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Investments in Subsidiaries
 12 Months Ended
Dec. 31, 2014
Business Combinations [Abstract]  
Investments in Subsidiaries

NOTE 4—INVESTMENTS IN SUBSIDIARIES

 

(a) USSI

 

On December 31, 2012, the Company owned 4,208,745 shares of USSI’s common stock and 6,017,690 shares of USSI’s Series A-1 Preferred Stock (“USSI Preferred Stock”). The USSI Preferred Stock provides that upon any future liquidation of USSI, to the extent funds are available for distribution to USSI’s stockholders after the satisfaction of any USSI liabilities at that time, USSI would first repay the Company for the purchase price of its USSI Preferred Stock. Thereafter, the Company would receive a further payment for such shares ratably with all other USSI Common Stock holders as though the Company’s shares of USSI Preferred Stock were the same number of shares of USSI Common Stock.

  

On February 28, 2013, the Company entered into a new Stock Purchase Agreement with USSI pursuant to which the Company made a payment to USSI of $2,500 to purchase additional shares of USSI Preferred Stock. In May 2013, the Company made another payment of $2,500 to purchase additional shares of USSI Preferred Stock.

 

On August 21, 2013, the Company entered into a second Stock Purchase Agreement with USSI pursuant to which the Company made a payment to USSI of $1,000 to purchase additional shares of USSI Preferred Stock.

 

Following the August 2013 investment in USSI, the Company owned 9,376,401 shares of USSI Preferred Stock representing (together with the common stock owned) approximately 95.7% of USSI on an as converted basis (which amount would be diluted to approximately 88.4% if all options which could be awarded under USSI’s 2012 Stock Purchase Plan were awarded and exercised). Through December 31, 2013, the Company invested $7,584 in USSI common shares (of which $5,355 was in cash and $2,229 was in Acorn common shares) and an additional $16,750 in USSI Preferred Stock. In addition, during the period from August to December 2013, the Company lent USSI $1,355 and during 2014 the Company lent USSI an additional $10,058. Such loans bear interest at 8% per annum. Given the suspension of USSI’s operations (see Notes 3 and 21), it is uncertain whether there will be any cash available to repay any of these loaned amounts after the disposition of USSI’s assets.

 

In the second quarter of 2014, the Company lent a channel partner active in sourcing trials for USSI’s products a total of $640 under a secured promissory note (“the Note”). The loan bore interest at 8%. The channel partner granted the Company, as security for the loans made pursuant to the Note, a first, secured lien on all of the channel partner’s receivables from customer accounts and all intellectual property used in its business. The loan and any accrued and unpaid interest was due and payable not later than June 30, 2014 at which time the Company took a full provision on the $640 of principal as well as the $9 of interest accrued through June 30, 2014. In November of 2014, the Company reached a settlement of the Note with the channel partner whereby the Company received a cash repayment of $400 from the channel partner as well as providing processing services valued at $240 for the benefit of USSI. The value of such processing services were treated as an additional loan to USSI subject to 8% annual interest from the settlement date. The value of such services were written off following the decision to suspend the operations of USSI (see Notes 3 and 21).

 

(b) DSIT Solutions, Ltd. (“DSIT”)

 

Effective July 1, 2013, the Company entered into a Stock Purchase Agreement with DSIT (the “DSIT SPA”) pursuant to which the Company converted a prior loan of approximately $800 into additional ordinary (common) shares of DSIT. The Company also converted $2,800 in advances and loans into DSIT’s Participating Preferred Stock (the “DSIT Preferred Stock”). At the closing, Acorn purchased an additional $800 of DSIT Preferred Stock and committed to purchasing an additional $1,400 of DSIT Preferred Stock.

 

The DSIT Preferred Stock provided that upon any future liquidation of DSIT, to the extent funds are available for distribution to DSIT’s stockholders after the satisfaction of any DSIT liabilities at that time, DSIT would first repay the Company for the purchase price of our DSIT Preferred Stock. Thereafter, the Company would receive a further payment for such shares ratably with all other DSIT ordinary stock holders as though the Company’s shares of DSIT Preferred Stock were the same number of DSIT ordinary shares. 

 

In September 2013, the Company informed DSIT that it did not plan to fund payment of the remaining $1,400 it had committed to invest in DSIT. In August 2014, the DSIT SPA was amended to release Acorn from the obligation to make the additional investment. Under the amended DSIT SPA, in consideration for amending the DSIT SPA, the Company agreed to waive the Liquidation Preference. The Company still would receive payment for such shares ratably with all other DSIT ordinary stockholders as though the Company’s shares of DSIT Preferred Stock were the same number of DSIT ordinary shares.

 

The Company currently owns approximately 88.3% of DSIT on an as converted basis. If all the options to purchase all shares of DSIT ordinary stock available under the DSIT Option Plan are granted and exercised, the Company would own approximately 77.4% of DSIT on a fully diluted as converted basis.

 

In the year ended December 31, 2013, in accordance with generally accepted accounting principles, the Company recorded an adjustment of $202 to the non-controlling interests balance with respect to the Acorn investment in common shares of DSIT.

 

(c) GridSense

 

On December 19, 2013, GridSense sold its Bushing IQ product line (also known as OMI) for $281 and recorded a gain on the sale of $116 which is included in Selling, general and administrative expense. The Bushing IQ product line provided revenues of $152 (included in Revenues - Products) during the year ended December 31, 2013.