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, 2003
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 811-08469
ACORN HOLDING CORP.
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(Exact name of small business issuer as specified in its charter)
Delaware 59-2332857
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(State or other jurisdiction of (IRS Employer Identifi-
incorporation or organization) cation No.)
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
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N/A
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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 No X
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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: 1,573,942 shares of common stock, $.01 par value, as of October 1, 2003
(which reflects the two-for-five reverse stock split effective April 19, 1999).
Acorn Holding Corp. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2003 2002
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 504,184 $ 753,785
Investment securities 12,788 14,230
Accounts receivable - trade 37,658 106,548
Inventories 65,000 1,852,319
Prepaid expenses 73,731 40,321
Assets held for sale 1,024,869 0
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Total current assets 1,718,230 2,767,203
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MACHINERY AND EQUIPMENT, net of accumulated
depreciation of $2,136,798 at December 31, 2002 0 2,819,579
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OTHER ASSETS
Other investments 9,108 9,108
Miscellaneous receivable 4,730 0
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13,838 9,108
$ 1,732,068 $ 5,595,890
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 120,584 $ 106,727
Accrued expenses:
Deferred Compensation 1,087,829 858,383
Other 152,487 93,947
Line of credit 485,000 375,000
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Total current liabilities 1,845,900 1,434,057
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STOCKHOLDERS' EQUITY
Common stock 15,739 15,856
Additional paid-in capital 11,772,377 11,786,229
Accumulated deficit (11,903,146) (7,628,923)
Accumulated other comprehensive income 1,198 2,640
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(113,832) 4,175,802
Treasury stock, at cost 0 (13,969)
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Total stockholders' equity (deficiency) (113,832) 4,161,833
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$ 1,732,068 $ 5,595,890
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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,
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2003 2002 2003 2002
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Net sales $ 0 $ 0 $ 0 $ 0
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Costs and expenses
Cost of sales 0 0 0 0
Selling, general and administrative 174,535 107,879 351,064 231,225
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174,535 107,879 351,064 231,225
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Operating loss (174,535) (107,879) (351,064) (231,225)
Other income
Interest income 470 1,934 1,488 4,191
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Loss from continuing operations
Before income taxes (174,065) (105,945) (349,576) (227,034)
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Income tax (benefit) expense 0 19,786 0 19,786
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Loss from continuing operations (174,065) (125,731) (349,576) (246,820)
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Discontinued operations
Operations of discontinued component (286,061) (70,110) (730,670) (103,259)
Loss on liquidation of assets (3,193,977) 0 (3,193,977) 0
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Loss on discontinued operations (3,480,038) (70,110) (3,924,647) (103,259)
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Net loss $(3,654,103) $(195,841) $(4,274,223) $ (350,079)
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Loss per share (basic and diluted) $ (2.31) $ (0.12) $ (2.71) $ (0.22)
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Weighted average shares outstanding - basic 1,579,796 1,585,642 1,579,796 1,585,642
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Weighted average shares outstanding - diluted 1,579,796 1,585,642 1,579,796 1,585,642
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Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
AND COMPREHENSIVE LOSS
From January 1, 2003 to June 30, 2003 (unaudited)
Accumulated
Additional other
Common paid-in Accumulated comprehensive Treasury
stock capital deficit income stock Total
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Balance at January 1, 2003 $ 15,856 $11,786,229 $(7,628,923) $ 2,640 $(13,969) $ 4,161,833
Comprehensive loss
Net loss - - (4,274,223) - - (4,274,223)
Net unrealized loss on
investments in securities
available-for-sale - - - (1,442) - (1,442)
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Total comprehensive loss (4,275,665)
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Treasury shares retired (117) (13,852) 0 0 13,969 0
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Balance at June 30, 2003 $ 15,739 $11,772,377 $(11,903,146) $ 1,198 $ 0 $ (113,832)
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Acorn Holding Corp. and Subsidiaries
CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
Six months ended June 30,
(unaudited)
2003 2002
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Cash flows from operating activities
Net loss $(4,274,223) $ (350,079)
Adjustments to reconcile net loss to net cash
(used in) operating activities
Depreciation and amortization 249,282 226,735
Deferred income taxes (benefit) 0 (18,828)
Loss on liquidation of assets 3,193,977 0
(Increase) decrease in assets
Accounts receivable 68,890 (41,472)
Inventories 138,770 (38,929)
Prepaid expenses and other assets (38,140) (61,908)
Increase (decrease) in liabilities
Accounts payable 13,857 10,717
Accrued expenses 287,986 77,800
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Net cash used in operating activities (359,601) (195,964)
Cash flows from investing activities
Purchase of machinery and equipment 0 (365,235)
Purchase of investments 0 1,192
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Net cash used in investing activities 0 (364,043)
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Cash flows from financing activities
Proceeds from bank line of credit 110,000 200,000
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Net cash provided by financing activities 110,000 200,000
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NET DECREASE IN CASH AND
CASH EQUIVALENTS (249,601) (360,007)
Cash and cash equivalents at beginning of period 753,785 1,476,244
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Cash and cash equivalents at end of period $ 504,184 $1,116,237
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Acorn Holding Corp. and Subsidiaries
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
June 30, 2003
(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 its wholly-owned
subsidiaries, Recticon Enterprises, Inc. (Recticon) and AI Liquidating Corp.
