results. Competition From Direct Sales The Company may face increased competition from manufacturers that sell products directly over the Internet or by telephone, such as Dell and Gateway. Many of these companies have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources. There can be no assurance that the Company will be able to compete effectively against such companies and that the purchasing patterns of the Company's customers will not increasingly shift to the direct sales channels of distribution. Such increased competition and changes in purchasing patterns may adversely affect the Company's future operations and financial results. -11- Protection of the Company's Domain Names The Company currently holds various domain names commencing with the "24" prefix. The acquisition and maintenance of domain names generally is regulated by Internet regulatory bodies. The regulation of domain names in the United States, the United Kingdom and in other countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, the Company may be unable to acquire or maintain relevant domain names in all countries in which it conducts business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, the Company may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of the Company's trademarks and other proprietary rights. The Company may not successfully carry out its business strategy of establishing a strong brand for the "24" prefix if the Company cannot prevent others from using similar domain names or trademarks. This could impair the Company's ability to increase market share and revenues. Rapid Technological Change The industry in which the Company competes is characterized by rapid technological change, frequent introductions of new products and services, changes in customer demands and evolving industry standards. The introduction or announcement of new products or services by the Company or one or more of its competitors embodying new technologies or changes in industry standards or customer requirements could render the Company's existing products or services obsolete or unmarketable. Accordingly, the life cycles of the Company's products are difficult to estimate. The Company's future results of operations will depend, in part, upon its ability to enhance its products and services and to introduce new products and services on a timely and cost-effective basis that will keep pace with technological developments and evolving industry standards, as well as address the increasingly sophisticated needs of the Company's customers. Failure of the Company to introduce, for technological or other reasons, new products and services in a timely and cost-effective manner could have a material adverse effect on the Company's business, results of operations and financial condition. Furthermore, the introduction or announcement of new product or service offerings or enhancements by the Company or the Company's competitors may cause customers to defer or forgo purchases of the Company's products or services, which could have a material adverse effect on the Company's business, results of operations and financial condition. System Interruption and Security Risks The Company's operations are dependent, in part, on its ability to protect its systems from interruption by damage from fire, earthquake, power loss, telecommunication failure, unauthorized entry or other events beyond the Company's control. The Company's computer equipment constituting its central computer systems, including its processing operations, are currently located in Basingstoke, United Kingdom. The Company conducts system backups daily, which are taken off site each evening. The Company's computer programs are password protected and firewalls, anti-virus software and uninterruptable power supplies are in place. However, there can be no assurance that damage to or failure of any of the Company's central computer systems will not take place. Any such damage or failure that causes interruptions in the Company's operations could have a material adverse effect on the Company's business, results of operations and financial condition. Persistent problems continue to affect public and private data networks. Computer break-ins and other disruptions may jeopardize the security of information stored in and transmitted through the computer systems of the Company and the parties utilizing the Company's services, which may result in significant liability to the Company and also may deter potential customers from using the Company's services. In addition, while the Company attempts -12- 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. Future Capital Needs; Uncertainty of Additional Financing The Company's main sources of funds currently come through its operating subsidiaries (see "Liquidity and Capital Resources" above). A reduction in market demand for the Company's products and services could damage the Company's ability to obtain short term funding from its current lenders and trade suppliers. There can be no assurance that additional financing will be available when needed on terms favorable to the Company or at all. If adequate funds are not available or are not available on acceptable terms, the Company may be unable to develop or enhance its products and services, take advantage of future opportunities or respond to competitive pressures, which would likely have a material adverse effect on the Company's business, results of operations and financial condition. 