SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2005
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
----------------------- ----------------------
Commission file number 000-22281
24HOLDINGS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0726608
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Cyberia House
Church Street, Basingstoke
Hampshire RG21 7QN
United Kingdom
(Address of Principal Executive Offices)
+44 1256 867 800
(Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) had been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes No X
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APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of shares of Common Stock outstanding at August 19, 2005:
96,147,395.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
24HOLDINGS, INC.
( FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED BALANCE SHEET
June 30, 2005 December 31, 2004
------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,786 $ 928
Assets of subsidiary held for sale 379,751 984,626
------------- -----------
Total current assets 386,537 985,554
$ 386,537 $ 985,554
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities-
Accounts payable and accrued expenses $ 81,325 $ 118,914
Liabilities of subsidiary held for sale 640,923 929,292
------------ -----------
Total current liabilities 722,248 1,048,206
Loan payable, bank, less current portion - -
Long term note payable, related party 583,137 149,976
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 (71,901) (181,785)
Accumulated deficit (11,245,922) (10,429,818)
------------ -----------
Total shareholders' equity (918,848) (212,628)
$ 386,537 $ 985,554
============ ===========
$ -
24HOLDINGS, INC.
( FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)
Three months ended Three months ended Six months ended Six months ended
June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue: $ - $ - $ - $ -
Cost of Revenue - - - -
-------------- ------------ ----------- -----------
Gross profit - - - -
Operating expenses:
General and administrative expenses 43,297 26,446 53,740 53,410
-------------- ------------ ----------- -----------
Total operating expenses 43,297 26,446 53,740 53,410
Loss from continuing operations
before provision for income taxes (43,297) (26,446) (53,740) (53,410)
Provision for income taxes - - - -
-------------- ------------ ----------- -----------
Loss from continuing operations (43,297) (26,446) (53,740) (53,410)
Loss from discontinued operations, net of taxes (566,735) (30,347) (762,264) (110,385)
Net income (loss) $ (610,032) $ (56,793) $ (816,104) $ (163,795)
======================================================================
Net loss per share - continuing operations
basic and diluted $ (0.00) $ (0.00) $ (0.00) $ (0.00)
======================================================================
Net loss per share - discontinued operations
basic and diluted $ (0.01) $ (0.00) $ (0.01) $ (0.00)
======================================================================
Net loss per share - basic and diluted $ (0.01) $ (0.00) $ (0.01) $ (0.00)
======================================================================
Weighted average number of shares outstanding -
basic and diluted 96,147,396 96,147,396 96,147,396 96,147,396
======================================================================
See accompanying notes to consolidated financial statements
24HOLDINGS, INC.
(FORMERLY KNOWN AS SCOOP, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six months ended Six months ended
June 30, 2005 June 30, 2004
------------- -------------
(Unaudited) (Unaudited)
Cash flows provided by (used for) operating activities:
Net loss $ (816,104) $ (163,795)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation 9,432 37,072
Foreign currency translation (2,589) (15,569)
Gain on sale of building - (180,247)
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 234,001 1,256,695
Loans receivable, related party (13,242) -
Prepaid expenses (29,698) (21,396)
Inventory 221,616 60,683
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts payable and accrued expenses (255,777) (1,310,520)
Income taxes payable - 95,925
Deferred taxes - (86,800)
----------- ------------
Total adjustments 163,743 (164,158)
----------- ------------
Net cash used for operating activities (652,361) (327,953)
Cash flows provided by (used for) investing activities:
Proceeds from sale of property and equipment, net of fees - 1,510,037
Due to/from related parties 428,847 60,000
----------- ------------
Net cash provided by investing activities 428,847 1,570,037
----------- ------------
Cash flows provided by (used for) financing activities:
Credit facility 136,130 (1,052,472)
Payment on long-term debt, bank - (236,578)
----------- ------------
Net cash provided by (used for) financing activities 136,130 (1,289,050)
----------- ------------
Net increase (decrease) in cash (87,384) (46,966)
Cash, beginning of period 95,032 147,841
----------- ------------
Cash, end of period $ 7,647 $ 194,807
====================================
Supplemental disclosure of cash flow information:
Interest paid $ 1,110 $ 17,573
----------- ------------
Income taxes paid $ - $ -
----------- ------------
See accompanying notes to consolidated financial statements
24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2005
(1) Description of Business:
Interim Financial Statements:
The accompanying financial statements include all adjustments (consisting
of only normal recurring accruals), which are, in the opinion of
management, necessary for a fair presentation of the results of operations
for the periods presented. Interim results are not necessarily indicative
of the results to be expected for a full year. The financial statements
should be read in conjunction with the financial statements included in the
annual report of 24Holdings Inc. and subsidiary (the "Company") on Form
10-K for the year ended December 31, 2004.
