UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
[X]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[ ]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to §240.14a-12
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ACORN
ENERGY, INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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ACORN
ENERGY, INC.
1000
N West Street, Suite 1200
Wilmington,
Delaware 19801
NOTICE
OF 2020 ANNUAL MEETING OF STOCKHOLDERS
To
the Stockholders:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders of Acorn Energy, Inc. (“Acorn Energy” or the “Company”)
will be held at [____], on September 14, 2020 at [____________] and virtually via Zoom at [_____________], for the following purposes,
all as more fully described in the attached Proxy Statement:
(1)
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election
of four directors to hold office until the 2021 Annual Meeting and until their respective successors are elected and qualified;
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(2)
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approval
of an amendment to the Company’s restated certificate of incorporation to authorize a reverse split of the Company’s
common stock at any time prior to September 14, 2021, at a ratio between one-for-ten and one-for-twenty, if and as determined
by the Company’s Board of Directors, which is referred to as the Reverse Split proposal (the full text of the proposed
amendment is attached as Annex A to the proxy statement accompanying this notice);
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(3)
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approval
of any motion to adjourn the Annual Meeting from time to time, if necessary or appropriate, to solicit additional proxies
in the event there are not sufficient votes at the time of the Annual Meeting to approve the Reverse Split proposal;
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(4)
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ratification
of the selection by the Audit Committee of the Company’s Board of Directors of Friedman LLP as the independent registered
public accounting firm for the Company for the year ending December 31, 2020;
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(5)
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consideration
of an advisory vote on the compensation of the Company’s named executive officers; and
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(6)
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such
other business as may properly come before the Annual Meeting or any adjournment thereof.
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Stockholders
may register to attend the Annual Meeting via Zoom by visiting [_________________] and following the instructions therein. The
Company encourages stockholders that wish to attend the Annual Meeting via Zoom to register promptly and in any event prior to
the date of the Annual Meeting. Stockholders that register for and attend the Annual Meeting via Zoom will have the opportunity
to vote their shares and ask questions during the Annual Meeting by following the instructions that will be provided upon registration
and during the Annual Meeting.
You
are requested to vote by Internet or by mail whether or not you expect to attend the meeting. This year we are furnishing our
proxy materials to our stockholders who hold their shares through brokers over the Internet, as permitted by rules adopted by
the Securities and Exchange Commission. These stockholders should have received a notice containing instructions on how to access
these materials and how to vote their shares online. The notice provides instructions on how you can request a paper copy of these
materials by mail, by telephone or by e-mail. If you previously requested that you receive annual meeting materials via e-mail,
the e-mail contains voting instructions and links to the materials on the Internet. All stockholders may read, print and download
our 2019 Annual Report and our Proxy Statement at [_________________].
The
proxy is revocable by you at any time prior to its exercise and will not affect your right to vote at the meeting (in person or
via Zoom) the event you attend the meeting or any adjournment thereof. The prompt return of the proxy will be of assistance in
preparing for the meeting and your cooperation in this respect will be appreciated.
A
copy of the Company’s Annual Report for the year ended December 31, 2019 is enclosed.
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By
Order of the Board of Directors,
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Wilmington,
Delaware
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SHELDON
KRAUSE
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August
[__], 2020
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Assistant
Secretary
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ACORN
ENERGY, INC.
1000
N West Street, Suite 1200
Wilmington,
Delaware 19801
PROXY
STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 14, 2020
This
proxy statement and the accompanying proxy are being furnished in connection with the solicitation of proxies by the Board of
Directors (the “Board”) of the Company for use in voting at the 2020 Annual Meeting of Stockholders (the “Annual
Meeting”) to be held at [_______] on September 14, 2020, at [__________] and virtually via Zoom at [_____________], and
any adjournments thereof. Distribution to stockholders of this proxy statement and a proxy form is scheduled to begin on or about
August [__], 2020 to each stockholder of record at the close of business on July 31, 2020 (the “Record Date”).
Your
vote is important. Whether or not you plan to attend the Annual Meeting, please take the time to vote your shares as early as
possible. You can ensure that your shares are voted at the meeting by completing, signing, dating and returning the enclosed proxy
card in the envelope provided if you are a stockholder of record or, if you hold your shares through a broker, bank or other nominee,
by submitting your voting instructions by mail, phone or Internet as provided in the instruction in the Notice of Internet Availability
of Proxy Materials. Submitting your proxy will not affect your right to attend the meeting (in person or via Zoom) and vote. A
stockholder of record who gives a proxy may revoke it at any time before it is exercised by voting (in person or via Zoom) at
the Annual Meeting, by delivering a subsequent proxy or by notifying our corporate Secretary in writing of such revocation.
INFORMATION
ABOUT THE 2020 ANNUAL MEETING AND PROXY VOTING
How
can I attend the Annual Meeting virtually via Zoom?
Stockholders
may register to attend the Acorn Energy Annual Meeting virtually via Zoom by visiting [_________________] and following the instructions
therein. The Company encourages stockholders that wish to attend the Annual Meeting via Zoom to register promptly and in any event
prior to the date of the Annual Meeting. Stockholders that register for and attend the Annual Meeting via Zoom will have the opportunity
to vote their shares and ask questions during the Annual Meeting by following the instructions that will be provided upon registration
and during the Annual Meeting.
What
matters are to be voted on at the Annual Meeting?
Acorn
Energy intends to present the following proposals for stockholder consideration and voting at the Annual Meeting:
(1)
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election
of four directors to hold office until the 2021 Annual Meeting and until their respective successors are elected and qualified;
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(2)
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approval
of an amendment to the Company’s restated certificate of incorporation to authorize a reverse split of the Company’s
common stock at any time prior to September 14, 2021, at a ratio between one-for-ten and one-for-twenty, if and as determined
by the Company’s Board of Directors, which is referred to as the Reverse Split proposal (the full text of the proposed
amendment is attached as Annex A to the proxy statement accompanying this notice);
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(3)
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approval
of any motion to adjourn the Annual Meeting from time to time, if necessary or appropriate, to solicit additional proxies
in the event there are not sufficient votes at the time of the Annual Meeting to approve the Reverse Split proposal;
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(4)
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ratification
of the selection by the Audit Committee of the Company’s Board of Directors of Friedman LLP as the independent registered
public accounting firm for the Company for the year ending December 31, 2020;
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(5)
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consideration
of an advisory vote on the compensation of the Company’s named executive officers; and
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(6)
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such
other business as may properly come before the Annual Meeting or any adjournment thereof.
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What
is the Board’s recommendation?
The
Board of Directors recommends that you vote your shares FOR each of the director nominees in Proposal 1, and FOR each of Proposals
2, 3, 4 and 5.
Will
any other matters be presented for a vote at the Annual Meeting?
We
do not expect that any other matters might be presented for a vote at the Annual Meeting. However, if another matter were to be
properly presented, the proxies would use their own judgment in deciding whether to vote for or against the proposal.
Who
is entitled to vote?
All
Acorn Energy stockholders of record at the close of business on the Record Date are entitled to vote at the Annual Meeting. Each
share outstanding on the Record Date will be entitled to one vote. There were [_________________] shares outstanding on the Record
Date.
How
do I vote my shares?
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If
you are a stockholder of record, you may grant a proxy with respect to your shares by mail using the proxy card included with
the proxy materials. Stockholders who own their shares through brokers, banks or other nominees may grant their
proxy by mail, by telephone or over the Internet in accordance with the instruction in the Notice of Internet Availability
of Proxy Materials. Internet and telephone voting by beneficial owners will generally be available through 11:59
p.m. Eastern Daylight Time on September 13, 2020.
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If
you are a stockholder of record or a duly appointed proxy of a stockholder of record, you may attend the Annual Meeting and
vote in person or via Zoom. However, if your shares are held in the name of a broker, bank or other nominee, and
you wish to attend the Annual Meeting to vote in person or via Zoom or to designate a proxy to vote on your behalf, you will
have to contact your broker, bank or other nominee to obtain its proxy to vote the shares that you beneficially own. Have
that document with you when you attend the meeting.
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All
proxies submitted will be voted in the manner you indicate by the individuals named on the proxy. If you do not
specify how your shares are to be voted, the proxies will vote your shares FOR all director nominees in Proposal 1, and FOR
Proposals 2, 3, 4 and 5.
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As
permitted by the Securities and Exchange Commission, or SEC, Acorn Energy is sending a Notice of Internet Availability of Proxy
Materials to stockholders who hold shares in “street name” through a bank, broker or other holder of record. All such
stockholders will have the ability to access this Proxy Statement and the Company’s Annual Report at [____________________].