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. See also the discussion in "Reorganization" below. Control By Existing Stockholder InfiniCom AB beneficially owns approximately 90.1% of the outstanding shares of the Company's Common Stock (which includes 10,660,679 shares that it has the right to acquire, as described in ITEM 13). As a result, this stockholder is 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 -13- 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 On December 20, 2002, the Company's parent company, InfiniCom AB, emerged from bankruptcy reorganization in accordance with Swedish law in a process similar to a Chapter 11 filing in the United States bankruptcy system. InfiniCom's recent reorganization may adversely affect a significant source of funding for the Company's operations and regulatory compliance costs. The Company may explore various options to address this contingency, including the possibility of ceasing to be a public company in the United States or a transaction or series of transactions involving the sale of the Company or the Company's operating subsidiaries. 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 subsidiaries, including 24STORE and denominated in British pounds sterling 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 and the United States may give rise to material variances in reported earnings of the Company. -14- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. 24Holdings Inc. (Formerly Scoop, Inc.) Consolidated Financial Statements Years Ended December 31, 2003, 2002, and 2001 Contents Page Independent Auditors' Report 1 Financial Statements: Consolidated Balance Sheets 2 Consolidated Statements of Operations 3 Consolidated Statement of Shareholders' Equity 4 Consolidated Statements of Cash Flows 5-6 Notes to Consolidated Financial Statements 7-19 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, 2003 and 2002 and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2003. 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, 2003 and 2002 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's net losses of $75,336 and $827,279 in the last two years, negative working capital of $923,509 and accumulated deficit of $9,943,420 at December 31, 2003 raise substantial doubt about their ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. CERTIFIED PUBLIC ACCOUNTANTS Santa Monica, California March 1, 2003 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED BALANCE SHEETS ASSETS December 31, December 31, 2003 2002 ---- ---- Current assets: Cash and cash equivalents $ 147,841 $ 802,091 Accounts receivable, less allowance of $18,592 2,158,883 1,424,802 Inventories 161,697 315,576 Prepaid and other current assets 34,710 67,230 ---------------- --------------- Total current assets 2,503,131 2,609,699 Property and equipment, net of accumulated depreciation 70,625 1,368,342 Long-term assets held for sale 1,405,720 - ---------------- --------------- $ 3,979,476 $ 3,978,041 ================ =============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,178,856 $ 2,377,465 Credit facility 1,044,285 874,110 Income taxes payable - 134 Current maturities of notes payable, bank 113,523 88,469 ---------------- --------------- Total current liabilities 3,336,664 3,340,178 ---------------- --------------- Note payable, bank, less current maturities 121,214 212,414 ---------------- --------------- Deferred tax liability 86,800 89,200 ---------------- --------------- Long-term loan payable, related party 89,976 - ---------------- --------------- 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; 96,147,396 shares issued and outstanding at December 31, 2003 and 2002 36,742 36,742 Additional paid-in capital 10,362,233 10,362,233 Other comprehensive loss (110,733) (194,642) Accumulated deficit (9,943,420) (9,868,084) ---------------- --------------- Total shareholders' equity 344,822 336,249 ---------------- --------------- $ 3,979,476 $ 3,978,041 ================ =============== The accompanying notes form an integral part of these consolidated financial statements. 2 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS Year ended Year ended Year ended December 31, 2003 December 31, 2002 December 31, 2001 ----------------- ----------------- ----------------- Revenue $ 14,562,402 $ 18,598,455 $ 22,036,485 Cost of Revenue 12,574,203 16,661,446 19,666,260 ------------------ ----------------- ----------------- Gross profit 1,988,199 1,937,009 2,370,225 ------------------ ----------------- ----------------- Operating expenses: Selling, general and administrative expenses 2,001,380 2,254,455 2,534,957 Goodwill amortization - - 666,277 Impairment loss on investments - 450,844 1,125,846 Gain on disposal of subsidiary - - (230,322) ------------------ ----------------- ----------------- 2,001,380 2,705,299 4,096,758 ------------------ ----------------- ----------------- Loss from operations (13,181) (768,290) (1,726,533) ------------------ ----------------- ----------------- Other: Interest income (3,147) (4,945) (24,799) Interest expense 65,302 58,200 123,637 ------------------ ----------------- ----------------- 62,155 53,255 98,838 ------------------ ----------------- ----------------- Loss before income taxes (75,336) (821,545) (1,825,371) Income taxes, principally current - 5,734 (2,400) ------------------ ----------------- ----------------- Net loss $ (75,336) $ (827,279) $ (1,822,971) ================== ================= ================= Net loss per share - basic and diluted $ - $ (0.01) $ (0.02) ================== ================= ================= Weighted average number of shares outstanding - basic and diluted 96,147,396 93,255,869 85,486,717 ================== ================= ================= The accompanying notes form an integral part of these consolidated financial statements. 