General:
24Holdings Inc., formerly known as Scoop, Inc., ("24Holdings" or the
"Company") is a majority owned subsidiary of InfiniCom AB, a publicly
listed company on the SBI market in Sweden. 24Holdings has a wholly owned
subsidiary, 24Store Europe, LTD, located in the United Kingdom, which is in
the business of selling and distributing consumer and commercial electronic
products in Europe.
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 $816,104 and
$486,398 during the six months ended June 30, 2005 and the year ended
December 31, 2004, respectively, and has an accumulated deficit of
$11,245,922 at June 30, 2005. These factors raise substantial doubt about
the Company's ability to continue as a going concern. Management is seeking
to sell the UK operating subsidiary (see Note 3). The financial statements
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Recent Accounting Pronouncements
In May 2005, the FASB issued SFAS No.154, :Accounting Changes and Error
Corrections" ("SFAS 154") which replaces Accounting Principles Board
Opinions No. 20 "Accounting Changes" and SFAS No. 3, "Reporting Accounting
Changes in Interim Financial Statements - An Amendment of APB Opinion No.
28." SFAS 154 provides guidance on the accounting for and reporting of
accounting changes and error corrections. It establishes retrospective
application, for the latest practicable date, as the required method for
reporting a change in accounting principle and the reporting of a
correction of an error. SFAS is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15,
2005 and is required to be adopted by the Company in the first quarter of
2006. The Company is currently evaluating the effect
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that the adoption of SFAS 154 will have on its consolidated results of
operations and financial condition but does not expect it to have a
material impact.
In March 2005, the staff of the SEC issued Staff Accounting Bulletin No.
107 ("SAB 107"). The interpretations in SAB 107 expresses views of the
staff regarding the interaction between SFAS 123R and certain SEC rules and
regulations and provide the staff's views regarding the valuation of
share-based payment arrangements for public companies. In particular SAB
107 provides guidance related to share-based payment transactions with
nonemployees, the transition from public entity status, valuation methods
(including assumptions such as expected volatility and expected term), the
accounting for certain redeemable financial instruments issued under
share-based payment arrangements, the classification of compensation
expense, non GAAP financial measures, first-time adoption of SFAS 123R in
an interim period, capitalization of compensation cost related to
share-based payment arrangements, the accounting for income tax effects of
share-based payment arrangements upon adoption of SFAS 123R, the
modification of employees share options prior to adoption of SFAS 123R and
disclosures in Management's Discussion and Analysis subsequent to adoption
of SFAS 123R.
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24HOLDINGS INC.
(formerly known as Scoop, Inc.)
NOTES TO FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 2005
(2) Principles of Consolidation:
The accompanying consolidated statements include the accounts of 24Holdings
and subsidiaries. All significant intercompany transactions and accounts
have been eliminated.
The financial statements of subsidiaries outside the United States are
generally measured using the local currency as the functional currency.
Accordingly, assets and liabilities are translated at year-end exchange
rates, and operating statement items are translated at average exchange
rates prevailing during the year. The resulting translation adjustments are
recorded as other comprehensive income. Exchange adjustments resulting from
foreign currency transactions are included in the determination of net
income (loss).
(3) 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 three months. The Company is in discussions with their Parent company,
Infinicom, to acquire the subsidiary in exchange for a cash payment. 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 June 30,
2005, are as follows:
Cash and cash equivalents $ 861
Accounts receivable 244,547
Inventory 56,220
Prepaid expenses and other assets 56,695
----------
Current assets held for sale 358,323
Property and equipment - held for sale 21,428
----------
Total assets held for sale $ 379,751
==========
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Accounts payable and accrued expenses 640,923
------------
Current liabilities held for sale $ 640,923
============
(4) Loan Payable, Related Party:
On May 13, 2005, Infinicom, the ultimate parent company, acquired an
intercompany receivable owing from 24Holdings to the UK subsidiary in the amount
of approximately $545,000 for a reduced amount of approximately $180,000. As the
original receivable amount is still owing from 24Holdings to Infinicom, but now
is no longer eliminated in consolidation as an intercompany loan, the Company
has recognized an loss on the receivable in the amount of the transfer of the
loan to Infinicom, less the replaced receivable from Infinicom, of approximately
$373,000 (taking into consideration foreign translation).