Recticon was organized to engage in the business of manufacturing and processing
of silicon wafers for the semiconductor industry (see Note D). AI Liquidating
Corp. is an inactive subsidiary.
NOTE B - BASIS OF PRESENTATION
The Company's financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America, which
contemplate continuation of the Company as a going concern.
Interim financial statements reflect all adjustments which are, in the opinion
of management, necessary to a fair statement of the financial position and
results for the periods. The 2002 balance sheet has been derived from the
audited financial statements contained in the 2002 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 of America. The results for the three and six months ended June
30, 2003 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
Recent Accounting Pronouncements
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 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 No. 144 makes changes to the scope
and certain measurement requirements of existing accounting guidance. SFAS No.
144 also changes the requirements relating to reporting the effects of a
disposal or discontinuation of a segment of a business. SFAS No. 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 applies to the liquidation of Recticon as of June 30, 2003 and
during three and six month periods ended June 30, 2003.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities". SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred rather
than at the date of a commitment to an exit or disposal plan. SFAS No. 146 is
effective prospectively for exit and disposal activities initiated after
December 31, 2002. The adoption of this accounting principal applies to the plan
of liquidation of Recticon at and for the three and six month periods ended June
30, 2003.
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NOTE D - LIQUIDATION OF RECTICON
On June 23, 2003 the Board of Directors of Acorn voted to cease operations and
to liquidate the assets of Recticon. Immediately thereafter, Recticon fulfilled
its backlog of orders and proceeded to sell or liquidate its assets and to pay
its creditors. Subsequent to June 20, 2003 Recticon realized $1,099,869 from the
sale of its assets and is proceeding to pay all its creditors.
The accompanying consolidated balance sheet as of June 30, 2003 include the
assets of Recticon at their actual sales price. The consolidated statement of
operations for the three and six month periods ended June 30, 2003 and 2002
include the operations of Recticon as a discontinued operation.
The net sales and pre tax losses of Recticon for the periods presented are as
follows:
Three months ended June 30 Six months ended June 30
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2003 2002 2003 2002
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Net Sales $ 348,254 $1,034,620 $ 819,321 $2,239,428
Pre-tax net loss 3,480,038 89,896 3,924,647 171,524
Subsequent to June 30, 2003, management of Recticon reached a verbal agreement
with its landlord to settle its future lease obligations by paying no more than
one years rent obligation following abandonment of the space on September 30,
2003.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Certain statements in this Form 10-QSB may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, including those concerning management's expectations with respect to
future financial performance and future events, particularly relating to sales
of current products. Such statements involve known and unknown risks,
uncertainties and contingencies, many of which are beyond the control of the
Company, which could cause actual results and outcomes to differ materially from
those expressed herein. These statements are often, but not always, made
typically by use of words or phrases such as "estimate," "plans," "projects,"
"anticipates," "continuing," "ongoing," "expects," "believes," or similar words
and phrases. Factors that might affect such forward-looking statements set forth
in this Form 10-QSB include, among others: (i) increased competition from new
and existing competitors and pricing practices from such competitors and (ii)
general industry and economic conditions. Any forward-looking statements
included in this Form 10-QSB are made only as of the date hereof, based on
information available to the Company as of the date hereof, and subject to
applicable law to the Company, the Company assumes no obligation to update any
forward-looking statements.
