EX-99.3 5 v190671_ex99-3.htm EX-99.3
Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial statements give effect to the acquisition by Coreworx, Inc., a wholly-owned subsidiary of Acorn Energy, Inc. (“Acorn”) of all the issued and outstanding shares of Decision Dynamics Technology Ltd. (“Decision Dynamics”) on April 30, 2010 in a transaction accounted for as a purchase business combination.

The Unaudited Pro Forma Condensed Consolidated Balance Sheet (the "Pro Forma Balance Sheet") as of March 31, 2010 has been prepared as if the acquisition occurred on March 31, 2010.  The Pro Forma Balance Sheet combines the historical consolidated balance sheet of Acorn, which is incorporated herein by reference, and Decision Dynamics, which is included herein, at March 31, 2010, and gives effect to the unaudited pro forma adjustments necessary to account for the acquisition as a purchase.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations (the "Pro Forma Statements of Operations") have been prepared as if the acquisition had occurred on January 1, 2009.  These Pro Forma Statements of Operations combine the historical consolidated statements of operations of Acorn for the year ended December 31, 2009 and the three months ended March 31, 2010, which are incorporated herein by reference, with the historical consolidated statements of income of Decision Dynamics for the year ended December 31, 2009 and the three months ended March 31, 2010, respectively, which are included herein, and give effect to the unaudited pro forma adjustments necessary to account for the acquisition as a purchase.

The unaudited pro forma adjustments are based on an estimated purchase price and preliminary purchase price allocation made based on available information and assumptions that Acorn believes are reasonable.  Therefore, the amounts in the Pro Forma Statements of Operations and Pro Forma Balance Sheet and accompanying notes (collectively, the "Pro Forma Financial Information") are subject to change which could be material.  In the opinion of management, all adjustments have been made that are necessary to present fairly the Pro Forma Financial Information. The Pro Forma Financial Information is provided for illustrative purposes only and do not purport to represent what Acorn’s results of operations or financial position would actually have been, had the acquisition occurred on such dates, nor do they purport to project the results of operations or financial position of Acorn for any future period or date.

The Pro Forma Financial Information should be read in conjunction with, and are qualified by reference to, the audited and unaudited consolidated financial statements and accompanying notes of Acorn and Decision Dynamics which are incorporated herein by reference and included herein, respectively.

 
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UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As  of March 31, 2010
(in thousands)

   
Acorn
    
Decision
Dynamics
    
Pro Forma
Adjustments
  
Note
  
Pro Forma
  
ASSETS
                          
Cash and cash equivalents
   $ 18,554     $ 1,295             $ 19,849  
Restricted deposits
     876       —               876  
Accounts receivable, net
     5,165       769               5,934  
Unbilled revenue and work-in-process
     3,720       —               3,720  
Inventory
     2,439       —               2,439  
Other current assets
     2,269       114               2,383  
Total current assets
     33,023       2,178               35,201  
                                 
Property and equipment, net
     5,212       353               5,565  
Other investments and loans to equity investees
     2,808       —               2,808  
Funds in respect of employee termination benefits
     2,175       —               2,175  
Restricted deposits
     1,185       —               1,185  
Other intangible assets, net
     10,647       —       1,248  
(1)
     11,895  
Goodwill
     8,174       —       2,452  
(1)
     10,626  
Deferred taxes
     238       —                 238  
Other assets
     139       31                 170  
Total assets
   $ 63,601     $ 2,562               $ 69,863  
LIABILITIES
                                  
Short-term bank credit and current maturities of long-term debt
   $ 463     $ —               $ 463  
Trade accounts payable
     2,068       571                 2,639  
Accrued payroll, payroll taxes and social benefits
     1,340       —                 1,340  
Advances from customers
     1,386       —                 1,386  
Other payables and accrued expenses
     4,721       300       (250 )
(1)
     4,771  
Total current liabilities
     9,978       871                 10,599  
                                   
Liability for employee termination benefits
     3,312       —                 3,312  
Long-term debt
     379       —                 379  
Other liabilities
     534       7       (6 )
(1)
     535  
Total long-term liabilities
     4,225       7                 4,226  
                                   
EQUITY
                                  
Acorn Energy, Inc. Shareholders
                                  
Common stock
     154       26,684       (26,684 )
(1)
        