The notice also includes information as to how these stockholders may vote their shares.
May
I change or revoke my proxy after it is submitted?
Yes,
you may change or revoke your proxy at any time before its exercise at the Annual Meeting by:
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returning
a later-dated proxy card;
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attending
the Annual Meeting and voting (either in person or via Zoom) or having a proxy designated by you attend the meeting and vote
on your behalf; or
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sending
your written notice of revocation to Sheldon Krause, our Assistant Secretary.
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Your
changed proxy or revocation must be received before the polls close for voting.
What
is a “quorum?”
In
order for business to be conducted at the Annual Meeting, a quorum must be present. A quorum will be present if stockholders of
record holding a majority in voting power of the outstanding shares of our common stock entitled to vote at the Annual Meeting
are present (in person or via Zoom) or are represented by proxies. For purposes of determining the presence or absence of a quorum,
we intend to count as present shares present (in person or via Zoom) but not voting and shares for which we have received proxies
but for which holders thereof have abstained. Furthermore, shares represented by proxies returned by a broker holding the shares
in nominee or “street” name will be counted as present for purposes of determining whether a quorum is present, even
if the broker is not entitled to vote the shares on matters where discretionary voting by the broker is not allowed (“broker
non-votes”).
What
vote is necessary to pass the items of business at the Annual Meeting?
Holders
of our common stock will vote as a single class and will be entitled to one vote per share with respect to each matter to be presented
at the Annual Meeting. With respect to Proposal 1, the four nominees for director receiving a plurality of the votes cast by holders
of common stock, at the Annual Meeting in person or by proxy, will be elected to our Board. Approval of Proposal 2 requires the
affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting in person
or by proxy. Because approval is based on the affirmative vote of a majority of the outstanding shares, abstentions from voting,
as well as broker non-votes, if any, will have the effect of votes being cast against Proposal 2. Approval of Proposals 3, 4 and
5 requires the votes cast in favor of each such proposal to exceed the votes cast against such proposal. Abstentions from voting,
as well as broker non-votes, if any, are not treated as votes cast and, therefore, will have no effect on Proposals 3, 4, and
5.
Who
pays the costs of this proxy solicitation?
This
solicitation of proxies is made by our Board of Directors, and all related costs will be borne by us. In addition, we may reimburse
brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials
to such beneficial owners.
What
is the deadline for submission of stockholder proposals for the 2021 Annual Meeting?
Proposals
that our stockholders may wish to include in our proxy statement and form of proxy for presentation at our 2021 Annual Meeting
of Stockholders must be received by or delivered to us at Acorn Energy, Inc., 1000 N West Street, Suite 1200, Wilmington, Delaware
19801, Attention: Secretary, no later than the close of business on April 18, 2021.
Any
stockholder proposal must be in accordance with the rules and regulations of the SEC. In addition, with respect to proposals submitted
by a stockholder other than for inclusion in our 2021 proxy statement, our By-Laws have established advance notice procedures
that stockholders must follow. Pursuant to the By-laws of the Company, stockholders who wish to nominate any person for election
to the Board of Directors or bring any other business before the 2021 Annual Meeting must generally give notice thereof to the
Company at its principal executive offices not less than 60 days nor more than 90 days before the date of the meeting. All nominations
for director or other business sought to be transacted that are not timely delivered to the Company, or that fail to comply with
the requirements set forth in the Company’s By-Laws, will be excluded from the Annual Meeting, as provided in the By-Laws.
A copy of the By-Laws of the Company is available upon request from the Assistant Secretary of the Company, 1000 N West Street,
Suite 1200, Wilmington, Delaware 19801.
Where
can I find the voting results of the Annual Meeting?
The
preliminary voting results will be announced at the Annual Meeting. The final results will be published in our current report
on Form 8-K to be filed with the Securities and Exchange Commission within four business days after the date of the Annual Meeting,
provided that the final results are available at such time. In the event the final results are not available within such time
period, the preliminary voting results will be published in our current report on Form 8-K to be filed within such time period,
and the final results will be published in an amended current report on Form 8-K/A to be filed within four business days after
the final results are available. Any stockholder may also obtain the results from the Assistant Secretary of the Company, 1000
N West Street, Suite 1200, Wilmington, Delaware 19801.
INFORMATION
ABOUT COMMUNICATING WITH OUR BOARD OF DIRECTORS
How
may I communicate directly with the Board of Directors?
The
Board provides a process for stockholders to send communications to the Board. You may communicate with the Board, individually
or as a group, as follows:
BY
MAIL
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BY
PHONE
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The
Board of Directors
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1-302-656-1708
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Acorn
Energy, Inc.
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Attn:
Assistant Secretary
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BY
EMAIL
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1000
N West Street, Suite 1200
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c/o
Samuel M. Zentman
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Wilmington,
Delaware 19801
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samzentman@yahoo.com
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You
should identify your communication as being from an Acorn Energy stockholder. The Assistant Secretary may require reasonable evidence
that your communication or other submission is made by an Acorn Energy stockholder before transmitting your communication to the
Board.
OWNERSHIP
OF THE COMPANY’S COMMON STOCK
The
following table and the notes thereto set forth information, as of the Record Date, July 31, 2020 (except as otherwise set forth
herein), concerning beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock
by (i) each director of the Company, (ii) each executive officer (iii) all executive officers and directors as a group, and (iv)
each holder of 5% or more of the Company’s outstanding shares of common stock.
Name and Address of Beneficial Owner (1) (2)
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Number of Shares of Common Stock Beneficially Owned (2)
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Percentage of Common Stock Outstanding (2)
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Jan H. Loeb
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7,752,263
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(3)
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[___]
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%
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Gary Mohr
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1,117,647
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(4)
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[___]
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%
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Michael F. Osterer
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2,848,808
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(5)
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[___]
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%
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Samuel M. Zentman
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228,539
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(6)
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*
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Tracy S. Clifford
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60,000
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(7)
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*
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All executive officers and directors of the Company as a group (5 people)
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11,173,925
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(8)
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[___]
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%
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*
Less than 1%
(1)
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Unless
otherwise indicated, the address for each of the beneficial owners listed in the table is in care of the Company, 1000 N West
Street, Suite 1200, Wilmington, Delaware 19801.
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(2)
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Unless
otherwise indicated, each person has sole investment and voting power with respect to the shares indicated. For purposes of
this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given
date which such person has the right to acquire within 60 days after such date. Percentage information is based on the [____________]
shares outstanding as of July 31, 2020.
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(3)
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Consists
of 1,857,330 shares held by Mr. Loeb directly, 1,366,666 shares held by PENSCO Trust Company Custodian FBO JAN LOEB IRA, 4,372,017
shares held by Leap Tide Capital Acorn LLC, 121,250 shares underlying currently exercisable options held by Mr. Loeb, and
35,000 currently exercisable warrants held by Leap Tide Capital Management LLC. Mr. Loeb is the sole manager of each of Leap
Tide Capital Acorn LLC and Leap Tide Capital Management LLC, with sole voting and dispositive power over the securities held
by such entities. Mr. Loeb disclaims beneficial ownership of the securities held by Leap Tide Capital Acorn LLC and Leap Tide
Capital Management LLC except to the extent of his pecuniary interest therein.
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(4)
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Consists
of 258,481 shares held by Mr. Mohr, 833,332 shares held by UE Systems Inc., and 25,834 shares underlying currently exercisable
options.
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(5)
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Consists
of 1,984,392 shares held by Mr. Osterer, 833,332 shares held by UE Systems Inc., and 31,084 shares underlying currently exercisable
options.
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(6)
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Consists
of 80,615 shares and 147,924 shares underlying currently exercisable options.
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(7)
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Consists
solely of currently exercisable options.
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(8)
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Consists
of 10,752,833 shares, 386,092 shares underlying currently exercisable options and 35,000 shares underlying currently exercisable
warrants.
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PROPOSAL
1
ELECTION
OF DIRECTORS
Our
Board of Directors currently consists of four seats. The Board of Directors has nominated Jan H. Loeb, Gary Mohr, Michael F. Osterer
and Samuel M. Zentman, all current directors, for election as directors at the 2020 Annual Meeting to serve until the 2021 Annual
Meeting and until their successors have been duly elected and qualified. The nominees were recommended by our Nominating Committee
and approved by our Board of Directors. All nominees have consented to be named as such and to serve if elected.
With
respect to the election of directors, stockholders may vote in favor of all nominees, withhold their votes as to all nominees
or withhold their votes as to specific nominees. Stockholders cannot vote for more than the four nominees. Stockholders should
specify their choices on the accompanying proxy card. If no specific instructions are given, the shares represented by a signed
proxy will be voted FOR the election of all four of the Board’s nominees. If any nominee becomes unavailable for any reason
to serve as a director at the time of the Annual Meeting (which event is not anticipated), proxies will be voted in the discretion
of the persons acting pursuant to the proxy for any nominee who shall be designated by the current Board of Directors as a substitute
nominee.