One June 23, 2003, the Company announced that is wholly-owned subsidiary
Recticon Enterprises, Inc. ("Recticon") had been advised by its principal
customer that the demand for the type of product Recticon was making would not
increase and furthermore there would be a sharp erosion in the price for such
products going forward. As a result thereof, the Company's negotiations to raise
additional capital were terminated. The Board of Directors of Recticon and the
Company determined that since the Company did not have the financial resources
to sustain the anticipated operating losses of Recticon and to try to limit the
further erosion of Recticon's assets, the management of Recticon was authorized
to liquidate the assets of Recticon at the highest possible price in the
shortest period of time. An immediate phase out of employees commenced, except
for four employees who were required to assist in the orderly liquidation of the
business. Since June 23, 2003, Recticon completed its remaining outstanding
orders and has sold all of its assets for $1,099,869. The Company is now
proceeding to pay all of its creditors.
Because the assets of Recticon are being liquidated, the operations of
Recticon are shown in the accompanying Statement of Operations as a discontinued
operation for all periods presented. Included in "Operations of discontinued
component" in the Statement of Operations are sales less all costs of operations
and other expenses of Recticon in each period. Sales for Recticon for the
three-month period ended June 30, 2003 decreased $686,366 from the three-month
period ended June 30, 2002 while sales for the six month period ended June 30,
2003 decreased $1,420,107 from the six month period ended June 30, 2002.
Upon the liquidation of the assets of Recticon, the Company plans on
seeking strategic alternatives (to be completed after the Board meeting).
The balance sheet for June 30, 2003 reflects the liquidation value of the
assets of Recticon. Based on those values, the Company incurred a loss of
approximately $3,193,977, which represents a loss on the disposal of machinery
and equipment of approximately $1,545,428 and approximately $1,648,549 from the
liquidation of inventory. The loss incurred in the sale of Recticon's machinery
and equipment is based on the proceeds of the immediate liquidation at a time
when there is little demand for this type of machinery and equipment due to,
among other factors, manufacturing overcapacity. The loss incurred as a result
of the sale of the inventory was primarily due to the fact that a significant
amount of the remaining inventory as of the date the liquidation of the assets
of Recticon was authorized, including work in progress and finished goods, were
the types of specialty wafer for which there currently is very little immediate
demand among the repeat customers who have customarily purchased these types of
wafers.
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ITEM 3. Controls and Procedures
The management of the Company, including Stephen A. Ollendorff as Chairman
and Chief Executive Officer and Larry V. Unterbrink as Treasurer, have evaluated
the Company's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"). Under
rules promulgated by the Commission, disclosure controls and procedures are
defined as those controls or other procedures of an issuer that are designed to
ensure that information required to be disclosed by the issuer in the reports
filed or submitted by it under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms. Based on the evaluation of the Company's disclosure controls
and procedures, Messrs. Ollendorff and Unterbrink determined that, as of the
Evaluation Date, such controls and procedures were effective. Since the
Evaluation Date, there have not been any significant changes in the Company's
internal controls or in other factors that could significantly affect such
controls.
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification by the Chief Executive Officer pursuant to Rule
13a-14(a) of the Exchange Act.
31.2 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.
32.2 Certification by the Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 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:
The Company filed a Current Report on Form 8-K dated June 23, 2003
announcing that Recticon Enterprises, Inc., its operating subsidiary was closing
down its operations upon fulfillment of its existing orders.
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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: October 2, 2003
/s/ Larry V. Unterbrink
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Larry V. Unterbrink, Treasurer
(Principal Financial and
Accounting Officer)
/s/ Stephen A. Ollendorff
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Stephen A. Ollendorff,
Chairman, Chief Executive Officer,
and Secretary
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