3 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENT OF SHAREHOLDERS ' EQUITY Retained Common stock Additional Other earnings/ Total ------------ paid-in Comprehensive accumulated shareholders' Shares Amount capital income/(loss) (deficit) equity/(deficit) ------ ------ ------- ------------ -------- ---------------- Balance at January 1, 2001 85,486,717 $ 26,081 $ 9,855,851 $ (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 85,486,717 26,081 9,855,851 (331,735) (9,040,805) 509,392 Shares issued upon conversion of debt on April 10, 2002 10,660,679 10,661 506,382 517,043 Foreign currency translation 137,093 137,093 Net loss for the year ended December 31, 2002 (827,279) (827,279) ----------- ----------- ----------- ----------- ----------- ----------- Balance at December 31, 2002 96,147,396 36,742 10,362,233 (194,642) (9,868,084) 336,249 Foreign currency translation 83,909 83,909 Net loss for the year ended December 31, 2003 (75,336) (75,336) ----------- ----------- ----------- ----------- ----------- ----------- Balance at December 31, 2003 96,147,396 $ 36,742 $10,362,233 $ (110,733) (9,943,420) $ 344,822 ========== =========== =========== =========== ========== =========== The accompanying notes form an integral part of these consolidated financial statements. 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, 2003 December 31, 2002 December 31, 2001 ----------------- ----------------- ----------------- Cash flows provided by (used for) operating activities: Net loss $ (75,336) $ (827,279) $ (1,822,971) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation 80,837 67,330 93,923 Amortization of goodwill - - 666,277 Loss on impairment of investments - 450,844 1,125,846 Gain on sale of subsidiary - - (230,322) Foreign currency translation 86,052 121,489 (46,786) Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable (550,734) 703,409 1,103,316 Inventories 178,969 29,150 266,701 Prepaid and other current assets 36,994 (25,694) 9,261 Changes in assets and liabilities: (Increase) decrease in assets: Accounts payable and accrued expenses (431,540) (584,524) (1,315,662) Deferred taxes (2,400) (2,400) (2,400) Income taxes payable (137) 549 (11,026) -------------- ------------- -------------- Total adjustments (601,961) 760,153 1,659,128 -------------- ------------- -------------- Net cash used for operating activities (677,297) (67,126) (163,843) -------------- ------------- -------------- (Continued) The accompanying notes form an integral part of these consolidated financial statements. 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, 2003 December 31, 2002 December 31, 2001 ----------------- ----------------- ----------------- Cash flows provided by (used for) investing activities: Acquisition of property and equipment (44,347) (35,484) 15,550 Due to/from related parties -- -- (40,456) ----------- ----------- ----------- Net cash used for investing activities (44,347) (35,484) (24,906) ----------- ----------- ----------- Cash flows provided by (used for) financing activities: Payments on note payable, bank (94,017) (81,183) (76,043) Credit facility 71,435 (353,766) (550,860) Sale of subsidiary, net of cash acquired -- -- (105,879) Proceeds from long-term loans, related parties 89,976 -- -- ----------- ----------- ----------- Net cash provided by (used for) financing activities 67,394 (434,949) (732,782) ----------- ----------- ----------- Net decrease in cash and cash equivalents (654,250) (537,559) (921,531) Cash and cash equivalents, beginning of year 802,091 1,339,650 2,261,181 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 147,841 $ 802,091 $ 1,339,650 =========== =========== =========== Supplemental disclosure of cash flow information: Interest paid $ 67,290 $ 67,718 $ 91,903 =========== =========== =========== Income taxes paid $ -- $ -- $ 6,952 =========== =========== =========== Supplemental disclosure of non-cash investing and financing activities - issuance of shares upon conversion of long-term debt, related party $ $ 517,043 $ -- =========== =========== =========== The accompanying notes form an integral part of these consolidated financial statements. 6 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (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, and changed its name to 24Holdings Inc. on April 2, 2001. The Company has a wholly owned subsidiary, 24Store, LTD, located in the UK. The Company is a wholly owned subsidiary of InfiniCom AB ("InfiniCom"), a publicly listed company on the SBI market in Sweden. 24Store, LTD is in the wholesale and retail business of selling and distributing consumer and commercial electronic products in Europe. (2) Summary of Significant Accounting Policies: Basis of Presentation: The Company's financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses of $75,336 and $827,279 during 2003 and 2002, respectively, and has an accumulated deficit of $9,943,421 at December 31, 2003. The Company had negative working capital of $833,533 at December 31, 2003. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management is currently attempting to decrease operating costs and enter into new sources of revenue, including software sales and consulting. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. 