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 Nine Months Ended September 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
|
)
|
Net 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
|
)
|
Balance as of June 30, 2020
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
102,710
|
|
|
$
|
3
|
|
|
$
|
(100,998
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(924
|
)
|
|
$
|
(1
|
)
|
|
$
|
(925
|
)
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(32
|
)
|
|
|
1
|
|
|
|
(31
|
)
|
Accrued dividend in OmniMetrix preferred shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
(1
|
)
|
Stock option compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8
|
|
|
|
—
|
|
|
|
8
|
|
Balances as of September 30, 2020
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
102,718
|
|
|
$
|
3
|
|
|
$
|
(101,030
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(948
|
)
|
|
$
|
(1
|
)
|
|
$
|
(949
|
)
|
Balance as of September 30, 2020
|
|
|
39,687
|
|
|
$
|
397
|
|
|
$
|
102,718
|
|
|
$
|
3
|
|
|
$
|
(101,030
|
)
|
|
|
802
|
|
|
$
|
(3,036
|
)
|
|
$
|
(948
|
)
|
|
$
|
(1
|
)
|
|
$
|
(949
|
)
|
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 nine- and three-month
periods ended September 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, filed with the Securities
and Exchange Commission on March 16, 2021.
NOTE 2—ACCOUNTING POLICIES
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 $2,016,000
at September 30, 2021. The Company does not believe
there is significant risk of non-performance by these counterparties. For the three and nine-month periods ended September 30, 2021,
there were no customers that represented greater than 10%
of the Company’s total invoiced sales. Approximately 12%
of the accounts receivable at September 30, 2021 was due from one customer who pays its receivables over usual credit periods. As of
November 8, 2021 the Company had collected 100%
of the outstanding amount of approximately $98,000
due from this customer as of September 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 income (loss) per share if doing so would be antidilutive. The number of options that were excluded from the computation
of diluted net income (loss) per share, as they had an antidilutive effect, was approximately 291,000
(which have a weighted average exercise price
of $0.56)
and approximately 181,000
(which have a weighted average exercise price
of $0.66)
for the nine- and three-month periods ending September 30, 2021, respectively. There were no anti-dilutive warrants. For both the nine-
and three-month periods ending September 30, 2020, the number of options and warrants that were excluded from the computation of diluted
net income (loss) per share, as they had an antidilutive effect, was approximately 937,000
options (which had a weighted average exercise
price of $1.19)
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
|
|
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net income (loss) available to common stockholders
|
|
$
|
45
|
|
|
$
|
(348
|
)
|
|
$
|
23
|
|
|
$
|
(32
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average share outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
39,687
|
|
|
|
39,669
|
|
|
|
39,687
|
|
|
|
39,687
|
|
Add: Warrants
|
|
|
28
|
|
|
|
—
|
|
|
|
28
|
|
|
|
—
|
|
Add: Stock options
|
|
|
207
|
|
|
|
—
|
|
|
|
244
|
|
|
|
—
|
|
Diluted
|
|
|
39,922
|
|
|
|
39,669
|
|
|
|
39,959
|
|
|
|
39,687
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
Recently
Issued Accounting Principles
Other
than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting pronouncements during
the nine- and three-month periods ended September 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
September 30, 2021, the Company had working capital of approximately $13,000. The Company’s working capital includes approximately
$2,016,000 of cash and deferred revenue of approximately $3,458,000. The deferred revenue does not require significant cash outlay for
the revenue to be recognized. During the first nine months of 2021, the Company’s OmniMetrix, LLC subsidiary provided approximately
$1,015,000 from operations while the Company’s corporate headquarters used approximately $692,000 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 and meeting 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 continue to be positioned for stable financial performance. Business travel
has now started to resume and sales are returning to projected levels.
