U.S. 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, 2002

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

       Delaware                                59-2332857
------------------------                   -------------------------------------
(State of incorporation)                   (I.R.S. Employer Identification No.)


         599 Lexington Avenue, 31st Floor, New York, New York 10022-6030
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

Registrant'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  Registrant  (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. [ ]

Registrant's  revenues  for  the  fiscal  year  ended  December  31,  2002  were
$3,705,005.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant  as of April 9,  2003  (valued  at the  average  of the bid  price of
$0.45 and the asked price of $1.01 on such date) was $462,006.

The  number of shares of Common  Stock  outstanding  (including  shares  held by
affiliates of the issuer) as of April 9, 2003 was: 1,573,946.

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 that the Company may acquire in the future.

RECENT DEVELOPMENT

      As a result of a depressed market and the resulting decrease in sales, the
Company  believes  that it will  require an infusion of capital to maintain  its
operations. No assurance can be given, however, that the Company will be able to
obtain such  infusion  of  capital.  See Item 6 -  MANAGEMENT'S  DISCUSSION  AND
ANALYSIS OR PLAN OF OPERATIONS for further discussion of this development.

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 furnaces and related  equipment (the
"Units").  Recticon  presently has ten functioning Units. The 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 wafer 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 2002,
31%, 25% and 10%  respectively,  of its raw  materials  were acquired from three
suppliers,  while for 2001,  25% and 20% of its raw materials were acquired from
two suppliers, respectively. Although Recticon has from time to time experienced
shortages  of  certain  supplies,  such  shortages  have  not  resulted  in  any
significant  disruptions  in  production.  The Company  believes  that there are
adequate alternative sources of supply to meet Recticon's requirements.

      For 2002 two  customers  of  Recticon  accounted  for 77%,  and 13% of its
sales,  respectively.  For 2001, two customers of the Company  accounted for 70%
and 17% of its sales,  respectively.  The loss of any or all of these  customers
would have a severe adverse 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, nor does Recticon
anticipate that such laws and regulations  will have, a material  adverse effect
on the results of operations,  capital  expenditures or the competitive position
of Recticon.

                                       2
<PAGE>

EMPLOYEES

      The  Company  currently  has two  executive  officers,  both  of whom  are
employees of the Company. Recticon presently employs 13 full-time persons and 18
part-time  persons,  all of whom  are  located  at its  facility  in  Pottstown,
Pennsylvania.

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 26,
2002.  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 the Delaware General Corporation Law:

           (a) The first proposal presented to the stockholders was the election
of seven persons to serve 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                    1,273,807             28,035
           Paula Berliner                   1,292,707              9,135
           Edward N. Epstein                1,276,707             25,135
           George Farley                    1,273,807             28,035
           Ronald J. Manganiello            1,276,807             25,035
           Stephen A. Ollendorff            1,292,707              9,135
           Bert Sager                       1,292,807              9,035

           (b) The second proposal  presented to the stockholders was to approve
and adopt the amendment to the Company's  Certificate of Incorporation to reduce
the number of  authorized  shares of Common Stock from  20,000,000 to 7,000,000.
There were  1,306,907  shares of common  stock  cast in favor of such  proposal,
6,150 shares voted against and 485 shares abstained.

                                       3

<PAGE>

                                     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 Common Stock was delisted on March 3, 2003
and is presently  listed on the  Over-the-Counter  Bulletin Board. 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
        --------------              ---                 ----

           2002
           ----

        March 29                    $1.419             $2.359
        June 28                     $1.289             $1.799
        September 30                $1.009             $1.299
        December 31                 $0.400             $1.179

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

           2001
           ----

        March 31                    $1.40              $2.375
        June 30                     $1.75              $2.50
        September 30                $1.23              $2.297
        December 31                 $1.266             $2.094

     As of April 9, 2003, there were  approximately 378 holders of record of the
Company's  Common Stock with 1,573,946  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 April 9, 2003, the closing bid and asked  quotations of the Common Stock were
$0.45 and $1.01, 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
         ------------------------------------

      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, 2002, the Company's
net  sales  of  $3,705,005  decreased  approximately  $1,809,087  from  sales of
$5,514,092  for the fiscal year ended  December 31, 2001.  The Company  incurred
operating losses of approximately  $1,406,304 in fiscal year 2002 as compared to
a profit of  $261,799 in fiscal  year 2001.  The Company  incurred a net loss of
$2,671,147 (of which,  approximately  $1,236,718  resulted from the write off of
its deferred  income tax asset) for fiscal year 2002 as compared to a net income
of $159,174  for fiscal year 2001.  The  profitability  of the Company in fiscal
year 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 its existing  product  line,  especially,  among its two
major  customers;  (ii) pricing  level and  competition;  and (iii) the cyclical
nature of the Company's business.

      Unless the Company's  sales increase  substantially,  the Company does not
believe it will achieve profitability during fiscal year 2003.

     Financial  Condition - Unless cash flow improves  substantially in the next
few months, the Company believes that it will require a significant  infusion of
capital to maintain its operations.  Although  negotiations  are presently being
conducted to obtain an infusion of capital,  no assurance  can be given that the
Company will be able to obtain such infusion of capital.  The Company's cash and
cash  equivalents  of $753,785 at December  31,  2002  decreased  $722,459  from
$1,476,244 at December 31, 2001.  The decrease in cash resulted  primarily  from
losses incurred from operations and the purchase of machinery and equipment.

