SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2004
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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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 ISSUERS:
Number of shares of Common Stock outstanding at May 14, 2004: 96,147,395.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED BALANCE SHEET
March 31, 2004 December 31, 2003
-------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 57,341 $ 147,841
Accounts receivable 1,378,316 2,158,883
Inventory 79,124 161,697
Prepaid expenses and other assets 56,875 34,710
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Total current assets 1,571,656 2,503,131
Property and equipment, net of
accumulated depreciation and amortization 68,861 70,625
Long term assets held for sale 1,438,585 1,405,720
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$ 3,079,102 $ 3,979,476
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 1,342,694 $ 2,178,856
Credit facility 1,018,443 1,044,285
Current portion of loan payable, bank 117,036 113,523
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Total current liabilities 2,478,173 3,336,664
Loan payable, bank, less current portion 98,764 121,214
Long term loans, related party 149,976 89,976
Deferred taxes 86,200 86,800
Shareholders' equity:
Preferred stock; $0.001 par value, 5,000,000 authorized, no shares
issued and outstanding - -
Common stock; $.001 par value, 100,000,000 shares authorized
96,147,396 shares issued and outstanding 36,742 36,742
Additional paid in capital 10,362,233 10,362,233
Other comprehensive loss (82,566) (110,733)
Accumulated deficit (10,050,420) (9,943,420)
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Total shareholders' equity 265,989 344,822
$ 3,079,102 $ 3,979,476
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24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Three months ended
March 31, 2004 March 31, 2003
------------------ ------------------
(Unaudited) (Unaudited)
Revenue $ 3,034,996 $ 4,190,612
Cost of Revenue 2,656,886 3,623,684
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Gross profit 378,110 566,928
Operating expenses:
Distribution costs 33,921 98,683
General and administative 413,975 455,051
Depreciation 24,257 17,519
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Total operating expenses 472,153 571,253
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Net loss before interest and other income
and interest expense (94,043) (4,325)
Interest and other income - (799)
Interest expense 12,958 13,995
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Net loss before provision for income taxes (107,001) (17,521)
Provision for income taxes - -
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Net(loss) $ (107,001) $ (17,521)
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Other comprehensive (loss):
Foreign currency translation (28,167) (16,525)
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Total comprehensive loss (135,168) (34,046)
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Net loss per share -
basic and diluted $ (0.00) $ (0.00)
================== ==================
Weighted average number of shares outstanding -
basic and diluted 96,147,396 96,147,396
================== ==================
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24HOLDINGS INC.
(FORMERLY KNOWN AS SCOOP, INC.)
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three months ended Three months ended
March 31, 2004 March 31, 2003
------------------ ------------------
(Unaudited) (Unaudited)
Cash flows provided by (used for) operating activities:
Net loss $ (107,001) $ (17,521)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 24,257 17,519
Amortization of goodwill - -
Foreign currency translation 16,069 (14,806)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 834,654 (555,877)
Prepaid expenses (20,774) (6,180)
Inventory 86,262 (225,612)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (890,383) (122,624)
Income taxes payable - (470)
Deferred taxes (600) (600)
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Total adjustments 49,485 (908,650)
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Net cash provided by (used for) operating activities (57,516) (926,171)
Cash flows provided by (used for) investing activities:
Acquisition of property and equipment (9,893) (21,976)
Due to/from related party 60,000 -
------------------ ------------------
Net cash used for investing activities 50,107 (21,976)
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Cash flows provided by (used for) financing activities:
Payments on credit facility (57,285) 170,041
Payments on long-term debt, related parties - -
Payments on long-term debt, bank (25,806) (21,684)
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Net cash provided by financing activities (83,091) 148,357
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Net decrease in cash (90,500) (799,790)
Cash, beginning of period 147,841 802,091
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Cash, end of period $ 57,341 $ 2,301
================== ==================
Supplemental disclosure of cash flow information:
Interest paid $ 18,815 $ 11,017
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Income taxes paid $ - $ -
================== ==================
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24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004
(1) Description of Business:
Interim Financial Statements:
The accompanying financial statements include all adjustments (consisting
of only normal recurring accruals), which are, in the opinion of
management, necessary for a fair presentation of the results of operations
for the periods presented. Interim results are not necessarily indicative
of the results to be expected for a full year. The Consolidated financial
statements should be read in conjunction with the financial statements
included in the annual report of 24Holdings Inc. and subsidiary on Form
10-K for the year ended December 31, 2003.
General:
24Holdings Inc., formerly known as Scoop, Inc. ("24Holdings" or the
"Company"), is a wholly owned subsidiary of InfiniCom AB, a publicly listed
company on the SBI market in Sweden. 24Holdings has a wholly owned
subsidiary, 24Store Europe LTD, located in the United Kingdom. All the
consolidated entities are in the business of selling and distributing
consumer and commercial electronic products in Europe.