As
of November 8, 2021, the Company had cash of approximately $1,928,000. 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 or other source of financing 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 nine months ended September 30,
2021 and 2020 were approximately $90,000 and $48,000, respectively. Operating lease payments for the three months ended September 30,
2021 and 2020 were approximately $30,000 and $10,000, respectively. The future minimum lease payments on non-cancellable operating leases
as of September 30, 2021 using a discount rate of 4.5% are $471,000. 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
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
Cash paid for operating lease liabilities
|
|
$
|
90
|
|
|
$
|
48
|
|
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
|
|
|
3.98
|
|
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 September
30, 2021 (in thousands):
SCHEDULE
OF FUTURE MINIMUM LEASE PAYMENTS
|
|
Twelve-month
period ended
September 30,
|
|
2022
|
|
$
|
124
|
|
2023
|
|
|
127
|
|
2024
|
|
|
129
|
|
2025
|
|
|
132
|
|
Total undiscounted cash flows
|
|
|
512
|
|
Less: Imputed interest
|
|
|
(41
|
)
|
Present value of operating lease liabilities (a)
|
|
$
|
471
|
|
|
(a)
|
Includes
current portion of $105,000 for operating leases.
|
On
July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc., to sublease from the Company 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
which includes 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 less the allocation of any shared expenses and leasehold improvements specific
to the sublease. The Company invested approximately $7,000
on leasehold improvements related to the sublease.
Due to the offset of the capital expenditures, the Company does not expect to have any net rent due to its landlord for the first twelve
months of the sublease. The estimated amount the Company expects to remit to the landlord subsequent to the
first twelve months is approximately $6,700
per year. The sublease commenced on October 1, 2021 and
will run through September 30, 2025 which is the end of the Company’s lease term with its landlord.
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 $22,000 and approximately $6,000 for the nine months and three months ended September 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. OmniMetrix will also 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 $117,000
and $100,000
in the nine months ended September 30, 2021 and
2020, respectively, and approximately $38,000
and $34,000
in the three months ended September 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 in design and development services ($14,000 was paid at the commencement
of this project and four equal installments of approximately $23,000 were paid monthly starting in July 2021 with the fourth and final
installment to be paid upon completion and launch of the new interface). 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 which is ongoing.
The new infrastructure environment is expected to be completed and launched on or about May 1, 2022. The Company has invested approximately
$114,000 in this initiative during the nine months ended September 30, 2021. 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 $512,000
in operating lease obligations payable
through 2026 and approximately $12,000 in other contractual obligations. The Company also has approximately $1.3 million in open
purchase order commitments payable through 2022.
NOTE
7—EQUITY
(a)
General
At
September 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
September 30, 2021, 1,563,121 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 September 30, 2021, 67,770 options were issued to employees of the Company. During the nine months ended September
30, 2021, 30,000 options were issued to directors, 35,000 options were issued to the Company’s CEO, 100,000 options were issued
to the Company’s CFO and 67,770 options were issued to other employees. In the nine and three months ended September 30, 2021,
there were no grants to non-employees. The fair value of the options issued was approximately $89,000.
No
options were exercised in the nine and three months ended September 30, 2021. The intrinsic value of options outstanding and of options
exercisable at September 30, 2021 was approximately $212,000 and $170,000, 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
|
|
|
232,770
|
|
|
|
0.54
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(104,752
|
)
|
|
|
2.15
|
|
|
|
|
|
|
|
|
|
Outstanding at September 30, 2021
|
|
|
850,519
|
|
|
$
|
0.41
|
|
|
|
4.9 years
|
|
|
$
|
212,000
|
|
Exercisable at September 30, 2021
|
|
|
558,491
|
|
|
$
|
0.36
|
|
|
|
4.2 years
|
|
|
$
|
170,000
|
|
The
fair value of the options granted of approximately $89,000 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
|
|
|
.53
|
%
|
Expected term of options
|
|
|
4.0 years
|
|
Expected annual volatility
|
|
|
99.7
|
%
|
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 $58,000 and $27,000 for the nine-month periods ended September 30, 2021 and 2020, respectively
and approximately $22,000 and $8,000 for the three-month periods ended September 30, 2021 and 2020, respectively.
