SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
______________________
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
_________ _________
Commission File No. 811-08469
ACORN HOLDING CORP.
_________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 59-2332857
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
599 Lexington Avenue, New York, New York 10022-6030
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (212) 536-4089
____________________
1251 Avenue of the Americas, 45th Floor, New York, New York 10020-1104
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Former name, former address and former fiscal year, if changed since last
report.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports) and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
_____________ ____________
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: 1,585,642 shares of common stock, $.01 par value, as of August 13, 2002
(which reflects the two-for-five reverse stock split effective April 19, 1999).
Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM BALANCE SHEETS
June 30, December 31,
2002 2001
------------- --------------
ASSETS (unaudited)
---------
CURRENT ASSETS
Cash and cash equivalents $ 1,116,237 $ 1,476,244
Investment securities 15,094 16,360
Accounts receivable - trade 188,788 147,316
Inventories 2,174,280 2,135,351
Prepaid expenses 92,192 30,284
------------ -----------
Total current assets 3,586,591 3,805,555
------------ -----------
MACHINERY AND EQUIPMENT, net of
accumulated depreciation of
$1,911,204 as of June 30, 2001 and
$1,684,469 as of December 31, 2001 2,613,981 2,605,481
------------ -----------
OTHER ASSETS
Other investments 9,108 9,108
Deposits 130,000 -
Goodwill 42,767 42,767
Deferred income tax asset 1,255,546 1,236,718
------------ -----------
1,437,421 1,288,593
------------ -----------
$ 7,637,993 $ 7,699,629
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable 139,496 128,779
Accrued expenses
Deferred compensation 649,284 524,006
Other 150,287 197,765
Due to bank 200,000 -
------------ -----------
Total current liabilities 1,139,067 850,550
------------ -----------
STOCKHOLDERS' EQUITY
Common stock 15,927 16,273
Additional paid-in capital 11,796,352 11,847,860
Accumulated deficit (5,307,855) (4,957,776)
Accumulated other comprehensive income 4,696 4,770
------------ -----------
6,509,120 6,911,127
Treasury stock, at cost (10,194) (62,048)
------------ -----------
Total stockholders' equity 6,498,926 6,849,079
------------ -----------
$ 7,637,993 $ 7,699,629
============ ===========
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Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ------------------------------
2002 2001 2002 2001
------------ ------------ ------------- -------------
Net sales $ 1,034,620 $ 1,551,326 $ 2,239,428 $ 3,685,920
------------ ------------- ------------ -------------
Costs and expenses
Cost of sales 867,278 1,171,106 1,890,102 2,647,844
Selling, general and administrative 365,294 415,427 753,324 876,842
------------ ------------- ------------ -------------
1,232,572 1,586,533 2,643,426 3,524,686
------------ ------------- ------------ -------------
Operating (loss) profit (197,952) (35,207) (403,998) 161,234
------------ ------------- ------------ -------------
Other income
Interest income 2,111 13,995 5,440 27,549
------------ ------------- ------------ -------------
2,111 13,995 5,440 27,549
------------ ------------- ------------ -------------
(Loss) income before income tax expense (195,841) (21,212) (398,558) 188,783
Income tax (benefit) expense - (9,589) (48,479) 81,340
------------ ------------- ------------ -------------
Net (loss) income $ (195,841) $ (11,623) $ (350,079) $ 107,443
============ ============= ============ =============
(Loss) earnings per share (basic and diluted) $ (0.12) $ (0.01) $ (0.22) $ 0.07
============ ============= ============ =============
Weighted average shares outstanding - basic 1,585,642 1,627,195 1,585,642 1,627,195
============ ============= ============ =============
Weighted average shares outstanding - diluted 1,585,642 1,627,213 1,585,642 1,627,213
============ ============= ============ =============
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Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
From January 1, 2002 to June 30, 2002 (unaudited)
Accumulated
Additional other
Common paid-in Accumulated comprehensive Treasury
stock capital deficit income stock Total
---------- ------------- --------------- ------------- ------------ ------------
Balance at January 1, 2002 $ 16,273 $ 11,847,860 $ (4,957,776) $ 4,770 $ (62,048) $ 6,849,079
Comprehensive income (loss)
