10KSB 1 c52419_10ksb.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007 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 INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 47 SCHOOL AVENUE CHATHAM, NEW JERSEY 07928 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 635-4047 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.001 PAR VALUE (TITLE OF CLASS) Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ] Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ] Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. |X| Indicate by check mark whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes |X| No [ ] For the year ended December 31, 2007, the issuer had no revenues. As of February 19, 2008, the aggregate market value of the voting stock held by non-affiliates of the issuer (based upon the closing price on the NASDAQ OTC Bulletin Board of $0.51 per share) was approximately $87,481. The number of shares outstanding of the issuer's common stock, $.001 par value, as of February 19, 2008 was 1,244,902 shares. DOCUMENTS INCORPORATED BY REFERENCE NONE Transitional Small Business Disclosure Format (Check One): Yes [ ] No |X| 24HOLDINGS INC. FORM 10-KSB ANNUAL REPORT TABLE OF CONTENTS PART I Item 1. Business......................................................... 2 Item 2. Properties....................................................... 8 Item 3. Legal Proceedings................................................ 9 Item 4. Submission of Matters to a Vote of Security Holders.............. 9 PART II Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities......... 9 Item 6. Plan of Operation................................................ 10 Item 7. Financial Statements............................................. 11 Item 8. Change in and Disagreements with Accountants on Accounting and Financial Disclosure......................................... 11 Item 8A(T). Controls And Procedures.......................................... 11 Item 8B. Other Information................................................ 12 PART III Item 9. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act................................................. 12 Item 10. Executive Compensation........................................... 13 Item 11. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.................................. 14 Item 12. Certain Relationships and Related Transactions, and Director Independence..................................................... 14 Item 13. Exhibits......................................................... 15 Item 14. Principal Accountant Fees and Services........................... 15 FORWARD LOOKING STATEMENT INFORMATION CERTAIN STATEMENTS MADE IN THIS ANNUAL REPORT ON FORM 10-KSB ARE "FORWARD-LOOKING STATEMENTS" REGARDING THE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT EXPECTATIONS THAT INVOLVE NUMEROUS RISKS AND UNCERTAINTIES. OUR PLANS AND OBJECTIVES ARE BASED, IN PART, ON ASSUMPTIONS INVOLVING JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS AND FUTURE BUSINESS DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND OUR CONTROL. ALTHOUGH WE BELIEVE THAT OUR ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT WILL PROVE TO BE ACCURATE. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN PARTICULARLY IN VIEW OF THE CURRENT STATE OF OUR OPERATIONS, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A STATEMENT BY US OR ANY OTHER PERSON THAT OUR OBJECTIVES AND PLANS WILL BE ACHIEVED. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THE FACTORS SET FORTH HEREIN UNDER THE HEADINGS "BUSINESS," "PLAN OF OPERATION" AND "RISK FACTORS". WE UNDERTAKE NO OBLIGATION TO REVISE OR UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON. 1 PART 1 ITEM 1. BUSINESS THE COMPANY'S HISTORY We are a Delaware corporation formerly known as Scoop, Inc. In April 2001, Scoop, Inc. amended its Certificate of Incorporation to change its name to 24Holdings Inc. ("we", "our", "us" or "24Holdings"). Prior to September 30, 2005, 24Holdings was a holding company that conducted its business operations through its wholly owned subsidiary 24STORE (Europe) Limited, a company incorporated under the laws of England formerly known as 24STORE.com Limited ("24STORE"). 24STORE commenced business operations in 1996 and focused on the sale of media products and business information services. Commencing in July 1998, 24Holdings 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 Swedish registered company ("Infinicom"), acquired 91% of the outstanding stock of 24Holdings in exchange for 100% of the stock of 24STORE. Subsequent to Infinicom's acquisition in 1999 and until September 30, 2005, the business operations of 24STORE, which represented all of 24Holding's operations, were devoted to supplying business customers with computer and electronics products. On October 23, 2006 (the "Effective Date"), we implemented a 1 for 125 reverse stock split (the "Reverse Split") of our common stock par value $0.001 per share (the "Common Stock"). Pursuant to the Reverse Split, each 125 shares of Common Stock issued and outstanding as of the Effective Date was converted into one (1) share of Common Stock. The Reverse Split also reduced the number of shares of Common Stock into which each share of Series A Convertible Preferred Stock, par value $.001 per share (the "Preferred Stock") could be converted from 100 shares to 0.8 shares. All per share data herein has been retroactively restated to reflect the Reverse Split. CHANGE OF OWNERSHIP TRANSACTIONS On May 26, 2005, we entered into a series of agreements with Infinicom in connection with our sale of all of the outstanding stock of 24STORE (the "24STORE Sale") and separately, the assignment of all rights and title to certain trademarks and domain names (the "IP Assets") that we held (the "IP Assignment"). Pursuant to the terms of the 24STORE Sale, Infinicom paid us $100,000 for our 24STORE shares and pursuant to the IP Assignment, we paid for the IP Assets through a set-off against all outstanding and contingent liabilities we owed to Infinicom determined as of the closing date of the 24STORE Sale, which amounted to $603,830. On May 26, 2005, we also entered into a Preferred Stock Purchase Agreement with Infinicom (the "Preferred Stock Agreement") pursuant to which we sold to Infinicom 344,595 shares of our Preferred Stock in exchange for the discharge of $230,879 of outstanding debt owed to Infinicom. Each share of the Preferred Stock is convertible into 0.8 shares of our Common Stock at the holder's option. On May 26, 2005, Infinicom, 24Holdings, Moyo Partners, LLC ("Moyo") and R&R Biotech Partners, LLC ("R&R", and together with Moyo, the "Purchasers") entered into a Common Stock Purchase Agreement (the "Infinicom Sale Agreement") pursuant to which, Infinicom agreed to sell to the Purchasers an aggregate of 873,369 shares of Common Stock (which included shares issuable upon conversion of the Preferred Stock) which represented approximately 83.6% of the then issued and outstanding shares of Common Stock (the "Infinicom Sale"). In return, the Purchasers (i) paid to Infinicom $500,000 in cash, and (ii) agreed that upon the occurrence of one of several post-closing events, including a merger with one or more as yet unidentified private unaffiliated operating companies, to cause 24Holdings to issue to Infinicom shares of Common Stock representing 1% of the then issued and outstanding shares of Common Stock on a fully diluted basis (the "Infinicom Additional Shares"). The consummation of the Infinicom Sale was contingent on the contemporaneous closing of the 24STORE Sale and the IP Assignment. 2 On September 30, 2005, 24Holdings and Infinicom completed the transactions contemplated in the 24STORE Sale, the IP Assignment and the Preferred Stock Agreement as described above. Infinicom forgave the $603,830 of debt 24Holdings owed to them in consideration of the IP Assignment. Effective September 30, 2005, Infinicom completed the sale to the Purchasers, under the Infinicom Sale Agreement, of 597,693 shares of Common Stock (which represented 77.7% of the 769,226 shares of Common Stock then issued and outstanding) and 344,595 shares of Preferred Stock, constituting 83.6% in the aggregate of the then issued and outstanding Common Stock (assuming the conversion of the Preferred Stock into 275,676 shares of Common Stock). As a result, the Purchasers acquired control of 24Holdings from Infinicom, with R&R beneficially owning 698,696 shares of Common Stock (assuming the conversion by R&R of 275,676 shares of Preferred Stock into 220,541 shares of Common Stock) constituting 66.9% of the then issued and outstanding shares of Common Stock, and Moyo in the aggregate beneficially owning 174,674 shares of Common Stock (assuming the conversion by Moyo of 68,919 shares of Preferred Stock into 55,135 shares of Common Stock) constituting 16.7% of the then issued and outstanding shares of Common Stock. Effective September 30, 2005 Urban von Euler resigned as our president and a director but remained our chief executive officer. Also, effective September 30, 2005, Larsake Sandin resigned as a director and each of Arnold P. Kling and Kirk M. Warshaw were appointed as directors of 24Holdings. On November 21, 2005, effective with the filing of our Form 