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, 1999

                          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, 1999 were $4,281,949.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  as of March 27,  2000  (valued  at the  average  of the bid price of
$1.65625 and asked price of $2.00 on such date) was $1,515,097.75.

The  number of shares of Common  Stock  outstanding  (including  shares  held by
affiliates  of the issuer) as of March 27,  2000:  1,627,358  (which  reflects a
two-for-five reverse stock split, effective April 19, 1999).

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.  Unless otherwise indicated,
all of the  shares  of the  Common  Stock  have been  adjusted  to  reflect  the
two-for-five reverse stock split, effective April 19, 1999.

         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.

        In 1995,  Recticon  entered into  long-term  agreements  with two of its
major customers, pursuant to which said customers have paid an aggregate of $2.3
Million in cash for the right to receive a specified number of silicon wafers at
a predetermined gross profit margin. In addition, in 1996, Recticon entered into
agreements  pursuant to which  Recticon  received  $2.4 Million in cash from two
customers  in order for  Recticon to purchase  additional  furnaces  and related
equipment (the "Units"). At the end of five years, the Units will be turned over
to Recticon at no cost. In exchange therefor,  Recticon has agreed to sell these
customers the wafers  produced by the Units at a mutually agreed to gross profit
margin.  Recticon has expanded its facilities and, as a result thereof,  has the
capacity to add an  additional  four or five 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
1999, 7% of its raw materials were acquired from one supplier, while for 1998 it
was 13%.  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 1999 three  customers of Recticon  accounted for 46%, 31% and 4% of
its sales, respectively.  For 1998, three customers of the Company accounted for

                                       2
<PAGE>

53%,  15% and 5% of its  sales,  respectively.  The  loss of any or all of these
customers,  could have an adverse,  possibly  severe,  effect on the business of
Recticon.

         Compliance   with  federal,   state  and  local  laws  and  regulations
regulating  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 42 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

         On May 14, 1999,  the Chapter 7 Trustee in  Bankruptcy  for  ServiceMax
Tire & Auto Centers of Michigan, Inc.,  ("ServiceMax") filed an avoidance action
in the United  States  Bankruptcy  Court for the  Eastern  District  of Michigan
seeking to recover $1,750,000 from the Company.

         ServiceMax  Inc.  is  not  included  in  the   consolidated   financial
statements of the Company,  because the majority owned subsidiary's control does
not rest with the Company.

         The Company has filed an answer to the avoidance  action and intends to
vigorously defend this action.

ITEM 4.  Submission of Matters to a Vote of Security Holders

         The Annual Meeting of  Stockholders of the Company was held on December
23, 1999 (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 five  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:

                                       3
<PAGE>
                                          VOTES
                                  FOR             WITHHELD
                                 -------------------------
       Paula Berliner            1,356,423         5,390
       Edward N. Epstein         1,356,183         5,630
       Ronald J. Manganiello     1,356,423         5,390
       Stephen A. Ollendorff     1,356,183         5,630
       Bert Sager                1,356,423         5,390

                  (b) The second proposal  presented to the  stockholders was to
ratify the firm of Grant Thornton LLP as the independent  public  accountants of
the Company  for the 1999 fiscal  year.  There were  1,359,757  shares of Common
Stock cast in favor of such  proposal,  900 shares of Common Stock voted against
such proposal, and 1,156 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,  adjusted for the two-for-five stock split,  effective,  April 19, 1999.
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
         --------------             ---          ----
            1999
            ----
         March 31                   $1.563       $3.344
         June 30                    $1.188       $2.344
         September 30               $1.063       $1.875
         December 31                $ .938       $2.063

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

            1998
            ----
         March 31                   $3.125       $3.75
         June 30                    $3.125       $4.063
         September 30               $2.110       $3.125
         December 31                $1.875       $3.047


         As of March 27, 2000, there were approximately 398 holders of record of
the Company's Common Stock with 1,627,358 shares of Common Stock outstanding. In
addition,  the Company believes that there are more than 1,300 beneficial owners
of Common Stock whose shares are held in "street" name as of such date. On March
27,  2000,  the  closing  bid and asked  quotations  of the  Common  Stock  were
$1.65625 and $2.00, respectively.