(5) Sale of Infinicom's Stockholding in 24Holdings Inc.:
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 The agreement is contingent on the
contemporaneous purchase by Infinicom of all the issued and outstanding capital
stock of 24Store (Europe) Ltd plus all trademarks and domain names held by
24Holdings An agreement between Infinicom and 24Store (Europe) was approved on
May 26, 2005, dependent on certain closing requirements. Additionally, as of the
closing, 344,595 shares of Series A Preferred Stock of the Company will be
issued to Infinicom in exchange for all outstanding debt owed by the Company to
Infinicom.
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.
The transactions are dependent on the filing of a Form 14C with the Securities
and Exchange Commission ("SEC"), as required under Delaware law. The 14C has
been filed with the SEC and the SEC approved the 14C on July 27th 2005. The
definitive 14C was then filed on August 11, 2005 and simultaneously mailed to
shareholders. There is a 20 day waiting period after the filing of the
Definitive 14C, before the transactions can be completed.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's interim
results of operations and financial condition. This discussion should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2004, filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
For the Three Months ended June 30, 2005: Continuing Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended June 30, 2005, were
$43,297 compared to $26,446 for the three months ended June 30, 2004. The main
areas of the increase were Legal fees for the preparation of a 14C regarding the
sales of the stock of the main stockholding in 24Holdings
For the Three Months ended June 30, 2005: Discontinued Operations
NET SALES. Net sales for the three months ended June 30, 2005 were $862,779
compared to $2,198,610 for the three months ended June 30, 2004 representing a
decrease of 60%. The reduction is the result of the loss of key sales staff and
the loss of some major accounts.
GROSS PROFIT. Gross profit for the three months ended June 30, 2005 was $142,423
compared to $256,214 for the three months ended June 30, 2004 representing a
decrease of 44%. Gross profits as a percentage of sales were 16.5% for the three
months ended June 30, 2005 compared to 11.7% for the three months ended June 31,
2004. The reason for the increase in gross profit as a percent age of sales was
the change in the sales mix, with the higher margin solutions sales becoming a
larger proportion of total sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the three months ended June 30, 2005 were
$709,118 compared to $351,875 for the three months ended June 30, 2004. The
reason for the increase was a $372,966 write down of inter company debts between
the 24Store Ltd and 24Holdings Other costs of mainly salary costs were reduced.
INTEREST EXPENSE. Interest expense, net of interest income for the three months
ended June 30, 2005 was a cost of $40 compared to a income of $4,600 for the
three months ended June 30, 2004, this reduction is the result of a worsening
cash position to support the trading losses.
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LIQUIDITY AND CAPITAL RESOURCES Continuing Operations
Cash and cash equivalents at June 30, 2005 were $6,786 compared to $928 as of
December 31, 2004.
LIQUIDITY AND CAPITAL RESOURCES Discontinued Operations
Cash and cash equivalents at June 30, 2005 were $861 compared to $94,104 as of
December 31, 2004. This decrease is the result of financing the losses for the
first six months of 2005 and as a result of the Company's poor trading results
over the last eighteen months suppliers have reduced our credit lines.
In its United Kingdom operating subsidiaries the Company has a revolving line of
credit based on 70% of eligible receivables. The revolving line of credit bears
interest at the prime rate (June 05 was 4.75 %) plus 2%.
For the Six Months ended June 30, 2005: Continuing Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the six months ended June 30, 2005, were
$53,740 compared to $53,410 for the six months ended June 30, 2004
For the Six Months ended June 30, 2005: Discontinued Operations
NET SALES. Net sales for the six months ended June 30, 2005 were $2,437,280
compared to $5,233,606 for the six months ended June 30, 2004 representing a
decrease of 53%. The reduction is the result of the loss of key sales staff and
the loss of some major accounts.
GROSS PROFIT. Gross profit for the six months ended June 30, 2005 was $321,054
compared to $634,324 for the six months ended June 30, 2004 representing a
decrease of 49%. Gross profits as a percentage of sales were 13.2% for the six
months ended June 30, 2005 compared to 12.1% for the six months ended June 31,
2004. The reason for the increase in gross profit as a percentage of sales was
the change in the sales mix, with the higher margin solutions sales becoming a
larger proportion of total sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses for the six months ended June 30, 2005 were
$1,082,849 compared to $772,808 for the six months ended June 30, 2004. The
reason for the increase was a $372,966 write down of inter company debts between
the 24Store Ltd and 24Holdings Other costs of mainly salary costs were reduced.
