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, 2004 ------------------- 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 12, 2005: $709,290. 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 12, 2005: 96,147,395 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 share capital 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 24STORE Limited, (previously known as Lapland U.K. Limited) a company registered in England in 1991, a wholly-owned subsidiary of 24STORE, which 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, customization, installation and training on software products from leading business software vendor Sage. The business is generated from an active sales team, working on inquiries from the existing customer base, and from the company's web site, www.24solutions.com. Products and Services The Company's primary products are computer and electronics products, and the provision, customization, 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 personal computers 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 authorization, and competitive pricing from software vendors, and (3) its ability to attract new customers at a favorable customer acquisition cost. Although the Company believes that it can compete favorably in such a competitive atmosphere, the Company cannot be assured that it will be able to maintain a competitive position against current and future competitors. Trademarks and Proprietary Rights The Company has relied, and intends to continue to rely, upon the protection of trademark law. In addition, the Company relies on confidentiality agreements with its employees to protect its proprietary rights. There can be no assurance that the steps taken, and anticipated to be taken, by the Company to protect its intellectual property rights will be adequate or that third parties will not infringe or misappropriate the Company's domain names, copyrights, trademarks, trade names, trade secrets, patents (if any) and similar proprietary rights. In addition, there can be no assurance that other parties will not assert infringement claims against the Company. -2- 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 April 12, 2005 the Company employed a total of 14 persons, including seven in sales, one in marketing, two in operations and four 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. Proposed Change in Control of the Company On February 15, 2005, InfiniCom AB, the majority stockholder of the Company, entered into a letter of intent to sell its shares of Common Stock in the Company to a group of private investors. As part of the transaction, it is contemplated that the Company will sell to InfiniCom all of the outstanding share capital of 24STORE, resulting in the Company continuing its existence as a shell company with no subsidiaries. ITEM 2. PROPERTIES. The Company's principal executive offices are located in Basingstoke, United Kingdom, approximately forty miles west of London. In 2004, the Company sold its freehold interest in its office and warehouse space in the United Kingdom and entered into a lease to occupy the space for a period not to exceed 18 months. The property, which is approximately 7,800 square feet, was constructed in 1959, and substantially refurbished in 1998. ITEM 3. LEGAL PROCEEDINGS. From time to time, the Company is subject to litigation in the ordinary course of its business. In the opinion of management, none of the currently pending litigation is likely to have a material adverse effect on the Company's business, financial condition, or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. -3- 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, 2004 $0.0400 $0.0200 September 30, 2004 $0.0300 $0.0110 June 30, 2004 $0.0400 $0.0110 March 31, 2004 $0.0600 $0.0080 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 On April 12, 2005 the last reported sales price for the Company's Common Stock on the OTC Bulletin Board was $0.0400 per share. As of April 14, 2005, 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 six fiscal years ended December 31, 2004 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," including discussions concerning the presentation in the Company's financial statements of the results of the Company's operating subsidiary as discontinued operations. Year Ended December 31, 2004 2003 2002 2001 2000 -------------------------------------------------------- Revenue - - - - - Loss from Continuing (129,430) (95,434) (592,186) (132,544) (447,478) Operations Loss from Discontinued (356,968) 20,098 (235,093) (1,690,427)(1,375,684) Operations Net Loss (486,398) (75,336) (827,279) (1,822,971)(1,823,162) Loss per share, (0.00) (0.00) (0.01) (0.00) (0.01) continuing operations, basic and diluted Loss per share, (0.00) (0.00) (0.00) (0.02) (0.02) discontinued operations, basic and diluted -4- Weighted average 96,147,396 96,147,396 93,255,869 85,486,717 81,241,503 number of shares outstanding Working capital (62,652) (833,533) (730,479) (305,596) (884,270) (deficit) Total Assets 985,554 3,979,477 3,978,041 5,327,740 10,456,258 Long-term debt 149,976 89,976 212,414 780,632 381,396 Total shareholders (212,628) 344,822 336,249 509,392 2,431,526 equity (deficit) 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"). Proposed Change in Control of the Company On February 15, 2005, InfiniCom AB, the majority stockholder of the Company, entered into a letter of intent to sell its shares of Common Stock in the Company to a group of private investors. As part of the -5- transaction, it is contemplated that the Company will sell to InfiniCom all of the outstanding share capital of 24STORE, resulting in the Company continuing its existence as a shell company with no subsidiaries. RESULTS OF OPERATIONS As it is management's intentions to sell the UK subsidiary, in accordance with SFAS 144, the operations of the subsidiary have been presented in the accompanying financial statements separate from continuing operations as "discontinued operations" for all periods presented. The following discussion of the Company's results of operations has therefore been grouped into a discussion of continuing operations, which mainly represents the parent company's operations, and discontinued operations, which represents the subsidiary's operations. Continuing