UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30,March 31, 20232024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-33886
ACORN ENERGY, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 22-2786081 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 1000 N West Delaware | 19801 | |
| (Address of principal executive offices) | (Zip Code) |
410770-654-3315209-0012
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Non-accelerated filer ☒ | Smaller reporting company ☒ | ||
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No No☒ ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at | |
| Common Stock, $0.01 par value per share |
ACORN ENERGY, INC.
Quarterly Report on Form 10-Q
Forfor the Quarterly Period Ended September 30, 2023March 31, 2024
TABLE OF CONTENTS
Certain statements contained in this report are forward-looking in nature. These statements are generally identified by the inclusion of phrases such as “we expect”, “we anticipate”, “we believe”, “we estimate” and other phrases of similar meaning. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Many of these factors are described in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission.
| 2 |
PART I
| ITEM 1. | UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| As of September 30, 2023 | As of December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,749 | $ | 1,450 | ||||
| Accounts receivable, net | 583 | 597 | ||||||
| Inventory, net | 909 | 789 | ||||||
| Deferred cost of goods sold (COGS) | 890 | 887 | ||||||
| Other current assets | 343 | 288 | ||||||
| Total current assets | 4,474 | 4,011 | ||||||
| Property and equipment, net | 610 | 653 | ||||||
| Operating right-of-use assets, net | 220 | 298 | ||||||
| Deferred COGS | 642 | 807 | ||||||
| Other assets | 209 | 215 | ||||||
| Total assets | $ | 6,155 | $ | 5,984 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 444 | $ | 243 | ||||
| Accrued expenses | 127 | 171 | ||||||
| Deferred revenue | 4,270 | 3,984 | ||||||
| Operating lease liabilities | 121 | 116 | ||||||
| Other current liabilities | 25 | 58 | ||||||
| Total current liabilities | 4,987 | 4,572 | ||||||
| Long-term liabilities: | ||||||||
| Deferred revenue | 1,941 | 2,187 | ||||||
| Operating lease liabilities | 129 | 220 | ||||||
| Other long-term liabilities | 19 | 16 | ||||||
| Total long-term liabilities | 2,089 | 2,423 | ||||||
| Commitments and contingencies (Note 7) | - | - | ||||||
| Stockholders’ deficit: | ||||||||
| Acorn Energy, Inc. stockholders | ||||||||
| Common stock - $par value per share: Authorized – shares; issued and outstanding – and shares at September 30, 2023 and December 31, 2022, respectively* | 25 | 25 | ||||||
| Additional paid-in capital* | 103,312 | 103,261 | ||||||
| Accumulated stockholders’ deficit | (101,232 | ) | (101,267 | ) | ||||
| Treasury stock, at cost – and shares at September 30, 2023 and December 31, 2022* | (3,036 | ) | (3,036 | ) | ||||
| Total Acorn Energy, Inc. stockholders’ deficit | (931 | ) | (1,017 | ) | ||||
| Non-controlling interest | 10 | 6 | ||||||
| Total stockholders’ deficit | (921 | ) | (1,011 | ) | ||||
| Total liabilities and stockholders’ deficit | $ | 6,155 | $ | 5,984 | ||||
| As of March 31, 2024 | As of December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,417 | $ | 1,449 | ||||
| Accounts receivable, net | 487 | 536 | ||||||
| Inventory, net | 788 | 962 | ||||||
| Deferred cost of goods sold (COGS) | 709 | 809 | ||||||
| Other current assets | 285 | 280 | ||||||
| Total current assets | 3,686 | 4,036 | ||||||
| Property and equipment, net | 544 | 570 | ||||||
| Right-of-use assets, net | 166 | 193 | ||||||
| Deferred COGS | 341 | 476 | ||||||
| Other assets | 142 | 174 | ||||||
| Total assets | $ | 4,879 | $ | 5,449 | ||||
| LIABILITIES AND DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 208 | $ | 288 | ||||
| Accrued expenses | 124 | 132 | ||||||
| Deferred revenue | 3,823 | 4,034 | ||||||
| Current operating lease liabilities | 124 | 123 | ||||||
| Other current liabilities | 27 | 30 | ||||||
| Total current liabilities | 4,306 | 4,607 | ||||||
| Long-term liabilities: | ||||||||
| Deferred revenue | 1,205 | 1,550 | ||||||
| Noncurrent operating lease liabilities | 66 | 98 | ||||||
| Other long-term liabilities | 21 | 20 | ||||||
| Total liabilities | 5,598 | 6,275 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Deficit: | ||||||||
| Acorn Energy, Inc. stockholders | ||||||||
| Common stock - $ par value per share: shares authorized, and shares issued at March 31, 2024 and December 31, 2023, respectively, and and shares outstanding at March 31, 2024 and December 31, 2023, respectively | 25 | 25 | ||||||
| Additional paid-in capital | 103,361 | 103,321 | ||||||
| Accumulated stockholders’ deficit | (101,083 | ) | (101,148 | ) | ||||
| Treasury stock, at cost – shares at March 31, 2024 and December 31, 2023 | (3,036 | ) | (3,036 | ) | ||||
| Total Acorn Energy, Inc. stockholders’ deficit | (733 | ) | (838 | ) | ||||
| Non-controlling interests | 14 | 12 | ||||||
| Total deficit | (719 | ) | (826 | ) | ||||
| Total liabilities and deficit | $ | 4,879 | $ | 5,449 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(UNAUDITED) (IN(IN THOUSANDS, EXCEPT PER SHARE DATA)
| 2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Nine months ended September 30, | Three months ended September 30, | Three months ended March 31, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
| Revenue | $ | 5,809 | $ | 5,155 | $ | 2,087 | $ | 1,783 | $ | 2,132 | $ | 1,749 | ||||||||||||
| COGS | 1,453 | 1,436 | 537 | 568 | 541 | 433 | ||||||||||||||||||
| Gross profit | 4,356 | 3,719 | 1,550 | 1,215 | 1,591 | 1,316 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| Research and development (R&D) expense | 614 | 637 | 212 | 227 | ||||||||||||||||||||
| Selling, general and administrative (SG&A) expense | 3,746 | 3,585 | 1,330 | 1,198 | ||||||||||||||||||||
| Impairment of software | — | 51 | — | — | ||||||||||||||||||||
| Research and development expenses (R&D) | 238 | 214 | ||||||||||||||||||||||
| Selling, general and administrative (SG&A) expenses | 1,275 | 1,197 | ||||||||||||||||||||||
| Total operating expenses | 4,360 | 4,273 | 1,542 | 1,425 | 1,513 | 1,411 | ||||||||||||||||||
| Operating (loss) income | (4 | ) | (554 | ) | 8 | (210 | ) | |||||||||||||||||
| Interest income (expense), net | 46 | (1 | ) | 19 | — | |||||||||||||||||||
| Operating income (loss) | 78 | (95 | ) | |||||||||||||||||||||
| Interest income, net | 15 | 11 | ||||||||||||||||||||||
| Income (loss) before income taxes | 42 | (555 | ) | 27 | (210 | ) | 93 | (84 | ) | |||||||||||||||
| Income tax expense | — | — | — | — | 25 | — | ||||||||||||||||||
| Net income (loss) | 42 | (555 | ) | 27 | (210 | ) | 68 | (84 | ) | |||||||||||||||
| Non-controlling interest share of net income | (7 | ) | (1 | ) | (3 | ) | — | |||||||||||||||||
| Non-controlling interest share of income | (3 | ) | (1 | ) | ||||||||||||||||||||
| Net income (loss) attributable to Acorn Energy, Inc. stockholders | $ | 35 | $ | (556 | ) | $ | 24 | $ | (210 | ) | $ | 65 | $ | (85 | ) | |||||||||
| Basic and diluted net income (loss) per share attributable to Acorn Energy, Inc. stockholders*: | $ | $ | ) | $ | $ | ) | ||||||||||||||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – basic and diluted | ||||||||||||||||||||||||
| Basic and diluted net income (loss) per share attributable to Acorn Energy, Inc. stockholders: | ||||||||||||||||||||||||
| Net income (loss) per share attributable to Acorn Energy, Inc. stockholders – basic and diluted* | $ | $ | ) | |||||||||||||||||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – basic and diluted: | ||||||||||||||||||||||||
| Basic* | 2,484 | 2,481 | 2,485 | 2,481 | 2,486 | 2,483 | ||||||||||||||||||
| Diluted* | 2,506 | 2,481 | 2,532 | 2,481 | 2,494 | 2,483 | ||||||||||||||||||
| * |
As adjusted to reflect the September 2023 1-for-16 reverse stock split. |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED) (IN THOUSANDS)
| Number of Shares* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock* | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Three and Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||
| Number of Shares* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock* | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | 2,483 | $ | 25 | $ | 103,261 | $ | (101,267 | ) | 50 | $ | (3,036 | ) | $ | (1,017 | ) | $ | 6 | $ | (1,011 | ) | ||||||||||||||||
| Net loss | — | — | — | (85 | ) | — | — | (85 | ) | 1 | (84 | ) | ||||||||||||||||||||||||
| Proceeds from warrant exercise | 2 | -** | 5 | — | — | — | 5 | — | 5 | |||||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock option compensation | — | — | 17 | — | — | — | 17 | — | 17 | |||||||||||||||||||||||||||
| Balances as of March 31, 2023 | 2,485 | $ | 25 | $ | 103,283 | $ | (101,352 | ) | 50 | $ | (3,036 | ) | $ | (1,080 | ) | $ | 6 | $ | (1,074 | ) | ||||||||||||||||
| Net income | — | — | — | 96 | — | — | 96 | 3 | 99 | |||||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock option compensation | — | — | 13 | — | — | — | 13 | — | 13 | |||||||||||||||||||||||||||
| Balances as of June 30, 2023 | 2,485 | $ | 25 | $ | 103,296 | $ | (101,256 | ) | 50 | $ | (3,036 | ) | $ | (971 | ) | $ | 8 | $ | (963 | ) | ||||||||||||||||
| Net income | — | — | — | 24 | — | — | 24 | 3 | 27 | |||||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock option compensation | — | — | 16 | — | — | — | 16 | — | 16 | |||||||||||||||||||||||||||
| Balances as of September 30, 2023 | 2,485 | $ | 25 | $ | 103,312 | $ | (101,232 | ) | 50 | $ | (3,036 | ) | $ | (931 | ) | $ | 10 | $ | (921 | ) | ||||||||||||||||
Number of Shares Outstanding* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||
Number of Shares Outstanding* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | 2,484 | $ | 25 | $ | 103,321 | $ | (101,148 | ) | 50 | $ | (3,036 | ) | $ | (838 | ) | $ | 12 | $ | (826 | ) | ||||||||||||||||
| Net income | — | — | — | 65 | — | — | 65 | 3 | 68 | |||||||||||||||||||||||||||
| Proceeds from warrant exercise | ||||||||||||||||||||||||||||||||||||
| Proceeds from warrant exercise, shares | ||||||||||||||||||||||||||||||||||||
| Proceeds from stock option exercise | 3 | -** | 13 | — | — | — | 13 | — | 13 | |||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock-based compensation | — | — | 27 | — | — | — | 27 | — | 27 | |||||||||||||||||||||||||||
| Balances as of March 31, 2024 | 2,487 | $ | 25 | $ | 103,361 | $ | (101,083 | ) | 50 | $ | (3,036 | ) | $ | (733 | ) | $ | 14 | $ | (719 | ) | ||||||||||||||||
| Three and Nine Months Ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||
