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.
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.
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 the accounting guidance, 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, 2009, 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, were 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.
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.
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.
ITEM 1A.
ITEM 1A.
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 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 SHAREHOLDERS.
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 personal pecuniary interest and their fiduciary duty to our shareholders. Further, our management’s own pecuniary interest may at some point compromise their fiduciary duty to our shareholders. In addition, Messrs. Kling and 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 shareholder 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 shareholder (“Rodman & Renshaw”), 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 shareholders 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 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. Management has not identified any particular industry or specific business within an industry for evaluation. 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.
CURRENT SHAREHOLDERS 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 our 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 shareholders 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 our Common Stock and could impair our ability to raise additional capital through the sale of equity securities.
CONTROL BY EXISTING SHAREHOLDER.
R&R beneficially owns over 56% of the outstanding shares of our Common Stock. As a result, this shareholder is able to exercise control over matters requiring shareholder approval, including the election of directors, and the approval of mergers, consolidations and sales of all or substantially all of 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 OTCBB, which provides significantly less liquidity than a securities exchange (such as the NYSE Amex 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 1B.
ITEM 1B.
UNRESOLVED STAFF COMMENTS.
None.
ITEM 2.
ITEM 2.
PROPERTIES.
Our principal offices are located at 133 Summit Avenue, Suite 22, Summit, NJ which are owned by Kirk M. Warshaw, LLC (the “LLC”), an affiliated company of Kirk Warshaw, our chief financial officer and secretary. We occupy our principal offices on a month to month basis. On January 1, 2009, we began paying a quarterly fee of $500 for to the LLC for the use and occupancy, and administrative services, related to our principal offices. We do not own or intend to invest in any real property. We currently have no policy 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.
(a) Market Information. Our Common Stock is traded on the 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.
(b) Holders. As of March 19, 2010, there were 223 record holders of all of our issued and outstanding shares of Common Stock.
(c) Dividend Policy
We have not declared or paid any cash dividends on our Common Stock and do not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on our earnings, if any, our capital requirements and financial condition and such other factors as the Board of Directors may consider.
ITEM 6.
SELECTED FINANCIAL DATA.
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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, 2009 we had cash on hand of $22,030 and positive working capital of $6,521. Since we have no revenue or plans to generate any revenue, when our accrued expenses exceed our cash on-hand we will be dependent upon loans or contributions of capital to fund obligations in excess of our cash.
EQUIPMENT AND EMPLOYEES
As of December 31, 2009, 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.
Results of Operations
Continuing Operating Expenses For The Fiscal Year Ended December 31, 2009 Compared To The Fiscal Year Ended December 31,
Because we have not had any business operations since September 30, 2005, we had no revenues during the years ended December 31, 2009 and 2008, respectively. Total expenses for the years ended December 31, 2009 increased to $39,044, as compared to $30,916 for the same period in 2008. The expenses incurred in 2009 and 2008 constituted professional and filing fees. The increase in expenses in 2009 is related to an increase in transfer agent fees.
Liquidity and Capital Resources
Our principal source of operating capital recently has been provided in the form of loans and capital contributions from our shareholders. We do not have any revenues from any operations absent a merger or other combination with an operating company and no assurance can be given that such a merger or other combination will occur or that we can engage in any public or private sales of our equity or debt securities to raise working capital. We are dependent upon future loans from our present shareholders or management and there can be no assurances that our present shareholders or management will make any loans to us. At December 31, 2009, we had cash of $22,030 and working capital of $6,521.
Our present material commitments are professional and administrative fees and expenses associated with the preparation of filings with the SEC and other regulatory requirements. In the event that we engage in any merger or other combination with an operating company, it is likely that we will have additional material commitments.
Commitments
We do not have any commitments which are required to be disclosed in tabular form as of December 31, 2009.
