UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2020
Commission
file number: 001-33886
ACORN
ENERGY, INC.
(Exact
name of registrant as specified in charter)
|
Delaware
(State
or other jurisdiction
of
incorporation or organization)
|
|
22-2786081
(I.R.S.
Employer
Identification
No.)
|
|
|
|
|
|
1000
N West, Suite 1200, Wilmington, Delaware
(Address
of principal executive offices)
|
|
19801
(Zip
Code)
|
410-654-3315
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
|
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
| None |
|
|
|
|
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 [ ]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit such
files). Yes [X] No [ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
|
|
Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
| |
|
|
|
| |
Non-accelerated
filer [X] |
|
Smaller
reporting company [X] |
| |
|
|
|
| |
Emerging
growth company [ ] |
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange
Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ]
No [X]
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date.
|
Class |
|
Outstanding
at May 10, 2020 |
|
Common
Stock, $0.01 par value per share |
|
39,687,589 |
ACORN
ENERGY, INC.
Quarterly
Report on Form 10-Q
for
the Quarterly Period Ended March 31, 2020
TABLE
OF CONTENTS
Certain
statements contained in this report are forward-looking in nature.
These statements are generally identified by the inclusion of
phrases such as “we expect”, “we anticipate”, “we believe”, “we
estimate” and other phrases of similar meaning. Whether such
statements ultimately prove to be accurate depends upon a variety
of factors that may affect our business and operations. Many of
these factors are described in our most recent Annual Report on
Form 10-K as filed with the Securities and Exchange
Commission.
PART I
|
ITEM
1. |
UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
|
|
|
As
of
March 31, 2020 |
|
|
As
of
December 31, 2019 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
| Current
assets: |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
1,416 |
|
|
$ |
1,247 |
|
|
Accounts
receivable, net |
|
|
528 |
|
|
|
962 |
|
|
Inventory,
net |
|
|
309 |
|
|
|
291 |
|
|
Deferred
charges |
|
|
781 |
|
|
|
741 |
|
|
Other
current assets |
|
|
136 |
|
|
|
189 |
|
|
Total
current assets |
|
|
3,170 |
|
|
|
3,430 |
|
| Property
and equipment, net |
|
|
263 |
|
|
|
189 |
|
|
Right-of-use
assets,
net |
|
|
564 |
|
|
|
587 |
|
|
Other
assets |
|
|
711 |
|
|
|
778 |
|
|
Total
assets |
|
$ |
4,708 |
|
|
$ |
4,984 |
|
|
LIABILITIES
AND DEFICIT |
|
|
|
|
|
|
|
|
| Current
liabilities: |
|
|
|
|
|
|
|
|
|
Short-term
credit |
|
$ |
139 |
|
|
$ |
136 |
|
|
Accounts
payable |
|
|
250 |
|
|
|
197 |
|
|
Accrued
expenses |
|
|
76 |
|
|
|
136 |
|
|
Deferred
revenue |
|
|
3,093 |
|
|
|
3,004 |
|
|
Current
operating lease liabilities |
|
|
55 |
|
|
|
53 |
|
|
Other
current liabilities |
|
|
86 |
|
|
|
68 |
|
|
Total
current liabilities |
|
|
3,699 |
|
|
|
3,594 |
|
| Non-current
liabilities: |
|
|
|
|
|
|
|
|
|
Deferred
revenue |
|
|
1,393 |
|
|
|
1,491 |
|
|
Noncurrent
operating lease liabilities |
|
|
518 |
|
|
|
542 |
|
|
Other
long-term liabilities |
|
|
3 |
|
|
|
2 |
|
|
Total
long-term liabilities |
|
|
1,914 |
|
|
|
2,035 |
|
| Commitments
and contingencies |
|
|
|
|
|
|
|
|
| Deficit: |
|
|
|
|
|
|
|
|
|
Acorn
Energy, Inc. shareholders |
|
|
|
|
|
|
|
|
| Common
stock - $0.01 par value per share: |
|
|
|
|
|
|
|
|
| Authorized
– 42,000,000 shares; Issued – 39,687,589 and 39,591,339 shares at
March 31, 2020 and December 31, 2019, respectively |
|
|
397 |
|
|
|
396 |
|
|
Additional
paid-in capital |
|
|
101,679 |
|
|
|
101,655 |
|
|
Warrants |
|
|
1,021 |
|
|
|
1,021 |
|
|
Accumulated
deficit |
|
|
(100,965 |
) |
|
|
(100,682 |
) |
|
Treasury
stock, at cost – 801,920 shares at March 31, 2020 and December 31,
2019 |
|
|
(3,036 |
) |
|
|
(3,036 |
) |
|
Total
Acorn Energy, Inc. shareholders’ deficit |
|
|
(904 |
) |
|
|
(646 |
) |
|
Non-controlling
interests |
|
|
(1 |
) |
|
|
1 |
|
|
Total
deficit |
|
|
(905 |
) |
|
|
(645 |
) |
|
Total
liabilities and deficit |
|
$ |
4,708 |
|
|
$ |
4,984 |
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
Three
months ended March 31, |
|
|
|
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
|
Revenue |
|
$ |
1,338 |
|
|
$ |
1,327 |
|
| Cost
of sales – products and services |
|
|
416 |
|
|
|
476 |
|
|
Cost
of sales – other |
|
|
― |
|
|
|
30 |
|
|
Gross
profit |
|
|
922 |
|
|
|
821 |
|
| Operating
expenses: |
|
|
|
|
|
|
|
|
|
Research
and development expense |
|
|
155 |
|
|
|
144 |
|
|
Selling,
general and administrative expense |
|
|
1,041 |
|
|
|
944 |
|
|
Total
operating expenses |
|
|
1,196 |
|
|
|
1,088 |
|
|
Operating
loss |
|
|
(274 |
) |
|
|
(267 |
) |
|
Finance
(expense) income, net |
|
|
(10 |
) |
|
|
6 |
|
|
Loss
before income taxes |
|
|
(284 |
) |
|
|
(261 |
) |
|
Income
tax expense |
|
|
— |
|
|
|
— |
|
|
Net
loss |
|
|
(284 |
) |
|
|
(261 |
) |
|
Non-controlling
interest share of net loss |
|
|
1 |
|
|
|
24 |
|
|
Net
loss attributable to Acorn Energy, Inc. shareholders |
|
$ |
(283 |
) |
|
$ |
(237 |
) |
| |
|
|
|
|
|
|
|
|
| Basic
and diluted net loss per share attributable to Acorn Energy, Inc.
shareholders: |
|
|
|
|
|
|
|
|
|
Total
attributable to Acorn Energy, Inc. shareholders |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
Weighted
average number of shares outstanding attributable to Acorn Energy,
Inc. shareholders – basic and diluted |
|
|
39,631 |
|
|
|
29,556 |
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACORN ENERGY, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
(UNAUDITED)
(IN
THOUSANDS)
| |
|
Three
Months Ended March 31, 2020 |
|
| |
|
Number
of Shares |
|
|
Common
Stock |
|
|
Additional
Paid-
In
Capital |
|
|
Warrants |
|
|
Accumulated
Deficit |
|
|
Number
of Treasury Shares |
|
|
Treasury
Stock |
|
|
Total
Acorn
Energy, Inc.
Shareholders’
Deficit |
|
|
Non-
controlling interests |
|
|
Total
Deficit |
|
|
Balances
as of December 31, 2019 |
|
|
39,591 |
|
|
$ |
396 |
|
|
$ |
101,655 |
|
|
$ |
1,021 |
|
|
$ |
(100,682 |
) |
|
|
802 |
|
|
$ |
(3,036 |
) |
|
$ |
(646 |
) |
|
$ |
1 |
|
|
$ |
(645 |
) |
| Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(283 |
) |
|
|
— |
|
|
|
— |
|
|
|
(283 |
) |
|
|
(1 |
) |
|
|
(284 |
) |
| Accrued
dividend in OmniMetrix preferred shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
| Proceeds
from stock option exercise |
|
|
96 |
|
|
|
1 |
|
|
|
18 |
|
|
|
― |
|
|
|
― |
|
|
|
― |
|
|
|
― |
|
|
|
19 |
|
|
|
― |
|
|
|
19 |
|
|
Stock
option compensation |
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
| Balances
as of March 31, 2020 |
|
|
39,687 |
|
|
$ |
397 |
|
|
$ |
101,679 |
|
|
$ |
1,021 |
|
|
$ |
(100,965 |
) |
|
|
802 |
|
|
$ |
(3,036 |
) |
|
$ |
(904 |
) |
|
$ |
(1 |
) |
|
$ |
(905 |
) |
| |
|
Three
Months Ended March 31, 2019 |
|
| |
|
Number
of Shares |
|
|
Common
Stock |
|
|
Additional
Paid-
In
Capital |
|
|
Warrants |
|
|
Accumulated
Deficit |
|
|
Number
of Treasury Shares |
|
|
Treasury
Stock |
|
|
Total
Acorn
Energy, Inc.
