UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended
or
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| Smaller
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| Emerging
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| Class | Outstanding at May 7, 2024 | |
| Common Stock, $0.01 par value per share |
ACORN ENERGY, INC.
Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 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 March 31, 2024 | As of December 31, 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Deferred cost of goods sold (COGS) | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Deferred COGS | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Current operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Deferred revenue | ||||||||
| Noncurrent operating lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| 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 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated stockholders’ deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares at March 31, 2024 and December 31, 2023 | ( | ) | ( | ) | ||||
| Total Acorn Energy, Inc. stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interests | ||||||||
| Total deficit | ( | ) | ( | ) | ||||
| Total liabilities and deficit | $ | $ | ||||||
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)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| COGS | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development expenses (R&D) | ||||||||
| Selling, general and administrative (SG&A) expenses | ||||||||
| Total operating expenses | ||||||||
| Operating income (loss) | ( | ) | ||||||
| Interest income, net | ||||||||
| Income (loss) before income taxes | ( | ) | ||||||
| Income tax expense | ||||||||
| Net income (loss) | ( | ) | ||||||
| Non-controlling interest share of income | ( | ) | ( | ) | ||||
| Net income (loss) attributable to Acorn Energy, Inc. stockholders | $ | $ | ( | ) | ||||
| 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* | ||||||||
| Diluted* | ||||||||
|
* |
|
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 DEFICIT (UNAUDITED) (IN THOUSANDS)
| 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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Proceeds from stock option exercise | ** | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| 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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| Net loss | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Proceeds from warrant exercise | ** | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| * | ||
| ** |
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)
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows used in operating activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Depreciation and amortization | ||||||||
| (Decrease) increase in the provision for credit loss | ( | ) | ||||||
| Impairment of inventory | ||||||||
| Non-cash lease expense | ||||||||
| Stock-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Decrease (increase) in accounts receivable | ( | ) | ||||||
| Decrease (increase) in inventory | ( | ) | ||||||
| Decrease in deferred COGS | ||||||||
| Decrease (increase) in other current assets and other assets | ( | ) | ||||||
| (Decrease) increase in deferred revenue | ( | ) | ||||||
| Decrease in operating lease liability | ( | ) | ( | ) | ||||
| (Decrease) increase in accounts payable, accrued expenses, other current liabilities and non-current liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows used in investing activities: | ||||||||
| Investments in technology | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Stock option exercise proceeds | ||||||||
| Warrant exercise proceeds | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accrued preferred dividends to former CEO of OmniMetrix | $ | $ | ||||||
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 three-month periods ended March 31, 2024 and 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 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, 2023, filed with the Securities and Exchange Commission on March 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
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.
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 $
| 7 |
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 conducts an assessment at each reporting period of the Company’s inventory reserve and writes-off inventory when the items are deemed obsolete.
Revenue Recognition
The 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) that were not separable from the Company’s monitoring services was deferred and amortized over the estimated 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 service period. See Notes 9 and 10 for the disaggregation of the Company’s revenue for the 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.
| 8 |
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 and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net income (loss) per share if doing so would be antidilutive.
The combined weighted average number of options and 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).
| Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | ) | ||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Add: Stock options | ||||||||
| -Diluted | ||||||||
| Basic and diluted net income (loss) per share | $ | $ | ) | |||||
Recent Accounting Pronouncements
In November 2023, the Financial 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 on its segment reporting disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and 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 this ASU.
NOTE 3—LIQUIDITY
As
of March 31, 2024, the Company had $
At
March 31, 2024, the Company had a negative working capital of $
| 9 |
As
of May 7, 2024, the Company had cash of $
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 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 March 31, 2024,
the Company had gross receivables of $
The following is a tabular reconciliation of the Company’s allowance for credit losses:
| As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
| (in thousands) | ||||||||
| Balance at beginning of period | $ | $ | ||||||
| Provision for credit losses adjustment | ( | ) | ||||||
| Net credits (charge-offs) | ( | ) | ||||||
| Balance at end of period | $ | $ | ||||||
NOTE 5—INVENTORY
| As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
| (in thousands) | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| $ | $ | |||||||
At
March 31, 2024 and December 31, 2023, the Company’s inventory reserve was $
| 10 |
NOTE 6—LEASES
OmniMetrix
leases office space and office equipment under operating lease agreements. The office lease has an expiration date of
Supplemental cash flow information related to leases consisted of the following (in thousands):
For the three months ending March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
Supplemental balance sheet information related to leases consisted of the following:
| 2024 | ||||
| Weighted average remaining lease terms for operating leases | ||||
The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2024 (in thousands):
| Year ended March 31, | ||||
| 2025 | $ | |||
| 2026 | ||||
| Total undiscounted cash flows | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of operating lease liabilities (a) | $ | |||
| (a) |
On
July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc., to sublease from the Company
| Year ended March 31, | ||||
| 2025 | $ | |||
| 2026 | ||||
| Total undiscounted cash flows | $ | |||
| 11 |
NOTE 7—COMMITMENTS AND CONTINGENCIES
The
Company has $
NOTE 8—STOCKHOLDERS’ DEFICIT
(a) General
At March 31, 2024, Acorn had shares issued and 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 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 three-month period ended March 31, 2024, options were issued. 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 three-month period ended March 31, 2024, there were grants to non-employees (other than the directors, CEO and CFO).
During the three-month period ended March 31, 2024, options were 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 | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2023 | $ | years | $ | |||||||||||||
| Granted | ||||||||||||||||
| Exercised | ( | ) | ||||||||||||||
| Forfeited or expired | ||||||||||||||||
| Outstanding at March 31, 2024 | $ | years | $ | |||||||||||||
| Exercisable at March 31, 2024 | $ | years | $ | |||||||||||||
| 12 |
| Risk-free interest rate | % | |||
| Expected term of options | years | |||
| Expected annual volatility | % | |||
| Expected dividend yield | % |
(c) Stock Option Compensation Expense
Stock option compensation expense included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations was $ and $ for the three-month periods ended March 31, 2024 and 2023, respectively.
The total compensation cost related to non-vested awards not yet recognized was $ as of March 31, 2024 which will be recognized over the next sixteen months.