         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

        On  November  4,  1997,  pursuant  to  the  approval  of  the  Company's
stockholders,  the Company  withdrew  its  election  with the  Commission  to be
treated as a Business  Development  Company under the 1940 Act. Since that time,
the  Company  has been  operating  as a holding  company  with one  wholly-owned
subsidiary, Recticon. The Company believes that it has sufficient short-term and
long-term  liquidity either from cash on hand, credit  arrangements or cash flow
from  operations.  The  business  in which  the  Company  is  engaged  is highly
competitive and cyclical in nature. For the fiscal year ended December 31, 1999,
the Company's net sales declined  approximately  $2,685,227 from the fiscal year
ended  December 31, 1998 and  operating  profit  (loss)  declined  approximately
$896,317 during the corresponding  period from a gain of $205,802 in fiscal 1998
to a loss of $690,515 in fiscal 1999.

         The Company's sales and profitability have shown improvement during the
first  quarter of the fiscal  year ending  December  31, 2000 and the Company is
anticipating  to be  profitable  for the first  quarter  of 2000.  Although  the
Company hopes to achieve even greater profitability during the second quarter of
2000, no assurance can be given that the Company will maintain its profitability
during 2000.

        The Company completed implementation of its Year 2000 compliance plan on
a timely basis and did not  experience any disruption in business or significant
issues resulting from Year 2000 compliance.

         From time to time in both written  reports and oral  statements  by the
Company's senior  management,  we may express our expectations  regarding future
performance by the Company.  These  "forward-looking  statements" are inherently
uncertain,  and investors  must recognize that events could turn out to be other
than what senior management expected.

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

                                   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:

                                       5
<PAGE>

                                Year of
                               Election
                                  as
 Name and Age                  Director       Position
---------------                ---------      --------
(As of 3/1/2000)

Bert Sager(1)(2)               1983           Director
  (74)

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

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

Larry V. Unterbrink            (3)            Treasurer
  (65)

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

Paula Berliner                 1990           Director
  (56)  (1)(2)

Ronald J. Manganiello*         1997           Director
  (50)    (1)(2)(4)

--------------
*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.
--------------

         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 and  Pharmaceutical  Resources,
Inc., a  publicly-traded  manufacturer of generic drugs,  of Spring Valley,  New
York.

                                       6
<PAGE>

         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. Mr. Unterbrink had been, from May 1982 to
December  1994,  President  and  Treasurer  of  Seahorse  Ltd.,  a  leasing  and
publishing company.

         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.  She is presently a director of Republic  Security  Financial  Corp., a
holding company for Republic Securities Bank.

         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. From 1986 to January 1996, Mr. Manganiello was Chairman
and Chief Executive Officer of Hanger Orthopedic Group,  Inc., a publicly-traded
provider of patient care  services  and  products  for  orthotic and  prosthetic
rehabilitation.

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

Section 16(a) Compliance

         The Company is aware of the following late filing of a report  required
by Section  16(a) of the Exchange  Act:  Edward N. Epstein  failed to file, on a
timely  basis,  a Statement of Changes in  Beneficial  Ownership on Form 4. This
filing was subsequently completed on the appropriate form.

ITEM 10.  Executive Compensation

Summary Compensation Table

         The following  table sets forth  information for the fiscal years ended
December  31, 1999,  December  31, 1998 and  December  31,  1997,  respectively,
respecting compensation earned by the Chief Executive Officer of the Company and
the  executive  officers  (whose salary and bonus earned in fiscal 1999 exceeded
$100,000)  of  the  Company  serving  at the  end of  fiscal  1999  (the  "Named
Executives").


                                                                    Long-Term
                                       Annual Compensation(1)      Compensation
                                       ----------------------      ------------
                                                                    Securities
   Name and                                                         Underlying
Principal Position          Year       Salary($)      Bonus($)     Options(#)(2)
-------------------         ----       ---------      --------     -------------
Stephen A. Ollendorff      1999(3)     $250,543(4)      -0-            --
  Chairman and Chief       1998(3)     $246,597         -0-            --
  Executive Officer        1997(3)     $254,615(5)      -0-          50,000

                                       7
<PAGE>

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

Edward N. Epstein            1999      $216,192(4)      -0-            --
  President and Chief        1998      $212,787         -0-            --
  Operating Officer          1997      $182,090(5)      -0-            --



Robert P. Freeman            1999      $203,353       $ 50,000         --
  President and Chief        1998      $197,830       $ 50,000         --
  Executive Officer -        1997      $215,920       $ 95,673       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. Includes
      the unpaid  balance of $29,879  and $18,016  for  Messrs.  Ollendorff  and
      Epstein, respectively, reflecting the amounts being accrued on the books
      of the Company.