Shareholders’
Deficit |
|
|
Non-
controlling interests |
|
|
Total
Deficit |
|
|
Balances
as of December 31, 2018 |
|
|
29,556 |
|
|
$ |
296 |
|
|
$ |
100,348 |
|
|
$ |
1,118 |
|
|
$ |
(100,064 |
) |
|
|
802 |
|
|
$ |
(3,036 |
) |
|
$ |
(1,338 |
) |
|
$ |
108 |
|
|
$ |
(1,230 |
) |
| Net
loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(237 |
) |
|
|
— |
|
|
|
— |
|
|
|
(237 |
) |
|
|
(24 |
) |
|
|
(261 |
) |
| Accrued
dividend in OmniMetrix preferred shares |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(20 |
) |
|
|
(20 |
) |
|
Stock
option compensation |
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
6 |
|
| Balances
as of March 31, 2019 |
|
|
29,556 |
|
|
$ |
296 |
|
|
$ |
100,354 |
|
|
$ |
1,118 |
|
|
$ |
(100,301 |
) |
|
|
802 |
|
|
$ |
(3,036 |
) |
|
$ |
(1,569 |
) |
|
$ |
64 |
|
|
$ |
(1,505 |
) |
ACORN ENERGY, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)(IN
THOUSANDS)
| |
|
Three
months ended March 31, |
|
|
|
|
2020 |
|
|
2019 |
|
| Cash
flows provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(284 |
) |
|
$ |
(261 |
) |
|
Depreciation
and amortization |
|
|
16 |
|
|
|
27 |
|
|
Non-cash
lease expense |
|
|
29 |
|
|
|
― |
|
|
Stock-based
compensation |
|
|
6 |
|
|
|
6 |
|
|
Change
in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Decrease
(increase) in accounts receivable |
|
|
434 |
|
|
|
(25 |
) |
|
Increase
in inventory |
|
|
(18 |
) |
|
|
(105 |
) |
|
Decrease
in deferred charges |
|
|
27 |
|
|
|
73 |
|
|
Decrease
in other current assets and other assets |
|
|
53 |
|
|
|
28 |
|
|
Decrease
in accounts payable and accrued expenses |
|
|
(7 |
) |
|
|
(69 |
) |
|
Decrease
in deferred revenue |
|
|
(9 |
) |
|
|
(10 |
) |
|
Decrease
in operating lease liability |
|
|
(28 |
) |
|
|
― |
|
|
Increase
in other current liabilities and non-current
liabilities |
|
|
18 |
|
|
|
11 |
|
|
Net
cash provided by (used in) operating activities |
|
|
237 |
|
|
|
(325 |
) |
| |
|
|
|
|
|
|
|
|
| Cash
flows used in investing activities: |
|
|
|
|
|
|
|
|
|
Purchases
of software |
|
|
(87 |
) |
|
|
― |
|
|
Payments
made for patent filings |
|
|
(3 |
) |
|
|
― |
|
|
Net
cash used in investing activities |
|
|
(90 |
) |
|
|
― |
|
| |
|
|
|
|
|
|
|
|
| Cash
flows provided by financing activities: |
|
|
|
|
|
|
|
|
|
Short-term
credit, net |
|
|
3 |
|
|
|
140 |
|
|
Stock
option exercise proceeds |
|
|
19 |
|
|
|
― |
|
|
Net
cash provided by financing activities |
|
|
22 |
|
|
|
140 |
|
| |
|
|
|
|
|
|
|
|
| Net
increase (decrease) in cash, cash equivalents and restricted
cash |
|
|
169 |
|
|
|
(185) |
|
|
Cash,
cash equivalents and restricted cash at the beginning of the
year |
|
|
1,247 |
|
|
|
1,263 |
|
|
Cash,
cash equivalents and restricted cash at the end of the
period |
|
$ |
1,416 |
|
|
$ |
1,078 |
|
| |
|
|
|
|
|
|
|
|
| Cash,
cash equivalents and restricted cash consist of the
following: |
|
|
|
|
|
|
|
|
|
End
of period |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
1,416 |
|
|
$ |
779 |
|
|
Restricted
cash |
|
|
― |
|
|
|
299 |
|
|
|
|
$ |
1,416 |
|
|
$ |
1,078 |
|
| |
|
|
|
|
|
|
|
|
| Cash,
cash equivalents and restricted cash consist of the
following: |
|
|
|
|
|
|
|
|
|
Beginning
of period |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
1,247 |
|
|
$ |
973 |
|
|
Restricted
cash |
|
|
― |
|
|
|
290 |
|
|
|
|
$ |
1,247 |
|
|
$ |
1,263 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental
cash flow information: |
|
|
|
|
|
|
|
|
|
Cash
paid during the year for: |
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
7 |
|
|
$ |
1 |
|
| |
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities: |
|
|
|
|
|
|
|
|
|
Purchase
of equipment under installment agreement |
|
$ |
― |
|
|
$ |
7 |
|
|
Accrued
preferred dividends to former Acorn director and/or former
Omnimetrix CEO |
|
$ |
1 |
|
|
$ |
20 |
|
The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
NOTE
1— BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements
of Acorn Energy, Inc. and its subsidiaries (the “Company”) have
been prepared in accordance with accounting principles generally
accepted in the United States of America for interim financial
information and with the instructions to Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in
the United States of America for complete consolidated financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for
the three-month period ended March 31, 2020 are not necessarily
indicative of the results that may be expected for the year ending
December 31, 2020.
Certain
reclassifications have been made to the Company’s condensed
consolidated financial statements for the three-month period ended
March 31, 2019 to conform to the current period’s condensed
consolidated financial statement presentation. There was no
effect on total assets, equity and net loss. A reclassification of
$6,000 from interest expense to SG&A expense was recorded to
reclass the Intuit processing fees for customer payments made
through the Intuit portal via credit card or bank draft that was
previously included in interest expense as of March 31, 2019 and is
included in SG&A as of March 31, 2020. These unaudited
condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and
footnotes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2019.
NOTE
2—RECENT AUTHORITATIVE GUIDANCE
Recently
Issued Accounting Principles
Other
than the pronouncement noted below, there have been no recent
accounting pronouncements or changes in accounting pronouncements
during the three-month period ended March 31, 2020, that are of
material significance, or have potential material significance, to
the Company.
In
June 2016, the FASB issued ASU 2016-13, Financial
Instruments-Credit Losses (“ASC 326”), authoritative guidance
amending how entities will measure credit losses for most financial
assets and certain other instruments that are not measured at fair
value through net income. The guidance requires the application of
a current expected credit loss model, which is a new impairment
model based on expected losses. The new guidance is effective for
interim and annual reporting periods beginning after December 15,
2022. The Company is currently evaluating the impact of the new
guidance on its condensed consolidated financial statements and
related disclosures.
Recently
Adopted Accounting Principles
In
June 2018, the FASB issued ASU 2018-07, which simplifies the
accounting for nonemployee share-based payment transactions. The
amendments specify that Topic 718 applies to all share-based
payment transactions in which a grantor acquires goods or services
to be used or consumed in a grantor’s own operations by issuing
share-based payment awards. The standard was effective in the first
quarter of fiscal year 2020, although early adoption was permitted
(but no sooner than the adoption of Topic 606). The Company
concluded that the adoption of this ASU did not have a material impact on the Company’s
condensed consolidated financial statements.
NOTE 3—LIQUIDITY
As of
March 31, 2020, the Company had approximately $1,416,000 in cash.
As of May 10, 2020, the Company had cash of approximately
$1,881,000 including $461,000 in PPP loan proceeds. OmniMetrix is
considered an essential business due to the fact that it provides
infrastructure support to both government and commercial sectors
and across key industries. The Company has not experienced any
material negative impacts due to the COVID-19 pandemic to date. The
Company continued to realize new equipment sales just not at the
anticipated growth rate and it continued to collect its monthly
recurring monitoring revenues and has retained its customer base.
While the impacts of COVID-19 in the future are uncertain, the
Company believes that due to the need for backup power and the
desirability of remote monitoring services, it should be positioned
for stable financial performance. Such cash plus the cash generated
from operations and borrowing from the OmniMetrix Loan and Security
Agreement, will provide sufficient liquidity to finance the
operating activities of Acorn and OmniMetrix at their current level
of operations for the foreseeable future and for the twelve months
from the issuance of these consolidated financial statements in
particular.
NOTE
4—INVESTMENT IN OMNIMETRIX
In
2015, one of the Company’s then-current directors (the “Investor”)
acquired a 20% interest in the Company’s OMX Holdings, Inc.
subsidiary (“Holdings”) through the purchase of $1,000,000 of
OmniMetrix Preferred Stock (“Preferred Stock”). Holdings is the
holder of 100% of the membership interests of OmniMetrix, LLC
through which the Company operates its Power Generation and
Cathodic Protection monitoring activities. The $1,000,000
investment by the Investor was recorded as an increase in
non-controlling interests.