NOTE 9— SEGMENT REPORTING
As of 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 gas pipelines serving the gas utilities market and pipeline operators. The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations and bonds. OmniMetrix also offers the industry’s first RADTM (Remote AC Mitigation Disconnect) that mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools, which can drastically reduce a company’s expense while increasing employee safety. |
The Company’s reportable segments are strategic business units, offering different products and services, and are managed separately as each business requires different technology and marketing strategies.
The following tables represent segmented data for the three-month periods ended March 31, 2024 and 2023 (in thousands):
| PG | CP | Total | ||||||||||
| Three months ended March 31, 2024: | ||||||||||||
| Revenues from external customers | $ | $ | $ | |||||||||
| Segment gross profit | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Segment income (loss) before income taxes | $ | $ | ( | ) | $ | |||||||
| Three months ended March 31, 2023: | ||||||||||||
| Revenues from external customers | $ | $ | $ | |||||||||
| Segment gross profit | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Segment income (loss) before income taxes | $ | $ | ( | ) | $ | |||||||
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
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Total net income before income taxes for reportable segments | $ | $ | ||||||
| Unallocated cost of corporate headquarters | ( | ) | ( | ) | ||||
| Consolidated net income (loss) before income taxes | $ | $ | ( | ) | ||||
NOTE 10—REVENUE
The following table disaggregates the Company’s revenue for the three-month periods ended March 31, 2024 and 2023 (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Three months ended March 31, 2024: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
| Hardware | Monitoring | Total | ||||||||||
| Three months ended March 31, 2023: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
Deferred revenue activity for the three-month period ended March 31, 2024 can be seen in the table below (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Recognized as revenue | ( | ) | ( | ) | ( | ) | ||||||
| Balance at March 31, 2024 | $ | $ | $ | |||||||||
| Amounts to be recognized as revenue in the twelve-month-period ending: | ||||||||||||
| March 31, 2025 | $ | $ | $ | |||||||||
| March 31, 2026 | ||||||||||||
| March 31, 2027 and thereafter | ||||||||||||
| $ | $ | $ | ||||||||||
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 $
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):
Three months ended March 31, | ||||||||
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
| Amortization of deferred revenue | $ | $ | ||||||
| Hardware sales (new product versions) | ||||||||
| Other accessories, services, shipping and miscellaneous charges | ||||||||
| Total hardware revenue | $ | $ | ||||||
| 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):
| Balance at December 31, 2023 | $ | |||
| Additions, net of adjustments, during the period | ||||
| Recognized as cost of sales | ( | ) | ||
| Balance at March 31, 2024 | $ | |||
| Amounts to be recognized as COGS in the twelve-month-period ending: | ||||
| March 31, 2025 | $ | |||
| March 31, 2026 | ||||
| March 31, 2027 and thereafter | ||||
| $ |
The following table provides a reconciliation of the Company’s COGS expense for the three-month periods ended March 31, 2024 and 2023 (in thousands):
Three months ended March 31, | ||||||||
| Reconciliation of COGS Expense | 2024 | 2023 | ||||||
| Amortization of deferred COGS | $ | $ | ||||||
| COGS of hardware sales (new product versions) | ||||||||
| Data costs for monitoring | ||||||||
| Other COGS of accessories, services, shipping and miscellaneous charges | ||||||||
| Total COGS expense | $ | $ | ||||||
The following table provides a reconciliation of the Company’s sales commissions contract assets for the three-month period ended March 31, 2024 (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Amortization of sales commissions | ( | ) | ( | ) | ( | ) | ||||||
| Balance at March 31, 2024 | $ | $ | $ | |||||||||
The
capitalized sales commissions are included in other current assets ($
Amounts to be recognized as sales commission expense in the twelve-month-period ending (in thousands):
| March 31, 2025 | $ | |||
| March 31, 2026 | ||||
| March 31, 2027 and thereafter | ||||
| $ |
NOTE 11—RELATED PARTY BALANCES AND TRANSACTIONS
Officer and Director Fees
The
Company recorded consulting service fees to officers of $
The
Company recorded fees to directors of $
| 15 |
| 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, 2023 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 tables show, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated companies.
| Three months ended March 31, 2024 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 2,132 | $ | — | $ | 2,132 | ||||||
| Cost of sales | 541 | — | 541 | |||||||||
| Gross profit | 1,591 | — | 1,591 | |||||||||
| Gross profit margin | 75 | % | 75 | % | ||||||||
| R&D expenses | 238 | — | 238 | |||||||||
| Selling, general and administrative expenses | 970 | 305 | 1,275 | |||||||||
| Operating income (loss) | $ | 383 | $ | (305 | ) | $ | 78 | |||||
| Three months ended March 31, 2023 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 1,749 | $ | — | $ | 1,749 | ||||||
| Cost of sales | 433 | — | 433 | |||||||||
| Gross profit | 1,316 | — | 1,316 | |||||||||
| Gross profit margin | 75 | % | 75 | % | ||||||||
| R&D expenses | 214 | — | 214 | |||||||||
| Selling, general and administrative expenses | 963 | 234 | 1,197 | |||||||||
| Operating income (loss) | $ | 139 | $ | (234 | ) | $ | (95 | ) | ||||
| 16 |
BACKLOG
As of March 31, 2024, OmniMetrix had a backlog of $5,028,000, primarily comprised of deferred revenue, of which $3,823,000 is expected to be recognized as revenue in the next twelve months. This compares to a backlog of $6,216,000 at 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. Prior to deployment on October 1, 2023, we had invested $194,000 in design, development and quality assurance services of the new user interface. Following deployment, our customers had 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 March 20, 2024 when we officially terminated our original user interface. The cost of this project was capitalized, and amortization began as of October 1, 2023. We have continued to implement bug fixes and enhancements to OV2, for which any related IT costs have been expensed as 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 gas pipelines serving the gas utilities market and pipeline operators. The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations and bonds. OmniMetrix also offers the industry’s first RADTM (Remote AC Mitigation Disconnect) that mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools, which can drastically reduce a company’s expense while increasing employee safety. |
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 such product modification, 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. 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 three-month periods ended March 31, 2024 and March 31, 2023, 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%
| 18 |
Revenue. Revenue in the first quarter of 2024 was $2,132,000 compared to $1,749,000 in the first quarter of 2023, which is an increase of $383,000, or 21.9%. As discussed above, OmniMetrix has two reportable segments, PG and CP. Of the $2,132,000 in revenue recognized in the three-month period ended March 31, 2024, $1,794,000 was generated by PG activities and $338,000 was generated by CP activities. As compared to the three-month period ended March 31, 2023, revenue from PG activities increased $287,000, or 19%, and revenue from CP activities increased $96,000, or 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. Gross profit during the three-month period ended March 31, 2024 was $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 $1,316,000, also reflecting a gross margin of 75%.