Persons
nominated in accordance with the notice requirements of our By-laws are eligible for election as directors of the Company. All
nominations for director that are not timely delivered to us or that fail to comply with the requirements set forth in our By-laws
will be excluded from the Annual Meeting, as provided in the By-laws. A copy of our By-laws can be obtained from our Secretary,
1000 N West Street, Suite 1200, Wilmington, Delaware 19801. Directors will be elected at the Annual Meeting by a plurality of
the votes cast (i.e., the four nominees receiving the greatest number of votes will be elected as directors).
Nominees
for Election
Jan
H. Loeb has served as our President and CEO since January 28, 2016 and as Acting CEO of OmniMetrix since December 1, 2019.
He was appointed to our Board in August 2015 pursuant to the terms of our Loan and Security Agreement with Leap Tide Capital Partners
III, LLC (the “Leap Tide Loan Agreement”). He was also appointed to the Board of our then subsidiary DSIT in August
2015 pursuant to the terms of the Leap Tide Loan Agreement and held that position until the sale of our remaining interest in
DSIT in February 2018. Mr. Loeb has more than 35 years of money management and investment banking experience. He has been the
Managing Member of Leap Tide Capital Management LLC since 2007. From 2005 to 2007, he served as the President of Leap Tide’s
predecessor, Leap Tide Capital Management Inc., which was formerly known as AmTrust Capital Management Inc. He served as a Portfolio
Manager of Chesapeake Partners from February 2004 to January 2005. From January 2002 to December 2004, he served as Managing Director
at Jefferies & Company, Inc. From 1994 to 2001, he served as Managing Director at Dresdner Kleinwort Wasserstein, Inc. (formerly
Wasserstein Perella & Co., Inc.). He served as a Lead Director of American Pacific Corporation from July 8, 2013 to February
27, 2014, and also served as its Director from January 1997 to February 27, 2014. He served as an Independent Director of Pernix
Therapeutics Holdings Inc. (formerly, Golf Trust of America, Inc.) from 2006 to August 31, 2011. He served as a Director of TAT
Technologies, Ltd. from August 2009 to December 21, 2016. He served as a Director of Keweenaw Land Association, Ltd. from December
2016 until May 2019.
Key
Attributes, Experience and Skills. Mr. Loeb brings to the Acorn Board significant financial expertise, cultivated over more
than 35 years of money management and investment banking experience, together with a background in public company management and
audit committee experience.
Gary
Mohr was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees. Mr. Mohr
is President of UE Systems, Incorporated, an international technology company specializing in the field of plant asset reliability
through ultrasound. Mr. Mohr started with UE Systems in 1988 as a salesman and rapidly progressed through the ranks as regional
sales manager, National Sales Manager, Vice President and eventually President of the company. It is through Mr. Mohr’s
stewardship that UE Systems has grown from a national brand to an international company with offices in Toronto, Mexico City,
Hong Kong, India and the Netherlands, and developed a list of loyal customers, including those in the Fortune 500.
Key
Attributes, Experience and Skills. Mr. Mohr brings to the Board a broad range of operational and managerial experience, including
a successful track record in product development and marketing leadership.
Michael
F. Osterer was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees. He
served as an advisor to our Board from October 2017 until his election as director. Since 1973, Mr. Osterer has served as Chairman
of the Board of UE Systems, Incorporated, a leader in the field of plant asset reliability through ultrasound, which he founded
in 1973. He also served as President of UE Systems from 1973 to 1985. Since 1987, Mr. Osterer has served as President of Libom
Oil, an oil exploration, drilling and purchasing company, which he founded in 1987. He is the Acting Chairman of the Board of
Radon Testing Corporation of America, Inc., which he founded in 1985 and where he served as President from 1985 through 1989.
Mr. Osterer also founded Westchester Consultants, a general business consultancy nationally recognized for branding expertise
of food products. He served in the United States Air Force/Air National Guard, 105th Airborne Division, from 1964 through 1970.
Mr. Osterer graduated from Fordham University with a BA in Social Sciences, Magna Cum Laude.
Key
Attributes, Experience and Skills. Mr. Osterer brings to Acorn a wealth of operational and managerial experience gained over
his long history of successful entrepreneurial pursuits, corporate leadership and oversight.
Samuel
M. Zentman has been one of our directors since November 2004 and currently serves as Chairman of our Audit Committee and as
a member of our Compensation and Nominating Committees. From 1980 until 2006, Dr. Zentman was the president and chief executive
officer of a privately-held textile firm, where he also served as vice president of finance and administration from 1978 to 1980.
From 1973 to 1978, Dr. Zentman served in various capacities in the Information Systems department at American Motors Corporation
including Director of the Corporate Data Center and the Engineering Computer Centers. He holds a Ph.D. in Complex Analysis. Dr.
Zentman serves on the board of Hinson & Hale Medical Technologies, Inc., as well as several national charitable organizations
devoted to advancing the quality of education.
Key
Attributes, Experience and Skills. Dr. Zentman’s long-time experience as a businessman together with his experience
with computer systems and software enables him to bring valuable insights to the Board. Dr. Zentman has a broad, fundamental understanding
of the business drivers affecting our Company and also brings leadership and oversight experience to the Board.
THE
BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THE NOMINEES FOR ELECTION. PROXIES SOLICITED BY THE BOARD
WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
Certain
Information Regarding Directors and Officers
In
addition to the information set forth above about the Company’s directors who have been nominated for election at the Annual
Meeting, set forth below is additional information concerning such directors and certain officers of the Company:
Name
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Age
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Position
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Jan
H. Loeb
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|
61
|
|
Director,
President and Chief Executive Officer
|
Gary
Mohr
|
|
61
|
|
Director
and member of our Audit, Nominating and Compensation Committees
|
Michael
F. Osterer
|
|
74
|
|
Director
and member of our Audit, Nominating and Compensation Committees
|
Samuel
M. Zentman
|
|
74
|
|
Director,
Chairman of our Audit Committee and member of our Nominating and Compensation Committees
|
Tracy
S. Clifford
|
|
51
|
|
Chief
Financial Officer
|
Tracy
S. Clifford has served as the Company’s Chief Financial Officer since June 1, 2018 and as the COO of OmniMetrix since
December 1, 2019. She serves in such positions pursuant to a Consulting Agreement between the Company and Tracy Clifford Consulting,
LLC. Ms. Clifford is President and Owner of Tracy Clifford Consulting, LLC, through which she has been providing contract CFO/COO
services and other advisory services and project engagements since June 2015. Between October 1999 and May 2015, she served as
CFO, Principal Accounting Officer, Corporate Controller and Secretary for a publicly-traded pharmaceutical company and a publicly-traded
REIT. Her prior experience includes accounting leadership positions at United Healthcare (Atlanta) and the North Broward Hospital
District (Fort Lauderdale) and work on the audit team of Deloitte & Touche (Miami). Ms. Clifford obtained a Bachelor of Science
Degree in Accounting from the College of Charleston and a Master’s Degree in Business Administration with a concentration
in Finance from Georgia State University. Ms. Clifford is a licensed CPA in the state of South Carolina and holds a Certification
in the Fundamentals of Forensic Accounting from the AICPA.
Biographical
information about the Company’s directors who have been nominated for election at the Annual Meeting is set forth above
under “Nominees for Election.”
CORPORATE
GOVERNANCE MATTERS
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers and directors, and
persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership
with the SEC. These persons are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Further, we have implemented measures to assure timely filing of Section 16(a) reports by our executive officers and directors.
Based solely on our review of such forms or written representations from certain reporting persons, we believe that during 2019
our executive officers and directors complied with the filing requirements of Section 16(a).
Board
Composition and Director Independence
Our
Board of Directors is composed of one class, with four Board seats. Four directors are currently serving until their reelection
or replacement at the 2020 Annual Meeting of Stockholders. Jan H. Loeb serves as both President and Chief Executive Officer as
well as serving as a Member of our Board of Directors. Applying the definition of independence provided under the NASDAQ rules,
the Board has determined that, with the exception of Mr. Loeb, all of the members of the Board of Directors are independent.
Board
Structure and Role in Risk Oversight
The
Board believes Mr. Loeb’s service as President and Chief Executive Officer and as a member of our Board is appropriate because
it bridges a critical gap between the Company’s management and the Board, enabling the Board to benefit from management’s
perspective on the Company’s business while the Board performs its oversight function. Further, the Board believes Mr. Loeb’s
significant ownership of Acorn Energy stock aligns his interests with those of Acorn Energy’s stockholders.
