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Dsit Solutions, Ltd. ('DSIT') | 9 Months Ended
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Sep. 30, 2016
Business Combinations [Abstract] |
Dsit Solutions, Ltd. ("DSIT") | NOTE 3—DSIT SOLUTIONS, LTD. (“DSIT”) On April 21, 2016 (the “Closing Date”), the Company closed on a transaction (the “DSIT Transaction”) initially entered into on January 28, 2016 for the sale of a portion of its interests DSIT Solutions, Ltd. business to Rafael Advanced Defense Systems Ltd., a major Israeli defense company. At closing, Acorn received gross proceeds of $4,913 before escrow, fees and taxes. From the gross proceeds, the Company deposited approximately $579 to satisfy the escrow requirements in the sale. The Company expects the escrow deposit to be released 18 months from the Closing Date. The Company also paid an Israeli withholding tax of approximately $266 and incurred transaction costs of $184. In connection with the DSIT Transaction, the Company recorded a gain of $3,543. The Company is also eligible to receive its 82.4% pro-rata share of a $1,000 earn-out over a three-year period if certain operating results targets are met. The earn-out is not included in the determination of the gain in the DSIT Transaction and will only be recorded as a gain if and when the parties agree that the earn-out has in fact been earned. Prior to the Closing Date, all options in the DSIT Key Employee Stock Option Plan were exercised and DSIT received proceeds of $391, and the Company’s holdings in DSIT were reduced from 88.3% to 78.7%. As a result of the DSIT Transaction, the Company’s holdings in DSIT were reduced from 78.7% to 41.2%, and subsequent to the DSIT Transaction, the Company has limited representation on the DSIT Board of directors. Accordingly, after the Closing Date, the Company no longer consolidates the results of DSIT. Assets and liabilities related to the deconsolidated operations of DSIT are as follows:
|  | September 30, 2016 |  |  | At the Closing Date |  |  | December 31, 2015 |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 9 |  |  | $ | 516 |  |  |  | 7 |
Restricted deposits |  |  | 1,885 |  |  |  | 2,517 |  |  |  | 2,172 |
Accounts receivable |  |  | 4,221 |  |  |  | 5,166 |  |  |  | 5,826 |
Unbilled revenue |  |  | 4,440 |  |  |  | 4,779 |  |  |  | 3,849 |
Inventory |  |  | 323 |  |  |  | 297 |  |  |  | 230 |
Other current assets |  |  | 923 |  |  |  | 935 |  |  |  | 698 |
Total current assets |  |  | 11,801 |  |  |  | 14,210 |  |  |  | 12,782 |
Property and equipment, net |  |  | 598 |  |  |  | 620 |  |  |  | 654 |
Severance assets |  |  | 3,860 |  |  |  | 3,762 |  |  |  | 3,558 |
Restricted deposits |  |  | 1,652 |  |  |  | 1,815 |  |  |  | 2,951 |
Due from Acorn |  |  | 1,066 |  |  |  | 916 |  |  |  | 802 |
Goodwill |  |  | -- |  |  |  | 536 |  |  |  | 516 |
Other assets |  |  | 86 |  |  |  | 80 |  |  |  | 124 |
Total assets |  | $ | 19,063 |  |  | $ | 21,939 |  |  |  | 21,387 |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Short-term bank credit and current maturities of long-term bank debt |  | $ | 1,317 |  |  | $ | 2,655 |  |  |  | 1,917 |
Accounts payable |  |  | 984 |  |  |  | 2,072 |  |  |  | 1,869 |
Accrued payroll, payroll taxes and social benefits |  |  | 1,106 |  |  |  | 1,286 |  |  |  | 1,261 |
Deferred revenue |  |  | 1,454 |  |  |  | 2,219 |  |  |  | 3,487 |
Other current liabilities |  |  | 2,351 |  |  |  | 1,615 |  |  |  | 1,417 |
Total current liabilities |  |  | 7,212 |  |  |  | 9,847 |  |  |  | 9,951 |
Accrued severance |  |  | 5,343 |  |  |  | 5,209 |  |  |  | 4,894 |
Other long-term liabilities |  |  | 43 |  |  |  | 38 |  |  |  | 82 |
Total liabilities |  | $ | 12,598 |  |  | $ | 15,094 |  |  |  | 15,017 |
The Due from Acorn balance at September 30, 2016 is comprised of a loan of $340 from DSIT and unreimbursed expenses of $476, both of which accrue interest at 3.15% per annum. Such balances are due the earlier of December 31, 2017 or the sale of Acorn’s remaining shares in DSIT. In addition to the above balances, the Due from Acorn balance also includes $250 with respect to provisions for severance and vacation for the Company’s CFO who is an employee of DSIT. DSIT’s results that were included in the Company’s Condensed Consolidated Statements of Operations in the three and nine month periods ending September 30, 2015 can be seen below:
|  | Three months ending September 30, 2015 |  |  | Nine months ending September 30, 2015 |
Revenue |  | $ | 3,616 |  |  | $ | 10,068 |
Cost of sales |  |  | 2,228 |  |  |  | 6,585 |
Gross profit |  |  | 1,388 |  |  |  | 3,483 |
Research and development expenses, net |  |  | 200 |  |  |  | 810 |
Selling, general and administrative expenses |  |  | 790 |  |  |  | 2,346 |
Operating income |  |  | 398 |  |  |  | 327 |
Finance expense, net |  |  | (17 | ) |  |  | (78 | )
Income before income taxes |  |  | 381 |  |  |  | 249 |
Income tax expense |  |  | (33 | ) |  |  | (46 | )
Net income |  |  | 348 |  |  |  | 203 |
Net income attributable to non-controlling interests |  |  | (46 | ) |  |  | (29 | )
Net income attributable to Acorn Energy Inc. |  | $ | 302 |  |  | $ | 174 |
As indicated above, after the Closing Date, the Company no longer consolidates the results of DSIT. After the Closing Date, the Company accounts for its investment in DSIT under the equity method. The initial balance of the Company’s investment in DSIT ($5,391) was determined based on the fair value of its 41.2% holdings in DSIT following the DSIT Transaction and the $13,100 value attributed to DSIT in the DSIT Transaction. DSIT’s results and the Company’s share of its net income for the three months ended September 30, 2016 and for the period from the Closing Date to September 30, 2016 can be seen below:
|  | Three months ending September 30, 2016 |  |  | From the Closing Date to September 30, 2016 |
Revenue |  | $ | 4,009 |  |  | $ | 6,805 |
Cost of sales |  |  | 2,883 |  |  |  | 4,803 |
Gross profit |  |  | 1,126 |  |  |  | 2,002 |
Research and development expenses, net |  |  | 235 |  |  |  | 341 |
Selling, general and administrative expenses |  |  | 737 |  |  |  | 1,394 |
Operating income |  |  | 154 |  |  |  | 267 |
Finance expense, net |  |  | (51 | ) |  |  | (89 | )
Income before income taxes |  |  | 103 |  |  |  | 178 |
Income tax expense |  |  | (12 | ) |  |  | (23 | )
Net income |  |  | 91 |  |  |  | 155 |
Acorn’s share in net income in DSIT |  | $ | 38 |  |  | $ | 63 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1497-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1490-128463 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1392-128463 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1486-128463 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4845-128472 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1524-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4922-128472 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4934-128472 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=73530397&loc=d3e4926-128472 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=73530397&loc=SL65897772-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65885119&loc=d3e1383-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 + Details
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