R&D expense. During the three-month periods ended March 31, 2024 and 2023, R&D expense was $238,000 and $214,000, respectively. The increase in R&D expense in the three-month period ended March 31, 2024 of approximately $24,000 is related to salary increases of our engineering 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.
Selling, general and administrative expense. SG&A expense of the consolidated entities in the first three months of 2024 reflected an increase of $78,000, or 6.5%, as compared to the first three months of 2023. OmniMetrix’s SG&A expense increased $7,000, or less than 1%, from $963,000 in the first three months of 2023 to $970,000 in the first three months of 2024. This increase was primarily due to an increase of (i) $36,000 in personnel expenses due to compensation increases and staff additions, (ii) $13,000 in technology expenses, primarily consulting fees, (iii) $3,000 in amortization of sales commissions, offset by decreases of (iv) $10,000 in depreciation expense, (v) $10,000 in travel and trade show expenses, (vi) $9,000 in bad debt expense, (vii) $5,000 in facility expenses and (viii) $11,000 in other expenses. Corporate SG&A expense increased $71,000, or 30.3%, from $234,000 in the first three months of 2023 to $305,000 in the first three months of 2024. This increase was due to an increase of (i) $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 (i.e., during the first quarter of 2024 instead of during the fourth quarter of 2023), (ii) $16,000 in tax fees from the preparation of the 2023 tax provision, (iii) $12,000 in stock compensation expense, (iv) $6,000 in legal fees and (v) $12,000 in other public company expenses.
Net income (loss) attributable to Acorn Energy. We recognized net income attributable to Acorn stockholders of $65,000 in the first three months of 2024 compared to a net loss attributable to Acorn stockholders of $85,000 in the first three months of 2023. Our net income during the three-month period ended 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 $151,000, less corporate expense of $235,000, offset by $1,000 representing the non-controlling interest share of our income in OmniMetrix.
| 19 |
Liquidity and Capital Resources
At March 31, 2024, we had a negative working capital of $620,000. Our working capital includes $1,417,000 of cash and deferred revenue of $3,823,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized.
During the three-month period ended March 31, 2024, our OmniMetrix subsidiary provided cash flow from operations of $268,000, while our corporate headquarters used $311,000 for operations during the same period.
During the three-month period ended March 31, 2024, we invested $2,000 in technology and received proceeds of $13,000 from financing activities related to the exercise of stock options.
Other Liquidity Matters
Intercompany
OmniMetrix owes Acorn $2,660,000 for amounts loaned, accrued interest and expenses paid by Acorn on OmniMetrix’s behalf as of March 31, 2024 as compared to $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 $84,000 offset by interest of $34,000, dividends of $19,000 due to Acorn and $34,000 in shared expenses paid by Acorn. These intercompany balances and amounts are eliminated in consolidation.
Liquidity
As of May 7, 2024, we had cash of $1,455,000. We believe that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance our activities at their current level of operations for at least the twelve-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 March 31, 2024.
CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
| Twelve Month Periods Ending March 31, (in thousands) | ||||||||||||||||||||
| Total | 2025 | 2026-2027 | 2028-2029 | 2030 and thereafter | ||||||||||||||||
| Software agreements | $ | 14 | $ | 14 | $ | — | $ | — | $ | — | ||||||||||
| Operating leases* | 196 | 130 | 66 | — | — | |||||||||||||||
| Contractual services | 608 | 238 | 370 | — | — | |||||||||||||||
| Purchase commitments** | 299 | 299 | — | — | — | |||||||||||||||
| Total contractual cash obligations | $ | 1,117 | $ | 681 | $ | 436 | $ | — | $ | — | ||||||||||
*Reflects the gross amount of the operating lease liabilities. Does not include rent amounts to be received under the 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 |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our CEO and CFO concluded that, due to the material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2023, our disclosure controls and 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, 2023, we employ a decentralized internal control methodology, coupled with management’s oversight, whereby our 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 the Company’s external consolidated financial statements. Also, as the Company’s subsidiary is not large enough to effectively mitigate certain risks by segregating incompatible duties, management must employ compensating mechanisms throughout the Company in a manner that is feasible given the constraints within which it operates.
The material weaknesses management identified were caused by an insufficient complement of resources at our OmniMetrix subsidiary and limited IT system capabilities, such that individual control policies and procedures 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 three material weaknesses present. This condition was further exacerbated as the Company could not demonstrate that each of the principles described within COSO’s document “Internal Control - Integrated Framework (2013)” were present and functioning.
Changes in Internal Control Over Financial Reporting
During 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 other 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.