(5)   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. See "Employment Arrangements" below.

        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 1991 Stock
Option Plan.

Stock Option Grants In Last Fiscal Year

        During the fiscal  year ended  December  31,  1999,  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

                                       8
<PAGE>

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 27, 2000, 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 27,  2000,  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,  1999
respecting exercisable and non-exercisable options held by the Named Executives.
During the fiscal year ended  December 31, 1999,  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.


                   Number of Unexercised      Value of Unexercised In-
                       Options Held               the-Money Options
                  at December 31, 1999(1)    Held at December 31, 1999(1)
                --------------------------   ----------------------------
                                   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-

----------------
(1) Based upon the closing sales price of the Common Stock on December 31, 1999:
    $1.75.

                                       9
<PAGE>

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.  Pursuant  to existing  contractual  commitments,  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.

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.

            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, 2000 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


                                       10
<PAGE>

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. In addition,  the Board of Directors of
Recticon  authorized an annual bonus to Mr. Freeman equal to 5% of the operating
profit of Recticon, prior to the payment of bonuses and without giving effect to
the account supply commitment fees,  corporate charges,  executive  compensation
and consulting fees, but no less than $50,000 through the year 2000.

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
15,  1999,  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)             113,200                  7.0%
 405 Lexington Avenue
 New York, NY 10174

Allen Landers, M.D.
1385 York Avenue
New York, NY 10021                       101,520                  6.3%

---------------
(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  15,  2000,  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.

                                       11

<PAGE>

                                       Amount and Nature     Percentage of
    Name and Address of                  of Beneficial        Outstanding
    Beneficial Owner(1)                   Ownership           Shares Owned
    -------------------                -----------------     -------------
    Bert Sager                              171,250              10.6%
                                             (3)(4)

    Stephen A. Ollendorff                   606,980              34.9%
                                             (5)(6)

    Edward N. Epstein                       387,500              23.3%
                                          (4)(5)(7)



    Paula Berliner                           67,320              4.09%
                                                (4)


    Robert P. Freeman                        56,000              3.38%
                                                (4)

    Ronald J. Manganiello                    66,578              4.57%
                                                (8)

    All executive officers and            1,036,056              53.0%
     directors as a group (7 persons)     (3)(4)(5)
                                          (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 15, 2000 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 15,  1999:  Mr.  Sager - 64,000;  Mr.
        Ollendorff - 20,000;  Mr. Epstein - 48,000;  Ms. Berliner - 28,000;  Mr.
        Freeman - 40,000;  and all directors and executive  officers as group (7
        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 387,500 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.

(8)     Includes shares owned by Mr. Manganiello's spouse and by Mr. Manganiello
        as trustee for his children.

                                       12
<PAGE>


ITEM 12.  Certain Relationships and Related Transactions

         Mr. Ollendorff,  Chief Executive Officer of the Company, was of counsel
to Hertzog,  Calamari & Gleason, general counsel to the Company, through January
31, 1999.  Effective February 1, 1999, the Company no longer retains counsel who
are affiliated with Mr. Ollendorff.

         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.


                                       13
<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.

         21    List of subsidiaries of the Company.

         27    Financial Data Schedule.

         (b) Reports on Form 8-K:

         There  were no  reports  on Form 8-K filed by the  Company  during  the
quarter ended December 31, 1999.