                      10  
(1)
     164  
Additional paid in capital
     70,217       2,981       (2,981 )
(1)
        
                      5,630  
(1)
     75,847  
Warrants
     274       345       (345 )
(1)
     274  
Accumulated deficit
     (26,466 )     (28,326 )     28,326  
(1)
     (26,466 )
Treasury stock
     (4,827 )     —                 (4,827 )
Accumulated other comprehensive income
     277       —                 277  
Total Acorn Energy, Inc. shareholders’ equity
     39,629       1,684                 45,269  
Non-controlling interests
     9,769       —                 9,769  
Total equity
     49,398       1,684                 55,038  
Total liabilities and equity
   $ 63,601     $ 2,562               $ 69,863  

 
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2010
(in thousands, except per share data)

   
Acorn
    
Decision
Dynamics
    
Pro Forma
Adjustments
  
Note
  
Pro Forma
  
                           
Revenues
   $ 7,854     $ 367             $ 8,221  
Cost of sales
     4,146       179       18  
(2)
     4,343  
Gross profit (loss)
     3,708       188                 3,878  
                                   
Research and development expenses
     670       227                 897  
Selling, general and administrative expenses
     6,321       941       11  
(2)
     7,273  
Dividends received from EnerTech
     (135 )     —                 (135 )
Operating loss
     (3,148 )     (980 )               (4,157 )
                                   
Finance income (expense), net
     50       (18 )               32  
                                   
Loss before provision for income taxes
     (3,098 )     (998 )               (4,125 )
                                   
Income tax expense
     (75 )     -                 (75 )
Net loss
     (3,173 )     (998 )               (4,200 )
                                   
Net loss attributable to non-controlling interests
     50       —                 50  
Net loss attributable to Acorn Energy, Inc. shareholders
   $ (3,123 )   $ (998 )             $ (4,150 )
                                   
Basic and diluted net loss per share attributable to Acorn Energy, Inc. shareholders
   $ (0.25 )                     $ (0.31 )
                                   
Weighted average number of shares outstanding  attributable to Acorn Energy, Inc. shareholders - basic and diluted
     12,498               1,000  
(1)
     13,498  

 
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2009
(in thousands, except per share data)

   
Acorn
    
Decision
Dynamics
    
Pro Forma
Adjustments
    
Note
  
Pro Forma
  
                             
Revenues
   $ 31,317     $ 2,800               $ 34,117  
Cost of sales
     17,765       954       65    
(2)
     18,784  
Gross profit
     13,552       1,846                   15,333  
                                     
Research and development expenses, net of credits of $1,016
     569       1,006                   1,575  
Selling, general and administrative expenses
     18,517       2,244       41    
(2)
     20,802  
Restructuring charges
     —       180                   180  
Impairments
     2,692       —                   2,692  
Operating loss
     (8,226 )     (1,584 )                 (9,916 )
                                     
Finance expense, net
     (231 )     (49 )                 (280 )
Gain on sale of shares in Comverge
     1,403       —                   1,403  
                                     
Loss before provision for income taxes
     (7,054 )     (1,633 )                 (8,793 )
                                     
Income tax benefit
     744       —                   744  
Loss from operations of the Company and its consolidated subsidiaries
     (6,310 )     (1,633 )                 (8,049 )
Share of income of Paketeria
     263       —                   263  
Share of losses of GridSense
     (129 )     —                   (129 )
Net loss
     (6,176 )     (1,633 )                 (7,915 )
                                     
Net loss attributable to non-controlling interests
     420       —                   420  
Net loss attributable to Acorn Energy, Inc. shareholders
   $ (5,756 )   $ (1,633 )                 (7,495 )
                                     
Basic and diluted net loss per share attributable to Acorn Energy, Inc. shareholders
   $ (0.50 )                       $ (0.60 )
                                     
Weighted average number of shares outstanding  attributable to Acorn Energy, Inc. shareholders - basic and diluted
     11,445               1,000    
(1)
     12,445  

 
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ACORN ENERGY, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

NOTE 1

To consolidate Decision Dynamics equity and to record the preliminary allocation of the purchase price over the historical net assets of Decision Dynamics at March 31, 2010.  In accordance with generally accepted accounting principles, the assets and liabilities of Decision Dynamics are required to be adjusted to their fair values.  The purchase price of $5,640 represents the market value of the one million shares of Acorn common stock issued to the former shareholders of Decision Dynamics (based market price of Acorn shares on the date of the announcement of the transaction in accordance with generally accepted accounting principles). The issuance of the one million shares of Acorn common stock increased the Common Stock and the Additional Paid-in-Capital on the Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2010 by $10 and $5,630, respectively.