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INTEREST EXPENSE. Interest expense, net of interest income for the six months
ended June 30, 2005 was a cost of $569 compared to a income of $17,558 for the
six months ended June 30, 2004, this reduction is the result of a worsening cash
position to support the trading losses.
PLAN OF OPERATIONS
It is the intention of 24Holdings to sell the UK operations, and in accordance
with SFAS 144 assets and liabilities of the units have been shown as held for
sale and operations as discontinued operations for all periods presented.
Critical accounting policies
Our Management's Discussion and Analyses of Financial Conditions 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 requires management to make
estimates and assumptions that affect the reported amounts of assets 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,
allowances for bad debts, accrued expenses, financing operations and
contingencies and litigation. Management basis its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the result of which form the basis 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
allowances for bad debts, goodwill, inventory valuation the deferred tax assets.
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 Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not hold any derivative financial instruments. However, the
Company is exposed to interest rate risk. The Company believes that he market
risk arising from holdings of its financial instruments in not material.
However all of the Company's operations are conducted through its 24Store and
denominated in British pounds sterling or, prior to the sale of its Norwegian
subsidiary, Norwegian Kroner and none of the Company's revenues are generated in
US Dollars. For consolidation purposes, the assets and liabilities of 24Store
are converted to US Dollars using year-end exchange rates and results of
operations are converted using a monthly average during the year. Fluctuations
in the currency rates between the United Kingdom, Norway and the United States
may give rise to material variances in reported earnings of the Company.
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Item 4. 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 specific time periods. As of the end of the fiscal quarter
covered by this report on Form 10-Q. The Company's Chief Executive Officer and
Chief Financial Officer evaluated the effectiveness of these controls and
procedures. Based on the evaluation of 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 controls and procedures are not effective.
There were not any significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the evaluation.
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PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
On June 7, 2005, Infinicom AB, the majority stockholder of the Company, owning
approximately 77.7% of the 96,147,395 total outstanding shares of voting capital
stock of the Company as of May 26, 2005 (the record date), consented to a
proposed sale by the Company of all of the outstanding stock of its subsidiary,
24STORE (Europe) Limited, to Infinicom AB. The sale of the shares of 24STORE
held by the Company constitute substantially all of the Company's assets and
will result in the Company continuing its existence as a shell company with no
subsidiaries and no business operations. The details of the transaction are
described more fully below and in the definitive information statement filed by
the Company on Schedule 14C and mailed to the stockholders on August 11, 2005.
Item 5. Other Information.
On May 26, 2005, Infinicom AB, the majority stockholder of the Company, entered
into a Common Stock Purchase Agreement with Moyo Partners, LLC and R&R Biotech
Partners LLC (the "Purchasers"), pursuant to which Infinicom will sell its
shares of Common Stock in the Company to the Purchasers. As part of the
transaction, the Company will sell to Infinicom all of the outstanding share
capital of 24STORE and certain intellectual property rights, resulting in the
Company continuing its existence as a shell company with no subsidiaries and no
operations. The Purchasers intend to cause the Company to enter into a merger
subsequent to the closing of the sale of common stock to the Purchasers, with
one or more as of yet unidentified companies in the biotechnology industry.
Rodman & Renshaw Holding, LLC, a broker-dealer and an affiliate of R&R Biotech
Partners LLC, may assist the Company with effecting a financing transaction in
conjunction with the merger. However, there is no assurance that such a merger
will occur, or that if such a merger does occur, that it will be with a company
or companies in the biotechnology industry. Moreover, if such transaction were
to occur, there can be no assurance that it would enhance the Company's future
operations and financial results. Details of the sale and the agreements
relating to the sale are described more fully in the current report filed on
Form 8-K by the Company on June 2, 2005 and the definitive information statement
filed by the Company on Schedule 14C and mailed to the stockholders on August
11, 2005.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
31.1 Chief Executive Officer Certification pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934
31.2 Chief Financial Officer Certification pursuant to Rule 13a-14(a)
under the Securities Exchange Act of 1934
32.1 Chief Executive Officer Certification pursuant to 18 U.S.C.
Section 1350
32.2 Chief Financial Officer Certification pursuant to 18 U.S.C.
Section 1350
(b) Reports on Form 8-K.
Current Report on Form 8-K filed June 2, 2005.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 22, 2005 24HOLDINGS INC.
By: /s/ Urban von Euler
------------------------------------
Urban von Euler
President and Chief Executive Officer
By: /s/ Roger Woodward
------------------------------------
Roger Woodward
Chief Financial Officer and Secretary
(Principal Accounting Officer)
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