| Number of Shares* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock* | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Balances as of December 31, 2021 | 2,480 | $ | 25 | $ | 103,176 | $ | (100,634 | ) | 50 | $ | (3,036 | ) | $ | (469 | ) | $ | 8 | $ | (461 | ) | ||||||||||||||||
| Net loss | — | — | — | (123 | ) | — | — | (123 | ) | 1 | (122 | ) | ||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock option compensation | — | — | 31 | — | — | — | 31 | — | 31 | |||||||||||||||||||||||||||
| Balances as of March 31, 2022 | 2,480 | $ | 25 | $ | 103,207 | $ | (100,757 | ) | 50 | $ | (3,036 | ) | $ | (561 | ) | $ | 8 | $ | (553 | ) | ||||||||||||||||
| Net loss | — | — | — | (223 | ) | — | — | (223 | ) | -** | (223 | ) | ||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock option compensation | — | — | 22 | — | — | — | 22 | — | 22 | |||||||||||||||||||||||||||
| Balances as of June 30, 2022 | 2,480 | $ | 25 | $ | 103,229 | $ | (100,980 | ) | 50 | $ | (3,036 | ) | $ | (762 | ) | $ | 7 | $ | (755 | ) | ||||||||||||||||
| Balance | 2,480 | $ | 25 | $ | 103,229 | $ | (100,980 | ) | 50 | $ | (3,036 | ) | $ | (762 | ) | $ | 7 | $ | (755 | ) | ||||||||||||||||
| Net loss | — | — | — | (210 | ) | — | — | (210 | ) | — | (210 | ) | ||||||||||||||||||||||||
| Net income (loss) | — | — | — | (210 | ) | — | — | (210 | ) | — | (210 | ) | ||||||||||||||||||||||||
| �� | ||||||||||||||||||||||||||||||||||||
| Accrued dividend on OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Proceeds from stock option exercise | 2 | -** | 5 | — | — | — | 5 | — | 5 | |||||||||||||||||||||||||||
| Stock option compensation | — | — | 16 | — | — | — | 16 | — | 16 | |||||||||||||||||||||||||||
| Balances as of September 30, 2022 | 2,482 | $ | 25 | $ | 103,250 | $ | (101,190 | ) | 50 | $ | (3,036 | ) | $ | (951 | ) | $ | 6 | $ | (945 | ) | ||||||||||||||||
| Balance | 2,482 | $ | 25 | $ | 103,250 | $ | (101,190 | ) | 50 | $ | (3,036 | ) | $ | (951 | ) | $ | 6 | $ | (945 | ) | ||||||||||||||||
| Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||
Number of Shares Outstanding* | Common Stock* | Additional Paid-In Capital* | Accumulated Deficit | Number of Treasury Shares* | Treasury Stock | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | 2,482 | $ | 25 | $ | 103,261 | $ | (101,267 | ) | 50 | $ | (3,036 | ) | $ | (1,017 | ) | $ | 6 | $ | (1,011 | ) | ||||||||||||||||
| Balance | 2,482 | $ | 25 | $ | 103,261 | $ | (101,267 | ) | 50 | $ | (3,036 | ) | $ | (1,017 | ) | $ | 6 | $ | (1,011 | ) | ||||||||||||||||
| Net loss | — | — | — | (85 | ) | — | — | (85 | ) | 1 | (84 | ) | ||||||||||||||||||||||||
| Proceeds from warrant exercise | 2 | -** | 5 | — | — | — | 5 | — | 5 | |||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||||||||
| Stock-based compensation | — | — | 17 | — | — | — | 17 | — | 17 | |||||||||||||||||||||||||||
| Balances as of March 31, 2023 | 2,484 | $ | 25 | $ | 103,283 | $ | (101,352 | ) | 50 | $ | (3,036 | ) | $ | (1,080 | ) | $ | 6 | $ | (1,074 | ) | ||||||||||||||||
| Balance | 2,484 | $ | 25 | $ | 103,283 | $ | (101,352 | ) | 50 | $ | (3,036 | ) | $ | (1,080 | ) | $ | 6 | $ | (1,074 | ) | ||||||||||||||||
| * |
| ** |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
| 2023 | 2022 | 2024 | 2023 | |||||||||||||
Nine months ended September 30, | Three months ended March 31, | |||||||||||||||
| 2023 | 2022 | 2024 | 2023 | |||||||||||||
| Cash flows provided by (used in) operating activities: | ||||||||||||||||
| Cash flows used in operating activities: | ||||||||||||||||
| Net income (loss) | $ | 42 | $ | (555 | ) | $ | 68 | $ | (84 | ) | ||||||
| Depreciation and amortization | 115 | 83 | 28 | 38 | ||||||||||||
| (Decrease) increase in the provision for credit loss | (7 | ) | 2 | |||||||||||||
| Impairment of inventory | 9 | 31 | 9 | 3 | ||||||||||||
| Impairment of software | — | 51 | ||||||||||||||
| Non-cash lease expense | 96 | 93 | 32 | 31 | ||||||||||||
| Stock-based compensation | 46 | 69 | 27 | 17 | ||||||||||||
| Change in operating assets and liabilities: | ||||||||||||||||
| Decrease (increase) in accounts receivable | 14 | (41 | ) | 56 | (176 | ) | ||||||||||
| Increase in inventory | (129 | ) | (317 | ) | ||||||||||||
| Decrease (increase) in deferred COGS | 162 | (158 | ) | |||||||||||||
| Increase in other current assets and other assets | (49 | ) | (62 | ) | ||||||||||||
| Increase (decrease) in accounts payable and accrued expenses | 157 | (91 | ) | |||||||||||||
| Increase in deferred revenue | 40 | 660 | ||||||||||||||
| Decrease (increase) in inventory | 165 | (18 | ) | |||||||||||||
| Decrease in deferred COGS | 235 | 37 | ||||||||||||||
| Decrease (increase) in other current assets and other assets | 27 | (20 | ) | |||||||||||||
| (Decrease) increase in deferred revenue | (556 | ) | 45 | |||||||||||||
| Decrease in operating lease liability | (104 | ) | (97 | ) | (36 | ) | (33 | ) | ||||||||
| (Decrease) increase in other current liabilities and non-current liabilities | (33 | ) | 23 | |||||||||||||
| Net cash provided by (used in) operating activities | 366 | (311 | ) | |||||||||||||
| (Decrease) increase in accounts payable, accrued expenses, other current liabilities and non-current liabilities | (91 | ) | 75 | |||||||||||||
| Net cash used in operating activities | (43 | ) | (83 | ) | ||||||||||||
| Cash flows used in investing activities: | ||||||||||||||||
| Investments in technology | (70 | ) | (286 | ) | (2 | ) | (26 | ) | ||||||||
| Other capital investments | (2 | ) | (6 | ) | ||||||||||||
| Net cash used in investing activities | (72 | ) | (292 | ) | (2 | ) | (26 | ) | ||||||||
| Cash flows provided by financing activities: | ||||||||||||||||
| Stock option exercise proceeds | — | 5 | 13 | — | ||||||||||||
| Warrant exercise proceeds | 5 | — | — | 5 | ||||||||||||
| Net cash provided by financing activities | 5 | 5 | 13 | 5 | ||||||||||||
| Net increase (decrease) in cash | 299 | (598 | ) | |||||||||||||
| Cash at the beginning of the year | 1,450 | 1,722 | ||||||||||||||
| Net decrease in cash | (32 | ) | (104 | ) | ||||||||||||
| Cash at the beginning of the period | 1,449 | 1,450 | ||||||||||||||
| Cash at the end of the period | $ | 1,749 | $ | 1,124 | $ | 1,417 | $ | 1,346 | ||||||||
| Supplemental cash flow information: | ||||||||||||||||
| Cash paid during the period for: | ||||||||||||||||
| Cash paid during the year for: | ||||||||||||||||
| Interest | $ | 2 | $ | 1 | $ | 1 | $ | — | ||||||||
| Income taxes | $ | 2 | $ | — | ||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||||
| Accrued preferred dividends to former CEO of OmniMetrix | $ | 3 | $ | 3 | $ | 1 | $ | 1 | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
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. (“Acorn”) and its subsidiaries, OmniMetrix, LLC (“OmniMetrix”) and OMX Holdings, Inc. (collectively, with Acorn and OmniMetrix, “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. The December 31, 2023 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by accounting principles generally accepted in the United States of America. 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,March 31, 2024 and 2023 and 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 2024.
All dollar amounts, except per share data, are rounded to the nearest thousand and, thus, are approximate.
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, 2022,2023, filed with the Securities and Exchange Commission on March 16, 2023.7, 2024.
Reverse Stock Split
On September 5, 2023, the Board of Directors of Acorn approved a Certificate of Amendment to Acorn’s Restated Certificate of Incorporation (the “Certificate of Amendment”) that provided for a 1-for-16 reverse stock split of Acorn’s Common Stock (the “Reverse Stock Split”). Acorn filed the Certificate of Amendment with the Secretary of State of the State of Delaware on September 6, 2023, and the Reverse Stock Split became effective at 5:00 p.m. EDT on September 7, 2023. At the effective time of the Reverse Stock Split, every sixteen issued and outstanding shares of Acorn’s Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. Stockholders who would have otherwise been entitled to fractional shares of Common Stock, as a result of the Reverse Stock Split, received a cash payment in lieu of receiving fractional shares. The value of the fractional shares repurchased was $347 and equated to fifty-eight shares. All share and per share amounts of common stock, options and warrants contained in this Quarterly Report on Form 10-Q and the accompanying unaudited condensed consolidated financial statements and related footnotes have been restated for all periods to give retroactive effect to the Reverse Stock Split and the related fractional share repurchase for all prior periods presented. Accordingly, the unaudited Condensed Consolidated Statement of Stockholders’ Deficit reflects the impact of the Reverse Stock Split by reclassifying from “Common Stock” to “Additional paid inpaid-in capital” an amount equal to the aggregate par value of the number of shares by which the total number of shares outstanding decreased as a result of the Reverse Stock Split.
NOTE 2—ACCOUNTING POLICIES
Use of Estimates in Preparation of Financial Statements
The preparation of unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
As applicable to these unaudited condensed consolidated financial statements, the most significant estimates and assumptions relate to uncertainties with respect to revenue recognition and management’s projections related to the going concern analysis.
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 $1,749,0001,417,000 at September 30, 2023.March 31, 2024. The Company does not believe there is a significant risk of non-performance by its counterparties. For the three-month period ended September 30, 2023,March 31, 2024, there were no customers that represented greater than 10% of the Company’s total invoiced sales. ForAt March 31, 2024, the nine-month period ended September 30, 2023, there wasCompany had one customer that represented 11% of the Company’s total invoiced sales. At September 30, 2023, the Company did not have any customers that represented greater than 1013% of our total accounts receivable.receivable which was subsequently collected in full. Approximately 1225% of the accounts receivable at December 31, 20222023 was due from one customer which was subsequently collected in full. 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. Although we do not believe there is significant risk of non-performance by these counterparties, any failures or defaults on their part could negatively impact the value of our financial instruments and could have a material adverse effect on our business, operations or financial condition.