The following pro forma adjustments give effect to the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired based upon available information.  These adjustments are subject to the determination of the final purchase price as described above and completion of the valuations as of the date of consummation of the acquisition.  Valuations of the specifically identifiable intangible assets are in progress.  Consequently, the actual allocation of the purchase price could differ materially from that presented below.

Under the purchase method of accounting, the total consideration of $5,640 is allocated to Decision Dynamics’ identifiable tangible and intangible assets and liabilities assumed based on their estimated fair values as of the date of the completion of the transaction. The purchase price is preliminarily allocated to Decision Dynamics’ assets acquired and liabilities assumed, as follows:

Purchase price
         $ 5,640  
               
Book value of  Decision Dynamics’ net assets
     1,684          
Adjustments to historical net book value:
                
Adjustment of deferred revenues
     256          
              (1,940 )
Balance to allocate
             3,700  
                 
Allocation to:
                
Customer contracts and relationships
             (367 )
Software
             (881 )
Purchase price in excess of fair value of net assets acquired (Goodwill)
           $ 2,452  

Under US GAAP, in a business combination revenue that appropriately has been deferred by the acquired enterprise may not represent an assumed liability, or the fair value of the assumed liability may be different from the amount of the deferred revenue on the acquired enterprise's balance sheet. The acquiring enterprise should recognize a liability for the deferred revenue only if the deferred revenue represents a legal performance obligation assumed by the acquiring enterprise. The amount assigned to that liability should be based on its fair value at the date of acquisition. The fair value of an assumed liability related to deferred revenue, would include the direct and incremental cost of fulfilling the obligation plus a normal profit margin. Accordingly, deferred revenues on Decision Dynamics’ balance sheet which are included in Other current liabilities ($300) and Other liabilities ($7) have been reduced by $250 and $6, respectively.

For purposes of the Pro Forma Financial Information, the estimated amount of goodwill generated by the transaction of $2,452 is not amortized in accordance with generally accepted accounting principles. Intangible assets with estimable useful lives are amortized over that period. The acquired intangible assets with estimable useful lives include approximately $367 for the estimated fair market value of Decision Dynamics’ customer contracts and relationships and approximately $881 for the estimated fair market value of Decision Dynamics’ software. The weighted average estimated useful life of these amortizable intangible assets is approximately 10.8 years. For every $1,000 increase or decrease, amortization expense may increase or decrease by approximately $93 based on the estimated weighted average useful life of intangible assets of 10.8 years.

 
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NOTE 2

To record additional amortization for the fair value of acquired intangibles as follows:

   
Three
months
ended March
31, 2010
    
Year ended
December
31, 2009
    
Estimated
useful life
(in years)
  
                   
Software
   $ 18     $ 65       12  
Customer contracts and related customer relationships
     11       41       8  
    $ 29     $ 106          

 
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NOTE 3

The reconciliation between Decision Dynamics’ financial statements in Canadian GAAP and Canadian dollars and the pro forma condensed financial statements presented in this report is as follows:

Decision Dynamics Technology Ltd.
Unaudited Condensed Consolidated Balance Sheet
As of March 31, 2010
(in thousands)

   
Canadian
GAAP(2)
  
US GAAP
adjustment(3)
  
US GAAP
Total
    
US GAAP
Total (1)
  
   
C$
  
C$
  
C$
    
US$
  
                     
Cash and cash equivalents
   $ 1,315       $ 1,315     $ 1,295  
Accounts receivable
     781         781       769  
Other current assets
     116         116       114  
Property and equipment, net
     359         359       353  
Other assets
     31         31       31  
Total assets
   $ 2,602       $ 2,602     $ 2,562  
                           
Accounts payable
   $ 580       $ 580     $ 571  
Other current liabilities
     305         305       300  
Other non-current liabilities
     7         7       7  
Total liabilities
     892         892       878  
                           
Common stock
     27,106         27,106       26,684  
Additional paid in capital
     3,028         3,028       2,981  
Warrants
     350         350       345  
Accumulated deficit
     (28,774 )       (28,774 )     (28,326 )
Shareholders’ equity
     1,710         1,710       1,684  
                           
Total liabilities and shareholder's equity
   $ 2,602       $ 2,602     $ 2,562  

 
(1)
The Decision Dynamics amounts included in the condensed pro forma consolidated balance sheet was translated into US dollars using an exchange rate of 0.9844 Canadian dollars per US dollar, which was the representative exchange rate for March 31, 2010.