                                       14
<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, 2000           By: 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
---------                        -----                             ----

Stephen A. Ollendorff            Chairman of the Board           March 29, 2000
------------------------         Chief Executive Officer
Stephen A. Ollendorff            (Principal Executive
                                 Officer), Secretary
                                 and Director

Edward N. Epstein                President and Chief             March 29, 2000
------------------------         Operating Officer;
Edward N. Epstein                Director


Larry V. Unterbrink              Treasurer (Principal            March 29, 2000
------------------------         Financial and Accounting
Larry V. Unterbrink              Officer)


Paula Berliner                   Director                        March 29, 2000
------------------------
Paula Berliner

Ronald J. Manganiello            Director                        March 29, 2000
------------------------
Ronald J. Manganiello


Bert Sager                       Director                        March 29, 2000
------------------------
Bert Sager


                                       15

<PAGE>

                  FINANCIAL STATEMENTS AND REPORT OF
               INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

                 ACORN HOLDING CORP. AND SUBSIDIARIES

                      December 31, 1999 and 1998









                                      F-1

<PAGE>



                                 C O N T E N T S


                                                                       Page


ACORN HOLDING CORP. AND SUBSIDIARIES

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                      F-3

FINANCIAL STATEMENTS

         CONSOLIDATED BALANCE SHEETS                                    F-4

         CONSOLIDATED STATEMENTS OF OPERATIONS                          F-5

         CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'
              EQUITY AND COMPREHENSIVE INCOME (LOSS)                    F-6

         CONSOLIDATED STATEMENTS OF CASH FLOWS                          F-7

         NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     F-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, 1999 and 1998, and the related
consolidated  statements  of  operations,  changes in  stockholders'  equity and
comprehensive  income  (loss)  and cash flows for the years  then  ended.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit 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 provides a reasonable basis for our opinions.

         In our opinion,  the  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,  1999 and 1998,  and the
consolidated  results of their operations and their  consolidated cash flows for
the  years  then  ended,  in  conformity  with  generally  accepted   accounting
principles.





Philadelphia, Pennsylvania
March 17, 2000




                                      F-3

<PAGE>
                      Acorn Holding Corp. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,

                ASSETS                                 1999             1998
                                                   -----------      -----------
CURRENT ASSETS
    Cash and cash equivalents                      $   956,357      $ 1,126,838
    Restricted cash                                        -             11,798
    Investment securities                              208,601          668,439
    Accounts receivable - trade                        355,259           84,817
    Current portion of note receivable
      from sale of subsidiary                          110,236          110,235
    Current portion of note receivable
      - employee                                        40,000           40,000
    Inventories                                      2,073,308        2,055,827
    Prepaid expenses                                    20,482           22,337
    Deferred income tax asset                          121,770           70,881
                                                   -----------      -----------
                Total current assets                 3,886,013        4,191,172
                                                   -----------      -----------

MACHINERY AND EQUIPMENT, net of accumulated
    depreciation of $1,016,755 and $720,055
    in 1999 and 1998, respectively                   1,832,326        1,978,743
                                                   -----------      -----------
OTHER ASSETS
    Note receivable from sale of subsidiary, less
     current portion                                    -               110,236
    Note receivable, less current portion
     - employee                                         40,000           80,000
    Other investments                                   9,108            9,108
    Goodwill, net of amortization of $641,477
     and $555,947 in 1999 and 1998, respectively       213,827          299,357
    Deferred income tax asset                        1,544,542        1,322,583
                                                   -----------      -----------
                                                     1,807,477        1,821,284

                                                   $ 7,525,816      $ 7,991,199
                                                   ===========      ===========
                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Line of credit                                 $   150,000              -
    Current maturities of long-term debt               121,062          121,062
    Accounts payable                                   138,257           20,157
    Accrued expenses
       Salaries and bonuses                            136,144           86,688
       Other                                            39,820           40,333
    Machine purchase deposit liability                     -             11,798
    Deferred income                                    300,000          300,000
                                                   -----------      -----------

                Total current liabilities              885,283          580,038
                                                   -----------      -----------
LONG-TERM DEBT, less current maturities                    -            121,061
                                                   -----------      -----------

DEFERRED INCOME                                        225,000          525,000
                                                   -----------      -----------

DEFERRED INCOME TAX LIABILITY                          206,800              -

COMMITMENTS                                                -                -

STOCKHOLDERS' EQUITY
    Common stock                                        16,280           40,684
    Additional paid-in capital                      11,847,853       11,823,449
    Accumulated deficit                             (5,635,154)      (5,083,839)
    Accumulated other comprehensive income (loss)      (20,246)         (15,194)
                                                   -----------      -----------
                Total stockholders' equity           6,208,733        6,765,100
                                                   -----------      -----------

