SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
                                                     -----------------

                          COMMISSION FILE NO. 811-08469
                               ACORN HOLDING CORP.
                               -------------------
                 (Name of small business issuer in its charter)

            Delaware                               59-2332857
-------------------------------              ---------------------------------
(State or other jurisdiction of              (IRS Employer Identification No.)
incorporation or organization)

      1251 Avenue of the Americas, 45th Floor, New York, NY 10020-1104
------------------------------------------------------------------------------
           (Address of principal executive offices)           (Zip code)

Issuer's telephone number, including area code        (212) 536-4089
                                              --------------------------------

Securities registered pursuant to Section 12(b) of the Act:         NONE

Securities registered pursuant to Section 12(g) of the Act:
                                                  Common  Stock,  $.01 par value

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 Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
                    Yes   X               No
                        -----                -----

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this Form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ___ ]

Issuer's revenues for the fiscal year ended December 31, 2001 were $5,514,092.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of March 28, 2002 (valued at the average of the bid price of $1.79
and the asked price of $1.79 on such date) was $1,581,296.

The  number of shares of Common  Stock  outstanding  (including  shares  held by
affiliates of the issuer) as of March 28, 2002: 1,585,642.

Transitional Small Business Disclosure Format (check one):
                    Yes      ;            No   X
                        -----                -----

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE


<PAGE>



ITEM 1.  DESCRIPTION OF BUSINESS
         -----------------------

GENERAL

      Acorn  Holding  Corp.  (the  "Company")  is a  holding  company  with  one
wholly-owned  subsidiary,  Recticon  Enterprises,  Inc.  ("Recticon"),  which it
acquired in 1993 by issuing 320,000 shares of the Company's  common stock,  $.01
par value (the "Common  Stock") to the  stockholders of Recticon in exchange for
all of the outstanding shares of stock of Recticon.

      The  principal  purpose  of the  Company  is to derive  earnings  from the
operation of Recticon and possibly other businesses  rather than for the purpose
of obtaining  dividend and interest  income  through the efforts of others.  The
Company may acquire other companies or operating businesses in the future. While
there can be no assurance that any such  acquisitions  will be made, the Company
intends  only to acquire the entire or, at the least,  controlling  interests in
such companies and have such companies operate as subsidiaries of the Company.

RECTICON'S PRESENT BUSINESS

      Recticon,  located in Pottstown,  Pennsylvania,  manufactures  two, three,
four,  five and six-inch  monocrystalline  silicon  wafers,  which are made from
silicon crystals and are the basic substrate from which integrated  circuits and
other  semiconductor  devices  are  fabricated.  Recticon's  wafers  are used by
university research departments and microelectronic manufacturers,  and are best
suited for use in electronics  devices employed in avionics,  telecommunications
and computers.

      The business in which  Recticon is engaged is highly  competitive  and the
Company believes that there are many competitors who produce,  sell,  design and
support similar products.  Many of these competitors have substantially  greater
marketing, financial, administrative and other resources than Recticon.

      Recticon has expanded its  facilities  and, as a result  thereof,  has the
capacity  to add an  additional  four or five  additional  furnaces  and related
equipment (the "Units"). Recticon presently has ten functioning Units. These new
Units have not only given Recticon added  capacity,  but have also enabled it to
enter  into the five and  six-inch  wafer  market  and,  subject  to  purchasing
additional equipment,  give it the capacity to enter into the eight-inch market.
There can be no assurance  that  Recticon will acquire any  additional  Units or
successfully enter into the eight-inch wafer market.

      Recticon's raw materials are acquired from silicon wholesalers.  For 2001,
25%  and  20%,  respectively,  of its  raw  materials  were  acquired  from  two
suppliers,  while for 2000, it was 39% and 17%, respectively.  Although Recticon
has from time to time experienced shortages of certain supplies,  such shortages
have  not  resulted  in any  significant  disruptions  in  production.  Recticon
believes  that  there are  adequate  alternative  sources  of supply to meet its
requirements.

      For 2001 two  customers  of  Recticon  accounted  for 70%,  and 17% of its
sales, respectively. For 2000, three customers of the Company accounted for 51%,
27%  and  11%  of its  sales,  respectively.  The  loss  of any or all of  these
customers, would have an adverse, severe, effect on the business of Recticon.

      Compliance with federal,  state and local laws and regulations  regulating


                                       2
<PAGE>

the discharge of materials into the  environment  has not had, and under present
conditions,  Recticon does not anticipate  that such laws and  regulations  will
have a material effect on the results of operations, capital expenditures or the
competitive position of Recticon.

EMPLOYEES

      The Company currently has three executive officers, all of whom are
employees of the Company. Recticon presently employs 37 full-time people, all of
whom are located at its facility in Pottstown.

ITEM 2.  DESCRIPTION OF PROPERTY
`        -----------------------

      The Company maintains its principal executive office in New York, New York
at no charge to the Company and an office in New Canaan,  Connecticut, at a cost
of $300 per month.

      Recticon currently leases  approximately  30,000 square feet in a facility
in  Pottstown,  Pennsylvania,  pursuant to a lease  agreement  which  expires on
February  28,  2009.  Recticon  has a right of first  refusal  to  purchase  the
property in the event of a sale by the lessor.  Recticon  considers the facility
to be generally  well-maintained,  adequate for its current needs and capable of
supporting a reasonably higher level of demand for its products.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

      None

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

      The Annual Meeting of Stockholders of the Company was held on December 20,
2001 (the  "Meeting").  The following  matters were voted on and approved by the
holders of a majority of the outstanding shares of the Company's Common Stock in
accordance with Delaware General Corporation Law:

      (a) The first proposal  presented to the  stockholders was the election of
seven  persons as  directors of the Company to hold office until the next Annual
Meeting of Stockholders and until their  respective  successors are duly elected
and qualified.  The following  persons were elected as directors of the Company,
and each person received that number of votes set opposite that person's name:

                                                        VOTES
                                                    FOR       WITHHELD
                                                -----------------------

            Mark Auerbach                        1,328,595     43,720
            Paula Berliner                       1,337,475     34,840
            Edward N. Epstein                    1,337,695     34,620
            George Farley                        1,328,395     43,920
            Ronald J. Manganiello                1,337,695     34,620
            Stephen A. Ollendorff                1,337,355     34,960
            Bert Sager                           1,337,375     34,940

            (b)     The second  proposal  presented to the  stockholders  was to
approve and adopt the Company's 2001 Performance Equity Plan. There were 712,590
shares of common  stock cast in favor of such  proposal,  155,042  shares  voted
against and 9,880  shares  abstained.  In addition,  there were  494,803  broker
non-votes.

            (c)     The third  proposal  presented to the  stockholders  was the
adoption of the 2001 Directors  Stock Option Plan.  There were 803,990 shares of


                                       3
<PAGE>

common stock cast in favor of such proposal, 65,322 shares of common stock voted
against  such  proposal  and 8,200 shares  abstained.  In  addition,  there were
494,803 broker non-votes.

            (d)     The fourth  proposal  presented to the  stockholders  was to
ratify the firm of Grant Thornton LLP as the independent  public  accountants of
the Company  for the 2001 fiscal  year.  There were  1,358,475  shares of Common
Stock cast in favor of such proposal, 2,480 shares of Common Stock voted against
such proposal, and 11,360 shares abstained.


                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY
        AND RELATED STOCKHOLDER MATTERS
        ------------------------------------------

      The  Company's  Common  Stock was  accepted for listing in October 1988 on
NASDAQ under the symbol "AVCC".  The following table sets forth, for the periods
indicated,  the range of high and low  closing  bid  quotations  as  reported by
NASDAQ.  Such quotations reflect  inter-dealer  prices,  without retail mark-up,
mark-down or commission and do not necessarily  represent  actual  transactions.
There presently is a limited public market for the Common Stock.

      Quarter Ending          Low                    High
      --------------          ---                    ----
         2001
         ----

      March 31               $1.40625               $2.375
      June 30                $1.75                  $2.50
      September 30           $1.23                  $2.297
      December 31            $1.266                 $2.094

      Quarter Ending          Low                    High
      --------------          ---                    ----

         2000
         ----
      March 31               $1.28125               $4.75
      June 30                $1.125                 $2.75
      September 30           $1.53125               $5.75
      December 31            $1.40625               $2.5625

       As of March 28, 2002, there were  approximately  384 holders of record of
the Company's Common Stock with 1,585,642 shares of Common Stock outstanding. In
addition, the Company believes that there are a significant number of beneficial
owners of Common Stock whose  shares are held in "street"  name as of such date.
On March 28, 2002, the closing bid and asked quotations of the Common Stock were
both $1.79.

      The  Company  has  never  paid and does not  currently  intend to pay cash
dividends.  In  addition,  the Company has never made,  nor adopted any policies
with respect to, in-kind distributions, and has no present intention of adopting
any such policies or of making any such distributions.

                                       4
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS
         OR PLAN OF OPERATIONS
         --------------------------------------

      Certain  statements  in this Form 10-KSB 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-KSB 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-KSB  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.