Net loss - - (350,079) - - (350,079)
Net unrealized gain on investments
in securities available-for-sale - - - (74) - (74)
------------
Total comprehensive loss (350,153)
------------
Treasury shares retired (346) (51,508) - - (51,854) -
---------- ------------- -------------- ---------- ----------- ------------
Balance at June 30, 2002 $ 15,927 $ 11,796,352 $ (5,307,855) $ 4,696 $ (10,194) $ 6,498,926
========== ============= ============== ========== =========== ============
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Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Six months ended June 30,
(unaudited)
2002 2001
------------ -------------
Cash flows from operating activities
Net (loss) income $ (350,079) $ 107,443
Adjustments to reconcile net (loss) income
to net cash used in operating activities
Depreciation and amortization 226,735 222,454
Deferred income taxes (18,828) 58,962
(Increase) decrease in assets
Accounts receivable (41,472) 52,091
Inventories (38,929) 225,130
Prepaid expenses and other assets (61,908) (45,351)
Increase (decrease) in liabilities
Accounts payable 10,717 (64,039)
Accrued expenses 77,800 178,345
------------ -------------
Net cash provided by operating
activities (195,964) 585,035
------------ -------------
Cash flows from investing activities
Purchase of machinery and equipment,
including deposits (365,235) (224,223)
Purchase of investments 1,192 167
Note receivable payments received - 40,000
------------ -------------
Net cash used in investing
activities (364,043) (184,056)
------------ -------------
Cash flows from financing activities
Proceeds from bank 200,000 -
Purchase of treasury stock - (18,854)
------------ -------------
Net cash used in financing
activities 200,000 (18,854)
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (360,007) 382,125
Cash and cash equivalents at beginning of period 1,476,244 1,012,124
------------ -------------
Cash and cash equivalents at end of period $ 1,116,237 $ 1,394,249
============ =============
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Acorn Holding Corp. and Subsidiaries
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2002
(Unaudited)
NOTE A - ORGANIZATION AND PURPOSE
Acorn Holding Corp. (Acorn) was incorporated under the laws of the State of
Delaware on September 8, 1983. Acorn is a holding company for it's wholly-owned
subsidiaries, Recticon Enterprises, Inc. (Recticon) and Automotive Industries,
Inc. (Automotive). Recticon is organized to engage in the business of
manufacturing and processing of silicon wafers for the semi-conductor industry.
Automotive is an inactive subsidiary.
NOTE B - BASIS OF PRESENTATION
Interim financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the results for the periods. The
2001 balance sheet has been derived from the audited financial statements
contained in the 2001 Annual Report to Stockholders. These interim financial
statements conform with the requirements for interim financial statements and
consequently do not include all the disclosures normally required by accounting
principles generally accepted in the United States. The results for the six
months ended June 30, 2002 are not necessarily indicative of the results to be
expected for the full year. Reporting developments have been updated where
appropriate.
NOTE C - RECENT ACCOUNTING PRONOUNCEMENTS
On July 20, 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Intangible
Assets". SFAS No. 141 eliminates the use of the pooling method of accounting and
requires the use of purchase accounting for all business combinations initiated
after June 30, 2001. It also provides guidance on purchase accounting related to
the recognition of intangible assets separate from goodwill. SFAS No. 142
changes the accounting for goodwill from an amortization method to an
impairment-only approach. Under SFAS No. 142, goodwill will be tested annually
and whenever events or circumstances occur indicating that goodwill might be
impaired. SFAS No. 141 and SFAS No. 142 are effective for all business
combinations completed after June 30, 2001. The Company is in the process of
adopting this statement. As of December 31, 2001, the beginning of fiscal 2002,
the Company no longer amortizes goodwill. The Company's goodwill is subject to
an annual impairment test, using a two-step process. If impairment losses are
required to be recognized upon the initial application of this statement, they
would be accounted for as a cumulative effect of the change in accounting
principles. The Company has not yet completed the impairment tests prescribed by
the Statement, but the Company does not believe the adoption of Statement No.