The
total compensation cost related to non-vested awards not yet recognized was approximately $76,000 as of September 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 September 30, 2021
|
|
|
35,000
|
|
|
$
|
0.13
|
|
|
|
1.4 years
|
|
NOTE
8— SEGMENT REPORTING
As
of September 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 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 nine-month periods ended September 30, 2021 and 2020 (in thousands):
SUMMARY
OF SEGMENTED DATA
|
|
PG
|
|
|
CP
|
|
|
Total
|
|
Nine months ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
4,283
|
|
|
$
|
739
|
|
|
$
|
5,022
|
|
Segment gross profit
|
|
|
3,241
|
|
|
|
433
|
|
|
|
3,674
|
|
Depreciation and amortization
|
|
|
48
|
|
|
|
8
|
|
|
|
56
|
|
Segment income (loss) before income taxes
|
|
$
|
774
|
|
|
$
|
(15
|
)
|
|
$
|
759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
3,633
|
|
|
$
|
690
|
|
|
$
|
4,323
|
|
Segment gross profit
|
|
|
2,656
|
|
|
|
365
|
|
|
|
3,021
|
|
Depreciation and amortization
|
|
|
17
|
|
|
|
4
|
|
|
|
21
|
|
Segment income (loss) before income taxes
|
|
$
|
414
|
|
|
$
|
(79
|
)
|
|
$
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,446
|
|
|
$
|
260
|
|
|
$
|
1,706
|
|
Segment gross profit
|
|
|
1,091
|
|
|
|
151
|
|
|
|
1,242
|
|
Depreciation and amortization
|
|
|
16
|
|
|
|
3
|
|
|
|
19
|
|
Segment income (loss) before income taxes
|
|
$
|
264
|
|
|
$
|
2
|
|
|
$
|
266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from external customers
|
|
$
|
1,262
|
|
|
$
|
255
|
|
|
$
|
1,517
|
|
Segment gross profit
|
|
|
936
|
|
|
|
141
|
|
|
|
1,077
|
|
Depreciation and amortization
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Segment income (loss) before income taxes
|
|
$
|
210
|
|
|
$
|
(7
|
)
|
|
$
|
203
|
|
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
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Total net income before income taxes for reportable segments
|
|
$
|
759
|
|
|
$
|
335
|
|
|
$
|
266
|
|
|
$
|
203
|
|
Unallocated cost of corporate headquarters
|
|
|
(708
|
)
|
|
|
(682
|
)
|
|
|
(241
|
)
|
|
|
(234
|
)
|
NOTE
9—REVENUE
The
following table disaggregates the Company’s revenue for the three-and-nine-month periods ended September 30, 2021 and 2020 (in
thousands):
SCHEDULE
OF DISAGGREGATES OF REVENUE
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Nine months ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG Segment
|
|
$
|
1,449
|
|
|
$
|
2,834
|
|
|
$
|
4,283
|
|
CP Segment
|
|
|
543
|
|
|
|
196
|
|
|
|
739
|
|
Total Revenue
|
|
$
|
1,992
|
|
|
$
|
3,030
|
|
|
$
|
5,022
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Nine months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG Segment
|
|
$
|
999
|
|
|
$
|
2,634
|
|
|
$
|
3,633
|
|
CP Segment
|
|
|
501
|
|
|
|
189
|
|
|
|
690
|
|
Total Revenue
|
|
$
|
1,500
|
|
|
$
|
2,823
|
|
|
$
|
4,323
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Three months ended September 30, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG Segment
|
|
$
|
507
|
|
|
$
|
939
|
|
|
$
|
1,446
|
|
CP Segment
|
|
|
194
|
|
|
|
66
|
|
|
|
260
|
|
Total Revenue
|
|
$
|
701
|
|
|
$
|
1,005
|
|
|
$
|
1,706
|
|
|
|
Hardware
|
|
|
Monitoring
|
|
|
Total
|
|
Three months ended September 30, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
PG Segment
|
|
$
|
354
|
|
|
$
|
908
|
|
|
$
|
1,262
|
|
CP Segment
|
|
|
193
|
|
|
|
62
|
|
|
|
255
|
|
Total Revenue
|
|
$
|
547
|
|
|
$
|
970
|
|
|
$
|
1,517
|
|
Deferred
revenue activity for the nine months ended September 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
|
|
|
1,777
|
|
|
|
3,182
|
|
|
|
4,959
|
|
Recognized as revenue
|
|
|
(1,373
|
)
|
|
|
(3,029
|
)
|
|
|
(4,402
|
)
|
Balance at September 30, 2021
|
|
$
|
2,980
|
|
|
$
|
2,131
|
|
|
$
|
5,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts to be recognized as revenue in the twelve-month-period ending:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022
|
|
$
|
1,583
|
|
|
$
|
1,875
|
|
|
$
|
3,458
|
|
September 30, 2023
|
|
|
999
|
|
|
|
251
|
|
|
|
1,250
|
|
September 30, 2024 and thereafter
|
|
|
398
|
|
|
|
5
|
|
|
|
403
|
|
Total
|
|
$
|
2,980
|
|
|
$
|
2,131
|
|
|
$
|
5,111
|
|
Other
revenue of approximately $620,000, 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 nine months ended September 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
|
|
|
797
|
|
Recognized as cost of sales
|
|
|
(710
|
)
|
Balance at September 30, 2021
|
|
$
|
1,393
|
|
|
|
|
|
|
Amounts to be recognized as cost of sales in the twelve-month-period ending:
|
|
|
|
|
September 30, 2022
|
|
$
|
756
|
|
September 30, 2023
|
|
|
459
|
*
|
September 30, 2024 and thereafter
|
|
|
178
|
*
|
|
|
$
|
1,393
|
|
|
*
|
Amounts
included in other assets in the Company’s unaudited condensed consolidated balance sheets at September 30, 2021.