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Inventory
Inventories are comprised of components (raw materials), work-in-process and finished goods, which are measured at the lower of cost or net realizable value.
Raw materials inventory is generally comprised of radios, cables, antennas, and electrical components. Finished goods inventory consists of fully assembled systems ready for final shipment to the customer. Costs are determined at cost of acquisition on a weighted average basis and include all outside production and applicable shipping costs.
All inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conductedconducts an assessment at each reporting period of the Company’s inventory reserve and wrote-offwrites-off inventory carried at $9,000 forwhen the nine months ended September 30, 2023, of which $1,000 was written off in the three months ended September 30, 2023.items are deemed obsolete.
Revenue Recognition
OnThe Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations. The core principle of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied. The Company assesses whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring. The Company’s sales arrangements generally include standard payment terms. These terms effectively relate to all customers, products, and arrangements regardless of customer type, product mix or arrangement size. See Note 10, Revenue, for further discussion.
Revenue from sales of the hardware products that are distinct products are recorded when shipped while the revenue from sales of the hardware products (product versions sold prior to September 1, 2023, OmniMetrix launched an updated version of its products2023) that includes new functionality in its TrueGuard, AIRGuard, Patriot and Hero products that allows its customers to have options as it relates to obtaining and utilizingwere not separable from the data that is provided by its hardware devices. This new functionality allows for SIM card options, configuration options regarding IP address endpoints and DNS routes, and access to OmniMetrix’s over-the-air data protocol. This product update allows customers to have the option to purchase OmniMetrix’s monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring provider if they so desire. OmniMetrix’s prior hardware product version could not function as a distinct product from its monitoring services. This new version’s functionality results in OmniMetrix’s hardware andCompany’s monitoring services being capable of being two distinct products and services. OmniMetrix recognizes revenue, COGS and commissions from the sale of the new version of its hardware products sold when the product is shipped rather than over the estimated time that the unit is in service for the customer. Monitoring revenue continues to bewas deferred and amortized over the period thatestimated unit life. Revenue from the prepayment of monitoring fees (generally paid twelve months in advance) are recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring services are rendered. The remaining balanceservice period. See Notes 9 and 10 for the disaggregation of deferredthe Company’s revenue fromfor the prior version of these products will continue to be amortized each period until it is fully amortized. The modification to the circuit boards and embedded firmware of hardware enclosures in inventory as of August 31, 2023 were made such that only the new version of these products was sold subsequent to this date.periods presented.
Any sales tax, value added tax, and other tax the Company collects concurrent with revenue producing activities are excluded from revenue.
Income Taxes
The Company and its subsidiaries are subject to U.S. federal income tax and income taxes imposed in the state and local jurisdictions where it operates its businesses. Deferred income taxes are determined using the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will be realized. The income tax expense in the three-month period ended March 31, 2024 represents the estimated state tax of various states on the 2023 income of OmniMetrix.
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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 period, 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.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. For the nine-month period ending September 30, 2023, the
The combined weighted average number of options that were excluded from the computation of diluted net loss, as they had an antidilutive effect, was (which have a weighted average exercise price of $). For the three-month period ending September 30, 2023, there were no options that were excluded from the computation of diluted net loss due to having an antidilutive effect. For both the nine- and three-month periods ending September 30, 2022, the number of options that were excluded from the computation of diluted net loss, as they had an antidilutive effect, was (which have a weighted average exercise price of $) and the number of warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was (which have a weighted average exercise price of $) and (which had a weighted average exercise price of $) for the three-month periods ended March 31, 2024 and 2023, respectively (as adjusted to account for the September 2023 1-for-16 reverse stock split).
SCHEDULE OF EFFECT ON NET INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Net income (loss) available to common stockholders | $ | 35 | $ | (556 | ) | $ | 24 | $ | (210 | ) | ||||||
| Weighted average share outstanding: | ||||||||||||||||
| Basic | 2,484 | 2,481 | 2,485 | 2,481 | ||||||||||||
| Add: Stock options | 22 | — | 47 | — | ||||||||||||
| Diluted | 2,506 | 2,481 | 2,532 | 2,481 | ||||||||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | $ | $ | ) | ||||||||||
| 2024 | 2023 | |||||||
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income (loss) attributable to common stockholders | $ | 65 | $ | (85 | ) | |||
| Weighted average shares outstanding: | ||||||||
| -Basic | 2,486 | 2,483 | ||||||
| Add: Stock options | 8 | — | ||||||
| -Diluted | 2,494 | 2,483 | ||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | |||||
Recently AdoptedRecent Accounting StandardsPronouncements
Other thanIn November 2023, the pronouncement noted below, thereFinancial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods beginning after December 15, 2024, and early application is permitted. The Company is currently assessing the impact the adoption of ASU 2023-07 will have been no recent accounting pronouncements or changes in accounting standards during the nine-month period ended September 30, 2023 that would affect the Company’s condensed consolidated financial statements.on its segment reporting disclosures.
On January 1,In December 2023, the Company adoptedFASB issued ASU 2016-13, “Financial Instruments – Credit Losses2023-09, Income Taxes (Topic 326)740): Measurement of Credit Losses on Financial Instruments.” This guidance was issuedImprovements to provide financial statement users with more usefulIncome Tax Disclosures, which requires disaggregated information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Specifically, this guidance requires entitiesentity’s effective tax rate reconciliation, as well as information related to utilize a new “expected loss” model as it relatesincome taxes paid to tradeenhance the transparency and other receivables.decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently evaluating the timing and impacts of adoption of the standard impacts the way the Company estimates the allowance for doubtful accounts on its trade and other receivables. Refer to Note 4, “Allowance for Credit Losses,” for further information regarding the Company’s allowance for expected credit losses.this ASU.
NOTE 3—LIQUIDITY
As of September 30, 2023,March 31, 2024, the Company had cash$1,417,000 of $1,749,000.consolidated cash.
At September 30, 2023,March 31, 2024, the Company had a negative working capital of $513,000620,000. The Company’sIts working capital includes $1,749,0001,417,000 of cash and deferred revenue of $4,270,0003,823,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized. Total deferred revenue decreased by $556,000, from $5,584,000 at December 31, 2023 to $5,028,000 at March 31, 2024, as a result of the sales mix of products sold. Based on the current products being sold, the Company expects continued decreases in the deferred revenue balance in the foreseeable future. The balance of deferred hardware revenue at March 31, 2024 will continue to be amortized over the months remaining in the three-year period since the hardware’s original date of shipment. Net cash increaseddecreased during the nine monthsthree-month period ended September 30, 2023March 31, 2024 by $299,00032,000, of whichwith $366,00043,000 was provided byused in operating activities, $72,0002,000 was used in investing activities, and $5,00013,000 was provided by financing activities.
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As of NovemberMay 7, 2023,2024, the Company had cash of $1,684,0001,455,000. The Company believes that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance the corporate activities of Acorn and operating activities of the CompanyOmniMetrix at itstheir current level of operations for at least the twelve monthstwelve-month period from the issuance of these unaudited condensed consolidated financial statements. 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. If the Company decides to pursue additional financing in the future, it may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof. Whether alternative funds, such as third-party loans or investments, will be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
For the Company, ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” applies to its contract assets (deferred COGS and deferred sales commissions), lease receivables (sublease, see Note 6) and trade receivables. There are no expected or estimated credit losses on the Company’s contract assets or its lease receivable based on the Company’s implementation of ASU 2016-13.
The Company’s trade receivables primarily arise from the sale of our products to independent residential dealers, industrial distributors and dealers, national and regional retailers, equipment distributors, and certain end users with payment terms generally ranging from 30 to 60 days. The Company evaluates the credit risk of a customer when extending credit based on a combination of various financial and qualitative factors that may affect the customer’s ability to pay. These factors include the customer’s financial condition and past payment experience.
The Company maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The Company measures expected credit losses on its trade receivables on an entity-by-entity basis. The estimate of expected credit losses considers a historical loss experience rate that is adjusted for delinquency trends, collection experience, and/or economic risk where appropriate. Additionally, management develops a specific allowance for trade receivables known to have a high risk of expected future credit loss.
The Company has historically experienced immaterial write-offs given the nature of the customers that receive credit. As of September 30, 2023,March 31, 2024, the Company had gross receivables of $590,000493,000 and an allowance for credit losses of $7,0006,000.
The following is a tabular reconciliation of the Company’s allowance for credit losses:
SCHEDULE OF ALLOWANCES FOR CREDIT LOSSES
| September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
| As of | As of | |||||||||||||||
| September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Balance at beginning of period | $ | 10 | $ | 6 | $ | 10 | $ | 10 | ||||||||
| Provision for credit losses | 3 | 3 | ||||||||||||||
| Net (charge-offs) credits | (6 | ) | 1 | |||||||||||||
| Provision for credit losses adjustment | (7 | ) | 2 | |||||||||||||
| Net credits (charge-offs) | 3 | (2 | ) | |||||||||||||
| Balance at end of period | $ | 7 | $ | 10 | $ | 6 | $ | 10 | ||||||||
NOTE 5—INVENTORY
SCHEDULE OF INVENTORY
| September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
| As of | As of | |||||||||||||||
| September 30, 2023 | December 31, 2022 | March 31, 2024 | December 31, 2023 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Raw materials | $ | 859 | $ | 684 | $ | 720 | $ | 904 | ||||||||
| Finished goods | 50 | 105 | 68 | 58 | ||||||||||||
| Inventory net | $ | 909 | $ | 789 | $ | 788 | $ | 962 | ||||||||
At September 30, 2023March 31, 2024 and December 31, 2022,2023, the Company’s inventory reserve was $9,000 and $4,0008,000, respectively.
All inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conducted an assessment and wrote-off inventory carried at $9,000 for the nine months ended September 30, 2023, of which $1,000 was written off in the three months ended September 30, 2023.
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NOTE 6—LEASES
OmniMetrix leases office space and office equipment under operating lease agreements. The office lease has an expiration date of September 30, 2025. 2025. The office equipment lease was entered into in April 2019 and hashad a sixty-month term.term. This lease is currently month-to-month until the Company negotiates a new term. Operating lease payments for the nine monthsthree-month periods ended September 30,March 31, 2024 and 2023 and 2022 were $96,00032,000 and $93,000, respectively. Operating lease payments for the three months ended September 30, 2023 and 2022 were $33,000and $31,000, respectively. The present value of future minimum lease payments on non-cancellablenon-cancelable operating leases as of September 30, 2023March 31, 2024 using a discount rate of 4.5% areis $250,000190,000. The 4.5% discount rate used iswas the estimated incremental borrowing rate when the lease was entered into, which, as defined in ASC 842,842: Leases, is the rate of interest that a lessee would have had to pay to borrow, on a collateralized basis, over a similar term and in a similar economic environment, an amount equal to the lease payments.