| 21 |
PART II
| ITEM 6. | EXHIBITS. |
| 22 |
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: May 9, 2024 | ||
| By: | /s/ TRACY S. CLIFFORD | |
| Tracy S. Clifford | ||
| Chief Financial Officer | ||
| 23 |
Exhibit 31.1
I, Jan H. Loeb, the Chief Executive Officer of Acorn Energy, Inc., certify that:
| 1. | I have reviewed this report on Form 10-Q of Acorn Energy, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 9, 2024 | ||
| By: | /s/ JAN H. LOEB | |
| Jan H. Loeb | ||
| Chief Executive Officer | ||
Exhibit 31.2
I, Tracy S. Clifford, the Chief Financial Officer of Acorn Energy, Inc., certify that:
| 1. | I have reviewed this report on Form 10-Q of Acorn Energy, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: May 9, 2024 | ||
| By: | /s/ TRACY S. CLIFFORD | |
| Tracy S. Clifford | ||
| Chief Financial Officer | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Acorn Energy, Inc. (the “Company”) for the quarterly period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jan H. Loeb, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ JAN H. LOEB | |
| Jan H. Loeb | |
| Chief Executive Officer | |
| May 9, 2024 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Acorn Energy, Inc. (the “Company”) for the quarterly period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tracy S. Clifford, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ TRACY S. CLIFFORD | |
| Tracy S. Clifford | |
| Chief Financial Officer | |
| May 9, 2024 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Common stock, par value | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 42,000,000 | 42,000,000 |
| Common stock, shares issued | 2,537,485 | 2,534,969 |
| Common stock, shares outstanding | 2,487,307 | 2,484,791 |
| Treasury stock, common shares | 50,178 | 50,178 |
Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) |
Sep. 05, 2023 |
|---|---|
| Income Statement [Abstract] | |
| Reverse stock split | 1-for-16 |
Condensed Consolidated Statements of Changes in Deficit (Unaudited) - USD ($) $ in Thousands |
Total |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
[1] | Retained Earnings [Member] |
Treasury Stock, Common [Member] |
Parent [Member] |
Noncontrolling Interest [Member] |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Balance at Dec. 31, 2022 | $ (1,011) | $ 25 | [1] | $ 103,261 | $ (101,267) | $ (3,036) | $ (1,017) | $ 6 | ||||||
| Balance, shares at Dec. 31, 2022 | [1] | 2,482,000 | 50,000 | |||||||||||
| Net loss | (84) | [1] | (85) | (85) | 1 | |||||||||
| Proceeds from warrant exercise | 5 | [1],[2] | 5 | 5 | ||||||||||
| Proceeds from warrant exercise, shares | [1] | 2,000 | ||||||||||||
| Accrued dividend in OmniMetrix preferred shares | (1) | [1] | (1) | |||||||||||
| Stock-based compensation | 17 | [1] | 17 | 17 | ||||||||||
| Balance at Mar. 31, 2023 | (1,074) | $ 25 | [1] | 103,283 | (101,352) | $ (3,036) | (1,080) | 6 | ||||||
| Balance, shares at Mar. 31, 2023 | 2,484,000 | 50,000 | [1] | |||||||||||
| Balance at Dec. 31, 2023 | (826) | $ 25 | [1] | 103,321 | (101,148) | $ (3,036) | (838) | 12 | ||||||
| Balance, shares at Dec. 31, 2023 | [1] | 2,484,000 | 50,000 | |||||||||||
| Net loss | 68 | [1] | 65 | 65 | 3 | |||||||||
| Proceeds from stock option exercise | $ 13 | [1],[2] | 13 | 13 | ||||||||||
| Proceeds from stock option exercise, shares | 2,812 | 3,000 | [2] | |||||||||||
| Accrued dividend in OmniMetrix preferred shares | $ (1) | [1] | (1) | |||||||||||
| Stock-based compensation | 27 | [1] | 27 | 27 | ||||||||||
| Balance at Mar. 31, 2024 | $ (719) | $ 25 | [1] | $ 103,361 | $ (101,083) | $ (3,036) | $ (733) | $ 14 | ||||||
| Balance, shares at Mar. 31, 2024 | 2,487,000 | 50,000 | [1] | |||||||||||
| ||||||||||||||
Condensed Consolidated Statements of Changes in Deficit (Unaudited) (Parenthetical) |
Sep. 05, 2023 |
|---|---|
| Equity [Abstract] | |
| Reverse stock split | 1-for-16 |
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Cash flows used in operating activities: | |||
| Net income (loss) | $ 68,000 | $ (84,000) | |
| Depreciation and amortization | 28,000 | 38,000 | |
| (Decrease) increase in the provision for credit loss | (7,000) | 2,000 | |
| Impairment of inventory | 9,000 | 3,000 | |
| Non-cash lease expense | 32,000 | 31,000 | |
| Stock-based compensation | 27,000 | 17,000 | |
| Change in operating assets and liabilities: | |||
| Decrease (increase) in accounts receivable | 56,000 | (176,000) | |
| Decrease (increase) in inventory | 165,000 | (18,000) | |
| Decrease in deferred COGS | 235,000 | 37,000 | |
| Decrease (increase) in other current assets and other assets | 27,000 | (20,000) | |
| (Decrease) increase in deferred revenue | (556,000) | 45,000 | |
| Decrease in operating lease liability | (36,000) | (33,000) | |
| (Decrease) increase in accounts payable, accrued expenses, other current liabilities and non-current liabilities | (91,000) | 75,000 | |
| Net cash used in operating activities | (43,000) | (83,000) | |
| Cash flows used in investing activities: | |||
| Investments in technology | (2,000) | (26,000) | |
| Net cash used in investing activities | (2,000) | (26,000) | |
| Cash flows provided by financing activities: | |||
| Stock option exercise proceeds | 13,000 | ||
| Warrant exercise proceeds | 5,000 | ||
| Net cash provided by financing activities | 13,000 | 5,000 | |
| Net decrease in cash | (32,000) | (104,000) | |
| Cash at the beginning of the period | 1,449,000 | 1,450,000 | $ 1,450,000 |
| Cash at the end of the period | 1,417,000 | 1,346,000 | $ 1,449,000 |
| Cash paid during the year for: | |||
| Interest | 1,000 | ||
| Income taxes | 2,000 | ||
| Non-cash investing and financing activities: | |||
| Accrued preferred dividends to former CEO of OmniMetrix | $ 1,000 | $ 1,000 | |
BASIS OF PRESENTATION |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| BASIS OF PRESENTATION | 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 three-month periods ended March 31, 2024 and 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 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, 2023, filed with the Securities and Exchange Commission on March 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 Deficit reflects the impact of the Reverse Stock Split by reclassifying from “Common Stock” to “Additional paid-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.
|
ACCOUNTING POLICIES |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ACCOUNTING POLICIES | 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.
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 $1,417,000 at 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 March 31, 2024, there were no customers that represented greater than 10% of the Company’s total invoiced sales. At March 31, 2024, the Company had one customer that represented 13% of our total accounts receivable which was subsequently collected in full. Approximately 25% of the accounts receivable at December 31, 2023 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.
