Note 3: Sale of CoaLogix

On August 31, 2011 (the “Closing Date”), the Company completed its previously announced sale of its majority owned CoaLogix Inc. subsidiary (“CoaLogix”) pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") with EnerTech Capital Partners III L.P., certain management employees of the CoaLogix subsidiary (collectively with the Company, the "Sellers"), CoaLogix and CoaLogix Holdings, Inc. (the "Buyer"), pursuant to which the Sellers sold all the outstanding capital stock of CoaLogix to the Buyer for $101 million (subject to certain adjustments) in cash. The Company owned approximately 65% of CoaLogix on a fully diluted basis and received $61,915 in consideration for its CoaLogix shares, of which $5,961 was deposited in an escrow account to secure possible indemnification claims which the Company expects to be released to it within one year from the Closing Date and $347 was deposited in an escrow account against a possible working capital shortfall which the Company expects to be released to it in the fourth quarter of 2011.

In connection with the sale of the Company’s shares of common stock of CoaLogix, the Company recorded a gain of $46,489. The Company also recorded income taxes of $15,806 based on a Federal income tax rate of 34%. The net gain of $30,683 is reflected in the Company’s Condensed Consolidated Statement of Operations as a “Gain on the sale of discontinued operations”. Concurrently, the Company recorded an income tax benefit of $12,000 with respect to the recognition of previously unrecognized deferred tax assets primarily associated with previous years’ net losses.

Assets and liabilities related to the discontinued operations of CoaLogix are as follows:

	December 31, 2010		August 31, 2011

Current assets:
Cash and cash equivalents	$	807	$	284
Restricted deposits		608		108
Accounts receivable		3,600		3,123
Unbilled revenue and work-in-process		54		587
Inventory		3,200		4,810
Other current assets		1,155		3,205
Total current assets		9,424		12,117
Property and equipment, net		10,453		9,781
Intangible assets, net		3,961		4,233
Goodwill		3,714		3,714
Other assets		70		102
Total assets	$	27,622	$	29,947

Current liabilities:
Short-term bank credit and current maturities of long-term bank debt	$	223	$	723
Accounts payable		1,969		3,046
Accrued payroll, payroll taxes and social benefits		512		442
Other current liabilities		1,668		2,753
Total current liabilities		4,372		6,964
Long-term liabilities:
Long-term debt		87		1,269
Other long-term liabilities		347		391
Total long-term liabilities		434		1,660
Total liabilities	$	4,806	$	8,624

CoaLogix losses for the nine and three month periods ended September 30, 2010 and the for eight and two month periods from January 1, 2011 through the Closing Date are reflected as “Loss from discontinued operations” in the Company’s Condensed Consolidated Statements of Income. Summarized financial information for CoaLogix’ operations for the nine and three month periods ended September 30, 2010 and for the eight and two month periods ended August 31, 2011 are presented below:

	January 1, 2010 to September 30, 2010			January 1, 2011 to Closing Date			July 1, 2010 to September 30, 2010			July 1, 2011 to Closing Date

Revenues	$	14,812		$	12,084		$	5,479		$	1,725
Cost of sales		10,109			8,837			4,563			1,195
Gross profit		4,703			3,247			916			530
Research and development expenses		17			390			—			135
Selling, general and administrative expenses		5,770			4,786			1,800			934
Operating loss		(1,084	)		(1,929	)		(884	)		(539	)
Finance expense, net		9			19			5			5
Net loss		(1,093	)		(1,948	)		(889	)		(544	)
Net loss attributable to non-controlling interests		284			540			244			151
Net loss attributable to Acorn Energy Inc.	$	(809	)	$	(1,408	)	$	(645	)	$	(393	)

“Loss from discontinued operations” in the Company’s Condensed Consolidated Statements of Income also includes losses of $7,621 and $2,418 from the Company’s former Coreworx subsidiary in the nine and three month periods ended September 30, 2010, respectively.