ITEM
1.
|
UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN
THOUSANDS, EXCEPT PER SHARE DATA)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT
(UNAUDITED)
(IN
THOUSANDS)
|
|
Three
and Six Months Ended June 30, 2020
|
|
|
|
Number
of Shares
|
|
|
Common
Stock
|
|
|
Additional
Paid-In Capital
|
|
|
Warrants
|
|
|
Accumulated
Deficit
|
|
|
Number
of Treasury Shares
|
|
|
Treasury
Stock
|
|
|
Total
Acorn
Energy, Inc.
Shareholders’
Deficit
|
|
|
Non-controlling
interests
|
|
|
Total
Deficit
|
|
Balances as of December 31, 2019
|
|
|
39,591
|
|
|
$
|
396
|
|
|
$
|
101,655
|
|
|
$
|
1,021
|
|
|
$
|
(100,682
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(646
|
)
|
|
$
|
1
|
|
|
$
|
(645
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(283
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(283
|
)
|
|
|
(1
|
)
|
|
|
(284
|
)
|
Accrued dividend in OmniMetrix
preferred shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Proceeds from stock option
exercise
|
|
|
96
|
|
|
|
1
|
|
|
|
18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
19
|
|
|
|
—
|
|
|
|
19
|
|
Stock
option compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
|
|
|
6
|
|
Balances as of March 31, 2020
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
101,679
|
|
|
$
|
1,021
|
|
|
$
|
(100,965
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(904
|
)
|
|
$
|
(1
|
)
|
|
$
|
(905
|
)
|
Beginning Balances
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
101,679
|
|
|
$
|
1,021
|
|
|
$
|
(100,965
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(904
|
)
|
|
$
|
(1
|
)
|
|
$
|
(905
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(33
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(33
|
)
|
|
|
1
|
|
|
|
(32
|
)
|
Net income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(33
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(33
|
)
|
|
|
1
|
|
|
|
(32
|
)
|
Accrued dividend in OmniMetrix
preferred shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Value of expired warrants
|
|
|
—
|
|
|
|
—
|
*
|
|
|
1,018
|
|
|
|
(1,018
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Stock
option compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
—
|
|
|
|
13
|
|
Balances as of June 30,
2020
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
102,710
|
|
|
$
|
3
|
|
|
$
|
(100,998
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(924
|
)
|
|
$
|
(1
|
)
|
|
$
|
(925
|
)
|
Ending Balances
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
102,710
|
|
|
$
|
3
|
|
|
$
|
(100,998
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(924
|
)
|
|
$
|
(1
|
)
|
|
$
|
(925
|
)
|
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN
THOUSANDS)
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
ACORN
ENERGY, INC. AND SUBSIDIARIES
NOTES
TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)
NOTE
1— BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements of Acorn Energy, Inc. and its subsidiaries, OmniMetrix, LLC and OMX
Holdings, Inc. (collectively, “Acorn” or “the Company”) have been prepared in accordance with accounting principles
generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the
United States of America for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six- and three-month
periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
These
unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Concentrations of Credit Risk
Financial instruments,
which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade accounts receivable.
The Company’s cash was deposited with a U.S. bank and amounted to approximately $1,955,000
at June 30, 2021. The Company does not believe there is significant risk of non-performance by these counterparties. For the
six-month period ended June 30, 2021, one customer represented approximately 10%
of total invoiced sales. Approximately 18%
and 11%
of the accounts receivable at June 30, 2021 was due from two different customers both of whom pay their receivables over usual
credit periods. As of August 5, 2021, the Company had collected 90% of the outstanding amount of approximately
$207,000 due from these customers as of June 30, 2021. Credit risk with respect to the balance of trade receivables is generally
diversified due to the number of entities comprising the Company’s customer base.
Basic
and Diluted Net Income (Loss) Per Share
Basic
net income (loss) per share is computed by dividing the net income (loss) attributable to Acorn Energy, Inc. by the weighted average
number of shares outstanding during the year, excluding treasury stock. Diluted net income (loss) per share is computed by dividing the
net income (loss) by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result
from the exercise of stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation
of diluted net loss per share if doing so would be antidilutive. The number of options that were excluded from the computation of diluted
net loss per share, as they had an antidilutive effect, was approximately 286,000
(which have a weighted average exercise price
of $0.79)
and approximately 321,000
(which have a weighted average exercise price
of $0.76)
for the six- and three-month periods ending June 30, 2021, respectively. There were no
anti-dilutive warrants. For both the six-
and three-month periods ending June 30, 2020, the number of options
and warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was approximately
858,000
options
(which had a weighted average exercise price of $1.51)
and approximately 35,000
warrants (which had a weighted average
exercise price of $0.13).
The
following data represents the amounts used in computing EPS and the effect on net income (loss) and the weighted average number of shares
of dilutive potential common stock (in thousands):
SCHEDULE OF EFFECT ON NET INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
Six
months ended
June
30,
|
|
|
Three
months ended
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income (loss) available to
common stockholders
|
|
$
|
22
|
|
|
$
|
(316
|
)
|
|
$
|
2
|
|
|
$
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
39,687
|
|
|
|
39,659
|
|
|
|
39,687
|
|
|
|
39,687
|
|
Add: Warrants
|
|
|
27
|
|
|
|
—
|
|
|
|
27
|
|
|
|
—
|
|
Add:
Stock options
|
|
|
199
|
|
|
|
—
|
|
|
|
221
|
|
|
|
—
|
|
Diluted
|
|
|
39,913
|
|
|
|
39,659
|
|
|
|
39,935
|
|
|
|
39,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.00
|
)
|
NOTE
2—RECENT AUTHORITATIVE GUIDANCE
Recently
Issued Accounting Principles
Other
than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting pronouncements during
the six- and three-month periods ended June 30, 2021, that are of material significance, or have potential material significance, to
the Company.
In
June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASC 326”), authoritative guidance amending
how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through
net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected
losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently
evaluating the impact of the new guidance on its condensed consolidated financial statements and related disclosures.
NOTE
3—LIQUIDITY
At
June 30, 2021, the Company had working capital of approximately $40,000. The Company’s working capital includes approximately $1,955,000
of cash and deferred revenue of approximately $3,239,000. The deferred revenue does not require significant cash outlay for the revenue
to be recognized. During the first six months of 2021, the Company’s OmniMetrix, LLC subsidiary provided approximately $529,000
from operations while the Company’s corporate headquarters used approximately $446,000 during the same period.