|
Other
cost of goods sold (COGS) recognized of approximately $266,000
is related to accessories, repairs, and other
miscellaneous charges that are recognized to revenue when sold and are not deferred, in addition to $372,000
in monitoring COGS which is not deferred.
The
following table provides a reconciliation of the Company’s sales commissions contract assets for the nine-month period ended September
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
|
|
|
151
|
|
|
|
23
|
|
|
|
174
|
|
Amortization of sales commissions
|
|
|
(75
|
)
|
|
|
(16
|
)
|
|
|
(91
|
)
|
Balance at September 30, 2021
|
|
$
|
212
|
|
|
$
|
48
|
|
|
$
|
260
|
|
The
capitalized sales commissions are included in other current assets (approximately $122,000) and other assets (approximately $138,000)
in the Company’s unaudited condensed consolidated balance sheets at September 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.
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 expense is referred to as “R&D expense,” and
selling, general and administrative expense is referred to as “SG&A expense.”
|
|
Nine months ended September 30, 2021
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total Continuing Operations
|
|
Revenue
|
|
$
|
5,022
|
|
|
$
|
—
|
|
|
$
|
5,022
|
|
Cost of sales
|
|
|
1,348
|
|
|
|
—
|
|
|
|
1,348
|
|
Gross profit
|
|
|
3,674
|
|
|
|
—
|
|
|
|
3,674
|
|
Gross profit margin
|
|
|
73
|
%
|
|
|
|
|
|
|
73
|
%
|
R&D expense
|
|
|
532
|
|
|
|
—
|
|
|
|
532
|
|
SG&A expense
|
|
|
2,379
|
|
|
|
707
|
|
|
|
3,086
|
|
Operating income (loss)
|
|
$
|
763
|
|
|
$
|
(707
|
)
|
|
$
|
56
|
|
|
|
Nine months ended September 30, 2020
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total Continuing Operations
|
|
Revenue
|
|
$
|
4,323
|
|
|
$
|
—
|
|
|
$
|
4,323
|
|
Cost of sales
|
|
|
1,302
|
|
|
|
—
|
|
|
|
1,302
|
|
Gross profit
|
|
|
3,021
|
|
|
|
—
|
|
|
|
3,021
|
|
Gross profit margin
|
|
|
70
|
%
|
|
|
|
|
|
|
70
|
%
|
R&D expense
|
|
|
453
|
|
|
|
—
|
|
|
|
453
|
|
SG&A expense
|
|
|
2,210
|
|
|
|
677
|
|
|
|
2,887
|
|
Operating income (loss)
|
|
$
|
358
|
|
|
$
|
(677
|
)
|
|
$
|
(319
|
)
|
|
|
Three months ended September 30, 2021
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total Continuing Operations
|
|
Revenue
|
|
$
|
1,706
|
|
|
$
|
—
|
|
|
$
|
1,706
|
|
Cost of Sales
|
|
|
464
|
|
|
|
—
|
|
|
|
464
|
|
Gross profit
|
|
|
1,242
|
|
|
|
—
|
|
|
|
1,242
|
|
Gross profit margin
|
|
|
73
|
%
|
|
|
|
|
|
|
73
|
%
|
R&D expense
|
|
|
179
|
|
|
|
—
|
|
|
|
179
|
|
SG&A expense
|
|
|
798
|
|
|
|
240
|
|
|
|
1,038
|
|
Operating income (loss)
|
|
$
|
265
|
|
|
$
|
(240
|
)
|
|
$
|
25
|
|
|
|
Three months ended September 30, 2020
|
|
|
|
OmniMetrix
|
|
|
Acorn
|
|
|
Total Continuing Operations
|
|
Revenue
|
|
$
|
1,517
|
|
|
$
|
—
|
|
|
$
|
1,517
|
|
Cost of Sales
|
|
|
440
|
|
|
|
—
|
|
|
|
440
|
|
Gross profit
|
|
|
1,077
|
|
|
|
—
|
|
|
|
1,077
|
|
Gross profit margin
|
|
|
71
|
%
|
|
|
|
|
|
|
71
|
%
|
R&D expense
|
|
|
160
|
|
|
|
—
|
|
|
|
160
|
|
SG&A expense
|
|
|
707
|
|
|
|
233
|
|
|
|
940
|
|
Operating income (loss)
|
|
$
|
210
|
|
|
$
|
(233
|
)
|
|
$
|
(23
|
)
|
BACKLOG
As
of September 30, 2021, our backlog of work to be completed (primarily deferred revenue) at our OmniMetrix subsidiary totaled approximately
$5,311,000, of which approximately $200,000 are open sales orders pending completion for shipping.