      The  business  in which the Company is engaged is highly  competitive  and
cyclical in nature.  For the fiscal year ended  December 31, 2001, the Company's
net  sales  of  $5,514,092  decreased  approximately  $1,554,597  from  sales of
$7,068,689  for the fiscal year ended  December  31, 2000 and  operating  profit
decreased  approximately $345,946 during the corresponding period from a gain of
$607,745 in fiscal 2000 as  compared to a gain of $261,799 in fiscal  2001.  Net
income for fiscal 2001 of $159,174  decreased  $359,030  from $518,204 in fiscal
2000.  The  profitability  of the  Company in fiscal 2001 was due  primarily  to
income realized from "Market Value of equipment received" of $653,400.

      Sales of the Company's  products will primarily  depend upon,  among other
things:  (i) demand for the existing  product  line,  especially,  among its two
major  customers;  (ii) pricing  level and  competition;  and (iii) the cyclical
nature of the Company's business.

      Although the Company hopes to achieve  profitability  during 2002, no such
assurance can be given.

      Financial  Condition  -  The  Company  believes  that  it  has  sufficient
short-term  and  long-term   liquidity   either  from  cash  on  hand,  cre  dit
arrangements  or  cash  flow  from  operations.  The  Company's  cash  and  cash
equivalents  of  $1,476,244  at  December  31,  2001  increased   $464,120  from
$1,012,124 at December 31. 2000. The increase in cash was generated primarily by
the reduction of investment securities, accounts receivable and inventories.

ITEM 7.  FINANCIAL STATEMENTS.
         --------------------

      See Index to Financial Statements after Signature Page.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
         ON ACCOUNTING AND FINANCIAL DISCLOSURE
         --------------------------------------

      Not Applicable




                                       5
<PAGE>
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
        CONTROL PERSONS
        ---------------

      The following is a list (along with certain  biographical  information) of
the  executive  officers  and  directors of the  Company.  All  directors of the
Company  are serving a current  term of office  which  continues  until the next
annual meeting of  stockholders,  and all officers are serving a current term of
office which continues until the next annual meeting of directors:


                                       6
<PAGE>




                               YEAR OF
                              ELECTION
                                 AS
 NAME AND AGE                 DIRECTOR                 POSITION
 ------------                 --------                 --------
(As of 3/1/2002)

Bert Sager(1)                 1983            Director
  (76)

Stephen A. Ollendorff         1983            Chairman of the Board,
  (63)  (1)                                   Chief Executive Officer,
                                              Secretary and Director

Edward N. Epstein*            1995            President and Chief
  (61)  (1)                                   Operating Officer; Director

Larry V. Unterbrink           (3)             Treasurer
  (67)

Robert P. Freeman              -              President and Chief
  (67)                                        Executive Officer
                                              of Recticon

Paula Berliner                1990            Director
  (58)  (1)

Ronald J. Manganiello*        1997            Director
  (52)    (1)(2)(4)

Mark Auerbach                 2001            Director
  (63)    (1)(2)

George Farley                 2001            Director
  (62)    (1)(2)
--------------
*Designees of Edward N. Epstein.  See "Certain Relationships and
 Related Transactions."

(1)  Member of the Stock Option and Compensation Committee.
(2)  Member of the Audit Committee.
(3)  Mr. Unterbrink was a member of the Board from
     1985 until February 1995.
(4)  Mr. Manganiello was a member of the Board from November 1995
     until January 1997, and was elected to the Board in December
      1997.
--------------

                                       7
<PAGE>

      BERT SAGER was  Co-Chairman of the Board of the Company from November 1995
to  December  1998 and was  Chairman  from June  1989 to  November  1995.  Prior
thereto,  he was President  since the Company's  inception  until June 1989. Mr.
Sager  has been a  private  investor  for more  than  five  years and has been a
practicing attorney since 1949. He is a director of Artesyn  Technologies,  Inc.
("Artesyn"), a publicly-traded manufacturer of standardized electronic products,
of Boca Raton, Florida.

      STEPHEN A.  OLLENDORFF  has been Chief  Executive  Officer of the  Company
since  September 1992,  Chairman of the Board since November 1995,  President of
the  Company  from  June 1989  until  November  1995,  and  Secretary  since the
Company's  inception.  He served as Vice President from the Company's  inception
until his election as President.  Mr.  Ollendorff was of counsel to the law firm
of Hertzog,  Calamari & Gleason from  December  1990 until  January  1999. He is
currently  of  counsel  to the law  firm of  Kirkpatrick  &  Lockhart  LLP.  Mr.
Ollendorff also serves as a director of Artesyn.

      EDWARD N. EPSTEIN was elected President and Chief Operating Officer of the
Company  in  November  1995.  For more  than the past five  years,  has been the
principal  of Edward N.  Epstein & Assoc.,  a consulting  firm  specializing  in
corporate  structure  and  management.  He has also been,  since January 1996, a
principal in the merchant banking firm of New Canaan Capital LLC, and since July
1996,  a  principal  of  Sylhan  LLC,  an   integrated   contract   manufacturer
specializing in the precision machining of refractory metal parts.

      LARRY V.  UNTERBRINK,  Treasurer of the Company since  February 1990, is a
private investor  residing in Florida.  Since November 1986, Mr.  Unterbrink has
been  a  principal  of  Groupe  Financier,  a  publishing  and  consulting  firm
specializing in international finance.

      PAULA  BERLINER  was a Vice  President of the Company from June 1992 until
December  1998,  and, since May 1990,  has been a private  investor  residing in
Florida.

      RONALD J. MANGANIELLO has been a principal in the merchant banking firm of
New  Canaan  Capital  LLC,  since  January  1996.  Since July 1996 he has been a
principal of Sylhan LLC.

      MARK AUERBACH - Since June 1993, Senior Vice President and Chief Financial
Officer of Central Lewmar L.P., a distributor of fine papers. From December 1995
to January 1999,  Chief Financial  Officer of Oakhurst  Company,  Inc. and Steel
City  Products,  Inc.,  each a  distributor  of automotive  products,  and Chief
Executive Officer of Oakhurst Company, Inc. from December 1995 to May 1997. Also
a director of Pharmaceutical Resources, Inc., a manufacturer of generic drugs.

      GEORGE FARLEY - Retired  partner of BDO Seidman;  self-employed  certified
public  accountant and financial  consultant  since August 1999. Chief Financial
Officer of Talk America, Inc. (formerly Talk.com, Inc.) from November 1997 until
August 1999.  Senior Vice President and Chief  Financial  Officer of Twin County
Grocers from September 1995 until October 1997.

      There  are no family  relationships  between  any  executive  officers  or
directors of the Company.


SECTION 16(A) COMPLIANCE

      Pursuant to Section  16(a) of the Exchange  Act,  directors  and executive
officers of the Company and beneficial  owners of greater than 10% of the Common
Stock are required to file  certain  reports  with the  Securities  and Exchange
Commission  in respect of their  ownership  of Company  securities.  The Company
believes  that during  fiscal year 2001,  other than with  respect to one report


                                       8
<PAGE>

required to be filed by Mr.  Manganiello,  all such required reports were timely
filed. Mr. Manganiello did not file a Form 4 transaction on a timely basis.

ITEM 10.  EXECUTIVE COMPENSATION
          ----------------------

SUMMARY COMPENSATION TABLE

      The  following  table sets forth  information  for the fiscal  years ended
December  31, 2001,  December  31, 2000 and  December  31,  1999,  respectively,
respecting compensation earned by the Chief Executive Officer of the Company and
the  executive  officers  (whose salary and bonus earned in Fiscal 2001 exceeded
$100,000) of the Company (the "Named Executives").


                                  Annual Compensation(1)           Long-Term
                                  ----------------------          Compensation
                                                                  ------------
 Name and                                                         Securities
 Principal Position         Year    Salary($)      Bonus($)       Underlying
 ------------------         ----    ---------      -------        Options(#)(2)
                                                                  -------------

 Stephen A.                 2001   $264,760(4)       -0-              --
 Ollendorff                 2000   $256,055(4)       -0-              --
   Chairman and Chief      1999(3) $250,543(4)       -0-              --
   Executive Officer

 Edward N. Epstein          2001   $228,760(4)       -0-              --
   President and Chief      2000   $220,948(4)       -0-              --
   Operating Officer        1999   $216,192(4)       -0-              --

 Robert P. Freeman          2001   $262,338        $ 40,669           --
   President and Chief      2000   $251,280        $ 61,280           --
   Executive Officer-       1999   $203,353        $ 50,000           --
   Recticon Enterprises,
   Inc.

(1) No officer received perquisites which, are in the aggregate, greater than or
    equal to the lesser of $50,000 or 10% of annual salary and bonus.

(2) Represents options awarded under the 1991 Stock Option Plan.

(3) Mr.  Ollendorff  has  voluntarily   assumed   responsibility  for  rent  and
    secretarial  expenses  relating to the New York office.  Mr. Ollendorff does
    not receive any fringe benefits from the Company.

(4) Effective November, 1999 Messrs.  Ollendorff and Epstein voluntarily reduced
    by  50%  their  cash  compensation   received  from  the  Company.  For  Mr.
    Ollendorff,  includes  the unpaid  balance of  $132,380  for the fiscal year
    2001,  $128,027  for fiscal  year 2000 and  $20,879  for  fiscal  year 1999,
    reflecting  the amounts being  accrued on the books of the Company.  For Mr.
    Epstein,  includes the unpaid  balance of $114,230 for the fiscal year 2001,
    $110,474  for fiscal year 2000 and $18,016 for fiscal year 1999,  reflecting
    the amounts being accrued on the books of the Company.


