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Basis of Presentation and Liquidity
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Basis of Presentation and Liquidity

NOTE 1— BASIS OF PRESENTATION AND LIQUIDITY

 

The accompanying unaudited condensed consolidated financial statements of Acorn Energy, Inc. and its subsidiaries (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. 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 nine-month period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. All dollar amounts in the notes to the condensed consolidated financial statements are in thousands except for per share data.

 

Certain reclassifications have been made to the Company’s condensed consolidated financial statements for the nine month period ended September 30, 2016 to conform to the current period’s condensed consolidated financial statement presentation. 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, 2016.

 

The Company had $133 of non-escrow corporate cash and cash equivalents on September 30, 2017 and approximately $516 on November 8, 2017 following the receipt of $538 (a gross amount of $579 less $41 of withholding taxes) of escrowed funds from the 2016 sale of DSIT shares to Rafael Advanced Defense Systems Ltd. The Company has a commitment from directors that would allow it to borrow up to an additional $1,000 on or after July 7, 2017. Through September 30, 2017 and November 8, 2017, the Company borrowed $400 on this commitment. The remaining commitment amount of $600 would be reduced to the extent that other additional liquidity is provided to the Company in the form of loans from the directors or other lenders with a maturity date no earlier than April 2018, or from any net proceeds from the sale by the Company of any of its DSIT shares. Such cash, together with the reduced cash need from OmniMetrix, based on their expected continued growth as well as their increased credit availability (see below), is only expected to finance the Company’s operations into the second quarter of 2018.

 

In February 2016, OmniMetrix signed a Loan and Security Agreement (subsequently amended in October 2017) with a lender providing OmniMetrix with access to accounts receivable formula-based financing of up to $1,000. Debt incurred under this financing arrangement bears interest at the greater of prime (4.25% at September 30, 2017) plus 2% or 6% per year. In addition, OmniMetrix is required to pay a monthly service charge of 0.9% of the average aggregate principal amount outstanding for the prior month. Amounts available under the financing arrangement are based on 75% of all eligible invoices. OmniMetrix also agreed to maintain a minimum loan balance of $150 in its line-of-credit with the lender for a minimum of one year beginning November 1, 2017. OmniMetrix’s loan balance under the Loan and Security Agreement was $350 at September 30, 2017.

 

The Company currently does not have sufficient cash flow for the next twelve months from the date of this report due to the fact that loans from directors and balances due to DSIT are due on the earlier of April 30, 2018 or the sale of the Company’s investment in DSIT which is currently being pursued. The Company cannot at this time determine whether it will be successful in selling its investment in DSIT in a timely manner. As such, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.

 

If the Company is unsuccessful in selling its DSIT investment, additional liquidity will be necessary to finance its operating activities and the operations of its OmniMetrix subsidiary. The Company will need to pursue sources of funding, which may include loans from related and/or non-related parties, a sale, partial sale or finding a strategic partner for OmniMetrix or equity financings. There can be no assurance additional funding will be available at terms acceptable to the Company. In addition, there can be no assurance that the Company will be able to successfully utilize any of these possible sources to provide additional liquidity. If additional funding is not available in sufficient amounts, the Company will not be able to fund its corporate activities during the next twelve months, which could materially impact its ability to continue operations, and the Company may not be able to fund OmniMetrix as it has historically, which could materially impact its carrying value.