8 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: Principles of Consolidation: The accompanying consolidated statements include the accounts of 24Holdings Inc. and subsidiary. All significant intercompany transactions and accounts have been eliminated. The financial statements of the entities owned outside the United States are generally measured using the local currency as the functional currency. Accordingly, assets and liabilities are translated at year-end exchange rates and operating statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as other comprehensive income. Exchange adjustments resulting from foreign currency 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 8 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (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 was being amortized using the straight-line method over the estimated useful lives of five years. Accumulated amortization on all goodwill was $2,265,828 at December 31, 2001. 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%. On January 1, 2002 the Company adopted SFAS No. 142, "Goodwill and Other Intangibles" and accordingly has ceased amortizing Goodwill, the expense for which would have been approximately $210,000, for the year ended December 31, 2002. Pursuant to the standard, the Company performed the first tier Goodwill impairment test based on criteria in effect at date of adoption, January 1, 2002, and determined that there was no indication of impairment. The Company has determined the date of the annual impairment test will be the Company's fiscal year end of December 31, and therefore performed the test again at December 31, 2002. Due to the decrease in the market value of the Company's publicly traded common stock, the fair value of the reporting unit was below the carrying value of the reporting unit, an indication of impairment to the carrying value of the goodwill. Pursuant to SFAS 142, the second tier impairment test was conducted to measure the amount of impairment loss, whereby the implied fair value of reporting unit goodwill is compared with the carrying amount of that goodwill, determined in the same manner as the amount of goodwill recognized in a business combination is determined. The impairment test resulted in the recognition of an impairment loss of approximately $451,000, the carrying value of the goodwill, in the year ended December 31, 2002. Inventory: Inventory is stated at the lower of cost or market using the FIFO (first-in, first-out) cost method. 9 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: 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, 2003, 2002, and 2001, advertising expenses amounted to approximately $26,000, $125,000, and $136,000, respectively. Concentration: During the year ended December 31, 2003, the Company had three major customers accounting for 23.1% of their sales, or approximately $3,330,000. Approximately $472,000 due from these customers is included in accounts receivable at December 31, 2003. During the year ended December 31, 2003, the Company has one major customer accounting for 13.8% of their sales, or approximately $1,705,000. There were no amounts due from this customer included in accounts receivable at December 31, 2002. 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, 2003, 2002 and 2001 because there were no dilutive securities outstanding during those periods. 10 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: Segment: During the year ended December 31, 2003 the Company started up a new division, 24Solutions, which sells and supports business management software. Based on Company's integration and management strategies the Company has determined 24Solutions qualifies as a separate segment as defined by SFAS 131. However, 24Solutions is not a reportable segment as the segment does not yet meet the quantitative thresholds set in SFAS 131 for financial disclosure, as neither it's revenues, profits nor assets account for ten percent of the combined revenues, profits nor assets of the Company. For the years ended December 31, 2003, 2002, and 2001 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 April 2002, the FASB issued Statement No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers". This Statement amends FASB Statement No. 13, "Accounting for Leases", to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. 11 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: Recent Accounting Pronouncements, Continued: In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. In October 2002, the FASB issued Statement No. 147, "Acquisitions of Certain Financial Institutions--an amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9", which removes acquisitions of financial institutions from the scope of both Statement 72 and Interpretation 9 and requires that those transactions be accounted for in accordance with Statements No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets. In addition, this Statement amends SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to include in its scope long-term customer-relationship intangible assets of financial institutions such as depositor- and borrower-relationship intangible assets and credit cardholder intangible assets. The requirements relating to acquisitions of financial institutions is effective for acquisitions for which the date of acquisition is on or after October 1, 2002. The provisions related to accounting for the impairment or disposal of certain long-term customer-relationship intangible assets are effective on October 1, 2002. The adoption of this Statement did not have a material impact to the Company's financial position or results of operations as the Company has not engaged in either of these activities. In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure", which amends FASB Statement No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of Statement 148 are effective for fiscal years ending after December 15, 2002, with earlier application permitted in certain circumstances. The interim disclosure provisions are effective for financial reports containing financial statements for interim periods beginning after December 15, 2002. The adoption of this statement did not have a material impact on the Company's financial position or results of operations as the Company has not elected to change to the fair value based method of accounting for stock-based employee compensation. 