Summary of Critical Accounting Policies

      REVENUE RECOGNITION

      The Company ships products to customers based on FOB shipping  point,  and
as such recognizes sales on the date of shipment.

      VALUATION OF INVENTORY

      The Company's  inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method.

      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

                                       5

<PAGE>

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 and Certifications.

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; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
        ------------------------------------------------------------------

      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:

                                 YEAR OF
                                ELECTION
                                   AS
 NAME AND AGE                   DIRECTOR          POSITION
 ------------                   --------          --------
(As of 3/1/2003)

Bert Sager                        1983            Director
  (77) (1)

Stephen A. Ollendorff             1983            Chairman of the Board of
  (64) (1)                                        Directors (the "Board"), Chief
                                                  Executive Officer and
                                                  Secretary; Director

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

Larry V. Unterbrink                 -             Treasurer
  (68) (3)

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

Paula Berliner                    1990            Director
  (59) (1)

Ronald J. Manganiello*            1997            Director
  (53) (1)(2)(4)

                                       6

<PAGE>

                                 YEAR OF
                                ELECTION
                                   AS
 NAME AND AGE                   DIRECTOR          POSITION
 ------------                   --------          --------
(As of 3/1/2003)

Mark Auerbach                     2001            Director
  (64)    (1)(2)

George Farley                     2001            Director
  (63)    (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.

(5)   Mr.  Auerbach was a member of the Board from 1995 until 1997, and was then
      elected to the Board in December 2001.

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

      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,  he 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.

                                       7

<PAGE>

      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. He
is 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  (the   "Commission")  in  respect  of  their  ownership  of  Company
securities.  The Company believes that during fiscal year 2002 all such required
reports were timely filed, other than with respect to one Form 4 report required
to be filed by each of  Messrs.  Auerbach,  Farley  and  Manganiello  for  their
automatic stock option grant, due to a clerical oversight.

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,  with
respect to compensation earned by the Chief Executive Officer of the Company and
the  executive  officers  (whose  salary  and bonus  earned in fiscal  year 2002
exceeded $100,000) of the Company (the "Named Executives").

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

Stephen A. Ollendorff       2002    $276,126(3)      -0-             --
   Chairman and Chief       2001    $264,760(3)      -0-             --
   Executive Officer        2000    $256,055(3)      -0-             --

 Edward N. Epstein          2002    $238,623(3)      -0-             --
   President and Chief      2001    $228,760(3)      -0-             --
   Operating Officer        2000    $220,948(3)      -0-             --

                                       8

<PAGE>

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

 Robert P. Freeman          2002    $238,746         -0-             --
   President and Chief      2001    $262,338      $ 40,669           --
   Executive Officer -      2000    $251,280      $ 61,280           --
   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 such  officer's  annual salary
      and bonus.

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

(3)   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 $168,323 for fiscal year 2002,
      $132,380  for  fiscal  year  2001  and  $128,027  for  fiscal  year  2000,
      reflecting the amounts being accrued on the books of the Company.  For Mr.
      Epstein,  includes  the unpaid  balance of $145,054  for fiscal year 2002,
      $114,230  for the fiscal  year 2001 and  $110,474  for  fiscal  year 2000,
      reflecting  the  amounts  being  accrued  on the  books  of  the  Company.
      Effective  November 1, 2002 until further notice,  Messrs.  Ollendorff and
      Epstein are accruing all cash compensation due to them.

      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, 2002, there were no stock option
grants or stock appreciation rights granted to the Named Executives.

      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

                                       9

<PAGE>

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 April 9, 2003, no such "change
of control" has occurred.

YEAR-END OPTION VALUES TABLE

      The  following  table sets forth  information  at  December  31, 2002 with
respect to exercisable and non-exercisable options held by the Named Executives.
During the fiscal year ended  December 31, 2002,  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 Held
                       at December 31, 2002(1)          at December 31, 2002(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, 2002:
$0.43.

COMPENSATION OF DIRECTORS

      Effective  December 18, 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 Ms. 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.  Effective  November 1, 2002 until  further
notice,  each member of the Board is accruing all cash  compensation due to each
Board member.

      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 ("Eligible Directors") are
granted  options  to  purchase  1,000  shares of  Common  Stock on the date such
director is initially  elected to the Board, 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.

                                       10

<PAGE>
EMPLOYMENT ARRANGEMENTS

      The  Company  entered  into  an  employment   agreement  with  Stephen  A.
Ollendorff,  for a  three-year  period,  which has been  renewed  by its  terms,
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. In  addition,
Recticon rents office space in Mr.  Ollendorff's New Jersey office and pays rent
directly to Mr.  Ollendorff 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 pursuant to which Mr. Epstein receives annual
compensation  of $150,000,  subject to annual  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  increase  to his annual
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 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) the 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, (ii)
any plan,  act,  scheme or design  to  constructively  terminate  him or (iii) a
reduction by Recticon of his annual base salary,  he shall receive the following
benefits: (x) annual base salary through the date of termination; (y) 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 (z) 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.

                                       11

<PAGE>

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 April 9,
2003,  information as to those stockholders (other than members of the Company's
management),  who are 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

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 Securities  Exchange Act of 1934,
      as amended (the "Exchange 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 April 9, 2003,  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.