On
July 1, 2019, in accordance with terms established in 2015 at the
time of the original investment, the Company repurchased from the
Investor the shares of Preferred Stock then held by the Investor
for a purchase price of $1,273,000 in cash (which included $323,000
of unpaid accrued dividends through June 30, 2019). The repurchase
raised the Company’s ownership in Holdings from 80% to 99%, with
the remaining 1% owned by the then-CEO of OmniMetrix,
LLC.
NOTE
5—LEASES
OmniMetrix
leases office space and office equipment under operating lease
agreements. The office lease expires on September 30, 2025. The
office equipment lease was entered into in April 2019 and has a
sixty-month term. Operating lease payments for the three months
ended March 31, 2020 and 2019 were $28,000 and $27,000,
respectively. The future minimum lease payments on non-cancelable
operating leases as of March 31, 2020 using a discount rate of 4.5%
are $573,000.
Supplemental
cash flow information related to leases consisted of the following
(in thousands):
| |
|
March
31, |
|
| |
|
2020 |
|
|
2019 |
|
|
Cash
paid for operating lease liabilities |
|
$ |
28 |
|
|
|
― |
|
Supplemental
balance sheet information related to leases consisted of the
following:
| |
|
2020 |
|
|
Weighted
average remaining lease terms for operating leases |
|
|
5.47 |
|
The
table below reconciles the undiscounted future minimum lease
payments under non-cancelable lease agreements having initial terms
in excess of one year to the total operating lease liabilities
recognized on the consolidated balance sheet as of March 31, 2020
(in thousands):
| |
|
Twelve-month
period
ended
March
31,
|
|
|
2021 |
|
$ |
80 |
|
| 2022 |
|
|
122 |
|
| 2023 |
|
|
125 |
|
| 2024 |
|
|
129 |
|
| 2025 |
|
|
129 |
|
|
Thereafter |
|
|
67 |
|
| Total
undiscounted cash flows |
|
|
652 |
|
|
Less:
Imputed interest |
|
|
(79 |
) |
|
Present
value of operating lease liabilities (a) |
|
$ |
573 |
|
|
|
(a) |
Includes
current portion of $55,000 for operating leases. |
NOTE
6—DEBT
(a)
OmniMetrix
In
March 2019, OmniMetrix reinstated its Loan and Security Agreement
providing OmniMetrix with access to accounts receivable
formula-based financing of the lesser of 75% of eligible
receivables or $1,000,000. Debt incurred under this financing
arrangement bears interest at the greater of 6% and prime (3.25% at
March 31, 2020) plus 1.5% per year. In addition, OmniMetrix is to
pay a monthly service charge of 0.75% of the average aggregate
principal amount outstanding for the prior month, for an effective
rate of interest on advances of 15% during the three months ended
March 31, 2020. OmniMetrix also agreed to continue to maintain a
minimum loan balance of $150,000 in its line-of-credit with the
lender for a minimum of two years beginning March 1, 2019. From
time to time, the balance outstanding may fall below $150,000 based
on collections applied against the loan balance and the timing of
loan draws. The monthly service charge and interest is calculated
on the greater of the outstanding balance or $150,000. Interest
expense for the three-months-ended March 31, 2020 and 2019 was
$7,000 and $2,000, respectively.
OmniMetrix
had an outstanding balance of $139,000 and $136,000 as of March 31,
2020 and December 31, 2019, respectively, pursuant to the Loan and
Security Agreement and $54,000 was available to borrow at March 31,
2020.
NOTE
7—EQUITY
(a)
General
At
March 31, 2020, the Company had issued and outstanding 39,687,589
shares of its common stock, par value $0.01 per share. Holders of
outstanding common stock are entitled to receive dividends when, as
and if declared by the Board and to share ratably in the assets of
the Company legally available for distribution in the event of a
liquidation, dissolution or winding up of the Company. Holders of
common stock do not have subscription, redemption, conversion or
other preemptive rights. Holders of the common stock are entitled
to elect all of the Directors on the Company’s Board. Holders of
the common stock do not have cumulative voting rights, meaning that
the holders of more than 50% of the common stock can elect all of
the Company’s Directors. Except as otherwise required by Delaware
General Corporation Law, all stockholder action is taken by vote of
a majority of shares of common stock present at a meeting of
stockholders at which a quorum (a majority of the issued and
outstanding shares of common stock) is present in person or by
proxy or by written consent pursuant to Delaware law (other than
the election of Directors, who are elected by a plurality
vote).
The
Company is not authorized to issue preferred stock. Accordingly, no
preferred stock is issued or outstanding.
(b)
Rights Offering
On
June 28, 2019, the Company completed a rights offering, raising
$2,184,000 in proceeds of which $1,628,000 was from related
parties, net of $210,000 in expenses. Pursuant to the rights
offering, Acorn securityholders and parties to a backstop agreement
purchased 9,975,553 shares of Acorn common stock for $0.24 per
share.
Under
the terms of the rights offering, each right entitled
securityholders as of June 3, 2019, the record date for the rights
offering, to purchase 0.312 shares of Acorn common stock at a
subscription price of $0.24 per whole share. No fractional shares
were issued. The closing price of Acorn’s common stock on the
record date of the rights offering was $0.2925. Distribution of the
rights commenced on June 6, 2019 and were exercisable through June
24, 2019.
In
connection with the rights offering, Acorn entered into a backstop
agreement with certain of its directors and Leap Tide Capital
Management LLC, the sole manager of which is Acorn’s President and
CEO, pursuant to which they agreed to purchase from Acorn any and
all unsubscribed shares of common stock in the rights offering,
subject to the terms, conditions and limitations of the backstop
agreement. The backstop purchasers did not receive any compensation
or other consideration for entering into or consummating the
backstop agreement.
On
July 1, 2019, the Company utilized a portion of the rights offering
proceeds to complete the planned reacquisition of a 19% interest in
its OMX Holdings, Inc. subsidiary (“Holdings”) for $1,273,000,
including accrued dividends. Holdings owns 100% of the membership
interests of OmniMetrix, LLC. The purchase price was based on terms
established in November 2015 at the time of the original
investment. The purchase raised Acorn’s ownership in Holdings from
80% to 99%, with the remaining 1% owned by the former CEO of
OmniMetrix, LLC. See Note 4 for further discussion.
The
balance of the rights offering net proceeds provides OmniMetrix
with additional sales and marketing resources to facilitate
expansion into additional geographic markets and new product
applications, to support next-generation product development and
for general working capital purposes.
(c)
Summary Employee Option Information
The
Company’s stock option plans provide for the grant to officers,
directors and other key employees of options to purchase shares of
common stock. The purchase price may be paid in cash or at the end
of the option term, if the option is “in-the-money”, it is
automatically exercised “net”. In a net exercise of an option, the
Company does not require a payment of the exercise price of the
option from the optionee, but reduces the number of shares of
common stock issued upon the exercise of the option by the smallest
number of whole shares that has an aggregate fair market value
equal to or in excess of the aggregate exercise price for the
option shares covered by the option exercised. Each option is
exercisable to one share of the Company’s common stock. Most
options expire within five to ten years from the date of the grant,
and generally vest over three-year period from the date of the
grant. At the annual meeting of stockholders on September 11, 2012,
the Company’s stockholders approved an Amendment to the Company’s
2006 Stock Incentive Plan to increase the number of available
shares by 1,000,000 and an Amendment to the Company’s 2006 Stock
Incentive Plan for Non-Employee Directors to increase the number of
available shares by 200,000. In February 2019, the Company’s Board
extended the expiration date of the 2006 Stock Incentive Plan until
December 31, 2024.
At
March 31, 2020, 1,766,719 options were available for grant under
the 2006 Amended and Restated Stock Incentive Plan and no options
were available for grant under the 2006 Director Plan. During the
three months ended March 31, 2020, 30,000 options were issued to
directors and 35,000 options were issued to the Company’s CEO. In
the three months ended March 30, 2020, there were no grants to
non-employees. The fair value of the options issued was
$14,000.
96,250
options were exercised during the three months ended March 31,
2020. The intrinsic value of options outstanding and of options
exercisable at March 31, 2020 was less than $1,000.