                                       9
<PAGE>

      The Company does not have any annuity,  retirement,  pension,  deferred or
incentive  compensation plan or arrangement  under which any executive  officers
are entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which  performance  units or other forms of  compensation  are paid.
Executives  who qualify are  permitted  to  participate  in the  Company's  2001
Performance Equity Plan.

STOCK OPTION GRANTS IN LAST FISCAL YEAR

      During the fiscal year ended December 31, 2001, there were no stock option
grants or stock appreciation rights granted to the Named Executives or any other
stock appreciation rights.

      On March 2, 1998 the Stock Option and  Compensation  Committee  authorized
the further  amendment to certain of the  Company's  outstanding  stock  options
(which had previously  been amended on November 22, 1994).  In exchange for each
optionee agreeing to an increase in the exercise price in the event of a "change
of  control"  from  $1.406 to $3.13  (equal to the  "fair  market  value" of the
Company's  Common  Stock  on  March 2,  1998),  the  Company  would  expand  the
definition of "change of control" to include the merger,  sale or liquidation of
the business as set forth in (iv) below. The amended and expanded  definition of
"change of control"  would occur in the following  circumstances:  (i) the first
purchase  of shares of equity  securities  of the  Company  pursuant to a tender
offer or exchange  offer (other than an offer by the Company) for 25% or more of
the equity  securities of the Company,  which offer has not been approved by the
Board  of  the  Company,  (ii) a  single  purchaser  or a  group  of  associated
purchasers  acquiring,  without  the  approval  or  consent  of the Board of the
Company,  securities  of the Company  representing  25% or more of the  combined
voting power of the Company's  then  outstanding  securities in one or a related
series of  transactions,  (iii) in respect of an  election of  directors  by the
Company's stockholders,  the election of any or all of the management's slate of
directors being contested or opposed, whether through a solicitation of proxies,
or otherwise,  or (iv) on the day the  stockholders of the Company approve (A) a
definitive agreement for the merger or other business combination of the Company
with or into  another  corporation  pursuant  to which the  stockholders  of the
Company  do not own,  immediately  after the  transaction,  more than 50% of the
voting  power  of  the  corporation  that  survives  and  is  a  publicly  owned
corporation  and not a subsidiary  of another  corporation,  or (B) a definitive
agreement for the sale,  exchange,  or other disposition of all or substantially
all of  the  assets  of the  Company,  or (C)  any  plan  or  proposal  for  the
liquidation or dissolution of the Company. As of March 29, 2002, no such "change
of control" has occurred.

      On November 7, 1996, the Board of Directors authorized the Company to loan
moneys to officers and  employees  of the Company in order to encourage  them to
exercise their stock options. The term of such loans would be for the shorter of
ten years or 60 days after termination of employment of the officer or employee,
interest would accrue and be payable monthly on the principal, at the prevailing
rate  applicable to 90-day  treasury bills at the time the loan is made, and the
loan  would  be  collateralized  at all  times,  which  collateral  (subject  to
applicable  law)  may  include  shares  of  the  Company.   The  loans  must  be
collateralized  so that the fair market  value of the  collateral  would have to
equal or exceed the principal outstanding amount of the loan at all times. As of
March 29,  2002,  no such loans to officers or  employees  have been made by the
Company.

YEAR-END OPTION VALUES TABLE

      The following table sets forth information at December 31, 2001 respecting
exercisable and non-exercisable options held by the Named Executives. During the
fiscal year ended December 31, 2001,  the Named  Executives did not exercise any
stock options. The table also includes the value of "in-the-money" stock options
which  represents the spread  between the exercise  prices of the existing stock
options and the year-end price of the Common Stock.


                                       10
<PAGE>

<TABLE>
<CAPTION>

                        Number of Unexercised               Value of Unexercised In-
                          Options Held                           the-Money Options
                         at December 31, 2001(1)            Held at December 31, 2001(1)
                        -------------------------           ----------------------------
<S>                      <C>              <C>               <C>               <C>

                         Not              Not
Name                     Exercisable      Exercisable       Exercisable       Exercisable
----                     -----------      -----------       -----------       -----------

Stephen A.
  Ollendorff             120,000          -0-                         $-0-             $-0-

Edward N.
  Epstein                 48,000          -0-                         $-0-             $-0-

Robert P.
  Freeman                 40,000          -0-                         $-0-             $-0-
</TABLE>

----------------
(1)  Based upon the  closing  sales price of the Common  Stock on  December  31,
     2001: $1.49.

COMPENSATION OF DIRECTORS

         Effective December 1998 directors who are not executive officers of the
Company are  compensated  for their services by payment of an annual retainer of
$12,000,  $1,000  per day for each  Board  meeting  attended  in  person by such
director and $750 per day for each committee  meeting attended in person by such
director.  Mr.  Sager and Mrs.  Berliner  are each  entitled as  consultants  to
receive $24,000 per year,  including  directors  fees, for a minimum  three-year
period, which has been renewed by its terms.

         Directors  of the  Company  who are  eligible  to  serve  on the  Audit
Committee and do not receive any  compensation  from the Company other than fees
to which  directors  are  entitled  for their  service on the Board of Directors
("Eligible  Directors")  are granted  options to purchase 1,000 shares of Common
Stock on the date such director is initially  elected to the Board of Directors,
and for each respective fiscal year thereafter,  the date on which  stockholders
of the Company elect directors at an annual meeting of stockholders  pursuant to
the 2001 Directors  Stock Option Plan.  Eligible  Directors are entitled to only
one automatic option grant each calendar year.

EMPLOYMENT ARRANGEMENTS

         The Company has entered  into an  employment  agreement,  for a minimum
three-year  period,  which  has been  renewed  by its  terms,  with  Stephen  A.
Ollendorff,  pursuant to which Mr.  Ollendorff  receives annual  compensation of
$250,000,  subject to annual  cost-of-living  adjustments,  from the Company. On
January 17, 1996, Mr. Ollendorff's  employment agreement was amended in order to
clarify certain terms and conditions, including the geographic location in which
services are to be provided,  events of  termination  and his  obligations  with
respect to confidential information, non-solicitation of employees and covenants
not to compete.  Mr.  Ollendorff  agrees to devote such time to the business and
affairs of the Company as he believes is  necessary  for the  operations  of the
Company. In addition,  Mr. Ollendorff has voluntarily assumed responsibility for
rent and  secretarial  expenses  relating to the Company's New York office.  Mr.
Ollendorff receives no fringe benefits from the Company.

                                      11
<PAGE>


         Effective January 1, 1997, Mr. Ollendorff receives a salary of $120,000
per year as Chairman of the Board of Recticon  Enterprises,  Inc.  ("Recticon"),
which  amount is paid by the Company  from the  amounts  paid by Recticon to the
Company each month. In addition, Recticon rents office space in Mr. Ollendorff's
New Jersey  office and pays rent  directly to Mr.  Ollendorff  directly for such
space in the amount of $500 per month.  Any amounts  received by Mr.  Ollendorff
from  Recticon  as rent  and/or  salary are  deducted  from his salary  from the
Company to the extent and as long as he receives such monies from Recticon.

         The  Company  entered  into an  employment  agreement  with  Edward  N.
Epstein,  effective  January 1, 1996,  for a three year  period,  which has been
renewed by its terms, on a year-to-year  basis,  through December 31, 2001 at an
annual  compensation of $150,000,  subject to  cost-of-living  adjustments.  Mr.
Epstein agrees to devote such time to the business and affairs of the Company as
he believes is necessary for the operations of the Company.

         As a result of an agreement between Messrs. Epstein and Ollendorff, Mr.
Ollendorff  voluntarily  reduced his annual  compensation by $24,280,  effective
July 1997, in order to increase Mr.  Epstein's  annual  compensation for 1997 by
$24,280.  Mr.  Ollendorff  has agreed not to accept any  increased  compensation
(other than  cost-of-living  increases) until Mr. Epstein's annual  compensation
shall be equal to Mr. Ollendorff's.

         Robert P. Freeman,  President and Chief Executive  Officer of Recticon,
entered into a letter  agreement  with  Recticon as of February 15, 1995,  which
provides  that if,  within one (1) year of a "change of control"  (as defined in
the  agreement)  of Recticon,  his  employment  is  terminated  without cause by
Recticon, or he resigns because of (i) assignment,  without his written consent,
of any duties  inconsistent  with his  position,  duties,  responsibilities  and
status with  Recticon,  or change in his  reported  responsibilities,  titles of
offices or any plan, act, scheme or design to  constructively  terminate him, or
(ii)  reduction  by  Recticon of his annual base  salary,  he shall  receive the
following benefits: (i) annual base salary through the date of termination; (ii)
in lieu of any further salary payments,  severance pay on the tenth business day
following the date of termination, a lump sum equal to two times his annual base
salary; and (iii) if Mr. Freeman terminates his employment with Recticon between
the first and second year of a change of control for any reason  other than "for
cause",  Recticon  will pay him the  amount  he would  have  been paid if he had
remained employed through the end of the second year of a change of control, but
in no event less than an amount equal to six months of base salary. In addition,
Recticon  will maintain all medical,  health and accident  plans for a period of
the  earlier  of (i) 24 months or (ii) the date of which he is covered by reason
of his being employed by a new employer.

ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT
          ---------------------------------------------------

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

         The  following  table sets forth,  as of the close of business on March
28,  2002,  information  as to those  stockholders  (other  than  members of the
Company's  management),  which is known by the Company to beneficially  own more
than 5% of its outstanding Common Stock.