Management
is responsible for Acorn Energy’s day-to-day risk management, and the Board’s role is to engage in informed oversight.
The entire Board performs the risk oversight role. Mr. Loeb, Acorn Energy’s Chief Executive Officer is a member of the Board
of Directors, which helps facilitate discussions regarding risk between the Board and Acorn Energy’s senior management,
as well as the exchange of risk-related information or concerns between the Board and the senior management. Further, the independent
directors periodically meet in executive session following regularly scheduled Board meetings to voice their observations or concerns
and to shape the agendas for future Board meetings.
The
Board of Directors believes that, with these practices, each director has an equal stake in the Board’s actions and oversight
role and equal accountability to Acorn Energy and its stockholders.
Meetings
and Meeting Attendance
During
2019, there were [____] meetings of the Board of Directors and the Board acted by unanimous written consent [____] times. All
incumbent directors attended 75% or more of the Board meetings and meetings of the committees on which they served during the
last fiscal year. Directors are encouraged to attend the annual meeting of stockholders. Three of the four directors then serving
attended our most recent annual meeting in 2019.
Audit
Committee; Audit Committee Financial Expert
The
Company has a separate designated standing Audit Committee established and administered in accordance with SEC rules. The three
members of the Audit Committee are Samuel M. Zentman (who serves as Chairman of the Audit Committee), Gary Mohr and Michael F.
Osterer. The Board of Directors has determined that each member of the Audit Committee meets the independence criteria prescribed
by NASDAQ governing the qualifications for audit committee members and each Audit Committee member meets NASDAQ’s financial
knowledge requirements. Our Board has determined that Dr. Zentman qualifies as an “audit committee financial expert,”
as defined in the rules and regulations of the SEC. During 2019, the Audit Committee met [____] times and acted by unanimous written
consent [____] times. The charter of the Audit Committee is available on our website www.acornenergy.com under the “Investor
Relations” tab.
Audit
Committee Report. The Audit Committee has (1) reviewed and discussed the audited financial statements with management; (2)
discussed with the independent auditors the matters required to be discussed by the statement of Auditing Standard No. 16 as amended;
and (3) received the written disclosures and the letter from the independent accountants required by applicable requirements of
the Public Company Accounting Oversight Board regarding the independent accountants’ communications with the Audit Committee
concerning independence, and has discussed with the independent accountant the independent accountant’s independence.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial
statements be included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019, which was
filed with the Securities and Exchange Commission on March 25, 2020.
|
THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF ACORN ENERGY, INC.
|
|
|
|
Samuel
M. Zentman
|
|
Gary
Mohr
|
|
Michael
F. Osterer
|
Compensation
Committee
Our
executive compensation is administered by the Compensation Committee of the Board of Directors, which was reconstituted in 2017.
The members of the Compensation Committee are Gary Mohr, Michael F. Osterer and Samuel M. Zentman, all of whom have been determined
by the Board to be independent in accordance with NASDAQ’s requirement for independent director oversight of executive officer
compensation.
Nominating
Committee
The
Nominating Committee of our Board of Directors, which was reconstituted in 2017, has overall responsibility for identifying, evaluating,
recruiting and selecting qualified candidates for election, re-election or appointment to the Board. The Members of the Nominating
Committee are Gary Mohr, Samuel M. Zentman and Michael Osterer all of whom have been determined by the Board to meet the independence
criteria prescribed by NASDAQ governing the qualifications of nominating committee members.
Our
stockholders may recommend potential director candidates by contacting the Secretary of the Company to receive a copy of the procedure
to recommend a potential director candidate for consideration by the Nominating Committee, who will evaluate recommendations from
stockholders in the same manner that they evaluate recommendations from other sources.
Code
of Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers and employees. This code of ethics
is designed to comply with the NASDAQ marketplace rules related to codes of conduct.
Our code of ethics may be accessed on the Internet under “Investor Relations” on our website at www.acornenergy.com.
We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision
of our code of ethics by posting such information on our website, www.acornenergy.com.
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Jan H. Loeb
|
|
2019
|
|
|
174,000
|
(4)
|
|
|
―
|
|
|
|
|
|
|
|
—
|
|
|
|
174,000
|
|
President and CEO of the Company and Acting CEO of OmniMetrix (1)
|
|
2018
|
|
|
159,000
|
(4)
|
|
|
100,000
|
(5)
|
|
|
9,800
|
(6)
|
|
|
—
|
|
|
|
268,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tracy S. Clifford
|
|
2019
|
|
|
129,000
|
(4)
|
|
|
—
|
|
|
|
6,353
|
(7)
|
|
|
—
|
|
|
|
135,353
|
|
CFO of the Company and COO of OmniMetrix (2)
|
|
2018
|
|
|
61,875
|
(4)
|
|
|
―
|
|
|
|
8,100
|
(8)
|
|
|
|
|
|
|
69,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter Czarnecki
|
|
2019
|
|
|
207,801
|
|
|
|
—
|
|
|
|
7,883
|
|
|
|
—
|
|
|
|
215,684
|
|
Former CEO and President of OmniMetrix (3)
|
|
2018
|
|
|
222,696
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
222,696
|
|
|
(1)
|
Mr.
Loeb began serving as President and CEO of the Company on January 28, 2016 and as Acting CEO of OmniMetrix on December 1,
2019.
|
|
(2)
|
Ms.
Clifford began serving as CFO of the Company on June 1, 2018 and as COO of OmniMetrix on December 1, 2019.
|
|
(3)
|
Mr.
Czarnecki resigned as CEO and President of OmniMetrix effective December 6, 2019.
|
|
(4)
|
Represents
the consulting fee paid for the provision of Mr. Loeb’s services to the Company as President and CEO of the Company
and Acting CEO of OmniMetrix and of Ms. Clifford’s services as CFO of the Company and COO of OmniMetrix, respectively.
|
|
(5)
|
Consists
of a bonus paid in connection with the closing of the sale of the remaining interest in DSIT.
|
|
(6)
|
Represents
the grant date fair value calculated in accordance with applicable accounting principles with respect to 35,000 options granted
on May 1, 2018 with an exercise price of $0.35. The fair value of the options was determined using the Black-Scholes option
pricing model using the following assumptions: (i) a risk-free interest rate of 2.69% (ii) an expected term of 3.4 years (iii)
an assumed volatility of 129% and (iv) no dividends.
|
|
(7)
|
Represents
the grant date fair value calculated in accordance with applicable accounting principles with respect to 30,000 options granted
on June 25, 2019 with an exercise price of $0.28. The fair value of the options was determined using the Black-Scholes option
pricing model using the following assumptions: (i) a risk-free interest rate of 1.7% (ii) an expected term of 4.0 years (iii)
an assumed volatility of 122% and (iv) no dividends.
|
|
(8)
|
Represents
the grant date fair value calculated in accordance with applicable accounting principles with respect to 30,000 options granted
on June 1, 2018 with an exercise price of $0.41. The fair value of the options was determined using the Black-Scholes option
pricing model using the following assumptions: (i) a risk-free interest rate of 2.67% (ii) an expected term of 4.0 years (iii)
an assumed volatility of 124% and (iv) no dividends.
|
Executive
compensation for 2019. Changes in each named executive officer’s base compensation for 2019, together with the methodology
for determining their respective bonuses, if any, are described below. The Board of Directors of OmniMetrix determined the compensation
of its own executive officers and other employees.
Jan
H. Loeb. On April 9, 2018, the Company entered into a new consulting agreement (the “2018 Consulting Agreement”)
with Mr. Loeb extending its arrangements for compensation of Mr. Loeb for his services as President and CEO of the Company. Following
the expiration of his 2017 Consulting Agreement on January 7, 2018, and through April 30, 2018, Mr. Loeb continued to provide
the consulting and other services to the Company called for in the agreement, and was compensated at the rate of $17,000 per month
provided for in the 2017 Consulting Agreement.
