-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BPpkNknAMcxZnmgrIek/jGF6RiA/uqFUdxkHgEOzIk/HtmyVpW1CV8aCCuFrdduT tO5f7gKX/q6dwuh1jzBnIQ== 0000950127-01-500268.txt : 20010815 0000950127-01-500268.hdr.sgml : 20010815 ACCESSION NUMBER: 0000950127-01-500268 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 24HOLDINGS INC CENTRAL INDEX KEY: 0001025315 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 330726608 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22281 FILM NUMBER: 1708727 BUSINESS ADDRESS: STREET 1: CYBERIA HOUSE STREET 2: CHURCH STREET CITY: BASINGSTOKE RG217QN STATE: X0 ZIP: 00000 BUSINESS PHONE: 011441256867800 MAIL ADDRESS: STREET 1: CYBERIA HOUSE STREET 2: CHURCH STREET CITY: BASINGSTOKE RG217QN STATE: X0 ZIP: 00000 FORMER COMPANY: FORMER CONFORMED NAME: SCOOP INC/DE DATE OF NAME CHANGE: 19970325 10-Q 1 a10-q_.txt FORM 10-Q 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, 2001 ------------- 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 --- --- APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes X No --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Number of shares of Common Stock outstanding at August 13, 2001: 85,486,716. PART I FINANCIAL INFORMATION Item 1. Financial Statements. 24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC. CONSOLIDATED BALANCE SHEET) June 30, 2001 December 31, 2000 ------------- ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 511,194 $ 2,261,181 Accounts receivable 3,466,558 3,464,412 Inventory 465,658 652,362 Prepaids and other current assets 30,583 43,111 --------------- -------------- Total current assets 4,473,993 6,421,066 Loan receivable, related party - 100,200 Property and equipment, net of accumulated depreciation and amortization 1,274,907 1,414,994 Goodwill, net of accumulated amortization 2,029,667 2,519,996 --------------- -------------- $ 7,778,567 $ 10,456,256 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 2,764,093 $ 4,918,228 Credit facility 1,292,981 1,704,704 Accrued expenses and other current liabilities 432,370 - Income taxes payable 10,773 Short term loans, related party 546,390 617,406 Current portion of loan payable 89,767 54,223 --------------- -------------- Total current liabilities 5,125,601 7,305,334 Loan payable, bank less current portion 288,687 381,396 Deferred taxes 334,400 338,000 Shareholders' equity: Preferred stock; $0.001 par value, 5,000,000 authorized, no shares issued and outstanding - - Common stock; $0.001 par value, 100,000,000 authorized, 85,493,352 shares issued and outstanding 26,081 26,081 Additional paid in capital 9,855,851 9,855,851 Other comprehensive loss (340,367) (232,572) Accumulated deficit (7,511,686) (7,217,834) --------------- -------------- Total shareholders' equity 2,029,879 2,431,526 --------------- -------------- $ 7,778,567 $ 10,456,256 =============== ============== See accompanying notes to consolidated financial statements 1
24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC.) CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS) Three months Three months Six months Six months ended ended ended ended June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000 ------------- ----------------- ------------- ------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenue: $5,333,934 $5,482,773 $12,941,764 $13,352,081 Cost of Revenue 4,743,266 4,992,089 11,622,875 12,086,185 ---------- ---------- ----------- ----------- Gross profit 590,668 490,684 1,318,889 1,265,896 Operating expenses: Distribution costs 96,945 100,851 235,120 251,474 General and administrative expenses 445,460 765,124 1,067,206 1,547,817 Depreciation 22,727 27,590 48,726 56,689 Amortization 184,585 153,212 373,887 330,260 Gain on sale of subsidiary (230,322) - (230,322) - Total operating expenses 519,395 1,046,777 1,494,618 2,186,240 ---------- ---------- ----------- ----------- Net income before interest and other income and interest expense 71,273 (556,093) (175,729) (920,344) Interest and other income (4,643) (2,134) (10,560) (5,249) Interest expense 34,097 4,494 71,822 204,823 ---------- ---------- ----------- ----------- Net income before provision for income taxes 41,819 (558,453) (236,991) (1,119,918) Provision for income taxes (1,800) (19,450) (3,600) (19,450) ---------- ---------- ----------- ----------- Net income (loss) $ 43,619 $ (539,003) $ (233,391) $(1,100,468) ========== ========== =========== =========== Net loss per share - basic and diluted $ 0.00 $ (0.01) $ (0.00) $ (0.01) ========== ========== =========== =========== Weighted average number of shares outstanding - basic and diluted 85,493,352 85,486,716 85,493,352 76,859,981 ========== ========== =========== ============
See accompanying notes to consolidated financial statements 2