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

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

   Stephen A. Ollendorff           610,380                         36.0%
                                  (4)(5)(6)



   Edward N. Epstein               385,800                         23.8%
                                  (4)(5)(7)

                                       12

<PAGE>

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

   Paula Berliner                   67,320                          4.2%
                                      (4)

   Ronald J. Manganiello            58,278                          3.7%
                                    (4)(8)

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

   Mark Auerbach                   1,000(4)                          *

   George Farley                   1,000(4)                          *

   All executive
     officers and                  1,041,236                       54.1%
     directors as a                (3)(4)(5)
     group (9 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 599
      Lexington Avenue, 31st Floor, New York, NY 10022-6030.

(2)   A person is deemed to be the beneficial  owner of voting  securities  that
      can be acquired by such person  within 60 days from April 9, 2003 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
      from April 9, 2003,  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 Ms.  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  April 9,  2003:  Mr.  Sager --  64,000;  Mr.
      Ollendorff -- 120,000;  Mr. Epstein -- 48,000; Ms. Berliner -- 28,000; Mr.
      Manganiello -- 1,000;  Mr. Freeman -- 40,000;  Mr. Auerbach -- 1,000;  Mr.
      Farley -- 1,000;  and all  executive  officers and directors as a group (9
      persons) -- 339,000.

(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 the
      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.

                                       13

<PAGE>

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

(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
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  directors  or (ii) a number of
directors  equal to 22%  (rounded up to the next  highest  number) of the entire
Board,  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 Employment 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.

                                       14

<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.

      10.14 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.

      99.1  Certification  of the Chief Executive  Officer Pursuant to 18 U.S.C.
Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley  Act of
2002.

      99.2  Certification  of the  Principal  Financial and  Accounting  Officer
Pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

      (b) Reports on Form 8-K:

      There were no reports on Form 8-K filed by the Company  during the quarter
ended December 31, 2002.

ITEM 14.  CONTROLS AND PROCEDURES
          -----------------------

      The management of the Company, including Stephen A. Ollendorff as Chairman
and Chief Executive Officer and Larry V. Unterbrink as Treasurer, have evaluated
the  Company's  disclosure  controls and  procedures as of a date within 90 days
prior to the filing date of this annual report (the  "Evaluation  Date").  Under
rules  promulgated  by the  Commission,  disclosure  controls and procedures are
defined as those controls or other  procedures of an issuer that are designed to
ensure that  information  required to be  disclosed by the issuer in the reports

                                       15

<PAGE>

filed  or  submitted  by it  under  the  Exchange  Act is  recorded,  processed,
summarized and reported,  within the time periods  specified in the Commission's
rules and forms.  Based on the evaluation of the Company's  disclosure  controls
and procedures,  Messrs.  Ollendorff and Unterbrink  determined  that, as of the
Evaluation  Date,  such  controls  and  procedures  were  effective.  Since  the
Evaluation  Date,  there have not been any significant  changes in the Company's
internal  controls  or in other  factors  that could  significantly  affect such
controls.

                                       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:  April 9, 2003                         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             April 9, 2003
------------------------         Chief Executive Officer
Stephen A. Ollendorff            (Principal Executive
                                 Officer), Secretary
                                 and Director

Edward N. Epstein                President and Chief               April 9, 2003
------------------------         Operating Officer;
Edward N. Epstein                Director

Larry V. Unterbrink              Treasurer (Principal              April 9, 2003
------------------------         Financial and Accounting
Larry V. Unterbrink              Officer)

Paula Berliner
------------------------         Director
Paula Berliner                                                     April 9, 2003

Ronald J. Manganiello
------------------------         Director
Ronald J. Manganiello                                              April 9, 2003

Bert Sager
------------------------         Director
Bert Sager                                                         April 9, 2003

Mark Auerbach
------------------------         Director                          April 9, 2003
Mark Auerbach

George Farley
------------------------
George Farley                    Director                          April 9, 2003

                                       17

<PAGE>

                                  CERTIFICATION

I, Stephen A. Ollendorff, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Acorn Holding Corp.;

2.    Based on my  knowledge,  this  annual  report  does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the  circumstances  under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information included in this annual report, fairly present in all material
      respects the financial condition,  results of operations and cash flows of
      the  registrant  as of, and for,  the  periods  presented  in this  annual
      report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange  Act Rules 13a-14 and 15d-14) for the  registrant  and
      have:

           a. designed such  disclosure  controls and  procedures to ensure that
           material  information  relating  to the  registrant,  including  it's
           consolidated subsidiaries, is made known to us by others within those
           entities,  particularly during the period in which this annual report
           is being prepared;

           b.  evaluated  the  effectiveness  of  the  registrant's   disclosure
           controls  and  procedures  as of a date  within 90 days  prior to the
           filing date of this annual report (the "Evaluation Date"); and

           c.  presented  in  this  annual  report  our  conclusions  about  the
           effectiveness of the disclosure  controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our most recent  evaluation,  to the  registrant's  auditors and the audit
      committee of  registrant's  board of directors (or persons  performing the
      equivalent functions):

           a.  all  significant  deficiencies  in the  design  or  operation  of
           internal  controls  which  could  adversely  affect the  registrant's
           ability to record,  process,  summarize and report financial data and
           have identified for the registrant's auditors any material weaknesses
           in internal controls; and

           b. any fraud,  whether or not material,  that involves  management or
           other  employees  who  have a  significant  role in the  registrant's
           internal controls; and

6.    The  registrant's  other  certifying  officer and I have indicated in this
      annual report whether there were significant  changes in internal controls
      or in other  factors that could  significantly  affect  internal  controls
      subsequent  to the  date of our  most  recent  evaluation,  including  any
      corrective  actions with regard to significant  deficiencies  and material
      weaknesses.

