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 March 31, 1999
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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 Identification No.)
incorporation or organization)
1251 Avenue of the Americas, 45th Floor, New York, New York 10020-1104
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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 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: 1,627,359 shares of common stock, $.01 par value, as of May 21, 1999
(which reflects the two-for-five reverse stock split effective April 19, 1999).
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Balance Sheet
March 31, 1999 and December 31, 1998
March 31, 1999 December 31,
(Unaudited) 1998
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 791,428 $ 1,126,838
Restricted Cash 9,896 11,798
Investment in marketable securities 589,928 668,439
Accounts receivable - trade 241,186 84,817
Current portion of note
receivable from sale of
subsidiary 110,235 110,235
Current portion of note receivable
- employee 40,000 40,000
Inventories 1,980,360 2,055,827
Prepaid expenses 109,318 22,337
Deferred income tax assets 121,770 70,881
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Total Current Assets 3,994,121 4,191,172
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MACHINERY AND EQUIPMENT, net of
accumulated depreciation of
$2,255,282 as of December 31,
1998 and $793,593 as of March 31,
1999 1,947,375 1,978,743
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OTHER ASSETS
Note receivable from sale of
subsidiary, less current 110,236 110,236
portion
Note receivable, less current portion
- employee 40,000 80,000
Other investments 9,108 9,108
Goodwill, net of amortization 277,974 299,357
Deferred income tax assets 1,284,167 1,322,583
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Total Other Assets 1,721,485 1,821,284
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7,662,981 7,991,199
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current Maturities of long-term debt 121,062 121,062
Accounts Payable 113,614 20,157
Accrued Expenses 107,522 127,021
Machine Purchase Deposit Liability 9,896 11,798
Deferred income 0 300,000
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Total Current Liabilities 352,094 580,038
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LONG-TERM DEBT, less current liabilities 90,796 121,061
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DEFERRED INCOME 750,000 525,000
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STOCKHOLDERS' EQUITY
Common Stock 40,684 40,684
Additional paid-in capital 11,874,338 11,823,449
Accumulated deficit (5,444,931) (5,083,839)
Accumulated other comprehensive
income (loss) 0 (15,194)
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Total Stockholders' Equity 6,470,091 6,765,100
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$ 7,662,981 $ 7,991,199
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See accompanying notes
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statement of Income
March 31, 1999 and March 31, 1998
March 31, 1999 March 31, 1998
(Unaudited) (Unaudited)
Net Sales $ 877,455 $ 2,056,016
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Costs and expenses
Costs of sales 805,118 1,418,871
Selling, general and administrative 380,641 475,792
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1,185,759 1,894,663
Operating Profit (308,304) 161,353
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Other income
Gain on investment (214) 0
Interest income, net 26,944 2,646
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26,730 2,646
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Income before income taxes (281,574) 163,999
Income taxes expense (benefit)
Current 64,323 85,865
Deferred 0 (75,865)
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64,323 10,000
Deferred income tax assets 1,284,167 1,322,583
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Net Income (345,897) 153,999
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Earnings per share ($ .085) $ 0.034
Weighted average shares outstanding 4,066,406 4,490,502
=========== ===========
See accompanying notes.