                                                  $  7,525,816     $  7,991,199
                                                   ===========      ===========
The accompanying notes are an integral part of these statements.
                                      F-4
<PAGE>
                      Acorn Holding Corp. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             Year ended December 31,




                                                        1999             1998
                                                     -----------    -----------

Net sales                                            $ 4,281,949    $ 6,967,176
                                                     -----------    -----------

Costs and expenses
    Cost of sales                                      3,453,085      5,098,572
    Selling, general and administrative                1,519,379      1,662,802
                                                     -----------    -----------
                                                       4,972,464      6,761,374

      Operating profit (loss)                           (690,515)       205,802
                                                     -----------    -----------

Other income (expense)
    Gain on sale of fixed assets                            --           18,000
    Loss on investment                                   (11,763)        (4,696)
    Interest income, net                                  84,451         42,232
                                                     -----------    -----------
                                                          72,688         55,536
                                                     -----------    -----------

      Income (loss) before income taxes
          (benefit) expenses                            (617,827)       261,338

Income tax (benefit) expenses                            (66,512)        97,493
                                                     -----------    -----------

                Net income (loss)                    $  (551,315)   $   163,845
                                                     ===========    ===========

Earnings (loss) per share (basic and diluted)        $     (0.34)   $      0.10
                                                     ===========    ===========

Weighted average shares outstanding                    1,628,002      1,671,817
                                                     ===========    ===========















                                      F-5



The accompanying notes are an integral part of these statements.


<PAGE>


                      Acorn Holding Corp. and Subsidiaries

            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                        AND COMPREHENSIVE INCOME (LOSS)

                     Years ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                               Accumulated
                                                   Additional                     other
                                     Common         paid-in      Accumulated   comprehensive     Treasury
                                      stock         capital       deficit      income (loss)       stock         Total
                                  ------------   ------------   ------------   -------------  ------------   ------------

<S>                               <C>            <C>            <C>            <C>            <C>            <C>
Balance at December 31, 1997      $     55,389   $ 14,090,156   $ (5,247,684)  $       --     $    (13,950)  $  8,883,911

Comprehensive income (loss)
  Net income                              --             --          163,845           --             --          163,845
  Other comprehensive income
   (loss), net of reclassi-
   fication adjustments and
   taxes                                  --             --             --          (15,194)          --          (15,194)
                                                                                                             ------------
    Total comprehensive income                                                                                    148,651
                                                                                                             ------------
Treasury shares purchased                 --             --             --             --       (2,267,462)    (2,267,462)
Retirement of treasury stock           (14,705)    (2,266,707)          --             --        2,281,412           --
                                  ------------   ------------   ------------   -------------  ------------   ------------
Balance at December 31, 1998            40,684     11,823,449     (5,083,839)  $    (15,194)          --        6,765,100
                                                                               =============

Five for two reverse stock split       (24,404)        24,404           --             --             --             --
Comprehensive income (loss)
  Net loss                                --             --         (551,315)  $       --             --         (551,315)
  Other comprehensive income
  (loss), net of reclassi-
  fication adjustments and taxes                                                    (20,246)                      (20,246)
                                                                                                             ------------
    Total comprehensive income
     (loss)                               --             --             --             --             --         (571,561)
                                  ------------   ------------   ------------   -------------  ------------   ------------

Balance at December 31, 1999      $     16,280   $ 11,847,853   $ (5,635,154)  $    (20,246)  $       --     $  6,208,733
                                  ============   ============   ============   ============   ============   ============
</TABLE>





The  accompanying  notes are an integral  part of this statement.