Date: April 9, 2003

                                 /s/ Stephen A. Ollendorff
                                 -----------------------------------------------
                                 Stephen A. Ollendorff
                                 Chairman and Chief Executive Officer

                                       18

<PAGE>

                                  CERTIFICATION

I, Larry V. Unterbrink, certify that:

1.    I have reviewed this annual report on Form 10-KSB of Acorn Holding Corp.;

2.    Based on my  knowledge,  this  annual  report  does not contain any untrue
      statement of a material fact or omit to state a material fact necessary to
      make the statements made, in light of the  circumstances  under which such
      statements were made, not misleading with respect to the period covered by
      this annual report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information included in this annual report, fairly present in all material
      respects the financial condition,  results of operations and cash flows of
      the  registrant  as of, and for,  the  periods  presented  in this  annual
      report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
      establishing  and  maintaining  disclosure  controls  and  procedures  (as
      defined in Exchange  Act Rules 13a-14 and 15d-14) for the  registrant  and
      have:

           a. designed such  disclosure  controls and  procedures to ensure that
           material  information  relating  to  the  registrant,  including  its
           consolidated subsidiaries, is made known to us by others within those
           entities,  particularly during the period in which this annual report
           is being prepared;

           b.  evaluated  the  effectiveness  of  the  registrant's   disclosure
           controls  and  procedures  as of a date  within 90 days  prior to the
           filing date of this annual report (the "Evaluation Date"); and

           c.  presented  in  this  annual  report  our  conclusions  about  the
           effectiveness of the disclosure  controls and procedures based on our
           evaluation as of the Evaluation Date;

5.    The registrant's other certifying  officer and I have disclosed,  based on
      our most recent  evaluation,  to the  registrant's  auditors and the audit
      committee of registrant's board of directors:

           a.  all  significant  deficiencies  in the  design  or  operation  of
           internal  controls  which  could  adversely  affect the  registrant's
           ability to record,  process,  summarize and report financial data and
           have identified for the registrant's auditors any material weaknesses
           in internal controls; and

           b. any fraud,  whether or not material,  that involves  management or
           other  employees  who  have a  significant  role in the  registrant's
           internal controls; and

6.    The  registrant's  other  certifying  officer and I have indicated in this
      annual report  whether or not there were  significant  changes in internal
      controls or in other  factors  that could  significantly  affect  internal
      controls  subsequent to the date of our most recent evaluation,  including
      any  corrective  actions  with  regard  to  significant  deficiencies  and
      material weaknesses.

Date: April 9, 2003


                                 /s/ Larry V. Unterbrink
                                 -----------------------------------------------
                                 Larry V. Unterbrink
                                 Treasurer

                                       19

<PAGE>

   Financial Statements and Report of Independent Certified Public Accountants
                      ACORN HOLDING CORP. AND SUBSIDIARIES
                           December 31, 2002 and 2001

                                      F-1

<PAGE>

                                 C O N T E N T S


                                                                       Page
                                                                       ----

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, 2002 and 2001, and the related
consolidated  statements  of  operations,  changes in  stockholders'  equity and
comprehensive  (loss)  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, 2002 and 2001, 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.

      As  discussed  in note A to the  consolidated  financial  statements,  the
Company adopted  Statement of Financial  Accounting  Standards No. 142, GOODWILL
AND OTHER INTANGIBLE ASSETS, on January 1, 2002.

      The  accompanying  consolidated  financial  statements  have been prepared
assuming that the Company will continue as a going concern. As discussed in note
B to the financial statements, certain factors raise substantial doubt about the
Company's ability to continue as a going concern. Management's plan in regard to
this matter is also described in note B. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.





Philadelphia, Pennsylvania
March 18, 2003

                                      F-3

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

                           CONSOLIDATED BALANCE SHEETS

                                  December 31,



   ASSETS                                                 2002          2001
                                                       ----------    ----------

CURRENT ASSETS
   Cash and cash equivalents                           $  753,785    $1,476,244
   Investment securities                                   14,230        16,360
   Accounts receivable - trade                            106,548       147,316
   Inventories                                          1,852,319     2,135,351
   Prepaid expenses                                        40,321        30,284
                                                        ---------     ---------

         Total current assets                           2,767,203     3,805,555
                                                        ---------     ---------

MACHINERY AND EQUIPMENT, net of accumulated
   depreciation of $2,144,940 and $1,684,469
   in 2002 and 2001, respectively                       2,819,579     2,605,481
                                                        ---------     ---------

OTHER ASSETS
   Other investments                                        9,108         9,108
   Goodwill, net of accumulated amortization
     of $812,537 in 2001                                      -          42,767
   Deferred income tax asset                                  -       1,236,718
                                                        ---------     ---------

                                                            9,108     1,288,593
                                                        ---------     ---------

                                                       $5,595,890    $7,699,629
                                                        =========     =========

         LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Line of credit                                      $  375,000    $      -
   Accounts payable                                       106,727       128,779
   Accrued expenses
      Salaries                                            858,383       524,006
      Other                                                93,947       197,765
                                                        ---------     ---------