Off-Balance Sheet Arrangements
As of December 31, 2009, we have no off-balance sheet arrangements such as guarantees, retained or contingent interest in assets transferred, obligation under a derivative instrument and obligation arising out of or a variable interest in an unconsolidated entity.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the index to the Financial Statements below, beginning on page.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A(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 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 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, management’s evaluation of controls and procedures can only provide reasonable 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, 2009. 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, 2009, 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 last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information concerning our officers and directors as of March 19, 2010:
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 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. During the past five years, Mr. Kling was a director of Enthrust Financial Services, Inc., n/k/a Rodman & Renshaw Capital Group, Inc. (NASDAQ: RODM). Mr. Kling currently also serves as a Director and President of 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), Mattmar Minerals, Inc. (OTCBB: MTMS), Newtown Lane Marketing, Incorporated (OTCBB: NTWN) and Protalex, Inc. (OTCBB: PRTX). Mr. Kling’s professional experience and background with other companies and with us, as our president and director since 2005, have given him the expertise needed to serve as one of our directors.
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. During the past five years, Mr. Warshaw was a director of Empire Financial Holding Company, n/k/a Jesup & Lamont, Inc. (NYSE AMEX: JLI). Mr. Warshaw is currently also the Chief Financial Officer of 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), Mattmar Minerals, Inc. (OTCBB: MTMS), Newtown Lane Marketing, Incorporated (OTCBB: NTWN) and Protalex, Inc. (OTCBB: PRTX), and a Director and the Chief Financial Officer of 24Holdings Inc. (OTCBB: TWFH). Mr. Warshaw’s professional experience and background with other companies and with us, as our chief financial officer and director since 2005, have given him the expertise needed to serve as one of our directors.
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-K. In addition, we have not adopted any
procedures by which our shareholders 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 ended December 31, 2009 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 11.
EXECUTIVE COMPENSATION.
Messrs. Kling and Warshaw are our sole officers and directors. Neither receives any regular compensation for their services rendered on our behalf. Neither Mr. Kling nor Mr. Warshaw received any compensation during the years ended December 31, 2009 and 2008. 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 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 affiliated. 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.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of March 19, 2010 regarding the number and percentage of our Common Stock (being our only voting securities) beneficially owned by each officer, 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.
(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 March 19, 2010 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 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Our Board of Directors consists of Arnold Kling and Kirk Warshaw. Neither of them are independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the fiscal year ended December 31, 2009, R&R Biotech Partners, LLC made a $51,026 capital contribution to us.
On January 29, 2009, we entered into an agreement with Kirk M. Warshaw, LLC (the “LLC”) for the use and occupancy, and administrative services, related to our principal offices. The agreement provides for quarterly payments from us to the LLC of $500. The effective date of the agreement is January 1, 2009. Kirk Warshaw, our chief financial officer, is a managing member of the LLC.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Sherb & Co., LLP (“Sherb & Co.”) is our independent registered public accounting firm.
Audit Fees
The aggregate fees billed by Sherb & Co. for professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q or services that are normally provided in connection with statutory and regulatory filings were $13,500 and $13,500 for the fiscal years ended December 31, 2009 and 2008, respectively.
Audit-Related Fees
There were no fees billed by Sherb & Co. for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements for the fiscal years ended December 31, 2009 and 2008, respectively.
Tax Fees
The aggregate fees billed by Sherb & Co. for professional services for tax compliance, tax advice, and tax planning were $1,500 and $1,500 for the fiscal years ended December 31, 2009 and 2008, respectively. These fees were incurred for the preparation of our tax returns.
All Other Fees
There were no fees billed by Sherb & Co. for other products and services for the fiscal years ended December 31, 2009 and 2008, respectively.
Pre-Approval Policy
We do not currently have a standing audit committee. The above services were approved by our Board of Directors.
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following financial statements and the report of our independent registered public accounting firm, are filed herewith.