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 conducts an assessment at each reporting period of the Company’s inventory reserve and writes-off inventory when the items are deemed obsolete.
Revenue Recognition
The 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) that were not separable from the Company’s monitoring services was deferred and amortized over the estimated 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 service period. See Notes 9 and 10 for the disaggregation of the Company’s revenue for the 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.
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 and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net income (loss) per share if doing so would be antidilutive.
The combined weighted average number of options and 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).
Recent Accounting Pronouncements
In November 2023, the Financial 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 on its segment reporting disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and 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 this ASU.
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LIQUIDITY |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Liquidity | |
| LIQUIDITY | NOTE 3—LIQUIDITY
As of March 31, 2024, the Company had $1,417,000 of consolidated cash.
At March 31, 2024, the Company had a negative working capital of $620,000. Its working capital includes $1,417,000 of cash and deferred revenue of $3,823,000. 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 decreased during the three-month period ended March 31, 2024 by $32,000, with $43,000 used in operating activities, $2,000 used in investing activities, and $13,000 provided by financing activities.
As of May 7, 2024, the Company had cash of $1,455,000. 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 OmniMetrix at their current level of operations for at least the twelve-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.
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ALLOWANCE FOR CREDIT LOSSES |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ALLOWANCE FOR CREDIT LOSSES | 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 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 March 31, 2024, the Company had gross receivables of $493,000 and an allowance for credit losses of $6,000.
The following is a tabular reconciliation of the Company’s allowance for credit losses:
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INVENTORY |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INVENTORY | NOTE 5—INVENTORY
At March 31, 2024 and December 31, 2023, the Company’s inventory reserve was $9,000 and $8,000, respectively.
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LEASES |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | 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. The office equipment lease was entered into in April 2019 and had a sixty-month term. This lease is currently month-to-month until the Company negotiates a new term. Operating lease payments for the three-month periods ended March 31, 2024 and 2023 were $32,000 and $31,000, respectively. The present value of future minimum lease payments on non-cancelable operating leases as of March 31, 2024 using a discount rate of 4.5% is $190,000. The 4.5% discount rate used was the estimated incremental borrowing rate when the lease was entered into, which, as defined in ASC 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):
Supplemental balance sheet information related to leases consisted of the following:
The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2024 (in thousands):
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 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. During 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 paid its landlord $2,000 for its share of the sublease 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 $2,750 (gross of the estimated amount expected to be remitted to our landlord):
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COMMITMENTS AND CONTINGENCIES |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 7—COMMITMENTS AND CONTINGENCIES
The Company has $190,000 in operating lease obligations payable through 2026 and $622,000 in other contractual 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 has $299,000 in open purchase order commitments payable through March 31, 2025.
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STOCKHOLDERS’ DEFICIT |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| STOCKHOLDERS’ DEFICIT | NOTE 8—STOCKHOLDERS’ DEFICIT
(a) General
At March 31, 2024, Acorn had shares issued and 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 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 three-month period ended March 31, 2024, options were issued. 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 three-month period ended March 31, 2024, there were grants to non-employees (other than the directors, CEO and CFO).
During the three-month period ended March 31, 2024, options were 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):
(c) Stock Option Compensation Expense
Stock option compensation expense included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations was $ and $ for the three-month periods ended March 31, 2024 and 2023, respectively.
The total compensation cost related to non-vested awards not yet recognized was $ as of March 31, 2024 which will be recognized over the next sixteen months.
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SEGMENT REPORTING |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENT REPORTING | NOTE 9— SEGMENT REPORTING
As of March 31, 2024, the Company operates in two reportable operating segments, both of which are performed through the Company’s OmniMetrix subsidiary:
The Company’s reportable segments are strategic business units, offering different products and services, and are managed separately as each business requires different technology and marketing strategies.
The following tables represent segmented data for the three-month periods ended March 31, 2024 and 2023 (in thousands):
The Company does not currently break out total assets by reportable segment as there is a high level of shared utilization between the segments. Further, the Chief Decision Maker does not review the assets by segment.
Reconciliation of Segment Net Income (Loss) to Consolidated Net Income (Loss) Before Income Taxes
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REVENUE |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Deferred Charges Activity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| REVENUE | NOTE 10—REVENUE
The following table disaggregates the Company’s revenue for the three-month periods ended March 31, 2024 and 2023 (in thousands):
Deferred revenue activity for the three-month period ended March 31, 2024 can be seen in the table below (in thousands):
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):
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):
The following table provides a reconciliation of the Company’s COGS expense for the three-month periods ended March 31, 2024 and 2023 (in thousands):
The following table provides a reconciliation of the Company’s sales commissions contract assets for the three-month period ended March 31, 2024 (in thousands):
The capitalized sales commissions are included in other current assets ($184,000) and other assets ($130,000) in the Company’s unaudited condensed consolidated balance sheet at March 31, 2024. The capitalized sales commissions are included in other current assets ($202,000) and other assets ($162,000) in the Company’s condensed consolidated balance sheet at December 31, 2023.
Amounts to be recognized as sales commission expense in the twelve-month-period ending (in thousands):
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RELATED PARTY BALANCES AND TRANSACTIONS |
3 Months Ended |
|---|---|
Mar. 31, 2024 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY BALANCES AND TRANSACTIONS | NOTE 11—RELATED PARTY BALANCES AND TRANSACTIONS
Officer and Director Fees
The Company recorded consulting service fees to officers of $134,000 and $130,000 for the three-month periods ended March 31, 2024 and 2023, respectively, which is included in selling, general and administrative expenses.
The Company recorded fees to directors of $18,000 and $15,000 for the three-month periods ended March 31, 2024 and 2023, respectively, which is included in selling, general and administrative expenses. |
ACCOUNTING POLICIES (Policies) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Use of Estimates in Preparation of Financial Statements | 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.
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| Concentrations of Credit Risk | 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 $1,417,000 at 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 March 31, 2024, there were no customers that represented greater than 10% of the Company’s total invoiced sales. At March 31, 2024, the Company had one customer that represented 13% of our total accounts receivable which was subsequently collected in full. Approximately 25% of the accounts receivable at December 31, 2023 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 | 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 conducts an assessment at each reporting period of the Company’s inventory reserve and writes-off inventory when the items are deemed obsolete.