142 will have a significant impact on the Company's consolidated financial
position or results of operations.
In August 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. SFAS 143 applies to all entities, including rate-regulated
entities, that have legal obligations associated with the retirement of a
tangible long-lived asset that result from acquisition, constructions or
development and (or) normal operations of the long-lived asset. The application
of this Statement is not limited to certain specialized industries, such as the
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extractive or nuclear industries. This Statement also applies, for example, to a
company that operates a manufacturing facility and has a legal obligation to
dismantle the manufacturing plant and restore the underlying land when it ceases
operation of that plant. A liability for an asset retirement obligation should
be recognized if the obligation meets the definition of a liability and can be
reasonably estimated. The initial recording should be at fair value. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002, with earlier application encouraged. The provisions of the Statement
are not expected to have a material impact on the financial condition or results
of operations of the Company.
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS 144 retains the existing requirements to
recognize and measure the impairment of long-lived assets to be held and used or
to be disposed of by sale. However, SFAS 144 makes changes to the scope and
certain measurement requirements of existing accounting guidance. SFAS 144 also
changes the requirements relating to reporting the effects of a disposal or
discontinuation of a segment of a business. SFAS 144 is effective for financial
statements issued for fiscal years beginning after December 15, 2001 and interim
periods within those fiscal years. The adoption of this Statement did not have a
significant impact on the financial condition or results of operations of the
Company.
NOTE D - RECONCILIATION OF EARNINGS (LOSS)
The following schedule reconciles the net income or (loss) for 2001 to
comparable amounts for 2002 as a result of the elimination of amortization of
goodwill as of January 1, 2002:
Three months ended Six months ended
June 30 June 30
2002 2001 2002 2001
---- ---- ---- ----
Net income (loss) (195,841) (11,623) (350,079) 107,443
Add amortization of goodwill - 21,382 - 42,764
--------- -------- --------- -------
Reconciled net income (loss) (195,841) 9,759 (350,079) 150,207
========= ======== ========= =======
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales for the three-month period ended June 30, 2002 decreased $516,706
from the three-month period ended June 30, 2002 while sales for the six month
period ended June 30, 2002 decreased $1,446,492 from the six month period ended
June 30, 2001. The Company realized an operating loss for the three months ended
June 30, 2002 of $(197,952) and an operating loss of $(403,998) for the six
month period ended June 30, 2002 as compared to an operating loss of $(35,027)
and an operating profit of $161,234, respectively, over the comparable prior
year periods.
Although the business in which the Company is engaged is highly
competitive and cyclical in nature, the Company believes it has sufficient
liquidity from cash on hand, credit arrangements and cash flow from operations
to sustain operations for the ensuing twelve months. Recticon Enterprises, Inc.,
the Company's wholly owned subsidiary has a line of credit of $1,250,000 with
the Sovereign Bank with interest at the floating prime rate. The line is fully
secured by all of the assets of Recticon and is guaranteed by the Company.
$200,000 of said line has been drawn down, as of June 30, 2002, in order to
finance the acquisition of certain equipment. Recticon is in full compliance
with all of the covenants of the loan. Recticon does not anticipate any further
capital expenditures other than replacement of equipment and parts in the normal
course of business.
Sales of the Company's products will primarily depend upon, among other
things: (i) demand for the existing product line, especially among its principal
two customers; (ii) pricing level and competition; and (iii) the cyclical nature
of the Company's business.
From time to time in both written reports and oral statements by the
Company's senior management, we may express our expectations regarding future
performance by the Company. These "forward-looking statements" are inherently
uncertain, and investors must recognize that events could turn out to be other
than what senior management expected.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification of the Principal Financial and Accounting Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company filed during the
quarter ended June 30, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ACORN HOLDING CORP.
Date: August 14, 2002
/s/ Larry V. Unterbrink
-----------------------------------
Larry V. Unterbrink, Treasurer
(Principal Financial and
Accounting Officer)
/s/ Stephen A. Ollendorff
-----------------------------------
Stephen A. Ollendorff,
Chairman, Chief Executive Officer,
and Secretary
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