•
Report of Independent Registered Public Accounting Firm (Sherb & Co.-2009 and 2008)
•
Balance Sheets at December 31, 2009 and 2008
•
Statements of Operations for the years ended December 31, 2009 and 2008
•
Statements of Changes in Shareholders’ Equity (Deficit) for the period from December 31, 2005 to December 31, 2009
•
Statements of Cash Flows for the years ended December 31, 2009 and 2008
•
Notes to Financial Statements
2. Financial Statement Schedules.
Schedules are omitted because the information required is not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits Incorporated by Reference or Filed with this Report.
*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.
(6)
Previously filed as an Exhibit in the company’s Annual Report on Form 10-K, filed on February 23, 2009 and incorporated herein by reference.
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.
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.
24Holdings Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders’ and Directors
24Holdings Inc.
Chatham, New Jersey
We have audited the accompanying balance sheets of 24Holdings Inc. as of December 31, 2009 and 2008, and the related statements of operations, shareholders’ equity (deficit), cash flows for each of the years then ended December 31, 2009 and 2008. 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 audits.
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, 2009 and 2008, and the results of its operations and its cash flows for each of the years then ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States.
/s/SHERB & CO, LLP
Certified Public Accountants
New York, NY
March 16, 2010
24HOLDINGS INC.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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 or 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 the accounting guidance, 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, 2009, 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 years ended December 31, 2009 and 2008, R&R Biotech Partners, LLC made $51,026 and $15,000 capital contributions, respectively, to the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
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 the Financial Accounting Standards Board’s (FASB) guidance for “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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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 accounting guidance for “Share Based Payments” requires the recognition of the fair 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.
(g) New Accounting Pronouncements
All new accounting pronouncements issued but not yet effective have been reviewed and determined to be not applicable. As a result, the adoption of such new accounting pronouncements, when effective, is not expected to have a material impact on the financial position of the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
NOTE 3 - SHAREHOLDERS’ EQUITY (DEFICIT):
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 were 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).
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, 2009, 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 fiscal years 2009, 2008 and 2007, the majority stockholder contributed an additional $51,026, $15,000 and $40,000, respectively, to the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
NOTE 4 - INCOME TAXES:
The provision for income taxes differs from the amount computed by applying the US statutory income tax rate as follows:
At December 31, 2009, the Company had approximately $1,000,000 of net operating loss carry forwards (“NOL’s”) available which expires in various years beginning in 2029. The deferred tax asset and related valuation increased by $14,000 during 2009. 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 5 - COMMITMENTS AND CONTINGENCIES
Effective January 1, 2009, the Company operates from the offices of its CFO and director for $500 a quarter. The Company has recorded rent expense of $2,000 and $0 for the years ended December 31, 2009 and 2008, respectively.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 16, 2010, and has determined that there were no subsequent events to recognize or disclose in these financial statements
ITEM 6.
SELECTED FINANCIAL DATA.
As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this item.
ITEM 7.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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, 2009 we had cash on hand of $22,030 and positive working capital of $6,521. Since we have no revenue or plans to generate any revenue, when our accrued expenses exceed our cash on-hand we will be dependent upon loans or contributions of capital to fund obligations in excess of our cash.
EQUIPMENT AND EMPLOYEES
As of December 31, 2009, 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.
Results of Operations
Continuing Operating Expenses For The Fiscal Year Ended December 31, 2009 Compared To The Fiscal Year Ended December 31,
Because we have not had any business operations since September 30, 2005, we had no revenues during the years ended December 31, 2009 and 2008, respectively. Total expenses for the years ended December 31, 2009 increased to $39,044, as compared to $30,916 for the same period in 2008. The expenses incurred in 2009 and 2008 constituted professional and filing fees. The increase in expenses in 2009 is related to an increase in transfer agent fees.