OmniMetrix
is considered an essential business because it provides infrastructure support to both government and commercial sectors and across key
industries. The Company has experienced minimal negative impacts due to the COVID-19 pandemic to date. Throughout the pandemic, the Company
continued to realize new equipment sales (although not at the anticipated growth rate due to travel restrictions which have negatively
impacted the sales closing timeline), has continued to collect its monthly recurring monitoring revenues and has retained its customer
base. While the impacts of COVID-19 in the future are uncertain, the Company believes that due to the need for backup power and the desirability
of remote monitoring services, it should be positioned for stable financial performance. Business travel has now started to resume and
sales are returning to projected levels.
As
of August 5, 2021, the Company had cash of approximately $2,039,000. The Company believes that such cash, plus the cash
generated from operations, will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their
current level of operations for the foreseeable future and for the twelve months from the issuance of these unaudited condensed
consolidated financial statements in particular. The Company may, at some point, elect to obtain a new line of credit to fund
additional investments in the business.
NOTE
4—LEASES
OmniMetrix
leases office space and office equipment under operating lease agreements. The office lease expires on September
30, 2025. The
office equipment lease commenced in April 2019 and has a sixty-month term. Operating
lease payments for the six months ended June 30, 2021 and 2020 were approximately $60,000
and $38,000,
respectively. Operating lease payments for the three months ended June 30, 2021 and 2020 were approximately $30,000
and $10,000,
respectively. The future minimum lease payments on non-cancellable operating leases as of June 30, 2021 using a discount rate of 4.5%
are $494,000.
Supplemental balance sheet information related to leases consisted of the following:
Supplemental
cash flow information related to leases consisted of the following (in thousands):
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
|
|
2021
|
|
|
2020
|
|
|
|
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for operating lease liabilities
|
|
$
|
60
|
|
|
$
|
38
|
|
Supplemental
balance sheet information related to leases consisted of the following:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
|
|
2021
|
|
Weighted average remaining lease
terms for operating leases
|
|
|
4.23
|
|
The
table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess
of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of June 30,
2021 (in thousands):
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
|
|
Twelve-month
period
ended
June
30,
|
|
2022
|
|
$
|
123
|
|
2023
|
|
|
126
|
|
2024
|
|
|
129
|
|
2025
|
|
|
131
|
|
2026
|
|
|
33
|
|
Total undiscounted cash flows
|
|
|
542
|
|
Less: Imputed interest
|
|
|
(48
|
)
|
Present value of operating
lease liabilities (a)
|
|
$
|
494
|
|
|
(a)
|
Includes
current portion of $103,000 for operating leases.
|
NOTE
5—DEBT
In
March 2019, OmniMetrix reinstated its loan and security agreement which provided OmniMetrix with access to accounts receivable
formula-based financing of the lesser of 75% of
eligible receivables or $1,000,000. Debt
incurred under this financing arrangement bore interest at the greater of 6% and prime plus 1.5% per year. In
addition, OmniMetrix was to pay a monthly service charge of 0.75% of
the average aggregate principal amount outstanding for the prior month, for an effective rate of interest on advances of 15% at
February 28, 2021. OmniMetrix also agreed to continue to maintain a minimum loan balance of $150,000
in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019. From time to time, the balance outstanding
fell below $150,000
based on collections applied against the loan balance and the timing of loan draws. The monthly service charge and interest was
calculated on the greater of the outstanding balance or $150,000.
Interest expense for the period January 1, 2021 to February 28, 2021, when the line expired, was approximately $4,000
compared to approximately $16,000 and approximately $9,000
for the six months and three months ended June 30, 2020, respectively.
OmniMetrix
paid off the outstanding balance of approximately $149,000 in February 2021 and decided not to renew this line of credit, which expired
in accordance with its terms on February 28, 2021.
NOTE
6—COMMITMENTS AND CONTINGENCIES
On
August 19, 2019, OmniMetrix entered into an agreement with a software development partner to create and license to OmniMetrix a new software
platform and application. Pursuant to this agreement, OmniMetrix paid this partner equal monthly payments over the first seven months
of the term of the agreement equal to $200,000 in the aggregate. In addition, OmniMetrix will pay the partner (i) a per-sensor monitoring
fee for each sensor connected to the developed technology, or (ii) a percentage of any revenue received above a specified amount per
sensor monitored per month in oil and gas applications only. Commencing on January 1, 2021, OmniMetrix pays the partner an annual licensing
fee of $50,000 which is paid in quarterly increments of $12,500. The per-sensor monitoring fees have not yet commenced. The initial term
of this agreement ends on August 19, 2022 but will automatically renew for one-year periods unless either party delivers a written notice
of termination to the other party sixty days prior to the end of the respective term.
The Company
entered into a new agreement effective May 1, 2020 for data hosting services, replacing an expiring agreement with the same
vendor. The agreement has a twelve-month term and the total payments under this agreement are approximately $148,000 in
the aggregate. In January 2021, the Company elected to renew this agreement for an additional twelve months under the same terms extending
the agreement to April 30, 2022. Under the data hosting services agreement applicable during the respective periods, the
Company paid approximately $79,000 and
$66,000 in
the six months ended June 30, 2021 and 2020, respectively, and approximately $42,000 and
$30,000 in
the three months ended June 30, 2021 and 2020, respectively.
On
March 17, 2021, the Company entered into a master services agreement for the development of a new user interface for its customer data
portal. The cost of this project will be approximately $106,000 ($14,000 was paid at the commencement of this project and four equal
installments of approximately $23,000 are due monthly starting in July 2021 and ending in October 2021). This project is expected to
be completed by the end of 2021. This master services agreement also covers strategic enhancements to the Company’s technology
infrastructure for an investment in the initial phase of approximately $21,000. These enhancements are expected to be completed by year-end.
These costs are capitalized and amortization will begin once the new interface and the new infrastructure environment are launched.
In
addition to the above, the Company has approximately $563,000 in other contractual obligations related to software agreements, operating
leases and contractual services, payable through 2026.
NOTE
7—EQUITY
(a)
General
At
June 30, 2021 the Company had issued and outstanding 39,687,589 shares of its common stock, par value $0.01 per share. Holders of outstanding
common stock are entitled to receive dividends when and if declared by the Board and to share ratably in the assets of the Company
legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.
