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ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

NOTE 2—ACCOUNTING POLICIES

Use of Estimates in Preparation of Financial Statements

The preparation of unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the unaudited condensed unaudited consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.

As applicable to these unaudited condensed consolidated financial statements, the most significant estimates and assumptions relate to uncertainties with respect to income taxes, inventories, account receivable allowances, contingencies, revenue recognition, management’s projections and analyses of the possible impairments.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade accounts receivable. The Company’s cash was deposited with a U.S. bank and amounted to $1,346,000 at March 31, 2023. The Company does not believe there is a significant risk of non-performance by these counterparties. For the three-month periods ended March 31, 2023 and 2022, there were no customers that represented greater than 10% of the Company’s total invoiced sales. Approximately 21% of the accounts receivable at March 31, 2023 was due from one customer who pays its receivables over usual credit periods. Approximately 12% of the accounts receivable at December 31, 2022 was due from one customer who pays its receivables over usual credit periods. As of May 9, 2023, we have collected 100% of the full outstanding amount of $160,000, in the aggregate, due from the one customer as of March 31, 2023. Credit risk with respect to the balance of trade receivables is generally diversified due to the number of entities comprising the Company’s customer base.

Inventory

Inventories are comprised of components (raw materials), work-in-process and finished goods, which are measured at net realizable value.

Raw materials inventory is generally comprised of radios, cables, antennas, and electrical components. Finished goods inventory consists of fully assembled systems ready for final shipment to the customer. Costs are determined at cost of acquisition on a weighted average basis and include all outside production and applicable shipping costs.

All inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conducted an assessment and wrote-off inventory carried at $3,000 for the three months ended March 31, 2023. There was no inventory write-off in the three months ended March 31, 2022.

Basic and Diluted Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the year, excluding treasury stock. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise of stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net loss per share if doing so would be antidilutive.

The combined number of options and warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was 1,035,000 (which had a weighted average exercise price of $0.41) and 964,000 (which had a weighted average exercise price of $0.40), respectively, for the three-month periods ending March 31, 2023 and 2022.

The following data represents the amounts used in computing EPS and the effect on net loss and the weighted average number of shares of dilutive potential common stock (in thousands):

	2023			2022
	Three months ended March 31,
	2023			2022
Net loss attributable to common stockholders	$	(85	)	$	(123	)

Weighted average shares outstanding:
-Basic		39,734			39,688
Add: Warrants		—			—
Add: Stock options		—			—
-Diluted		39,734			39,688

Basic and diluted net loss per share	$	0.00		$	0.00

Recently Adopted Accounting Standards

Other than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting standards during the three-month period ended March 31, 2023.

On January 1, 2023, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This guidance was issued to provide financial statement users with more useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. Specifically, this guidance requires entities to utilize a new “expected loss” model as it relates to trade and other receivables. The adoption of the standard impacts the way the Company estimates the allowance for doubtful accounts on its trade and other receivables. Refer to Note 4, “Allowance for Credit Losses,” for further information regarding the Company’s allowance for expected credit losses.

Recently Issued Accounting Standards

In March 2023, the FASB issued Accounting standards update No. 2016-13 (“ASU 2016-13”), which amends the application of ASU 2016-02, Leases (Topic 842), related to leases with entities under common control, also referred to as common control leases. The amendments to this update require an entity to consider the useful life of leasehold improvements associated with common control leases from the perspective of the common control group and amortize the leasehold improvements over the useful life of the assets to the common control group, instead of the term of the lease. Any remaining value for the leasehold improvement at the end of the lease would be adjusted through equity. The standard is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The adoption is not expected to have a material impact on the Company’s consolidated financial statements.