Operations COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 Selling, General and Administrative Expenses--Selling, general and administrative ("SG&A") expenses for the years ended December 31, 2004, 2003 and 2002 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Selling, general and administrative $129,430 $95,434 $113,873 % decrease from the previous year 35.6% (16.2)% (34.0)% SG&E expenses for the year ended December 31, 2004 increased by 35.6% from $95,434 to $129,430. SG&A expenses for the year ended December 31, 2003 decreased by 16.2% from $113,873 to $95,434. The increase in SG&A for the year 2004 fiscal year came from increased audit and legal cost. The decrease in SG&A for the 2003 fiscal year was a reduction in audit and legal cost. Goodwill Amortization--Following the implementation of SFAS 142, "Goodwill and Other Intangibles", there was no Goodwill amortization for the years ended December 31, 2004, 2003 and 2002. SFAS 142 no longer requires goodwill to be amortized, but periodically tested for impairment. The impairment charge in the year ended December 31, 2002 arose from the write down of the remaining carrying value of Goodwill. Discontinued Operations COMPARISON OF FISCAL YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002 Net Sales--Net sales for the years ended December 31, 2004, 2003 and 2002 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Net sales $7,889,746 $14,562,402 $18,598,455 % increase (decrease) from (45.8)% (21.7)% (15.6)% the previous year -6- Net sales for the years ended December 31, 2004, 2003 and 2002 were all derived from operations in Europe. The decrease in net sales for the year ended December 31, 2004 is attributable to increased competition from large retailers moving from the home/domestic market into the SMA market. Also during 2004 key sales personnel left the company with the company suffering a corresponding decline in its customer base. The continued reduction in the unit cost of a laptop computer also contributed to the decline in sales revenues. For the UK Group, net sales decreased by 51% in local currency as compared to 2003. Gross Profit--Gross profit for the years ended December 31, 2004, 2003 and 2002 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Gross profit $1,048,854 $1,988,199 $1,937,009 % increase (decrease) from 47.2% (2.6%) (18.2)% the previous year Gross margin 13.3% 13.7% 10.4% Gross profit consists of net sales less the cost of sales, which consists of the cost of merchandise sold to customers. The decrease in Gross profit for the year ended December 31, 2004 is the result of the lower sales level. Gross margin as a percent of sales remained constant at over 13%. 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, 2004, 2003 and 2002 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Selling, general and administrative $1,575,686 $1,908,376 $2,562,992 % decrease from the previous year (17.4)% (25.5)% (34.0)% % of net sales 20.0% 13.1% 13.8% SG&A expenses for the year ended December 31,2004 decreased by 17.4% from $1,908,376 to $1,575,686. SG&A expenses for the year ended December 31, 2003 decreased by 25.5% from $2,562,992 to $1,908,376. The decrease in SG&A for the year 2004 fiscal year in local currency was 25.7%, which came from reductions in staff cost and advertising. The decrease in SG&A for the 2002 fiscal year is the result of a reduction in staff related costs. Sale of Building--On April 14, 2004, the Company completed the sale of the freehold property in which its operations are conducted, for a sale price of approximately $1,523,000. The sale resulted in a gain on sale recognized in the accompanying financial statements of approximately $180,000, which includes the write off of the deferred tax liability which arose in relation to the step up in basis upon acquisition of the UK subsidiary. As the building was an asset of the UK subsidiary which is being disposed of (see discussion in "Proposed Change in Control of the Company" above) this gain on sale is included in discontinued operations in the accompanying Statement of Operations. 24Store Ltd, a wholly owned subsidiary of 24 Holdings Inc., entered into a lease with the purchaser of the building on completion of the sale to remain in the building for a transitional period of 18 months. Interest Expenses--Interest expenses, net of interest income for the years ended December 31, 2004, 2003 and 2002, were as follows: -7- YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Interest income $7,718 $3,147 $4,945 % change from the previous year 145.2% (36.4)% (80.0)% Interest expenses $18,102 $65,302 $58,201 % change from the previous year (72.3)% 12.2% (52.9)% Interest income represents interest received on cash deposits. Interest expenses include interest payable on bank overdrafts, mortgages, receivables financing arrangements and other loans. The favorable change in interest income and expense for year ended December 31, 2004 is the result of the sale of the Company's office building in April 2004, as the proceeds of such sale were applied to repay both the Company's mortgage loan and other outstanding debt of the Company. 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 attributable to the need for a lower rate of borrowing to finance the lower sales levels, reduction in the building long term loan and reduced bank rate in the UK. Income Taxes--Income taxes, for the years ended December 31, 2004, 2003 and 2002 were as follows: YEAR ENDED DECEMBER 31, ----------------------- 2004 2003 2002 Income taxe $ - $ - $5,734 Income tax for the year ended December 31, 2002 is related to an under accrual from the previous year. LIQUIDITY AND CAPITAL RESOURCES The following discussion of liquidity and capital resources of the Company includes discontinued operations. Cash and cash equivalents at December 31, 2004 were $95,032 compared to $147,841 as of December 31, 2003, which includes cash held for sale. The increase came from the sale of the building in April 2004. 