A
summary of stock option activity for the three months ended March
31, 2020 is as follows:
|
|
|
Number
of
Options
(in
shares)
|
|
|
Weighted
Average
Exercise
Price
Per
Share
|
|
|
Weighted
Average
Remaining
Contractual Life |
|
|
Aggregate
Intrinsic
Value |
|
|
Outstanding
at December 31, 2019 |
|
|
1,364,490 |
|
|
$ |
1.87 |
|
|
|
1.81
years |
|
|
$ |
46,000 |
|
| Granted |
|
|
65,000 |
|
|
|
0.37 |
|
|
|
|
|
|
|
|
|
| Exercised |
|
|
(96,250 |
) |
|
|
0.19 |
|
|
|
|
|
|
|
|
|
| Forfeited
or expired |
|
|
(524,430 |
) |
|
|
2.43 |
|
|
|
|
|
|
|
|
|
| Outstanding
at March 31, 2020 |
|
|
808,810 |
|
|
$ |
1.59 |
|
|
|
3.3
years |
|
|
$ |
— |
|
| Exercisable
at March 31, 2020 |
|
|
585,726 |
|
|
$ |
2.06 |
|
|
|
2.2
years |
|
|
$ |
— |
|
The
fair value of the options granted of $14,000 was estimated on the
grant date using the Black-Scholes option-pricing model with the
following weighted average assumptions:
|
Risk-free
interest rate |
|
|
1.5 |
% |
| Expected
term of options |
|
|
3.7
years |
|
| Expected
annual volatility |
|
|
110 |
% |
| Expected
dividend yield |
|
|
— |
% |
(d)
Stock-based Compensation Expense
Stock-based
compensation expense included in selling, general and
administrative expenses in the Company’s unaudited condensed
consolidated statements of operations was $6,000 and $6,000 for the
three-month periods ended March 31, 2020 and 2019,
respectively.
The
total compensation cost related to non-vested awards not yet
recognized was $39,000 as of March 31, 2020.
(e)
Warrants
The
Company previously issued warrants at exercise prices equal to or
greater than market value of the Company’s common stock at the date
of issuance. A summary of warrant activity follows:
|
|
|
Number
of
Warrants
(in
shares)
|
|
|
Weighted
Average
Exercise
Price Per Share |
|
|
Weighted
Average
Remaining
Contractual Life |
|
|
Outstanding
at December 31, 2019 |
|
|
2,177,857 |
|
|
$ |
1.28 |
|
|
|
4
months |
|
| Granted |
|
|
— |
|
|
|
— |
|
|
|
|
|
| Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
| Forfeited
or expired |
|
|
— |
|
|
|
— |
|
|
|
|
|
| Outstanding
at March 31, 2020 |
|
|
2,177,857 |
|
|
$ |
1.28 |
|
|
|
1
month |
|
NOTE
8— SEGMENT REPORTING
As of
March 31, 2020, the Company operates in two reportable operating
segments, both of which are performed through the Company’s
OmniMetrix subsidiary:
|
|
● |
The
PG (Power Generation) segment provides wireless remote monitoring
and control systems and services for critical assets as well as
Internet of Things applications. The PG segment includes
OmniMetrix’s air compressor monitoring device that provides
performance monitoring on industrial air compressors and
dryers. |
|
|
|
|
|
|
● |
The
CP (Cathodic Protection) segment provides for remote monitoring of
cathodic protection systems on gas pipelines for gas utilities and
pipeline companies. |
The
Company’s reportable segments are strategic business units,
offering different products and services and are managed separately
as each business requires different technology and marketing
strategies.
The
following tables represent segmented data for the three-month
periods ended March 31, 2020 and March 31, 2019 (in
thousands):
|
|
|
PG |
|
|
CP |
|
|
Total |
|
|
Three
months ended March 31, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external customers |
|
$ |
1,109 |
|
|
$ |
229 |
|
|
$ |
1,338 |
|
|
Segment
gross profit |
|
|
805 |
|
|
|
117 |
|
|
|
922 |
|
|
Depreciation
and amortization |
|
|
13 |
|
|
|
3 |
|
|
|
16 |
|
|
Segment
income(loss) before income taxes |
|
$ |
5 |
|
|
$ |
(62 |
) |
|
$ |
(57 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Three
months ended March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
from external customers |
|
$ |
996 |
|
|
$ |
331 |
|
|
$ |
1,327 |
|
|
Segment
gross profit |
|
|
686 |
|
|
|
135 |
|
|
|
821 |
|
|
Depreciation
and amortization |
|
|
20 |
|
|
|
7 |
|
|
|
27 |
|
|
Segment
income (loss) before income taxes |
|
$ |
23 |
|
|
$ |
(85 |
) |
|
$ |
(62 |
) |
The
gross profit of the PG segment during the three months ended March
31, 2019 included a $30,000 accrual, which unfavorably impacted
gross margin by approximately 2%. The accrual was for an estimated
payment of approximately $30,000 related to a long-term purchase
commitment of what is now discontinued technology that has been
replaced with upgraded technology. This adjustment is recorded in
cost of sales – other.
The
Company does not currently break out total assets by reportable
segment as there is a high level of shared utilization between the
segments. Further, the Chief Decision Maker (CDM) does not review
the assets by segment.
Reconciliation
of Segment Loss to Consolidated Net Loss Before Income
Taxes
|
|
|
Three
months ended
March
31,
|
|
|
|
|
2020 |
|
|
2019 |
|
|
Total
net loss before income taxes for reportable segments |
|
$ |
(57 |
) |
|
$ |
(62 |
) |
|
Unallocated
cost of corporate headquarters |
|
|
(227 |
) |
|
|
(199 |
) |
|
Consolidated
loss before income taxes |
|
$ |
(284 |
) |
|
$ |
(261 |
) |
NOTE
9—REVENUE
The
following table disaggregates the Company’s revenue for the
three-month periods ended March 31, 2020 and 2019 (in
thousands):
| |
|
Hardware |
|
|
Monitoring |
|
|
Total |
|
| Three
months ended March 31, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
PG
Segment |
|
$ |
277 |
|
|
$ |
832 |
|
|
$ |
1,109 |
|
|
CP
Segment |
|
|
166 |
|
|
|
63 |
|
|
|
229 |
|
|
Total
Revenue |
|
$ |
443 |
|
|
$ |
895 |
|
|
$ |
1,338 |
|
| |
|
Hardware |
|
|
Monitoring |
|
|
Total |
|
| Three
months ended March 31, 2019: |
|
|
|
|
|
|
|
|
|
|
|
|
|
PG
Segment |
|
$ |
290 |
|
|
$ |
706 |
|
|
$ |
996 |
|
|
CP
Segment |
|
|
271 |
|
|
|
60 |
|
|
|
331 |
|
|
Total
Revenue |
|
$ |
561 |
|
|
$ |
766 |
|
|
$ |
1,327 |
|
Deferred
revenue activity for the three months ended March 31, 2020 can be
seen in the table below (in thousands):
| |
|
Hardware |
|
|
Monitoring |
|
|
Total |
|
|
Balance
at December 31, 2019 |
|
$ |
2,663 |
|
|
$ |
1,832 |
|
|
$ |
4,495 |
|
|
Additions
during the period |
|
|
349 |
|
|
|
908 |
|
|
|
1,286 |
|
|
Recognized
as revenue |
|
|
(371 |
) |
|
|
(895 |
) |
|
|
(1,295 |
) |
| Balance
at March 31, 2020 |
|
$ |
2,641 |
|
|
$ |
1,845 |
|
|
$ |
4,486 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Amounts
to be recognized as revenue in the twelve-month-period
ending: |
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2021 |
|
$ |
1,431 |
|
|
$ |
1,662 |
|
|
$ |
3,093 |
|
|
March
31, 2022 |
|
|
928 |
|
|
|
180 |
|
|
|
1,108 |
|
|
March
31, 2023 and thereafter |
|
|
282 |
|
|
|
3 |
|
|
|
285 |
|
| |
|
$ |
2,641 |
|
|
$ |
1,845 |
|
|
$ |
4,486 |
|
Other
revenue of approximately $72,000 is related to accessories,
repairs, and other miscellaneous charges that are recognized to
revenue when sold and are not deferred.
Deferred
charges relate only to the sale of equipment. Deferred charges
activity for the three months ended March 31, 2020 can be seen in
the table below (in thousands):
|
Balance
at December 31, 2019 |
|
$ |
1,433 |
|
|
Additions,
net of adjustments, during the period |
|
|
190 |
|
|
Recognized
as cost of sales |
|
|
(208 |
) |
| Balance
at March 31, 2020 |
|
$ |
1,415 |
|
| |
|
|
|
|
| Amounts
to be recognized as cost of sales in the twelve-month-period
ending: |
|
|
|
|
|
March
31, 2021 |
|
$ |
781 |
|
|
March
31, 2022 |
|
|
490 |
* |
|
March
31, 2023 and thereafter |
|
|
144 |
* |
| |
|
$ |
1,415 |
|
Other
COGS recognized of approximately $63,000 is related to accessories,
repairs, and other miscellaneous charges that are recognized to
revenue when sold and are not deferred in addition to $145,000 in
monitoring COGS which is not deferred.
*Amounts
included in other assets in the Company’s unaudited condensed
consolidated balance sheets at March 31, 2020.