Supplemental cash flow information related to leases consisted of the following (in thousands):
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
For the Nine Months Ending September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash paid for operating lease liabilities | $ | 96 | $ | 93 | ||||
For the three months ending March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for operating lease liabilities | $ | 32 | $ | 31 | ||||
Supplemental balance sheet information related to leases consisted of the following:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
| 2024 | |||||||
| Weighted average remaining lease terms for operating leases | 1.5 | ||||||
The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of more than one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of September 30, 2023March 31, 2024 (in thousands):
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Year ended September 30, | Year ended March 31, | |||||||
| 2024 | $ | 129 | ||||||
| 2025 | 132 | $ | 129 | |||||
| 2026 | 67 | |||||||
| Total undiscounted cash flows | 261 | 196 | ||||||
| Less: Imputed interest | (11 | ) | (6 | ) | ||||
| Present value of operating lease liabilities (a) | $ | 250 | $ | 190 | ||||
| (a) | Includes current portion of $ |
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 (plus(plus an annual escalator each year of 3%) 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 estimated amountDuring each of the three-month periods ended March 31, 2024 and 2023, after the offset of the investment in leasehold improvements and other expenses related to the sublease, the Company expects to remit to thepaid its landlord each future year$2,000 for its share of the sublease is $6,100 per year.profit since the lease commencement. 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. Below are the future payments (in thousands) expected under the sublease net of the estimated annual service cost of $2,2202,750 (gross of the estimated amount expected to be remitted to our landlord):
SCHEDULE OF SUB LEASESSUBLEASES
Year ended September 30, | Year ended March 31, | |||||||
| 2024 | $ | 28 | ||||||
| 2025 | 29 | $ | 29 | |||||
| 2026 | 14 | |||||||
| Total undiscounted cash flows | $ | 57 | $ | 43 | ||||
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NOTE 7—COMMITMENTS AND CONTINGENCIES
The Company has $250,000190,000 in operating lease obligations payable through 20252026 and $15,000622,000 in other contractual obligations.services . The contractual services include $252,000 payable through March 31, 2025, $220,000 payable through March 31, 2026 and $150,000 payable through March 31, 2027. The Company also hadhas $603,000299,000 in open purchase order commitments payable through October 2023.March 31, 2025.
NOTE 8—EQUITYSTOCKHOLDERS’ DEFICIT
(a) General
Reverse Stock Split
On September 5, 2023, the Board of Directors of Acorn approved a Certificate of Amendment to Acorn’s Restated Certificate of Incorporation that provided for a 1-for-16 reverse stock split of Acorn’s Common Stock. See Note 1 for related details. At September 30, 2023,March 31, 2024, Acorn had shares issued and outstanding shares outstanding of its common stock, par value $ 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, 2023,March 31, 2024, 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 nine monthsthree-month period ended September 30, 2023,March 31, 2024, options were issued. options were issued in the three months ended September 30, 2023. The options were issued as follows: an aggregate of to directors (excluding the CEO), to the CEO, to the CFO and an aggregate of to employees. In the nine and three monthsthree-month period ended September 30, 2023,March 31, 2024, there were grants to non-employees (other than the directors, CEO and CFO).
NoDuring the three-month period ended March 31, 2024, options were exercised in the nine and three months ended September 30, 2023. The intrinsic value of options outstanding and of options exercisable at September 30, 2023 was $.exercised. 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):
Number of Options (in shares) | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | Number of Options (in shares) | Weighted Average Exercise Price Per | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||||||||||||||
| Outstanding at December 31, 2022 | 58,966 | $ | 6.71 | years | $ | 16,000 | ||||||||||||||||||||||||||
| Outstanding at December 31, 2023 | 71,893 | $ | 6.41 | years | $ | 40,000 | ||||||||||||||||||||||||||
| Granted | 13,436 | 5.24 | 7,900 | 6.08 | ||||||||||||||||||||||||||||
| Exercised | — | — | (2,812 | ) | 5.12 | |||||||||||||||||||||||||||
| Forfeited or expired | (1,280 | ) | 6.48 | — | — | |||||||||||||||||||||||||||
| Outstanding at September 30, 2023 | 71,122 | $ | 6.44 | years | $ | 46,000 | ||||||||||||||||||||||||||
| Exercisable at September 30, 2023 | 61,786 | $ | 6.49 | years | $ | 38,000 | ||||||||||||||||||||||||||
| Outstanding at March 31, 2024 | 76,981 | $ | 6.42 | years | $ | 85,000 | ||||||||||||||||||||||||||
| Exercisable at March 31, 2024 | 66,106 | $ | 6.46 | years | $ | 74,000 | ||||||||||||||||||||||||||
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SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES
| Risk-free interest rate | % | ||||||
| Expected term of options | years | ||||||
| Expected annual volatility | % | ||||||
| Expected dividend yield | — | % |
(c) Stock-basedStock Option Compensation Expense
Stock-basedStock option compensation expense included in SG&Aselling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations was $ and $ for the nine-month periods ended September 30, 2023 and 2022, respectively, and $ and $ for the three-month periods ended September 30,March 31, 2024 and 2023, and 2022, respectively.
The total compensation cost related to non-vested awards not yet recognized was $ and $ as of September 30, 2023 and 2022, respectively.March 31, 2024 which will be recognized over the next sixteen months.
(d) Warrants
The Company previously issued warrants at exercise prices equal to or greater than the 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, 2022 | 2,187 | $ | 2.08 | months | ||||||||
| Granted | — | — | ||||||||||
| Exercised | (2,187 | ) | 2.08 | |||||||||
| Forfeited or expired | — | — | ||||||||||
| Outstanding at September 30, 2023 | — | $ | — | — | ||||||||
NOTE 9— SEGMENT REPORTING
As of September 30, 2023,March 31, 2024, the Company operates in two reportable operating segments, both of which are performed through the Company’s OmniMetrix subsidiary:
| ● | Power Generation (“PG”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT applications for residential and commercial/industrial power generation equipment. This includes OmniMetrix’s AIRGuard product, which remotely monitors and controls industrial air compressors, and its Smart Annunciator product, which is typically sold to commercial customers that require a visual representation of the generator’s status and has a touchscreen display that indicates the current state of that generator. | |
| ● | Cathodic Protection (“CP”). OmniMetrix’s CP services provide remote monitoring and control products for cathodic protection systems on |
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 nine-month and three-month periods ended September 30,March 31, 2024 and 2023 and 2022 (in thousands):
SUMMARY OF SEGMENTED DATA
| PG | CP | Total | ||||||||||
| Nine months ended September 30, 2023: | ||||||||||||
| Revenues from external customers | $ | 4,994 | $ | 815 | $ | 5,809 | ||||||
| Segment gross profit | 3,876 | 480 | 4,356 | |||||||||
| Depreciation and amortization | 99 | 16 | 115 | |||||||||
| Segment income (loss) before income taxes | $ | 891 | $ | (35 | ) | $ | 856 | |||||
| Nine months ended September 30, 2022: | ||||||||||||
| Revenues from external customers | $ | 4,335 | $ | 820 | $ | 5,155 | ||||||
| Segment gross profit | 3,256 | 463 | 3,719 | |||||||||
| Depreciation and amortization | 72 | 13 | 85 | |||||||||
| Segment income (loss) before income taxes* | $ | 340 | $ | (103 | ) | $ | 237 | |||||
| Three months ended September 30, 2023: | ||||||||||||
| Revenues from external customers | $ | 1,798 | $ | 289 | $ | 2,087 | ||||||
| Segment gross profit | 1,381 | 169 | 1,550 | |||||||||
| Depreciation and amortization | 36 | 5 | 41 | |||||||||
| Segment income before income taxes | $ | 361 | $ | 5 | $ | 366 | ||||||
| Three months ended September 30, 2022: | ||||||||||||
| Revenues from external customers | $ | 1,510 | $ | 273 | $ | 1,783 | ||||||
| Segment gross profit | 1,092 | 123 | 1,215 | |||||||||
| Depreciation and amortization | 31 | 5 | 36 | |||||||||
| Segment income (loss) before income taxes | $ | 78 | $ | (58 | ) | $ | 20 | |||||
| PG | CP | Total | ||||||||||
| Three months ended March 31, 2024: | ||||||||||||
| Revenues from external customers | $ | 1,794 | $ | 338 | $ | 2,132 | ||||||
| Segment gross profit | 1,398 | 193 | 1,591 | |||||||||
| Depreciation and amortization | 24 | 4 | 28 | |||||||||
| Segment income (loss) before income taxes | $ | 416 | $ | (18 | ) | $ | 398 | |||||
| Three months ended March 31, 2023: | ||||||||||||
| Revenues from external customers | $ | 1,507 | $ | 242 | $ | 1,749 | ||||||
| Segment gross profit | 1,179 | 137 | 1,316 | |||||||||
| Depreciation and amortization | 33 | 5 | 38 | |||||||||
| Segment income (loss) before income taxes | $ | 199 | $ | (48 | ) | $ | 151 | |||||
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.
| 13 |
Reconciliation of Segment Net Income (Loss) to Consolidated Net Income (Loss) Before Income Taxes
SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT OF OPERATIONS
| 2024 | 2023 | |||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | Three months ended March 31, | ||||||||||||||||||||
Nine months ended September 30, | Three months ended September 30, | 2024 | 2023 | |||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | (in thousands) | ||||||||||||||||||||
| Total net income before income taxes for reportable segments | $ | 856 | $ | 237 | $ | 366 | $ | 20 | $ | 398 | $ | 151 | ||||||||||||
| Unallocated software impairment | (51 | ) |
| |||||||||||||||||||||
| Unallocated cost of corporate headquarters | (814 | ) | (741 | ) | (339 | ) | (230 | ) | (305 | ) | (235 | ) | ||||||||||||
| Consolidated net income (loss) before income taxes | $ | 42 | $ | (555 | ) | $ | 27 | $ | (210 | ) | $ | 93 | $ | (84 | ) | |||||||||
NOTE 10—REVENUE
The following table disaggregates the Company’s revenue for the nine-month and three-month periods ended September 30,March 31, 2024 and 2023 and 2022 (in thousands):
SCHEDULE OF DISAGGREGATES OF REVENUE
| Hardware | Monitoring | Total | Hardware | Monitoring | Total | |||||||||||||||||||
| Nine months ended September 30, 2023: | ||||||||||||||||||||||||
| Three months ended March 31, 2024: | ||||||||||||||||||||||||
| PG Segment | $ | 2,017 | $ | 2,977 | $ | 4,994 | $ | 753 | $ | 1,041 | $ | 1,794 | ||||||||||||
| CP Segment | 620 | 195 | 815 | 277 | 61 | 338 | ||||||||||||||||||
| Total Revenue | $ | 2,637 | $ | 3,172 | $ | 5,809 | $ | 1,030 | $ | 1,102 | $ | 2,132 | ||||||||||||
| Hardware | Monitoring | Total | ||||||||||
| Nine months ended September 30, 2022: | ||||||||||||
| PG Segment | $ | 1,610 | $ | 2,725 | $ | 4,335 | ||||||
| CP Segment | 631 | 189 | 820 | |||||||||
| Total Revenue | $ | 2,241 | $ | 2,914 | $ | 5,155 | ||||||
| Hardware | Monitoring | Total | ||||||||||
| Three months ended September 30, 2023: | ||||||||||||
| PG Segment | $ | 780 | $ | 1,018 | $ | 1,798 | ||||||
| CP Segment | 224 | 65 | 289 | |||||||||
| Total Revenue | $ | 1,004 | $ | 1,083 | $ | 2,087 | ||||||
| Hardware | Monitoring | Total | Hardware | Monitoring | Total | |||||||||||||||||||
| Three months ended September 30, 2022: | ||||||||||||||||||||||||
| Three months ended March 31, 2023: | ||||||||||||||||||||||||
| PG Segment | $ | 608 | $ | 902 | $ | 1,510 | $ | 549 | $ | 958 | $ | 1,507 | ||||||||||||
| CP Segment | 217 | 56 | 273 | 176 | 66 | 242 | ||||||||||||||||||
| Total Revenue | $ | 825 | $ | 958 | $ | 1,783 | $ | 725 | $ | 1,024 | $ | 1,749 | ||||||||||||
Deferred revenue activity for the nine monthsthree-month period ended September 30,March 31, 2024 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED REVENUE ACTIVITY
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2023 | $ | 2,965 | $ | 2,619 | $ | 5,584 | ||||||
| Additions during the period | — | 1,081 | 1,081 | |||||||||
| Recognized as revenue | (535 | ) | (1,102 | ) | (1,637 | ) | ||||||
| Balance at March 31, 2024 | $ | 2,430 | $ | 2,598 | $ | 5,028 | ||||||
| Amounts to be recognized as revenue in the twelve-month-period ending: | ||||||||||||
| March 31, 2025 | $ | 1,621 | $ | 2,202 | $ | 3,823 | ||||||
| March 31, 2026 | 751 | 393 | 1,144 | |||||||||
| March 31, 2027 and thereafter | 58 | 3 | 61 | |||||||||
| Total | $ | 2,430 | $ | 2,598 | $ | 5,028 | ||||||
The amount of hardware revenue recognized during the three-month period ended March 31, 2024 that was included in deferred revenue at the beginning of the fiscal year was $535,000. The amount of monitoring revenue during the three-month period ended March 31, 2024 that was included in deferred revenue at the beginning of the fiscal year was $954,000.