12 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: Recent Accounting Pronouncements, Continued: During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", effective for contracts entered into or modified after September 30, 2003, except as stated below and for hedging relationships designated after September 30, 2003. In addition, except as stated below, all provisions of this Statement should be applied prospectively. The provisions of this Statement that relate to Statement 133 Implementation Issues that have been effective for fiscal quarters that began prior to June 15, 2003, should continue to be applied in accordance with their respective effective dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases or sales of when-issued securities or other securities that do not yet exist, should be applied to both existing contracts and new contracts entered into after September 30, 2003. The adoption of this statement did not have a material impact on the Company's financial position or results of operations as the Company does not participate in such transactions. During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity", effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective for public entities at the beginning of the first interim period beginning after June 15, 2003. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a freestanding financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Some of the provisions of this Statement are consistent with the current definition of liabilities in FASB Concepts Statement No. 6, Elements of Financial Statements. The adoption of this statement did not have a material impact on the Company's financial position or results of operations. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities" (an interpretation of Accounting Research Bulletin (ARB) No. 51, Consolidated Financial Statements). Interpretation 46 addresses consolidation by business enterprises of entities to which the usual condition of consolidation described in ARB-51 does not apply. The Interpretation changes the criteria by which one company includes another entity in its consolidated financial statements. The general requirement to consolidate under ARB-51 is based on the presumption that an enterprise's financial statements should include all of the entities in which it has a controlling financial interest (i.e., majority voting interest). Interpretation 46 requires a variable interest entity to be consolidated by a company that does not have a majority voting interest, but nevertheless, is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. A company that consolidates a variable interest entity is called the primary beneficiary of that entity. 13 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (2) Summary of Significant Accounting Policies, Continued: Recent Accounting Pronouncements, Continued: In December 2003 the FASB concluded to revise certain elements of FIN 46, primarily to clarify the required accounting for interests in variable interest entities. FIN-46R replaces FIN-46,that was issued in January 2003. FIN-46R exempts certain entities from its requirements and provides for special effective dates for entities that have fully or partially applied FIN-46 as of December 24, 2003. In certain situations, entities have the option of applying or continuing to apply FIN-46 for a short period of time before applying FIN-46R. In general, for all entities that were previously considered special purpose entities, FIN 46 should be applied in periods ending after December 15, 2003. Otherwise, FIN 46 is to be applied for registrants who file under Regulation SX in periods ending after March 15, 2004, and for registrants who file under Regulation SB, in periods ending after December 15, 2004. The Company does not expect the adoption to have a material impact on the Company's financial position or results of operations. In December 2003, the FASB issued a revised SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" which replaces the previously issued Statement. The revised Statement increases the existing disclosures for defined benefit pension plans and other defined benefit postretirement plans. However, it does not change the measurement or recognition of those plans as required under SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Specifically, the revised Statement requires companies to provide additional disclosures about pension plan assets, benefit obligations, cash flows, and benefit costs of defined benefit pension plans and other defined benefit postretirement plans. Also, companies are required to provide a breakdown of plan assets by category, such as debt, equity and real estate, and to provide certain expected rates of return and target allocation percentages for these asset categories. The Company has implemented this pronouncement and has concluded that the adoption has no material impact to the financial statements. 