         Total current liabilities                      1,434,057       850,550
                                                        ---------     ---------
STOCKHOLDERS' EQUITY
   Common stock                                            15,856        16,273
   Additional paid-in capital                          11,786,229    11,847,860
   Accumulated deficit                                 (7,628,923)   (4,957,776)
   Accumulated other comprehensive income                   2,640         4,770
                                                        ---------     ---------
                                                        4,175,802     6,911,127
   Treasury stock, at cost                                (13,969)      (62,048)
                                                        ---------     ---------

         Total stockholders' equity                     4,161,833     6,849,079
                                                        ---------     ---------

                                                       $5,595,890    $7,699,629
                                                        =========     =========


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,

                                                       2002            2001
                                                  -------------   -------------

Net sales                                         $  3,705,005    $  5,514,092

Cost of sales                                        3,681,924       4,312,853
                                                  -------------   -------------

                                                        23,081       1,201,239

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

         Gross profit                                   23,081       1,854,639

Selling, general and administrative                  1,429,385       1,592,840
                                                  -------------   -------------

Operating (loss) profit                             (1,406,304)        261,799
                                                  -------------   -------------
Other income (expense)
   Interest income                                       7,592          51,205
   Interest expense                                     (7,208)         (3,892)
   Other                                               (59,817)        (17,805)
                                                  -------------   -------------
                                                       (59,433)         29,508

(Loss) income before income tax expense             (1,465,737)        291,307

Income tax expense                                   1,205,410         132,133
                                                  -------------   -------------

Net (loss) income                                 $ (2,671,147)   $    159,174
                                                  =============   =============

(Loss) earnings per share (basic and diluted)     $      (1.69)   $       0.10
                                                  =============   =============

Weighted average shares outstanding - basic          1,582,405       1,597,626
                                                  =============   =============

Weighted average shares outstanding - diluted        1,582,405       1,598,055
                                                  =============   =============

The accompanying notes are an integral part of these statements.

                                      F-5

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

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

                     Years ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                             Accumulated
                                                Additional                      other
                                      Common      paid-in     Accumulated   comprehensive    Treasury
                                       stock      capital       deficit         income         stock        Total
                                     --------   -----------   -----------   --------------   ---------    ----------
<S>                                  <C>        <C>           <C>              <C>           <C>          <C>
Balance at January 1, 2001           $ 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

Comprehensive loss
Net loss                                   -             -     (2,671,147)           -             -      (2,671,147)
Net unrealized loss on investments
   in securities available-for-sale        -             -             -         (2,130)                      (2,130)
                                                                                                         -----------
Total comprehensive loss                                               -                                  (2,673,277)
                                                                                                         -----------
Treasury shares retired                 (417)       (61,631)           -             -         62,048             -
Treasury shares purchased                 -              -             -             -        (13,969)       (13,969)
                                     --------   -----------   -----------      --------      ---------   -----------

Balance at December 31, 2002         $ 15,856   $11,786,229   $(7,628,923)     $  2,640      $(13,969)   $ 4,161,833
                                     ========   ===========   ===========      ========      =========   ===========
</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,

<TABLE>
<CAPTION>
                                                                               2002          2001
                                                                            ----------    ----------

Cash flows from operating activities
<S>                                                                         <C>           <C>
   Net (loss) income                                                        $(2,671,147)  $  159,174
   Adjustments to reconcile net (loss) income to net cash
      (used in) provided by operating activities
   Market value of equipment received                                              -        (653,400)
   Depreciation and amortization                                               460,471       431,408
   Impairment of goodwill                                                       42,767           -
   Deferred income taxes                                                     1,236,718        78,984
   (Increase) decrease in assets
      Accounts receivable                                                       40,768       210,186
      Inventories                                                              283,032       319,232
      Prepaid expenses and other assets                                        (10,037)      (11,888)
   Increase (decrease) in liabilities
      Accounts payable                                                         (22,052)     (128,518)
      Accrued expenses                                                         230,559       300,425
      Deferred income                                                              -        (225,000)
                                                                              --------      --------

         Net cash (used in) provided by operating activities                  (408,921)      480,603
                                                                              --------      --------

Cash flows from investing activities
   Purchase of machinery and equipment                                        (674,569)     (224,222)
   Note receivable payments received                                               -          40,000
                                                                              --------      --------

         Net cash (used in) provided by investing activities                  (674,569)       17,065
                                                                              --------      --------

Cash flows from financing activities
   Proceeds from line of credit                                                375,000           -
   Purchase of treasury stock                                                  (13,969)      (33,548)
                                                                              --------      --------

         Net cash provided by (used in) financing activities                   361,031       (33,548)
                                                                              --------      --------

         NET (DECREASE) INCREASE IN CASH AND
           CASH EQUIVALENTS                                                   (722,459)      464,120

Cash and cash equivalents at beginning of year                               1,476,244     1,012,124
                                                                             ---------     ---------

Cash and cash equivalents at end of year                                    $  753,785    $1,476,244
                                                                             =========     =========

Supplemental disclosure of cash flow information
   Cash paid for interest expense                                           $    7,208    $    3,892
                                                                             =========     =========
</TABLE>

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, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  1.    Description of Business and Basis of Presentation
        -------------------------------------------------

  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,  AI Liquidating
  Corp. and Recticon  Enterprises,  Inc. (Recticon).  AI Liquidating Corp. is an
  inactive subsidiary.

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

  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.

                                   (Continued)


                                      F-8
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

  The majority of the  Company's  accounts  receivable  are due from  electronic
  manufacturers.  Credit  is  extended  based on  evaluation  of the  customer's
  financial  condition  and,  generally,  collateral is not  required.  Accounts
  receivable  payment terms vary and are stated in the  financial  statements at
  amounts due from customers. Accounts outstanding longer than the payment terms
  are considered past due.

