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Equity

12 Months Ended

Dec. 31, 2020

Equity [Abstract]

Equity

NOTE 9—EQUITY

(a) General

At December 31, 2020 the Company had issued and outstanding 39,687,589 shares of its common stock, par value $0.01 per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.

The Company is not authorized to issue preferred stock. Accordingly, no preferred stock is issued or outstanding.

(b) Rights Offering

On June 28, 2019, the Company completed a rights offering, raising approximately $2,184,000 in proceeds of which approximately $1,628,000 was from related parties, net of approximately $210,000 in expenses. Pursuant to the rights offering, Acorn securityholders and parties to a backstop agreement purchased 9,975,553 shares of Acorn common stock for $0.24 per share.

Under the terms of the rights offering, each right entitled securityholders as of June 3, 2019, the record date for the rights offering, to purchase 0.312 shares of Acorn common stock at a subscription price of $0.24 per whole share. No fractional shares were issued. The closing price of Acorn’s common stock on the record date of the rights offering was $0.2925. Distribution of the rights commenced on June 6, 2019 and were exercisable through June 24, 2019.

In connection with the rights offering, Acorn entered into a backstop agreement with certain of its directors and Leap Tide Capital Management LLC, the sole manager of which is Acorn’s President and CEO, pursuant to which they agreed to purchase from Acorn any and all unsubscribed shares of common stock in the rights offering, subject to the terms, conditions and limitations of the backstop agreement. The backstop purchasers did not receive any compensation or other consideration for entering into or consummating the backstop agreement.

On July 1, 2019, the Company utilized a portion of the rights offering proceeds to complete the planned reacquisition of a 19% interest in its OMX Holdings, Inc. subsidiary (“Holdings”) for $1,273,000, including accrued dividends. Holdings owns 100% of the membership interests of OmniMetrix, LLC. The purchase price was based on terms established in November 2015 at the time of the original investment. The purchase raised Acorn’s ownership in Holdings from 80% to 99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC. See Note 3 for further discussion.

The balance of the rights offering net proceeds provides OmniMetrix with additional sales and marketing resources to facilitate expansion into additional geographic markets and new product applications, to support next-generation product development and for general working capital purposes.

(c) Summary Employee Option Information

The Company’s stock option plans provide for the grant to officers, directors and other key employees of options to purchase shares of common stock. The purchase price may be paid in cash or at the end of the option term, if the option is “in-the-money”, it is automatically exercised “net”. In a net exercise of an option, the Company does not require a payment of the exercise price of the option from the optionee but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by the option exercised. Each option is exercisable to one share of the Company’s common stock. Most options expire within five to ten years from the date of the grant, and generally vest over three-year period from the date of the grant. At the annual meeting of stockholders on September 11, 2012, the Company’s stockholders approved an Amendment to the Company’s 2006 Stock Incentive Plan to increase the number of available shares by 1,000,000 and an Amendment to the Company’s 2006 Stock Option Plan for Non-Employee Directors to increase the number of available shares by 200,000. In February 2019, the Company’s Board extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December 31, 2024.

At December 31, 2020, 1,717,394 options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no options were available for grant under the 2006 Stock Option Plan for Non-Employee Directors. In 2020 and 2019, 230,000 and 227,500 options, respectively, were granted to directors, executive officers and employees. In 2020 and 2019, there were no grants to non-employees (other than the non-employee directors and executive officers). The fair value of the options issued was approximately $59,000 and $58,000 in 2020 and 2019, respectively.

96,250 options were exercised in the year ended December 31, 2020. No options were exercised in the year ended December 31, 2019. The intrinsic value of options outstanding and of options exercisable at December 31, 2020 was approximately $29,000 and $46,000, respectively.

The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective years (all in weighted averages):

		2020				2019
Risk-free interest rate			0.6	%			2.3	%
Expected term of options, in years			4.4				4.7
Expected annual volatility			115.2	%			118.7	%
Expected dividend yield			—	%			—	%
Determined weighted average grant date fair value per option		$	0.25			$	0.25

The expected term of the options is the length of time until the expected date of exercising the options. With respect to determining expected exercise behavior, the Company has grouped its option grants into certain groups in order to track exercise behavior and establish historical rates. The Company estimated volatility by considering historical stock volatility over the expected term of the option. The risk-free interest rates are based on the U.S. Treasury yields for a period consistent with the expected term. The Company expects no dividends to be paid. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in determining the estimated fair value of the Company’s stock options granted in the years ended December 31, 2020 and 2019. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

(d) Summary Option Information

A summary of the Company’s option plans as of December 31, 2020 and 2019, as well as changes during each of the years then ended, is presented below:

		2020								2019
		Number of Options (in shares)				Weighted Average Exercise Price				Number of Options (in shares)				Weighted Average Exercise Price
Outstanding at beginning of year			1,364,490				1.87				1,466,489			$	3.01
Granted at market price			230,000				0.36				227,500				0.31
Exercised			96,250				0.19				—				—
Forfeited or expired			775,739				2.80				(329,499	)			5.86
Outstanding at end of year			722,501				0.62				1,364,490				1.87
Exercisable at end of year			429,833				0.81				1,190,156			$	2.10

Summary information regarding the options outstanding and exercisable at December 31, 2020 is as follows:

		Outstanding												Exercisable
Range of Exercise Prices		Number Outstanding				Weighted Average Remaining Contractual Life				Weighted Average Exercise Price				Number Exercisable				Weighted Average Exercise Price
		(in shares)				(in years)								(in shares)
$0.14 – $0.41			611,250				5.13			$	0.33				318,582			$	0.32
$1.68			70,996				.73			$	1.68				70,996			$	1.68
$2.49			24,000				.32			$	2.49				24,000			$	2.49
$4.07			16,255				—			$	4.07				16,255			$	4.07
			722,501												429,833

Stock-based compensation expense included in selling, general and administrative expense in the Company’s Consolidated Statements of Operations was approximately $35,000 and $22,000 in the years ending December 31, 2020 and 2019, respectively.

The total compensation cost related to non-vested awards not yet recognized was approximately 61,000 as of December 31, 2020.

(e) Warrants

The Company has issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows:

		2020								2019
		Number of shares underlying warrants				Weighted Average Exercise Price				Number of shares underlying warrants				Weighted Average Exercise Price
Outstanding at beginning of year			2,177,857				1.28				2,392,142			$	1.28
Granted			—				—				—				—
Exercised			—				—				—				—
Forfeited or expired			2,142,857				1.30				(214,285	)			1.26
Outstanding and exercisable at end of year			35,000				0.13				2,177,857			$	1.28

The warrants outstanding at December 31, 2020 have a weighted average remaining contractual life of approximately 26.5 months.