14 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (3) Property and Equipment: Property and equipment consist of the following: December 31, December 31, 2003 2002 ---- ---- Land and building $ - $ 1,375,865 Computer equipment 329,163 257,586 Vehicles - 27,226 Office furniture and equipment 251,083 162,843 ---------------- --------------- 580,246 1,823,520 Less accumulated depreciation 509,621 455,178 ---------------- --------------- $ 70,625 $ 1,368,342 ================ =============== (4) Long Lived Assets held for sale: 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. The Company is in negotiations to sell the freehold property in which their operations are conducted. As all the conditions of SFAS 145 "Long-Lived Assets to Be Disposed Of by Sale", paragraph 30, have been meet, the property has been classified in the accompanying financial statements as a separate line item. (5) Major Vendor: Included in accounts payable at December 31, 2003 is approximately $987,000 owed to three suppliers. Purchases from these suppliers during 2003 totaled approximately $5,323,000. 15 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (6) Credit Facility: One of the Company's subsidiaries in the United Kingdom uses 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, 5.5% and 5.75% at December 31, 2003 and 2002, respectively. The financing company holds as security interests all receivables as well as the personal guarantees of the officer-stockholders limited to anti-fraud. (7) Note Payable, Bank: One of the Company's subsidiaries in the United Kingdom has a note payable to its bank. The note is due March 2006 and accrues interest at 2% above the bank's current base rate (5.75% and 6% at December 31, 2003 and 2002). The note is secured by the underlying building and the cross guarantee of the two other United Kingdom subsidiaries. When the sale of the building is final, a portion of the proceeds will be used to pay off the remaining outstanding principle owned on the note. A summary of the note payable is as follows: December 31, December 31, 2003 2002 ---- ---- Principal $ 234,737 $ 300,883 Less current maturities 113,523 88,469 ---------------- --------------- $ 121,214 $ 212,414 ================ =============== The following summarizes the aggregate maturities of the note payable as of December 31, 2003: Year ended December 31, 2004 $ 113,523 2005 113,523 2006 7,691 ---------------- $ 234,737 ================ 16 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (8) 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 $ 0.485 per share. (9) Loan from Parent Company: As of December 31, 2003 the Company's ultimate Parent company has advanced them a total of approximately $90,000 for expenses associated with the Company's public registrant filing requirements. The note is non-interest bearing and due January 31, 2005. (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, 2003 and 2002 relates to the step up basis of tangible assets acquired. The Company does not file consolidated tax returns in the United Kingdom, however, no tax expense is due in December 31, 2003 or 2002 due to group relief between the related entities under UK taxation rules. The provision for income taxes differs from the amount computed by applying the U.S. statutory income tax rate as follows: December 31, December 31, December 31, 2003 2002 2001 ---- ---- ---- Provision at expected federal statutory rate (35)% (35)% (35)% Loss for which no benefit is available 35 35 35 ---------- -------- -------- -% -% -% ========== ======== ======== 17 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (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 had discovered the losses or liabilities as of the date of disposal were understated, the Company would have had to make whole the deficiency, which did not occur. 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. (12) Contingencies: 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 has restructured their debt and emerged from reconstruction during 2002. As a result, the parent company is experiencing difficulties in providing funds to assist in financing the working capital of the Company, including the reporting requirements of the Company. The parent company had a change of control during the second quarter of 2003 and as of December 31, 2003 has advanced approximately $90,000 to the Company. However, it cannot be guaranteed that the parent company will continue to advance funds to the Company, either for operations or reporting requirements. On July 17, 2002, the Company, by way of redundancy, terminated the employment of the President/Chief Executive Officer, with the Board of Directors ratifying the termination on August 12, 2002. Under the terms of the former President/Chief Executive Officer's employment agreement with the operating companies, the Company paid six months salary to him upon his termination. The former President/Chief Executive Officer initiated proceedings against the Company and during March 2003 the Company reached a settlement agreement for approximately $72,000, which has been paid as of December 31, 2003. 