Basis of Presentation:
The Company's Consolidated 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 $107,001
during the year ended December 31, 2003 and the three months ended March
31, 2004, respectively, and has an accumulated deficit of $10,050,420 at
March 31, 2004. The Company had negative working capital of $906,517 at
March 31, 2004. 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, and selling some assets to raise
funds. The Consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.
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24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004
(2) Principles of Consolidation:
The accompanying consolidated statements include the accounts of 24holdings
Inc. and subsidiaries. All significant intercompany transactions and
accounts have been eliminated.
The financial statements of subsidiaries 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).
(3) Subsequent Event:
During the first quarter of 2004, the Company completed its negotiations on
the sale of the freehold property in which its operations are conducted,
for $1,523,220. On March 25th 2004 contracts for the sale of the building
were exchanged with the completion of the sales being made on April 14th
2004.
24Store Ltd, a wholly owned subsidiary of 24Holdings 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 18 months.
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Item 2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's interim
results of operations and Consolidated financial condition. This discussion
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, filed with the
Securities and Exchange Commission.
RESULTS OF OPERATIONS
For the Three Months ended March 31, 2004:
NET SALES. Net sales for the three months ended March 31, 2004 were $3,034,996
compared to $4,190,612 for the three months ended March 31, 2003 representing a
decrease of 28%. The main reason for the reduction in the three months ended
March 31, 2004, as compared to March 31, 2003 was the loss of a high volume
account during the second quarter of 2003. The customer was taken over by
another company which had its own established supplier channels.
GROSS PROFIT. Gross profit for the three months ended March 31, 2004 was
$378,110 compared to $566,928 for the three months ended March 31, 2003
representing an increase of 33%. Gross profits as a percentage of sales were
12.5% for the three months ended March 31, 2004 compared to 13.51% for the three
months ended March 31, 2003. The changes in gross profit between periods are a
result of the reduction in sales and a high margins deal on a software solutions
sale in March 2003.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended March 31, 2004 were
$472,153 compared to $571,253 for the three months ended March 31, 2003.
Overhead staff cost saving where made during 2003 and also in the three months
ended March 31 2004.
INTEREST EXPENSE. Interest expense, net of interest income for the three months
ended March 31, 2004 was $12,958 compared to $13,196 for the three months ended
March 31, 2003.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 2004 were $57,341 compared to $147,841 as
of December 31, 2003. This decrease is primarily due to the position of cash
advances on the revolving line of credit at year end and the timing of payments
to creditors at year end and at March 31, 2004.
The net decrease in cash for the three months ended March 31, 2004 was $90,500
compared to a net decrease of $799,790 in the three months ended March 31, 2003.
Cash used for acquisition of equipment in the three months ended March 31, 2004
was $9,893 mainly used for the upgrading of computer equipment.
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In its United Kingdom operating subsidiaries the Company has (1) a revolving
line of credit based on 70% of eligible receivables and (2) a ten year mortgage
expiring in 2008, secured by the underlying 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%.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold any derivative financial instruments. However, the
Company is exposed to interest rate risk. The Company believes that the market
risk arising from holdings of its financial instruments is not material.
However, all of the Company's operations are conducted through its subsidiary
24STORE and denominated in British pounds sterling or, prior to the sale of its
Norwegian subsidiary, Norwegian Kroner, and none of the Company's revenues are
generated in US Dollars. For consolidation purposes, the assets and liabilities
of 24STORE are converted to US Dollars using year-end exchange rates and results
of operations are converted using a monthly average rate during the year.
Fluctuations in the currency rates between the United Kingdom, Norway and the
United States may give rise to material variances in reported earnings of the
Company.
Item 4. Controls and Procedures.
The Company's Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of the Company's disclosure controls and
procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934,
as amended, have concluded that, as of the end of the fiscal quarter covered by
this report on Form 10-Q, the Company's disclosure controls and procedures were
effective to provide reasonable assurances that information required to be
disclosed in the reports filed or submitted under such Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms.
There was no change in the Company's internal control over financial reporting
during the quarter ended March 31, 2004 that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
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PART II
OTHER INFORMATION
Item 5. Other Information.
On April 14, 2004, the Company completed its sale of the building currently
occupied by the Company for a total cash purchase price of $1,523,220. The
purchase price was determined by appraisal and negotiation among the parties to
the sale. The purchasers were third parties with no prior relationship with the
Company or any of its officers and directors. As part of the sale transaction,
24Store Ltd, a wholly owned subsidiary of 24Holdings Inc., entered into a lease
with the purchaser of the building to remain in the building for an 18-month
transitional period.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
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
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this report
is filed.
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SIGNATURES
Pursuant to the requirements 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.
Date: May 17, 2004 24HOLDINGS INC.
By: /s/ Urban von Euler
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Urban von Euler
President and Chief Executive Officer
By: /s/ Roger Woodward
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Roger Woodward
Chief Financial Officer and Secretary
(Principal Accounting Officer)
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