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

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

  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.    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.

  9.    Earnings Per Share
        ------------------

  The Company follows  Statement of Financial  Accounting  Standards  (SFAS) No.
  128, EARNINGS PER SHARE, which 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.

                                   (Continued)

                                      F-9

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

  10.   Stock-Based Compensation
        ------------------------

  The Company has adopted  only the  disclosure  provisions  of SFAS No. 123. It
  applies  Accounting   Principles  Board  (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, 2002 and 2001 would have  reflected  the pro forma amounts
  indicated below:

                                                          2002          2001
                                                       ----------    ----------

      Net earnings (loss)
         As reported                                   $(2,671,147)  $  159,174
         Pro forma                                      (2,671,147)     112,547

      Earnings (loss) per share
         As reported                                   $     (1.69)  $     0.10
         Pro forma                                           (1.69)        0.07

  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:
  expected  volatility of 97.6%,  risk-free interest rate of 5.09%, and expected
  life of 10 years.  The weighted  average fair value of options  granted during
  fiscal 2001 was $1.49.

  11.   Goodwill
        --------

  Goodwill  represents  the excess of cost over the fair value of the net assets
  acquired for the purchase of Recticon.  This excess was being amortized over a
  period of ten years (see note A14).

  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-10

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE A - 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.   Goodwill
        --------

  On July 20, 2001, the Financial  Accounting Standards Board (FASB) issued SFAS
  No. 142,  GOODWILL AND  INTANGIBLE  ASSETS.  The Company  adopted SFAS No. 142
  effective  January 1,  2002,  as  required.  As of that  date,  the  Company's
  goodwill  is no  longer  amortized,  but is  tested  for  impairment  at least
  annually.  During the third quarter of 2002, the Company  determined  that the
  fair value of its goodwill was impaired as a result of continued losses of its
  subsidiary,  Recticon,  and wrote off the remaining goodwill carried at a book
  value of $42,767 at that date.

  15.   Asset Impairment
        ----------------

  On  October  3,  2001,  the FASB  issued  SFAS  No.  144,  ACCOUNTING  FOR THE
  IMPAIRMENT  OF  LONG-LIVED  ASSETS.  SFAS No. 144 replaces  previously  issued
  impairment  rules,  but retains the basic  accounting  framework.  The Company
  adopted SFAS No. 144 effective January 1, 2002, as required.  The adoption did
  not have a material effect on the Company's  financial condition or results of
  operations.

  16.   Recent Accounting Pronouncements
        --------------------------------

  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.

                                   (Continued)

                                      F-11

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

  In April 2002,  SFAS No. 145,  RESCISSION OF FASB STATEMENTS NO. 4, 44 AND 64,
  AMENDMENT OF FASB NO. 13, AND TECHNICAL CORRECTION,  was issued. This standard
  changes the  accounting  principles  governing  extraordinary  items by, among
  other things,  providing more definitive  criteria for extraordinary  items by
  clarifying  and,  to  some  extent,  modifying  the  existing  definition  and
  criteria,   specifying  disclosure  for  extraordinary  items  and  specifying
  disclosure requirements for other unusual or infrequently occurring events and
  transactions that are not  extraordinary  items. SFAS No. 145 is effective for
  financial  statements  issued for fiscal years  beginning after June 15, 2002.
  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 July 2002, the FASB issued SFAS No. 146,  ACCOUNTING  FOR COSTS  ASSOCIATED
  WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires companies to recognize
  costs  associated  with exit or  disposal  activities  when they are  incurred
  rather than at the date of a commitment to an exit or disposal plan.  SFAS No.
  146 is  effective  prospectively  for exit and disposal  activities  initiated
  after  December 31, 2002. As the  provisions of SFAS No. 146 are to be applied
  prospectively  after the  adoption  date,  the Company  cannot  determine  the
  potential effects that the adoption of SFAS No. 146 will have on its financial
  statements.

  In December  2002, the FASB issued SFAS No. 148,  ACCOUNTING  FOR  STOCK-BASED
  COMPENSATION  - TRANSITION AND  DISCLOSURE.  SFAS No. 148 amends SFAS No. 123,
  ACCOUNTING FOR STOCK-BASED  COMPENSATION,  to provide  alternative  methods of
  transition for a voluntary change to the fair value-based method of accounting
  for stock-based employee  compensation.  In addition,  SFAS No. 148 amends the
  disclosure  requirements of SFAS No. 123 to require  prominent  disclosures in
  both annual and interim  financial  statements  about the method of accounting
  for  stock-based  employee  compensation  and the effect of the method used on
  reported  results.  SFAS No. 148 is effective for fiscal years beginning after
  December  15,  2002.  The  expanded  annual  disclosure  requirements  and the
  transition provisions are effective for fiscal years ending after December 15,
  2002. The interim  disclosure  provisions are effective for financial  reports
  containing  financial  statements for interim periods beginning after December
  15,  2002.  Management  does not expect the adoption of SFAS No. 148 to have a
  material effect on the Company's financial position,  results of operations or
  cash flows.

NOTE B - REALIZATION OF ASSETS

  The Company's  financial  statements  have been  prepared in  conformity  with
  accounting  principles  generally  accepted  in the United  States of America,
  which  contemplate  continuation  of the Company as a going concern.  However,
  during 2002, the Company has sustained significant losses from operations.