                                      F-6
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             Year ended December 31,



                                              1999             1998
                                           -----------    -----------
Cash flows from operating activities
  Net income (loss)                        $  (551,315)   $   163,845
  Adjustments to reconcile net income
     (loss) to net cash (used in)
     provided by operating activities
    Realized loss on investment                (11,763)          --
    Depreciation and amortization              382,230        343,210
    Deferred income taxes                      (66,519)        91,536
    Gain on sale of assets                        --          (18,000)
    (Increase) decrease in assets
      Accounts receivable                     (270,442)       345,076
      Inventories                              (17,481)       450,936
      Prepaid expenses and other assets          2,326         74,069
    Increase (decrease) in liabilities
       Accounts payable                        118,100       (283,317)
       Accrued expenses                         48,943        (86,498)
       Deferred income                        (300,000)      (424,986)
                                           -----------    -----------
         Net cash (used in) provided
          by operating activities             (665,921)       655,871
                                           -----------    -----------
Cash flows from investing activities
  Purchase of machinery and equipment         (150,283)      (529,600)
  Purchase of investments                         --          303,946
  Proceeds from sale of machinery
     and equipment                                --            8,000
  Proceeds from redemption of
     investments                               466,548           --
  Note receivable proceeds                     150,236        184,618
                                           -----------    -----------
         Net cash provided by
          (used in) investing activities       466,502        (23,036)
                                           -----------    -----------
Cash flows from financing activities
  Proceeds from line of credit, net            150,000           --
  Payment of long-term debt and
     capital lease                            (121,062)      (121,061)
  Purchase of treasury stock                      --       (2,267,462)
                                           -----------    -----------
         Net cash provided by
          (used in) financing activities        28,938     (2,388,523)
                                           -----------    -----------

         NET DECREASE IN CASH AND
           CASH EQUIVALENTS                   (170,481)    (1,755,688)

Cash and cash equivalents at
      beginning of year                      1,126,838      2,882,526
                                           -----------    -----------

Cash and cash equivalents at end of year   $   956,357    $ 1,126,838
                                           ===========    ===========
Supplemental disclosure of cash flow
   information
    Interest paid                          $    16,985    $    26,060
                                           ===========    ===========

    Retirement of treasury stock           $      --      $ 2,281,412
                                           ===========    ===========

The accompanying notes are an integral part of these statements.
                                      F-7

<PAGE>


                      Acorn Holding Corp. and Subsidiaries

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                           December 31, 1999 and 1998


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.

    2.  Use of Estimates

    In preparing the financial  statements in accordance with generally accepted
    accounting  principles,   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

    The subsidiaries  provide their products to customers  throughout the United
    States.  The  subsidiaries  perform  ongoing  credit  evaluations  of  their
    customers'  financial  condition  and generally  require no collateral  from
    their 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.  Inventories

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

    6.  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.
                                                           (Continued)

                                      F-8
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

    7.  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  until  September  2001.  The deferred  amounts are amortized on a
    straight-line basis over the terms of the agreements.

    8.  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 it 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.

    9.  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.

    10.  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.

    11.  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.

    12.  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.

                                      F-9


<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE C - RESTRICTED CASH

    Recticon  has entered  into  agreements  with  customers  and has  purchased
    machinery  consisting  of crystal  growing and wafer  finishing  units.  The
    customers  have provided cash to Recticon for the purchase and  construction
    of the units. Title of all machinery and equipment  purchased is in the name
    of the customers.  Amounts received and not utilized are refundable.  At the
    conclusion of the  contracts  with these  customers,  title to the machinery
    will be given to Recticon for a nominal sum.

NOTE D - 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, 1999
    and 1998 are:


                                                     1999
                                                     ----
                                                Gross      Gross        Fair
                                   Amortized  unrealized  unrealized   market
                                     cost        gain       loss        value
                                   ---------  ----------  ----------  ---------
U.S. government and agency        $    -      $    -      $    -     $     -
State and municipal obligations     228,847        -       (20,246)     208,601
                                  ----------  ----------  ---------  ----------

                                  $ 228,847   $    -      $(20,246)  $  208,601
                                  ==========  ==========  =========  ==========


                                                     1998
                                                     ----
                                                Gross      Gross        Fair
                                   Amortized  unrealized  unrealized   market
                                     cost        gain       loss        value
                                   ---------  ----------  ----------  ---------

U.S. government and agency        $    5,943  $       82  $    -     $    6,025
State and municipal obligations      677,690        -       (15,276)    662,414
                                  ----------  ----------  ---------  ----------

                                  $  683,633  $       82  $ (15,276) $  668,439
                                  ==========  ==========  =========  ==========

The following table lists the contractual maturities of investments:
                                                                       Fair
                                                    Amortized         market
                                                        cost           value