Pursuant
to the 2018 Consulting Agreement, Mr. Loeb received cash compensation of $12,000 per month commencing May 1, 2018, and $16,000
per month commencing August 15, 2019. When he assumed the additional position of Acting CEO of OmniMetrix, his monthly cash compensation
was increased to $26,000 effective December 1, 2019. Mr. Loeb also received a bonus of $100,000 in recognition of his performance
in the sale of the Company’s shares of DSIT Solutions Ltd. He was eligible for two additional bonuses during the term of
the 2018 Consulting Agreement: $150,000 upon consummation of a corporate acquisition transaction approved by the Company’s
Board, and $150,000 upon consummation of a corporate financing/funding transaction approved by the Company’s Board. On August
13, 2019, Mr. Loeb waived his right to receive the $150,000 bonus otherwise due to him under the terms of the 2018 Consulting
Agreement in connection with the consummation of the Company’s June 2019 Rights Offering. Mr. Loeb also received a grant
on May 1, 2018, of options to purchase 35,000 shares of the Company’s common stock, which shall be exercisable at a price
of $0.35 per share (the closing price for the common stock on the last trading day preceding the date of the grant). Fifty percent
(50%) of the options vested immediately; the remaining options vested in two equal increments on July 1, 2018 and October 1, 2018.
The options will expire on the earlier of January 1, 2025 or 18 months from the date Mr. Loeb ceases to be a director, officer,
employee or consultant of the Company.
The
2018 Consulting Agreement expired on December 31, 2019; the Company and Mr. Loeb have entered into a new Consulting Agreement
for 2020 as described below.
Tracy
S. Clifford. On June 1, 2018, Tracy S. Clifford was appointed CFO of the Company, replacing outgoing CFO, Michael Barth,
who resigned from this position as of that date. Concurrent with the appointment of Ms. Clifford as CFO, the Company entered into
a consulting arrangement with Ms. Clifford pursuant to which she initially received a monthly fee of $8,500, increased to $9,500
effective November 1, 2018 as allowed by the agreement for the additional hours worked in excess of the average monthly hours
covered by the original retainer, in exchange for her services as CFO. Her monthly fee was increased to $11,500 effective August
15, 2019. Ms. Clifford was appointed to the additional position of COO of OmniMetrix on November 18, 2019 and her monthly fee
was increased to $16,500 effective December 1, 2019. Ms. Clifford is not an employee of the Company. Unless otherwise terminated
in accordance with its provisions, her consulting agreement with the Company automatically renews for an additional year upon
the expiration of each one-year term. Ms. Clifford also received a grant on June 1, 2018 of options to purchase 30,000 shares
of our common stock, with an exercise price of $0.41 per share, which was the closing price of the common stock on May 31, 2018.
The options vested and became exercisable on the first anniversary of the date of grant and shall expire upon the earlier of (a)
seven years from the date of the grant or (b) 18 months from the date Ms. Clifford ceases to be a consultant to the Company. At
the beginning of each additional one-year term, the Company shall grant Ms. Clifford an additional 30,000 stock options, which
shall have an exercise price equal to the most recent closing price immediately preceding the grant date and otherwise have the
same terms as the options described above. Ms. Clifford received a grant on June 25, 2019 of options to purchase 30,000 shares
of our common stock, with an exercise price of $0.28 per share, which was the closing price of the common stock on June 24, 2019,
and similar vesting and expiration terms as her 2018 option grant.
Walter
Czarnecki. Mr. Czarnecki’s base compensation was increased to $242,000 from $220,000 effective June 1, 2018 pursuant
to the terms of his employment agreement. Mr. Carnecki resigned from the Company effective December 6, 2019.
Stockholder
input on executive compensation. Stockholders can provide the Company with their views on executive compensation matters
at each year’s annual meeting through the stockholder advisory vote on executive compensation and during the interval between
stockholder advisory votes. The Company welcomes stockholder input on our executive compensation matters, and stockholders are
able to reach out directly to our independent directors by emailing to samzentman@yahoo.com to express their views on executive
compensation matters.
Employment
Arrangements
The
employment arrangements of each named executive officer and certain other officers are described below. From time to time, the
Company has made discretionary awards of management options as reflected in the table above.
Jan
H. Loeb. On January 30, 2020, the Company entered into a new consulting agreement (the “2020 Consulting Agreement”)
with Jan H. Loeb, extending its arrangements for compensation of Mr. Loeb for his services as President and CEO of the Company
and as principle executive officer of the Company’s OmniMetrix subsidiary in the capacity of Acting CEO.
Pursuant
to the 2020 Consulting Agreement, Mr. Loeb will receive cash compensation, effective retroactively as of January 1, 2020, of $16,000
per month for service as President and CEO of the Company, and an additional $10,000 per month for so long as he serves as Acting
CEO of OmniMetrix. Mr. Loeb also received a grant of options on January 30, 2020, to purchase 35,000 shares of the Company’s
common stock, which are exercisable at an exercise price equal to the December 31, 2019, closing price of the common stock of
$0.37 per share. Twenty-five percent (25%) of the options were vested immediately; the remaining options shall vest in three equal
increments on April 1, 2020, July 1, 2020 and October 1, 2020. The exercise period and other terms are otherwise substantially
the same as the terms of the options granted by the Company to its outside directors.
Tracy
S. Clifford serves as both CFO of the Company and COO of OmniMetrix pursuant to a Consulting Agreement with Tracy Clifford
Consulting, LLC, for the provision of Ms. Clifford’s services. In such capacity, Ms. Clifford acts as a consultant to, and
not an employee of, Acorn. The current term of the Consulting Agreement began on June 1, 2020, and expires on June 1, 2021. The
Consulting Agreement automatically renews for an additional year upon the expiration of each one-year term. Pursuant to the Consulting
Agreement, Ms. Clifford currently receives cash compensation of $16,500 per month. Ms. Clifford also receives additional cash
compensation at the rate of $200 per hour for each hour worked in excess of an aggregate of five hundred twenty (520) hours during
any one-year term. At the beginning of each one-year term of the Consulting Agreement, Ms. Clifford also receives a grant of options
to purchase 50,000 shares of the Company’s common stock, with an exercise price equal to the closing price of the common
stock on trading day immediately preceding the commencement of such one-year term. The options will vest and become exercisable
on the first anniversary of the date of grant and shall expire upon the earlier of (a) seven years from the date of grant or (b)
18 months from the date Ms. Clifford ceases to be a consultant to the Company.
Walter
Czarnecki. Mr. Czarnecki resigned as President and COO of OmniMetrix effective December 6, 2019. Mr. Czarnecki served
as President and COO of OmniMetrix beginning in March 2014 and as CEO beginning in March 2015. Until June 1, 2017, Mr. Czarnecki
had no employment agreement and was employed on an “at-will” basis. Mr. Czarnecki’s annual salary for 2016 and
until June 1, 2017 was $200,000. Mr. Czarnecki and OmniMetrix entered into an Employment Agreement on June 19, 2017. The Employment
Agreement had a three-year term and provided for a base annual salary of $220,000 which was increased to $242,000 on June 1, 2018.
Upon the achievement by OmniMetrix and Mr. Czarnecki of certain performance goals established annually by the Board of OmniMetrix,
Mr. Czarnecki would have been entitled to increases in his annual salary and an annual bonus. If his employment had been terminated
without Cause (as defined in the Employment Agreement), Mr. Czarnecki would have been eligible for a severance payment equal to
six-months’ base salary at the rate in effect at the time of termination, to be paid in equal installments over a six-month
period subject to his continuing fulfillment of his ongoing obligations under the Agreement. Mr. Czarnecki did not receive a bonus
for 2016 or 2017. Mr. Czarnecki continues to hold a 1% interest in OMX Holdings, Inc., which is itself the holder of 100% of the
membership interests of OmniMetrix.
Outstanding
Equity Awards at 2019 Fiscal Year End
The
following tables set forth all outstanding equity awards made to each of the Named Executive Officers that were outstanding at
December 31, 2019.
OPTIONS TO PURCHASE ACORN ENERGY, INC. STOCK
|
Name
|
|
Number of Securities Underlying Unexercised Options (#) Exercisable
|
|
|
Number of Securities Underlying Unexercised Options (#) Unexercisable
|
|
|
Option Exercise Price ($)
|
|
|
Option Expiration Date
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan H. Loeb
|
|
|
25,000
|
|
|
|
―
|
|
|
|
0.20
|
|
|
August 13, 2022
|
|
|
|
35,000
|
|
|
|
—
|
|
|
|
0.36
|
|
|
January 8, 2024
|
|
|
|
35,000
|
|
|
|
―
|
|
|
|
0.35
|
|
|
January 1, 2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tracy S. Clifford
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
0.41
|
|
|
June 1, 2025
|
|
|
|
―
|
|
|
|
30,000
|
|
|
|
0.28
|
|
|
June 24, 2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter Czarnecki
|
|
|
―
|
|
|
|
—
|
|
|
|
―
|
|
|
―
|
WARRANTS TO PURCHASE ACORN ENERGY, INC. STOCK
|
Name
|
|
Number of Securities Underlying Unexercised Warrants (#) Exercisable
|
|
|
Number of Securities Underlying Unexercised Warrants (#) Unexercisable
|
|
|
Warrant Exercise Price ($)
|
|
|
Warrant Expiration Date
|
Jan H. Loeb
|
|
|
35,000
|
(1)
|
|
|
—
|
|
|
|
0.13
|
|
|
March 16, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tracy S. Clifford
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter Czarnecki
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
(1)
|
Warrants
held by Leap Tide Capital Management, LLC.
|
Option
and Warrant Exercises
None.
