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SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 o
    
    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.
  Delaware
    
    59-2332857(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 2629 York Avenue, Minden, LA 71055(Address of principal executive offices)
    
    (Zip code)
 (318) 382-4574
  
   o þ
 o þ
   o þ




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Part I Financial InformationItem 1. Financial Statements
    
    
    1Item 2: Managements Discussion And Analysis Or Plan Of Operation
    
    
    9Item 3. Controls And Procedures
    
    
    17Part II Other InformationItem 1: Legal Proceedings
    
    
    19Item 2:
Changes in Securities
    
    
    19Item 3: Defaults Upon Senior Securities
    
    
    19Item 4: Submission Of Matters To A Vote Of The Security Holders
    
    
    19Item 5: Other Information
    
    
    19Item 6: Exhibits And Reports On Form 8-K
    
    
    19Signatures
    
    
    21Exhibit 31.1
    
    
    31.1-1Exhibit 31.2
    
    
    31.2-1Exhibit 32.1
    
    
    32.1-1Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to 18 U.S.C. Section 1350Certification Pursuant to Section 906Certification Pursuant to Section 906




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ITEM 1. FINANCIAL STATEMENTS
  1




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ACORN HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
 June 30, 2005
    
    
    Dec. 30, 2004ASSETSCurrent AssetsCash & Cash Equivalents
    
    $
    1,558,873
    
    
    $
    1,589,665Accounts Receivables
    
    
    6,675,249
    
    
    
    1,821,546Finished Goods Inventory
    
    
    1,058,265
    
    
    
    1,058,265In-Process Development Cost
    
    
    1,503,651
    
    
    
    6,261,978Income Tax Receivable
    
    
    91,132
    
    
    
    91,132Prepaid Expenses
    
    
    647
    
    
    
    Total Current Assets
    
    $
    10,887,817
    
    
    $
    10,822,586Fixed AssetsFurniture, Fixtures & Leasehold Improvements
    
    $
    368,412
    
    
    
    364,565Machinery & Equipment
    
    
    2,031,575
    
    
    
    2,009,3532,399,987
    
    
    
    2,373,918Less Accumulated Depreciation
    
    
    (1,232,492
    )
    
    
    (1,053,380
    )Total Fixed Assets
    
    $
    1,167,495
    
    
    $
    1,320,538TOTAL ASSETS
    
    $
    12,055,312
    
    
    $
    12,143,124LIABILITIESCurrent LiabilitiesAccounts Payable & Accrued Expenses
    
    $
    2,792,291
    
    
    $
    1,515,372Line of Credit
    
    
    3,499,545
    
    
    
    2,255,545Customer
Deposits
    
    
    
    
    
    
    2,453,787Current Notes Payable
    
    
    100,000
    
    
    
    Accrued Salaries
    
    
    259,870
    
    
    
    219,805Payable Shareholders
    
    
    1,591,694
    
    
    
    1,660,604Deferred Taxes Payable
    
    
    232,128
    
    
    
    237,207Total Current Liabilities
    
    $
    8,475,528
    
    
    $
    8,342,320Total Liabilities
    
    $
    8,475,528
    
    
    $
    8,342,320STOCKHOLDERS EQUITYCommon Stock $0.01 par value, 20,000,000 authorized
6,997,100 (2005) and 1,000 (2004) issued and
outstanding
    
    $
    69,971
    
    
    $
    10Additional Paid In Capital
    
    
    2,814,812
    
    
    
    3,484,773Retained Earnings
    
    
    695,001
    
    
    
    316,021Total Stockholders Equity
    
    $
    3,579,784
    
    
    $
    3,800,804TOTAL
LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    12,055,312
    
    
    $
    12,143,124
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ACORN HOLDING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Revenue
    
    $
    4,382,326
    
    
    $
    1,152,015
    
    
    $
    8,263,374
    
    
    $
    2,432,180Direct Contract CostDirect Labor
    
    $
    470,038
    
    
    
    314,662
    
    
    $
    748,715
    
    
    
    581,831Direct Materials
    
    
    1,618,735
    
    
    
    566,137
    
    
    
    2,496,348
    
    
    
    813,607Other Direct
    
    
    389,025
    
    
    
    572,096
    
    
    
    1,927,702
    
    
    
    1,003,253Total Direct Cost
    
    $
    2,477,798
    
    
    $
    1,452,895
    
    
    $
    5,172,765
    
    
    
    2,398,691Gross Margin
    
    $
    1,904,528
    
    
    
    (300,880
    )
    
    $
    3,090,609
    
    
    $
    33,489Indirect CostIndirect Expenses
    
    $
    202,966
    
    
    $
    128,468
    
    
    $
    277,206
    
    
    
    210,837Overhead Expense
    
    
    349,152
    
    
    
    420,285
    
    
    
    663,351
    
    
    
    776,356Depreciation/Amortization
    
    
    234,868
    
    
    
    89,556
    
    
    
    461,397
    
    
    
    179,111G&A Expense
    
    
    652,333
    
    
    $
    382,921
    
    
    