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| Revenue Recognition | Revenue Recognition
The 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) that were not separable from the Company’s monitoring services was deferred and amortized over the estimated 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 service period. See Notes 9 and 10 for the disaggregation of the Company’s revenue for the periods presented.
Any sales tax, value added tax, and other tax the Company collects concurrent with revenue producing activities are excluded from revenue.
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| Income Taxes | 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 and Diluted Net Income (Loss) Per Share |
Basic net income (loss) per share is computed by dividing the net income (loss) attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the 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 and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net income (loss) per share if doing so would be antidilutive.
The combined weighted average number of options and 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).
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In November 2023, the Financial 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 on its segment reporting disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and 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 this ASU.
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ACCOUNTING POLICIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF EFFECT ON NET INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES |
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ALLOWANCE FOR CREDIT LOSSES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF ALLOWANCES FOR CREDIT LOSSES | The following is a tabular reconciliation of the Company’s allowance for credit losses:
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INVENTORY (Tables) |
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF INVENTORY |
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LEASES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||
| Leases | ||||||||||||||||||||||||||||||||||
| SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES | Supplemental cash flow information related to leases consisted of the following (in thousands):
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| SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES | Supplemental balance sheet information related to leases consisted of the following:
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| SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS | The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2024 (in thousands):
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| SCHEDULE OF SUBLEASES |
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STOCKHOLDERS’ DEFICIT (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF BLACK-SCHOLES OPTION PRICING ESTIMATE FAIR VALUE |
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| SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES |
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SEGMENT REPORTING (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SUMMARY OF SEGMENTED DATA | The following tables represent segmented data for the three-month periods ended March 31, 2024 and 2023 (in thousands):
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| SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT OF OPERATIONS | Reconciliation of Segment Net Income (Loss) to Consolidated Net Income (Loss) Before Income Taxes
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REVENUE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule Of Deferred Charges Activity | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SCHEDULE OF DISAGGREGATES OF REVENUE | The following table disaggregates the Company’s revenue for the three-month periods ended March 31, 2024 and 2023 (in thousands):
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| SCHEDULE OF DEFERRED REVENUE ACTIVITY | Deferred revenue activity for the three-month period ended March 31, 2024 can be seen in the table below (in thousands):
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| SCHEDULE OF RECONCILIATION OF HARDWARE REVENUE | 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):
|
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| SCHEDULE OF DEFERRED CHARGES ACTIVITY | 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):
|
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| SCHEDULE OF RECONCILIATION OF COGS EXPENSE | The following table provides a reconciliation of the Company’s COGS expense for the three-month periods ended March 31, 2024 and 2023 (in thousands):
|
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| SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS | The following table provides a reconciliation of the Company’s sales commissions contract assets for the three-month period ended March 31, 2024 (in thousands):
|
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| SCHEDULE OF SALES COMMISSIONS EXPENSE | Amounts to be recognized as sales commission expense in the twelve-month-period ending (in thousands):
|
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BASIS OF PRESENTATION (Details Narrative) |
Sep. 05, 2023
USD ($)
|
|---|---|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Reverse stock split | 1-for-16 |
| Shares repurchased | $ 347 |
SCHEDULE OF EFFECT ON NET INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|||
| Accounting Policies [Abstract] | ||||
| Net income (loss) attributable to common stockholders | $ 65 | $ (85) | ||
| Weighted average shares outstanding: | ||||
| -Basic | [1] | 2,486 | 2,483 | |
| Add: Stock options | 8 | 0 | ||
| -Diluted | [1] | 2,494 | 2,483 | |
| Basic net income (loss) per share | [1] | $ 0.03 | $ (0.03) | |
| Diluted net income (loss) per share | [1] | $ 0.03 | $ (0.03) | |
| ||||
ACCOUNTING POLICIES (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | |
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Product Information [Line Items] | |||
| Deposits assets | $ 1,417,000 | ||
| Antidilutive securities excluded from computation of earnings per share, amount | 34,000 | 65,000 | |
| Weighted average exercise price | $ 7.77 | $ 6.56 | |
| Revenue Benchmark [Member] | Customer Concentration Risk [Member] | One Customer [Member] | |||
| Product Information [Line Items] | |||
| Concentration risk percentage | 10.00% | ||
| Accounts Receivable [Member] | Customer Concentration Risk [Member] | Two Customer [Member] | |||
| Product Information [Line Items] | |||
