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, 1998
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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.)
100 Park Avenue, 23rd Floor, New York, New York 10017
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (212) 685-5654
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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 X No
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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: 4,088,806 shares of common stock, $.01 par value, as of August 13, 1998.
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheet
June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
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ASSETS (Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 421,856 $ 2,882,526
Restricted cash 36,735 41,439
Investments 1,260,884 986,706
Accounts receivable - trade 469,703 429,893
Other receivables 25,176 0
Current portion of note receivable
from sale of subsidiary 110,235 121,696
Current portion of note receivable
- employee 40,000 40,000
Inventories 2,360,814 2,506,763
Prepaid expenses 54,828 13,843
Deferred income tax asset 138,673 179,000
----------- -----------
Total Current Assets 4,918,904 7,201,866
----------- -----------
MACHINERY AND EQUIPMENT, net of accumulated
depreciation of $2,241,687 as of June 30,
1998 and $1,998,010 as of December 31, 1997 2,063,706 1,706,823
----------- -----------
OTHER ASSETS
Deposits and other 0 82,563
Note receivable from sale of subsidiary,
less current portion 110,236 243,393
Note receivable, less current portion
- employee 80,000 120,000
Other investments 9,108 9,981
Goodwill, net of amortization 320,739 384,887
Deferred income tax asset 1,340,922 1,306,000
----------- -----------
1,861,005 2,146,824
----------- -----------
$ 8,843,615 $11,055,513
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 131,150 $ 121,062
Line of credit 0 0
Accounts payable 151,779 303,474
Accrued expenses 247,202 213,519
Machine purchase deposit liability 36,735 41,439
Deferred income 1,016,645 466,680
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Total Current Liabilities 1,583,511 1,146,174
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LONG-TERM DEBT, less current maturities 181,593 242,122
----------- -----------
DEFERRED INCOME 0 783,306
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COMMITMENTS 0 0
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<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Balance Sheet, Continued
June 30, 1998 and December 31, 1997
June 30, December 31,
1998 1997
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(Unaudited)
STOCKHOLDERS' EQUITY
Common Stock, par value $.01 per share:
20,000,000 shares authorized, 4,164,806
shares as of June 30, 1998 and 5,538,906
as of December 31, 1997 55,389 55,389
Additional paid-in capital 14,090,156 14,090,156
Accumulated deficit (4,950,609) (5,247,684)
Less common stock in treasury, at cost
-1,374,100 shares as of June 30,
1998 and 9,000 shares
as of December 31, 1997 (2,116,425) (13,950)
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Total stockholders' equity 7,078,511 8,883,911
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$ 8,843,615 $ 11,055,513
============ ============
See accompanying notes
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<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statement of Income
(Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,140,993 $ 1,961,839 $ 4,197,009 $ 3,952,644
----------- ----------- ----------- -----------
Costs and expenses
Costs of sales 1,526,730 1,332,264 2,945,601 2,720,082
Selling, general and administrative 453,584 584,268 929,376 1,016,833
----------- ----------- ----------- -----------
1,980,314 1,916,532 3,874,977 3,736,915
Operating profit 160,679 45,307 322,032 215,729
----------- ----------- ----------- -----------
Other income (expense)
Gain on investment sales 18,000 11,506 18,000 105,000
Interest, net (4,565) 22,087 (1,919) 11,861
----------- ----------- ----------- -----------
13,435 33,593 16,081 116,861
Income from continuing
operations before income taxes 174,114 78,900 338,113 332,590
Income taxes expense (benefit)
Current (28,160) 99,540 57,705 165,540
Deferred 81,270 (92,373) 5,405 (151,373)
----------- ----------- ----------- -----------
53,110 7,167 63,110 14,167
Income from continuing
operations 121,004 71,733 275,003 318,423
Discontinued operations
Loss from discontinued
operations net of tax benefit
of $0, $201,034 and $0, $239,589,
respectively 0 (319,101) 0 (379,395)
Gain on Sale of Assets, net of tax
expense $0, $700,138 and $0,
$700,138, respectively 0 1,095,087 0 1,095,087
----------- ----------- ----------- -----------
0 775,986 0 715,692
Net Income $ 121,004 $ 847,719 $ 275,003 $ 1,034,115
=========== =========== =========== ===========
Earnings per share
Income from continuing operations-
basic and dilutive 0.029 0.013 0.063 0.057
Income from discontinued operations-
basic and dilutive 0.000 0.140 0.000 0.129
=========== =========== =========== ===========
0.029 0.153 0.063 0.187
Weighted average shares outstanding-
basic and dilutive 4,181,928 5,538,906 4,334,500 5,538,906
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
Page -4-
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statement of Cash Flows
June 30, 1998 and June 30, 1997
June 30, 1998 June 30, 1997
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(Unaudited) (Unaudited)
Net income from operations $ 275,003 $ 1,034,115
Adjustments to reconcile net income to
net cash used in
operating activities
Depreciation 186,354 372,776
Gain on sale of assets 0 (1,795,225)
Loss on sale of property 0 3,645
Imputed Interest 0 53,321
(Increase) decrease in assets
Trade receivable (39,810) 215,560
Notes and other receivable 90,867 170,165
Inventory 145,949 231,948
Prepaid expenses (40,985) 183,645
Deferred taxes 58,205 242,562
Accounts payable (117,670) (736,863)
Accrued expenses 0 103,070
Deferred income (233,341) (233,340)
Deferred credit 0 (53,321)
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Net cash provided by (used in)
