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Investment in Dsit Solutions, Ltd. ('DSIT')

3 Months Ended

Mar. 31, 2017

Investment In Dsit Solutions Ltd. Dsit

Investment in Dsit Solutions, Ltd. ('DSIT')

NOTE 3—INVESTMENT IN DSIT SOLUTIONS, LTD. (“DSIT”)

On April 21, 2016, the Company closed on a transaction (the “DSIT Transaction”) for the sale of a portion of its interests DSIT Solutions, Ltd. business to Rafael Advanced Defense Systems Ltd., a major Israeli defense company. 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, the Company no longer consolidates the results of DSIT, but rather accounts for its investment in DSIT under the equity method. DSIT’s results and the Company’s share of its net income for the three months ended March 31, 2017 can be seen below:

	Three months ending March 31, 2017

Revenue	$	4,061
Cost of sales		2,766
Gross profit		1,295
Research and development expenses, net		243
Selling, general and administrative expenses		953
Operating income		99
Finance income, net		8
Income before income taxes		107
Income tax expense		(21	)
Net income	$	86

Acorn’s share of net income in DSIT	$	36

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

	March 31, 2017		December 31, 2016
Current assets:
Cash and cash equivalents	$	3,484	$	1,047
Restricted deposits		984		2,648
Accounts receivable, net		2,172		2,825
Unbilled revenue		4,043		4,918
Inventory		386		481
Other current assets		938		795
Total current assets		12,007		12,714
Property and equipment, net		609		569
Severance assets		4,256		3,915
Restricted deposits		65		646
Due from Acorn		1,241		1,171
Other assets		287		339
Total assets	$	18,465	$	19,354

Current liabilities:
Short-term bank credit and current maturities of long-term bank debt	$	546	$	1,239
Accounts payable		1,201		1,461
Accrued payroll, payroll taxes and social benefits		1,261		1,142
Deferred revenue		361		431
Other current liabilities		2,223		2,736
Total current liabilities		5,592		7,009
Accrued severance		5,810		5,374
Other non-current liabilities		16		9
Total liabilities	$	11,418	$	12,392

The Due from Acorn balance at March 31, 2017 is comprised of a loan of $340 from DSIT and unreimbursed expenses of $672, both of which accrue interest at 3.15% per annum. Such balances are due the earlier of April 30, 2018 or the sale of Acorn’s remaining shares in DSIT. In addition to the above balances, the Due from Acorn balance also includes $229 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 month period ending March 31, 2016 can be seen below:

	Three months ending March 31, 2016

Revenue	$	3,920
Cost of sales		2,714
Gross profit		1,206
Research and development expenses, net		288
Selling, general and administrative expenses		857
Operating income		61
Finance expense, net		(14	)
Income before income taxes		47
Income tax expense		(8	)
Net income		39
Net income attributable to non-controlling interests		(6	)
Net income attributable to Acorn Energy Inc.	$	33