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 September 30, 2000
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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.)
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: 1,627,358 shares of common stock, $.01 par value, as of November 10, 2000
(which reflects the two-for-five reverse stock split effective April 19, 1999).
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ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Balance Sheets
September 30, December 31,
2000 1999
(Unaudited)
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,050,670 $ 956,357
Investment securities 205,125 208,601
Accounts receivable - trade 535,305 355,259
Current portion of note receivable
from sale of subsidiary - 110,236
Current portion of note
receivable - employee 40,000 40,000
Inventories 2,143,910 2,073,308
Prepaid expenses 19,531 20,482
Deferred income tax asset 121,770 121,770
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Total current assets 4,116,311 3,886,013
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MACHINERY AND EQUIPMENT, net of accumulated
depreciation of $1,255,029 as of
September 30, 2000 and $1,016,755
as of December 31, 1999 2,069,083 1,832,326
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OTHER ASSETS
Note receivable, less current
portion - employee - 40,000
Other assets 11,713 9,108
Goodwill, net of amortization
of $705,625 as of September 30, 2000
and $641,477, as of December 31, 1999 149,679 213,827
Deferred income tax assets 1,453,214 1,544,542
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Total other assets 1,614,606 1,807,477
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$ 7,800,000 $ 7,525,816
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of credit $ 250,000 $ 150,000
Current maturities of long-term debt 30,265 121,062
Accounts payable 231,194 138,257
Accrued expenses
Salaries and bonuses 217,770 136,144
Other 175,832 39,820
Deferred income 300,000 300,000
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Total current liabilities 1,205,061 885,283
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DEFERRED INCOME - 225,000
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DEFERRED INCOME TAX LIABILITY 215,038 206,800
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STOCKHOLDERS' EQUITY
Common stock, 20,000,000 shares 16,274 16,280
of $.01 per value authorized; 1,627,358
and 1,628,002 shares issued and
outstanding as of September 30, 2000 and
December 31, 1999, respectively
Additional paid-in capital 11,847,859 11,847,853
Accumulated deficit (5,465,640) (5,635,154)
Accumulated other comprehensive
income (loss) (18,592) (20,246)
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Total stockholders' equity 6,379,901 6,208,733
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$ 7,800,000 $ 7,525,816
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The accompanying notes are an integral part of these statements.
2
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ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
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Net sales $ 1,746,766 $ 989,774 $ 5,234,473 $ 2,970,698
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Costs and expenses
Costs of sales 1,310,619 814,828 3,746,249 2,508,816
Selling, general
and administrative 442,600 328,801 1,255,310 1,097,902
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1,753,219 1,143,629 5,001,559 3,606,718
Operating profit
(loss) (6,453) (153,855) 232,914 (636,020)
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Other income (expense)
Loss on investment - (10,523) - (11,277)
Interest income, net 11,034 (1,853) 54,121 74,896
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11,034 (12,376) 54,121 63,619
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Income (loss)
before income
taxes (benefit)
expenses 4,581 (166,231) 287,035 (572,401)
Income taxes expense 2,845 23,074 117,521 113,250
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Net Income (Loss) $ 1,736 $(189,305) $169,514 $ (685,651)
Earnings (loss) per share
(basic and diluted) $ .001 $ (.12) $ 0.104 $ (0.421)
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Weighted average shares
outstanding 1,627,358 1,627,358 1,627,358 1,627,358
=========== =========== ========== ==========
The accompanying notes are an integral part of these statements.