18 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2003, 2002, AND 2001 (13) Subsequent Event: Subsequent to year end, the Company completed it's negotiations on the sale of the freehold property in which their operations are conducted (Note 4), for approximately $1,547,000. On March 25th 2004 contracts for the sale of the building were exchanged with the completion of the sales expected to be made on April 15th 2004. 24Store Ltd, a wholly owned subsidiary of 24 Holdings Inc., will be entering into a lease with the purchaser of the building on completion of the sale to remain in the building for the next 15 to 18 months. (14) Selected Quarterly Financial Data (unaudited): 2003 Dec 31 Sep 30 Jun 30 Mar 31 -------------------------------------------------------------------- Net Revenue 4,209,566 3,170,609 2,991,615 4,190,612 -------------------------------------------------------------------- Gross profit 615,516 437,669 368,086 566,928 -------------------------------------------------------------------- Net income/loss 171,706 (62,945) (150,051) (34,046) ==================================================================== Basic and diluted net loss per common share 0.00 0.00 0.00 0.00 ==================================================================== Number of shares 96,147,396 96,147,396 96,147,396 96,147,396 2002 Dec 31 Sep 30 Jun 30 Mar 31 -------------------------------------------------------------------- Net Revenue 3,479,638 4,215,707 5,930,446 4,972,664 -------------------------------------------------------------------- Gross profit 538,716 456,403 490,602 451,288 -------------------------------------------------------------------- Net income/loss (583,490) (98,219) (56,509) (89,061) ==================================================================== Basic and diluted net loss per common share (0.01) 0.00 0.00 0.00 ==================================================================== Number of shares 93,255,869 96,147,396 95,199,780 85,486,717 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A. CONTROLS AND PROCEDURES. The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the specified time periods. As of December 31, 2003, the Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of these controls and procedures. Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation. 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 ---- --- -------- ----- Urban von Euler 48 Director, Chairman of the Board and 2002 Chief Executive Officer Larsake Sandin 54 Director 2000 Roger Woodward 58 Chief Financial Officer, 2001 Chief Accounting Officer and Secretary Urban von Euler, Director, Chairman of the Board and Chief Executive Officer. Mr. von Euler is the Chief Executive Officer of Infinicom AB, the majority shareholder of the Company. Mr. von Euler joined Infinicom in August 2000 and has been closely involved with the Company since then. Mr. von Euler has long experience as an executive manager of several companies both in Sweden and different countries in Europe as well as in the United States and has extensive marketing and sales experience. Mr. von Euler is presently on the board of directors of several companies and has specialized in working with companies in strong development, change of management and in turn-around situations. Mr. von Euler has a formal education and diploma in business administration and a background in accounting from one of the leading international accounting firms in Sweden, where he worked for 6 years. Prior to joining Infinicom, Mr. von Euler was the president and Chief Executive Officer of a private health care company. 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. 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 -16- 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 director or executive officer and any other person pursuant to which the director or executive officer was or is to be selected as such. 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 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. Audit Committee Financial Expert The Company's Board of Directors has determined that the Audit Committee of the Board does not have an "audit committee financial expert," as that term is defined in Item 401(h) of Regulation S-K. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the 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, 2003 the Reporting Persons complied with all applicable Section 16(a) reporting requirements. -17- Code of Ethics The Company has adopted a "code of ethics," as that term is defined in Item 406 of Regulation S-K. 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, 2003, 2002 and 2001 by the Company's Chief Executive Officer and the Executive Officers of the Company whose compensation was $100,000 or greater during the fiscal year ended December 31, 2003. Annual Compensation Long-Term Compensation ------------ -------------------------- Restricted Securities All Other Principal Salary Bonus Stock Underlying Compensation Name Position Year ($) ($) Awards ($) Options (#) ($) - ---------------------------------------------------------------------------------------------------------------- Michael Neame (1) President and 2003 $ 156,333 $ -- $ -- -- $ 19,773 Chief Executive 2002 $ 142,500 $ -- $ -- -- $ 18,000 Officer 2001 $ 137,085 $ -- $ -- -- $ 17,316 (1) Mr. Neame resigned as Director, President and Chief Executive Officer of the Company on February 10, 2004, and Urban von Euler was subsequently appointed as President and Chief Executive Officer of the Company. Option Grants in Last Fiscal Year The Company did not grant any options during the last fiscal year. ITEM 12. BENEFICIAL OWNERSHIP OF COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth information, as of April 6, 2004, 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. Other than the shares which may be acquired by InfiniCom AB (see footnote 1 of the table), 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. -18- Beneficially Owned Name and Address Shares Percent ---------------- ------ -------- InfiniCom AB (publ) Karlaplan 2 114 60 Stockholm Sweden........................................................ 