The
Company is not authorized to issue preferred stock. Accordingly, no preferred stock is issued or outstanding.
(b)
Summary Employee Option Information
The
Company’s stock option plans provide for the grant to officers, directors and employees of options to purchase shares of common
stock. The purchase price may be paid in cash or, if the option is “in-the-money” at the end of the option term, it is automatically
exercised “net”. In a net exercise of an option, the Company does not require a payment of the exercise price of the option
from the optionee, but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of
whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered
by the option exercised. Each option is exercisable for one share of the Company’s common stock. Most options expire within five
to ten years from the date of the grant, and generally vest over a three-year period from the date of the grant.
At
June 30, 2021, 1,576,394 options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no options were
available for grant under the 2006 Stock Option Plan for Non-Employee Directors. During the three
months ended June 30, 2021, 100,000 options were issued to the Company’s CFO. During the six months ended June 30, 2021, 30,000
options were issued to directors, 35,000 options were issued to the Company’s CEO and 100,000 options were issued to the Company’s
CFO. In the six and three months ended June 30, 2021, there were no grants to non-employees. The fair value of the options issued was
approximately $62,000.
No
options were exercised in the six and three months ended June 30, 2021. The intrinsic value of options outstanding and of options exercisable
at June 30, 2021 was approximately $177,000 and $134,000, respectively.
The
Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective
years (all in weighted averages):
SUMMARY OF BLACK-SCHOLES OPTION PRICING TO ESTIMATE FAIR VALUE
|
|
Number
of
Options
(in
shares)
|
|
|
Weighted
Average
Exercise
Price
Per
Share
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2020
|
|
|
722,501
|
|
|
$
|
0.62
|
|
|
|
4.4
years
|
|
|
$
|
29,000
|
|
Granted
|
|
|
165,000
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(40,255
|
)
|
|
|
3.13
|
|
|
|
|
|
|
|
|
|
Outstanding at June 30, 2021
|
|
|
847,246
|
|
|
$
|
0.48
|
|
|
|
4.7
years
|
|
|
$
|
177,000
|
|
Exercisable at June 30, 2021
|
|
|
546,074
|
|
|
$
|
0.50
|
|
|
|
3.9
years
|
|
|
$
|
134,000
|
|
The
fair value of the options granted of approximately $62,000 was estimated on the grant date using the Black-Scholes option-pricing model
with the following weighted average assumptions:
SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES PRICING MODEL
|
|
|
|
|
Risk-free interest rate
|
|
|
.44
|
%
|
Expected term of options
|
|
|
3.9
years
|
|
Expected annual volatility
|
|
|
101
|
%
|
Expected dividend yield
|
|
|
—
|
%
|
(c)
Stock-based Compensation Expense
Stock-based
compensation expense included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated
statements of operations was approximately $36,000 and $19,000 for the six-month periods ended June 30, 2021 and 2020, respectively and
approximately $21,000 and $13,000 for the three-month periods ended June 30, 2021 and 2020, respectively.
The
total compensation cost related to non-vested awards not yet recognized was approximately $73,000 as of June 30, 2021.
(d)
Warrants
The
Company previously issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the
date of issuance. A summary of warrant activity follows:
SUMMARY OF WARRANT ACTIVITY
|
|
Number
of
Warrants
(in
shares)
|
|
|
Weighted
Average
Exercise
Price Per Share
|
|
|
Weighted
Average
Remaining
Contractual Life
|
|
Outstanding at December 31, 2020
|
|
|
35,000
|
|
|
$
|
0.13
|
|
|
|
2.2
years
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Forfeited or expired
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
Outstanding at June 30, 2021
|
|
|
35,000
|
|
|
$
|
0.13
|
|
|
|
1.71
years
|
|
NOTE
8— SEGMENT REPORTING
As
of June 30, 2021, the Company operates in two reportable operating segments, both of which are performed through the Company’s
OmniMetrix subsidiary:
|
●
|
The
PG (Power Generation) segment provides wireless remote monitoring and control systems and services for critical assets as well as
Internet of Things applications. The PG segment includes OmniMetrix’s monitoring device for industrial air compressors and
dryers, and a new line of annunciators.
|
|
|
|
|
●
|
The
CP (Cathodic Protection) segment provides remote monitoring of cathodic protection systems on gas pipelines for gas utilities and
pipeline companies.
|
The
Company’s reportable segments are strategic business units, offering different products and services, and are managed separately
as each business requires different technology and marketing strategies.
The
following tables represent segmented data for the three-month and six-month periods ended June 30, 2021 and 2020 (in thousands):
SUMMARY OF SEGMENTED DATA
|
|
PG
|
|
|
CP
|
|
|
Total
|
|
Six months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from
external customers
|
|
$
|
2,837
|
|
|
$
|
479
|
|
|
$
|
3,316
|
|
Segment gross profit
|
|
|
2,150
|
|
|
|
282
|
|
|
|
2,432
|
|
Depreciation and amortization
|
|
|
32
|
|
|
|
5
|
|
|
|
37
|
|
Segment income(loss) before
income taxes
|
|
$
|
510
|
|
|
$
|
(17
|
)
|
|
$
|
493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external
customers
|
|
$
|
2,371
|
|
|
$
|
435
|
|
|
$
|
2,806
|
|
Segment gross profit
|
|
|
1,720
|
|
|
|
224
|
|
|
|
1,944
|
|
Depreciation and amortization
|
|
|
17
|
|
|
|
4
|
|
|
|
21
|
|
Segment income(loss) before
income taxes
|
|
$
|
204
|
|
|
$
|
(72
|
)
|
|
$
|
132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external
customers
|
|
$
|
1,379
|
|
|
$
|
232
|
|
|
$
|
1,611
|
|
Segment gross profit
|
|
|
1,082
|
|
|
|
140
|
|
|
|
1,222
|
|
Depreciation and amortization
|
|
|
19
|
|
|
|
3
|
|
|
|
22
|
|
Segment income(loss) before
income taxes
|
|
$
|
234
|
|
|
$
|
(4
|
)
|
|
$
|
230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external
customers
|
|
$
|
1,262
|
|
|
$
|
206
|
|
|
$
|
1,468
|
|
Segment gross profit
|
|
|
915
|
|
|
|
107
|
|
|
|
1,022
|
|
Depreciation and amortization
|
|
|
4
|
|
|
|
1
|
|
|
|
5
|
|
Segment income(loss) before
income taxes
|
|
$
|
199
|
|
|
$
|
(10
|
)
|
|
$
|
189
|
|
The
Company does not currently break out total assets by reportable segment as there is a high level of shared utilization between the segments.