10-Q for the quarter ended September 30, 2005, Mr. von Euler resigned as chief executive officer and Mr. Kling was appointed president and treasurer and Mr. Warshaw was appointed chief financial officer and secretary. As of that same date, 24Holdings relocated its headquarters to Chatham, New Jersey. On November 25, 2005, the Infinicom Sale Agreement was amended to provide, among other criteria, that the fair market value of the Infinicom Additional Shares would be no less than $400,000 nor more than $600,000 at the time such shares are required to be issued to Infinicom. On February 1, 2006, a total of 250,000 shares of Preferred Stock were authorized for issuance to two individuals who provided services to us. On May 12, 2006, we issued 150,000 and 100,000 shares of the Preferred Stock to Arnold P. Kling and Kirk M. Warshaw for their services as our president and chief financial officer, respectively. Each share of Preferred Stock was immediately convertible, at the holder's option, into 0.8 shares of Common Stock. Mr. Kling's services were valued at $11,250 and Mr. Warshaw's services were valued at $7,500. As a result of the Reverse Split we had adequate shares of Common Stock to facilitate the conversion of all the issued and outstanding shares of Preferred Stock. Prior to the Reverse Split, because the conversion terms of the Preferred Stock would have required more shares of Common Stock to be issued than were authorized and available for issuance, $249,628 of indebtedness had been recorded on our balance sheet as a long term liability. As a result of the Reverse Split this amount was reclassified, pursuant to EITF 00-19, as preferred equity. On November 29, 2006, the holders of all the issued and outstanding shares of Preferred Stock elected to convert all of their Preferred Stock into shares of Common Stock. As a result, the 594,595 shares of Preferred Stock outstanding were exchanged for 475,676 shares of Common Stock. As of December 31, 2007, our authorized capital stock consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock of which 1,244,902 shares of Common Stock, and no shares of Preferred Stock, are issued and outstanding. All shares of Common Stock currently outstanding are validly issued, fully paid and non-assessable. THE COMPANY TODAY Since September 30, 2005, our purpose has been to serve as a vehicle to acquire an operating business and we are currently considered a "shell" company inasmuch as we are not generating revenues, do not own an operating business, and have no specific plan other than to engage in a merger or acquisition transaction with a yet-to-be identified operating company or business. We have no employees and no material assets. 3 We currently have no definitive agreements or understandings with any prospective business combination candidates and there are no assurances that we will find a suitable business with which to combine. The implementation of our business objectives is wholly contingent upon a business combination and/or the successful sale of our securities. We intend to utilize the proceeds of any offering, any sales of equity securities or debt securities, bank and other borrowings or a combination of those sources to effect a business combination with a target business which we believe has significant growth potential. While we may, under certain circumstances, seek to effect business combinations with more than one target business, unless additional financing is obtained, we will not have sufficient proceeds remaining after an initial business combination to undertake additional business combinations. A common reason for a target company to enter into a merger with a shell company is the desire to establish a public trading market for its shares. Such a company would hope to avoid the perceived adverse consequences of undertaking a public offering itself, such as the time delays and significant expenses incurred to comply with the various federal and state securities law that regulate initial public offerings. As a result of our limited resources, unless and until additional financing is obtained we expect to have sufficient proceeds to effect only a single business combination. Accordingly, the prospects for our success will be entirely dependent upon the future performance of a single business. Unlike certain entities that have the resources to consummate several business combinations or entities operating in multiple industries or multiple segments of a single industry, we will not have the resources to diversify our operations or benefit from the possible spreading of risks or offsetting of losses. A target business may be dependent upon the development or market acceptance of a single or limited number of products, processes or services, in which case there will be an even higher risk that the target business will not prove to be commercially viable. Our officers are only required to devote a small portion of their time (less than 10%) to our affairs on a part-time or as-needed basis. Our officers may be entitled to receive compensation from a target company they identify or provide services in connection with a business combination. We expect to use outside consultants, advisors, attorneys and accountants as necessary, none of which will be hired on a retainer basis. We do not anticipate hiring any full-time employees so long as we are seeking and evaluating business opportunities. We do not expect our present management to play any managerial role for us following a business combination. Although we intend to scrutinize closely the management of a prospective target business in connection with our evaluation of a business combination with a target business, our assessment of management may be incorrect. In evaluating a prospective target business, we will consider several factors, including the following: - experience and skill of management and availability of additional personnel of the target business; - costs associated with effecting the business combination; - equity interest retained by our stockholders in the merged entity; - growth potential of the target business; - capital requirements of the target business; - capital available to the target business; - stage of development of the target business; - proprietary features and degree of intellectual property or other protection of the target business; - the financial statements of the target business; and - the regulatory environment in which the target business operates. 4 The foregoing criteria are not intended to be exhaustive and any evaluation relating to the merits of a particular target business will be based, to the extent relevant, on the above factors, as well as other considerations we deem relevant. In connection with our evaluation of a prospective target business, we anticipate that we will conduct a due diligence review which will encompass, among other things, meeting with incumbent management as well as a review of financial, legal and other information. The time and costs required to select and evaluate a target business (including conducting a due diligence review) and to structure and consummate the business combination (including negotiating and documenting relevant agreements and preparing requisite documents for filing pursuant to applicable corporate and securities laws) cannot be determined at this time. Our president intends to devote only a very small portion of his time to our affairs, and, accordingly, the consummation of a business combination may require a longer time than if he devoted his full time to our affairs. However, he will devote such time as he deems reasonably necessary to carry out our business and affairs. The amount of time devoted to our business and affairs may vary significantly depending upon, among other things, whether we have identified a target business or are engaged in active negotiation of a business combination. We anticipate that various prospective target businesses will be brought to our attention from various sources, including securities broker-dealers, investment bankers, venture capitalists, bankers and other members of the financial community, including, possibly, the executive officers and our affiliates. As a general rule, federal and state tax laws and regulations have a significant impact upon the structuring of business combinations. We will evaluate the possible tax consequences of any prospective business combination and will endeavor to structure a business combination so as to achieve the most favorable tax treatment to our company, the target business and our respective stockholders. There can be no assurance that the Internal Revenue Service or relevant state tax authorities will ultimately assent to our tax treatment of a particular consummated business combination. To the extent the Internal Revenue Service or any relevant state tax authorities ultimately prevail in recharacterizing the tax treatment of a business combination, there may be adverse tax consequences to our company, the target business, and our respective stockholders. We may acquire a company or business by purchasing the securities of such company or business. However, we do not intend to engage primarily in such activities. Specifically, we intend to conduct our activities so as to avoid being classified as an "investment company" under the Investment Company Act of 1940, as amended (the "Investment Act") and therefore avoid application of the costly and restrictive registration and other provisions of the Investment Company Act and the regulations promulgated thereunder. Section 3(a) of the Investment Company Act excepts from the definition of an "investment company" an entity which does not engage primarily in the business of investing, reinvesting or trading in securities, or which does not engage in the business of investing, owning, holding or trading "investment securities" (defined as "all securities other than government securities or securities of majority-owned subsidiaries") the value of which exceed 40% of the value of its total assets (excluding government securities, cash or cash items). We intend to operate any business in the future in a manner which will result in the availability of this exception from the definition of an investment company. Consequently, our acquisition of a company or business through the purchase and sale of investment securities will be limited. Although we intend to act to avoid classification as an investment company, the provisions of the Investment Company Act are extremely complex and it is possible that we may be classified as an inadvertent investment company. We intend to vigorously resist classification as an investment company, and to take advantage of any exemptions or exceptions from application of the Investment Company Act, which allows an entity a one-time option during any three-year period to claim an exemption as a "transient" investment company. The necessity of asserting any such resistance, or making any claim of exemption, could be time consuming and costly, or even prohibitive, given our limited resources. Various impediments to a business combination may arise, such as appraisal rights afforded the stockholders of a target business under the laws of its state of organization. This may prove to be deterrent to a particular combination. 5 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION PROVIDED IN THIS REPORT, YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN EVALUATING OUR BUSINESS, OPERATIONS AND FINANCIAL CONDITION. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US, THAT WE CURRENTLY DEEM IMMATERIAL OR THAT ARE SIMILAR TO THOSE FACED BY OTHER COMPANIES IN OUR INDUSTRY OR BUSINESS IN GENERAL, SUCH AS COMPETITIVE CONDITIONS, MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. THE OCCURRENCE OF ANY OF THE FOLLOWING RISKS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS. WE HAVE NO RECENT OPERATING HISTORY OR BASIS FOR EVALUATING PROSPECTS. Since September 30, 2005, we have no operating business or plans to develop one. We are currently seeking to enter into a merger or business combination with another company. To date, our efforts have been limited to meeting our regulatory filing requirements and searching for a merger target. WE HAVE LIMITED RESOURCES AND NO REVENUES FROM OPERATIONS, AND WILL NEED ADDITIONAL FINANCING IN ORDER TO EXECUTE ANY BUSINESS PLAN. We have limited resources, no revenues from operations to date and our cash on hand may not be sufficient to satisfy our cash requirements during the next twelve months. In addition, we will not achieve any revenues (other than insignificant investment income) until, at the earliest, the consummation of a merger and we cannot ascertain our capital requirements until such time. Further limiting our abilities to achieve revenues, in order to avoid status as an "Investment Company" under the Investment Company Act, we can only invest our funds prior to a merger in limited investments which do not invoke Investment Company status. There can be no assurance that determinations ultimately made by us will permit us to achieve our business objectives. WE WILL BE ABLE TO EFFECT AT MOST ONE MERGER, AND THUS MAY NOT HAVE A DIVERSIFIED BUSINESS. Our resources are limited and we will most likely have the ability to effect only a single merger. This probable lack of diversification will subject us to numerous economic, competitive and regulatory developments, any or all of which may have a material adverse impact upon the particular industry in which we may operate subsequent to the consummation of a merger. We will become dependent upon the development or market acceptance of a single or limited number of products, processes or services. WE DEPEND SUBSTANTIALLY UPON OUR PRESIDENT, WHOSE EXPERIENCE IS LIMITED, TO MAKE ALL MANAGEMENT DECISIONS. Our ability to effect a merger will be dependent upon the efforts of our president, Arnold Kling. Notwithstanding the importance of Mr. Kling, we have not entered into any employment agreement or other understanding with Mr. Kling concerning compensation or obtained any "key man" life insurance on any of his life. The loss of the services of Mr. Kling will have a material adverse effect on our business objectives and success. We will rely upon the expertise of Mr. Kling and do not anticipate that we will hire additional personnel. THERE MAY BE CONFLICTS OF INTEREST BETWEEN OUR MANAGEMENT AND OUR NON-MANAGEMENT STOCKHOLDERS. Conflicts of interest create the risk that management may have an incentive to act adversely to the interests of other investors. Our officers may be entitled to receive compensation from a target company they identify or provide services to in connection with a business combination. A conflict of interest may arise between our management's 6 personal pecuniary interest and their fiduciary duty to our stockholders. Further, our management's own pecuniary interest may at some point compromise their fiduciary duty to our stockholders. In addition, Mr. Kling and Mr. Warshaw, our officers and directors, are currently involved with other blank check offerings and conflicts in the pursuit of business combinations with such other blank check companies with which they and affiliates of our majority stockholder are, and may in the future be affiliated with, may arise. If we and the other blank check companies that our officers and directors are affiliated with desire to take advantage of the same opportunity, then those officers and directors that are affiliated with both companies would abstain from voting upon the opportunity. Further, Rodman & Renshaw, LLC, a registered broker-dealer and affiliate of our majority stockholder, may act as investment banker, placement agent or financial consultant to us in connection with a potential business combination transaction and may receive a fee and/or securities for such services. We cannot assure you that conflicts of interest among us, our management, Rodman & Renshaw and our stockholders will not develop. THERE IS COMPETITION FOR THOSE PRIVATE COMPANIES SUITABLE FOR A MERGER TRANSACTION OF THE TYPE CONTEMPLATED BY MANAGEMENT. We are in a highly competitive market for a small number of business opportunities which could reduce the likelihood of consummating a successful business combination. We are and will continue to be an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination. FUTURE SUCCESS IS HIGHLY DEPENDENT ON THE ABILITY OF MANAGEMENT TO LOCATE AND ATTRACT A SUITABLE ACQUISITION. The nature of our operations is highly speculative. The success of our plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While management intends to seek business combination(s) with entities having established operating histories, we cannot assure you that we will be successful in locating candidates meeting that criterion. In the event we complete a business combination, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control. WE HAVE NO AGREEMENT FOR A BUSINESS COMBINATION OR OTHER TRANSACTION. We have no definitive agreement with respect to engaging in a merger with, joint venture with or acquisition of, a private or public entity. No assurances can be given that we will successfully identify and evaluate suitable business opportunities or that we will conclude a business combination. We cannot guarantee that we will be able to negotiate a business combination on favorable terms, and there is consequently a risk that funds allocated to the purchase of our shares will not be invested in a company with active business operations. MANAGEMENT WILL CHANGE UPON THE CONSUMMATION OF A MERGER. After the closing of a merger or business combination, it is likely our current management will not retain any control or managerial responsibilities. Upon such event, Mr. Kling and Mr. Warshaw intend to resign from their positions with us. 7 CURRENT STOCKHOLDERS WILL BE IMMEDIATELY AND SUBSTANTIALLY DILUTED UPON A MERGER OR BUSINESS COMBINATION. Our Certificate of Incorporation authorized the issuance of 100,000,000 shares of Common Stock. There are currently 98,755,098 authorized but unissued shares of Common Stock available for issuance. To the extent that additional shares of Common Stock are authorized and issued in connection with a merger or business combination, our stockholders could experience significant dilution of their respective ownership interests. Furthermore, the issuance of a substantial number of shares of Common Stock may adversely affect prevailing market prices, if any, for the Common Stock and could impair our ability to raise additional capital