                                      No. of Shares
Name and Address                      Beneficially         Percentage
of Beneficial Owner                    Owned(1)             of Class
-------------------                   -------------        ----------

Estate of Herbert Berman(2)              113,440            7.2%
405 Lexington Avenue
New York, NY 10174

                                       12
<PAGE>

Allen Landers, M.D.
1385 York Avenue
New York, NY 10021                       101,520            6.4%

---------------
(1) Beneficial ownership, as reported in the above table, has been determined in
    accordance with Rule 13d-3 under the 1934 Act. Unless  otherwise  indicated,
    beneficial ownership includes both sole voting and sole dispositive power.

(2) Excludes  shares of Common  Stock  owned by the adult  children  of the late
    Herbert Berman.

OWNERSHIP BY MANAGEMENT

         The following  table sets forth,  as of March 28, 2002,  the beneficial
ownership of the Common Stock of the Company of (i) each director (including the
Named Executives) of the Company,  and (ii) all directors and executive officers
of the Company as a group (based upon  information  furnished by such  persons).
Under the rules of the Commission,  a person is deemed to be a beneficial  owner
of a security if he has or shares the power to vote or direct the voting of such
security  or the power to dispose or direct the  disposition  of such  security.
Accordingly,  more than one person may be deemed to be a beneficial owner of the
same  securities.  A  person  is also  deemed  to be a  beneficial  owner of any
securities  of which that person has the right to acquire  beneficial  ownership
within 60 days.




                                                                Percentage of
   Name and Address of               Amount and Nature of        Outstanding
   Beneficial Owner(1)           Beneficial  Ownership(2)        Shares Owned
   -------------------           ------------------------        ------------

                                                  171,330
   Bert Sager                                      (3)(4)           10.4%


   Stephen A. Ollendorff                          610,380           34.8%
                                                   (5)(6)


   Edward N. Epstein                              385,800           23.6%
                                                (4)(5)(7)


   Paula Berliner                                  67,320            4.2%
                                                      (4)


   Ronald J. Manganiello                           57,278            3.6%
                                                      (8)


   Robert P. Freeman                               56,000            3.4%
                                                      (4)


                                       13
<PAGE>

                                                                Percentage of
   Name and Address of               Amount and Nature of        Outstanding
   Beneficial Owner(1)           Beneficial  Ownership(2)        Shares Owned
   -------------------           ------------------------        ------------


   Mark Auerbach                                        0             *


   George Farley                                        0             *


   All executive officers and                   1,038,236           54.0%
   directors as a group (9                      (3)(4)(5)
   persons)                                     (6)(7)(8)


------------------

*   Less than 1%

(1)  Unless otherwise indicated, the address of all the Company's directors and
     executive officers is c/o the Company's principal executive offices at 1251
     Avenue of the Americas, 45th Floor, New York, NY 10020-1104.

(2)  A person is deemed to be the beneficial owner of voting securities that can
     be  acquired  by such  person  within 60 days from March 28,  2002 upon the
     exercise of options,  warrants or convertible  securities.  Each beneficial
     owner's  percentage  ownership is determined  by assuming that  convertible
     securities, options or warrants that are held by such person (but not those
     held by any other person) and which are  exercisable  within 60 days of the
     Record  Date have been  exercised.  Unless  otherwise  noted,  the  Company
     believes  that  all  persons  named  in the  table  have  sole  voting  and
     investment  power with respect to all shares of Common  Stock  beneficially
     owned by them.

(3)  Does not include 80 shares of Common Stock owned by Mr. Sager's spouse,  as
     sole  trustee of a trust  formed by Mrs.  Sager's  mother,  as to which Mr.
     Sager disclaims beneficial ownership.

(4)  Includes the following shares that may be acquired upon exercise of options
     within 60 days from March 28, 2002:  Mr. Sager - 64,000;  Mr.  Ollendorff -
     120,000; Mr. Epstein - 48,000; Ms. Berliner - 28,000; Mr. Freeman - 40,000;
     and all directors and executive officers as group (9 persons) 336,000.

(5)  Stephen A. Ollendorff,  Chairman of the Board,  Chief Executive Officer and
     Secretary of the Company,  has entered into an Irrevocable Proxy and Voting
     Agreement  with  Respect to Election of Directors  dated  December 19, 1995
     with Edward N. Epstein,  President of the Company,  with respect to 385,500
     shares of Common  Stock  beneficially  owned by Mr.  Epstein.  See "Certain
     Relationship  and  Related  Transactions."  Accordingly,  Mr.  Ollendorff's
     beneficial  ownership includes such shares.  Other than as set forth above,
     Mr. Ollendorff disclaims beneficial ownership of such shares.

(6)  Includes 400 shares owned by Mr. Ollendorff's spouse.

(7)  Includes shares owned by Mr. Epstein as trustee for his minor child.

                                       14
<PAGE>

(8)  Includes shares owned by Mr. Manganiello's spouse.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

      Mr.  Ollendorff has entered into an Irrevocable Proxy and Voting Agreement
With Respect to Election of Directors  (the  "PROXY"),  with Edward N.  Epstein,
with respect to the shares of Common  Stock  beneficially  owned by Mr.  Epstein
(the "STOCK"), commencing on December 19, 1995 and terminating on December 31 of
such year in which either party shall have given the other party at least twelve
(12) months'  written  notice  thereof prior to December 31 of such year. If any
shares of the Stock covered by the Proxy are sold to any other party,  the Proxy
as it relates to such  shares of Stock  shall  terminate  immediately  upon such
sale.  Pursuant to the Proxy,  Mr.  Ollendorff  undertakes to vote the Stock, as
well as use his best efforts  (including  voting  shares of stock of the Company
owned by him) for the election of the greater of (i) two (2) directors or (ii) a
number of directors  equal to 22% (rounded up to the next highest number) of the
entire Board of Directors, acceptable to Mr. Epstein. Mr. Epstein had designated
himself and Ronald J. Manganiello to Mr. Ollendorff with respect to the election
of members of the Board as acceptable to him.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

      (a)    Exhibits:
             --------

      3.1 Certificate of  Incorporation as filed and recorded with the Secretary
of State of Delaware,  as amended - incorporated  by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.

      3.3 By-laws,  as amended,  effective  November 7, 1996 -  incorporated  by
reference to Exhibit 3 to the Company's  Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1996.

      10.1 Employment  Agreement dated August 31, 1993,  between the Company and
Stephen A.  Ollendorff  -  incorporated  by  reference  to  Exhibit  10.2 to the
Company's  Registration  Statement  on Form N-2 (No.  33-69610)  filed  with the
Commission on September 19, 1993.

      10.2  Agreement  dated  October 31, 1991  between the Company and Larry V.
Unterbrink - incorporated  by reference to Exhibit 10.3 to the Company's  Annual
Report on Form 10-K for the fiscal year ended December 31, 1991.

      10.3 1991 Stock Option  Plan,  as amended -  incorporated  by reference to
Exhibit 10.7 to the Company's  Registration Statement on Form N-2 (No. 33-69610)
filed with the Commission on September 29, 1993.

      10.4 Purchase and Settlement Agreement,  dated as of April 8, 1994, by and
among  ServiceMax,  ServiceMax  Tire and Auto  Centers of  Michigan,  Inc.,  the
Company, Stephen A. Ollendorff,  Orland Wolford, Bert Sager, Donald R. Nance, C.
James Sabo,  Richard A. Sabo and Robert L. Sabo -  incorporated  by reference to
Exhibit  10.7 to the  Company's  Annual  Report on Form 10-K for the fiscal year
ended December 31, 1993.

      10.5  Amendment  No. 1 to  Employment  Agreement,  dated as of January 17,
1996,  by and between the Company and Stephen A.  Ollendorff -  incorporated  by
reference to Exhibit 10.7 to the Company's  Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995.

                                       15
<PAGE>

      10.6  Employment  Agreement,  dated as of January 17, 1996, by and between
the Company and Edward N. Epstein - incorporated by reference to Exhibit 10.8 to
the Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December
31, 1995.

      10.7  Amendment  No. 1 to  Employment  Agreement,  dated as of January 17,
1996,  by and  between the Company and Larry V.  Unterbrink  -  incorporated  by
reference to Exhibit 10.10 to the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1995.

      10.8 Asset  Purchase  Agreement,  dated May 30, 1997,  by and among Morgan
Tire & Auto, Inc., the Company and Automotive Industries, Inc. - incorporated by
reference to Exhibit 2.1 to the Company's  Current Report on Form 8-K dated June
9, 1997.

      10.9 Assumption Agreement,  dated May 30, 1997, by and among Morgan Tire &
Auto,  Inc.,  the Company and  Automotive  Industries,  Inc. -  incorporated  by
reference to Exhibit 2.2 to the Company's  Current Report on Form 8-K dated June
9, 1997.

      10.10 Letter Agreement,  dated as of February 15, 1995,  between Robert P.
Freeman  and  Recticon -  incorporated  by  reference  to  Exhibit  10-13 to the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1997.

      10.11  Consulting  Agreement,  dated as of January 1, 1999,  between Paula
Berliner and the Company -  incorporated  by  reference to Exhibit  10.11 to the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
2000.

      10.12  Consulting  Agreement,  dated as of January 1, 1999,  between  Bert
Sager and the  Company -  incorporated  by  reference  to  Exhibit  10.12 to the
Company's  Annual  Report on Form 10-KSB for the fiscal year ended  December 31,
2000.