The following table provides a reconciliation of the Company’s hardware revenue for the three-month periods ended March 31, 2024 and 2023 (in thousands):
SCHEDULE OF RECONCILIATION OF HARDWARE REVENUE
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
Three months ended March 31, | ||||||||
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
| Amortization of deferred revenue | $ | 535 | $ | 585 | ||||
| Hardware sales (new product versions) | 376 | — | ||||||
| Other accessories, services, shipping and miscellaneous charges | 119 | 140 | ||||||
| Total hardware revenue | $ | 1,030 | $ | 725 | ||||
| 14 |
Deferred COGS relate only to the sale of equipment. Deferred COGS activity for the three-month period ended March 31, 2024 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED REVENUECHARGES ACTIVITY
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2022 | $ | 3,751 | $ | 2,420 | $ | 6,171 | ||||||
| Additions during the period | 1,597 | 3,436 | 5,033 | |||||||||
| Recognized as revenue | (1,821 | ) | (3,172 | ) | (4,993 | ) | ||||||
| Balance at September 30, 2023 | $ | 3,527 | $ | 2,684 | $ | 6,211 | ||||||
| Amounts to be recognized as revenue in the twelve-month-period ending: | ||||||||||||
| September 30, 2024 | $ | 2,023 | $ | 2,247 | $ | 4,270 | ||||||
| September 30, 2025 | 1,179 | 433 | 1,612 | |||||||||
| September 30, 2026 and thereafter | 325 | 4 | 329 | |||||||||
| $ | 3,527 | $ | 2,684 | $ | 6,211 | |||||||
| Balance at December 31, 2023 | $ | 1,285 | ||
| Additions, net of adjustments, during the period | — | |||
| Recognized as cost of sales | (235 | ) | ||
| Balance at March 31, 2024 | $ | 1,050 | ||
| Amounts to be recognized as COGS in the twelve-month-period ending: | ||||
| March 31, 2025 | $ | 709 | ||
| March 31, 2026 | 316 | |||
| March 31, 2027 and thereafter | 25 | |||
| $ | 1,050 |
The amount of hardware revenue recognized during the nine months ended September 30, 2023 that was included in deferred revenue at the beginningfollowing table provides a reconciliation of the fiscal year was $1,469,000. The amount of monitoring revenue during the nine months ended September 30, 2023 that was included in deferred revenue at the beginning of the fiscal year was $1,890,000.
SCHEDULE OF RECONCILIATION OF HARDWARE REVENUE
| Reconciliation of Hardware Revenue | 2023 | 2022 | 2023 | 2022 | ||||||||||||
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| Reconciliation of Hardware Revenue | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Amortization of deferred revenue | $ | 1,821 | $ | 1,658 | $ | 629 | $ | 631 | ||||||||
| Sales of custom designed units and related accessories | 135 | — | 43 | — | ||||||||||||
| Hardware sales (new product versions) | 150 | — | 150 | — | ||||||||||||
| Other accessories, services, shipping and miscellaneous charges | 531 | 583 | 182 | 194 | ||||||||||||
| Total hardware revenue | $ | 2,637 | $ | 2,241 | $ | 1,004 | $ | 825 | ||||||||
Deferred charges relate only to the sale of equipment. Deferred charges activityCompany’s COGS expense for the nine monthsthree-month periods ended September 30,March 31, 2024 and 2023 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED CHARGES ACTIVITY
| Balance at December 31, 2022 | $ | 1,694 | ||
| Additions, net of adjustments, during the period | 655 | |||
| Recognized as COGS | (817 | ) | ||
| Balance at September 30, 2023 | $ | 1,532 | ||
| Amounts to be recognized as COGS in the twelve-month-period ending: | ||||
| September 30, 2024 | $ | 890 | ||
| September 30, 2025 | 507 | |||
| September 30, 2026 and thereafter | 135 | |||
| $ | 1,532 |
SCHEDULE OF RECONCILIATION OF COGS EXPENSE
| Reconciliation of COGS Expense | 2023 | 2022 | 2023 | 2022 | 2024 | 2023 | ||||||||||||||||||
Nine months ended September 30, | Three months ended September 30, | Three months ended March 31, | ||||||||||||||||||||||
| Reconciliation of COGS Expense | 2023 | 2022 | 2023 | 2022 | 2024 | 2023 | ||||||||||||||||||
| Amortization of deferred COGS | $ | 817 | $ | 793 | $ | 277 | $ | 309 | $ | 235 | $ | 268 | ||||||||||||
| COGS of custom designed units and related accessories | 34 | — | 11 | — | ||||||||||||||||||||
| COGS of hardware sales (new product versions) | 66 | — | 66 | — | 163 | — | ||||||||||||||||||
| Data costs for monitoring | 224 | 250 | 76 | 93 | 62 | 75 | ||||||||||||||||||
| Other COGS of accessories, services, shipping and miscellaneous charges | 312 | 393 | 107 | 166 | 81 | 90 | ||||||||||||||||||
| Total COGS expense | $ | 1,453 | $ | 1,436 | $ | 537 | $ | 568 | $ | 541 | $ | 433 | ||||||||||||
The following table provides a reconciliation of the Company’s sales commissions contract assets for the nine-monththree-month period ended September 30, 2023March 31, 2024 (in thousands):
SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS
| Hardware | Monitoring | Total | Hardware | Monitoring | Total | |||||||||||||||||||
| Balance at December 31, 2022 | $ | 319 | $ | 80 | $ | 399 | ||||||||||||||||||
| Balance at December 31, 2023 | $ | 268 | $ | 96 | $ | 364 | ||||||||||||||||||
| Additions during the period | 148 | 43 | 191 | — | 8 | 8 | ||||||||||||||||||
| Amortization of sales commissions | (149 | ) | (27 | ) | (176 | ) | (48 | ) | (10 | ) | (58 | ) | ||||||||||||
| Balance at September 30, 2023 | $ | 318 | 96 | 414 | ||||||||||||||||||||
| Balance at March 31, 2024 | $ | 220 | $ | 94 | $ | 314 | ||||||||||||||||||
The capitalized sales commissions are included in other current assets ($218,000184,000) and other assets ($196,000130,000) in the Company’s unaudited condensed consolidated balance sheets as of September 30, 2023.sheet at March 31, 2024. The capitalized sales commissions are included in other current assets ($196,000202,000) and other assets ($203,000162,000) in the Company’s condensed consolidated balance sheet at December 31, 2022.2023.
Amounts to be recognized as sales commission expense in the twelve-month-period ending:ending (in thousands):
SCHEDULE OF SALES COMMISSIONS EXPENSE
| September 30, 2024 | $ | 218 | ||
| September 30, 2025 | 138 | |||
| September 30, 2026 and thereafter | 58 | |||
| Total | $ | 414 |
| March 31, 2025 | $ | 184 | ||
| March 31, 2026 | 101 | |||
| March 31, 2027 and thereafter | 29 | |||
| Total | $ | 314 |
The contract assets of deferred COGS and deferred sales commissions are subject to review under ASU 2016-13, see Notes 2 and 4; however, no credit losses on contract assets are expected based on the Company’s implementation of ASU 2016-13.
Commissions earned from the sales of the new hardware products will be recognized when the product is shipped.
NOTE 11—RELATED PARTY BALANCES AND TRANSACTIONS
Officer and Director Fees
The Company recorded consulting service fees to officers of $391,000 and $391,000 for the nine months ended September 30, 2023 and 2022, respectively, and $131,000134,000 and $130,000 for the three monthsthree-month periods ended September 30,March 31, 2024 and 2023, and 2022, respectively, which areis included in SG&Aselling, general and administrative expenses.
The Company recorded fees to directors of $52,000 and $44,000 for the nine months ended September 30, 2023 and 2022, respectively, and $18,000 and $15,000 for the three monthsthree-month periods ended September 30,March 31, 2024 and 2023, and 2022, respectively, which areis included in SG&Aselling, general and administrative expenses.
Intercompany
The intercompany balance due to Acorn from OmniMetrix for amounts loaned, accrued interest and expenses paid by Acorn on OmniMetrix’s behalf was $2,928,000 as of September 30, 2023 as compared to $3,677,000 as of December 31, 2022. During the nine months ended September 30, 2023, the intercompany amount due to Acorn from OmniMetrix decreased by $749,000. This included repayments of $961,000 offset by interest of $134,000 and dividends of $57,000 due to Acorn and $21,000 in shared expenses paid by Acorn. During the nine months ended September 30, 2022, the intercompany amount due to Acorn from OmniMetrix decreased by $447,000. This included repayments of $780,000 offset by interest of $134,000, dividends of $57,000 due to Acorn and $142,000 in shared expenses paid by Acorn. The intercompany balances are eliminated in consolidation.
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 Annual Report on Form 10-K for the year ended December 31, 20222023 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 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.
All dollar amounts in the tables and discussion below are rounded to the nearest thousand, except per share data, and, thus, are approximate.