Non-qualified
Deferred Compensation
The
following table provides information on the executive non-qualified deferred compensation activity for each of our named executive
officers for the year ended December 31, 2019.
Named Executive Officer
|
|
Executive Contributions in Last Fiscal Year ($)
|
|
|
Registrant Contributions in
Last Fiscal Year ($)
|
|
|
Aggregate Earnings (Losses)
in Last Fiscal Year ($)
|
|
|
Aggregate Withdrawals/ Distributions ($)
|
|
|
Aggregate Balance at Last Fiscal Year End ($)
|
|
Jan H. Loeb
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tracy S. Clifford
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
―
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Walter Czarnecki
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Payments
and Benefits Upon Termination or Change in Control
Jan
H. Loeb
Under
the terms of the consulting agreement with Mr. Loeb, there are no amounts due under any termination scenario.
Tracy
S. Clifford
Under
the terms of the consulting agreement under which Ms. Clifford serves as our CFO, there are no amounts due under any termination
scenario.
Michael
Barth
Michael
Barth resigned as our Chief Financial Officer effective May 31, 2018. No severance amounts or benefits were paid directly by Acorn
in connection with his resignation, as Mr. Barth’s severance arrangements were with our former equity investee DSIT.
Walter
Czarnecki
Mr.
Czarnecki resigned from the Company effective December 6, 2019. He was not paid any severance or any other benefits in connection
with his resignation. Under the terms of the employment agreement with Mr. Czarnecki (which terminated upon his resignation),
we would have been obligated to make certain payments to him upon the termination of his employment not for cause.
The
following table describes the potential payments and benefits that would have been due upon termination of employment for Mr.
Czarnecki, as if his employment terminated as of December 31, 2019, the last day of our last fiscal year assuming that there had
been no earned, but unpaid base salary at the time of termination.
|
|
Circumstances of Termination
|
|
Payments and benefits
|
|
Voluntary resignation
|
|
|
Termination
not for cause
|
|
|
Change of control
|
|
|
Death or disability
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base salary
|
|
$
|
—
|
|
|
$
|
121,000
|
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
Benefits and perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and other personal benefits
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
—
|
|
|
$
|
121,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
Represents a payment of six months’ salary that would have been due, payable in equal installments over a six-month period
to Mr. Czarnecki.
Compensation
of Directors
The
Board reviews non-employee director compensation on an annual basis. Our compensation policy for non-employee Directors for 2019
was as follows:
Each
non-employee Director receives an annual retainer of $15,000, plus an annual grant on January 1 of an option to purchase 10,000
shares of Company Common Stock.
Upon
a non-employee Director’s first election or appointment to the Board, such newly elected/appointed Director will be granted
an option to purchase 25,000 shares of Company Common Stock. Each option so granted to a newly elected/appointed Director shall
vest for the purchase of one-third of the shares purchasable under such option on each of the three anniversaries following the
date of first election or appointment.
All
options granted to non-employee Directors shall have an exercise price equal to closing price of the Company’s Common Stock
on its then-current trading platform or exchange on the last trading day immediately preceding the date of grant, and shall, except
as described in the preceding paragraph, vest in four installments quarterly in advance. Once vested, such options shall be exercisable
in whole or in part at all times until the earliest of (i) seven years from the date of grant or (ii) 18 months from the date
such Director ceases to be a Director, officer, employee of, or consultant to, the Company.
The
chair of the Audit Committee receives an additional annual retainer of $10,000; each Audit Committee member other than the chair
receives an additional annual retainer of $2,000.
Each
Director may, in his or her discretion, elect by written notice delivered on or before the first day of each calendar year whether
to receive, in lieu of some or all of his or her retainer and board fees, that number of shares of Company Common Stock as shall
have a value equal to the applicable retainer and board fees, based on the closing price of the Company’s Common Stock on
its then-current trading platform or exchange on the last trading day immediately preceding the first day of the applicable year.
Once made, the election shall be irrevocable for such election year and the shares subject to the election shall vest and be issued
one-fourth upon the first day of the election year and one-fourth as of the first day of each of the second through fourth calendar
quarters thereafter during the remainder of the election year. A newly-elected or appointed Director may, in his or her discretion,
make such an election for the balance of the year in which he or she was elected/appointed by written notice delivered on or before
the tenth day after his or her election/appointment to the Board, with the number of shares of Company Common Stock subject to
such newly elected/appointed Director’s election to be based on closing price of the Company’s Common Stock on its
then-current trading platform or exchange on the last trading day immediately preceding the day of such newly elected/appointed
Director’s election/appointment.
The
following table sets forth information concerning the compensation earned for service on our Board of Directors during the fiscal
year ended December 31, 2019 by each individual (other than Mr. Loeb who was not separately compensated for his Board service)
who served as a Director at any time during the fiscal year.
DIRECTOR
COMPENSATION IN 2019
Name
|
|
Fees Earned or Paid in Cash
($)
|
|
|
Option
Awards ($) (1)
|
|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
Samuel M. Zentman
|
|
|
25,000
|
(2)
|
|
|
2,383
|
|
|
|
—
|
|
|
|
27,383
|
|
Gary Mohr
|
|
|
17,000
|
(3)
|
|
|
2,383
|
|
|
|
―
|
|
|
|
19,383
|
|
Michael F. Osterer
|
|
|
8,500
|
(4)
|
|
|
2,383
|
|
|
|
―
|
|
|
|
10,883
|
|
|
(1)
|
On
February 5, 2019, Samuel M. Zentman, Gary Mohr, and Michael F. Osterer were each granted 10,000 options to acquire stock in
the Company. The options had an exercise price of $0.31 and were to expire on February 5, 2026. The fair value of the options
was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate
of 2.5% (ii) an expected term of 3.7 years (iii) an assumed volatility of 122% and (iv) no dividends.
|
|
(2)
|
Represents
the annual retainer of $15,000 as a non-employee director and $10,000 received for services rendered as Chairman of the Audit
Committee.
|
|
(3)
|
Represents
the annual retainer of $15,000 as a non-employee director plus $2,000 received for services rendered as a member of the Audit
Committee.
|
|
(4)
|
Mr.
Osterer waived his right to receive board fees for the first half of 2019. Represents half of the annual retainer of $15,000
plus $1000 received for services rendered as a member of the Audit Committee.
|
PROPOSAL
2
AMENDMENT
OF THE COMPANY’S RESTATED CERTIFICATE OF INCORPORATION TO AUTHORIZE A REVERSE SPLIT OF THE COMPANY’S COMMON STOCK
AT ANY TIME PRIOR TO SEPTEMBER 14, 2021, AT A RATIO BETWEEN ONE-FOR-TEN AND ONE-FOR-TWENTY, IF AND AS DETERMINED BY THE COMPANY’S
BOARD OF DIRECTORS
Article
FOURTH of our Certificate of Incorporation currently authorizes the issuance of up to 42 million shares of our common stock, par
value $0.01 per share (no shares of preferred stock are authorized). As of July 31, 2020, a total of [_____________] shares of
common stock were issued and outstanding.
The
Board of Directors has approved, subject to stockholder approval, an amendment to Article FOURTH of the Certificate of Incorporation
to effect a reverse stock split of our common stock any time prior to the first anniversary of its approval by the stockholders
at a ratio to be selected by our Board of Directors between one-for-ten and one-for-twenty, which is referred to as the Reverse
Split proposal (the full text of the proposed amendment is attached as Annex A to this proxy statement).
At
last year’s annual meeting, our stockholders approved a similar proposal that authorized the Board of Directors to implement
a reverse stock split, at its discretion, at any time prior to the first anniversary of the date of the annual meeting. To date,
our Board of Directors has not deemed the implementation of a reverse split to be beneficial to our Company and our stockholders,
and, as a result, has not exercised the authority to effect a reverse split granted at last year’s annual meeting. That
authority will expire on September 25, 2020.
If
the current Reverse Split proposal is approved by a majority of our stockholders, the Board will have the discretion to determine,
as it deems to be in the best interest of our stockholders, the specific ratio to be used within the range described above and
the timing of the reverse stock split, which must occur at any time prior to the first anniversary of its approval by the stockholders.