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 $220,635 in 2004 compared to net cash used by operating activities of $677,297 in 2003. The reason of the decrease was the lower level of working capital required to finance the reduced sales level in Q4/04 compared to Q4/03. As of December 31, 2004 the Company had a working capital deficit of $62,652 compared to a working capital deficit of $833,533 as of December 31, 2003. The sale of the building, resulting in increased cash balance and elimination of debt, was the reason for this change. As of December 31, 2004 included in current assets were cash and cash equivalents of $95,032 and receivables, net, expected to be collected within one year of $503,140. Cash provided by investing activities was $1,493,926 in 2004, compared to cash used in investing activities of $44,347 in 2003. The cash proceeds from the sale of the building accounted for the change. -8- 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. The revolving line of credit 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 believes its current resources of cash and cash equivalents, accounts receivable and available credit line to be sufficient to meet cash needs for working capital and capital expenditures for at least the next six months. If available cash and cash generated from operations is insufficient to satisfy liquidity requirements, selling additional equity or debt securities may be required. The sale of additional equity or convertible debt securities could result in dilution to the Company's stockholders. There can be no assurance that financing will be available in sufficient amounts or on acceptable terms, if at all. RECENTLY ISSUED ACCOUNTING STANDARDS 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 to the company's financial position or results of operation. 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 to the company's financial position or results of operation. 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 -9- 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 adoption of this Statement did not have a material impact to the company's financial position or results of operation. 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. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4". The amendments made by Statement 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The Company has evaluated the impact of the adoption of SFAS 151, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes this Statement produces financial reporting that more faithfully represents the economics of the transactions. The Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 152, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". Statement 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement 123(R) covers a wide range of share-based compensation -10- arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and does not believe the impact will be significant to the Company's overall results of operations or financial position as the Company at this time does not plan to grant stock based compensation. 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 -11- The Company may face increased competition from manufacturers that sell products directly over the Internet or by telephone, such as Dell and Gateway. Many of these companies have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources. There can be no assurance that the Company will be able to compete effectively against such companies and that the purchasing patterns of the Company's customers will not increasingly shift to the direct sales channels of distribution. Such increased competition and changes in purchasing patterns may adversely affect the Company's future operations and financial results. Protection of the Company's Domain Names The Company currently holds various domain names commencing with the "24" prefix. The acquisition and maintenance of domain names generally is regulated by Internet regulatory bodies. The regulation of domain names in the United States, the United Kingdom and in other countries is subject to change. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, the Company may be unable to acquire or maintain relevant domain names in all countries in which it conducts business. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, the Company may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of the Company's trademarks and other proprietary rights. The Company may not successfully carry out its business strategy of establishing a strong brand for the "24" prefix if the Company cannot prevent others from using similar domain names or trademarks. This could impair the Company's ability to increase market share and revenues. Rapid Technological Change The industry in which the Company competes is characterized by rapid technological change, frequent introductions of new products and services, changes in customer demands and evolving industry standards. The introduction or announcement of new products or services by the Company or one or more of its competitors embodying new technologies or changes in industry standards or customer requirements could render the Company's existing products or services obsolete or unmarketable. Accordingly, the life cycles of the Company's products are difficult to estimate. The Company's future results of operations will depend, in part, upon its ability to enhance its products and services and to introduce new products and services on a timely and cost-effective basis that will keep pace with technological developments and evolving industry standards, as well as address the increasingly sophisticated needs of the Company's customers. Failure of the Company to introduce, for technological or other reasons, new products and services in a timely and cost-effective manner could have a material adverse effect on the Company's business, results of operations and financial condition. Furthermore, the introduction or announcement of new product or service offerings or enhancements by the Company or the Company's competitors may cause customers to defer or forgo purchases of the Company's products or services, which could have a material adverse effect on the Company's business, results of operations and financial condition. System Interruption and Security Risks The Company's operations are dependent, in part, on its ability to protect its systems from interruption by damage from fire, earthquake, power loss, telecommunication failure, unauthorized entry or other events beyond the Company's control. The Company's computer equipment constituting its central computer systems, including