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statement of Cash Flows
March 31, 1999 and March 31, 1998
March 31, March 31,
1999 1998
(Unaudited) (Unaudited)
Net Income from operations $ (345,898) $ 153,999
Adjustments to reconcile net income to
net cash provided by
operating activities
Depreciation and amortization 94,921 94,921
(Increase) decrease in assets
Accounts Receivable (156,369) 36,928
Inventory 75,467 55,106
Prepaid expenses (86,981) (89,351)
Deferred taxes (12,473) (17,798)
Deposits and other assets 0 82,563
Accounts payable 93,457 17,327
Accrued expenses (19,499) 85,641
Deferred income (75,000) (116,671)
Other liabilities 0 11,990
Customer machinery acquisition liability 0 (4,704)
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Net Cash provided by operating activities (432,375) 293,645
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Cash flows from Investing Activities
Purchase of property, plant and equipment (42,170) (447,611)
Purchase of company stock 0 (2,094,375)
Redemption of U.S. Treasury Bill 0 501,140
Investment in marketable securities 78,511 0
Proceeds notes receivable 40,000 40,000
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Net cash used in investing activities 76,341 (2,000,846)
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Cash Flows from Financing Activities
Payment of debt (30,265) (30,264)
Additional paid-in capital 50,889 0
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Net cash used in investing activities 20,624 (30,264)
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Net decrease in cash and cash equivalents (335,410) (1,737,465)
Cash and cash equivalents at beginning of year 1,126,838 2,923,965
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Cash and cash equivalents at end of year $ 791,428 $ 1,186,500
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See accompanying notes
<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
March 31, 1999
NOTE A - 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
1998 balance sheet has been derived from the audited financial statements
contained in the 1998 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 three months ended March 31,
1999 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 B- NEW ACCOUNTING PRONOUNCEMENTS
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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales for the three-month period ended March 31, 1999 decreased $1,178,561
from the three-month period ended March 31, 1998. The Company incurred operating
losses of ($308,304) as compared to an operating profit of $161,353 over the
comparable prior year period. The principal reason for the decline in
profitability was due to pricing pressures resulting from a lower demand for the
Company's products, without a corresponding decrease in the cost of sales. The
Company does not foresee, based on its present orders, an increased demand for
its products for the next several months. However, it is cautiously optimistic
that the Company may see an increased demand for its products in the second half
of the 1999 fiscal year.
Although the business in which the Company is engaged is highly
competitive and cyclical in nature and has been recently incurring losses from
operations, 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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. 3 - Certificate of Amendment of Certificate of Incorporation
of the Company, filed with the Secretary of State of Delaware on April 19, 1999.
Exhibit No. 27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Company filed during the
quarter ended March 31, 1999.
<PAGE>
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: May 24, 1999 Larry V. Unterbrink
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Larry V. Unterbrink, Treasurer
(Principal Financial and
Accounting Officer)
Stephen A. Ollendorff
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Stephen A. Ollendorff,
Chairman, Chief Executive Officer,
and Secretary
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 04/19/1999
991151734 - 2016590
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION OF ACORN HOLDING CORP.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Acorn Holding Corp.
2. The certificate of incorporation of the Corporation is hereby amended by
the addition of the following to Article FOURTH:
"The presently issued and outstanding shares of Common Stock, exclusive
of treasury stock, shall be combined in the ratio of two (2) shares of
Common Stock for each five (5) shares of Common Stock currently issued
and outstanding. Such combination shall not change the stated capital
of the Corporation nor shall it affect the rights or preferences of the
holders of the shares of Common Stock now issued and outstanding."
3. The amendment of the Certificate of Incorporation herein certified has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware by the approval of the holders
of a majority of the outstanding shares of capital stock entitled to vote at a
special meeting of stockholders duly called and held for such purpose.
IN WITNESS WHEREOF, we have signed this Certificate this 16th day of April,
1999.
Stephen A. Ollendorff
------------------------------------
Stephen A. Ollendorff,
Chairman and Chief Executive Officer
Attest:
Marian E. Gustafson
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Marian E. Gustafson
Assistant Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ACORN HOLDING CORP. FOR THE QUARTER ENDED MARCH 31, 1999
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 791,428
<SECURITIES> 589,928
<RECEIVABLES> 391,421
<ALLOWANCES> 0
<INVENTORY> 1,980,360
<CURRENT-ASSETS> 3,994,121
<PP&E> 1,947,375
<DEPRECIATION> 793,593
<TOTAL-ASSETS> 7,662,981
<CURRENT-LIABILITIES> 352,094
<BONDS> 0
0
0
<COMMON> 40,684
<OTHER-SE> 6,429,407
<TOTAL-LIABILITY-AND-EQUITY> 7,662,981
<SALES> 877,455
<TOTAL-REVENUES> 877,455
<CGS> 805,118
<TOTAL-COSTS> 1,185,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (281,574)
<INCOME-TAX> 64,323
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (345,897)
<EPS-BASIC> (0.085)
<EPS-DILUTED> 0
</TABLE>