      10.13 2001 Performance  Equity Plan - incorporated by reference to Exhibit
10.1 to the Company's Quarterly Report on Form 10-QSB for the quarter ended June
30, 2001.

      10.13 2001  Directors  Stock  Option Plan -  incorporated  by reference to
Exhibit 10.2 to the  Company's  Quarterly  Report on Form 10-QSB for the quarter
ended June 30, 2001.

      21    List of subsidiaries of the Company.

      (b)   REPORTS ON FORM 8-K:

      There were no reports on Form 8-K filed by the Company  during the quarter
ended December 31, 2001.


                                       16
<PAGE>


                                   SIGNATURES

      In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of
1934,  the  Registrant  caused  this  report to be  signed on its  behalf by the
undersigned, thereunto duly authorized.

                                          ACORN HOLDING CORP.
                                          (Registrant)

Dated:  March 29, 2002                    By: /s/Stephen A. Ollendorff
                                           ---------------------------------
                                           STEPHEN A. OLLENDORFF, Chairman
                                          of the Board and Chief Executive
                                          Officer

      In accordance  with the Securities  Exchange Act of 1934,  this report has
been  signed  by the  following  persons  on  behalf  of the  Registrant  in the
capacities and on the dates indicated.

Signature                     Title                            Date
---------                     -----                            ----

/s/Stephen A. Ollendorff      Chairman of the Board            March 29, 2002
-------------------------     Chief Executive Officer
STEPHEN A. OLLENDORFF         (Principal Executive
                              Officer), Secretary
                              and Director

/s/Edward N. Epstein          President and Chief              March 29, 2002
------------------------      Operating Officer;
EDWARD N. EPSTEIN             Director

/s/Larry V. Unterbrink        Treasurer (Principal             March 29, 2002
------------------------      Financial and Accounting
LARRY V. UNTERBRINK           Officer)

/s/Paula Berliner
------------------------      Director                         March 29, 2002
PAULA BERLINER

/s/Ronald J. Manganiello
------------------------      Director                         March 29, 2002
RONALD J. MANGANIELLO

/s/Bert Sager
------------------------      Director                         March 29, 2002
BERT SAGER

/s/Mark Auerbach
------------------------      Director                         March 29, 2002
MARK AUERBACH


                                       17
<PAGE>


/s/George Farley
------------------------      Director                         March 29, 2002
GEORGE FARLEY


                                       18



<PAGE>












   Financial Statements and Report of Independent Certified Public Accountants
                      ACORN HOLDING CORP. AND SUBSIDIARIES
                           December 31, 2001 and 2000



                                      F-1




<PAGE>






                                 C O N T E N T S


                                                                      Page


REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.................... 3

FINANCIAL STATEMENTS

     CONSOLIDATED BALANCE SHEETS...................................... 4

     CONSOLIDATED STATEMENTS OF INCOME................................ 5

     CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
        EQUITY AND COMPREHENSIVE INCOME............................... 6

     CONSOLIDATED STATEMENTS OF CASH FLOWS............................ 7

     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS....................... 8


                                      F-2
<PAGE>





               Report of Independent Certified Public Accountants
               --------------------------------------------------


Board of Directors
Acorn Holding Corp.


         We have audited the accompanying  consolidated  balance sheets of Acorn
Holding Corp. and Subsidiaries as of December 31, 2001 and 2000, and the related
consolidated   statements  of  income,   changes  in  stockholders'  equity  and
comprehensive income and cash flows for the years then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards  require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Acorn Holding Corp. and  Subsidiaries  as of December 31, 2001 and 2000, and the
consolidated  results of their operations and their  consolidated cash flows for
the years  then  ended,  in  conformity  with  accounting  principles  generally
accepted in the United States of America.


Grant Thornton LLP


Philadelphia, Pennsylvania
March 11, 2002

                                      F-3
<PAGE>

<TABLE>
<CAPTION>
                                            Acorn Holding Corp. and Subsidiaries

                                                 CONSOLIDATED BALANCE SHEETS

                                                        December 31,



    ASSETS                                                                                       2001              2000
                                                                                             ------------     ------------
<S>                                                                                          <C>              <C>
CURRENT ASSETS
    Cash and cash equivalents                                                                $ 1,476,244      $  1,012,124
    Investment securities                                                                         16,360           212,952
    Accounts receivable - trade                                                                  147,316           357,502
    Current portion of note receivable - employee                                                    -              40,000
    Inventories                                                                                2,135,351         2,454,583
    Prepaid expenses                                                                              30,284            18,396
    Deferred income tax asset                                                                        -              91,328
                                                                                               ---------        ----------

          Total current assets                                                                 3,805,555         4,186,885
                                                                                               ---------        ----------

MACHINERY AND EQUIPMENT, net of accumulated depreciation of
    $1,684,469 and $1,338,591 in 2001 and 2000, respectively                                   2,605,481         2,012,537
                                                                                               ---------        ----------

OTHER ASSETS
    Deposits                                                                                         -              61,200
    Other investments                                                                              9,108             9,108
    Goodwill, net of accumulated amortization of $812,537 and
       $727,007 in 2001 and 2000, respectively                                                    42,767           128,297
    Deferred income tax asset                                                                  1,236,718         1,224,374
                                                                                               ---------        ----------

                                                                                               1,288,593         1,422,979

                                                                                             $ 7,699,629      $  7,622,401
                                                                                              ==========       ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable                                                                         $   128,779      $    257,297
    Accrued expenses
      Salaries                                                                                   524,006           277,396
      Other                                                                                      197,765           143,950
    Deferred income                                                                                  -             225,000
                                                                                               ---------        ----------

          Total current liabilities                                                              850,550           903,643
                                                                                               ---------        ----------

STOCKHOLDERS' EQUITY
    Common stock                                                                                  16,273            16,273
    Additional paid-in capital                                                                11,847,860        11,847,860
    Accumulated deficit                                                                       (4,957,776)       (5,116,950)
    Accumulated other comprehensive income                                                         4,770                75
                                                                                               ---------        ----------
                                                                                               6,911,127         6,747,258
    Treasury stock, at cost                                                                      (62,048)          (28,500)
                                                                                               ---------        ----------

          Total stockholders' equity                                                           6,849,079         6,718,758
                                                                                               ---------        ----------

                                                                                             $ 7,699,629      $  7,622,401
                                                                                              ==========       ===========

                              The accompanying notes are an integral part of these statements.
</TABLE>



                                                              F-4
<PAGE>

<TABLE>
<CAPTION>

                                            Acorn Holding Corp. and Subsidiaries

                                              CONSOLIDATED STATEMENTS OF INCOME

                                                   Year ended December 31,


                                                                                                 2001              2000
                                                                                             -----------      ------------
<S>                                                                                          <C>              <C>
    Net sales                                                                                $ 5,514,092      $  7,068,689

    Cost of sales                                                                              4,312,853         4,727,708
                                                                                               ---------        ----------
                                                                                               1,201,239         2,340,981

    Market value of equipment received                                                           653,400                 -
                                                                                               ---------        ----------

    Gross profit                                                                               1,854,639         2,340,981

    Selling, general and administrative                                                        1,592,840         1,733,236
                                                                                               ---------        ----------

    Operating profit                                                                             261,799           607,745
                                                                                               ---------        ----------

    Other income (expense)
      Interest income                                                                             51,205            91,994
      Interest expense                                                                            (3,892)          (20,989)
      Other                                                                                      (17,805)          (14,255)
                                                                                               ---------        ----------
                                                                                                  29,508            56,750
                                                                                               ---------        ----------

    Income before income tax expense                                                             291,307           664,495

    Income tax expense                                                                           132,133           146,291
                                                                                               ---------        ----------

    Net income                                                                               $   159,174      $    518,204
                                                                                              ==========       ===========

    Earnings per share (basic and diluted)                                                   $      0.10      $       0.32
                                                                                              ==========       ===========

    Weighted average shares outstanding - basic                                                1,597,626         1,627,195
                                                                                               =========        ==========

    Weighted average shares outstanding - diluted                                              1,598,055         1,627,213
                                                                                               =========        ==========




                              The accompanying notes are an integral part of these statements.