The
following table provides a reconciliation of the Company’s sales
commissions contract assets for the three-month period ended March
31, 2020 (in thousands):
|
|
|
Hardware |
|
|
Monitoring |
|
|
Total |
|
|
Balance
at December 31, 2019 |
|
$ |
101 |
|
|
$ |
37 |
|
|
$ |
138 |
|
| Additions
during the period |
|
|
21 |
|
|
|
5 |
|
|
|
26 |
|
| Amortization
of sales commissions |
|
|
(14 |
) |
|
|
(5 |
) |
|
|
(19 |
) |
| Balance
at March 31, 2020 |
|
$ |
108 |
|
|
$ |
37 |
|
|
$ |
145 |
|
The
capitalized sales commissions are included in other current assets
($76,000) and other assets ($69,000) in the Company’s unaudited
condensed consolidated balance sheets at March 31, 2020. The
capitalized sales commissions are included in other current assets
($60,000) and other assets ($78,000) in the Company’s consolidated
balance sheets at December 31, 2019.
NOTE
10—SUBSEQUENT EVENTS
On
April 24, 2020, Acorn Energy, Inc. received Paycheck Protection
Program (“PPP”) loan proceeds in the amount of $41,600.
On
April 30, 2020, OmniMetrix, LLC received PPP loan proceeds in the
amount $419,800.
Under
the PPP of the Coronavirus Aid, Relief and Economic Security Act
(the “Act”), up to the full principal amount of a loan and any
accrued interest can be forgiven if the borrower uses all of the
loan proceeds for forgivable purposes (payroll, benefits,
lease/mortgage payments and/or utilities) required under the Act
and any rule, regulation, or guidance issued by the SBA pursuant to
the Act (collectively, the “Forgiveness Provisions”). The amount of
forgiveness of the PPP loan depends on the borrower’s payroll costs
over an eight-week period beginning on the date of funding. Any
processes or procedures established under the Forgiveness
Provisions must be followed and any requirements of the Forgiveness
Provisions must be fully satisfied in order to obtain such loan
forgiveness. Pursuant to the provisions of the Act, the first six
monthly payments of principal and interest will be deferred.
Interest will accrue during the deferment period. The borrower must
pay principal and interest payments on the fifth day of each month
beginning seven months from the date of the applicable promissory
note.
If no portion of the Acorn Energy PPP loan is forgiven under the
Forgiveness Provisions, the monthly payments on that loan will be
in the amount of $2,400 each; if no portion of the OmniMetrix PPP
loan is forgiven under the Forgiveness Provisions, the monthly
payments on that loan will be in the amount of $24,000 each.
If
any portion of a loan is forgiven under the Forgiveness Provisions,
the payments will be in equal amounts which are sufficient to repay
all principal and interest over the remaining term of the loan. The
lender will apply each installment payment first to pay interest
accrued to the day the lender receives the payment, then to bring
principal current, then to pay any late fees, and will apply any
remaining balance to reduce principal. All remaining principal and
accrued interest is due and payable two years from the date of the
applicable promissory note. In any event any payment is not made
within ten days of the due date, the borrower will pay the lender a
late charge in the amount not to exceed 5% of the payment. The
borrower may prepay the principal at any time without penalty. Upon
default, the loan shall bear interest at 6% per year until paid in
full.
On April 28, 2020, the Company entered into a new agreement for
data hosting and business continuity services replacing an expiring
agreement with the same vendor effective May 1, 2020. The agreement
has a twelve-month term and the total payments under this agreement
are $148,000 in the aggregate. This represents an increase of
$21,000 for additional services under this agreement from the prior
twelve-month period.
On
May 5, 2020, 2,142,857 warrants with a fair value of $1,018,000
expired in accordance with their terms.
ACORN
ENERGY, INC.
|
ITEM
2. |
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
This
Form 10-Q contains “forward-looking statements” relating to the
Company which represent the Company’s current expectations or
beliefs including, but not limited to, statements concerning the
Company’s operations, performance, financial condition and growth.
For this purpose, any statements contained in this Form 10-Q that
are not statements of historical fact are forward-looking
statements. Without limiting the generality of the foregoing, words
such as “may”, “anticipate”, “intend”, “could”, “estimate” or
“continue” or the negative or other comparable terminology are
intended to identify forward-looking statements. These statements
by their nature involve substantial risks and uncertainties, such
as credit losses, dependence on management and key personnel,
variability of quarterly results, and the ability of the Company to
continue its growth strategy and the Company’s competition, certain
of which are beyond the Company’s control. Should one or more of
these risks or uncertainties materialize or should the underlying
assumptions prove incorrect, or any of the other risks set out
under the caption “Risk Factors” in the Company’s 10-K report for
the year ended December 31, 2019 occur, actual outcomes and results
could differ materially from those indicated in the forward-looking
statements.
Any
forward-looking statement speaks only as of the date on which such
statement is made, and the Company undertakes no obligation to
update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements.
FINANCIAL
RESULTS BY COMPANY
The
following tables show, for the periods indicated, the financial
results (dollar amounts in thousands) attributable to each of our
consolidated companies.
|
|
|
Three
months ended March 31, 2020 |
|
|
|
|
OmniMetrix |
|
|
Acorn |
|
|
Total
Continuing Operations |
|
|
Revenue |
|
$ |
1,338 |
|
|
$ |
— |
|
|
$ |
1,338 |
|
|
Cost
of sales |
|
|
416 |
|
|
|
— |
|
|
|
416 |
|
| Gross
profit |
|
|
922 |
|
|
|
— |
|
|
|
922 |
|
| Gross
profit margin |
|
|
69 |
% |
|
|
|
|
|
|
69 |
% |
| R&D
expenses |
|
|
155 |
|
|
|
— |
|
|
|
155 |
|
|
Selling,
general and administrative expenses |
|
|
818 |
|
|
|
223 |
|
|
|
1,041 |
|
|
Adjusted
operating loss |
|
$ |
(51 |
) |
|
$ |
(223 |
) |
|
$ |
(274 |
) |
|
|
|
Three
months ended March 31, 2019 |
|
|
|
|
OmniMetrix |
|
|
Acorn |
|
|
Total
Continuing Operations |
|
|
Revenue |
|
$ |
1,327 |
|
|
$ |
— |
|
|
$ |
1,327 |
|
| Cost
of sales |
|
|
476 |
|
|
|
― |
|
|
|
476 |
|
|
Cost
of sales - other |
|
|
30 |
|
|
|
— |
|
|
|
30 |
|
| Gross
profit |
|
|
821 |
|
|
|
— |
|
|
|
821 |
|
| Gross
profit margin |
|
|
62 |
% |
|
|
|
|
|
|
62 |
% |
| R&D
expenses |
|
|
144 |
|
|
|
— |
|
|
|
144 |
|
|
Selling,
general and administrative expenses |
|
|
735 |
|
|
|
209 |
|
|
|
944 |
|
|
Adjusted
operating loss |
|
$ |
(58 |
) |
|
$ |
(209 |
) |
|
$ |
(267 |
) |
In
the three months ended March 31, 2019, OmniMetrix recorded an
accrual for an estimated payment of approximately $30,000 for a
long-term purchase commitment of what is now discontinued
technology that has been replaced with upgraded technology. This
adjustment is recorded as cost of sales – other and is included in
the OmniMetrix gross profit in the table above. Gross profit
excluding this non-recurring adjustment would be $851,000, or
64%.
BACKLOG
As of
March 31, 2020, our backlog of work to be completed (primarily
deferred revenue) at our OmniMetrix subsidiary totaled
approximately $4.5 million.
RECENT
DEVELOPMENTS
On
April 24, 2020, Acorn Energy, Inc. received Paycheck Protection
Program (“PPP”) loan proceeds in the amount of $41,600.
On
April 30, 2020, OmniMetrix, LLC received PPP loan proceeds in the
amount $419,800.
Under
the PPP of the Coronavirus Aid, Relief and Economic Security Act
(the “Act”), up to the full principal amount of a loan and any
accrued interest can be forgiven if the borrower uses all of the
loan proceeds for forgivable purposes (payroll, benefits,
lease/mortgage payments and/or utilities) required under the Act
and any rule, regulation, or guidance issued by the SBA pursuant to
the Act (collectively, the “Forgiveness Provisions”). The amount of
forgiveness of the PPP loan depends on the borrower’s payroll costs
over an eight-week period beginning on the date of funding. Any
processes or procedures established under the Forgiveness
Provisions must be followed and any requirements of the Forgiveness
Provisions must be fully satisfied in order to obtain such loan
forgiveness. Pursuant to the provisions of the Act, the first six
monthly payments of principal and interest will be deferred.
Interest will accrue during the deferment period. The borrower must
pay principal and interest payments on the fifth day of each month
beginning seven months from the date of the applicable promissory
note.