through the sale of equity securities. CONTROL BY EXISTING STOCKHOLDER. R&R beneficially owns over 56% of the outstanding shares of our Common Stock. As a result, this stockholder is able to exercise control over matters requiring stockholder approval, including the election of directors, and the approval of mergers, consolidations and sales of all or substantially all of our assets. OUR COMMON STOCK IS A "PENNY STOCK" WHICH MAY RESTRICT THE ABILITY OF STOCKHOLDERS TO SELL OUR COMMON STOCK IN THE SECONDARY MARKET. The SEC has adopted regulations which generally define "penny stock" to be an equity security that has a market price, as defined, of less than $5.00 per share, or an exercise price of less than $5.00 per share, subject to certain exceptions, including an exception of an equity security that is quoted on a national securities exchange. Our Common Stock is not now quoted on a national exchange but is traded on Nasdaq's OTC Bulletin Board ("OTCBB"). Thus, they are subject to rules that impose additional sales practice requirements on broker-dealers who sell these securities. For example, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser's written consent to the transactions prior to the purchase. Additionally, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered underwriter, and current quotations for the securities, and, if the broker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, among other requirements, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The "penny stock" rules, may restrict the ability of our stockholders to sell our Common Stock and warrants in the secondary market. OUR COMMON STOCK HAS BEEN THINLY TRADED, LIQUIDITY IS LIMITED, AND WE MAY BE UNABLE TO OBTAIN LISTING OF OUR COMMON STOCK ON A MORE LIQUID MARKET. Our Common Stock is quoted on the NASDAQ OTC Bulletin Board ("OTCBB"), which provides significantly less liquidity than a securities exchange (such as the American or New York Stock Exchange) or an automated quotation system (such as the Nasdaq Global Market or Capital Market). There is uncertainty that we will ever be accepted for a listing on an automated quotation system or national securities exchange. Often there is currently a limited volume of trading in our Common Stock, and on many days there has been no trading activity at all. The purchasers of shares of our Common Stock may find it difficult to resell their shares at prices quoted in the market or at all. ITEM 2. PROPERTIES Our principal offices are located at 47 School Avenue, Chatham, New Jersey which are owned by an affiliate of Kirk Warshaw, a director and our chief financial officer and secretary. We occupy our principal offices on a month to month basis for no rent. We do not own or intend to invest in any real property. We currently have no policy 8 with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities. ITEM 3. LEGAL PROCEEDINGS We are not a party to any pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES (a) Market Information: Our Common Stock is traded on Nasdaq's Over-The-Counter Bulletin Board ("OTCBB") market under the symbol "TWFH". The following table sets forth, for the periods indicated and as reported on the OTCBB, the high and low bid prices for our Common Stock. Such quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions. BID PRICE High Low 2007 First Quarter $0.27 $0.27 Second Quarter $0.27 $0.27 Third Quarter $1.55 $0.27 Fourth Quarter * $0.51 $0.51 2006 First Quarter $2.50 $1.25 Second Quarter $3.75 $1.50 Third Quarter $3.25 $1.13 Fourth Quarter $1.37 $0.51 * A 1 for 125 reverse stock split was effected on October 23, 2006. All prices prior to October 23, 2006 have been adjusted as if the reverse stock split had occurred at the beginning of the first quarter of 2006. (b) Holders: There were 240 stockholders of record of our Common Stock as of February 15, 2008. (c) Dividend: We have not declared any cash dividends and do not intend to declare or pay any cash dividends in the foreseeable future. 9 ITEM 6. PLAN OF OPERATION PLAN OF OPERATION GENERAL Our plan is to seek, investigate, and consummate a merger or other business combination, purchase of assets or other strategic transaction (i.e. a merger) with a corporation, partnership, limited liability company or other operating business entity (a "Merger Target") desiring the perceived advantages of becoming a publicly reporting and publicly held corporation. We have no operating business, and conduct minimal operations necessary to meet regulatory requirements. Our ability to commence any operations is contingent upon obtaining adequate financial resources. We are not currently engaged in any business activities that provide cash flow. The costs of investigating and analyzing business combinations for the next 12 months and beyond such time will be paid with money in our treasury. During the next twelve months we anticipate incurring costs related to: (i) filing of Exchange Act reports, and (ii) costs relating to identifying and consummating a transaction with a Merger Target. We believe we will be able to meet these costs through use of funds in our treasury and additional amounts, as necessary, to be loaned to or invested in us by our stockholders, management or other investors. We may consider a business which has recently commenced operations, is a developing company in need of additional funds for expansion into new products or markets, is seeking to develop a new product or service, or is an established business which may be experiencing financial or operating difficulties and is in need of additional capital. In the alternative, a business combination may involve the acquisition of, or merger with, a company which does not need substantial additional capital, but which desires to establish a public trading market for its shares, while avoiding, among other things, the time delays, significant expense, and loss of voting control which may occur in a public offering. On November 22, 2005, following the filing of our 10-Q for the quarter ended September 30, 2005, Arnold P. Kling joined us as our president and Kirk M. Warshaw joined us as our chief financial officer and secretary. Messrs. Kling and Warshaw are only required to devote a small portion of their time (less than 10%) to our affairs on a part-time or as-needed basis. No regular compensation has or will be paid to any officer or director in their capacities as such. We do not anticipate hiring any full-time employees as long as we are seeking and evaluating business opportunities. Since September 30, 2005, we had not incurred any material costs or expenses other than those associated with our minimal operations necessary to meet regulatory requirements. As of December 31, 2007 we had cash on hand of $28,604 and working capital of $10,455. Since we have no revenue or plans to generate any revenue, if our expenses exceed our cash currently on hand we will be dependent upon loans to fund losses incurred in excess of our cash. EQUIPMENT AND EMPLOYEES As of December 31, 2007, we had no operating business, no equipment, and no employees. We do not intend to develop our own operating business but instead plan to merge with another operating company. 10 OPERATIONAL EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2007 and 2006 During the year ended December 31, 2007, we incurred $44,562 of operating expenses and for the year ended December 31, 2006, our operating expenses were $75,593. During both periods the expenses resulted primarily from accounting/auditing, legal and SEC report filing expenses. ITEM 7. FINANCIAL STATEMENTS See the index to the Financial Statements below, beginning on page F-1. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Effective March 7, 2006, we dismissed Stonefield Josephson, Inc., ("Stonefield") from serving as our independent accountants and engaged Sherb & Co., LLP ("Sherb") as our new independent accountants. There were no disagreements, adverse opinions or disclaimer of opinion by Stonefield at the time of the change. ITEM 8A(T). CONTROLS AND PROCEDURES. (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES Our management, with the participation of our president and chief financial officer, carried out an evaluation of the effectiveness of our "disclosure controls and procedures" (as defined in the Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the "Evaluation Date"). Based upon that evaluation, the president and chief financial officer, who are our sole officers and directors, concluded that as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms and (ii) is accumulated and communicated to our management, including our president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including our president and chief financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within 24Holdings have been detected. (b) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Our management has concluded that, as of December 31, 2007, our internal control over financial reporting is effective based on these criteria. This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this annual report." (c) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes in our internal controls over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 11 ITEM 8B. OTHER INFORMATION