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 were paid monthly starting in July 2021 with the fourth and final installment payment to be paid
upon completion and launch of the new interface). This project is expected to be completed by the end of 2021. This master services agreement
also covers strategic enhancements to our technology infrastructure which is ongoing. The new infrastructure environment is expected
to be completed and launched by May 1, 2022. We invested approximately $114,000 in this initiative during the nine months ended September
30, 2021. These costs are capitalized and amortization will begin once the new interface and the new infrastructure environment are launched.
On
July 6, 2021, we entered into an agreement with King Industrial Realty, Inc., to sublease from us 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 less the allocation
of any shared expenses and leasehold improvements specific to the sublease. We invested approximately $7,000 on leasehold improvements
related to the sublease. Due to the offset of the capital expenditures, we do not expect to have any net rent due to our landlord
for the first twelve months of the sublease. The estimated amount we expect to remit to the landlord subsequent to the first twelve months
is approximately $6,700 per year. The term of the sublease commenced on October 1, 2021 and runs through September 30, 2025 which is
the termination date of our lease with our landlord.
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 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 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 $149,000 in February 2021 and elected not to renew this line of credit, which expired
in accordance with its terms on February 28, 2021.
Results
of Operations
The
following table sets forth certain information with respect to the unaudited condensed consolidated results of operations of the Company
for the nine-month periods ended September 30, 2021 and 2020, including the percentage of total revenues during each period attributable
to selected components of the operations statement data and for the period-to-period percentage changes in such components. For segment
data, see Notes 8 and 9 to the unaudited condensed consolidated financial statements included in this quarterly report.
|
|
Nine months ended September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
Change
|
|
|
|
($,000)
|
|
|
% of revenues
|
|
|
($,000)
|
|
|
% of revenues
|
|
|
from 2020 to 2021
|
|
Revenue
|
|
$
|
5,022
|
|
|
|
100
|
%
|
|
$
|
4,323
|
|
|
|
100
|
%
|
|
|
16
|
%
|
Cost of sales
|
|
|
1,348
|
|
|
|
27
|
%
|
|
|
1,302
|
|
|
|
30
|
%
|
|
|
4
|
%
|
Gross profit
|
|
|
3,674
|
|
|
|
73
|
%
|
|
|
3,021
|
|
|
|
70
|
%
|
|
|
22
|
%
|
R&D expense
|
|
|
532
|
|
|
|
11
|
%
|
|
|
453
|
|
|
|
10
|
%
|
|
|
17
|
%
|
SG&A expense
|
|
|
3,086
|
|
|
|
61
|
%
|
|
|
2,887
|
|
|
|
67
|
%
|
|
|
7
|
%
|
Operating income (loss)
|
|
|
56
|
|
|
|
1
|
%
|
|
|
(319
|
)
|
|
|
7
|
%
|
|
|
118
|
%
|
Finance expense, net
|
|
|
(5
|
)
|
|
|
*
|
%
|
|
|
(28
|
)
|
|
|
1
|
%
|
|
|
82
|
%
|
Income (loss) before income taxes
|
|
|
51
|
|
|
|
1
|
%
|
|
|
(347
|
)
|
|
|
8
|
%
|
|
|
115
|
%
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
Net income (loss)
|
|
|
51
|
|
|
|
1
|
%
|
|
|
(347
|
)
|
|
|
8
|
%
|
|
|
115
|
%
|
Non-controlling interests share of net income
|
|
|
(6
|
)
|
|
|
*
|
%
|
|
|
(1
|
)
|
|
|
*
|
%
|
|
|
500
|
%
|
Net income (loss) attributable to Acorn Energy, Inc.