  During 2002,  the Company had a  consolidated  net loss of $2,671,147 and used
  cash flows in its operating  activities of $408,921.  Acorn's only significant
  source of  revenue  is  through  the  operations  of  Recticon.  During  2002,
  Recticon's  sales  declined 33% compared to 2001.  The decline  accelerated in
  each quarter compared to the previous quarter. Recticon also had a net loss of
  $650,724 and used $221,413 of cash in its operating activities. As a result of
  the Company's decline in sales, profitability and the use of cash in operating
  activities,  additional  capital  or  financing  may be  required  to meet the
  Company's continuing operating requirements.

                                   (Continued)

                                      F-12
<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE B - REALIZATION OF ASSETS - Continued

  In view of the matters described in the preceding paragraph, recoverability of
  a major  portion of the  recorded  assets  amounts  shown in the  accompanying
  balance  sheets is dependent  upon  continued  operations of the Company.  The
  financial   statements  do  not  include  any  adjustments   relating  to  the
  recoverability  and  classification  of recorded  asset amounts or amounts and
  classifications  of liabilities  that might be necessary should the Company be
  unable to continue in existence.

  Management is negotiating with possible  investors to secure additional equity
  financing in order for the Company to continue in existence.

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, 2002 and
  2001 are:

<TABLE>
<CAPTION>
                                                                    2002
                                           -----------------------------------------------------
                                                            Gross          Gross         Fair
                                            Amortized     unrealized    unrealized      market
                                              cost          gains         losses         value
                                           ----------     ----------    ----------    ----------
<S>                                        <C>            <C>           <C>           <C>
      State and municipal obligations      $   11,590     $   2,640     $      -      $   14,230
                                           ==========     ==========    ==========    ==========

                                                                    2001
                                           -----------------------------------------------------
                                                            Gross          Gross         Fair
                                            Amortized     unrealized    unrealized      market
                                              cost          gains         losses         value
                                           ----------     ----------    ----------    ----------

      State and municipal obligations      $   11,590     $   4,770     $      -      $   16,360
                                           ==========     ==========    ==========    ==========
</TABLE>

  The following  table lists the  contractual  maturities of  investments  as of
  December 31, 2002:

<TABLE>
<CAPTION>
<S>                                                                     <C>           <C>
                                                                                        Fair
                                                                         Amortized      market
                                                                           cost          value
                                                                        ----------    ----------

      After eight years                                                 $   11,590    $   14,230
                                                                        ----------    ----------

                                                                        $   11,590    $   14,230
                                                                        ==========    ==========
</TABLE>

                                      F-13

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001

NOTE D - INVENTORIES

  Inventories consist of the following:

                                                      2002          2001
                                                   ----------    ----------

      Raw materials and supplies                   $  458,028    $  603,845
      Work in process                               1,056,874     1,108,525
      Finished goods                                  337,417       422,981
                                                   ----------    ----------

                                                   $1,852,319    $2,135,351
                                                   ==========    ==========

NOTE E - CREDIT ARRANGEMENTS

  Recticon has available a $1,250,000  revolving  line of credit which is due on
  demand.  Interest is payable  monthly at the prime rate (4.25% at December 31,
  2002).  The  line is  available  through  June 30,  2003,  and is  secured  by
  Recticon's  assets and is guaranteed by Acorn. At December 31, 2002, there was
  $875,000  available  under  the  line  of  credit.  Unless  additional  equity
  financing is obtained (note B),  management  does not intend to use the amount
  available.

NOTE F - 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.

  The income tax provision consists of the following:

                                                      2002          2001
                                                   ----------    ----------

      Current
         Federal                                   $      -      $      -
         State                                       (31,308)       53,149
                                                   ----------    ----------

      Deferred
         Federal                                    1,072,056        63,187
         State                                        164,662        15,797
                                                   ----------    ----------
                                                    1,236,718        78,984
                                                   ----------    ----------

                                                   $1,205,410    $  132,133
                                                   ==========    ==========

                                   (Continued)

                                      F-14

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001



NOTE F - INCOME TAXES - Continued

   Deferred tax assets (liabilities) consist of the following:

                                                      2002          2001
                                                   ----------    ----------

      Net operating loss carryforwards             $2,618,000    $2,174,000
      Depreciation                                   (167,000)     (220,000)
      Carrying value of assets                        447,000       364,000
      Note receivable                                 192,000       192,000
      Other                                            69,000       124,000
                                                   ----------    ----------
                                                    3,159,000     2,634,000
      Less valuation allowance                     (3,159,000)   (1,397,000)
                                                   ----------    ----------

                                                   $      -      $1,237,000
                                                   ==========    ==========

  A valuation  allowance of $3,159,000 has been established against the deferred
  tax assets due to the Company's  current  inability to utilize the benefits of
  these deferred tax assets.

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

                                                      2002          2001
                                                   ----------    ----------

      Tax at statutory federal rate                   (34.0)%        34.0%
      State income taxes on subsidiary taxable
        income, net of federal benefits                (2.1)          7.5
      Other                                            (1.9)          3.9
      Change in valuation allowance                   120.2            -
                                                   ----------    ----------

                                                       82.2%         45.4%
                                                   ==========    ==========

NOTE G - 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,
      ------------------------

              2003                                 $  120,000
              2004                                    120,000
              2005                                    120,000
              2006                                    120,000
              2007                                    120,000
              Thereafter                              164,000
                                                   ----------

                                                   $  764,000
                                                   ==========

  Rental expense for 2002 and 2001 was $120,000 and $116,000, respectively.