None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. The following table sets forth information concerning our officers and directors as of February 15, 2008: Name Age Title ------- --- ----- Arnold P. Kling 49 President, treasurer and director Kirk M. Warshaw 49 Chief financial officer, secretary and director ARNOLD P. KLING. Mr. Kling has served as a director since September 2005 and as our president and treasurer since November, 2005. Mr. Kling is currently a Managing Director of GH Venture Partners, LLC, a private equity and merchant banking boutique for which he also served as a Managing Director and General Counsel from 1995 to 1999. From 1999 through August 2005, Mr. Kling was the president of Adelphia Holdings, LLC, a merchant-banking firm, as well as the managing member of several private investment funds. From 1993 to 1995 he was a senior executive and General Counsel of Buckeye Communications, Inc., a Nasdaq listed licensing and multimedia company. From 1990 through 1993, Mr. Kling was an associate and partner in the corporate and financial services department of Tannenbaum, Helpern, Syracuse & Hirschtritt LLP, a mid-size New York law firm. Mr. Kling received a Bachelor of Science degree from New York University in International Business in 1980 and a Juris Doctor degree from Benjamin Cardozo School of Law in 1983. Mr. Kling currently serves as a director and president of Twin Lakes Delaware, Inc., R&R Acquisition, III, Inc., R&R Acquisition, V, Inc., R&R Acquisition, VI, Inc., R&R Acquisition, VII, Inc., R&R Acquisition, VIII, Inc. R&R Acquisition IX, Inc., R&R Acquisition X, Inc., Rodman International Enterprises I, Ltd., Rodman International Enterprise II, Ltd., and Rodman International Enterprise III, Ltd. (each a publicly reporting, non-trading company) and Newtown Lane Marketing, Incorporated (OTCBB:NWLM). KIRK M. WARSHAW. Mr. Warshaw has served as a director since September 2005 and our chief financial officer and secretary, since November, 2005. Mr. Warshaw is a financial professional who, since 1990, has provided clients in a multitude of different industries with advice on accounting, corporate finance, and general business matters. Prior to starting his own consulting firm, from 1983 to 1990, he held the various titles of controller, chief financial officer, president, and chief executive officer at three separate financial institutions in New Jersey. From 1980 through 1983, Mr. Warshaw was a Senior Accountant at the public accounting firm of Deloitte, Haskins & Sells. Mr. Warshaw is a 1980 graduate of Lehigh University and has been a CPA in New Jersey since 1982. Mr. Warshaw is currently the chief financial officer of Twin Lakes Delaware, Inc., R&R Acquisition, III, Inc., R&R Acquisition, V, Inc., R&R Acquisition, VI, Inc., R&R Acquisition, VII, Inc., and R&R Acquisition, VIII, Inc. R&R Acquisition IX, Inc., R&R Acquisition X, Inc., Rodman International Enterprises I, Ltd., Rodman International Enterprise II, Ltd., and Rodman International Enterprise III, Ltd. (each a publicly reporting, non-trading company), the chief financial officer of Newtown Lane Marketing, Incorporated (OTCBB:NWLM), and a director of two privately owned entities. Mr. Kling and Mr. Warshaw are not required to commit their full time to our business affairs and they will not devote a substantial amount of time to our business affairs. COMPENSATION AND AUDIT COMMITTEES As we only have two board members and given our limited operations, we do not have separate or independent audit or compensation committees. Our Board of Directors has determined that it does not have an "audit committee financial expert," as that term is defined in Item 407(d)(5) of Regulation S-B. In addition, we have not adopted any 12 procedures by which our stockholders may recommend nominees to our Board of Directors. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of our Common Stock (collectively, the "Reporting Persons") to report their ownership of and transactions in our Common Stock to the SEC. Copies of these reports are also required to be supplied to us. To our knowledge, during the fiscal year ending December 31, 2007 the Reporting Persons complied with all applicable Section 16(a) reporting requirements. CODE OF ETHICS We have not adopted a Code of Ethics given our limited operations. We expect that our Board of Directors following a merger or other acquisition transaction will adopt a Code of Ethics. ITEM 10. EXECUTIVE COMPENSATION. Mr. Kling and Mr. Warshaw are our sole officers and directors. Neither receives any regular compensation for their services rendered on our behalf. Since September 30, 2005 we have paid no cash compensation to our officers or directors. On February 1, 2006, our Board of Directors authorized the issuance to Mr. Kling and Mr. Warshaw, an aggregate of 250,000 shares of our Preferred Stock for services they provided to us. On May 12, 2006 we issued to Mr. Kling 150,000 shares of Preferred Stock which was determined to be worth $11,250 and to Mr. Warshaw 100,000 shares of Preferred Stock which was determined to be worth $7,500. The expense was recognized in our 2006 financial statements. No officer or director is required to make any specific amount or percentage of his business time available to us. While we do not presently anticipate engaging the services of professional firms that specialize in finding business acquisitions on any formal basis, we may engage such firms in the future, in which event we may be required to pay a finder's fee or other compensation. In no event, however, will the we pay a finder's fee or commission to any of our officers and directors or any entity with which an officer or director is. We do not have any incentive or stock option plan in effect. DIRECTOR COMPENSATION We do not currently pay any cash fees to our directors, nor do we pay directors' expenses in attending board meetings. EMPLOYMENT AGREEMENTS We are not a party to any employment agreements. 13 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information as of February 15, 2008 regarding the number and percentage of our Common Stock (being our only voting securities) beneficially owned by each officer and director, each person (including any "group" as that term is used in Section 13(d)(3) of the Exchange Act) known by us to own 5% or more of our Common Stock, and all officers and directors as a group. SHARES OF COMMON STOCK BENEFICIALLY PERCENTAGE OF NAME OF BENEFICIAL OWNER OWNED (1) OWNERSHIP -------------------------------------------- ------------------ ------------- R&R Biotech Partners, LLC 1270 Avenue of the Americas - 16th Floor New York, NY 10020 Attention: Thomas Pinou, CFO 698,696 56.1% Moyo Partners, LLC (2) c/o Arnold P. Kling 712 Fifth Avenue - 11th Floor New York, NY 10019 174,674 14.0% Arnold P. Kling (3) 712 Fifth Avenue - 11th Floor New York, NY 10019 294,674 23.7% Kirk M. Warshaw (4) 47 School Avenue Chatham, NJ 07928 80,000 6.4% All Directors and Officers (2 persons) as a group 374,674 30.1% ------------------------------------------------- (1) Unless otherwise indicated, we have been advised that all individuals or entities listed have the sole power to vote and dispose of the number of shares set forth opposite their names. For purposes of computing the number and percentage of shares beneficially owned by a security holder, any shares which such person has the right to acquire within 60 days of February 15, 2008 are deemed to be outstanding, but those shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other security holder. (2) Arnold P. Kling, our president and a director, controls Moyo Partners, LLC and therefore is the beneficial owner of the shares held by this entity. (3) Includes all the shares held by Moyo Partners, LLC. (4) Mr. Warshaw is our chief financial officer, secretary and a director. We currently do not have any equity compensation plans. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Our Board of Directors consists of Arnold Kling and Kirk Warshaw. Neither of them is independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the fiscal year ended December 31, 2007, R&R Biotech Partners, LLC made a $40,000 capital contribution to us. 14 ITEM 13. EXHIBITS EXHIBIT NO. DESCRIPTION ------- ----------- 3.1 Certificate of Designations, Rights and Preferences of Series A Preferred Stock $.001 Par Value(1) 3.2 Certificate of Incorporation (2) 3.3 Certificate of Amendment of the Certificate of Incorporation dated October 20, 1999 (2) 3.4 Certificate of Amendment of the Certificate of Incorporation dated April 1, 2001 (2) 3.5 By-Laws of the Company(3) 3.6 Certificate of Amendment of the Bylaws of the Company (3) 3.7 Certificate of Amendment of the Certificate of Incorporation dated October 11, 2006 (5) 4.1 Form of Common Stock Certificate(4) 31.1 Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.* 32.2 Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002.