ACORN FACTOR, INC ANNOUNCES YEAR END RESULTS
MAHWAH, NEW JERSEY - MARCH 30, 2007 - Acorn Factor, Inc. (OTCBB: ACFN) today announced financial results for the year ended December 31, 2006.
The results for the year ended December 31, 2006 reflect the sale in March 2006 of the Company’s Databit Inc. subsidiary and its computer hardware sales business. Under applicable accounting principles, the results of this business have been reclassified in the current period and for all prior periods as a discontinued operation. The condensed results of these operations are presented in each of the current and comparative periods as net income from discontinued operations. The Company’s continuing operations consist of its RT Solutions and IT Solutions segments, which are conducted though the Company’s dsIT Solutions Ltd. subsidiary.
The Company reported a net loss of $6.1 million for the year ended December 31, 2006, as compared with a net loss of $1.3 million for the year ended December 31, 2005.
In 2006 sales decreased marginally as compared with 2005. Gross profit increased in 2006 by $112,000, or 9%, primarily due to an increase in gross profit of the RT Solutions segment, which more than offset the decrease in gross profits from our IT Solutions segment. The increase in gross profit in our RT Solutions segment was primarily attributable to a number of specific projects with particularly high profit margins, which offset the decrease in sales. The decrease in gross profit in our IT Solutions segment was attributable to a combination of reduced sales and a reduced gross margin.
Research and development expenses increased by $271,000, which was primarily attributable to an increase in development costs associated with our OncoProTM solution package in our IT Solutions segment.
SMG&A increased in 2006 by approximately $1.2 million or 34%. This increase is entirely attributable to the $1.2 million of stock-compensation expense that is included in SMG&A which we recorded as a result of our adoption of FAS 123(R) in 2006. Excluding the stock-compensation expense, our corporate SMG&A increased only marginally in 2006 compared with 2005 while the SMG&A of our dsIT Solutions subsidiary decreased by a similar amount in 2006 as compared with 2005. The increase in taxes on income in 2006 was due to the increase in a tax provision with respect to a transaction in a previous year.
The Company’s share of Comverge's net loss in 2006 was $210,000, all of which related to Comverge’s operations in the first quarter of 2006. In the first quarter of 2006, the carrying value of our investment in Comverge's common stock and preferred stock was reduced to zero. As such, Comverge has had no effect on our results since the first quarter of 2006.
In the third quarter of 2006, we acquired a 23% interest in Paketeria and increased our investment in the fourth quarter of 2006 to approximately 33%. Our share of Paketeria’s net losses plus amortization of the purchase price allocated to intangibles during the period since our acquisition and FAS 123(R) stock compensation expense connected with our investment was $424,000.
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