3
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<TABLE>
<CAPTION>
ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statements of Changes in Stockholders' Equity and Comprehensive Income (Loss)
Nine months ended September 30, 2000
Accumulated
Additional other
Common paid-in Accumulated comprehensive Treasury
Stock capital deficit income (loss) stock Total
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<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 $ 16,280 $11,847,853 $ (5,635,154) $ (20,246) - $6,208,733
Cash paid for fractional shares
as a result of 5-for-2 reverse
stock split (6) 6 - - - -
Comprehensive income (loss)
Net income (unaudited) - - 169,514 - - 169,514
Other comprehensive income
(loss), net of reclassification
adjustments and taxes (unaudited) - - - 1,654 - 1,654
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Total comprehensive income
(unaudited) - - - - - 171,168
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Balance at September 30, 2000
(unaudited) $ 16,274 $11,847,859 $ (5,465,640) $ (18,592) $ - $6,379,901
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</TABLE>
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ACORN HOLDING CORP. AND SUBSIDIARIES
Consolidated Interim Statements of Cash Flows
Nine months ended September 30,
(Unaudited)
2000 1999
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Cash flows from operating activities
Net income (loss) $ 169,514 $ (685,651)
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities
Depreciation and amortization 310,565 288,033
Deferred income taxes 99,566 78,875
(Increase) decrease in assets
Accounts receivable (180,046) (105,187)
Inventories (70,602) 158,540
Prepaid expenses 951 (4,485)
Other assets (2,605) (3,184)
Increase (decrease) in liabilities
Accounts payable 92,937 67,651
Accrued expenses 217,638 (39,251)
Deferred income (225,000) (225,000)
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Net cash provided by (used in)
operating Activities 412,918 (469,659)
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Cash flows from investing activites
Purchase of machinery and equipment (483,174) (125,650)
Proceeds from redemption of investments 5,130 452,552
Note receivable proceeds 150,236 150,236
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Net cash (used in) provided
by investing Activities (327,808) 477,138
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Cash flows from financing activities
Payment of long-term debt (90,797) (89,796)
Proceeds from line of credit 100,000 -
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Net cash provided by (used in)
financing Activities 9,203 (89,796)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 94,313 (82,317)
Cash and cash equivalents at
beginning of period 956,357 1,126,838
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Cash and cash equivalents at
end of period $1,050,670 $1,044,521
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<PAGE>
ACORN HOLDING CORP. AND SUBSIDIARIES
Notes to Consolidated Interim Financial Statements
September 30, 2000
(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 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, n the opinion of
management, necessary to a fair statement of the results for the periods. The
1999 balance sheet has been derived from the audited financial statements
contained in the 1999 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 nine months ended September
30, 2000 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:
1. Reclassifications.
Certain prior period financial information has been reclassified to
conform to current period presentation.
2. Common Stock
On April 19, 1999, the Company approved a resolution to amend the
Company's certificate of incorporation to decrease the issued and
outstanding common shares and to effect a 5-for-2 reverse stock split
earnings per share and weighted average earnings per share outstanding
for all periods have been changed to reflect the 5-for-2 reverse stock
split. As a result, fractional shares which would otherwise be
issuable, will have only the right to receive cash.
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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 September 30, 2000 increased
$756,992 from the three-month period ended September 30, 1999, while sales for
the nine-month period ended September 30, 2000 increased $2,263,775 from the
nine-month period ended September 30, 1999. The Company had an operating loss
for the three months ended September 30, 2000 of $6,453 and an operating profit
of $232,914 for the nine months ended September 30, 2000, as compared to
operating losses of $153,855 and $636,020, respectively, over the comparable
prior year periods. The principal reason for the improved financial performance
was the result of the higher demand for the Company's products. The Company
believes, based on its present orders, that the present trend should continue in
the fourth quarter.
Although the business in which the Company is engaged is highly
competitive and cyclical in nature, 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.
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 1. LEGAL PROCEEDINGS
On May 14, 1999, the Chapter 7 Trustee in Bankruptcy for ServiceMax
Tire & Auto Centers of Michigan, Inc., filed an avoidance action in the United
States Bankruptcy Court for the Eastern District of Michigan seeking to recover
$1,750,000 from the Company on account of payments made to the Company and its
subsidiary, Automotive Industries, Inc. ("AII"), during 1996 and 1997. The
Company settled this action, without admission of liability, with the Trustee
for the payment by the Company of the amount of $10,000 in exchange for a full
and final release of all claims the Trustee had or might have against the
Company or AII. An Order dismissing the proceedings has been entered in the
Bankruptcy Court and the Company and the Trustee executed a Settlement and
Release Agreement in connection therewith.
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 filed during the
quarter ended September 30, 2000.
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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: November 13, 2000
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