|
|
$
|
45
|
|
|
|
1
|
%
|
|
$
|
(348
|
)
|
|
|
8
|
%
|
|
|
113
|
%
|
*result
is less than 1%.
The
following table sets forth certain information with respect to the unaudited consolidated results of operations of the Company for the
three-month periods ended September 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 September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
Change
|
|
|
|
($,000)
|
|
|
% of revenues
|
|
|
($,000)
|
|
|
% of revenues
|
|
|
from
2020 to 2021
|
|
Revenue
|
|
$
|
1,706
|
|
|
|
100
|
%
|
|
$
|
1,517
|
|
|
|
100
|
%
|
|
|
12
|
%
|
Cost of sales
|
|
|
464
|
|
|
|
27
|
%
|
|
|
440
|
|
|
|
29
|
%
|
|
|
5
|
%
|
Gross profit
|
|
|
1,242
|
|
|
|
73
|
%
|
|
|
1,077
|
|
|
|
71
|
%
|
|
|
15
|
%
|
R&D expense
|
|
|
179
|
|
|
|
10
|
%
|
|
|
160
|
|
|
|
11
|
%
|
|
|
12
|
%
|
SG&A expense
|
|
|
1,038
|
|
|
|
61
|
%
|
|
|
940
|
|
|
|
62
|
%
|
|
|
10
|
%
|
Operating income (loss)
|
|
|
25
|
|
|
|
1
|
%
|
|
|
(23
|
)
|
|
|
2
|
%
|
|
|
209
|
%
|
Finance expense, net
|
|
|
—
|
|
|
|
—
|
%
|
|
|
(8
|
)
|
|
|
1
|
%
|
|
|
100
|
%
|
Income (loss) before income taxes
|
|
|
25
|
|
|
|
1
|
%
|
|
|
(31
|
)
|
|
|
2
|
%
|
|
|
181
|
%
|
Income tax expense
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
|
|
—
|
%
|
|
|
—
|
|
Net income (loss)
|
|
|
25
|
|
|
|
1
|
%
|
|
|
(31
|
)
|
|
|
2
|
%
|
|
|
181
|
%
|
Non-controlling interests share of net income
|
|
|
(2
|
)
|
|
|
*
|
%
|
|
|
(1
|
)
|
|
|
*
|
%
|
|
|
100
|
%
|
Net income (loss) attributable to Acorn Energy, Inc.
|
|
$
|
23
|
|
|
|
1
|
%
|
|
$
|
(32
|
)
|
|
|
2
|
%
|
|
|
172
|
%
|
*result
is less than 1%.
Revenue
for the nine and three months ended September 30, 2021 and 2020
In
the nine months ended September 30, 2021, revenue increased by approximately $699,000, or 16%, from approximately $4,323,000 in the nine
months ended September 30, 2020 to approximately $5,022,000 in the nine months ended September 30, 2021. OmniMetrix’s increased
revenue during the nine months ended September 30, 2021 was primarily attributable to increased hardware and accessories sales, which
increased approximately $492,000, or 33%, from approximately $1,500,000 in the nine months ended September 30, 2020 to approximately
$1,992,000 in the nine months ended September 30, 2021. The increase in hardware revenue was due to an increase in the sale of (i) TG
Pro units due, in part, to the sales of new units to replace older units with sunsetting 3G technology and also due to an increase in
the number of industrial and commercial customers as a percentage of our total customer base, (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 $207,000, or 7%, from approximately $2,823,000 in the nine months ended September 30, 2020 to approximately
$3,030,000 in the nine months ended September 30, 2021. As previously noted, the increase in monitoring revenue is due to an increase
in the monthly average number of installed billable connections.