While we fully anticipate that Acorn and OmniMetrix will each
comply with their applicable Forgiveness Provisions and qualify for
forgiveness of their respective loans, there can be no assurance
that such loan forgiveness will be obtained. If no portion of the
Acorn PPP loan is forgiven under the Forgiveness Provisions, the
monthly payments on that loan will be in the amount of $2,330 each;
if no portion of the OmniMetrix PPP loan is forgiven under the
Forgiveness Provisions, the monthly payments on that loan will be
in the amount of $23,510 each. If any portion of a loan is forgiven
under the Forgiveness Provisions, the payments will be in equal
amounts which are sufficient to repay all principal and interest
over the remaining term of the loan. The lender will apply each
installment payment first to pay interest accrued to the day the
lender receives the payment, then to bring principal current, then
to pay any late fees, and will apply any remaining balance to
reduce principal. All remaining principal and accrued interest is
due and payable two years from the date of the applicable
promissory note. In any event any payment is not made within ten
days of the due date, the borrower will pay the lender a late
charge in the amount not to exceed 5% of the payment. The borrower
may prepay the principal at any time without penalty. Upon default,
the loan shall bear interest at 6% per year until paid in full.
On
April 28, 2020, we entered in to a new agreement for data hosting
and business continuity services replacing an expiring agreement
with the same vendor effective May 1, 2020. The agreement has a
twelve-month term and the total payments under this agreement are
$148,000 in the aggregate. This represents an increase of $21,000
for additional services under this agreement from the prior
twelve-month period.
On
May 5, 2020, 2,142,857 warrants with a fair value of $1,018,000
expired in accordance with their terms.
OVERVIEW
AND TREND INFORMATION
Acorn
Energy, Inc. (“Acorn” or “the Company”) is a holding company
focused on technology driven solutions for energy infrastructure
asset management. We provide the following services and products
through our OmniMetrixTM, LLC (“OmniMetrix”)
subsidiary:
|
|
● |
Power
Generation (“PG”) monitoring. OmniMetrix’s PG activities
provide wireless remote monitoring and control systems and services
for critical assets as well as Internet of Things applications. The
PG activities includes monitoring on industrial air compressors and
dryers. |
|
|
|
|
|
|
● |
Cathodic
Protection (“CP”) monitoring. OmniMetrix’s CP activities
provide for remote monitoring of cathodic protection systems on gas
pipelines for gas utilities and pipeline companies. |
Each
of our PG and CP activities represents a reportable segment. The
following analysis should be read together with the segment
information provided in Note 8 to the interim unaudited condensed
consolidated financial statements included in this quarterly
report.
OmniMetrix
OmniMetrix
LLC is a Georgia limited liability company based in Buford, Georgia
that develops and markets wireless remote monitoring and control
systems and services for multiple markets in the Internet of Things
(“IoT”) ecosystem: critical assets (including stand-by power
generators, pumps, pumpjacks, light towers, turbines, compressors,
as well as other industrial equipment) as well as cathodic
protection for the pipeline industry (gas utilities and pipeline
companies). Acorn owns 99% of OmniMetrix with 1% owned by the
former CEO of OmniMetrix.
Following
the emergence of machine-to-machine (M2M) and Internet of Things
(IoT) applications whereby companies aggregate multiple sensors and
monitors into a simplified dashboard for customers, OmniMetrix
believes it plays a key role in this new economic ecosystem. In
addition, OmniMetrix sees a rapidly growing need for backup power
infrastructure to secure critical military, government, and private
sector assets against emergency events including terrorist attacks,
natural disasters, and cybersecurity threats. As residential and
industrial standby generators, turbines, compressors, pumps,
pumpjacks, light towers and other industrial equipment are part of
the critical infrastructure increasingly becoming monitored in
Internet of Things applications, and given that OmniMetrix monitors
all major brands of critical equipment, OmniMetrix believes it is
well-positioned as a competitive participant in this new
market.
Sales
of OmniMetrix monitoring systems include the sale of equipment and
of monitoring services. Revenue (and related costs) associated with
sale of equipment are recorded to deferred revenue (and deferred
charges) upon shipment for PG and CP monitoring units. Revenue and
related costs with respect to the sale of equipment are recognized
over the estimated life of the units which are currently estimated
to be three years. Revenues from the prepayment of monitoring fees
(generally paid twelve months in advance) are initially recorded as
deferred revenue upon receipt of payment from the customer and then
amortized to revenue over the monitoring service period.
Revenue.
OmniMetrix has two divisions: PG and CP. In the three months ended
March 31, 2020, OmniMetrix recorded revenue of $1,338,000
($1,109,000 in its PG activities and $229,000 in its CP activities)
as compared to revenue of $1,327,000 recorded in the three months
ended March 31, 2019 ($996,000 in its PG activities and $331,000 in
its CP activities). The nominal increase in revenue of $11,000 in
the three months ended March 31, 2020 was due to an increase in
monitoring revenue of $129,000 offset by a decrease in hardware
revenue of $118,000. The increase in monitoring revenue is the
result of an increase in the number of units being monitored. The
decrease in hardware revenue is primarily due to a decrease in the
CP segment of $102,000 as a result of the lack of a fully staffed
CP sales team for the majority of 2019 and the longer sales and
closing cycle of a CP sale compared to a PG sale. A CP sales cycle
can take twelve to eighteen months from customer introduction to
closing. We have had a fully staffed CP sales team since the end of
2019 and our new sales director stared in January 2020; however,
the length of our CP sales cycle has been negatively impacted by
restrictions related to COVID-19.
Gross
Profit. Gross profit during the three months ended March 31,
2020 was $922,000 reflecting a gross margin of 69% on revenue
compared with a gross profit of $821,000 reflecting a 62% gross
margin in the three months ended March 31, 2019. The increased
gross profit in 2020 was due to a change in the revenue mix with a
higher percentage of our total revenue being monitoring revenue
which has a higher gross margin. Gross margin on hardware revenue
for the three months ended March 31, 2020 was 39% which was
essentially flat over the three months ended March 31, 2019 which
was 38%. Gross margin on monitoring revenue remained strong at 84%
during the three months ended March 31, 2020 as compared to 83% for
the three months ended March 31, 2019.
Research
and development expenses. During the three months ended March
31, 2020, OmniMetrix recorded $155,000 of R&D expense as
compared to $144,000 in the three months ended March 31, 2019. The
increase in R&D expense in 2020 is related to the continued
development of next generation PG and CP products and exploration
into new possible product lines. We expect a moderate increase in
R&D expense throughout 2020 as we continue to work on certain
initiatives to redesign products and expand product lines to
increase the level of innovation and to reduce their costs in order
to increase our future margins.
Selling,
general and administrative expenses “SG&A”. During the
three months ended March 31, 2020, OmniMetrix recorded $818,000 of
SG&A costs compared to SG&A costs of $735,000 in the three
months ended March 31, 2019, an increase of $83,000 or 11%. This
increase was primarily due to increases in personnel costs,
computer software, travel and payment processing service charges.
We anticipate that our annual SG&A costs throughout 2020 will
increase approximately 15% due to having a fully staffed sales team
and as a result of our continuing investments in our IT
infrastructure.
OmniMetrix
Line of Credit
In
March 2019, OmniMetrix reinstated its Loan and Security Agreement
providing OmniMetrix with access to accounts receivable
formula-based financing of the lesser of 75% of eligible
receivables or $1 million. Debt incurred under this financing
arrangement bears interest at the greater of 6% and prime (3.25% at
May 15, 2020) plus 1.5% per year. In addition, OmniMetrix is to pay
a monthly service charge of 0.75% of the average aggregate
principal amount outstanding for the prior month, for a current
effective rate of interest on advances of 15%. OmniMetrix also
agreed to continue to maintain a minimum loan balance of $150,000
in its line-of-credit with the lender for a minimum of two years
beginning March 1, 2019. From time to time, the balance outstanding
may fall below $150,000 based on collections applied against the
loan balance and the timing of loan draws.
During
the three months ended March 31, 2020, the intercompany amount due
to Acorn from OmniMetrix increased by approximately $54,000
representing accrued interest and dividends. This included accrued
interest and dividends of $83,000 offset by repayments of $29,000.
We believe that OmniMetrix will not need working capital support in
2020 beyond the amounts available to it under the amended Loan and
Security Agreement. However, we have no assurance that this will be
the case. Additional financing for OmniMetrix may be in the form of
a bank line, a new loan or investment by others, a loan by Acorn,
or a combination of the above. The availability and amount of any
additional loans from us to OmniMetrix may be limited by the
working capital needs of our corporate activities. Whether Acorn
will have the resources necessary to provide funding, or whether
alternative funds, such as third-party loans, will be available at
the time and on terms acceptable to Acorn and OmniMetrix cannot be
determined.
Corporate
Corporate
general and administrative (“G&A”) expenses were $223,000 and
$209,000 during the three months ended March 31, 2020 and 2019,
respectively, reflecting an increase of $14,000, or 7%. This
increase was primarily due to an increase in officer and board fees
and travel expenses offset by savings in insurance expenses, We do
not expect our annual corporate G&A expense to materially
change in 2020 other than expenses that may be required to
corporately support the growth in OmniMetrix. Non-cash stock
compensation was flat at $6,000 for both periods.
On
December 24, 2019, we signed on an income tax assessment agreement
for tax years 2013-2018, with the Israeli Tax Authority, according
to which, we had additional tax liability in the amount of NIS
1,306 (approximately $373,000), in tax year 2018, with respect to
our sale of DSIT Solutions Ltd. shares.