Further, the Chief Decision Maker does not review the assets by segment.
Reconciliation
of Segment Income (Loss) to Consolidated Net Income (Loss) Before Income Taxes
SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED NET INCOME LOSS BEFORE INCOME TAXES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six
months ended
June
30,
|
|
|
Three
months ended
June
30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Total net income before income
taxes for reportable segments
|
|
$
|
493
|
|
|
$
|
132
|
|
|
$
|
230
|
|
|
$
|
189
|
|
Unallocated cost of
corporate headquarters
|
|
|
(467
|
)
|
|
|
(448
|
)
|
|
|
(226
|
)
|
|
|
(221
|
)
|
Consolidated net income (loss) before income
taxes
|
|
$
|
26
|
|
|
$
|
(316
|
)
|
|
$
|
4
|
|
|
$
|
(32
|
)
|
NOTE
9—REVENUE
The
following table disaggregates the Company’s revenue for the three-and-six-month periods ended June 30, 2021 and 2020 (in thousands):
SCHEDULE OF DISAGGREGATES OF REVENUE
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Six months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG Segment
|
|
$
|
942
|
|
|
$
|
1,895
|
|
|
$
|
2,837
|
|
CP
Segment
|
|
|
349
|
|
|
|
130
|
|
|
|
479
|
|
Total
Revenue
|
|
$
|
1,291
|
|
|
$
|
2,025
|
|
|
$
|
3,316
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Six
months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
PG
Segment
|
|
$
|
645
|
|
|
$
|
1,726
|
|
|
$
|
2,371
|
|
CP
Segment
|
|
|
308
|
|
|
|
127
|
|
|
|
435
|
|
Total
Revenue
|
|
$
|
953
|
|
|
$
|
1,853
|
|
|
$
|
2,806
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Three
months ended June 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG
Segment
|
|
$
|
425
|
|
|
$
|
954
|
|
|
$
|
1,379
|
|
CP
Segment
|
|
|
169
|
|
|
|
63
|
|
|
|
232
|
|
Total
Revenue
|
|
$
|
594
|
|
|
$
|
1,017
|
|
|
$
|
1,611
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Three
months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG
Segment
|
|
$
|
368
|
|
|
$
|
894
|
|
|
$
|
1,262
|
|
CP
Segment
|
|
|
142
|
|
|
|
64
|
|
|
|
206
|
|
Total
Revenue
|
|
$
|
510
|
|
|
$
|
958
|
|
|
$
|
1,468
|
|
Deferred
revenue activity for the six months ended June 30, 2021 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED REVENUE ACTIVITY
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Balance
at December 31, 2020
|
|
$
|
2,576
|
|
|
$
|
1,978
|
|
|
$
|
4,554
|
|
Additions
during the period
|
|
|
1,068
|
|
|
|
2,019
|
|
|
|
3,087
|
|
Recognized
as revenue
|
|
|
(898
|
)
|
|
|
(2,024
|
)
|
|
|
(2,922
|
)
|
Balance
at June 30, 2021
|
|
$
|
2,746
|
|
|
$
|
1,973
|
|
|
$
|
4,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts
to be recognized as revenue in the twelve-month-period ending:
|
|
|
|
|
|
|
|
|
|
|
|
|
June
30, 2022
|
|
$
|
1,507
|
|
|
$
|
1,732
|
|
|
$
|
3,239
|
|
June
30, 2023
|
|
|
905
|
|
|
|
234
|
|
|
|
1,139
|
|
June
30, 2024 and thereafter
|
|
|
334
|
|
|
|
7
|
|
|
|
341
|
|
Total
|
|
$
|
2,746
|
|
|
$
|
1,973
|
|
|
$
|
4,719
|
|
Other
revenue of approximately $394,000, is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue
when sold and are not deferred.
Deferred
charges relate only to the sale of equipment. Deferred charges activity for the six months ended June 30, 2021 can be seen in the table
below (in thousands):
SCHEDULE OF DEFERRED CHARGES ACTIVITY
Balance at December 31, 2020
|
|
$
|
1,306
|
|
Additions, net of adjustments,
during the period
|
|
|
472
|
|
Recognized as cost
of sales
|
|
|
(467
|
)
|
Balance at June 30, 2021
|
|
$
|
1,311
|
|
|
|
|
|
|
Amounts to be recognized as cost of sales in
the twelve-month-period ending:
|
|
|
|
|
June 30, 2022
|
|
$
|
738
|
|
June 30, 2023
|
|
|
425
|
*
|
June 30, 2024 and
thereafter
|
|
|
148
|
*
|
|
|
$
|
1,311
|
|
|
*
|
Amounts included in other
assets in the Company’s unaudited condensed consolidated balance sheets at June 30, 2021.
|
Other
cost of goods sold (COGS) recognized of approximately $231,000
is related to accessories, repairs, and other
miscellaneous charges that are recognized to revenue when sold and are not deferred in addition to $186,000
in monitoring COGS which is not deferred.
The
following table provides a reconciliation of the Company’s sales commissions contract assets for the six-month period ended June
30, 2021 (in thousands):
SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Balance at December 31, 2020
|
|
$
|
136
|
|
|
$
|
41
|
|
|
$
|
177
|
|
Additions during the period
|
|
|
88
|
|
|
|
15
|
|
|
|
103
|
|
Amortization of sales
commissions
|
|
|
(48
|
)
|
|
|
(10
|
)
|
|
|
(58
|
)
|
Balance at June 30, 2021
|
|
$
|
176
|
|
|
$
|
46
|
|
|
$
|
222
|
|
The
capitalized sales commissions are included in other current assets (approximately $107,000) and other assets (approximately $115,000)
in the Company’s unaudited condensed consolidated balance sheets at June 30, 2021. The capitalized sales commissions are included
in other current assets (approximately $90,000) and other assets (approximately $87,000) in the Company’s consolidated balance
sheets at December 31, 2020.