       After ten years                             $   228,847      $   208,601
                                                    ----------       ----------

                                                   $   228,847      $   208,601
                                                    ==========       ==========


                                      F-10
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE E - INVENTORIES

    Inventories consist of the following:
                                                   1999             1998
                                             ---------------  --------------

       Raw materials and supplies            $    778,530     $    961,333
       Work in process                          1,147,304          943,134
       Finished goods                             147,474          151,360
                                              -----------      -----------

                                             $  2,073,308      $ 2,055,827
                                              ===========       ==========

NOTE F - 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 (8.5% at December 31,
    1999).  The line is  available  through  April 30,  2000,  and is secured by
    Recticon's  assets and is guaranteed by Acorn.  At December 31, 1999,  there
    was $600,000 available under the line of credit.

NOTE G - LONG-TERM DEBT

    Recticon has long-term debt consisting of the following:

                                                   1999             1998
                                              ---------------  --------------
    Term loan at 8.25%  interest per annum;
      principal  payable in 48 monthly
      installments of $10,088, with final
      payment due December 30, 2000;
      secured by Recticon's assets            $   121,062      $   242,123

       Less current maturities                    121,062          121,062
                                               ----------       ----------
                                              $      -         $   121,061
                                               ==========       ==========

NOTE H - DEFERRED INCOME

    Recticon  received  nonrefundable  payments of $2,300,000  from customers in
    exchange for its  commitment to provide  certain  quantities of product over
    periods  extending  until  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.

    Annual recognition of deferred income is as follows:

         Year ending December 31,

                  2000                       $   300,000
                  2001                           225,000
                                              ----------

                                             $   525,000
                                             ===========
                                      F-11
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998


NOTE I - 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 is
    being  recognized  over a period of years for financial  statement  purposes
    (note H).

    The income tax provision consists of the following:

                                               1999             1998
                                         ---------------  --------------
       Current
           Federal                       $      -         $           -
           State                                -                  8,286
       Deferred
           Federal                             (66,512)           89,207
           State                                -                 -
                                         -------------    --------------

                                         $     (66,512)   $       97,493
                                         =============    ==============

    Deferred tax assets (liabilities) consist of the following:
                                              1999             1998
                                         ---------------  --------------

       Net operating loss carryforwards   $ 2,290,000      $ 2,013,000
       Depreciation                          (206,000)        (174,000)
       Deferred income                        214,000          334,000
       Carrying value of assets               293,000          332,000
       Note receivable                        192,000          192,000
       Other                                   73,000           93,464
                                          -----------      -----------
                                            2,856,000        2,790,464
       Less valuation allowance             1,397,000        1,397,000
                                          -----------      -----------

                                          $ 1,459,000      $ 1,393,464
                                          ===========      ===========

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

                                                       1999             1998
                                                  -------------    -----------

    Tax at statutory federal rate                      -  %            34.0%
    State income taxes, net of federal benefits        -                3.3
    Net operating losses                               -                  -
    Other                                              -                  -
                                                   --------          ---------
                                                       -  %            37.3%
                                                   ========          =======

                                      F-12
<PAGE>


                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE J - 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,

                     2000                $    96,000
                     2001                    116,000
                     2002                    120,000
                     2003                    120,000
                     Thereafter              656,000
                                         -----------

                                         $ 1,108,000
                                         ===========
NOTE K - CONCENTRATIONS

    Three customers  accounted for 46%, 31% and 4% of sales in 1999 and 53%, 15%
    and 5% of sales in 1998.

    For  1999  and  1998,  one  vendor  accounted  for 7% and  13% of  materials
    purchases, respectively.

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

NOTE L - RELATED PARTY TRANSACTIONS

    During  1999,  Acorn  and its  subsidiaries  paid a law  firm,  of which the
    Company's Chief Executive Officer and Chairman was of counsel, approximately
    $5,200 for reimbursement of expenses.

    During  1998,  Acorn  and its  subsidiaries  paid a law  firm,  of which the
    Company's Chief Executive Officer and Chairman was of counsel, approximately
    $116,000 for services rendered, including reimbursement of expenses.

    For the year ended December 31, 1999,  Acorn paid  consulting fees totalling
    $48,000 to two of its former Officers (currently Directors).