| Concentration risk percentage | 13.00% | 25.00% | |
LIQUIDITY (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
May 07, 2024 |
|
| Cash | $ 1,417,000 | |||
| Working capital | 620,000 | |||
| Deferred revenue | 3,823,000 | $ 4,034,000 | ||
| Total deferred revenue decreased | (556,000) | $ 45,000 | ||
| Increase decrease in net cash | 32,000 | 104,000 | ||
| Net cash used in operating activities | 43,000 | 83,000 | ||
| Net cash used in investing activities | 2,000 | 26,000 | ||
| Net cash used in financing activities | 13,000 | $ 5,000 | ||
| Cash | 1,417,000 | 1,449,000 | ||
| Subsequent Event [Member] | ||||
| Cash | $ 1,455,000 | |||
| Maximum [Member] | ||||
| Total deferred revenue decreased | $ 5,584,000 | |||
| Minimum [Member] | ||||
| Total deferred revenue decreased | $ 5,028,000 | |||
SCHEDULE OF ALLOWANCES FOR CREDIT LOSSES (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Receivables [Abstract] | ||
| Balance at beginning of period | $ 10 | $ 10 |
| Provision for credit losses adjustment | (7) | 2 |
| Net credits (charge-offs) | 3 | (2) |
| Balance at end of period | $ 6 | $ 10 |
ALLOWANCE FOR CREDIT LOSSES (Details Narrative) $ in Thousands |
Mar. 31, 2024
USD ($)
|
|---|---|
| Receivables [Abstract] | |
| Gross receivables | $ 493 |
| Allowances for credit losses | $ 6 |
SCHEDULE OF INVENTORY (Details) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 720 | $ 904 |
| Finished goods | 68 | 58 |
| Inventory net | $ 788 | $ 962 |
INVENTORY (Details Narrative) - USD ($) |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Inventory reserves | $ 9,000 | $ 8,000 |
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Leases | ||
| Cash paid for operating lease liabilities | $ 32 | $ 31 |
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES (Details) |
Mar. 31, 2024 |
|---|---|
| Leases | |
| Weighted average remaining lease terms for operating leases | 1 year 6 months |
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS (Details) |
Mar. 31, 2024
USD ($)
|
|||
|---|---|---|---|---|
| Leases | ||||
| 2025 | $ 129,000 | |||
| 2026 | 67,000 | |||
| Total undiscounted cash flows | 196,000 | |||
| Less: Imputed interest | (6,000) | |||
| Present value of operating lease liabilities | $ 190,000 | [1] | ||
| ||||
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS (Details) (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2024 |
Dec. 31, 2023 |
|---|---|---|
| Leases | ||
| Operating leases current portion | $ 124 | $ 123 |
SCHEDULE OF SUBLEASES (Details) $ in Thousands |
Mar. 31, 2024
USD ($)
|
|---|---|
| Leases | |
| 2025 | $ 29 |
| 2026 | 14 |
| Total undiscounted cash flows | $ 43 |
LEASES (Details Narrative) |
3 Months Ended | ||||
|---|---|---|---|---|---|
|
Jul. 06, 2021
USD ($)
ft²
|
Mar. 31, 2024
USD ($)
|
Mar. 31, 2023
USD ($)
|
|||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||
| Lessee, Operating Lease, Discount Rate | 4.50% | ||||
| Operating Lease, Liability | [1] | $ 190,000 | |||
| Sublease payment | $ 2,375 | ||||
| Leasehold Improvements, Gross | $ 2,000 | ||||
| Annual service cost | $ 2,750 | ||||
| King Industrial Reality Inc [Member] | |||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||
| Office and production space | ft² | 1,900 | ||||
| King Industrial Realty Inc [Member] | |||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||
| Office and production space | ft² | 21,000 | ||||
| Operating Lease Agreements [Member] | Omni Metrix Holdings, Inc. [Member] | |||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||
| Lease Expiration Date | Sep. 30, 2025 | ||||
| Operating Lease, Payments | $ 32,000 | $ 31,000 | |||
| |||||
COMMITMENTS AND CONTINGENCIES (Details Narrative) |
3 Months Ended | |||
|---|---|---|---|---|
|
Mar. 31, 2024
USD ($)
| ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Operating lease obligations payable | $ 190,000 | [1] | ||
| Master Services Agreement [Member] | ||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||||
| Operating lease obligations payable | 190,000 | |||
| Operating leases and contractual services | 622,000 | |||
| Contractual services, year one | 252,000 | |||
| Contractual services, year two | 220,000 | |||
| Contractual services, year three | 150,000 | |||
| Commitment payable | $ 299,000 | |||
| ||||
SCHEDULE OF BLACK-SCHOLES OPTION PRICING ESTIMATE FAIR VALUE (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
|---|---|---|
Mar. 31, 2024 |
Dec. 31, 2023 |
|
| Equity [Abstract] | ||
| Number of Options (in shares), Outstanding at beginning of year | 71,893 | |
| Weighted Average Exercise Price Per Share, Outstanding at beginning of year | $ 6.41 | |
| Weighted average remaining contractual life at end | 4 years | 3 years 9 months 18 days |
| Aggregate intrinsic value at beginning of year | $ 40,000 | |
| Number of Options (in shares), Granted | 7,900 | |
| Weighted Average Exercise Price Per Share, Granted | $ 6.08 | |
| Number of Options (in shares), Exercised | (2,812) | |
| Weighted Average Exercise Price Per Share, Exercised | $ 5.12 | |
| Number of Options (in shares), Forfeited or expired | ||
| Weighted Average Exercise Price Per Share, Forfeited or expired | ||
| Number of Options (in shares), Outstanding at end of year | 76,981 | 71,893 |
| Weighted Average Exercise Price Per Share, Outstanding at end of year | $ 6.42 | $ 6.41 |
| Aggregate intrinsic value at end of year | $ 85,000 | $ 40,000 |
| Number of Options (in shares), Exercisable at end of year | 66,106 | |
| Weighted Average Exercise Price Per Share, Exercisable at end of year | $ 6.46 | |
| Weighted average remaining contractual life at exercisable at end of year | 3 years 7 months 6 days | |
| Aggregate intrinsic value, Exercisable at end of year | $ 74,000 |
SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES (Details) |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
USD ($)
| |
| Equity [Abstract] | |
| Fair value of options granted | $ 47,000 |
| Risk-free interest rate | 3.92% |
| Expected term of options, in years | 4 years 10 months 24 days |
| Expected annual volatility | 194.10% |
| Expected dividend yield |
STOCKHOLDERS’ DEFICIT (Details Narrative) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2023 |
|
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Common stock, shares issued | 2,537,485 | 2,534,969 | |
| Common stock, shares outstanding | 2,487,307 | 2,484,791 | |
| Common stock, par value | $ 0.01 | $ 0.01 | |
| Number of options granted during period | 7,900 | ||
| Number of options exercisable | $ 74,000 | ||
| Compensation cost, non-vested awards not yet recognized | 45,000 | ||
| Selling, General and Administrative Expenses [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Stock based compensation expense | 27,000 | $ 17,000 | |