NOTE
10—SUBSEQUENT EVENTS
On
July 6, 2021, the Company entered into an agreement with King Industrial Reality, Inc. to sublease 1,900 square feet of office space
of the Company’s 21,000 square feet of office and production space in the Hamilton Mill Business Park located in Buford, Georgia
for a monthly sublease payment of $2,375 including the base rent plus a pro-rata share of utilities, property taxes and insurance. Fifty
percent of any excess rent received above the per square foot amount that the Company pays will be remitted to the Company’s landlord.
The sublease will commence on or about September 1, 2021 and run through December 31, 2024.
ACORN
ENERGY, INC.
ITEM
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
This
Form 10-Q contains “forward-looking statements” relating to the Company which represent the Company’s current expectations
or beliefs including, but not limited to, statements concerning the Company’s operations, performance, financial condition and
growth. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements.
Without limiting the generality of the foregoing, words such as “may”, “anticipate”, “intend”, “could”,
“estimate” or “continue” or the negative or other comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management
and key personnel, variability of quarterly results, and the ability of the Company to continue its growth strategy and the Company’s
competition, certain of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialize
or should the underlying assumptions prove incorrect, or any of the other risks set out under the caption “Risk Factors”
in the Company’s 10-K report for the year ended December 31, 2020 occur, actual outcomes and results could differ materially from
those indicated in the forward-looking statements.
Any
forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update
any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect
the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for management to predict all of
such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors,
may cause actual results to differ materially from those contained in any forward-looking statements.
FINANCIAL
RESULTS BY COMPANY
The
following table shows, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated
companies. In the tables and discussion below, research and development expenses is referred to as “R&D” expense, selling,
general and administrative expense is referred to as “SG&A” expense.
|
|
Six
months ended June 30, 2021
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total
Continuing Operations
|
|
Revenue
|
|
$
|
3,316
|
|
|
$
|
—
|
|
|
$
|
3,316
|
|
Cost of sales
|
|
|
884
|
|
|
|
—
|
|
|
|
884
|
|
Gross profit
|
|
|
2,432
|
|
|
|
—
|
|
|
|
2,432
|
|
Gross profit margin
|
|
|
73
|
%
|
|
|
|
|
|
|
73
|
%
|
R&D expense
|
|
|
353
|
|
|
|
—
|
|
|
|
353
|
|
SG&A expense
|
|
|
1,581
|
|
|
|
467
|
|
|
|
2,048
|
|
Operating income (loss)
|
|
$
|
498
|
|
|
$
|
(467
|
)
|
|
$
|
31
|
|
|
|
Six
months ended June 30, 2020
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total
Continuing Operations
|
|
Revenue
|
|
$
|
2,806
|
|
|
$
|
—
|
|
|
$
|
2,806
|
|
Cost of sales
|
|
|
862
|
|
|
|
—
|
|
|
|
862
|
|
Gross profit
|
|
|
1,944
|
|
|
|
—
|
|
|
|
1,944
|
|
Gross profit margin
|
|
|
69
|
%
|
|
|
|
|
|
|
69
|
%
|
R&D expense
|
|
|
293
|
|
|
|
—
|
|
|
|
293
|
|
SG&A expense
|
|
|
1,502
|
|
|
|
445
|
|
|
|
1,947
|
|
Operating loss
|
|
$
|
149
|
|
|
$
|
(445
|
)
|
|
$
|
(296
|
)
|
|
|
Three
months ended June 30, 2021
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total
Continuing Operations
|
|
Revenue
|
|
$
|
1,611
|
|
|
$
|
—
|
|
|
$
|
1,611
|
|
Cost of Sales
|
|
|
389
|
|
|
|
—
|
|
|
|
389
|
|
Gross profit
|
|
|
1,222
|
|
|
|
—
|
|
|
|
1,222
|
|
Gross profit margin
|
|
|
76
|
%
|
|
|
|
|
|
|
76
|
%
|
R&D expense
|
|
|
175
|
|
|
|
—
|
|
|
|
175
|
|
SG&A expense
|
|
|
816
|
|
|
|
226
|
|
|
|
1,042
|
|
Operating income (loss)
|
|
$
|
231
|
|
|
$
|
(226
|
)
|
|
$
|
5
|
|
|
|
Three
months ended June 30, 2020
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total
Continuing Operations
|
|
Revenue
|
|
$
|
1,468
|
|
|
$
|
—
|
|
|
$
|
1,468
|
|
Cost of Sales
|
|
|
446
|
|
|
|
—
|
|
|
|
446
|
|
Gross profit
|
|
|
1,022
|
|
|
|
—
|
|
|
|
1,022
|
|
Gross profit margin
|
|
|
70
|
%
|
|
|
|
|
|
|
70
|
%
|
R&D expense
|
|
|
138
|
|
|
|
—
|
|
|
|
138
|
|
SG&A expense
|
|
|
684
|
|
|
|
222
|
|
|
|
906
|
|
Operating loss
|
|
$
|
200
|
|
|
$
|
(222
|
)
|
|
$
|
(22
|
)
|
BACKLOG
As
of June 30, 2020, our backlog of work to be completed (primarily deferred revenue) at our OmniMetrix subsidiary totaled approximately
$4,719,000.
RECENT
DEVELOPMENTS
On
March 17, 2021, we entered into a master services agreement for the development of a new user interface for our customer data portal.
The cost of this project will be approximately $106,000 ($14,000 was paid at the commencement of this project and four equal installments
of approximately $23,000 are due monthly starting in July 2021 and ending in October 2021). This project is expected to be completed
by the end of 2021. This master services agreement also covers strategic enhancements to our technology infrastructure for an investment
in the initial phase of approximately $21,000. These enhancements are expected to be completed by year-end. These costs are capitalized
and amortization will begin once the new interface and the new infrastructure environment are launched.
On
May 10, 2021, the monthly consulting fee for our Chief Financial Officer, Tracy S. Clifford, who also serves as Chief Operating Officer
of our OmniMetrix subsidiary, was increased from $16,500 to $17,500, effective June 1, 2021. Ms. Clifford was also granted options to
purchase 100,000 shares of our common stock, with an exercise price of $0.62 per share, which was the closing price of the common stock
on May 7, 2021. The options vest and become exercisable on the first anniversary of the date of the 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 our Company.