24HOLDINGS INC. (FORMERLY KNOWN AS SCOOP, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Six months Six months ended ended June 30, 2001 June 30, 2000 ------------- ------------- (Unaudited) (Unaudited) Cash flows provided by (used for) operating activities: Net income (loss) $(233,391) $(1,100,468) Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities: Depreciation 48,662 56,689 Amortization 373,364 330,260 Gain on sale of subsidiary (230,322) - Foreign currency translation (74,580) 45,304 Other - net - (33,699) Changes in assets and liabilities: (Increase) decrease in assets: Accounts receivable (528,228) 37,998 Loans receivable, related party 35,922 - Prepaid expenses 95,513 - Inventory 14,584 (724,199) Changes in assets and liabilities: (Increase) decrease in assets: Accounts payable and accrued expenses (753,544) (677,277) Income taxes payable (11,788) (41,911) Deferred taxes (3,600) - ---------- ---------- Total adjustments (1,034,017) (1,006,836) ---------- ---------- Net cash used for operating activities (1,267,408) (2,107,304) Cash flows provided by (used for) investing activities: Acquisition of property and equipment 14,780 (29,981) Due to/from related parties (20,013) 60,120 Group distribution, common ownership - - Net cash provided by (used for) investing ---------- ----------- activities (5,232) 30,140 ---------- ----------- Cash flows provided by (used for) financing activities: Proceeds from issuance of common stock - 1,870,426 Proceeds from sale of subsidiary, net of cash sold (105,879) Credit facility (337,351) Payment on long-term debt, related parties - (1,351,255) Payment on long-term debt, bank (34,116) (33,883) ---------- ----------- Net cash provided by (used for) financing activities (477,346) 485,288 ---------- ----------- Net increase (decrease) in cash (1,749,987) (1,591,876) Cash, beginning of period 2,261,181 1,860,445 ---------- ---------- Cash, end of period $ 511,194 $ 268,569 ========== ========== Supplemental disclosure of cash flow information: Interest paid $ 53,965 $ 73,687 ========= ========= Income taxes paid $ - $ 1,149 ========= ========= Supplemental disclosure of non-cash investing and financing activities: Shares issued in satisfaction of debt 8,008,441 =========
See accompanying notes to consolidated financial statements 3 24HOLDINGS INC. (formerly known as Scoop, Inc.) NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2001 (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 subsidiaries on Form 10-K for the year ended December 31, 2000. General: 24Holdings Inc., formerly known as Scoop, Inc. ("24Holdings" or the "Company"), was incorporated in 1996 in the state of Delaware as an online news provider. In July 1998, the Company filed a petition for relief under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy Court for the Central District of California. In September 1999, the Company filed a Plan of Reorganization ("Plan") with the Bankruptcy Court. The Plan was confirmed on October 5, 1999. Pursuant to the Plan, the Company was acquired in a reverse merger with 24STORE (Europe) Limited, formerly known as 24STORE.com Limited ("24STORE"), whose parent company acquired 91% of the outstanding shares of the Company, or 60,783,219 of newly issued shares, in exchange for all the outstanding shares of 24STORE. 24STORE was incorporated July 28, 1998 in England and Wales, and was a wholly owned subsidiary of InfiniCom AB, a publicly listed company on the SBI market in Sweden, whose principal activity is that of a holding company. On April 9, 1999 24STORE entered into a Share Purchase Agreement, whereby it acquired from its parent company several companies registered in Sweden and Norway. This transaction was treated as a reorganization. All of the Swedish entities either entered bankruptcy or ceased operations soon after transfer. On May 6, 1999, 24STORE acquired three companies registered in the United Kingdom, related through common ownership. All the consolidated entities are in the business of selling and distributing consumer and commercial electronic products in Europe. 4 24HOLDINGS INC. (formerly known as Scoop, Inc.) NOTES TO FINANCIAL STATEMENTS SIX MONTHS ENDED JUNE 30, 2001 (2) Principles of Consolidation: The accompanying consolidated statements include the accounts of 24Holdings Inc. and subsidiaries. All significant intercompany transactions and accounts have been eliminated. The financial statements of subsidiaries outside the United States are generally measured using the local currency as the functional currency. Accordingly, assets and liabilities are translated at year-end exchange rates, and operating statement items are translated at average exchange rates prevailing during the year. The resulting translation adjustments are recorded as other comprehensive income. Exchange adjustments resulting from foreign currency transactions are included in the determination of net income (loss). (3) Sale of Subsidiary: Due to the continued losses of the Company's Norwegian subsidiary, 24STORE AS, the Company made a determination during March 2001 to divest itself of the Norwegian subsidiary. On April 1, 2001, the Company, disposed of all of the issued shares of 24STORE AS, for 1.00 Pound Sterling, or approximately $1.45. Following this transaction the Company has no further rights, liabilities or obligations with regard to 24STORE AS. The transaction does not qualify for accounting treatment as a discontinued operation as the subsidiary is in the same line of business as the Company. No loss will be recognized on this disposition; all goodwill associated with the subsidiary's acquisition was previously written off in recognition of an impairment loss on the investment. Furthermore, as a result of the subsidiary having negative net assets, the Company recorded a gain on disposition in the second quarter of 2001. 