                                      F-15

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001

NOTE H - CONCENTRATIONS

  For 2002,  two  customers of the Company  accounted  for 77% and 13% of sales,
  respectively. For 2001, two customers of the Company accounted for 70% and 17%
  of sales, respectively.

  For  2002,  three  vendors  accounted  for 31%,  25% and 10% of the  Company's
  materials purchases, respectively. For 2001, two vendors accounted for 25% and
  20% 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 I - RELATED PARTY TRANSACTIONS

  During 2002 and 2001, Acorn and its subsidiaries paid a law firm, of which the
  Company's Chief Executive  Officer and Chairman was of counsel,  approximately
  $20,052 and $12,700, respectively, for reimbursement of expenses.

  For the years ended December 31, 2002 and 2001,  Acorn paid consulting fees of
  $48,000 to two of its former officers (currently Directors).

  Directors'  fee  expense for the years  ended  December  31, 2002 and 2001 was
  $36,000 and $24,000, respectively.

NOTE J - EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                      Income              Number of shares
                                    (numerator)             (denominator)         Per share amount
                              ----------------------   -----------------------    ----------------
<S>                               <C>         <C>         <C>          <C>         <C>      <C>
                                  2002        2001        2002         2001        2002     2001
      Basic earnings (loss)
           per share
         Net (loss) income    $(2,671,147) $ 159,174   $1,582,405   $1,597,626    $(1.69)  $ 0.10
                              ============ =========   ==========   ==========    =======  =======
</TABLE>

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

  In 2002, none of the options outstanding to purchase common stock (see note K)
  were included in the computation of diluted  earnings per share because of net
  losses incurred.

  In 2001,  311,000 of the 363,000 options  outstanding to purchase common stock
  (see note K) with an  exercise  price  ranging  from $2.13 to $5.48,  were not
  included in the  computation of diluted  earnings per share 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
  earnings per share calculation.

                                      F-16

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE K - 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 ten  years  from  the  date of  grant.  The
  following is a summary of stock options  outstanding  at December 31, 2002 and
  2001:

<TABLE>
<CAPTION>
                                                           2002                      2001
                                                  ----------------------     ---------------------
                                                              Weighted-                 Weighted-
                                                               average                   average
                                                              exercise                  exercise
                                                   Shares       price         Shares      price
                                                  --------    ---------      --------   ---------
<S>                                               <C>         <C>            <C>         <C>
        Outstanding at January 1,                 363,000     $   3.55       360,000     $  4.58
           Granted                                  3,000         0.49        58,200        1.39
           Cancelled                                   -           -          (3,200)      (1.53)
           Expired                                     -           -         (52,000)      (8.44)
                                                  -------                    --------

        Outstanding at December 31,               366,000         3.52       363,000        3.55
                                                  =======                    ========

        Options exercisable at December 31,       364,000         3.55       363,000        3.55
                                                  =======                    ========
</TABLE>

  The following table summarizes  information about stock options outstanding at
  December 31, 2002:

                                        Options outstanding and exercisable
                               ------------------------------------------------
                                Weighted            Weighted-
         Range of               remaining            average           Exercise
      exercise price             shares          contractual life        price
      --------------           ----------        ----------------      --------

        $0.49                       3,000           10.0 years           $0.49
        $1.30                      52,000            9.0 years           $1.30
        $2.13                       6,200            8.4 years           $2.13
        $2.19                      48,000            2.9 years           $2.19
        $2.27                      20,800            5.9 years           $2.27
        $2.90                      20,000            1.8 years           $2.90
        $3.95                      40,000            4.4 years           $3.95
        $4.60 - $5.48             176,000            0.4 years           $4.77
                               ----------

                                  366,000
                               ==========

  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 earnings per share.

                                      F-17

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001




NOTE L - COMMON STOCK

  At December  31,  2002 and 2001,  the Company  had  20,000,000  and  7,000,000
  shares, respectively,  of $0.01 par value common stock authorized. At December
  31, 2002,  1,585,646 shares were issued and 1,573,946 shares were outstanding.
  At December 31, 2001,  1,627,362  shares were issued and 1,585,646 shares were
  outstanding.

  During 2002 and 2001, the Company  repurchased 11,700 and 22,716 shares of its
  common stock, respectively, through the open market.

NOTE M - 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 N - 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 O - 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  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-18

<PAGE>

                      Acorn Holding Corp. and Subsidiaries

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                           December 31, 2002 and 2001


NOTE P - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

                                      Year ended December 31, 2002
                                                                    Diluted net
                                       Operating        Net        income (loss)
                          Revenues       loss           loss         per share
                        ------------ ------------   ------------   -------------

      1st Quarter        $1,204,808  $  (206,046)  $  (154,238)      $(0.10)
      2nd Quarter         1,034,620     (197,952)     (195,841)       (0.12)
      3rd Quarter           887,903     (437,075)   (1,704,592)       (1.08)
      4th Quarter           577,674     (565,231)     (616,476)       (0.39)
                        ------------ ------------   ------------   -------------

      Total              $3,705,005  $(1,406,304)  $(2,671,147)      $(1.69)
                        ============ ============   ============   =============

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

      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        $ 0.10
                        ============ ============   ============   =============

                                      F-19