* ---------------------------- *Included herewith (1) Previously filed as an Exhibit in the company's Current Report on Form 8-K, filed on October 6, 2005, and incorporated herein by reference. (2) Previously filed as an Exhibit in the company's Annual Report on Form 10-K, filed on April 13, 2001, and incorporated herein by reference. (3) Previously filed as an Exhibit in the company's Annual Report on Form 10-K, filed on February 21, 2001, and incorporated herein by reference. (4) Previously filed as an Exhibit in the company's Registration Statement on Form SB-2 (Registration No. 333-15129), filed on October 30, 1996 and incorporated herein by reference. (5) Previously filed as an Exhibit in the company's quarterly report on Form 10-QSB for the period ended September 30, 2006, and incorporated herein by this reference. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES. AUDIT FEES: We incurred audit and financial statement review fees totaling $7,500 and $7,500 to Sherb, our current independent accountants, for the years ended December 31, 2007 and 2006, respectively. AUDIT-RELATED FEES: NONE. TAX FEES: We incurred tax preparation fees totaling $1,500 and $1,500 to Sherb, our current independent accountants for the years ended December 31, 2007 and 2006, respectively. ALL OTHER FEES: NONE. AUDIT COMMITTEE POLICIES AND PROCEDURES: We do not currently have a standing audit committee. The above services were approved by our Board of Directors. 15 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 24HOLDINGS INC. Date: February 19, 2008 By: /S/ARNOLD P. KLING ------------------------------- Arnold P. Kling, President In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: February 19, 2008 By: /S/ARNOLD P. KLING ------------------------ Arnold P. Kling, President and Director (Principal Executive Officer) Date: February 19, 2008 By: /S/KIRK M. WARSHAW ----------------------------------- Kirk M. Warshaw, Chief Financial Officer and Director (Principal Financial and Accounting Officer) 16 24HOLDINGS INC. INDEX Report of Independent Registered Public Accounting Firm F-2 Financial Statements: Balance Sheet as of December 31, 2007 F-3 Statements of Operations for Years Ended December 31, 2007 and 2006 F-4 Statement of Shareholders' Equity Years Ended December 31, 2007 and 2006 F-5 Statements of Cash Flows Years Ended December 31, 2007 and 2006 F-6 Notes to Financial Statements F-7 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Directors 24Holdings Inc. Chatham, New Jersey We have audited the accompanying balance sheet of 24Holdings Inc. as of December 31, 2007, and the related statements of operations, shareholders' equity (deficit), cash flows for each of the years then ended December 31, 2007 and 2006. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 24Holdings Inc. as of December 31, 2007, and the results of its operations and its cash flows for each of the years then ended December 31, 2007 and 2006, in conformity with accounting principles generally accepted in the United States. /s/ Sherb & Co., LLP Certified Public Accountants New York, New York February 15, 2008 F-2 24HOLDINGS INC. BALANCE SHEET December 31, 2007 ASSETS Current Assets Cash and cash equivalents $ 28,604 ------------------ Total current Assets 28,604 ------------------ TOTAL ASSETS $ 28,604 ================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accrued expenses $ 18,149 ------------------ TOTAL CURRENT LIABILITIES 18,149 ------------------ TOTAL LIABILITIES 18,149 SHAREHOLDERS' EQUITY Convertible 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, 1,244,902 shares issued and outstanding 1,245 Additional paid-in capital 10,687,358 Accumulated deficit (10,678,148) ------------------ TOTAL SHAREHOLDERS' EQUITY 10,455 ------------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 28,604 ================== The accompanying notes are an integral part of these financial statements. F-3 24HOLDINGS INC. STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31, 2007 2006 --------------------------------- Revenues $ - $ - Expenses General and administrative 44,562 75,593 --------------------------------- Total operating expenses 44,562 75,593 Net Loss $ (44,562) $ (75,593) ================================= Net loss per share - basic and diluted $ (0.04) (0.09) ================================= Weighted average number of common shares - basic and diluted 1,244,902 $ 842,407 ================================= The accompanying notes are an integral part of these financial statements. F-4 24HOLDINGS INC STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
TOTAL PREFERRED STOCK COMMON STOCK ADDITIONAL SHAREHOLDERS' ------------------------- --------------------------- PAID-IN ACCUMULATED EQUITY SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIT) ------------------------------------------------------------------------------------------------ Balance at December 31, 2005 - $ - 769,226 $ 769 $ 10,398,206 $(10,557,993) $ (159,018) Reclassification of Debt into Preferred Stock 594,879 595 249,033 249,628 Conversion of Preferred Stock into Common (594,879) (595) 475,676 476 119 - - Net loss for year ended December 31, 2006 - - - - - (75,593) (75,593) ------------------------------------------------------------------------------------------------ Balance at December 31, 2006 - - 1,244,902 1,245 10,647,358 (10,633,586) 15,017 Capital Contribution - - - - 40,000 40,000 Net loss for year ended December 31, 2007 - - - - (44,562) (44,562) ------------------------------------------------------------------------------------------------ Balance at December 31, 2007 - $ - 1,244,902 $ 1,245 $ 10,687,358 $(10,678,148) $ 10,455 ================================================================================================
The accompanying notes are an integral part of these financial statements. F-5 24HOLDINGS INC. STATEMENTS OF CASH FLOWS Year Ended December 31, December 31, 2007 2006 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss (44,562) (75,593) Preferred shares issues for services - 18,750 Changes in operating assets and liabilities Accounts receivable - 7,500 Increase (decrease) in accrued expenses 3,530 (21,022) ------------- ------------- NET CASH USED IN OPERATING ACTIVITIES (41,032) (70,365) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Investing Activities - - ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Contributed Capital 40,000 - ------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 40,000 - ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS (1,032) (70,364) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 29,636 100,000 ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,604 $ 29,636 ============= ============= SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION Interest paid $ - $ - ============= ============= Income taxes $ - $ - ============= ============= The accompanying notes are an integral part of these financial statements. F-6 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 1 - DESCRIPTION OF COMPANY: We are a Delaware corporation formerly known as Scoop, Inc. In April 2001 Scoop, Inc. amended its Certificate of Incorporation to change its name to 24Holdings Inc. ("we", "our", "us", "24Holdings" or the "Company"). Prior to September 30, 2005, 24Holdings was a holding company that conducted its business operations through its wholly owned subsidiary 24STORE (Europe) Limited, a company incorporated under the laws of England formerly known as 24STORE.com Limited ("24STORE"). 24STORE commenced business operations in 1996 and focused on the sale of media products and business information services. 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 Swedish registered company ("Infinicom"), acquired 91% of the outstanding stock of the Company in exchange for 100% of the stock of 24STORE. Subsequent to Infinicom's acquisition in 1999 and until September 30, 2005, the business operations of 24STORE, which represented all of the Company's operations, were devoted to supplying business customers with computer and electronics products. On October 23, 2006 (the "Effective Date"), the Company implemented a 1 for 125 reverse stock split (the "Reverse Split") of its common stock par value $0.001 per share (the "Common Stock"). Pursuant to the Reverse Split, each 125 shares of Common Stock issued and outstanding as of the Effective Date was converted into one (1) share of Common Stock. The Reverse Split also reduced the number of shares of Common Stock into which each share of our Series A Convertible Preferred Stock, par value $0.001 (the "Preferred Stock") could be converted from 100 shares to 0.8 shares. All per share data herein has been retroactively restated to reflect the Reverse Split. Since September 30, 2005, our purpose has been to serve as a vehicle to acquire an operating business and we are currently considered a "shell" company inasmuch as we are not generating revenues, do not own an operating business, and have no specific plan other than to engage in a merger or acquisition transaction with a yet-to-be identified operating company or business. We have no employees and no material assets. CHANGE OF OWNERSHIP TRANSACTIONS On May 26, 2005, we entered into a series of agreements with Infinicom in connection with our sale of all of the outstanding stock of 24STORE (the "24STORE Sale") and separately, the assignment of all rights and title to certain trademarks and domain names (the "IP Assets") that we held (the "IP Assignment"). Pursuant to the terms of the 24STORE Sale, Infinicom paid us $100,000 for our 24STORE shares and pursuant to the IP Assignment, we paid for the IP Assets through a set-off