On
July 6, 2021, we entered into an agreement with King Industrial Reality, Inc. to sublease 1,900 square feet of office space of our 21,000
square feet of office and production space in the Hamilton Mill Business Park located in Buford, Georgia for a monthly sublease payment
of $2,375 including the base rent plus a pro-rata share of utilities, property taxes and insurance. Fifty percent of any excess rent
received above the per square foot amount that we pay will be remitted to our landlord. The term of the sublease will commence on
or about September 1, 2021 and run through December 31, 2024.
OVERVIEW
AND TREND INFORMATION
Acorn
Energy, Inc. (“Acorn” or “the Company”) is a holding company focused on technology driven solutions for energy
infrastructure asset management. We provide the following services and products through our OmniMetrixTM, LLC (“OmniMetrix”)
subsidiary:
|
●
|
Power
Generation (“PG”) monitoring. OmniMetrix’s PG activities provide wireless remote monitoring and control systems
and services for critical assets as well as Internet of Things applications. The PG segment includes our monitoring device for industrial
air compressors and dryers and a new line of annunciators.
|
|
|
|
|
●
|
Cathodic
Protection (“CP”) monitoring. OmniMetrix’s CP segment provides remote monitoring of cathodic protection systems
on gas pipelines for gas utilities and pipeline companies.
|
Each
of our PG and CP activities represents a reportable segment. The following analysis should be read together with the segment and revenue
information provided in Notes 8 and 9 to the interim unaudited condensed consolidated financial statements included in this quarterly
report.
OmniMetrix
OmniMetrix
is a Georgia limited liability company based in Buford, Georgia that develops and markets wireless remote monitoring and control systems
and services for multiple markets in the Internet of Things (“IoT”) ecosystem: critical assets (including stand-by power
generators, pumps, pumpjacks, light towers, turbines, compressors, as well as other industrial equipment) as well as cathodic protection
for the pipeline industry (gas utilities and pipeline companies). Acorn owns 99% of OmniMetrix with 1% owned by the former CEO of OmniMetrix.
Following
the emergence of machine-to-machine (M2M) and IoT applications, whereby companies aggregate multiple sensors and monitors into a simplified
dashboard for customers, OmniMetrix believes it plays a key role in this new economic ecosystem. In addition, OmniMetrix sees a rapidly
growing need for backup power infrastructure to secure critical military, government, and private sector assets against emergency events
including terrorist attacks, natural disasters, and cybersecurity threats. As residential and industrial standby generators, turbines,
compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure increasingly becoming
monitored in IoT applications, and given that OmniMetrix monitors all major brands of critical equipment, OmniMetrix believes it is well-positioned
as a competitive participant in this new market.
Sales
of OmniMetrix monitoring systems include the sale of equipment and of monitoring services. Revenue (and related costs) associated with
sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. Revenue and related
costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently estimated to be three
years. Revenues from the prepayment of monitoring fees (generally paid twelve months in advance) are initially recorded as deferred revenue
upon receipt of payment from the customer and then amortized to revenue over the monitoring service period.
OmniMetrix
Line of Credit
In
March 2019, OmniMetrix reinstated its loan and security agreement which provided OmniMetrix with access to accounts receivable formula-based
financing of the lesser of 75% of eligible receivables or $1 million. Debt incurred under this financing arrangement bore interest at
the greater of 6% and prime plus 1.5% per year. In addition, OmniMetrix was to pay a monthly service charge of 0.75% of the average aggregate
principal amount outstanding for the prior month, for an effective rate of interest on advances of 15%. OmniMetrix also agreed to maintain
a minimum loan balance of $150,000 in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019. The monthly
service charge and interest was calculated on the greater of the outstanding balance or $150,000. From time to time, the balance outstanding
could fall below $150,000 based on collections applied against the loan balance and the timing of loan draws.
We
repaid the outstanding balance of approximately $149,000 in February 2021 and elected not to renew this line of credit, which expired
in accordance with its terms on February 28, 2021.
Results
of Operations
The
following table sets forth certain information with respect to the condensed consolidated results of operations of the Company for the
six-month periods ended June 30, 2021 and 2020, including the percentage of total revenues during each period attributable to selected
components of the operations statement data and for the period-to-period percentage changes in such components. For segment data, see
Notes 8 and 9 to the unaudited condensed consolidated financial statements included in this quarterly report.
|
|
Six
months ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
Change
|
|
|
|
($,000)
|
|
|
%
of revenues
|
|
|
($,000)
|
|
|
%
of revenues
|
|
|
from
2020 to 2021
|
|
Revenue
|
|
$
|
3,316
|
|
|
|
100
|
%
|
|
$
|
2,806
|
|
|
|
100
|
%
|
|
|
18
|
%
|
Cost
of sales
|
|
|
884
|
|
|
|
27
|
%
|
|
|
862
|
|
|
|
31
|
%
|
|
|
3
|
%
|
Gross
profit
|
|
|
2,432
|
|
|
|
73
|
%
|
|
|
1,944
|
|
|
|
69
|
%
|
|
|
25
|
%
|
R&D
expense
|
|
|
353
|
|
|
|
11
|
%
|
|
|
293
|
|
|
|
10
|
%
|
|
|
20
|
%
|
SG&A
expense
|
|
|
2,048
|
|
|
|
62
|
%
|
|
|
1,947
|
|
|
|
69
|
%
|
|
|
5
|
%
|
Operating
income (loss)
|
|
|
31
|
|
|
|
1
|
%
|
|
|
(296
|
)
|
|
|
(11
|
)%
|
|
|
(110
|
)%
|
Finance
expense, net
|
|
|
(5
|
)
|
|
|
*
|
%
|
|
|
(20
|
)
|
|
|
(1
|
)%
|
|
|
(75
|
)%
|
Income
(loss) before income taxes
|
|
|
26
|
|
|
|
1
|
%
|
|
|
(316
|
)
|
|
|
(11
|
)%
|
|
|
(108
|
)%
|
Income
tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
Net
income (loss)
|
|
|
26
|
|
|
|
1
|
%
|
|
|
(316
|
)
|
|
|
(11
|
)%
|
|
|
(108
|
)%
|
Non-controlling
interests share of net income
|
|
|
(4
|
)
|
|
|
*
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
(100
|
)%
|
Net
income (loss) attributable to Acorn Energy, Inc.
|
|
$
|
22
|
|
|
|
1
|
%
|
|
$
|
(316
|
)
|
|
|
(11
|
)%
|
|
|
(107
|
)%
|
*result
is less than 1%.