FINANCIAL RESULTS BY COMPANY
The following table shows,tables show, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated companies.
| Nine months ended September 30, 2023 | Three months ended March 31, 2024 | |||||||||||||||||||||||
| OmniMetrix | Acorn | Total | OmniMetrix | Acorn | Total | |||||||||||||||||||
| Revenue | $ | 5,809 | $ | — | $ | 5,809 | $ | 2,132 | $ | — | $ | 2,132 | ||||||||||||
| COGS | 1,453 | — | 1,453 | |||||||||||||||||||||
| Cost of sales | 541 | — | 541 | |||||||||||||||||||||
| Gross profit | 4,356 | — | 4,356 | 1,591 | — | 1,591 | ||||||||||||||||||
| Gross profit margin | 75 | % | 75 | % | 75 | % | 75 | % | ||||||||||||||||
| R&D expense | 614 | — | 614 | |||||||||||||||||||||
| SG&A expense | 2,932 | 814 | 3,746 | |||||||||||||||||||||
| R&D expenses | 238 | — | 238 | |||||||||||||||||||||
| Selling, general and administrative expenses | 970 | 305 | 1,275 | |||||||||||||||||||||
| Operating income (loss) | $ | 810 | $ | (814 | ) | $ | (4 | ) | $ | 383 | $ | (305 | ) | $ | 78 | |||||||||
| Nine months ended September 30, 2022 | Three months ended March 31, 2023 | |||||||||||||||||||||||
| OmniMetrix | Acorn | Total | OmniMetrix | Acorn | Total | |||||||||||||||||||
| Revenue | $ | 5,155 | $ | — | $ | 5,155 | $ | 1,749 | $ | — | $ | 1,749 | ||||||||||||
| COGS | 1,436 | — | 1,436 | |||||||||||||||||||||
| Cost of sales | 433 | — | 433 | |||||||||||||||||||||
| Gross profit | 3,719 | — | 3,719 | 1,316 | — | 1,316 | ||||||||||||||||||
| Gross profit margin | 72 | % | 72 | % | 75 | % | 75 | % | ||||||||||||||||
| R&D expense | 637 | — | 637 | |||||||||||||||||||||
| SG&A expense | 2,845 | 740 | 3,585 | |||||||||||||||||||||
| Impairment of software | 51 | — | 51 | |||||||||||||||||||||
| R&D expenses | 214 | — | 214 | |||||||||||||||||||||
| Selling, general and administrative expenses | 963 | 234 | 1,197 | |||||||||||||||||||||
| Operating income (loss) | $ | 186 | $ | (740 | ) | $ | (554 | ) | $ | 139 | $ | (234 | ) | $ | (95 | ) | ||||||||
| Three months ended September 30, 2023 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 2,087 | $ | — | $ | 2,087 | ||||||
| COGS | 537 | — | 537 | |||||||||
| Gross profit | 1,550 | — | 1,550 | |||||||||
| Gross profit margin | 74 | % | 74 | % | ||||||||
| R&D expense | 212 | — | 212 | |||||||||
| SG&A expense | 990 | 340 | 1,330 | |||||||||
| Operating income (loss) | $ | 348 | $ | (340 | ) | $ | 8 | |||||
| Three months ended September 30, 2022 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 1,783 | $ | — | $ | 1,783 | ||||||
| COGS | 568 | — | 568 | |||||||||
| Gross profit | 1,215 | — | 1,215 | |||||||||
| Gross profit margin | 68 | % | 68 | % | ||||||||
| R&D expense | 227 | — | 227 | |||||||||
| SG&A expense | 968 | 230 | 1,198 | |||||||||
| Operating loss | $ | 20 | $ | (230 | ) | $ | (210 | ) | ||||
BACKLOG
As of September 30, 2023,March 31, 2024, OmniMetrix had a backlog of $6,211,000,$5,028,000, primarily comprised of deferred revenue, of which $4,270,000$3,823,000 is expected to be recognized as revenue in the next twelve months. This compares to a backlog of $6,053,000$6,216,000 at September 30, 2022.March 31, 2023. Now that we are selling hardware units that are capable of being distinct, the hardware backlog will no longer continue to grow and will be fully amortized by August 31, 2026, while the monitoring backlog will continue to be deferred and amortized over the period of service.
RECENT DEVELOPMENTS
On January 12, 2024, we entered into a new contract with our current primary data provider for Internet of Things (IoT) wireless services for a 36-month contract term with automatic one-year extensions, subject to termination notice. The pricing structure involves account setup, SIM charges, monthly revenue obligations, and various rate plans based on data usage and regions along with other optional services. The monthly expense obligation is $10,000 for the first 6 months and $15,000 thereafter. We will also be eligible for volume discounts based on total monthly service revenue. Additionally, the agreement includes an IoT Enhanced Support and Priority Care Services Rate Plan with various support service types and pricing tiers based on the number of devices and terms for SIM migrations, including tiered pricing and conditions for waiver of certain charges during migration. This new agreement will allow us to migrate our customers to higher tier data plans for nominal additional cost.
On October 1, 2023, we deployed our new user interface to our customer data portal and made it available to customers. On March 17, 2021, we entered into a master services agreement for the development of a new user interface for our customer data portal. As of September 30,Prior to deployment on October 1, 2023, we havehad invested $178,000$194,000 in design, development and quality assurance services of the new user interface. We deployed the new interface and made it available toFollowing deployment, our customers on October 1, 2023. Our customers havehad the option to continue to use the “classic view” of our user interface, which is our original user interface, or our new user interface known as “OV2” until December 31, 2023March 20, 2024 when we will officially terminateterminated our original user interface. The cost of this project was capitalized, and amortization began onas of October 1, 2023 when it was deployed.
In July 2022, we announced a partnership between OmniMetrix, CPower Energy Management (“CPower”),2023. We have continued to implement bug fixes and Power Solutions Specialists TX (“PSS”) designedenhancements to help homeowners that install next-generation standby generators to earn compensationOV2, for offering grid relief, known as “demand response,” to the Electric Reliability Council of Texas (“ERCOT”). CPower’s demand response solutions, combined with OmniMetrix’s remote control capabilities, allow the shifting of electricity production to PSS’s best-in-class residential standby generators for a few hours each year when the grid is stressed or ERCOT energy pricing is high, without the homeowner needing to takewhich any action. Homeowners are compensated for signing up and possibly supplying grid offload by running their generators for up to 12 hours per year. We are currently assisting PSS to market the demand response program to generator owners and will incentivize existing generator owners who sign up and satisfy certain terms and conditions by offering a one-time rebate of $200 to anyone who signs up before March 31, 2024.
On September 1, 2023, we launched an updated version of our products that includes new functionality in our TrueGuard, AIRGuard, Patriot and Hero products that allows our customers to have options as it relates to obtaining and utilizing the data that is provided by our hardware devices. This new functionality allows for SIM card options, configuration options regarding IP address endpoints and DNS routes, and access to our over-the-air data protocol. This product update allows customers to have the option to purchase our monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring provider if they so desire, whereas, historically, our standard products only functioned with our monitoring services. The modification to the circuit boards and embedded firmware of hardware enclosures in stock as of August 31, 2023 were made such that only the new version of these products was sold subsequent to this date.
On September 5, 2023, the Board of Directors of Acorn approved a Certificate of Amendment to Acorn’s Restated Certificate of Incorporation (the “Certificate of Amendment”) that provided for a 1-for-16 reverse stock split of Acorn’s Common Stock (the “Reverse Stock Split”). Acorn filed the Certificate of Amendment with the Secretary of State of the State of Delaware on September 6, 2023, and the Reverse Stock Split became effective at 5:00 p.m. EDT on September 7, 2023. The Reverse Stock Split increased the market price of Acorn’s Common Stock and makes Acorn’s shares accessible to a broader range of investors, including institutions and those unable to purchase or recommend low-priced stocks. At the effective time of the Reverse Stock Split, every sixteen issued and outstanding shares of Acorn’s Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change in the par value per share. Stockholders who would have otherwise been entitled to fractional shares of Common Stock as a result of the Reverse Stock Split received a cash payment in lieu of receiving fractional shares. The value of the fractional shares repurchased was $347 and equated to fifty-eight shares. All share and per-share amounts of common stock, options and warrants contained in this Management’s Discussion and Analysisrelated IT costs have been restated for all periods to give retroactive effect to the Reverse Stock Split and the related fractional share repurchase for all prior periods presented.
On November 7, 2023, we entered into a non-exclusive reseller agreement with one of the nation’s largest commercial generator dealers with regional dealerships throughout the United States. We believe this agreement could yield 2,500 to 3,000 new monitoring connections per year for OmniMetrix, which could represent hardware sales, start-up fees and monitoring revenue of $1 million to $2 million per year in the aggregate. Importantly, endpoints added from this relationship are expected to make a meaningful contribution to the growth of our base of recurring monitoring revenue. We expect initial revenue from this relationship to start in the first quarter of 2024 and to buildexpensed as the program is rolled out across their dealer network. incurred.
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”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT applications for residential and commercial/industrial power generation equipment. This includes our AIRGuard product, which remotely monitors and controls industrial air compressors, and our Smart Annunciator product, which is typically sold to commercial customers that require a visual representation of the generator’s status and has a touchscreen display that indicates the current state of that generator. | |
| ● | Cathodic Protection (“CP”). OmniMetrix’s CP services provide remote monitoring and control products for cathodic protection systems on |
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 9 and 10 to the unaudited condensed consolidated financial statements included in this quarterly report.
| 17 |
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, and 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, cybersecurity threats, and other issues related to the reliability of the electric power grid. 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.
OmniMetrix sells monitoring hardware devices and data monitoring services. On September 1, 2023, we launched an updated version of our products that includes new functionality in our TrueGuard, AIRGuard, Patriot and Hero products that allows our customers to have options as it relates to obtaining and utilizing the data that is provided by our hardware devices. This new functionality allows for SIM card options, configuration options regarding IP address endpoints and DNS routes, and access to our over-the-air data protocol. This product update allows customers to have the option to purchase our monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring provider if they so desire, whereas, historically, our standard products only functioned with our monitoring services. The modification to the circuit boards and embedded firmware of hardware enclosures in stock as of August 31, 2023 were made such that only the new version of these products was sold subsequent to this date. Prior to thesuch product modification, discussed above under Recent Developments, revenue (and related costs) associated with sale of equipment was recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. This deferred revenue and the deferred cost of the hardware with respect to the sale of new equipment was recognized over the life of the units, which was estimated to be three years. Revenue from hardware sales subsequent to August 31, 2023 is recognized upon shipment, instead of being deferred, as discussed above under Recent Developments.deferred. Revenues from the prepayment of monitoring fees (generally paid 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 (typically twelve-month, renewable periods).