 
(2)
The Decision Dynamics balance sheet statement was reclassified to conform to Acorn’s financial statements presentation. . 1) Non-current accounts receivable are presented under the item Other assets; 2) Deferred revenues is presented under the item Advances from customers; and 3) Long term deferred revenue is presented under the item Other liabilities.

 
(3)
As described in Note 6 of the interim consolidated unaudited financial statements as of March 31, 2010, the application of US GAAP would not have a significant impact on total assets, total liabilities or total shareholders’ equity.

 
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Decision Dynamics Technology Ltd.
Unaudited Condensed Statement of Operations
For the Three months Ended March 31, 2010
(in thousands)

   
Canadian
GAAP(6)
  
US GAAP
adjustment(5)
  
US GAAP
Total
    
US GAAP
Total (4)
  
   
C$
  
C$
  
C$
    
US$
  
                     
Revenues
   $ 382       $ 382     $ 367  
Cost of sales
     186         186       179  
Gross profit
     196         196       188  
Research and development expenses
     236         236       227  
Selling, general and administrative expenses
     980         980       941  
Operating loss
     (1,020 )       (1,020 )     (980 )
Finance expense, net
     (19 )       (19 )     (18 )
Net loss before tax benefit
     (1,039 )       (1,039 )     998 )
Income tax benefit
     -         -       -  
Net loss
   $ (1,039 )     $ (1,039 )   $ (998 )

 
(4)
The Decision Dynamics amounts included in the condensed pro forma consolidated statement of operations was translated into US dollars using an exchange rate of 0.9607 Canadian dollars per US dollar, which was the average of the representative exchange rate for the three months ended March 31, 2010.

 
(5)
The Decision Dynamics statement of operations was reclassified to conform to Acorn’s financial statements presentation. 1) General and administration, Selling and marketing, Amortization of property and equipment, Stock based compensation and Loss on disposal of equipment are all presented under the item Selling, general and administrative expenses; and 2) Foreign exchange loss (gain), Interest income and Interest expense are all presented under the item Finance expense, net.

 
(6)
As described in Note 6 of the interim consolidated unaudited financial statements as of March 31, 2010, the application of US GAAP would not have a significant impact on net income.

 
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Decision Dynamics Technology Ltd.
Unaudited Condensed Statement of Operations
For the Year Ended December 31, 2009
(in thousands)

   
Canadian
GAAP(8)
  
US GAAP
adjustment(9)
  
US GAAP
Total
    
US GAAP
Total (7)
  
   
C$
  
C$
  
C$
    
US$
  
                     
Sales
   $ 3,198       $ 3,198     $ 2,800  
Cost of sales
     1,090         1,090       954  
Gross profit
     2,108         2,108       1,846  
Research and development expenses
     1,149         1,149       1,006  
Selling, general and administrative expenses
     2,563         2,563       2,244  
Restructuring charges
     206         206       180  
Operating loss
     (1,810 )       (1,810 )     (1,584 )
Finance expense, net
     (56 )       (56 )     (49 )
Net loss
   $ (1,866 )     $ (1,866 )   $ (1,633 )

 
(7)
The Decision Dynamics amounts included in the condensed pro forma consolidated statement of operations was translated into US dollars using an exchange rate of 0.8760 Canadian dollars per US dollar, which was the average of the representative exchange rate for the year ended December 31, 2009.

 
(8)
The Decision Dynamics statement of operations was reclassified to conform to Acorn’s financial statements presentation. The main reclassifications are: 1) General and administration, Selling and marketing, Amortization of property and equipment and (Gain) loss on disposal of equipment and leasehold improvements are all presented under the item Selling, general and administrative expenses; and 2) Foreign exchange loss (gain), Interest income and Interest expense are all presented under the item Finance expense, net.

 
(9)
As described in Note 16 of the consolidated audited financial statements as of December 31, 2009, the application of US GAAP would not have a significant impact on net income.

 
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