The Board may also, in its discretion, determine not to effect the reverse stock split if it concludes, subsequent to obtaining
stockholder approval, that such action is not in the best interests of our Company and our stockholders. Our Board of Directors
believes that the availability of a range of reverse stock split ratios will provide it with the flexibility to implement the
reverse stock split in a manner designed to maximize the anticipated benefits for us and our stockholders. In determining whether
to implement the reverse split following the receipt of stockholder approval, our Board of Directors may consider, among other
things, factors such as:
|
●
|
the
historical trading price and trading volume of our common stock;
|
|
|
|
|
●
|
the
then-prevailing trading price and trading volume of our common stock and the anticipated impact of the reverse split on the
trading market for our common stock;
|
|
|
|
|
●
|
the
anticipated impact of the reverse split on our ability to raise additional financing; and
|
|
|
|
|
●
|
prevailing
general market and economic conditions.
|
If
our Board determines that effecting the reverse stock split is in our best interest, the reverse stock split will become effective
upon filing of an amendment to our Certificate of Incorporation with the Secretary of State of the State of Delaware. The amendment
will set forth the number of shares to be combined into one share of our common stock within the limits set forth in this proposal.
Except for adjustments that may result from the treatment of fractional shares as described below, each stockholder will hold
the same percentage of our outstanding common stock immediately following the reverse stock split as such stockholder holds immediately
prior to the reverse split.
Effective
Date
If
the proposed amendment to the Certificate of Incorporation to give effect to the reverse stock split is approved at the Annual
Meeting and the Board of Directors determines to effect the reverse stock split, the reverse stock split will become effective
on the effective date of the certificate of amendment to our Certificate of Incorporation with the office of the Secretary of
State of the State of Delaware, which we would expect to be the date of filing. We refer to this time and date as the “Effective
Date.” As set forth below with respect to fractional shares, each issued share of common stock immediately prior to the
Effective Date will automatically be changed, as of the Effective Date, into a fraction of a share of common stock based on the
exchange ratio within the approved range determined by the Board of Directors.
Reasons
for the Reverse Stock Split
The
Board of Directors believes that a reverse stock split is advisable because the increased market price of our common stock expected
as a result of implementing the reverse stock split will improve the marketability and liquidity of our common stock and will
encourage interest and trading in our common stock. A reverse stock split could allow a broader range of institutions to invest
in our stock (namely, funds that are prohibited from buying stocks whose price is below a certain threshold), potentially increasing
the liquidity of our common stock. A reverse stock split could help increase analyst and broker interest in our stock as their
policies can discourage them from following or recommending companies with low stock prices. Because of the trading volatility
often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices
that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced
stocks to their customers. Some of those policies and practices may function to make the processing of trades in low-priced stocks
economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent
a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our common
stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value
than would be the case if the share price were substantially higher.
Risks
of the Reverse Stock Split
We
cannot assure you that the proposed reverse stock split will increase our stock price. The Board of Directors expects
that a reverse stock split of our common stock will increase the market price of our common stock. However, we cannot predict
the effect of a reverse stock split upon the market price of our common stock with any certainty, and the history of similar reverse
stock splits for companies in like circumstances is varied.
It
is possible that the per share price of our common stock after the reverse stock split will not rise in proportion to the reduction
in the number of shares of our common stock outstanding resulting from the reverse stock split, and the reverse stock split may
not result in a per share price that would attract brokers and investors who do not trade in lower priced stocks. Even if we effect
a reverse stock split, the market price of our common stock may decrease due to factors unrelated to the stock split. Further,
the market price of our common stock may also be based on other factors which may be unrelated to the number of shares outstanding,
including our future performance. If the reverse stock split is consummated and the trading price of the common stock declines,
the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would
occur in the absence of the reverse stock split.
The
proposed reverse stock split may decrease the liquidity of our stock. The liquidity of our common stock may be harmed
by the proposed reverse stock split given the reduced number of shares that would be outstanding after the reverse stock split,
particularly if the stock price does not increase as a result of the reverse stock split. Additionally, investors might consider
the increased proportion of unissued authorized shares to issued shares to have an anti-takeover effect under certain circumstances,
because the proportion allows for dilutive issuances that could prevent certain stockholders from changing the composition of
the Board of Directors or render tender offers for a combination with another entity more difficult to successfully complete.
The Board of Directors does not intend for the reverse stock split to have any anti-takeover effects.
Impact
of the Reverse Stock Split if Implemented
If
approved and effected, the reverse stock split will automatically apply to all shares of our common stock and all outstanding
rights to acquire shares of our common stock. Except for adjustments that may result from the treatment of fractional shares as
described below, the reverse stock split will not affect any stockholder’s percentage ownership or proportionate voting
power.
If
this Reverse Split proposal is approved, the number of authorized shares of our common stock will not be reduced proportionately
upon implementation of the reverse stock split, meaning the reverse stock split will increase the Board’s ability to issue
authorized and unissued shares of common stock without further stockholder action. There are no existing plans, arrangements or
understandings relating to the issuance of any of the additional authorized but unissued shares of common stock that would be
available as a result of the approval of this Reverse Split proposal.
Based
on the number of shares, options and warrants outstanding as of the Record Date, the principal effect of a reverse stock split
(at a ratio between one-for-ten and one-for-twenty) would be that:
|
●
|
the
number of shares of our common stock issued and outstanding would be reduced from [___________] shares to between approximately
[___________] shares and [___________] shares;
|
|
|
|
|
●
|
the
number of shares of the Company’s common stock issuable upon the exercise of outstanding stock options would be reduced
from [___________] to between approximately [___________] shares and [___________] shares (and the respective exercise prices
of the options would increase by a factor equal to the inverse of the split ratio);
|
|
|
|
|
●
|
the
number of shares of the Company’s common stock issuable upon the exercise of outstanding warrants would be reduced from
[___________] to between approximately [___________] shares and [___________] shares (and the respective exercise prices of
the warrants would increase by a factor equal to the inverse of the split ratio); and
|
|
|
|
|
●
|
the
number of shares of the Company’s common stock that are authorized, but unissued, and can be used for future issuances
of common stock as described above would increase from [___________] to between approximately [___________] shares and [___________]
shares.
|
In
addition, the reverse stock split may increase the number of stockholders who own odd lots (less than 100 shares). Stockholders
who hold odd lots typically may experience an increase in the cost of selling their shares and may have greater difficulty in
effecting sales.
Fractional
Shares
To
avoid the existence of fractional shares of common stock after the reverse stock split, fractional shares that would be created
as a result of the reverse stock split will be rounded up to the next whole share, including fractional shares that are less than
one half of one share.
Effect
on Registered and Beneficial Stockholders
Upon
a reverse stock split, we intend to treat stockholders holding common stock in “street name”, through a bank, broker
or other nominee, in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or
other nominees will be instructed to effect the reverse stock split for their beneficial holders holding common stock in “street
name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing
the reverse stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard,
we encourage you to contact your bank, broker or nominee.
Effect
on Registered Certificated Shares
Some
of our registered stockholders hold all their shares in certificate form. If any of your shares are held in certificate form,
you will receive a transmittal letter from our transfer agent, American Stock Transfer and Trust Company, as soon as practicable
after the effective date of the reverse stock split. The letter of transmittal will contain instructions on how to surrender your
certificate(s) representing your pre-reverse stock split shares to the transfer agent.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Accounting
Matters
The
reverse stock split will not affect the par value of the common stock. As a result, as of the Effective Date, the stated capital
attributable to common stock on our balance sheet will be reduced proportionately based on the reverse stock split ratio described
above, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The
per-share net income or loss and net book value of the Company’s common stock will be restated because there will be fewer
shares of common stock outstanding.
Certain
Federal Income Tax Considerations
The
following discussion describes certain material federal income tax considerations relating to the reverse stock split. This discussion
is based upon the Internal Revenue Code, existing and proposed regulations thereunder, legislative history, judicial decisions
and current administrative rulings and practices, all as amended and in effect on the date hereof. Any of these authorities could
be repealed, overruled or modified at any time. Any such change could be retroactive and, accordingly, could cause the tax consequences
to vary substantially from the consequences described herein. No ruling from the Internal Revenue Service (the “IRS”)
with respect to the matters discussed herein has been requested, and there is no assurance that the IRS would agree with the conclusions
set forth in this discussion.
This
discussion may not address certain federal income tax consequences that may be relevant to particular stockholders in light of
their personal circumstances or to stockholders who may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local or foreign laws.