</TABLE>


                                                             F-5
<PAGE>

<TABLE>
<CAPTION>

                                            Acorn Holding Corp. and Subsidiaries

                                  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                                  AND COMPREHENSIVE INCOME

                                           Years ended December 31, 2001 and 2000




                                                                                    Accumulated
                                                     Additional                        other
                                          Common       paid-in      Accumulated    comprehensive    Treasury
                                           stock       capital        deficit         income          stock       Total
                                        ----------  ------------- -------------- ----------------  ---------- ------------

<S>                                     <C>         <C>           <C>               <C>            <C>        <C>
Balance at December 31, 1999            $   16,273  $  11,847,860 $   (5,635,154)   $  (20,246)    $      -   $  6,208,733

Comprehensive income
Net income                                     -              -          518,204           -              -        518,204
Net unrealized gain on investments
    in securities available-for-sale           -              -              -          20,321            -         20,321
                                          --------    -----------   ------------      --------       --------   ----------
Total comprehensive income                                                                                         538,525
                                                                                                                ----------
Treasury shares purchased                      -              -              -             -          (28,500)     (28,500)
                                          --------    -----------   ------------      --------       --------   ----------

Balance at December 31, 2000                16,273     11,847,860     (5,116,950)           75        (28,500)   6,718,758

Comprehensive income
Net income                                     -              -          159,174           -              -        159,174
Net unrealized gain on investments
    in securities available-for-sale           -              -              -           4,695            -          4,695
                                                                                                                ----------
Total comprehensive income                                                                                         163,869
                                                                                                                ----------
Treasury shares purchased                      -              -              -             -          (33,548)     (33,548)
                                          --------    -----------   ------------      --------       --------   ----------

Balance at December 31, 2001            $   16,273  $  11,847,860 $   (4,957,776)   $    4,770     $  (62,048) $ 6,849,079
                                         =========   ============  =============     =========      =========   ==========











                               The accompanying notes are an integral part of this statement.
</TABLE>


                                                             F-6
<PAGE>

<TABLE>
<CAPTION>

                                            Acorn Holding Corp. and Subsidiaries

                                            CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                   Year ended December 31,




                                                                                                 2001              2000
                                                                                             -----------      ------------
<S>                                                                                          <C>              <C>
Cash flows from operating activities
    Net income                                                                               $   159,174      $    518,204
    Adjustments to reconcile net income to net cash
       provided by operating activities
    Market value of equipment received                                                          (653,400)              -
    Depreciation and amortization                                                                431,408           407,367
    Deferred income taxes                                                                         78,984           143,810
    (Increase) decrease in assets
       Accounts receivable                                                                       210,186            (2,243)
       Inventories                                                                               319,232          (381,275)
       Prepaid expenses and other assets                                                         (11,888)            2,086
    Increase (decrease) in liabilities
       Accounts payable                                                                         (128,518)          404,331
       Accrued expenses                                                                          300,425           (39,909)
       Deferred income                                                                          (225,000)         (300,000)
                                                                                               ---------        ----------

          Net cash provided by operating activities                                              480,603           752,371
                                                                                               ---------        ----------

Cash flows from investing activities
    Purchase of machinery and equipment, including deposits                                     (224,222)         (563,248)
    Proceeds from redemption of investments                                                      201,287            15,970
    Note receivable payments received                                                             40,000           150,236
                                                                                               ---------        ----------

          Net cash provided by (used in) investing activities                                     17,065          (397,042)
                                                                                               ---------        ----------

Cash flows from financing activities
    Repayments from line of credit, net                                                              -            (150,000)
    Payment of long-term debt                                                                        -            (121,062)
    Purchase of treasury stock                                                                   (33,548)          (28,500)
                                                                                               ---------        ----------

          Net cash used in financing activities                                                  (33,548)         (299,562)
                                                                                               ---------        ----------

          NET INCREASE IN CASH AND CASH EQUIVALENTS                                              464,120            55,767

Cash and cash equivalents at beginning of year                                                 1,012,124           956,357
                                                                                               ---------        ----------

Cash and cash equivalents at end of year                                                     $ 1,476,244      $  1,012,124
                                                                                              ==========       ===========

Supplemental disclosure of cash flow information
    Interest paid                                                                            $     3,892      $     20,989
                                                                                              ==========       ===========




                               The accompanying notes are an integral part of this statement.
</TABLE>



                                                             F-7
<PAGE>



                      Acorn Holding Corp. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 2001 and 2000




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,  Automotive
    Industries,  Inc.  (Automotive) and Recticon  Enterprises,  Inc. (Recticon).
    Automotive is an inactive subsidiary.

    Recticon  is  organized  to  engage in the  business  of  manufacturing  and
    processing of silicon wafers for the semi-conductor industry.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    1.  Principles of Consolidation
        ---------------------------

    The consolidated  financial statements include the accounts of Acorn and its
    wholly owned  subsidiaries.  All significant  intercompany  transactions and
    balances are eliminated in consolidation.

    2.  Use of Estimates
        ----------------

    In  preparing  the  financial   statements  in  accordance  with  accounting
    principles generally accepted in the United States of America, management is
    required to make estimates and assumptions  that affect the reported amounts
    of  assets  and  liabilities   and  disclosure  of  contingent   assets  and
    liabilities  at the  date of the  financial  statements,  and  revenues  and
    expenses during the reported period.  Actual results could differ from those
    estimates.

    3.  Concentration of Risk
        ---------------------

    Recticon provides its products to customers  throughout the United States of
    America.  Recticon  performs  ongoing  credit  evaluations of its customers'
    financial condition and generally requires no collateral from its customers.
    Bad debt expense is not significant.

    4.  Cash and Cash Equivalents
        -------------------------

    Cash and cash equivalents consist of cash and highly liquid investments with
    a maturity of three months or less when purchased.

    5.   Accounts Receivable
         -------------------

    The  Company  considers   accounts   receivable  to  be  fully  collectible;
    accordingly,  no  allowance  for doubtful  accounts is required.  If amounts
    become   uncollectible,   they  will  be  charged  to  operations  when  the
    determination is made.

    6.  Inventories
        -----------

    Inventories are stated at the lower of cost or market. Cost is determined by
    the first-in, first-out method.


                                   (Continued)



                                       F-8
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000



NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    7.  Machinery and Equipment
        -----------------------

    Machinery and equipment  are stated at cost less  accumulated  depreciation.
    Depreciation is provided by the  straight-line  method over estimated useful
    lives. Maintenance and repair costs are charged to expense as incurred.

    8.  Deferred Income
        ---------------

    Deferred  income  is an amount  received  from  customers  in  exchange  for
    Recticon's  commitment to provide certain quantities of product over periods
    extending  through  September 2001. The deferred amounts were amortized on a
    straight-line basis over the terms of the agreements.

    9.  Income Taxes
        ------------

    Deferred income tax assets and liabilities represent the tax effects,  based
    on current tax law, of future deductible or taxable amounts  attributable to
    events that have been  recognized  in the financial  statements.  Income tax
    expense  represents  taxes  payable,  net of changes in deferred  income tax
    assets and liabilities  during the year. Acorn files a consolidated  federal
    income tax return which includes the  subsidiaries'  taxable  income.  Under
    Acorn's  tax-sharing  agreement with its subsidiaries,  the subsidiaries are
    required to pay to Acorn an amount  equivalent  to what each would have paid
    had  it  filed  a  separate  company  federal  income  tax  return  and  the
    subsidiaries' tax losses may be offset against future years' amounts payable
    to Acorn.

    10. Earnings Per Share
        ------------------

    The Company follows Statement of Financial  Accounting  Standards (SFAS) No.
    128, EARNINGS PER SHARE, which eliminates primary and fully diluted earnings
    per share  (EPS) and  requires  presentation  of basic  and  diluted  EPS in
    conjunction  with the disclosure of the  methodology  used in computing such
    EPS.  Basic  EPS  excludes  dilution  and is  computed  by  dividing  income
    available to common  shareholders  by the  weighted  average  common  shares
    outstanding during the period.  Diluted EPS takes into account the potential
    dilution that could occur if  securities or other  contracts to issue common
    stock were exercised and converted into common stock.

    11. Goodwill
        --------

    Goodwill represents the excess of cost over the fair value of the net assets
    acquired for the purchase of Recticon. This excess is being amortized over a
    period of 10 years (see note B 14).

    12. Comprehensive Income
        --------------------

    The Company follows SFAS No. 130, REPORTING  COMPREHENSIVE  INCOME. SFAS No.
    130 establishes  standards to provide prominent  disclosure of comprehensive
    income  items.  Comprehensive  income is the  change in equity of a business
    enterprise   during  a  period  from   transactions  and  other  events  and
    circumstances from non-owner sources. Other comprehensive income consists of
    net unrealized gains on investment securities available-for-sale.


                                   (Continued)

                                       F-9
<PAGE>



                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000




NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    13. Investments
        ------------

    The Company  accounts for its  investments in accordance  with SFAS No. 115,
    ACCOUNTING  FOR  CERTAIN   INVESTMENTS   IN  DEBT  AND  EQUITY   SECURITIES.
    Accordingly,  the Company classifies its investments as  available-for-sale,
    whereby net  unrealized  gains and losses,  net of tax,  are  required to be
    recognized as a separate component of stockholders' equity.

    14. Recent Accounting Pronouncements
        --------------------------------

    On July 20, 2001,  the Financial  Accounting  Standards  Board (FASB) issued
    Statement  of  Financial  Accounting  Standards  (SFAS)  No.  141,  BUSINESS
    COMBINATIONS, and SFAS No. 142, GOODWILL AND INTANGIBLE ASSETS. SFAS No. 141
    is effective for all business  combinations  completed  after June 30, 2001.
    SFAS No. 142 is effective  for fiscal  years  beginning  after  December 15,
    2001;  however,  certain  provisions of this Statement apply to goodwill and
    other intangible assets acquired between July 1, 2001 and the effective date
    of SFAS No. 142. Major  provisions of these  Statements and their  effective
    dates for the Company are as follows:

      o   all business  combinations  initiated after June 30, 2001 must use the
          purchase  method of  accounting.  The  pooling of  interest  method of
          accounting is prohibited except for transactions initiated before July
          1, 2001.

      o   intangible assets acquired in a business  combination must be recorded
          separately from goodwill if they arise from contractual or other legal
          rights or are  separable  from the  acquired  entity  and can be sold,
          transferred,  licensed, rented or exchanged, either individually or as
          part of a related contract, asset or liability

      o   goodwill, as well as intangible assets with indefinite lives, acquired
          after June 30, 2001, will not be amortized. Effective January 1, 2002,
          all  previously   recognized   goodwill  and  intangible  assets  with
          indefinite lives will no longer be subject to amortization.

      o   effective  January  1,  2002,  goodwill  and  intangible  assets  with
          indefinite  lives will be tested for impairment  annually and whenever
          there is an impairment indicator

      o   all acquired goodwill must be assigned to reporting units for purposes
          of impairment testing and segment reporting.