    Directors  fees expense for the years ended  December 31, 1999 and 1998 were
    $12,000 and $11,000, respectively.

                                      F-13

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE M - EARNINGS PER SHARE

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

                       Income (loss)        Number of Shares
                        (numerator)          (denominator)     Per share amount
                    --------------------  -------------------- ----------------
                       1999       1998       1999     1998      1999      1998
                       ----       ----       ----     ----      ----      ----
Basic EPS
 Net income (loss)  $(551,315)  $163,845  1,628,002  1,671,817  $(0.34)  $ 0.10
                    ==========  ========  =========  =========  =======  =======

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

    In 1999, all of the 360,000  options  outstanding  to purchase  common stock
    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 1998,  of the total  360,000  options  outstanding,  options to  purchase
    288,000  shares of common stock ranging from $2.27 to $8.44 per share,  were
    outstanding  during the year.  They were not included in the  computation of
    diluted EPS because the option  exercise  price was greater than the average
    market price.

NOTE N - STOCK OPTIONS

    The Company has issued stock options to various officers of the Company. The
    stock  options  were issued at fair value 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, 1999 and 1998:
                                   1999                       1998
                         ------------------------        ----------------------
                                       Weighted                       Weighted
                                       average                         average
                                       exercise                       exercise
                         Shares         price            Shares        price
                         -------       ---------         ------       --------
  Outstanding at
     January 1,          360,000       $    4.59         360,000      $    4.58

  Granted                   -              -              24,000           2.27

  Cancelled                 -              -             (24,000)          6.53

  Outstanding at
     December 31,        360,000       $    4.59         360,000      $    4.59
                         =======                         =======

  Options exercisable at
     December 31,        360,000       $    4.59         360,000      $    4.59
                         =======                         =======

                                                           (Continued)
                                      F-14

<PAGE>
                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998

NOTE N - STOCK OPTIONS - Continued

    The following table summarizes  information about stock options  outstanding
    at December 31, 1999:

                                      Options outstanding and exercisable
                              -------------------------------------------------
                                                  Weighted         Weighted
         Range of                                 remaining         average
       exercise price             Shares      contractual life   exercise price
       --------------         ----------      ----------------   --------------
       1999
       ----
       $  8.44                    52,000            1 year         $  8.44
       $  4.60 - 5.48            176,000            3 years           4.77
       $  2.90                    20,000            4 years           2.90
       $  2.19                    48,000            5 years           2.19
       $  3.95                    40,000            7 years           3.95
       $  2.27                    24,000            8 years           2.27
                             -----------

                                 360,000
                             ===========

    The stock  option  agreements,  as  amended  on March 2,  1998,  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, 1999 and
    1998 would have reflected the pro forma amounts indicated below:

                                                   1999            1998
                                            ---------------- --------------
       Net earnings (loss)
          As reported                       $   (551,315)     $   163,845
          Pro forma                             (551,315)         138,897

       EPS
          As reported                       $     (0.34)      $      0.10
          Pro forma                               (0.34)             0.08

    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
    1998:  expected  volatility of 53%,  risk-free  interest rate of 4.91%,  and
    expected  life of 10 years.  The  weighted  average  fair  value of  options
    granted  during  fiscal year 1998 was $2.27.  There were no options  granted
    during fiscal year 1999.


                                      F-15
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 1999 and 1998


NOTE O - COMMON STOCK

    On April 19, 1999, the Company  approved a resolution to amend the Company's
    certificate of incorporation  to decrease the issued and outstanding  common
    shares and to effect a 5-for-2  reverse stock split.  Earnings per share and
    weighted  average  earnings  shares  outstanding  for all  periods and stock
    option  information  presented  have been  changed  to reflect  the  5-for-2
    reverse stock split.

    At December 31, 1999, the Company had  20,000,000  shares of $0.01 par value
    common stock authorized, 1,628,002 shares issued and outstanding.

    At December 31, 1998, the Company had  20,000,000  shares of $0.01 par value
    common stock  authorized,  4,068,400  shares  issued,  and 2,211,963  shares
    outstanding.

    During  1998,  the Company  repurchased  584,600  shares of its common stock
    through the open market. All treasury shares were retired.

NOTE P - 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 Q - 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.

                                      F-16