against all outstanding and contingent liabilities we owed to Infinicom determined as of the closing date of the 24STORE Sale, which amounted to $603,830. F-7 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 1 - DESCRIPTION OF COMPANY (continued): On May 26, 2005, we also entered into a Preferred Stock Purchase Agreement with Infinicom (the "Preferred Stock Agreement") pursuant to which we sold to Infinicom 344,595 shares of Preferred Stock in exchange for the discharge of $230,879 of outstanding debt owed to Infinicom. Each share of the Preferred Stock is convertible into 0.8 shares of our Common Stock at the holder's option. On May 26, 2005, Infinicom, 24Holdings, Moyo Partners, LLC ("Moyo") and R&R Biotech Partners, LLC ("R&R", and together with Moyo, the "Purchasers") entered into a Common Stock Purchase Agreement (the "Infinicom Sale Agreement") pursuant to which, Infinicom agreed to sell to the Purchasers an aggregate of 873,369 shares of Common Stock (which included shares issuable upon conversion of the Preferred Stock) which represented approximately 83.6% of the then issued and outstanding shares of Common Stock (the "Infinicom Sale"). In return, the Purchasers (i) paid to Infinicom $500,000 in cash, and (ii) agreed that upon the occurrence of one of several post-closing events, including a merger with one or more as yet unidentified private unaffiliated operating companies, to cause 24Holdings to issue to Infinicom shares of Common Stock representing 1% of the then issued and outstanding shares of Common Stock on a fully diluted basis (the "Infinicom Additional Shares"). The consummation of the Infinicom Sale was contingent on the contemporaneous closing of the 24STORE Sale and the IP Assignment. On September 30, 2005, 24Holdings and Infinicom completed the transactions contemplated in the 24STORE Sale, the IP Assignment and the Preferred Stock Agreement as described above. Infinicom forgave the $603,830 of debt 24Holdings owed to them in consideration of the IP Assignment. Effective September 30, 2005, Infinicom completed the sale to the Purchasers, under the Infinicom Sale Agreement, of 597,693 shares of Common Stock (which represented 77.7% of the 769,226 shares of Common Stock then issued and outstanding) and 344,595 shares of Preferred Stock, constituting 83.6% in the aggregate of the then issued and outstanding Common Stock (assuming the conversion of the Preferred Stock into 275,676 shares of Common Stock). As a result, the Purchasers acquired control of 24Holdings from Infinicom, with R&R beneficially owning 698,696 shares of Common Stock (assuming the conversion by R&R of 275,676 shares of Preferred Stock into 220,541 shares of Common Stock) constituting 66.9% of the then issued and outstanding shares of Common Stock, and Moyo in the aggregate beneficially owning 174,674 shares of Common Stock (assuming the conversion by Moyo of 68,919 shares of Preferred Stock into 55,135 shares of Common Stock) constituting 16.7% of the then issued and outstanding shares of Common Stock. F-8 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 1 - DESCRIPTION OF COMPANY (continued): Effective September 30, 2005 Urban von Euler resigned as our president and a director but remained our chief executive officer. Also, effective September 30, 2005, Larsake Sandin resigned as a director and each of Arnold P. Kling and Kirk M. Warshaw were appointed as directors of 24Holdings. On November 21, 2005, effective with the filing of our Form 10-Q for the quarter ended September 30, 2005, Mr. von Euler resigned as chief executive officer and Mr. Kling was appointed president and treasurer and Mr. Warshaw was appointed chief financial officer and secretary. As of that same date, 24Holdings relocated its headquarters to Chatham, New Jersey. On November 25, 2005, the Infinicom Sale Agreement was amended to provide, among other criteria, that the fair market value of the Infinicom Additional Shares would be no less than $400,000 nor more than $600,000 at the time such shares are required to be issued to Infinicom. On February 1, 2006, a total of 250,000 shares of Preferred Stock were authorized for issuance to two individuals who provided services to the Company. On May 12, 2006, we issued 150,000 and 100,000 shares of the Preferred Stock to Arnold P. Kling and Kirk M. Warshaw for their services as the Company's president and chief financial officer, respectively. Each share of Preferred Stock is immediately convertible, at the holder's option, into 0.8 shares of Common Stock. Mr. Kling's services were valued at $11,250 and Mr. Warshaw's services were valued at $7,500. As a result of the Reverse Split we had adequate shares of Common Stock to facilitate the conversion of all the issued and outstanding shares of Preferred Stock. Prior to the Reverse Split, because the conversion terms of the Preferred Stock would have required more shares of Common Stock to be issued than were authorized and available for issuance, $249,628 of indebtedness had been recorded on our balance sheet as a long term liability. As a result of the Reverse Split this amount was reclassified, pursuant to EITF 00-19, as preferred equity. On November 29, 2006, the holders of all the issued and outstanding shares of Preferred Stock elected to convert all of their Preferred Stock into shares of Common Stock. As a result, the 594,595 shares of Preferred Stock outstanding were exchanged for 475,676 shares of Common Stock. As of December 31, 2007, our authorized capital stock consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock of which 1,244,902 shares of Common Stock, and no shares of Preferred Stock, are issued and outstanding. All shares of Common Stock currently outstanding are validly issued, fully paid and non-assessable. During the year ended December 31, 2007, R&R Biotech Partners, LLC made a $40,000 capital contribution to the Company. F-9 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 1 - DESCRIPTION OF COMPANY (continued): THE COMPANY TODAY Since September 30, 2005, our purpose has been to serve as a vehicle to acquire an operating business and we are currently considered a "shell" company inasmuch as we are not generating revenues, do not own an operating business, and have no specific plan other than to engage in a merger or acquisition transaction with a yet-to-be identified operating company or business. We have no employees and no material assets. Commencing with the filing of our Form 10-Q for the quarter ended June 30, 2004, all of our computer related business services activities have been accounted for as Discontinued Operations. As such, all of the prior activity has been shown in the financials as one line item that is labeled "Income (Loss) from Discontinued Operations, net of taxes." Our activities since September 2005 are shown in the Income Statement under the section labeled "Loss from Continuing Operations." These amounts are for expenses incurred since September 30, 2005 and are of the nature we expect to incur in the future, whereas the Income (loss) from Discontinued Operations are from activities we are no longer engaged in. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Company's accounting policies are in accordance with accounting principles generally accepted in the United States of America. Outlined below are those policies considered particularly significant. (a) Use of Estimates: In preparing financial statements in accordance with accounting principles generally accepted in the United States of America, management makes certain estimates and assumptions, where applicable, that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. While actual results could differ from those estimates, management does not expect such variances, if any, to have a material effect on the financial statements. (b) Statements of Cash Flows: For purposes of the statements of cash flows the Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents. (c) Earnings (Loss) Per Share: Basic earnings (loss) per share has been computed on the basis of the weighted average number of common shares outstanding during each period presented according to the provisions of SFAS No. 128 "EARNINGS PER SHARE". Diluted earnings (loss) per share reflects the potential dilution that could occur if options or other contracts to issue shares of common stock were exercised or converted to common stock as long as the effect of their inclusion is not anti-dilutive. We currently have no options or contracts to issue shares of common stock outstanding. F-10 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): (d) Income Taxes: The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for operating loss and tax credit carry forwards and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. (e) 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. (f) Equity Based Compensation The Company adopted SFAS No. 123R, "Share Based Payments." SFAS No. 123R requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards. In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company's stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company's forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company's actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The last equity based compensation issued by the Company