| Options Held [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options exercisable | $ 2,812 | ||
| Share-Based Payment Arrangement, Employee [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 1,000 | ||
| Share-Based Payment Arrangement, Nonemployee [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 0 | ||
| Non-Employee Directors [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 7,900 | ||
| Director [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 2,500 | ||
| Chief Executive Officer [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 2,200 | ||
| Chief Financial Officer [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options granted during period | 2,200 | ||
| Amended and Restated 2006 Stock Incentive Plan [Member] | |||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
| Number of options available for grant | 68,869 | ||
SUMMARY OF SEGMENTED DATA (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Segment Reporting Information [Line Items] | ||
| Revenue from external customers | $ 2,132 | $ 1,749 |
| Segment gross profit | 1,591 | 1,316 |
| Depreciation and amortization | 28 | 38 |
| Segment income (loss) before income taxes | 398 | 151 |
| PG [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Revenue from external customers | 1,794 | 1,507 |
| Segment gross profit | 1,398 | 1,179 |
| Depreciation and amortization | 24 | 33 |
| Segment income (loss) before income taxes | 416 | 199 |
| CP [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Revenue from external customers | 338 | 242 |
| Segment gross profit | 193 | 137 |
| Depreciation and amortization | 4 | 5 |
| Segment income (loss) before income taxes | $ (18) | $ (48) |
SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT OF OPERATIONS (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Segment Reporting [Abstract] | ||
| Total net income before income taxes for reportable segments | $ 398 | $ 151 |
| Unallocated cost of corporate headquarters | (305) | (235) |
| Income (loss) before income taxes | $ 93 | $ (84) |
SCHEDULE OF DISAGGREGATES OF REVENUE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Total Revenue | $ 2,132 | $ 1,749 |
| PG [Member] | ||
| Total Revenue | 1,794 | 1,507 |
| CP [Member] | ||
| Total Revenue | 338 | 242 |
| Hardware [Member] | ||
| Total Revenue | 1,030 | 725 |
| Hardware [Member] | PG [Member] | ||
| Total Revenue | 753 | 549 |
| Hardware [Member] | CP [Member] | ||
| Total Revenue | 277 | 176 |
| Monitoring [Member] | ||
| Total Revenue | 1,102 | 1,024 |
| Monitoring [Member] | PG [Member] | ||
| Total Revenue | 1,041 | 958 |
| Monitoring [Member] | CP [Member] | ||
| Total Revenue | $ 61 | $ 66 |
SCHEDULE OF DEFERRED REVENUE ACTIVITY (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
USD ($)
| |
| Balance at December 31, 2023 | $ 5,584 |
| Additions during the period | 1,081 |
| Recognized as revenue | (1,637) |
| Total | 5,028 |
| March 31, 2025 | 3,823 |
| March 31, 2026 | 1,144 |
| March 31, 2027 and thereafter | 61 |
| Hardware [Member] | |
| Balance at December 31, 2023 | 2,965 |
| Additions during the period | |
| Recognized as revenue | (535) |
| Total | 2,430 |
| March 31, 2025 | 1,621 |
| March 31, 2026 | 751 |
| March 31, 2027 and thereafter | 58 |
| Monitoring [Member] | |
| Balance at December 31, 2023 | 2,619 |
| Additions during the period | 1,081 |
| Recognized as revenue | (1,102) |
| Total | 2,598 |
| March 31, 2025 | 2,202 |
| March 31, 2026 | 393 |
| March 31, 2027 and thereafter | $ 3 |
SCHEDULE OF RECONCILIATION OF HARDWARE REVENUE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Revenue | $ 2,132 | $ 1,749 |
| Hardware [Member] | ||
| Revenue | 1,030 | 725 |
| Hardware [Member] | Amortization [Member] | ||
| Revenue | 535 | 585 |
| Hardware [Member] | Hardware Sales [Member] | ||
| Revenue | 376 | |
| Hardware [Member] | Other Accessories [Member] | ||
| Revenue | $ 119 | $ 140 |
SCHEDULE OF DEFERRED CHARGES ACTIVITY (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
USD ($)
| |
| Schedule Of Deferred Charges Activity | |
| 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 |
| March 31, 2025 | 709 |
| March 31, 2026 | 316 |
| March 31, 2027 and thereafter | 25 |
| Total | $ 1,050 |
SCHEDULE OF RECONCILIATION OF COGS EXPENSE (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Revenue | $ 2,132 | $ 1,749 |
| C O G S [Member] | ||
| Revenue | 541 | 433 |
| C O G S [Member] | Amortization [Member] | ||
| Revenue | 235 | 268 |
| C O G S [Member] | C O G S Of Hardware Sales [Member] | ||
| Revenue | 163 | |
| C O G S [Member] | C O G S Data Costs [Member] | ||
| Revenue | 62 | 75 |
| C O G S [Member] | Other C O G S Accessories [Member] | ||
| Revenue | $ 81 | $ 90 |
SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS (Details) $ in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2024
USD ($)
| |
| Balance at December 31, 2023 | $ 364 |
| Additions during the period | 8 |
| Amortization of sales commissions | (58) |
| Balance at March 31, 2024 | 314 |
| Hardware [Member] | |
| Balance at December 31, 2023 | 268 |
| Additions during the period | |
| Amortization of sales commissions | (48) |
| Balance at March 31, 2024 | 220 |
| Monitoring [Member] | |
| Balance at December 31, 2023 | 96 |
| Additions during the period | 8 |
| Amortization of sales commissions | (10) |
| Balance at March 31, 2024 | $ 94 |
SCHEDULE OF SALES COMMISSIONS EXPENSE (Details) $ in Thousands |
Mar. 31, 2024
USD ($)
|
|---|---|
| Schedule Of Deferred Charges Activity | |
| March 31, 2025 | $ 184 |
| March 31, 2026 | 101 |
| March 31, 2027 and thereafter | 29 |
| Total | $ 314 |
REVENUE (Details Narrative) - USD ($) |
3 Months Ended | |||
|---|---|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
Dec. 31, 2024 |
Dec. 31, 2023 |
|
| Revenue | $ 2,132,000 | $ 1,749,000 | ||
| Other current assets | 285,000 | $ 280,000 | ||
| Capitalized Sales Commissions [Member] | ||||
| Other current assets | 184,000 | 202,000 | ||
| Other assets | 130,000 | $ 162,000 | ||
| Other Revenue Related to Accessories, Repairs and Other Miscellaneous Charges [Member] | ||||
| Revenue | 535,000 | |||
| Monitoring [Member] | ||||
| Revenue | $ 1,102,000 | $ 1,024,000 | ||
| Deferred revenue recognized | $ 954,000 | |||
RELATED PARTY BALANCES AND TRANSACTIONS (Details Narrative) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2024 |
Mar. 31, 2023 |
|
| Officer [Member] | ||
| Consulting and other fees to directors | $ 134,000 | $ 130,000 |
| Director [Member] | ||
| Consulting and other fees to directors | $ 18,000 | $ 15,000 |
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