As a
result, we received a tax refund in the amount of NIS 146,000
(approximately $42,000) and NIS 44,000 (approximately $12,500) as
principal, with interest and linkage in the amount of approximately
NIS 14,500 (approximately $4,000) and approximately NIS 1,900
(approximately $550), for the tax years 2017 and 2018,
respectively. Prior to receiving this refund, the balance in our
account in Israel was $313,000 which represented the $287,000
refund received for 2016 plus interest income of $21,000 and
exchange gain of $5,000(the fees of $65,000 were paid out of our US
bank account). Subsequent to year-end December 31, 2019, the
aggregate tax refunds held in the bank account in Israel of
approximately $371,000 were transferred from our bank account in
Israel to our bank account in the US with exemption from
withholding tax and our corporate income tax file was closed as of
January 1, 2020.
As of
May 10, 2020, Acorn’s corporate operations (excluding cash at our
OmniMetrix subsidiary) held a total of approximately
$1,881,000 in cash and cash equivalents.
Results
of Operations
The
following table sets forth certain information with respect to the
condensed consolidated results of operations of the Company for the
three-month periods ended March 31, 2020 and March 31, 2019,
including the percentage of total revenues during each period
attributable to selected components of the operations statement
data and for the period-to-period percentage changes in such
components. For segment data, see Notes 8 and 9 to the Unaudited
Condensed Consolidated Financial Statements included in this
quarterly report.
|
|
|
Three
months ended March 31, |
|
|
|
|
2020 |
|
|
2019 |
|
|
Change |
|
|
|
|
($,000) |
|
|
%
of
revenues |
|
|
($,000) |
|
|
%
of
revenues |
|
|
from
2019 to 2020
favorable/(unfavorable)
|
|
|
Revenue |
|
$ |
1,338 |
|
|
|
100 |
% |
|
$ |
1,327 |
|
|
|
100 |
% |
|
|
1 |
% |
| Cost
of sales – products and services |
|
|
416 |
|
|
|
31 |
% |
|
|
506 |
|
|
|
38 |
% |
|
|
18 |
% |
|
Gross
profit |
|
|
922 |
|
|
|
69 |
% |
|
|
821 |
|
|
|
62 |
% |
|
|
12 |
% |
| R&D
expenses |
|
|
155 |
|
|
|
12 |
% |
|
|
144 |
|
|
|
11 |
% |
|
|
(8 |
)% |
|
SG&A
expenses |
|
|
1,041 |
|
|
|
78 |
% |
|
|
944 |
|
|
|
71 |
% |
|
|
(10 |
)% |
|
Operating
loss |
|
|
(274 |
) |
|
|
(20 |
)% |
|
|
(267 |
) |
|
|
(20 |
)% |
|
|
(3 |
)% |
|
Finance
income (expense), net
|
|
|
(10 |
) |
|
|
(1
|
)% |
|
|
6 |
|
|
|
* |
% |
|
|
(267 |
)% |
|
Loss
before income taxes |
|
|
(284 |
) |
|
|
(21 |
)% |
|
|
(261 |
) |
|
|
(20 |
)% |
|
|
(9 |
)% |
|
Income
tax expense |
|
|
― |
|
|
|
― |
% |
|
|
— |
|
|
|
— |
% |
|
|
— |
% |
|
Net
loss |
|
|
(284 |
) |
|
|
(21 |
)% |
|
|
(261 |
) |
|
|
(20 |
)% |
|
|
(9 |
)% |
|
Non-controlling
interests share of net loss |
|
|
|
1 |
|
|
* |
% |
|
|
24 |
|
|
|
2 |
% |
|
|
(96 |
)% |
|
Net
loss attributable to Acorn Energy, Inc. |
|
$ |
(283 |
) |
|
|
(21 |
)% |
|
$ |
(237 |
) |
|
|
(18 |
)% |
|
|
(19 |
)% |
See
discussion of Revenue, Gross Profit and Research and development
expenses above under the section titled “Omnimetrix”
Selling,
general and administrative expenses. SG&A expenses in the
first three months of 2020 reflected an increase of $97,000 (10%)
as compared to the first three months of 2019. OmniMetrix’s
SG&A expense increased from $735,000 in the first three months
of 2019 to $818,000 in the first three months of 2020. Corporate
SG&A expense increased from $209,000 in the first three months
of 2019 to $223,000 in the first three months of 2020. See
discussion of these fluctuations above under the sections titled
“Omnimetrix” and “Corporate”.
Net
loss attributable to Acorn Energy. We recognized a net loss
attributable to Acorn shareholders of $283,000 in the first three
months of 2020 compared to $237,000 in the first three months of
2019. Our loss during the three months ended March 31, 2020 is
comprised of a net loss at OmniMetrix of $57,000 plus corporate
expenses of $227,000 offset by $1,000 representing the
non-controlling interest share of our loss in OmniMetrix. Our
loss in the three months ended March 31, 2019 is comprised of net
loss at OmniMetrix of $61,000 plus corporate expense of $200,000.
These losses were partially offset by $24,000 representing the
non-controlling interest share of our loss in
OmniMetrix.
Liquidity
and Capital Resources
At
March 31, 2020, we had a negative working capital of $529,000. Our
working capital includes approximately $1,416,000 of cash and
deferred revenue of approximately $3.1 million. Such deferred
revenue does not require significant cash outlay for the revenue to
be recognized.
During
the first three months of 2020, our OmniMetrix subsidiary provided
$407,000 from its operations while our corporate headquarters used
$170,000 during the same period.
We
invested $87,000 in software and $3,000 in patent related
expenses.
Net
cash of $22,000 was provided by financing activities during the
first three months of 2020 which was $19,000 in proceeds from the
exercise of stock options and net proceeds from borrowings on our
line of credit of $3,000.
In
March 2019, OmniMetrix reinstated its Loan and Security Agreement
providing OmniMetrix with access to accounts receivable
formula-based financing of the lesser of 75% of eligible
receivables or $1 million. Debt incurred under this financing
arrangement bears interest at the greater of 6% and prime (3.25% at
May 10, 2020) plus 1.5% per year. In addition, OmniMetrix is to pay
a monthly service charge of 0.75% of the average aggregate
principal amount outstanding for the prior month, for a current
effective rate of interest on advances of 15%. OmniMetrix also
agreed to continue to maintain a minimum loan balance of $150,000
in its line-of-credit with the lender for a minimum of two years
beginning March 1, 2019. The monthly service charge and interest is
calculated on the greater of the outstanding balance or $150,000.
From time to time, the balance outstanding may fall below $150,000
based on collections applied against the loan balance and the
timing of loan draws.
OmniMetrix
had an outstanding balance of $139,000 at March 31, 2020, pursuant
to the Loan and Security Agreement.
Rights
Offering
On
June 28, 2019, we completed a rights offering, raising $2,186,000
in proceeds, net of $210,000 in expenses. Pursuant to the rights
offering, our securityholders and parties to a backstop agreement
purchased 9,975,553 shares of our common stock for $0.24 per
share.
Under
the terms of the rights offering, each right entitled
securityholders as of June 3, 2019, the record date for the rights
offering, to purchase 0.312 shares of our common stock at a
subscription price of $0.24 per whole share. No fractional shares
were issued. The closing price of our common stock on the record
date of the rights offering was $0.2925. Distribution of the rights
commenced on June 6, 2019 and were exercisable through June 24,
2019.
In
connection with the rights offering, we entered into a backstop
agreement with certain of our directors and Leap Tide Capital
Management LLC, the sole manager of which is our President and CEO,
pursuant to which they agreed to purchase from us any and all
unsubscribed shares of common stock in the rights offering, subject
to the terms, conditions and limitations of the backstop agreement.
The backstop purchasers did not receive any compensation or other
consideration for entering into or consummating the backstop
agreement.
On
July 1, 2019, we utilized a portion of the rights offering proceeds
to complete the planned reacquisition of a 19% interest in our OMX
Holdings, Inc. subsidiary (“Holdings”) for $1,273,000 discussed
below.
The
balance of the rights offering net proceeds provided OmniMetrix
with additional sales and marketing resources to facilitate
expansion into additional geographic markets and new product
applications, to support next-generation product development and
for general working capital purposes.
Purchase
of Non-Controlling Interest
In
2015, one of our then-current directors (the “Investor”) acquired a
20% interest in our OMX Holdings, Inc. subsidiary (“Holdings”)
through the purchase of $1,000,000 of OmniMetrix Preferred Stock
(“Preferred Stock”). Holdings is the holder of 100% of the
membership interests of OmniMetrix, LLC through which we operate
our Power Generation and Cathodic Protection monitoring activities.
The $1,000,000 investment by the Investor was recorded as an
increase in non-controlling interests.