The
following table sets forth certain information with respect to the condensed consolidated results of operations of the Company for the
three-month periods ended June 30, 2021 and 2020, including the percentage of total revenues during each period attributable to selected
components of the operations statement data and for the period-to-period percentage changes in such components. For segment data, see
Notes 8 and 9 to the unaudited condensed consolidated financial statements included in this quarterly report.
|
|
Three
months ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
Change
|
|
|
|
($,000)
|
|
|
%
of revenues
|
|
|
($,000)
|
|
|
%
of revenues
|
|
|
from
2020 to 2021
|
|
Revenue
|
|
$
|
1,611
|
|
|
|
100
|
%
|
|
$
|
1,468
|
|
|
|
100
|
%
|
|
|
10
|
%
|
Cost
of sales
|
|
|
389
|
|
|
|
24
|
%
|
|
|
446
|
|
|
|
30
|
%
|
|
|
(13
|
)%
|
Gross
profit
|
|
|
1,222
|
|
|
|
76
|
%
|
|
|
1,022
|
|
|
|
70
|
%
|
|
|
20
|
%
|
R&D
expense
|
|
|
175
|
|
|
|
11
|
%
|
|
|
138
|
|
|
|
9
|
%
|
|
|
27
|
%
|
SG&A
expense
|
|
|
1,042
|
|
|
|
65
|
%
|
|
|
906
|
|
|
|
62
|
%
|
|
|
15
|
%
|
Operating
income (loss)
|
|
|
5
|
|
|
|
*
|
%
|
|
|
(22
|
)
|
|
|
(1
|
)%
|
|
|
123
|
%
|
Finance
expense, net
|
|
|
(1
|
)
|
|
|
*
|
%
|
|
|
(10
|
)
|
|
|
(1
|
)%
|
|
|
(90
|
)%
|
Income
(loss) before income taxes
|
|
|
4
|
|
|
|
*
|
%
|
|
|
(32
|
)
|
|
|
(2
|
)%
|
|
|
113
|
%
|
Income
tax expense
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
Net
income (loss)
|
|
|
4
|
|
|
|
*
|
%
|
|
|
(32
|
)
|
|
|
(2
|
)%
|
|
|
113
|
%
|
Non-controlling
interests share of net income
|
|
|
(2
|
)
|
|
|
*
|
%
|
|
|
(1
|
)
|
|
|
*
|
%
|
|
|
100
|
%
|
Net
income (loss) attributable to Acorn Energy, Inc.
|
|
$
|
2
|
|
|
|
*
|
%
|
|
$
|
(33
|
)
|
|
|
(2
|
)%
|
|
|
106
|
%
|
*result
is less than 1%.
Revenue
for the six and three months ended June 30, 2021 and 2020
In
the six months ended June 30, 2021, revenue increased by approximately $510,000, or 18%, from approximately $2,806,000 in the six
months ended June 30, 2020 to approximately $3,316,000 in the six months ended June 30, 2021. OmniMetrix’s increased revenue
during the six months ended June 30, 2021 was primarily attributable to increased hardware and accessories sales, which increased
approximately $338,000, or 35%, from approximately $953,000 in the six months ended June 30, 2020 to approximately $1,291,000 in the
six months ended June 30, 2021. The increase in hardware revenue was due to an increase in the sale of (i) TG2 units , (ii) custom
TG Pro units that are designed to large customer specifications and monitored by the customer and thus the revenue is not deferred,
(iii) unit accessories for which the revenue is not deferred, and (iv) Hero-2 units.
Monitoring
revenue increased by approximately $172,000, or 9%, from approximately $1,853,000 in the six months ended June 30, 2020 to approximately
$2,025,000 in the six months ended June 30, 2021. As previously noted, the increase in monitoring revenue is due to an increase in the
number of installed billable connections.
As
discussed above, OmniMetrix has two reportable segments, PG and CP. Of the approximately $3,316,000 in revenue recognized in the six
months ended June 30, 2021, approximately $2,837,000 was generated by PG activities and approximately $479,000 was generated by CP activities.
This represents an increase in revenue from PG activities of approximately $466,000, or 20%, from approximately $2,371,000 in the six
months ended June 30, 2020, and an increase in revenue from CP activities of approximately $44,000, or 10%, from approximately $435,000
in the six months ended June 30, 2020. The CP sales cycle can take twelve to eighteen months from customer introduction to closing. The
CP sales cycle has been further extended due to the restrictions from COVID-19 and our ability to meet with potential customers and to
act timely and effectively on sales leads. We are now starting to see some positive results from the CP sales efforts as potential customers
are opening or otherwise relaxing the COVID-19 restrictions.
Revenue
increased by approximately $143,000, or 10%, from approximately $1,468,000 in the three months ended June 30, 2020 to approximately $1,611,000
in the three months ended June 30, 2021. OmniMetrix’s increased revenue during the three months ended June 30, 2021 was primarily
attributable to increased hardware and accessories sales, which increased approximately $84,000 or 16%, from approximately $510,000 in
the three months ended June 30, 2020 to approximately $594,000 in the three months ended June 30, 2021.
Monitoring
revenue increased by approximately $59,000, or 6%, from approximately $958,000 in the three months ended June 30, 2020 to approximately
$1,017,000 in the three months ended June 30, 2021. The increase in monitoring revenue is due to an increase in the number of installed
billable connections.
Of
the approximately $1,611,000 in revenue recognized in the three months ended June 30, 2021, approximately $1,379,000 was generated by
PG activities and approximately $232,000 was generated by CP activities. This represents an increase in revenue from PG activities of
approximately $117,000, or 9%, from approximately $1,262,000 in the three months ended June 30, 2020, and an increase in revenue from
CP activities of approximately $26,000, or 13%, from approximately $206,000 in the three months ended June 30, 2020.
Gross
profit for the six and three months ended June 30, 2021 and 2020
Gross
profit for the six months ended June 30, 2021 was approximately $2,432,000 reflecting a gross margin of 73% compared with a gross profit
of $1,944,000 reflecting a 69% gross margin for the six months ended June 30, 2020. Gross margin on hardware revenue for the six months
ended June 30, 2021 was 46% compared to 40% for the six months ended June 30, 2020.