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, 2023 and 2022, including the percentage of total revenues during each period attributable to selected components of the Statements of Operations data and for the period-to-period percentage changes in such components. For segment data, see Notes 9 and 10 to the unaudited condensed consolidated financial statements included in this quarterly report.
| Nine months ended September 30, | ||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||
| ($,000) | % of revenues | ($,000) | % of revenues | From 2022 to 2023 | ||||||||||||||||
| Revenue | $ | 5,809 | 100 | % | $ | 5,155 | 100 | % | 13 | % | ||||||||||
| COGS | 1,453 | 25 | % | 1,436 | 28 | % | 1 | % | ||||||||||||
| Gross profit | 4,356 | 75 | % | 3,719 | 72 | % | 17 | % | ||||||||||||
| R&D expense | 614 | 11 | % | 637 | 12 | % | (4 | )% | ||||||||||||
| SG&A expense | 3,746 | 64 | % | 3,585 | 70 | % | 4 | % | ||||||||||||
| Impairment of software | — | — | % | 51 | 1 | % | (100 | )% | ||||||||||||
| Operating loss | (4 | ) | (* | )% | (554 | ) | (11 | )% | (99 | )% | ||||||||||
| Interest income (expense), net | 46 | 1 | % | (1 | ) | * | % | (4700 | )% | |||||||||||
| Income (loss) before income taxes | 42 | 1 | % | (555 | ) | (11 | )% | (108 | )% | |||||||||||
| Income tax expense | — | — | — | — | % | — | ||||||||||||||
| Net income (loss) | 42 | 1 | % | (555 | ) | (11 | )% | (108 | )% | |||||||||||
| Less: Non-controlling interest share of net income | 7 | * | % | 1 | * | % | 600 | % | ||||||||||||
| Net income (loss) attributable to Acorn Energy, Inc. | $ | 35 | 1 | % | $ | (556 | ) | (11 | )% | (106 | )% | |||||||||
*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,March 31, 2024 and March 31, 2023, and 2022, 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 9 and 10 to the unaudited condensed consolidated financial statements included in this quarterly report.
| Three months ended March 31, | ||||||||||||||||||||
| 2024 | 2023 | Change | ||||||||||||||||||
| ($000) | % of revenues | ($000) | % of revenues | from 2023 | ||||||||||||||||
| Revenue | $ | 2,132 | 100 | % | $ | 1,749 | 100 | % | 22 | % | ||||||||||
| Cost of sales | 541 | 25 | % | 433 | 25 | % | 25 | % | ||||||||||||
| Gross profit | 1,591 | 75 | % | 1,316 | 75 | % | 21 | % | ||||||||||||
| R&D expenses | 238 | 11 | % | 214 | 12 | % | 11 | % | ||||||||||||
| SG&A expenses | 1,275 | 60 | % | 1,197 | 68 | % | 7 | % | ||||||||||||
| Operating income (loss) | 78 | 4 | % | (95 | ) | (5 | )% | (182 | )% | |||||||||||
| Interest income | 15 | 1 | % | 11 | 1 | % | 36 | % | ||||||||||||
| Income (loss) before income taxes | 93 | 4 | % | (84 | ) | (5 | )% | (211 | )% | |||||||||||
| Income tax expense | 25 | 1 | % | — | — | % | 100 | % | ||||||||||||
| Net income (loss) | 68 | 3 | % | (84 | ) | (5 | )% | (181 | )% | |||||||||||
| Non-controlling interests share of net income | (3 | ) | (* ) | % | (1 | ) | (* ) | % | 200 | % | ||||||||||
| Net income (loss) attributable to Acorn Energy, Inc. | $ | 65 | 3 | % | $ | (85 | ) | (5 | )% | (176 | )% | |||||||||
*result is less than 1%
| Three months ended September 30, | ||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||
| ($,000) | % of revenues | ($,000) | % of revenues | from 2022 to 2023 | ||||||||||||||||
| Revenue | $ | 2,087 | 100 | % | $ | 1,783 | 100 | % | 17 | % | ||||||||||
| COGS | 537 | 26 | % | 568 | 32 | % | (5 | )% | ||||||||||||
| Gross profit | 1,550 | 74 | % | 1,215 | 68 | % | 28 | % | ||||||||||||
| R&D expense | 212 | 10 | % | 227 | 13 | % | (7 | )% | ||||||||||||
| SG&A expense | 1,330 | 64 | % | 1,198 | 67 | % | 11 | % | ||||||||||||
| Operating income (loss) | 8 | * | % | (210 | ) | (12 | )% | 104 | % | |||||||||||
| Interest income, net | 19 | 1 | % | — | — | % | 100 | % | ||||||||||||
| Income (loss) before income taxes | 27 | 1 | % | (210 | ) | (12 | )% | (113 | )% | |||||||||||
| Income tax expense | — | — | % | — | — | % | — | % | ||||||||||||
| Net income (loss) | 27 | 1 | % | (210 | ) | (12 | )% | (113 | )% | |||||||||||
| Less: Non-controlling interest share of net income | 3 | * | % | ** | * | % | * | % | ||||||||||||
| Net income (loss) attributable to Acorn Energy, Inc. | $ | 24 | 1 | % | $ | (210 | ) | (12 | )% | (111 | )% | |||||||||
*result is less than 1%.
**less than $1
Revenue. Revenue for the nine and three months ended September 30, 2023 and 2022
In the nine months ended September 30, 2023, revenue increased by $654,000, or 13%, from $5,155,000 in the nine months ended September 30, 2022 to $5,809,000 in the nine months ended September 30, 2023. Hardware revenue increased by $396,000 from $2,241,000 in the nine months ended September 30, 2022 to $2,637,000 in the nine months ended September 30, 2023. During the nine months ended September 30, 2023, we recorded $136,000 in revenue from the sale of custom TG Pro units and related accessories that are designed to large customer specifications and monitored by the customer. We did not have any custom unit orders in the first nine months ended September 30, 2022. The hardware revenue during the nine months ended September 30, 2023 is further detailedquarter of 2024 was $2,132,000 compared to $1,749,000 in the table below:
Nine months ended September 30, | Three months ended September 30, | |||||||||||||||
| Reconciliation of Hardware Revenue | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Amortization of deferred revenue | $ | 1,821 | $ | 1,658 | $ | 629 | $ | 631 | ||||||||
| Sales of custom designed units and related accessories | 135 | — | 43 | — | ||||||||||||
| Hardware sales (new product versions) | 150 | — | 150 | — | ||||||||||||
| Other accessories, services, shipping and miscellaneous charges | 531 | 583 | 182 | 194 | ||||||||||||
| Total hardware revenue | $ | 2,637 | $ | 2,241 | $ | 1,004 | $ | 825 | ||||||||
The increase in hardware revenue was due to the salefirst quarter of custom PG units (as noted above) and increased sales of other PG products as well as from installation income realized, offset by a decrease in revenue from Hero products as sales of CP products were down period over period. Monitoring revenue increased by $258,000, or 9%, from $2,914,000 in the nine months ended September 30, 2022 to $3,172,000 in the nine months ended September 30, 2023. The increase in monitoring revenue was due to2023, which is an increase in the number of connections being monitored and growth in our customer base.
$383,000, or 21.9%. As discussed above, OmniMetrix has two reportable segments, PG and CP. Of the $5,809,000$2,132,000 in revenue recognized in the nine monthsthree-month period ended September 30, 2023, $4,994,000March 31, 2024, $1,794,000 was generated by PG activities and $815,000 was generated by CP activities. This represents an increase in revenue from PG activities of $659,000, or 15%, from $4,435,000 in the nine months ended September 30, 2022, and a decrease in revenue from CP activities of $5,000, or 1%, from $820,000 in the nine months ended September 30, 2022. As noted above, the increase in PG revenue was due to the sale of custom units, an increase in the sale of other PG products and growth in our customer base. Revenue increased by $304,000, or 17%, from $1,783,000 in the three months ended September 30, 2022 to $2,087,000 in the three months ended September 30, 2023. The increase is due to the same drivers in the nine-month period as previously discussed.
Of the $2,087,000 in revenue recognized in the three months ended September 30, 2023, $1,798,000 was generated by PG activities and $289,000$338,000 was generated by CP activities. As compared to the three monthsthree-month period ended September 30, 2022,March 31, 2023, revenue from PG activities increased $288,000,$287,000, or 19%, and revenue from CP activities increased $16,000,$96,000, or 6%39.7%. As compared to the three-month period ended March 31, 2023, hardware revenue increased $305,000, or 42.1%, while monitoring revenue increased $78,000, or 7.6%.
Hardware revenue during the three-month periods ended March 31, 2024 and 2023 is further detailed in the table below (in thousands):
Three months ended March 31, | ||||||||
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
| Amortization of deferred revenue | $ | 535 | $ | 585 | ||||
| Hardware sales (new product versions) | 376 | — | ||||||
| Other accessories, services, shipping and miscellaneous charges | 119 | 140 | ||||||
| Total hardware revenue | $ | 1,030 | $ | 725 | ||||
The increase in PG revenue was due to an increase in the sales of TG Pro and TG2 products. The increase in CP revenue was due to an increase in the sale of Hero2 units. We sold 23% more Hero2 units in the three-month period ended March 31, 2024 compared to the number of units sold in the three-month period ended March 31, 2023. In addition, the new version of the hardware was sold in the first quarter of 2024; thus, the revenue was recognized when the units were shipped instead of being deferred and amortized over three years. The increase in monitoring revenue is due to an increase in the number of connections being monitored.
Gross profit for the nine and three months ended September 30, 2023 and 2022Profit.
Gross profit forduring the nine monthsthree-month period ended September 30, 2023March 31, 2024 was $4,356,000,$1,591,000, reflecting a gross margin of 75%, on revenue, compared with a gross profit during the three-month period ended March 31, 2023 of $3,719,000,$1,316,000, also reflecting a gross margin of 72%, for the nine months ended September 30, 2022.
Gross margin on hardware revenue for the nine months ended September 30, 2023 was 53% compared to 47% for the nine months ended September 30, 2022. Gross margin on monitoring revenue for the nine months ended September 30, 2023 was 93% compared to 91% for the nine months ended September 30, 2022.
Gross profit for the three months ended September 30, 2023 was $1,550,000, reflecting a gross margin of 74%, compared with a gross profit for the three months ended September 30, 2022 of $1,215,000, reflecting a gross margin of 68%75%. Gross margin on hardware revenue for the three months ended September 30, 2023 was 54% compared to 43% for the three months ended September 30, 2022. Cost of sales in the three and nine months ended September 30, 2022 included a write-off of $31,000 in obsolete CP parts inventory which was the primary reason for lower gross margin during these prior year periods. Gross margin on monitoring revenue for the three months ended September 30, 2023 was 93% compared to 90% for the three months ended September 30, 2022. The lower monitoring gross margin in the prior year periods was due to monitoring rebates that were given to two large customers during the three months ended September 30, 2022.
Operating expenses for the nine and three months ended September 30, 2023 and 2022
OmniMetrix R&D expense. During the nine monthsthree-month periods ended September 30,March 31, 2024 and 2023, and 2022, R&D expense was $614,000$238,000 and $637,000,$214,000, respectively. During the three months ended September 30, 2023, OmniMetrix recorded $212,000 of R&D expense as compared to $227,000 in the three months ended September 30, 2022. The decreaseincrease in R&D expense in the nine monthsthree-month period ended September 30, 2023March 31, 2024 of $23,000approximately $24,000 is due to a reduction of R&D hours related to the phased retirement of onesalary increases of our engineers partially offset by increased engineering consulting expenses.team effective October 1, 2023, 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 in 2024 as we continue to work on certain initiatives to redesign products and expand product lines to increase the level of innovation.
OmniMetrix SG&ASelling, general and administrative expense. During the nine months ended September 30, 2023, OmniMetrix recorded SG&A expense of $2,932,000, compared to SG&A expense of $2,845,000the consolidated entities in the ninefirst three months ended September 30, 2022,of 2024 reflected an increase of $87,000,$78,000, or 3%. During6.5%, as compared to the first three months ended September 30, 2023, OmniMetrix recordedof 2023. OmniMetrix’s SG&A expense of $990,000, compared to SG&A expense of $968,000increased $7,000, or less than 1%, from $963,000 in the first three months ended September 30, 2022, an increase of $22,000, or 2%. The increase2023 to $970,000 in the nine-month periodfirst three months of 2024. This increase was primarily due to an increase of (i) $45,000$36,000 in sales commission amortization,personnel expenses due to compensation increases and staff additions, (ii) $30,000$13,000 in technology expenses, primarily consulting fees, (iii) $3,000 in amortization primarily related to IT assets, (iii) $83,000 in personnel costs, (iv) $5,000 in net aggregate increases in other expense categories,of sales commissions, offset by decreases of (v) $66,000(iv) $10,000 in technology consulting and software license fees and (vi)depreciation expense, (v) $10,000 in travel and trade show expenses.