was more than two years ago and such shares were fully vested upon issuance, hence an expense was recorded at that time. F-11 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): (g) New Accounting Pronouncements FASB 141(revised 2007) - Business Combinations In December 2007, the FASB issued FASB Statement No. 141 (revised 2007), Business Combinations. This Statement replaces FASB Statement No. 141, Business Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. This Statement defines the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date that the acquirer achieves control. This Statement's scope is broader than that of Statement 141, which applied only to business combinations in which control was obtained by transferring consideration. By applying the same method of accounting--the acquisition method--to all transactions and other events in which one entity obtains control over one or more other businesses, this Statement improves the comparability of the information about business combinations provided in financial reports. This Statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions specified in the Statement. That replaces Statement 141's cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. This Statement applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more businesses (the acquirer), including those sometimes referred to as "true mergers" or "mergers of equals" and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. This Statement applies to all business entities, including mutual entities that previously used the pooling-of-interests method of accounting for some business combinations. It does not apply to: (a) The formation of a joint venture, (b) The acquisition of an asset or a group of assets that does not constitute a business, (c) A combination between entities or businesses under common control, (d) A combination between not-for-profit organizations or the acquisition of a for-profit business by a not-for-profit organization. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. Management believes this Statement will have no impact on the financial statements of the Company once adopted until the Company effectuates a merger or acquisition with a yet-to-be identified operating company or business. F-12 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): (g) New Accounting Pronouncements (continued): FASB 160 - Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51 In December 2007, the FASB issued FASB Statement No. 160 - Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51. This Statement applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. Not-for-profit organizations should continue to apply the guidance in Accounting Research Bulletin No. 51, Consolidated Financial Statements, before the amendments made by this Statement, and any other applicable standards, until the Board issues interpretative guidance. This Statement amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. Before this Statement was issued, limited guidance existed for reporting noncontrolling interests. As a result, considerable diversity in practice existed. So-called minority interests were reported in the consolidated statement of financial position as liabilities or in the mezzanine section between liabilities and equity. This Statement improves comparability by eliminating that diversity. A noncontrolling interest, sometimes called a minority interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require: (a) The ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent's equity, (b) The amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, (c) Changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently. A parent's ownership interest in a subsidiary changes if the parent purchases additional ownership interests in its subsidiary or if the parent sells some of its ownership interests in its subsidiary. It also changes if the subsidiary reacquires some of its ownership interests or the subsidiary issues additional ownership interests. All of those transactions are economically similar, and this Statement requires that they be accounted for similarly, as equity transactions, (d) When a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any noncontrolling equity investment rather than F-13 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued): (g) New Accounting Pronouncements (continued): the carrying amount of that retained investment, (e) Entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is prohibited. This Statement shall be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except for the presentation and disclosure requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods presented. Management believes this Statement will have no impact on the financial statements of the Company once adopted. NOTE 3 - OTHER RECEIVABLES - RELATED PARTY An amount of $7,500 was agreed upon to be reimbursed to the Company by Infinicom AB for certain post-closing expenses yet to be paid. Such monies were received in March 2006. NOTE 4 - SHAREHOLDERS' EQUITY: On the Effective Date, the Company implemented the Reverse Split of its Common Stock. Pursuant to the Reverse Split, each 125 shares of Common Stock issued and outstanding as of the Effective Date was converted into one (1) share of Common Stock. The Reverse Split also reduced the number of shares of Common Stock into which each share of Preferred Stock could be converted from 100 shares to 0.8 shares. All per share data herein has been retroactively restated to reflect the Reverse Split. On September 30, 2005, Moyo Partners, LLC and R&R Biotech Partners, LLC purchased 597,693 shares of Common Stock and 344,595 shares of Preferred Stock from Infinicom, AB in exchange for aggregate gross proceeds of $500,000 and 1% of our outstanding shares following the occurrence of one of several possible post-closing corporate events. The Common Stock acquired represented 77.7% of the shares of Common Stock then outstanding and together with the shares of Preferred Stock constituted 83.6% in the aggregate of the Company's then issued and outstanding Common Stock (assuming conversion of the Preferred Stock into 275,676 shares of Common Stock). F-14 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 4 - SHAREHOLDERS' EQUITY(continued): On February 1, 2006, a total of 250,000 shares of Preferred Stock were authorized for issuance to two individuals who provided services to the Company. On May 12, 2006, the Company filed a Certificate of Amendment to the Certificate of Designation for the Preferred Stock with the Secretary of State of the State of Delaware, increasing the number of shares designated as Preferred Stock from 500,000 to 600,000 shares. As a result of this filing, the Company issued 150,000 and 100,000 shares of the Preferred Stock to Arnold Kling and Kirk Warshaw for their services as the Company's President and Chief Financial Officer, respectively. Each share of Preferred Stock was convertible, at the holder's option, into 0.8 share of Common Stock. Mr. Kling's services were valued at $11,250 and Mr. Warshaw's services were valued at $7,500. On November 29, 2006, the holders of all the issued and outstanding shares of Preferred Stock elected to convert all of their Preferred Stock into shares of Common Stock. As a result, the 594,595 shares of Preferred Stock outstanding were exchanged for 475,676 shares of Common Stock. As of December 31, 2007, our authorized capital stock consists of 100,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock of which 1,244,902 shares of Common Stock, and no shares of Preferred Stock, are issued and outstanding. All shares of Common Stock currently outstanding are validly issued, fully paid and non-assessable. During the year, the majority stockholder contributed an additional $40,000 to the Company. F-15 24HOLDINGS INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2007 and 2006 NOTE 5 - INCOME TAXES: 2007 2006 --------- --------- Deferred tax assets and liabilities consist of the following: Deferred tax assets: Net operating loss carry forwards $ 325,000 $ 310,000 Less valuation allowance (325,000) (310,000) --------- --------- - - ========= ========= The provision for income taxes differs from the amount computed by applying the US statutory income tax rate as follows: December 31, 2007 2006 Provision for expected federal statutory rate (35)% (35)% Loss for which no benefit is available or a 35% 35% valuation allowance has been recorded --% --% At December 31, 2007, the Company had approximately $930,000 of net operating loss carry forwards ("NOL's") available which expires in various years beginning in 2027. The deferred tax asset and related valuation increased by $15,000 during 2007. The utilization of the net operating loss carryforward has been limited as to its use pursuant to the Internal Revenue Code Section 382 due to the recent change in ownership of the Company. The benefits of these NOL's may be reduced in the future if the Company is successful in establishing a new business. NOTE 6 - COMMITMENTS AND CONTINGENCIES Currently the Company operates from the offices of its CFO and director on a rent-free basis. No amounts have been recorded for the use of such office space used since such rent expense is deemed to be insignificant.