5 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, 2000, filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS For the Six Months ended June 30, 2001: NET SALES. Net sales for the six months ended June 30, 2001 were $12,941,764 compared to $13,352,081 for the six months ended June 30, 2000 representing a decrease of 3.1%. The results for 2000 include 6 months of sales from the Norwegian operation; the results for 2001 only include three months of sales in Norway as the operation was sold on April 1, 2001. In local currency net sales for the six months ended June 30, 2001 for the UK operations increased by 6%. GROSS PROFIT. Gross profits for the six months ended June 30, 2001 were $1,318,889 compared to $1,265,896 for the six months ended June 30, 2000 representing an increase of 4.0%. Gross profits as a percentage of sales were 10.2% for the six months ended June 30, 2001 compared to 9.5% for the six months ended June 30, 2000. The improvement in gross profit between periods is the result of a change in sales mix in the UK from distribution customers to end user customers. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative ("SG&A") expenses for the six months ended June 30, 2001 were $1,302,326 compared to $1,799,291 for the six months ended June 30, 2000. The decrease in the operational companies is primarily attributable to the weakness of local currencies against the US Dollar and the sale of the Norwegian operations on April 1, 2001. In local currencies the SG&A expenses showed a 3% increase. In the parent company the reduction in SG&A expenses is due to reduced professional and legal costs compared with the costs incurred during the previous period in order to bring the Company into compliance with SEC reporting requirements. GOODWILL AMORTIZATION. Goodwill amortization, reflecting the excess of purchase price of the May 1999 acquisition over the fair value of the assets acquired, for the six months ended June 30, 2001 was $373,887 compared to $330,260 for the six months ended June 30, 2000. The difference is due to foreign currency exchange rate fluctuations between periods. PROFIT ON SALE OF THE NORWEGIAN COMPANY. The Norwegian company was sold on April 1, 2001 for a nominal amount. However because the Norwegian company had negative net assets and the original investment by the Company had been fully written off, the sale resulted in a profit on disposal in the consolidated accounts of the Company. INTEREST EXPENSE. Interest expense, net of interest income for the six months ended June 30, 2001 was $61,262 compared to $199,574 for the six months ended June 30, 2000 representing a decrease of 69.3%. The decrease in interest expenses is primarily attributable to the Company now having lower interest bearing debts to related parties following the restructuring of debt that occurred on March 24, 2000. See discussion in "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of the company's annual report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission. INCOME TAXES. In the six months ended June 30, 2001 there was an income tax credit of $3,600 compared to an income tax credit in the six months ended June 30, 2000 of $19,450. This credit in June 2001 is a reduction in the deferred tax accrual, the credit in June 2000 is the result in an over accrual of taxes in the UK operating company from the previous year. 6 RESULTS OF OPERATIONS For the Three Months ended June 30, 2001: NET SALES. Net sales for the three months ended June 30, 2001 were $5,333,934 compared to $5,482,773 for the three months ended June 30, 2000, representing a decrease of 3.0%. The results for 2000 include 3 months of sales from the Norwegian operation, which was sold April 1, 2001. In local currency, Net sales for the three months ended June 30, 2001 for the UK operations increased by 5.2%. GROSS PROFIT. Gross profits for the three months ended June 30, 2001 were $590,668 compared to $490,684 for the three months ended June 31, 2000, representing an increase of 16.6%. Gross profits as a percentage of sales were 11.1% for the three months ended June 30, 2001 compared to 8.9% for the three months ended June 30, 2000. The improvement in gross profit between periods is the result of a change in sales mix in the UK from distribution customers to end user customers. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses for the three months ended June 30, 2001 were $542,405 compared to $865,975 for the three months ended June 30, 2000. The decrease in the operational companies is primarily attributable to a reduction of local currencies against the US Dollar and the sale of the Norwegian operation. In local currencies SG&A expenses show a 9% increase, mainly the result of an increase in the sales force. In the parent company the reduction in SG&A expenses is due to reduced professional and legal costs compared with the costs incurred during the previous period in order to bring the Company into compliance with SEC reporting requirements. GOODWILL AMORTIZATION. Goodwill amortization, reflecting the excess of purchase price of the May 1999 acquisition over fair value of assets acquired, for the three months ended June 30, 2001 was $184,585 compared to $153,212 for the three months ended June 30, 2000. The difference is due to foreign currency exchange rate fluctuations between periods. PROFIT ON SALE OF THE NORWEGIAN COMPANY. The Norwegian company was sold on April 1, 2001 for a nominal amount. However because the Norwegian company had negative net assets and the original investment by the Company had been fully written off, the sale resulted in a profit on disposal in the consolidated accounts of the Company. INTEREST EXPENSE. Interest expense, net of interest income for the three months ended June 30, 2001 was $29,454 compared to $2,360 for the three months ended June 30, 2000. The increase in interest expenses is the result of accrued interest on loans from related companies agreed to in December 2000. See discussion in "Part II - Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations" of the company's annual report on Form 10-K for the fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission. INCOME TAXES. In the three months ended June 30, 2001 there was an income tax credit of $1,800 compared to an income tax in the three months ended June 30, 2000 of $19,450. This credit in June 2001 is a reduction in the deferred tax accrual, the credit in June 2000 is the result in an over accrual in the UK operating company from the previous year. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at June 30, 2001 were $511,194 compared to $2,261,181 as of December 31, 2000. This decrease is primarily due to the position of cash advances on the revolving line of credit at year end and at June 30, 2001, also the timing of payments to creditors at year end and at June 30, 2001. In addition the reported cash position was further reduced by weakening foreign exchange rates in translation into US Dollars. 7 Cash used by operating activities for the six months ended June 30, 2001 was $1,267,408 compared to net cash used by operating activities of $2,107,304 in the six months ended June 30, 2000. The cash used for both years, reflects the timing of payments to creditors at period end 2001 and year-end 2000. The improvement on the first six months of 2001 against the first six months of 2000 is a result of the improvement in profitability in the UK operating company and reduced professional costs of the parent company. These improvements were offset by changes in current assets. At June 30, 2001 the Company had a working capital deficit of $651,607 compared to a working capital deficit of $884,270 as of December 31, 2000. Cash used by investing activities was $5,232 in the six months ended June 30, 2001 compared to cash provided of $30,140 in June 30, 2000. Cash used for financing activities was $477,346 in the six months ended June 30, 2001, representing payments on bank loans and on the Company's credit facility which was not being utilized at June 30, 2000. Cash provided by financing activities in the six months ended June 30, 2000 was $485,288, representing the net effect of capital raised through the sale of stock and the retirement of long term debt to related parties. In its UK operating subsidiaries the Company has (1) a revolving line of credit based on 70% of eligible receivables, (2) a ten year mortgage expiring in 2008, secured by the underlying property and (3) a $75,000 overdraft facility. The mortgage, the revolving line of credit and the overdraft facility bear interest at the prime rate plus 2%. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company does not hold any derivative financial instruments. However, the Company is exposed to interest rate risk. The Company believes that the market risk arising from holdings of its financial instruments is not material. However, all of the Company's operations are conducted through its subsidiary 24STORE and denominated in British pounds sterling or, prior to the sale of its Norwegian subsidiary, Norwegian Kroner, and none of the Company's revenues are generated in US Dollars. For consolidation purposes, the assets and liabilities of 24STORE are converted to US Dollars using year-end exchange rates and results of operations are converted using a monthly average rate during the year. Fluctuations in the currency rates between the United Kingdom, Norway and the United States may give rise to material variances in reported earnings of the Company. 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. None. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter for which this report is filed. 9 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 14, 2001 24HOLDINGS INC. By: /s/ Martin Clarke ---------------------------------------- Martin Clarke President and Chief Executive Officer By: /s/ Roger Woodward ---------------------------------------- Roger Woodward Chief Financial Officer and Principal Accounting Officer 10 -----END PRIVACY-ENHANCED MESSAGE-----