operating activities 324,572 (207,942)
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Cash flows from Investing Activities
Purchase of property, plant and equipment (479,089) (113,287)
Purchase of investments, net (337,855) (1,387,671)
Proceeds from sales of assets 0 2,500,000
Proceeds from sale of property, plant
and equipment 0 6,000
Proceeds notes receivable 184,618 40,735
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Net cash used in investing activities (632,326) 1,045,777
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Cash Flows from Financing Activities
Purchase of treasury stock (2,102,475) 0
Proceeds from line of credit 0 534,000
Payment of debt (50,441) (169,620)
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Net cash provided by (used in)
investing activities (2,152,916) 364,380
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Net increase (decrease) in cash and
cash equivalents (2,460,670) 1,202,215
Cash and cash equivalents at beginning
of period 2,882,526 2,210,873
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Cash and cash equivalents at end
of period 421,856 3,413,088
=========== ===========
Supplemental disclosure of cash flow
information
Interest paid 10,120 83,798
Dividend declared to parent satisfaction
of receivable 434,000
See accompanying notes
Page -5-
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
June 30, 1998
NOTE 1 - ORGANIZATION AND PURPOSE
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
1997 balance sheet has been derived from the audited financial statements
contained in the 1997 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 generally
accepted accounting principles. The results for the six months ended June 30,
1998 are not necessarily indicative of the results to be expected for the full
year. Reporting developments have been updated where appropriate. In this
connection, there are no significant changes in disclosures, except for the
following:
Acorn Holding Corp. filed an election with the Securities and Exchange
Commission to be treated as a business development company under the Investment
Company Act of 1940, as amended, and operated as such until November 1997. In
November 1997, Acorn Holding Corp. withdrew its election as an investment
company, ceased to be a business development company, and commenced business as
an operating company. At that date, the name of the company was changed to Acorn
Holding Corp. The financial statements presented reflect Acorn Holding Corp. as
an operating company.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
A. In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activity." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure
those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a hedge. The accounting for
changes in the fair value of a derivative (gains and loses) depends upon
the intended use of the derivative and resulting designation. SFAS No. 133
is effective for all fiscal quarters of fiscal years beginning after June
15, 1999. Earlier application is permitted only as of the beginning of any
fiscal quarter. The Company is currently reviewing the provisions of SFAS
No. 133.
B. The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," which is effective for years beginning after December 15, 1997.
This new standard requires entities presenting a complete set of financial
statements to include details of comprehensive income. Comprehensive income
consists of net income or loss for the current period and income, expenses,
gains, and losses that bypass the income statement and are reported
directly in a separate component of equity. The adoption of SFAS No. 130
will not have a material effect on the presentation of the Company's
financial position or results of operations.
Page -6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
During the fiscal year ended December 31, 1997, the Company completed the
divestiture of all of its major operating assets other than Recticon
Enterprises, Inc. (its principal subsidiary) ("Recticon") and, on November 4,
1997, pursuant to the approval of the Company's stockholders, withdrew its
election with the Securities and Exchange Commission to be treated as a Business
Development Company under the 1940 Act. Accordingly, the Company will be
operating in the foreseeable future as a holding company with one wholly-owned
subsidiary, Recticon. The Company believes that it has sufficient short-term and
long-term liquidity either from cash on hand, credit arrangements or cash flow
from operations. The business in which the Company is engaged is highly
competitive and cyclical in nature. Therefore, the reported financial
information may not be necessarily indicative during the upcoming calendar year
of the future operating results of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. 27 -- Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company during the quarter
ended June 30, 1998.
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.
Dated: August 14, 1998 Larry V. Unterbrink
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Larry V. Unterbrink, Treasurer
(Principal Financial and
Accounting Officer)
Stephen A. Ollendorff
------------------------------
Stephen A. Ollendorff,
Chairman, Chief Executive Officer,
and Secretary
Page -7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ACORN HOLDING CORP. FOR THE SECOND QUARTER ENDED JUNE
30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000737243
<NAME> ACORN HOLDING CORP.
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 421,856
<SECURITIES> 1,260,884
<RECEIVABLES> 469,703
<ALLOWANCES> 0
<INVENTORY> 2,360,814
<CURRENT-ASSETS> 4,918,904
<PP&E> 2,063,706
<DEPRECIATION> 2,241,687
<TOTAL-ASSETS> 8,843,615
<CURRENT-LIABILITIES> 1,583,511
<BONDS> 0
0
0
<COMMON> 55,389
<OTHER-SE> 7,023,122
<TOTAL-LIABILITY-AND-EQUITY> 8,843,615
<SALES> 4,197,009
<TOTAL-REVENUES> 4,197,009
<CGS> 2,945,601
<TOTAL-COSTS> 3,874,977
<OTHER-EXPENSES> (18,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,919
<INCOME-PRETAX> 338,113
<INCOME-TAX> 63,110
<INCOME-CONTINUING> 275,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275,003
<EPS-PRIMARY> 0.063
<EPS-DILUTED> 0.063
</TABLE>