its processing operations, are currently located in Basingstoke, United Kingdom. The Company conducts system backups daily, which are taken off site each evening. The Company's computer programs are password protected and firewalls, anti-virus software and uninterruptable power -12- supplies are in place. However, there can be no assurance that damage to or failure of any of the Company's central computer systems will not take place. Any such damage or failure that causes interruptions in the Company's operations could have a material adverse effect on the Company's business, results of operations and financial condition. Persistent problems continue to affect public and private data networks. Computer break-ins and other disruptions may jeopardize the security of information stored in and transmitted through the computer systems of the Company and the parties utilizing the Company's services, which may result in significant liability to the Company and also may deter potential customers from using the Company's services. In addition, while the Company attempts to be careful with respect to the employees it hires and maintain controls through software design and security systems to prevent unauthorized employee access, it is possible that, despite such safeguards, an employee of the Company could obtain access, which would also expose the Company to a risk of loss or litigation and possible liability to customers or other users. There can be no guarantee that the growth of the Company's customer base will not strain or exceed the capacity of its computer and telecommunications systems and lead to degradations in performance or system failure. Any damage, failure or delay that causes interruptions in the Company's operations could have a material adverse effect on the Company's business, results of operations and financial condition. 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 discussions in "Reorganization" and "Proposed Change in Control of the Company" below. Control By Existing Stockholder InfiniCom AB beneficially owns approximately 81.56% of the outstanding shares of the Company's Common Stock. 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. See also the discussion in "Proposed Change in Control of the Company" below. 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. -13- Recent Significant Changes to Business The Company has experienced significant changes in its business, including changes resulting from recent acquisitions and other business combinations. Such changes have placed and may continue to place a significant strain upon the Company's management, systems and resources. The Company's ability to compete effectively and to manage future changes will require the Company to continue to improve its financial and management controls, reporting systems and procedures, budgeting and forecasting capabilities on a timely basis and adequately train and manage its employee work force. There can be no assurance that the Company, or the Company's current management, will be able to manage such changes successfully. The Company's failure to do so could have a material adverse effect upon the Company's business, results of operations and financial condition. See also the discussion in "Proposed Change in Control of the Company" below. 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. Proposed Change in Control of the Company On February 15, 2005, InfiniCom AB, the majority stockholder of the Company, entered into a letter of intent to sell its shares of Common Stock in the Company to a group of private investors. As part of the transaction, it is contemplated that the Company will sell to InfiniCom all of the outstanding share capital of 24STORE, resulting in the Company continuing its existence as a shell company with no subsidiaries. Although the Company believes that the proposed purchaser of InfiniCom's majority interest in the Company intends to cause the Company to merge with or acquire an existing business, there can be no assurance that such a secondary transaction will occur. Moreover, if such transaction were to occur, there can be no assurance that it would enhance the Company's future operations and financial results. 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, 2004,2003 and 2002 Contents Page ---- Report of Independent Registered Public Accounting Firm F-1 Financial Statements: Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statement of Shareholders' Equity (Deficit) F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6-F-17 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors 24Holdings Inc. Basingstoke, United Kingdom We have audited the accompanying consolidated balance sheets of 24Holdings Inc. (formerly Scoop, Inc.) and subsidiary at December 31, 2004 and 2003 and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with standards of the Public Companies Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of 24Holdings Inc. (formerly Scoop, Inc.) and subsidiary at December 31, 2004 and 2003 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's net losses of $456,398, $75,336 and $827,279 in the last three years and accumulated deficit of $10,429,818 at December 31, 2004 raise substantial doubt about their ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments to asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. CERTIFIED PUBLIC ACCOUNTANTS Santa Monica, California March 1, 2005 F-1 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED BALANCE SHEETS December 31, 2004 December 31, 2003 ----------------- ----------------- ASSETS Current assets: Cash and cash equivalents $ 928 $ 13,283 Current assets of subsidiary held for sale 984,626 2,489,849 ---------------------- -------------------- Total current assets 985,554 2,503,132 Long term assets of subsidiary held for sale - 1,476,345 ----------------------- -------------------- $ 985,554 $ 3,979,477 ======================= ==================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities- Accounts payable and accrued expenses $ 118,914 $ 82,888 Current liabilities of subsidiary held for sale 929,292 3,253,777 ---------------------- -------------------- Total current liabilities 1,048,206 3,336,665 Long term note payable, related party 149,976 89,976 Long term liabilities of subsidiary held for