As
discussed above, OmniMetrix has two reportable segments, PG and CP. Of the approximately $5,022,000 in revenue recognized in the nine
months ended September 30, 2021, approximately $4,283,000 was generated by PG activities and approximately $739,000 was generated by
CP activities. This represents an increase in revenue from PG activities of approximately $650,000, or 18%, from approximately $3,633,000
in the nine months ended September 30, 2020, and an increase in revenue from CP activities of approximately $49,000, or 7%, from approximately
$690,000 in the nine months ended September 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 $189,000, or 12%, from approximately $1,517,000 in the three months ended September 30, 2020 to approximately
$1,706,000 in the three months ended September 30, 2021. OmniMetrix’s increased revenue during the three months ended September
30, 2021 was primarily attributable to increased hardware and accessories sales, which increased approximately $154,000 or 28%, from
approximately $547,000 in the three months ended September 30, 2020 to approximately $701,000 in the three months ended September 30,
2021.
Monitoring
revenue increased by approximately $35,000, or 4%, from approximately $970,000 in the three months ended September 30, 2020 to approximately
$1,005,000 in the three months ended September 30, 2021. The increase in monitoring revenue is due to an increase in the number of installed
billable connections offset by disconnections attributed to the sunset of 3G technology.
Of
the approximately $1,706,000 in revenue recognized in the three months ended September 30, 2021, approximately $1,446,000 was generated
by PG activities and approximately $260,000 was generated by CP activities. This represents an increase in revenue from PG activities
of approximately $184,000, or 15%, from approximately $1,262,000 in the three months ended September 30, 2020, and an increase in revenue
from CP activities of approximately $5,000, or 2%, from approximately $255,000 in the three months ended September 30, 2020.
Gross
profit for the nine and three months ended September 30, 2021 and 2020
Gross
profit for the nine months ended September 30, 2021 was approximately $3,674,000 reflecting a gross margin of 73% compared with a gross
profit of $3,021,000 reflecting a 70% gross margin for the nine months ended September 30, 2020. Gross margin on hardware revenue for
the nine months ended September 30, 2021 was 46% compared to 42% for the nine months ended September 30, 2020.
Gross
profit for the three months ended September 30, 2021 was approximately $1,242,000 reflecting a gross margin of 73% on revenue compared
with a gross profit for the three months ended September 30, 2020 of $1,077,000 reflecting a gross margin of 71% on revenue. Gross margin
on hardware revenue for the three months ended September 30, 2021 was 46% compared to 44% for the three months ended September 30, 2020.
The
increased gross profit and gross margin in both the nine- 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 (iv) the restructuring of our
data plan.
Operating
expenses for the nine and three months ended September 30, 2021 and 2020
OmniMetrix
R&D expense. During the nine months ended September 30, 2021 and 2020, R&D expense was $532,000 and $453,000, respectively.
During the three months ended September 30, 2021, OmniMetrix recorded $179,000 of R&D expense as compared to $160,000 in the three
months ended September 30, 2020. The increase in R&D expense in the nine months ended September 30, 2021 of approximately $79,000
is related to salary increases of our engineering team effective September 1, 2020 and September 1, 2021, 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
for the remainder of 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 nine months ended September 30, 2021, OmniMetrix recorded SG&A expense of approximately $2,379,000
compared to SG&A costs of approximately $2,210,000 in the nine months ended September 30, 2020, an increase of $169,000, or 8%. During
the three months ended September 30, 2021, OmniMetrix recorded SG&A expense of approximately $798,000 compared to SG&A costs
of approximately $707,000, in the three months ended September 30, 2020, an increase of approximately $91,000, or 13%. The increase in
both periods is due to (i) compensation and benefit expenses in connection with three new positions added to our staff in the nine months
ended September 30, 2021 and performance-based salary increases for our staff that were effective September 1, 2021 (ii) changes in our
commission plan, and (iii) increases in our information technology consulting and managed services expenses. 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 continued spending for information technology consulting, services
and support related to certain strategic initiatives in this area.