    1,082,848
    
    
    $
    748,091Total Indirect
    
    $
    1,439,319
    
    
    $
    1,021,229
    
    
    $
    2,484,802
    
    
    $
    1,913,944Income from Operations
    
    $
    465,209
    
    
    
    (1,322,109
    )
    
    $
    605,807
    
    
    
    (1,880,456
    )Other Income (Expense)Interest Income
    
    
    14,523
    
    
    $
    20
    
    
    $
    21,725
    
    
    $
    22Interest Expense
    
    
    (76,750
    )
    
    
    (13,592
    )
    
    
    (108,008
    )
    
    
    (29,431
    )Miscellaneous
    
    
    54,050
    
    
    
    (722
    )
    
    
    (15,544
    )
    
    
    (201
    )Total Other Income
(Expense)
    
    
    (8,177
    )
    
    
    (14,344
    )
    
    
    (101,827
    )
    
    
    (29,610
    )Income before Taxes
    
    $
    457,032
    
    
    $
    (1,336,453
    )
    
    $
    503,980
    
    
    $
    (1,910,066
    )Provision for Taxes
    
    
    (11,367
    )
    
    
    1,542
    
    
    
    
    
    
    
    458Net Income
    
    $
    445,665
    
    
    $
    (1,334,911
    )
    
    $
    503,980
    
    
    $
    (1,910,583
    )Income (Loss)/Share
    
    $
    0.0858
    
    
    $
    0.8481
    
    
    $
    0.0720
    
    
    $
    0.8481Weighted Average Shares
(Basic and Diluted)
    
    
    6,997,072
    
    
    
    1,573,900
    
    
    
    6,997,072
    
    
    
    1,573,900
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CONSOLIDATED ACORN HOLDING
STATEMENT OF STOCKHOLDERS EQUITY
PERIOD ENDING JUNE 30, 2005
 AdditionalCommon
    
    Paid-In
    
    RetainedStock
    
    Capital
    
    Earnings
    
    TotalValentec Balance 12/31/04
    
    
    10
    
    
    
    3,484,773
    
    
    
    316,021
    
    
    
    3,800,804Net Income
    
    
    
    
    
    
    
    
    
    
    503,980
    
    
    
    503,980Re-class Add Paid In Cap
    
    
    
    
    
    
    (600,000
    )
    
    
    
    
    
    
    (600,000
    )Distribution to Parent
    
    
    
    
    
    
    
    
    
    
    (125,000
    )
    
    
    (125,000
    )Valentec 6/30/05
    
    
    10
    
    
    
    2,884,773
    
    
    
    695,001
    
    
    
    3,579,784ConsolidationRe-class Add Paid In Cap
    
    
    
    
    
    
    (125,000
    )
    
    
    
    
    
    
    (125,000
    )Distribution to Parent
    
    
    
    
    
    
    125,000
    
    
    
    
    
    
    
    125,000Acorn Stock at Par
    
    
    69,971
    
    
    
    
    
    
    
    
    
    
    
    69,971Re-class Add Paid In Cap
    
    
    
    
    
    
    (69,971
    )
    
    
    
    
    
    
    (69,971
    )Valentec Stock at Par
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (10
    )Re-class Add Paid In Cap
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Consolidated 6/30/05
    
    
    69,971
    
    
    
    2,814,812
    
    
    
    695,001
    
    
    
    3,579,784
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ACORN HOLDING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Unaudited)
 June 30, 2005
    
    
    June 30, 2004Cash from OperationsNet Income
    
    $
    503,980
    
    
    
    (1,910,583
    )Depreciation & Amortization
    
    
    461,397
    
    
    
    167,583Deferred Taxes
    
    
    (5,801
    )
    
    
    12,441Net
    
    $
    959,576
    
    
    
    (1,755,441
    )Increase (Decrease) in AssetsAccounts Receivable
    
    
    (4,853,703
    )
    
    
    (490,939
    )In-Process Development Cost
    
    
    (1,103,758
    )
    
    
    (2,052,883
    )Pre Paid Expenses
    
    
    (647
    )
    
    
    10,698Net
    
    
    (5,958,108
    )
    
    
    (2,533,124
    )Increase (Decrease) in LiabilitiesAccounts Payable & Accrued Expenses
    
    
    1,276,919
    
    
    
    (509,747
    )Accrued Expenses
    
    
    60,785
    
    
    
    3,682Customer Deposits, Advance Payments
    
    
    3,126,013
    
    
    
    1,690,605Net
    
    
    4,463,717
    
    
    
    1,184,540Net Cash (Used) By Operating Activities
    
    
    (534,815
    )
    
    
    (3,104,025
    )Cash Flow from Investing ActivitiesFurniture Fixtures Mach & Equipment
    
    
    (26,068
    )
    
    
    (144,016
    )Distribution to Parent
    
    
    (125,000
    )
    
    
    Net
    
    
    (151,068
    )
    
    
    (144,016
    )Cash Flow from Financing ActivitiesRestricted Cash
    
    $
    1,327,468
    
    
    
    Line of Credit
    
    
    1,224,000
    
    
    
    766,000Additional
Paid in Capital
    
    
    
    
    
    
    571,213Note Payable
    
    
    100,000
    
    
    