sale - 208,014 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 36,742 36,742 issued and outstanding Additional paid in capital 10,362,233 10,362,233 Other comprehensive loss (181,785) (110,733) Accumulated deficit (10,429,818) (9,943,420) ---------------------- --------------------- Total shareholders' equity (deficit) (212,628) 344,822 $ 985,554 $ 3,979,477 ======================= ==================== The accompanying notes form an integral part of these consolidated financial statements. F-2 24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC.) CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS) Year ended Year ended Year ended December 31, 2004 December 31, 2003 December 31, 2002 ----------------- ----------------- ----------------- Revenue: $ - $ - $ - Cost of Revenue - - - ----------------------- -------------------------- ------------------------ Gross profit - - - Operating expenses: General and administrative expenses 129,430 95,434 113,871 Goodwill amortization - - 450,844 -------------------------------------------------------------------------- Total operating expenses 129,430 95,434 564,715 Loss from continuing operations before interest expense (129,430) (95,434) (564,715) Interest expense - - 27,471 --------------------------------------------------------------------------- Loss from continuing operations before provision for income taxes (129,430) (95,434) (592,186) Provision for income taxes - - - ----------------------- -------------------------- ------------------------ Loss from continuing operations (129,430) (95,434) (592,186) Loss from discontinued operations, net of taxes (356,968) 20,098 (235,093) Net income (loss) $ (486,398) $ (75,336) $ (827,279) =========================================================================== Net loss per share - continuing operations basic and diluted $ (0.00) $ (0.00) $ (0.01) =========================================================================== Net loss per share - discontinued operations basic and diluted $ (0.00) $ (0.00) $ (0.01) =========================================================================== Weighted average number of shares outstanding - basic and diluted 96,147,396 96,147,396 96,147,396 =========================================================================== The accompanying notes form an integral part of these consolidated financial statements. F-3 24HOLDINGS INC. (FORMERLY SCOOP, INC.) CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) Common Stock Additional Other Comprehensive Shares Amount Paid in Capital Income/loss Balance at December 31, 2001 85,486,717 $ 26,081 $ 9,855,851 $ (331,735) Shares issued upon conversion of debt on April 10, 2002 10,660,679 10,661 506,382 Foreign currency translation 137,093 Net loss for the year ended December 31, 2002 -------------------------------------------------------------- Balance at December 31, 2002 96,147,396 36,742 10,362,233 (194,642) ============================================================== Foreign currency translation 83,909 Net loss for the year ended December 31, 2003 -------------------------------------------------------------- 96,147,396 36,742 10,362,233 (110,733) ============================================================== Foreign currency translation (71,052) Net loss for the year ended December 31, 2004 -------------------------------------------------------------- 96,147,396 $ 36,742 $ 10,362,233 $ (181,785) ============================================================== Accumulated Total Deficit Shareholders' Equity (Deficit) Balance at December 31, 2001 $ (9,040,805) $ 509,392 Shares issued upon conversion of debt on April 10, 2002 517,043 Foreign currency translation 137,093 Net loss for the year ended December 31, 2002 (827,279) (827,279) ------------------------------------------------------ Balance at December 31, 2002 (9,868,084) 336,249 ====================================================== Foreign currency translation 83,909 Net loss for the year ended December 31, 2003 (75,336) (75,336) ------------------------------------------------------ (9,943,420) 344,822 Net loss for the year ended December 31, 2004 ====================================================== Foreign currency translation (71,052) Net loss for the year ended December 31, 2004 (486,398) (486,398) ------------------------------------------------------ $ (10,429,818) $ (212,628) ====================================================== The accompanying notes form an integral part of these consolidated financial statements. F-4 24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Year ended Year ended Year ended December 31, 2004 December 31, 2003 December 31, 2002 ----------------- ----------------- ----------------- Cash flows provided by (used for) operating activities: Net income (loss) $ (486,398) $ (75,336) $ (827,279) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation 63,590 80,835 67,330 Gain on sale of building, net of deferred taxes (92,751) - - Loss on impairment of investments 450,844 Foreign currency translation 71,052 86,052 121,489 Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable 1,752,456 (550,734) 703,409 Loans receivable, related party 60,000 - Inventory (111,508) 178,969 29,150 Prepaid expenses 7,104 36,994 (25,694) Changes in assets and liabilities: (Increase) decrease in assets: Accounts payable and accrued expenses (1,397,380) (431,540) (584,524) Income taxes payable - (137) 549 Deferred taxes (86,800) (2,400) (2,400) ------------------ -------------------------- ------------------ Total adjustments 265,763 (601,961) 760,153 ------------------ -------------------------- ------------------ Net cash used for operating activities (220,635) (677,297) (67,126) Cash flows provided by (used for) investing activities: Sale of Building 1,523,000 Acquisition of property and equipment (29,074) (44,347) (35,484) Proceeds from short-term loans, related party - - - ------------------ -------------------------- ------------------ Net cash provided by (used for) investing activities 1,493,926 (44,347) (35,484) ------------------ -------------------------- ------------------ Cash flows provided by (used for) financing activities: Credit facility (1,082,723) 71,435 (353,766) Proceeds from long-term debt, bank 89,976 - Payment on long-term debt, bank (243,377) (94,017) (81,183) ------------------ -------------------------- ------------------ Net cash provided by (used for) financing activities (1,326,100) 67,394 (434,949) ------------------ -------------------------- ------------------ Net increase (decrease) in cash (52,809) (654,250) (537,559) Cash, beginning of period 147,841 802,091 1,339,650 Cash, end of period $ 95,032 $ 147,841 $ 802,091 ------------------ -------------------------- ------------------ Supplemental disclosure of cash flow information: Interest paid $ 18,102 $ 67,290 $ 91,903 Income taxes paid - - - ------------------ -------------------------- ------------------ The accompanying notes from an integral part of these consolidated financial statements. F-5 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (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 majority 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 $486,398 $75,336 and $827,279 during 2004, 2003 and 2002, respectively, and has an accumulated deficit of $10,429,818 at December 31, 2004. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's intentions as relate to this are as follows: o Management made the determination to separately sell the UK subsidiary, 24Store LTD, and the remaining public shell to realize the value inherent in the public vehicle and as there was more value to the two halves as opposed to the whole. The subsidiary has been presented as a discontinued operations. o The Company recently entered into a non-binding Letter of Intention for the sale of the public shell for $500,000. o Management during 2004 has decreased operating costs and is increasing revenues through 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. F-6 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (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: All revenue is generated by 24Store, the UK subsidiary, and therefore is included in Discontinued Operations. Hardware and peripheral sales ----------------------------- 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. Software support sales ---------------------- The Company recognizes revenue upon the installation of its product to customers. Service contracts paid in advance are classified as deferred income and recognized over the term as services are provided. Deferred income is not material and is included in accounts payable and accrued 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. F-7 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (2) Summary of Significant Accounting Policies, Continued: 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 (sold in 2004) 50 years Furniture and equipment 5 years Computers 3-4 years Software 3-4 years Goodwill: In connection with various acquisitions which were accounted for under the purchase method of accounting, the Company recorded goodwill. 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. 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 has followed the guidance of this pronouncement in the accounting for, and financial statement presentation of, their UK subsidiary, 24Store (Note 4). Inventory: Inventory is stated at the lower of cost or market using the FIFO (first-in, first-out) cost method. F-8 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (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, 2004, 2003, and 2002, advertising expenses amounted to approximately $17,000, $26,000, and $125,000 respectively. Concentration: During the year ended December 31, 2004 the Companies largest customer only accounted for 4.5% of total sales. 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, 2002, the Company had 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, 2004, 2003 and 2002 because there were no dilutive securities outstanding during those periods. F-9 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (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, 2004, 2003, and 2002 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: 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 to the company's financial position or results of operation. F-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: Recent Accounting Pronouncements, Continued: 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 to the company's financial position or results of operation. 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. F-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 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 adoption of this Statement did not have a material impact to the company's financial position or results of operation. 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. In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an amendment of ARB No. 43, Chapter 4". The amendments made by Statement 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as current period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 23, 2004. The Company has evaluated the impact of the adoption of SFAS 151, and does not believe the impact will be significant to the Company's overall results of operations or financial position. F-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: In December 2004, the FASB issued SFAS No.153, "Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions." The amendments made by Statement 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded amount of the asset relinquished. Opinion 29 provided an exception to its basic measurement principle (fair value) for exchanges of similar productive assets. The Board believes that exception required that some nonmonetary exchanges, although commercially substantive, be recorded on a carryover basis. By focusing the exception on exchanges that lack commercial substance, the Board believes this Statement produces financial reporting that more faithfully represents the economics of the transactions. The Statement is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The Company has evaluated the impact of the adoption of SFAS 152, and does not believe the impact will be significant to the Company's overall results of operations or financial position. In December 2004, the FASB issued SFAS No.123 (revised 2004), "Share-Based Payment". Statement 123(R) will provide investors and other users of financial statements with more complete and neutral financial information by requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. Statement 123(R) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. Statement 123(R) replaces FASB Statement No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees. Statement 123, as originally issued in 1995, established as preferable a fair-value-based method of accounting for share-based payment transactions with employees. However, that Statement permitted entities the option of continuing to apply the guidance in Opinion 25, as long as the footnotes to financial statements disclosed what net income would have been had the preferable fair-value-based method been used. Public entities (other than those filing as small business issuers) will be required to apply Statement 123(R) as of the first interim or annual reporting period that begins after June 15, 2005. The Company has evaluated the impact of the adoption of SFAS 123(R), and does not believe the impact will be significant to the Company's overall results of operations or financial position as the Company at this time does not plan to grant stock based compensation. F-13 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (3) Sale of Building: During the first quarter of 2004, the Company completed it's negotiations on the sale of the freehold property in which their operations are conducted, for approximately $1,523,000. On March 25, 2004 contracts for the sale of the building were exchanged with the completion of the sale made on April 14, 2004. The sale resulted in a gain on sale recognized in the accompanying financial statements of approximately $180,000, which includes the write off of the deferred tax liability which arose in relation to the step up in basis upon acquisition of the UK subsidiary. As the building was an asset of the UK subsidiary which is being disposed of (Note 4) this gain on sale is included in discontinued operations in the accompanying Statement of Operations. 24Store Ltd, a wholly owned subsidiary of 24Holdings Inc., entered into a lease with the purchaser of the building on completion of the sale to remain in the building for the next 18 months, through September 2005 . Total rent expense for the year ending December 31, 2004 amounted to $56,700. (4) Discontinued Operations : The Company's management has committed to a plan to sell their UK subsidiary, 24Europe, which presently is anticipated to occur within the next six months. The Company is in discussions with their Parent company, Infinicom, to acquire the subsidiary in exchange for a combination of cash and a note payable. As the intended sale meets all the requirements of paragraph 30 of Statements of Financial Accounting Standards ("SFAS") 144 "Accounting for the Impairment or Disposal of Long-Lived Assets", the assets and liabilities of the subsidiary have been classified as Held for sale on the accompanying balance sheet, while the results of operations have been presented as discontinued operations for all periods presented. As the Company anticipates selling the subsidiary for an amount in excess of the carrying value, no loss on disposal has been recognized and included as a component of discontinued operations. The carrying amounts of the major classes of assets and liabilities included as part of the assets and liabilities held for sale at December 31, 2004, are as follows: Cash and cash equivalents $ 94,104 Accounts receivable 503,140 Inventory 289,067 Prepaid expenses and other assets 29,908 Property and equipment - held for sale 68,407 ----------- Current assets held for sale $ 984,626 =========== Accounts payable and accrued expenses 929,292 Income taxes payable - ------------ Current liabilities held for sale $ 929,292 ============ F-14 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (5) Major Vendor: Included in accounts payable at December 31, 2004 is approximately $547,000 owed to three suppliers. Purchases from these suppliers during 2004 totaled approximately $3,990,000. (6) Credit Facility: The Company's subsidiary 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 financing company holds as security interests all receivables and at times the facility was outstanding, certain guarantees of the officer-shareholders. The related overdraft facility and the guarantees were terminated in April, 2004. The discount rate is 2% above the base rate of National Westminster Bank in the United Kingdom, 6% and 5.5% at December 31, 2004 and 2003, respectively. (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, 2004 the Company's ultimate Parent company has advanced them a total of approximately $150,000 for expenses associated with the Company's public registrant filing requirements. The note is non-interest bearing and due January 31, 2005. The note was not paid back, and is therefore past due, but the parent company has not requested payment. F-15 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 (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 Company does not file consolidated tax returns in the United Kingdom, however, no tax expense is due in December 31, 2004 or 2003 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, 2004 2003 2002 ----------------------- ------------ Provision at expected federal statutory rate (35)% (35)% (35)% Loss for which no benefit is available 35 35 35 ---------- --------- -------- -% -% - % ========== ========= ========== (14) Subsequent Event: In February 2005, the Company's ultimate parent company, Infinicom, entered into a nonbinding Letter of Intent with an unrelated third party, to purchase all of Infinicom's shares in 24Holdings Inc. The agreement is contingent on the contemporaneous purchase by Infinicom of all the issued and outstanding capital stock of 24Store (Europe) Ltd. Following the exchange, the party will use it's best efforts, as soon as reasonably practical, to identify an operating company to enter into an agreement to merge with the Company in exchange for shares of the Company's stock. F-16 24HOLDINGS INC. (FORMERLY SCOOP, INC.