Corporate
SG&A expense. Corporate SG&A expense was $707,000 in the nine months ended September 30, 2021, an increase of approximately
$29,000, or 4%, from the $677,000 of corporate SG&A expense reported in the nine months ended September 30, 2020. This increase is
primarily due to increased stock compensation expense, audit fees and insurance costs. Corporate SG&A expense for the three months
ended September 30, 2021 increased $7,000, or 3%, to $240,000 from $233,000 for the three months ended September 30, 2020. Third
quarter 2021 corporate SG&A expense of $240,000 was higher than second quarter 2021 corporate SG&A expense of $226,000 by $14,000
primarily due to expenses related to our annual shareholder meeting held in the third quarter. 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 $45,000
in the nine months ended September 30, 2021 compared to a net loss attributable to Acorn shareholders of approximately $348,000 in the
nine months ended September 30, 2020. Our net income during the nine months ended September 30, 2021 is comprised of net income at OmniMetrix
of approximately $759,000 offset by corporate expenses, including net interest expense, of approximately $708,000 and the non-controlling
interest share of our income from OmniMetrix of approximately $6,000. Our net loss in the nine months ended September 30, 2020 was comprised
of net income at OmniMetrix of $335,000 offset by corporate expenses of approximately $682,000 and the non-controlling interest share
of our income from OmniMetrix of approximately $1,000.
For
the three months ended September 30, 2021, we recognized net income attributable to Acorn shareholders of approximately $23,000 compared
to a net loss attributable to Acorn shareholders of approximately $32,000 for the three months ended September 30, 2020. Our net income
in the three months ended September 30, 2021 is comprised of net income at OmniMetrix of approximately $266,000 offset by corporate expenses
of approximately $241,000 and the non-controlling interest share of our income from OmniMetrix of approximately $2,000. Our loss in the
three months ended September 30, 2020 was comprised of net income at OmniMetrix of $203,000 offset by corporate expenses of $234,000
and $1,000 attributed to the non-controlling interest share of our income in OmniMetrix.
Liquidity
and Capital Resources
At
September 30, 2021, we had working capital of approximately $13,000. Our working capital includes approximately $2,016,000 of cash and
deferred revenue of approximately $3,458,000. The deferred revenue does not require significant cash outlay for the revenue to be recognized.
During
the nine months ended September 30, 2021, our OmniMetrix subsidiary provided approximately $1,015,000 from operations while our corporate
headquarters used approximately $692,000 during the same period.
During
the nine months ended September 30, 2021, we invested approximately $214,000 in technology including user interface development and design
of cloud server environment as well as investments in new hardware and software upgrades. In addition, we had other capital expenditures
of approximately $7,000 related to patent filings and minor leasehold improvements.
Net
cash of approximately $149,000 was used in financing activities during the nine months ended September 30, 2021 as repayments on our
line of credit described above.
Other
Liquidity Matters
OmniMetrix
owes Acorn approximately $4,303,000 for loans, accrued interest and expenses advanced to it by Acorn. OmniMetrix made repayments to Acorn
of approximately $523,000 in the nine months ended September 30, 2021 offset by interest, dividends and other advances of approximately
$251,000 in the aggregate.
As
of November 8, 2021, we had cash of approximately $1,928,000. 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 or other source of financing 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 September 30, 2021.
CASH
PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
|
|
Twelve Month Periods Ending September 30, (in thousands)
|
|
|
|
Total
|
|
|
2022
|
|
|
2023-2024
|
|
|
2025-2026
|
|
|
2027 and thereafter
|
|
Software agreements
|
|
$
|
48
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating leases
|
|
|
512
|
|
|
|
124
|
|
|
|
257
|
|
|
|
131
|
|
|
|
—
|
|
Contractual services
|
|
|
114
|
|
|
|
114
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total contractual cash obligations
|
|
$
|
674
|
|
|
$
|
286
|
|
|
$
|
257
|
|
|
$
|
131
|
|
|
$
|
—
|
|
The Company also has approximately
$1.3 million in open purchase order commitments payable through 2022.