Liquidity and Capital Resources
Our principal source of operating capital recently has been provided in the form of loans and capital contributions from our shareholders. We do not have any revenues from any operations absent a merger or other combination with an operating company and no assurance can be given that such a merger or other combination will occur or that we can engage in any public or private sales of our equity or debt securities to raise working capital. We are dependent upon future loans from our present shareholders or management and there can be no assurances that our present shareholders or management will make any loans to us. At December 31, 2009, we had cash of $22,030 and working capital of $6,521.
Our present material commitments are professional and administrative fees and expenses associated with the preparation of filings with the SEC and other regulatory requirements. In the event that we engage in any merger or other combination with an operating company, it is likely that we will have additional material commitments.
Commitments
We do not have any commitments which are required to be disclosed in tabular form as of December 31, 2009.
Off-Balance Sheet Arrangements
As of December 31, 2009, we have no off-balance sheet arrangements such as guarantees, retained or contingent interest in assets transferred, obligation under a derivative instrument and obligation arising out of or a variable interest in an unconsolidated entity.
ITEM 7A.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.
ITEM 8.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the index to the Financial Statements below, beginning on page.
ITEM 9.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
ITEM 9A(T).
ITEM 9A(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 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 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, management’s evaluation of controls and procedures can only provide reasonable 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, 2009. 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, 2009, 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 last fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets forth information concerning our officers and directors as of March 19, 2010:
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 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. During the past five years, Mr. Kling was a director of Enthrust Financial Services, Inc., n/k/a Rodman & Renshaw Capital Group, Inc. (NASDAQ: RODM). Mr. Kling currently also serves as a Director and President of 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), Mattmar Minerals, Inc. (OTCBB: MTMS), Newtown Lane Marketing, Incorporated (OTCBB: NTWN) and Protalex, Inc. (OTCBB: PRTX). Mr. Kling’s professional experience and background with other companies and with us, as our president and director since 2005, have given him the expertise needed to serve as one of our directors.
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. During the past five years, Mr. Warshaw was a director of Empire Financial Holding Company, n/k/a Jesup & Lamont, Inc. (NYSE AMEX: JLI). Mr. Warshaw is currently also the Chief Financial Officer of 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), Mattmar Minerals, Inc. (OTCBB: MTMS), Newtown Lane Marketing, Incorporated (OTCBB: NTWN) and Protalex, Inc. (OTCBB: PRTX), and a Director and the Chief Financial Officer of 24Holdings Inc. (OTCBB: TWFH). Mr. Warshaw’s professional experience and background with other companies and with us, as our chief financial officer and director since 2005, have given him the expertise needed to serve as one of our directors.
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-K. In addition, we have not adopted any
procedures by which our shareholders 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 ended December 31, 2009 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 11.
ITEM 11.
EXECUTIVE COMPENSATION.
Messrs. Kling and Warshaw are our sole officers and directors. Neither receives any regular compensation for their services rendered on our behalf. Neither Mr. Kling nor Mr. Warshaw received any compensation during the years ended December 31, 2009 and 2008. 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 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 affiliated. 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.
ITEM 12.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information as of March 19, 2010 regarding the number and percentage of our Common Stock (being our only voting securities) beneficially owned by each officer, 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.
(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 March 19, 2010 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 13.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Our Board of Directors consists of Arnold Kling and Kirk Warshaw. Neither of them are independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the fiscal year ended December 31, 2009, R&R Biotech Partners, LLC made a $51,026 capital contribution to us.
On January 29, 2009, we entered into an agreement with Kirk M. Warshaw, LLC (the “LLC”) for the use and occupancy, and administrative services, related to our principal offices. The agreement provides for quarterly payments from us to the LLC of $500. The effective date of the agreement is January 1, 2009. Kirk Warshaw, our chief financial officer, is a managing member of the LLC.
ITEM 14.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Sherb & Co., LLP (“Sherb & Co.”) is our independent registered public accounting firm.