During September 2022, we conducted an evaluation of the status of an ERP software customization project that had been initiatedexpenses, (vi) $9,000 in July 2019bad debt expense, (vii) $5,000 in facility expenses and was ongoing. As a result of this evaluation, we elected to terminate this project effective September 30, 2022 and recorded an impairment against the capitalized investment(viii) $11,000 in this project of $51,000.
Corporate SG&A expense.other expenses. Corporate SG&A expense was $814,000increased $71,000, or 30.3%, from $234,000 in the ninefirst three months ended September 30,of 2023 an increase of $74,000, or 10%, from the $740,000 of corporate SG&A expense reportedto $305,000 in the ninefirst three months ended September 30, 2022.of 2024. This increase was due to $102,000 in expenses related to the execution of the reverse stock split offset by a decreasean increase of (i) $15,000$25,000 in audit fees due to an increase in engagement fees year over year of 14% and also to the timing of when the services were performed as some were performed in(i.e., during the first quarter of 2024 instead of during the fourth quarter of 2022 versus first quarter2023), (ii) $16,000 in tax fees from the preparation of the 2023 (ii) $20,000tax provision, (iii) $12,000 in stock compensation expense, (iii) $9,000(iv) $6,000 in insurance expenses offset by a net increase of (iv) $16,000legal fees and (v) $12,000 in other public company expenses.
Corporate SG&A expense for the three months ended September 30, 2023 increased $110,000, or 48%, to $340,000 from $230,000 in the three months ended September 30, 2022 primarily due to $102,000 in expenses related to the execution of the reverse stock split. Third quarter 2023 corporate SG&A expense of $340,000 was higher by $100,000 than second quarter 2023 corporate SG&A expense of $240,000 due to the expenses related to the execution of the reverse stock split which were incurred in the third quarter of 2023. We expect the quarterly corporate overhead to increase in future quarters due to increased audit fees and board fees in addition to costs that may be required to support the growth of our OmniMetrix subsidiary.
Net income (loss) attributable to Acorn Energy. We recognized net income attributable to Acorn stockholders of $35,000$65,000 in the nine months ended September 30, 2023, compared to net loss attributable to Acorn stockholders of $556,000 in the nine months ended September 30, 2022. Our net income during the nine months ended September 30, 2023 is comprised of net income at OmniMetrix of $856,000 offset by corporate expenses of $814,000 and the non-controlling interest share of our income from OmniMetrix of $7,000. Our net loss during the nine months ended September 30, 2022 is comprised of net income at OmniMetrix of $52,000 offset by corporate expenses, including net interest expense, of $607,000 and the non-controlling interest share of our income from OmniMetrix of $1,000.
For thefirst three months ended September 30, 2023, we recognized net income attributable to Acorn stockholders of $24,000,2024 compared to a net loss attributable to Acorn stockholders of $210,000 for$85,000 in the first three months ended September 30, 2022.of 2023. Our net income during the three monthsthree-month period ended September 30,March 31, 2024 is comprised of pre-tax net income at OmniMetrix of $364,000 less state taxes of $25,000 on OmniMetrix income, corporate expenses of $271,000, and $3,000 representing the non-controlling interest share of our income from OmniMetrix. Our loss in the three-month period ended March 31, 2023 is comprised of net income at OmniMetrix of $366,000$151,000, less corporate expense of $235,000, offset by corporate expenses of $339,000 and$1,000 representing the non-controlling interest share of our income from OmniMetrix of $3,000. Our net loss in the three months ended September 30, 2022 is comprised of net income at OmniMetrix of $19,000 offset by corporate expenses of $229,000. The non-controlling interest share of OmniMetrix during this period was less than $1,000 and rounded to zero.OmniMetrix.
| 19 |
Liquidity and Capital Resources
At September 30, 2023,March 31, 2024, we had a negative working capital of $513,000.$620,000. Our working capital includes $1,749,000$1,417,000 of cash and deferred revenue of $4,270,000. The$3,823,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized.
During the nine monthsthree-month period ended September 30, 2023,March 31, 2024, our OmniMetrix subsidiary provided $1,098,000cash flow from operations of $268,000, while our corporate headquarters used $732,000$311,000 for operations during the same period.
During the nine monthsthree-month period ended September 30, 2023,March 31, 2024, we invested $72,000$2,000 in technology and other capital projects and received proceeds of $5,000$13,000 from financing activities related to the exercise of warrants.stock options.
Other Liquidity Matters
Intercompany
OmniMetrix owes Acorn $2,928,000$2,660,000 for loans,amounts loaned, accrued interest and expenses advancedpaid by Acorn on OmniMetrix’s behalf as of March 31, 2024 as compared to it by Acorn. OmniMetrix made repayments$2,657,000 as of December 31, 2023. During the three-month period ended March 31, 2024, the intercompany amount due to Acorn from OmniMetrix increased by $3,000. This included repayments of $961,000 in the nine months ended September 30, 2023$84,000 offset by interest of $34,000, dividends of $19,000 due to Acorn and other advances of $212,000$34,000 in the aggregate. Theshared expenses paid by Acorn. These intercompany balances and amounts are eliminated in consolidation.
Liquidity
As of NovemberMay 7, 2023,2024, we had cash of $1,684,000.$1,455,000. We believe that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance the operatingour activities of Acorn and OmniMetrix at their current level of operations for at least the twelve monthstwelve-month period from the issuance of these unaudited condensed consolidated financial statements. 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. If we decide to pursue additional financing in the future, it may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof. Whether alternative funds, such as third-party loans or investments, will be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
Contractual Obligations and Commitments
The table below provides information concerning obligations under certain categories of our contractual obligations as of September 30, 2023.March 31, 2024.
CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
| Twelve Month Periods Ending September 30, (in thousands) | Twelve Month Periods Ending March 31, (in thousands) | |||||||||||||||||||||||||||||||||||||||
| Total | 2024 | 2025-2026 | 2027-2028 | 2029 and thereafter | Total | 2025 | 2026-2027 | 2028-2029 | 2030 and thereafter | |||||||||||||||||||||||||||||||
| Software agreements | $ | 8 | $ | 8 | $ | — | $ | — | $ | — | $ | 14 | $ | 14 | $ | — | $ | — | $ | — | ||||||||||||||||||||
| Operating leases* | 261 | 130 | 131 | — | — | 196 | 130 | 66 | — | — | ||||||||||||||||||||||||||||||
| Contractual services | 7 | 7 | — | — | — | 608 | 238 | 370 | — | — | ||||||||||||||||||||||||||||||
| Purchase commitments** | 603 | 603 | — | — | — | 299 | 299 | — | — | — | ||||||||||||||||||||||||||||||
| Total contractual cash obligations | $ | 879 | $ | 748 | $ | 131 | $ | — | $ | — | $ | 1,117 | $ | 681 | $ | 436 | $ | — | $ | — | ||||||||||||||||||||
*Reflects the gross amount of the operating lease liabilities. Does not include rent amounts to be received under the sublease and it is gross of the imputed interest of $11,000.sublease.
**Reflects open purchase orders for components/parts to be delivered over the next twelve months as sales forecast requires.
| 20 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
Concentrations of Credit RiskNot applicable.
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 $1,749,000 at September 30, 2023. The Company does not believe there is a significant risk of non-performance by its counterparties. For the three-month period ended September 30, 2023, there were no customers that represented greater than 10% of the Company’s total invoiced sales. For the nine-month period ended September 30, 2023, there was one customer that represented 11% of the Company’s total invoiced sales. At September 30, 2023, the Company did not have any customers that represented greater than 10% of our total accounts receivable. Approximately 12% of the accounts receivable at December 31, 2022 was due from one customer which was subsequently collected in full. 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. Although we do not believe there is significant risk of non-performance by these counterparties, any failures or defaults on their part could negatively impact the value of our financial instruments and could have a material adverse effect on our business, operations or financial condition.
Fair Value of Financial Instruments
Fair values of financial instruments included in current assets and current liabilities are estimated to approximate their book values due to the short maturity of such investments.
| ITEM 4. | CONTROLS AND PROCEDURES |
AsEvaluation of the end of the period covered by this report, we carried out an evaluation, under the supervisionDisclosure Controls and Procedures
Our management, with the participation of our management, includingCEO and CFO, has evaluated the Chief Executive Officer and the Chief Financial Officer,effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) underas of the Securities Exchange Actend of 1934, as amended (the “Exchange Act”)).the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive OfficerCEO and Chief Financial OfficerCFO concluded that, our disclosure controls and procedures were not effective due to the material weaknesses notedin our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2022, to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated2023, our disclosure controls and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.procedures were not effective as of March 31, 2024.
As noted in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, we employ a decentralized internal control methodology, coupled with management’s oversight, whereby our OmniMetrix subsidiary is responsible for mitigating its risks to financial reporting by implementing and maintaining effective control policies and procedures and subsequently translating that respective risk mitigation up and through to the parent level and to ourthe Company’s external consolidated financial statements. In addition,Also, as our operatingthe Company’s subsidiary is not large enough to effectively mitigate certain risks by segregating incompatible duties, management must employ compensating mechanisms throughout our companythe Company in a manner that is feasible withingiven the constraints inwithin which it operates.
The material weaknesses management identified were caused by an insufficient complement of resources at our OmniMetrix subsidiary and limited ERPIT system capabilities, such that individual control policies and procedures at the subsidiary could not be implemented, maintained, or remediated when and where necessary. More specifically, there were material weaknesses identified in our internal control over financial reporting related to ineffective design and implementation of information technology general controls (“ITGCs”) in the areas of user access, program change management and vendor management controls.
As a result, a majority of the significant process areas management identified for our OmniMetrix subsidiary had one or morethree material weaknesses present. This condition was further exacerbated as the Company could not demonstrate that each of the principles described within the Committee of Sponsoring Organizations of the Treadway Commission’sCOSO’s document entitled “Internal Control - Integrated Framework (2013)” were present and functioning.
Changes in Internal Control Over Financial Reporting
There wasDuring the three-month period ended March 31, 2024, we have implemented the following (i) a process pursuant to which System and Organization Controls (SOC) reports are obtained from third-party vendors on a recurring schedule and such reports are evaluated for any issues, (ii) provisioning/termination controls with signed and authenticated authorizations, and (iii) change controls for development processes that require authorizations, peer review, quality assurance documentation, ticket matching of changes to work authorizations and overall change controls. It is our belief that these added controls and related actions will effectively remediate the existing material weaknesses. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of these material weaknesses will be completed prior to the end of fiscal 2024.
Other than the remediation actions above, there were no changeother changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
| ITEM 6. | EXHIBITS. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by its principal financial officer thereunto duly authorized.
| ACORN ENERGY, INC. | ||
| Dated: | ||
| By: | /s/ TRACY S. CLIFFORD | |
| Tracy S. Clifford | ||
| Chief Financial Officer | ||