    The Company will continue to amortize  goodwill  recognized prior to July 1,
    2001,  under its current  method until January 1, 2002, at which time annual
    goodwill amortization of approximately $85,530 will no longer be recognized.
    By December 31, 2002, the Company will have  completed a  transitional  fair
    value based  impairment  test of goodwill as of January 1, 2002.  Impairment
    losses, if any,  resulting from the transitional  testing will be recognized
    upon the completion of the transitional testing, as a cumulative effect of a
    change in accounting principle.





                                   (Continued)



                                       F-10
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000



NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    In  August  2001,  the  FASB  issued  SFAS No.  143,  ACCOUNTING  FOR  ASSET
    RETIREMENT  OBLIGATIONS.  SFAS No. 143  applies to all  entities,  including
    rate-regulated  entities,  that have legal  obligations  associated with the
    retirement  of a tangible  long-lived  asset that result  from  acquisition,
    construction  or development  and (or) normal  operations of the long- lived
    asset.  The  application  of  this  Statement  is  not  limited  to  certain
    specialized industries,  such as the extractive or nuclear industries.  This
    Statement  also  applies,   for  example,  to  a  company  that  operates  a
    manufacturing   facility  and  has  a  legal  obligation  to  dismantle  the
    manufacturing plant and restore the underlying land when it ceases operation
    of that plant.  A liability  for an asset  retirement  obligation  should be
    recognized if the obligation  meets the definition of a liability and can be
    reasonably  estimated.  The initial  recording should be at fair value. SFAS
    No. 143 is  effective  for  financial  statements  issued  for fiscal  years
    beginning  after June 15, 2002,  with earlier  application  encouraged.  The
    provisions of the  Statement  are not expected to have a material  impact on
    the financial condition or results of operations of the Company.

    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 is not expected to have a
    significant  impact on the  financial  condition or results of operations of
    the Company.

    15. Reclassifications
        -----------------

    Certain prior year financial  statement  amounts have been  reclassified  to
    conform to current year presentation.

NOTE C - INVESTMENT SECURITIES

    The amortized cost,  unrealized  gains and losses,  and fair market value of
    the Company's available-for-sale  investment securities at December 31, 2001
    and 2000 are:

<TABLE>
<CAPTION>
                                                                                        2001
                                                          ----------------------------------------------------------------
                                                                               Gross             Gross            Fair
                                                           Amortized        unrealized        unrealized            market
                                                             cost              gains            losses            value
                                                          -----------      ------------      -----------      ------------
       <S>                                                <C>              <C>               <C>              <C>
       State and municipal obligations                    $    11,590      $      4,770      $       -        $     16,360
                                                           ==========       ===========       ==========       ===========

                                                                                        2000
                                                          ----------------------------------------------------------------
                                                                               Gross             Gross            Fair
                                                           Amortized        unrealized        unrealized            market
                                                             cost              gains            losses            value
                                                          -----------      ------------      -----------      ------------

       State and municipal obligations                    $   212,877      $         75      $       -        $    212,952
                                                           ==========       ===========       ==========       ===========

                                   (Continued)
</TABLE>

                                       F-11
<PAGE>



                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000




NOTE C - INVESTMENT SECURITIES - Continued

    The following  table lists the  contractual  maturities of investments as of
December 31, 2001:

                                                                         Fair
                                                     Amortized          market
                                                       cost              value
                                                   -----------      ------------

       After ten years                             $    11,590      $     16,360
                                                    ----------       -----------

                                                   $    11,590      $     16,360
                                                    ==========       ===========

NOTE D - INVENTORIES

    Inventories consist of the following:
                                                       2001             2000
                                                   -----------      ------------

       Raw materials and supplies                  $   603,845      $    734,299
       Work in process                               1,108,525         1,434,710
       Finished goods                                  422,981           285,574
                                                     ---------        ----------

                                                   $ 2,135,351      $  2,454,583
                                                    ==========       ===========

NOTE E - CREDIT ARRANGEMENTS

    Recticon has available a $750,000  revolving  line of credit which is due on
    demand. Interest is payable monthly at the prime rate (4.75% at December 31,
    2001).  The line is  available  through  April 30,  2002,  and is secured by
    Recticon's  assets and is guaranteed by Acorn. At both December 31, 2001 and
    2000, there was $750,000 available under the line of credit.

NOTE F - DEFERRED INCOME

    Recticon received  nonrefundable payments from customers in exchange for its
    commitment to provide certain  quantities of product over periods  extending
    through September 2001. The payments received have been recorded as deferred
    income and are being amortized over the periods of the contracts.  The sales
    price of the product to be delivered  under the  agreements  is permitted to
    provide a gross profit not to exceed 35%. The  customers are not required to
    purchase any amount of product under the agreements.

    The  remaining  deferred  income of  $225,000  as of  December  31, 2000 was
recognized as income during 2001.

NOTE G - INCOME TAXES

    The Company  depreciates its machinery and equipment for income tax purposes
    at rates which vary from those used for  financial  reporting  purposes.  In
    addition, the Company has reported certain income for tax purposes which was
    being  recognized  over a period of years for financial  statement  purposes
    (note F).

                                   (Continued)



                                       F-12
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000




NOTE G - INCOME TAXES - Continued

    The income tax provision consists of the following:

                                                     2001             2000
                                                 -----------      ------------
       Current
          Federal                                $       -        $        -
          State                                       53,149            2,481
                                                   ---------        ----------

       Deferred
          Federal                                     63,187          109,986
          State                                       15,797           33,824
                                                   ---------        ----------
                                                      78,984          143,810
                                                   ---------        ----------

                                                 $   132,133      $   146,291
                                                  ==========       ===========

    Deferred tax assets (liabilities) consist of the following:

                                                     2001             2000
                                                 -----------      ------------

       Net operating loss carryforwards          $ 2,174,000      $  2,174,000
       Depreciation                                 (220,000)         (222,000)
       Deferred income                                   -              91,000
       Carrying value of assets                      364,000           385,000
       Note receivable                               192,000           192,000
       Other                                         124,000            92,000
                                                   ---------        ----------
                                                   2,634,000         2,712,000
       Less valuation allowance                    1,397,000         1,397,000
                                                   ---------        ----------

                                                 $ 1,237,000      $  1,315,000
                                                  ==========       ===========

    A valuation  allowance has been established  against the deferred tax assets
    of net operating loss  carryforwards due to separate return limitations that
    are  applicable to $1,397,000  of net  operating  losses.  The remaining net
    operating loss carryforwards of $2,283,000 begin to expire in 2006.

    The income tax  provision  reconciled  to the tax computed at the  statutory
federal rate was as follows:

                                                           2001          2000
                                                       -----------    ----------

       Tax at statutory federal rate                        34.0%          34.0%
       State income taxes on subsidiary taxable
        income, net of federal benefits                      7.5            2.4
       Other                                                 3.9          (12.7)
                                                        --------       --------

                                                            45.4%          23.7%
                                                        ========       ========


                                       F-13
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000



NOTE H - COMMITMENTS

    Recticon  leases its  facilities  under a lease  agreement  which expires on
February 28, 2009. Minimum lease payments are as follows:

       Year ending December 31,

                 2002                                         $   120,000
                 2003                                             120,000
                 2004                                             120,000
                 2005                                             120,000
                 Thereafter                                       416,000
                                                                ---------

                                                              $   896,000
                                                               ==========

    Rental expense for 2001 and 2000 was $116,000 and $96,000, respectively.

NOTE I - CONCENTRATIONS

    For 2001,  two customers of the Company  accounted for 70% and 17% of sales,
    respectively.  For 2000,  three customers of the Company  accounted for 51%,
    27% and 11% of sales, respectively.

    For 2001, two vendors  accounted for 25% and 20% of the Company's  materials
    purchases,  respectively. For 2001, two vendors accounted for 39% and 17% of
    the Company's materials purchases, respectively.

    Acorn and its subsidiaries maintain cash balances at financial institutions,
    mutual funds and brokerage  accounts located throughout the United States of
    America.  Accounts with  financial  institutions  are insured by the Federal
    Deposit Insurance Corporation up to $100,000.  Acorn periodically  maintains
    balance in excess of these limits.  Acorn  believes it is not exposed to any
    significant credit risk on cash and cash equivalents.

NOTE J - RELATED PARTY TRANSACTIONS

    During 2001 and 2000, Acorn and its  subsidiaries  paid a law firm, of which
    the  Company's  Chief  Executive   Officer  and  Chairman  was  of  counsel,
    approximately  $12,700  and  $7,600,  respectively,   for  reimbursement  of
    expenses.

    For the years ended December 31, 2001 and 2000,  Acorn paid  consulting fees
    of $48,000 in each year to two of its former officers (currently Directors).

    Directors  fees  expense for each of the years ended  December  31, 2001 and
    2000 was $12,000.