STOCKHOLDERS
ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT FOR THEM, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The
reverse stock split is intended to be a tax-free recapitalization to the Company and its stockholders, except for those stockholders
who receive a whole share of Common Stock in lieu of a fractional share. Stockholders will not recognize any gain or loss for
federal income tax purposes as a result of the reverse stock split, except for those stockholders receiving a whole share of Common
Stock in lieu of a fractional share (as described below). The holding period for shares of Common Stock after the reverse stock
split will include the holding period of shares of Common Stock before the reverse stock split, provided that such shares of Common
Stock are held as a capital asset at the effective time of the reverse stock split. The adjusted basis of the shares of Common
Stock after the reverse stock split will be the same as the adjusted basis of the shares of Common Stock before the reverse stock
split, excluding the basis of any fractional share.
A
stockholder who receives a whole share of Common Stock in lieu of a fractional share generally may recognize gain in an amount
not to exceed the excess of the fair market value of such whole share over the fair market value of the fractional share to which
the stockholder was otherwise entitled.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE REVERSE SPLIT PROPOSAL TO AUTHORIZE A REVERSE SPLIT OF THE COMPANY’S
COMMON STOCK AT ANY TIME PRIOR TO SEPTEMBER 14, 2021, AT A RATIO BETWEEN ONE-FOR-TEN AND ONE-FOR-TWENTY, IF AND AS DETERMINED
BY THE COMPANY’S BOARD OF DIRECTORS.
PROPOSAL
3
ADJOURNMENT
OF THE ANNUAL MEETING
The
Annual Meeting may be adjourned to another time or place from time to time, if necessary or appropriate, to permit further solicitation
of proxies in the event there are not sufficient votes at the time of the Annual Meeting to approve the Reverse Split proposal.
With
respect to the Reverse Split proposal, approval requires the affirmative vote of a majority of the outstanding shares of our common
stock entitled to vote at the Annual Meeting in person or by proxy. If, at the time of the Annual Meeting, the number of shares
of our common stock present or represented and voting in favor of the Reverse Split proposal is insufficient to approve the Reverse
Split proposal, we intend to adjourn the Annual Meeting from time to time in order to enable our Board to solicit additional proxies.
In
this adjournment proposal, we are asking our stockholders to authorize the holder of any proxy solicited by our Board to vote
in favor of granting authority to the proxy holders, and each of them individually, to adjourn the Annual Meeting to another time
and place from time to time for the purpose of soliciting additional proxies. If our stockholders approve this adjournment proposal,
we could adjourn the Annual Meeting, and any adjourned session of the Annual Meeting, and use the additional time to solicit additional
proxies, including the solicitation of proxies from our stockholders who have previously voted.
THE
BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF ANY MOTION TO ADJOURN THE ANNUAL MEETING.
PROPOSAL
4
RATIFICATION
OF THE SELECTION OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
The
Audit Committee has selected Friedman LLP as the independent registered public accounting firm to perform the audit of our consolidated
financial statements for the year ending December 31, 2020. Friedman LLP representatives are expected to attend the 2020 Annual
Meeting. They will have the opportunity to make a statement if they desire to do so, and will be available to respond to appropriate
questions. Friedman LLP is a registered public accounting firm with the Public Company Accounting Oversight Board (the “PCAOB”),
as required by the Sarbanes-Oxley Act of 2002 and the Rules of the PCAOB.
The
Board is asking our stockholders to ratify the selection of Friedman LLP as our independent registered public accounting firm.
Although current law, rules, and regulations, as well as the charter of the Audit Committee, require the Audit Committee to engage,
retain, and supervise our independent registered public accounting firm, the Board considers the selection of the independent
registered public accounting firm to be an important matter of stockholder concern and is submitting the selection of Friedman
LLP for ratification by stockholders as a matter of good corporate practice. Even if the selection is ratified, the Audit Committee
in its discretion may select a different independent registered public accounting firm at any time during the year if it determines
that such a change would be in the best interests of the Company and its stockholders.
Accounting
Fees
The
following table summarized the fees billed to Acorn for professional services rendered by Friedman LLP for the years ended December
31, 2019 and 2018.
|
|
2019
|
|
|
2018
|
|
Audit Fees
|
|
$
|
115,600
|
|
|
$
|
87,000
|
|
Audit-Related Fees
|
|
|
400
|
|
|
|
4,800
|
|
Tax Fees
|
|
|
10,500
|
|
|
|
―
|
|
All Other Fees
|
|
|
―
|
|
|
|
―
|
|
Total
|
|
$
|
126,500
|
|
|
$
|
91,800
|
|
Audit
Fees were for professional services rendered for the audits of the consolidated financial statements of the Company, assistance
with review of documents filed with the SEC, consents, and other assistance required to be performed by our independent accountants.
Audit-Related
Fees were for travel costs and administrative fees associated with our audit.
Audit
Committee Pre-Approval Policies and Procedures
The
Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to
be charged by our independent auditor to assure that the provision of these services does not impair the independence of the auditor.
The Audit Committee pre-approved all audit and non-audit services rendered by our principal accountant in 2019 and 2018.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE SELECTION OF FRIEDMAN LLP AS THE COMPANY’S
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2020.
PROPOSAL
5
ADVISORY
VOTE ON EXECUTIVE COMPENSATION
We
are asking stockholders to cast an advisory vote on the compensation of our Named Executive Officers disclosed in the “Executive
and Director Compensation” section of this Proxy Statement. While this vote is non-binding, the Company values the opinions
of stockholders and will consider the outcome of the vote when making future compensation decisions.
The
Board believes that the objectives of our executive compensation program are appropriate for a company of our size and stage of
development and that our compensation policies and practices help meet those objectives. In addition the Board believes that our
executive compensation program achieves an appropriate balance between fixed compensation and variable incentive compensation
and pays for performance. The Board also believes that the Company’s executive compensation programs effectively align the
interests of our executive officers with those of our stockholders by tying a significant portion of their compensation to the
Company’s performance and by providing a competitive level of compensation needed to recruit, retain and motivate talented
executives critical to the Company’s long-term success. Accordingly, we are asking our stockholders to approve the compensation
of our named executive officers. This advisory vote is not intended to be limited or specific to any particular element of compensation,
but rather cover the overall compensation of our named executive officers and the compensation policies and practices described
in this proxy statement.
We
are asking our stockholders to vote FOR, in a non-binding vote, the compensation of the Company’s Named Executive Officers
as disclosed pursuant to Item 402 of Regulation S-K in this Proxy Statement under the heading “Executive and Director Compensation”.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.
OTHER
MATTERS
The
Board of Directors of the Company is not aware of any other matters to be presented for action at the Annual Meeting other than
those listed in the accompanying Notice of Annual Meeting and described herein. If any other matters not described herein should
properly come before the meeting for stockholder action, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in respect thereof in accordance with the Board of Directors’ recommendations.
ANNUAL
REPORT ON FORM 10-K
A
copy of the Company’s Annual Report covering the fiscal year ended December 31, 2019, including audited financial statements,
is enclosed with this Proxy Statement. Such report is not incorporated in this Proxy Statement and is not a part of the proxy
soliciting material.
SOLICITATION
OF PROXIES
The
cost of soliciting proxies for the Annual Meeting will be borne by the Company. In addition to the use of the mails, proxies may
be solicited by in person interview, Internet, telephone, e-mail or facsimile. The Company will, upon request and in accordance
with applicable regulation, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material
to the beneficial owners of stock.
|
By
Order of the Board of Directors,
|
|
|
August
[__], 2020
|
SHELDON
KRAUSE
|
Wilmington,
Delaware
|
Assistant
Secretary
|
ANNEX
A
The
Restated Certificate of Incorporation of the Corporation be amended by changing Article FOURTH so that, as amended, said Article
shall be and read as follows:
“FOURTH:
The total number of shares of capital stock which the Corporation has authority to issue is 42 million shares, par value $.01
per share, all of which shall be Common Stock. Shares of capital stock of the Corporation may be issued by the Corporation from
time to time for such legally sufficient consideration as may be fixed from time to time by the Board of Directors.
Upon
this Certificate of Amendment of Certificate of Incorporation of the Corporation becoming effective pursuant to the General Corporation
Law of the State of Delaware (the “Effective Time”), each share of the Corporation’s Common Stock, issued and
outstanding immediately prior to the Effective Time (the “Old Common Stock”), will be automatically reclassified as
and converted into [one tenth (1/10)/one twentieth (1/20)] of a share of Common Stock, par value $.01 per share, of the Corporation
(the “New Common Stock”). Any stock certificate that, immediately prior to the Effective Time, represented shares
of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same
for exchange, represent the number of shares of the New Common Stock as equals the product obtained by multiplying the number
of shares of Old Common Stock represented by such certificate immediately prior to the Effective Time by [one tenth (1/10)/one
twentieth (1/20)].”
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