Gross
profit for the three months ended June 30, 2021 was approximately $1,222,000 reflecting a gross margin of 76% on revenue compared with
a gross profit for the three months ended June 30, 2020 of $1,022,000 reflecting a gross margin of 70% on revenue. Gross margin on hardware
revenue for the three months ended June 30, 2021 was 43% compared to 42% for the three months ended June 30, 2020.
The
increased gross profit and gross margin in both the six- and three-month periods in 2021 was due to an increase in (i) sales to commercial
and industrial customers over residential customers, (ii) accessory sales, (iii) monitoring revenue, and the restructuring of our data
plan.
Operating
expenses for the six and three months ended June 30, 2021 and 2020
OmniMetrix
R&D expense. During the six months ended June 30, 2021 and 2020, R&D expense was $353,000 and $293,000, respectively. During
the three months ended June 30, 2021, OmniMetrix recorded $175,000 of R&D expense as compared to $138,000 in the three months ended
June 30, 2020. The increase in R&D expense in 2021 is related to the continued development of next generation PG and CP products
and exploration into new possible product lines. We expect a moderate increase in R&D expense throughout 2021 as we continue to work
on certain initiatives to redesign products and expand product lines to increase the level of innovation.
OmniMetrix
SG&A expense. During the six months ended June 30, 2021, OmniMetrix recorded SG&A expense of approximately $1,581,000 compared
to SG&A costs of approximately $1,507,000 in the six months ended June 30, 2020, an increase of $74,000, or 5%. During the three
months ended June 30, 2021, OmniMetrix recorded SG&A expense of approximately $816,000 compared to SG&A costs of approximately
$687,000, in the three months ended June 30, 2020, an increase of approximately $129,000, or 19%. The increase in both periods is due
to (i) an increase in travel expenses which had been significantly lower than normal in 2020 due to COVID-19 travel and trade show restrictions,
(ii) compensation and benefit expenses in connection with two new sales engineers hired in March 2021, (iii) changes in our commission
plan, and (iv) continued expenses related to enhancements in our technology infrastructure. We anticipate that our annual SG&A costs
throughout 2021 will continue to increase due to having a fully staffed sales team, increases in sales travel to gain momentum stymied
by COVID-19, additions to staff as we grow and our continuing investments in our technology infrastructure.
Corporate SG&A
expense. Corporate SG&A expense of $467,000 in the first six months of 2021 reflected an increase of approximately $22,000,
or 5%, from the $445,000 of corporate SG&A expense reported in the first six months of 2020. This increase is primarily
due to increases audit fees and insurance costs. Corporate SG&A expense for the three months ended June 30, 2021 increased
$4,000, or 2%, to $226,000 from $222,000 for the three months ended June 30, 2020. Second quarter 2021 corporate
SG&A expense of $226,000 was below first quarter 2021 corporate SG&A expense of $241,000 primarily due to
the timing of certain expenses. We do not expect the quarterly corporate overhead to change materially except as may be required to support
the growth of our OmniMetrix subsidiary and typical annual increases in professional fees and insurance premiums.
Net
income (loss) attributable to Acorn Energy. We recognized net income attributable to Acorn shareholders of approximately $22,000
in the six months ended June 30, 2021 compared to a net loss attributable to Acorn shareholders of approximately $316,000 in the six
months ended June 30, 2020. Our net income during the six months ended June 30, 2021 is comprised of net income at OmniMetrix of approximately
$493,000 offset by corporate expenses of approximately $467,000 and the non-controlling interest share of our income from OmniMetrix
of approximately $4,000. Our net loss in the six months ended June 30, 2020 was comprised of net income at OmniMetrix of $133,000 plus
corporate expense of $449,000.
For
the three months ended June 30, 2021, we recognized net income attributable to Acorn shareholders of approximately $2,000 compared to
a net loss attributable to Acorn shareholders of approximately $33,000 for the three months ended June 30, 2020. Our net income in the
three months ended June 30, 2021 is comprised of net income at OmniMetrix of approximately $230,000 offset by corporate expenses of approximately
$226,000 and the non-controlling interest share of our income from OmniMetrix of approximately $2,000. Our loss in the three months ended
June 30, 2020 was comprised of net income at OmniMetrix of $190,000 offset by corporate expense of $222,000 plus $1,000 attributed to
the non-controlling interest share of our income in OmniMetrix.
Liquidity
and Capital Resources
At
June 30, 2021, we had working capital of approximately $40,000. Our working capital includes approximately $1,955,000 of cash and deferred
revenue of approximately $3,239,000. The deferred revenue does not require significant cash outlay for the revenue to be recognized.
During
the first six months of 2021, our OmniMetrix subsidiary provided approximately $544,000 from operations while our corporate headquarters
used approximately $461,000 during the same period.
We
invested $42,000 in technology in projects including user interface development and design of cloud server environment as well as investments
in new hardware and software upgrades.
Net
cash of $149,000 was used in financing activities during the first six months of 2021 in repayments on our line of credit described above.
Other
Liquidity Matters
OmniMetrix
owes Acorn approximately $4,431,000 for loans, accrued interest and expenses advanced to it by Acorn. OmniMetrix made repayments to Acorn
of approximately $344,000 in the six months ended June 30, 2021 offset by interest, dividends and other advances of approximately $200,000
in the aggregate.
As
of August 5, 2021, we had cash of approximately $2,039,000. We believe that such cash, plus the cash generated from operations,
will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their current level of operations for
the foreseeable future and for the twelve months from the issuance of these unaudited condensed consolidated financial statements in
particular. We may, at some point, elect to obtain a new line of credit to fund additional investments in the business.
Contractual
Obligations and Commitments
The
table below provides information concerning obligations under certain categories of our contractual obligations as of June 30, 2021.
CASH
PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
|
|
Twelve
Month Periods Ending June 30, (in thousands)
|
|
|
|
Total
|
|
|
2022
|
|
|
2023-2024
|
|
|
2025-2026
|
|
|
2027
and thereafter
|
|
Software agreements
|
|
$
|
66
|
|
|
$
|
62
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating leases
|
|
|
542
|
|
|
|
122
|
|
|
|
256
|
|
|
|
164
|
|
|
|
—
|
|
Contractual services
|
|
|
223
|
|
|
|
223
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total contractual cash
obligations
|
|
$
|
831
|
|
|
$
|
407
|
|
|
$
|
260
|
|
|
$
|
164
|
|
|
$
|
—
|
|