86,665,136(1) 90.1 Larsake Sandin Frensham Court, Summerfield Lane Surrey GU10 3AN England....................................................... 0 0 Urban von Euler Valhallavagen 108 Stockholm Sweden........................................................ 0 0 Roger Woodward Zennor Cherry Tree Walk Rowledge Farnham Surrey GU10 4AD United Kingdom................................................ 0 0 All executive officers and directors as a group (3 persons)... 0 0 (1) Includes the right of InfiniCom AB to acquire 10,660,679 shares of Common Stock under a Capital Contribution Agreement with the Company (see ITEM 13 below). The Company currently maintains no equity compensation plans. 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 to which 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. As of March 31, 2004, the shares had not yet been issued. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. The following is a summary of the fees billed to the Company by Stonefield Josephson, Inc., the Company's independent auditors, for professional services rendered for the years ended December 31, 2003 and 2002: 2002 2003 --------------- ---------------- Fee Category: Audit fees (1) $65,172 $34,686 Audit-related fees -- -- Tax fees -- -- All other fees -- -- -------------------------------- Total Fees $65,172 $34,686 ================================ -19- (1) Audit fees consist of aggregate fees billed for professional services rendered for the audit of the Company's annual financial statements and review of the interim financial statements included in quarterly reports or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for the years ended December 31, 2003 and 2002. All fees were pre-approved. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Financial Statements and Financial Statement Schedules (1) Financial Statements The financial statements listed below and included under Item 8, are filed as part of this report. Consolidated Financial Statements of 24Holdings Inc. (i) Independent Auditors' Report (ii) Consolidated Balance Sheet at December 31, 2003 and December 31, 2002 (iii) Consolidated Statement of Income (Operations) for each of the three years ended December 31, 2003 (iv) Consolidated Statement of Shareholders' Equity (Deficit) for each of the three years ended December 31, 2003 (v) Consolidated Statement of Cash Flows for each of the three years ended December 31, 2003 (vi) Notes to the Consolidated Financial Statements (2) Financial Statement Schedules All schedules have been omitted because either they are not applicable, not required or because the information required is included in the consolidated financial statements, including the notes thereto. (b) Exhibits Exhibit 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) (Filed as Exhibit 2.4 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2001 (filed April 16, 2002) and incorporated herein by this reference). 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). -20- Exhibit Number Description -------------- ------------ 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). 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. (Filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2001 (filed April 16, 2002) and incorporated herein by this reference). -21- Exhibit Number Description -------------- ------------ 10.11 Agreement dated March 21, 2003 among Lapland UK Ltd., Mobile Planet Ltd., Cyberia (UK) Ltd., 24Holdings Inc., Michael Neame, Larsake Sandin, Lennart Orkan, Roger Woodward, Urban von Ueler, Akbar Seddigh, 24Store (Europe) Ltd. and Martin Clarke (Filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the Period Ended December 31, 2002 (filed April 15, 2003) and incorporated herein by this reference). 10.12* Agreement dated March 24, 2004 between Cyberia (UK) Limited, as seller, and Stephen George Cranstone, Anthony Robert Norris, Hugo James Bibby and Tenon Pensioneer Trustee Limited, as trustees of the Link Microtek Limited Executive Retirement Plan. 14.1* Code of Ethics. 21* List of Subsidiaries of the Company. 31.1* Chief Executive Officer Certification pursuant to Rule 13a-14(a) under the Securities Act of 1934. 31.2* Chief Financial Officer Certification pursuant to Rule 13a-14(a) under the Securities Act of 1934. 32.1* Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350. 32.2* Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350. * filed or furnished with this report (c) Current Reports on Form 8-K None. -22- 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/ Urban von Euler ----------------------------------- Name: Urban von Euler Title: President and Chief Executive Officer Date: April 14, 2004 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/ Urban von Euler ----------------------------------- Name: Urban von Euler Title: President, Chief Executive Officer and Director By: /s/ Roger Woodward ----------------------------------- Name: Roger Woodward Title: Chief Financial Officer (Principal Accounting Officer) By: /s/ Larsake Sandin ----------------------------------- Name: Larsake Sandin Title: Director