Audit Fees
The aggregate fees billed by Sherb & Co. for professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q or services that are normally provided in connection with statutory and regulatory filings were $13,500 and $13,500 for the fiscal years ended December 31, 2009 and 2008, respectively.
Audit-Related Fees
There were no fees billed by Sherb & Co. for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements for the fiscal years ended December 31, 2009 and 2008, respectively.
Tax Fees
The aggregate fees billed by Sherb & Co. for professional services for tax compliance, tax advice, and tax planning were $1,500 and $1,500 for the fiscal years ended December 31, 2009 and 2008, respectively. These fees were incurred for the preparation of our tax returns.
All Other Fees
There were no fees billed by Sherb & Co. for other products and services for the fiscal years ended December 31, 2009 and 2008, respectively.
Pre-Approval Policy
We do not currently have a standing audit committee. The above services were approved by our Board of Directors.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
1. Financial Statements. The following financial statements and the report of our independent registered public accounting firm, are filed herewith.
•
Report of Independent Registered Public Accounting Firm (Sherb & Co.-2009 and 2008)
•
Balance Sheets at December 31, 2009 and 2008
•
Statements of Operations for the years ended December 31, 2009 and 2008
•
Statements of Changes in Shareholders’ Equity (Deficit) for the period from December 31, 2005 to December 31, 2009
•
Statements of Cash Flows for the years ended December 31, 2009 and 2008
•
Notes to Financial Statements
2. Financial Statement Schedules.
Schedules are omitted because the information required is not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits Incorporated by Reference or Filed with this Report.
*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.
(6)
Previously filed as an Exhibit in the company’s Annual Report on Form 10-K, filed on February 23, 2009 and incorporated herein by reference.
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.
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.
24Holdings Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders’ and Directors
24Holdings Inc.
Chatham, New Jersey
We have audited the accompanying balance sheets of 24Holdings Inc. as of December 31, 2009 and 2008, and the related statements of operations, shareholders’ equity (deficit), cash flows for each of the years then ended December 31, 2009 and 2008. 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 audits.
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, 2009 and 2008, and the results of its operations and its cash flows for each of the years then ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States.
/s/SHERB & CO, LLP
Certified Public Accountants
New York, NY
March 16, 2010
24HOLDINGS INC.
BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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 or 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 the accounting guidance, 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, 2009, 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 years ended December 31, 2009 and 2008, R&R Biotech Partners, LLC made $51,026 and $15,000 capital contributions, respectively, to the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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.
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 the Financial Accounting Standards Board’s (FASB) guidance for “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.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
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 accounting guidance for “Share Based Payments” requires the recognition of the fair 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.
(g) New Accounting Pronouncements
All new accounting pronouncements issued but not yet effective have been reviewed and determined to be not applicable. As a result, the adoption of such new accounting pronouncements, when effective, is not expected to have a material impact on the financial position of the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
NOTE 3 - SHAREHOLDERS’ EQUITY (DEFICIT):
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 were 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).
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, 2009, 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 fiscal years 2009, 2008 and 2007, the majority stockholder contributed an additional $51,026, $15,000 and $40,000, respectively, to the Company.
24HOLDINGS INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2009 and 2008
NOTE 4 - INCOME TAXES:
The provision for income taxes differs from the amount computed by applying the US statutory income tax rate as follows:
At December 31, 2009, the Company had approximately $1,000,000 of net operating loss carry forwards (“NOL’s”) available which expires in various years beginning in 2029. The deferred tax asset and related valuation increased by $14,000 during 2009. 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 5 - COMMITMENTS AND CONTINGENCIES
Effective January 1, 2009, the Company operates from the offices of its CFO and director for $500 a quarter. The Company has recorded rent expense of $2,000 and $0 for the years ended December 31, 2009 and 2008, respectively.
NOTE 6 - SUBSEQUENT EVENTS
The Company has evaluated subsequent events through March 16, 2010, and has determined that there were no subsequent events to recognize or disclose in these financial statements