On
July 1, 2019, in accordance with terms established in 2015 at the
time of the original investment, the Company utilized a portion of
the rights offering proceeds, as discussed above, to repurchase
from the Investor the shares of Preferred Stock then held by the
Investor for a purchase price of $1,273,000 (which included
$323,000 of unpaid accrued dividends through June 30, 2019). The
repurchase raised the Company’s ownership in Holdings from 80% to
99%, with the remaining 1% owned by the former CEO of OmniMetrix,
LLC.
Other
Liquidity Matters
OmniMetrix
owes Acorn approximately $4,559,000 for loans, accrued interest and
expenses advanced to it by Acorn. Such amounts will only be repaid
to Acorn when OmniMetrix is generating sufficient cash to allow
such repayment.
We
had approximately $1,416,000 of cash on March 31, 2020, and
approximately $1,881,000 on May 10, 2020 which includes
approximately $461,000 in PPP loan proceeds. On May 10,
2020, we had $184,000 outstanding on our line of credit and
$157,000 available to borrow. We believe that our current cash plus
the cash expected to be generated from operations and borrowing
from available lines of credit will provide sufficient liquidity to
finance the operating activities of Acorn and the operations of its
operating subsidiaries for at least the next twelve months.
Contractual
Obligations and Commitments
The
table below provides information concerning obligations under
certain categories of our contractual obligations as of March 31,
2020.
CASH
PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
| |
|
Twelve
Month Periods Ending March 31,
(in thousands) |
|
|
|
|
Total |
|
|
2020 |
|
|
2021-2022 |
|
|
2023-2024 |
|
|
2025
and thereafter |
|
|
Debt |
|
$ |
136 |
|
|
$ |
136 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Software
agreements |
|
|
167 |
|
|
|
83 |
|
|
|
84 |
|
|
|
― |
|
|
|
― |
|
| Operating
leases |
|
|
652 |
|
|
|
80 |
|
|
|
247 |
|
|
|
259 |
|
|
|
66 |
|
|
Contractual
services |
|
|
173 |
|
|
|
149 |
|
|
|
24 |
|
|
|
— |
|
|
|
— |
|
|
Total
contractual cash obligations |
|
$ |
1,128 |
|
|
$ |
448 |
|
|
$ |
355 |
|
|
$ |
259 |
|
|
$ |
66 |
|
|
ITEM
3. |
QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
COVID-19 Risk
The COVID-19 pandemic could negatively affect various aspects of
our business, including our workforce and supply chain, and make it
more difficult and expensive to meet our obligations to our
customers, and could result in reduced demand from our
customers.
The outbreak of the COVID-19 Coronavirus pandemic has caused
governments around the world to implement quarantines of certain
geographic areas and implement significant restrictions on travel.
Several governments have also implemented work restrictions that
prohibit many employees from going to work, both around the world
as well as in certain jurisdictions in the United States. The
number of these quarantines, travel bans, and other restrictions
have been increasing at a rapid pace. At this time, it is unclear
if foreign governments or U.S. federal, state or local governments
will further extend any of the current restrictions or if further
restrictions will be put into place. In addition, many countries,
including the United States, have placed significant bans on
international travel. It is possible that restrictions or bans on
domestic travel may be implemented by U.S. federal, state or local
governments. As a result of the pandemic, businesses can be shut
down, supply chains can be interrupted, slowed, or rendered
inoperable, and individuals can become ill, quarantined, or
otherwise unable to work and/or travel due to health reasons or
governmental restrictions. However, OmniMetrix is considered an
essential business due to the fact that it provides infrastructure
support to both government and commercial sectors and across key
industries. So it has not been forced to shut down to date.
Governmental mandates may require forced shutdowns of our
facilities for extended or indefinite periods. In addition, the
pandemic could adversely affect our workforce resulting in serious
health issues and absenteeism. The pandemic could also
substantially interfere with general commercial activity related to
our supply chain and customer base, which could have a material
adverse effect on our financial condition, results of operations,
business, or prospects. Some of the electronic devices and
hardware we purchase, like antennas, radios, and GPS modules are
very specific to our application; there are not likely to be
practical alternatives. In some cases, our circuit boards were
designed around specific electronic hardware that met our
specifications. We are working closely with our contract
manufacturers and suppliers in order to mitigate as much as
possible the risks to our supply chain for these critical devices
and hardware, including identifying any lead-time issues and any
potential alternate sources. We are also examining all currently
open purchase orders in an effort to identify whether we need to
issue additional orders to secure product that is critical,
already has questionable lead times and/or is unique to our
requirements.
Concentrations
of Credit Risk
Financial
instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash and
trade accounts receivable. The Company’s cash were deposited
primarily with U.S. banks and brokerage firms and amounted to
approximately $1,416,000 at March 31, 2020. The Company does not
believe there is significant risk of non-performance by these
counterparties. Approximately 15% of the accounts receivable at
March 31, 2020 was due from one customer who pays its receivables
over usual credit periods (the Company collected $50,000 of the
$77,000 due from this customer as of May 10, 2020). Credit risk
with respect to the balance of trade receivables is generally
diversified due to the number of entities comprising the Company’s
customer base.
Fair
Value of Financial Instruments
Fair
values of financial instruments included in current assets and
current liabilities are estimated to approximate their book values
due to the short maturity of such investments.
Interest
Rate Risk
In
March 2019, OmniMetrix reinstated its Loan and Security Agreement
providing OmniMetrix with access to accounts receivable
formula-based financing of the lesser of 75% of eligible
receivables or $1 million. Debt incurred under this financing
arrangement bears interest at the greater of 6% and prime (3.25% at
May 10, 2020) plus 1.5% per year. In addition, OmniMetrix is to pay
a monthly service charge of 0.75% of the average aggregate
principal amount outstanding for the prior month, for a current
effective rate of interest on advances of 15%. OmniMetrix also
agreed to continue to maintain a minimum loan balance of $150,000
in its line-of-credit with the lender for a minimum of two years
beginning March 1, 2019.
|
ITEM
4. |
CONTROLS
AND PROCEDURES |
Evaluation
of Disclosure Controls and Procedures
As of
the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our
management, including the Chief Executive Officer and the Chief
Financial Officer, of the design and operation of our disclosure
controls and procedures (as such term is defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)). Based on this evaluation, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were not effective due to material
weaknesses noted in our Annual Report on Form 10-K for the year
ended December 31, 2019, to ensure that the information required to
be disclosed by us in the reports we file or submit under the
Exchange Act is (i) accumulated and communicated to our management
(including our Chief Executive Officer and Chief Financial Officer)
in a timely manner, and (ii) recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and
forms.
As
noted in our Annual Report on Form 10-K for the year ended December
31, 2019, we employ a decentralized internal control methodology,
coupled with management’s oversight, our OmniMetrix subsidiary is
responsible for mitigating its risks to financial reporting by
implementing and maintaining effective control policies and
procedures and subsequently translating that respective risk
mitigation up and through to the parent level and to our external
financial statements. In addition, as our operating subsidiary is
not large enough to effectively mitigate certain risks by
segregating incompatible duties, management must employ
compensating mechanisms throughout our company in a manner that is
feasible within the constraints it operates.
The
material weaknesses management identified were caused by an
insufficient complement of resources at our OmniMetrix subsidiary
and limited IT system capabilities, such that individual control
policies and procedures at the subsidiary could not be implemented,
maintained, or remediated when and where necessary. As a result, a
majority of the significant process areas management identified for
our OmniMetrix subsidiary had one or more material weaknesses
present.
Changes
in Internal Control Over Financial Reporting
There
was no change in our internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act)
during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
PART II
|
10.1 |
Consulting Agreement, dated as of
January 30, 2020, by and between Acorn Energy, Inc. and Jan H. Loeb
(incorporated herein by reference to Exhibit 10.7 to the
Registrant’s Annual Report on Form 10-K for the year ended December
31, 2019). |
| |
|
|
#31.1 |
Certification
of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| |
|
| #31.2 |
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
| |
|
| #32.1 |
Certification
of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
| |
|
| #32.2 |
Certification
of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
| |
|
|
#101.1 |
The
following financial statements from Acorn Energy’s Form 10-Q for
the quarter ended March 31, 2020, filed on May 13, 2020, formatted
in XBRL (eXtensible Business Reporting Language): (i) Condensed
Consolidated Balance Sheets, (ii) Condensed Consolidated Statements
of Operations, (iii) Condensed Consolidated Statements of Changes
in Equity, (iv) Condensed Consolidated Statements of Cash Flows and
(v) Notes to Condensed Consolidated Financial Statements, tagged as
blocks of text. |
| |
|
| # |
This
exhibit is filed or furnished herewith. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf
by its principal financial officer thereunto duly
authorized.
| |
ACORN
ENERGY, INC. |
|
|
|
|
| Dated:
May 13, 2020 |
|
|
| |
|
|
| |
By: |
/s/
TRACY S. CLIFFORD |
| |
|
Tracy
S. Clifford |
| |
|
Chief
Financial Officer |