    Shareholder Loan
    
    
    (668,909
    )
    
    
    1,799,326Net
    
    $
    1,982,559
    
    
    
    3,136,539Net Increase (Decrease) in Cash
    
    $
    1,296,676
    
    
    
    (111,502
    )Cash and Cash Equivalents at Beginning of Year
    
    $
    262,197
    
    
    $
    152,767Cash and Cash Equivalents at End of Quarter
    
    $
    1,558,873
    
    
    $
    41,265
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NOTE 1 ORGANIZATION AND PURPOSE
      NOTE 2 BASIS OF PRESENTATION
  6




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NOTE 3 ACCOUNTING POLICIES
 (A) Use of Estimates
  (B) Loss per Share
  (C) Income Taxes
  (D) Concentration of Credit Risk
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(E) Business Segments
 Revenues by Segment
 Six Months EndedJune 30, 2005Systems Management/Systems Integration
    
    $
    3,464,143Energetic Manufacturing
    
    $
    4,302,191Metal Parts
    
    $
    85,578Other
    
    $
    411,461Total
    
    $
    8,263,373
 Gross Margin Segment
 Six Months EndedJune 30, 2005Systems Management/Systems Integration
    
    $
    906,055Energetic Manufacturing
    
    $
    2,053,024Metal Parts
    
    $
    85,567Other
    
    $
    45,963Total
    
    $
    3,090,609
 Order Backlog by Segment
 As of June 30, 2005Systems Management/Systems Integration
    
    $
    32,894,437Energetic Manufacturing
    
    $
    4,016,761Metal Parts Manufacturing
    
    $
    1,883,922Total
    
    $
    38,795,120
 
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(G) Recent Accounting Pronouncements
   
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    9




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Plan of Operation
   Results of Operations
       10




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Liquidity and Capital Resources
     11




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Valentec Systems, Inc.
   Systems Management/Systems Integration
 120MM Mortar Weapon System with Electronic Fire Control  KESHET.
     Mortar Ammunition.
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Ø
    
    BMJ Belgrade, Herzegovina
    
    M8M PropellantØ
    
    Accurate Energetics, McCuen, TN
    
    Explosive LoadingØ
    
    Medico, Wilkes-Barre, PA
    
    Metal PartsØ
    
    POCAL
    
    Metal PartsØ
    
    Lockheed-Martin, Scranton, PA
    
    Metal PartsØ
    
    Greene Tweed, Kulpsville, PA
    
    O-ring & SealsØ
    
    Ellwood National Forge, Irvine, PA
    
    ForgingØ
    
    Rotek, Inc., Aurora, OH
    
    Bearings
 Energetic Manufacturing
  13




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Ø
    
    GOEX, Inc., Minden, LA
    
    Black PowderØ
    
    ATK, Radford, VA
    
    PropellantØ
    
    Flexible Concepts, Elkhart, IN
    
    Metal ComponentØ
    
    Woodlawn Manufacturing, Marshall, TX
    
    Metal ComponentØ
    
    B & T Screw, Bristol, CT
    
    Metal ComponentØ
    
    Spaulding Composites, Rochester, NH
    
    Plastic Component
 Metal Parts Manufacturing
    Ø
    
    Vy-Comp, Shreveport, LA
    
    Metal ComponentsØ
    
    Northwest Stamping, St. Louis, MO
    
    Metal ComponentsØ
    
    Alta Max, New Orleans, LA
    
    Packaging
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Foreign Work
  Ø Foreign Military Sales.
  Ø Foreign Military Financing.
   The Contracting Process.
 15




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Customers
 Soltam Systems, Inc.
     16




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DSE, Inc .
  Kingdom of Saudi Arabia
  U.S. Government
  Ø  Ø  Ø  Ø  Ø
  Off Balance Sheet Arrangements
  
 ITEM 3. Controls and Procedures
 (A) Evaluation Of Disclosure Controls And Procedures
  17




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(B) Changes In Internal Controls
  18




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. CHANGES IN SECURITIES
     
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6
  10.1
    
    Award/Contract No. W52P1J-05-C-0024, dated April 18, 2005, by and between
HQAFSC (US Army) and Valentec Systems, Inc. (incorporated by reference as Exhibit 10.2
to our Report on Form 8-K/A filed on December 14, 2005)31.1
    
    Certification by the Chief Executive Officer pursuant to 18 U.S.L. 1350, as
adopted pursuant to Rule 13a-14(a) of the Exchange Act.31.2
    
    Certification of the Principal Financial and Accounting Officer Pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Rule 13a-14(a) of the Exchange Act.32.1
    
    Certification by 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.
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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.
  Date
    
    Items1.
    
    
    April 1, 2005
    
    5.022.
    
    
    April 4, 2005
    
    4.01 and 9.013.
    
    
    April 11, 2005
    
    4.01 and 9.014.
    
    
    April 20, 2005
    
    4.015.
    
    
    May 27, 2005
    
    1.01, 3.02, 5.01, 7.01 and 9.01
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ACORN HOLDING CORP.Date: January 17, 2006/s/ Robert A ZummoRobert A. ZummoChief Executive Officer
 21