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEARS ENDED DECEMBER 31, 2004, 2003, AND 2002 Dec-31 Sep-30 Jun-30 Mar-31 Total Year Ended December 31, 2004: Continued Operations - -------------------- Net Revenues $ - $ - $ - $ - $ - Gross Profit - - - - - Loss from continuing operations (49,719) (26,301) (26,446) (26,964) (129,430) Discontinued Operations - ----------------------- Net Revenues 1,145,775 1,499,364 2,198,610 3,034,996 7,878,745 Gross Profit 208,654 205,876 256,214 378,110 1,048,854 Loss from discontinued operations (83,819) (162,765) (30,347) (80,037) (356,968) Net loss (133,538) (189,066) (56,793) (107,001) (486,398) Year Ended December 31, 2003: Continued Operations - -------------------- Net Revenues - - - - - Gross Profit - - - - - Loss from continuing operations (4,771) (43,192) (19,468) (28,003) (95,434) Discontinued Operations - ----------------------- Net Revenues 4,209,566 3,170,609 2,991,615 4,190,612 14,562,402 Gross Profit 615,515 437,670 368,086 566,928 1,988,199 Income(Loss) from discontinued operations 159,953 (19,751) (147,110) 27,006 20,098 Net Income(loss) 155,182 (62,943) (166,578) (997) (75,336) F-17 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, 2004, the Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of these controls and procedures. Based on the evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the failure of the Company to have an audit committee, and the failure of the Board to assume the audit committee functions, results in the absence of an important oversight, constituting a material weakness in the Company's corporate governance structure. Accordingly, the Company's disclosure controls and procedures are not 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 49 Director, Chairman of the Board and 2002 Chief Executive Officer Larsake Sandin 55 Director 2000 Roger Woodward 59 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. -16- Roger Woodward, Chief Financial Officer, Chief Accounting Officer and Secretary. Mr. Woodward came to 24Holdings Inc. via the acquisition of LapLand (UK) Limited, where he had been Group Financial Controller since joining the company in 1997. Prior to this he held a number of senior financial positions within the manufacturing and service industries. As Financial Controller for the European subsidiary of ITW Inc., a NYSE-listed multi-national firm, Mr. Woodward was responsible for annual and monthly reporting and was a member of the senior management team. Mr. Woodward attended Kingston University gaining a Diploma in Business Studies and he is also a member of the Chartered Institute of Management Accountants. Each director of the Company will hold office until such director's successor is elected and qualified or until such director's earlier resignation or removal. Each executive officer of the Company will hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal in accordance with the Company's bylaws. There currently exists no arrangement or understanding between any 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 As the Company does not have an audit committee, the Company's board of directors has determined that it does not have an "audit committee financial expert," as that term is defined in Item 401(h) of Regulation S-K. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the 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, 2004, 2003 and 2002 by the Company's Chief Executive Officer and the Executive Officers of the Company whose compensation was $100,000 or greater during the fiscal year ended December 31, 2004. Annual Compensation Long-Term Compensation ------------ ------------------------ Restricted Securities All Other Principal Salary Bonus Stock Underlying Compensation Name Position Year ($) ($) Awards ($) Options (#) ($) - ---------------------------------------------------------------------------------------------------------------- Urban von Euler (1) President and 2004 $ -- $ -- $ -- -- $ -- Chief Executive 2003 $ -- $ -- $ -- -- $ -- Officer 2002 $ -- $ -- $ -- -- $ -- Michael Neame (1) President and 2004 $ 34,230 $ -- $ -- -- $ 24,900 Chief Executive 2003 $ 156,333 $ -- $ -- -- $ 19,773 Officer 2002 $ 142,500 $ -- $ -- -- $ 18,000 (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 12, 2005, 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 81.56 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 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. The shares were issued to InfiniCom in April 2004. On February 15, 2005, InfiniCom AB, the majority stockholder of the Company, entered into a letter of intent to sell its shares of Common Stock in the Company to a group of private investors. As part of the transaction, it is contemplated that the Company will sell to InfiniCom all of the outstanding share capital of 24STORE, resulting in the Company continuing its existence as a shell company with no subsidiaries. Although the Company believes that the proposed purchaser of InfiniCom's majority interest in the Company intends to cause the Company to merge with or acquire an existing business, there can be no assurance that such a secondary transaction will occur. Moreover, if such transaction were to occur, there can be no assurance that it would enhance the Company's future operations and financial results. 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, 2004 and 2003: 2003 2004 ------------------------------- Fee Category: Audit fees (1) $34,686 $63,316 -19- Audit-related fees -- -- Tax fees -- -- All other fees -- -- ------------------------------- Total Fees $34,686 $63,316 =============================== (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, 2004 and 2003. 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, 2004 and December 31, 2003 (iii) Consolidated Statement of Income (Operations) for each of the three years ended December 31, 2004 (iv) Consolidated Statement of Shareholders' Equity (Deficit) for each of the three years ended December 31, 2004 (v) Consolidated Statement of Cash Flows for each of the three years ended December 31, 2004 (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). -20- Exhibit Number Description - -------------- ----------- 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). 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). -21- Exhibit Number Description - -------------- ----------- 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). 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 Current Report on Form 8-K filed March 9, 2005. -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 15, 2005 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