                                       F-14
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000

<TABLE>
<CAPTION>
NOTE K - EARNINGS PER SHARE

    The Company's calculation of earnings per share in accordance with SFAS No. 128 is as follows:

                                               Income                     Number of shares
                                             (numerator)                    (denominator)              Per share amount
                                    ---------------------------     ----------------------------    ----------------------
                                       2001             2000            2001            2000          2001          2000
                                    -----------     -----------     ------------    ------------    ---------    ---------

       <S>                          <C>             <C>             <C>             <C>             <C>          <C>
       Basic EPS
          Net income                $   159,174     $   518,204     $  1,597,626    $  1,627,195    $    0.10    $    0.32
                                     ==========      ==========      ===========     ===========     ========     ========
</TABLE>

    Diluted  EPS is  not  presented,  as  the  effect  of  dilutive  securities,
    consisting of options, has no impact.

    In 2001, 311,000 of the 363,000 options outstanding to purchase common stock
    (see note L) with an exercise  price  ranging from $2.13 to $5.48,  were not
    included in the computation of diluted EPS because the option exercise price
    was  greater  than the  average  market  price.  In 2001,  a total of 52,000
    options  with an exercise  price of $1.30 were  including in the diluted EPS
    calculation.

    In 2000, 356,400 of the 360,000 options outstanding to purchase common stock
    (see note L) with an exercise  price  ranging from $2.19 to $8.44,  were not
    included in the computation of diluted EPS because the option exercise price
    was greater than the average market price. In 2000, a total of 3,600 options
    with  an  exercise   price  of  $1.53  were  included  in  the  diluted  EPS
    calculation.

NOTE L - STOCK OPTIONS

    The Company has issued stock options,  under two plans, to various  officers
    of the Company.  In addition,  the Company has issued stock  options under a
    third plan to directors of the Company.  The stock  options were issued with
    exercise prices equal to the fair market value of the Company's common stock
    as of the date of grant and have a term of 10 years  from the date of grant.
    The following is a summary of stock options outstanding at December 31, 2001
    and 2000:

<TABLE>
<CAPTION>
                                                                            2001                            2000
                                                                 --------------------------      --------------------------
                                                                                 Weighted                         Weighted
                                                                                  average                          average
                                                                                 exercise                         exercise
                                                                  Shares           price          Shares            price
                                                                 ---------       ---------       ---------       ---------

         <S>                                                     <C>             <C>             <C>             <C>
         Outstanding at January 1,                                 360,000       $    4.58         360,000       $    4.59
              Granted                                               58,200            1.39           3,600            1.53
              Cancelled                                             (3,200)          (1.53)         (3,600)          (2.27)
              Expired                                              (52,000)          (8.44)            -
                                                                 ---------                       ---------

         Outstanding at December 31,                               363,000            3.55         360,000            4.58
                                                                 =========                       =========

         Options exercisable at December 31,                       363,000            3.55         360,000            4.58
                                                                 =========                       =========


                                                         (Continued)
</TABLE>

                                                             F-15
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000




NOTE L - STOCK OPTIONS - Continued

    The following table summarizes  information about stock options  outstanding
at December 31, 2001:

<TABLE>
<CAPTION>
                                                                              Options outstanding and exercisable
                                                                -----------------------------------------------------------
                                                                  Weighted                 Weighted
           Range of                                              remaining                  average                Exercise
         exercise price                                            shares              contractual life              price
         --------------                                         ------------           ----------------            --------
         <S>                                                     <C>                     <C>                         <C>
         $1.30                                                      52,000               10.0 years                  $1.30
         $2.13                                                       6,200                9.4 years                  $2.13
         $2.19                                                      48,000                3.9 years                  $2.19
         $2.27                                                      20,800                6.9 years                  $2.27
         $2.90                                                      20,000                2.8 years                  $2.90
         $3.95                                                      40,000                5.4 years                  $3.95
         $4.60 - $5.48                                             176,000                1.4 years                  $4.77
                                                                 ---------

                                                                   363,000
                                                                 =========
</TABLE>

    The stock  option  agreements,  as  amended  on March 2,  1999,  state  that
    outstanding  options can be exercised at a price of $3.125 in the event of a
    "change in control,"  as defined in the  agreements.  Assuming  these shares
    were exercised, there would be no material impact on EPS.

    The Company has adopted only the  disclosure  provisions of SFAS No. 123. It
    applies APB Opinion No. 25 and related interpretations in accounting for its
    plans  and does  not  recognize  compensation  expense  for its  stock-based
    compensation  plans. Had compensation cost been determined based on the fair
    value of the options at the grant date  consistent  with SFAS No.  123,  the
    Company's  net  earnings  and EPS for the years ended  December 31, 2001 and
    2000 would have reflected the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                                 2001             2000
                                                                                             -----------      ------------
       <S>                                                                                   <C>              <C>
       Net earnings
          As reported                                                                        $   159,174      $    518,204
          Pro forma                                                                              112,547           515,047

       EPS
          As reported                                                                        $      0.10      $       0.32
          Pro forma                                                                                 0.07              0.32
</TABLE>

    These pro forma  amounts  may not be  representative  of future  disclosures
    because they do not take into effect pro forma compensation  expense related
    to grants  before  January  1,  1998.  The fair  value of these  options  is
    estimated on the date of grant using the Black-Scholes  option pricing model
    with the following  weighted  average  assumptions for grants in fiscal year
    2001 and 2000: expected volatility of 97.6% and 86%, risk-free interest rate
    of 5.09% and 5.24%, and expected life of 10 years. The weighted average fair
    value of  options  granted  during  fiscal  year 2001 and 2000 was $1.49 and
    $1.53, respectively.

                                                             F-16
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2001 and 2000



NOTE M - COMMON STOCK

    At December 31, 2001 and 2000,  the Company had  20,000,000  shares of $0.01
    par value common stock  authorized.  At December 31, 2001,  1,627,362 shares
    were issued and  1,585,646  shares were  outstanding.  At December 31, 2000,
    1,627,362 shares were issued and 1,608,362 shares were outstanding.

    During 2001 and 2000,  the Company  repurchased  22,716 and 19,000 shares of
    its common stock, respectively, through the open market.

NOTE N - SEGMENT INFORMATION

    The Company is a holding  company  which owns and  operates  one  subsidiary
    which   manufactures    monocrystalline   silicon   wafers   used   in   the
    microelectronics  industry. The Company considers its business to consist of
    one reportable operating segment.

NOTE O - CONTINGENCIES

    The Company is involved in legal and  administrative  proceedings and claims
    of  various  types  during  the  ordinary  course  of  business.  While  any
    litigation  contains an element of  uncertainty,  management does not expect
    these legal  matters will have a material  adverse  effect on the  Company's
    results of operations or financial position.

NOTE P - MARKET VALUE OF EQUIPMENT RECEIVED

    In December 1995 and January 1996, Recticon entered into two agreements with
    two of its  customers  requiring the  construction  and  maintenance  of two
    crystal-growing  furnaces and all of the necessary  related  equipment.  The
    construction  and  maintenance of these furnaces and related  equipment were
    financed in full by the two  customers in exchange for a set  production  of
    silicon  wafers to be  delivered  to each  customer  over the next five full
    years.  During  2001,  these  agreements  expired  and, per the terms of the
    agreements,  Recticon  was  assigned  title  to  the  furnaces  and  related
    equipment  from  the  two  customers  as  compensation  for  fulfilling  its
    commitments  under the contracts.  Individual  bills of sale were signed for
    each  furnace and related  equipment in September  and December  2001,  thus
    changing  title of ownership to Recticon.  At this time,  Recticon  obtained
    third-party  quotations  for each of the furnaces  and related  equipment to
    determine the fair market value of the machines, amounting to $653,400. This
    amount is included in property, plant and equipment at December 31, 2001 and
    income for the year ended December 31, 2001.






                                       F-17
<PAGE>

<TABLE>
<CAPTION>

NOTE Q - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                                                                            Year ended December 31, 2001
                                                        ------------------------------------------------------------------
                                                                                                Net           Diluted net
                                                                            Operating          income        income (loss)
                                                           Revenues          profit            (loss)          per share
                                                        -------------     -------------    -------------     -------------

       <S>                                              <C>               <C>              <C>                  <C>
       1st Quarter                                      $   2,134,594     $     196,441    $     119,066        $  0.07
       2nd Quarter                                          1,551,326           (35,207)         (11,623)         (0.01)
       3rd Quarter                                            988,802          (289,857)        (293,914)         (0.18)
       4th Quarter                                            839,370           390,422          345,645           0.20
                                                          -----------       -----------      -----------          -----

       Total                                            $   5,514,092     $     261,799    $     159,174        $   .10
                                                         ============      ============     ============         ======


                                                                            Year ended December 31, 2000
                                                        ------------------------------------------------------------------
                                                                                                              Diluted net
                                                                            Operating            Net            income
                                                           Revenues          profit            income          per share
                                                        -------------     -------------    -------------     -------------

       1st Quarter                                      $   1,639,551     $      79,433    $      46,978        $  0.03
       2nd Quarter                                          1,848,156           159,934          120,800           0.07
       3rd Quarter                                          1,746,766            (6,453)           1,736             -
       4th Quarter                                          1,834,216           374,831          348,690           0.21
                                                          -----------       -----------      -----------          -----

       Total                                            $   7,068,689     $     607,745    $     518,204        $   .32
                                                         ============      ============     ============         ======

</TABLE>




                                                             F-18