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Acorn Energy Inc. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 10, 2010 04:43PM

Acorn Energy Inc. (ACFN) filed Quarterly Report for the period ended 2010-09-30. Acorn Energy Inc. has a market cap of $62.1 million; its shares were traded at around $3.97 with and P/S ratio of 2. Acorn Energy Inc. had an annual average earning growth of 34.6% over the past 5 years.

ACFN is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

On November 9, 2010, we entered into a letter of intent with Coreworx (the “Letter of Intent”) for us to sell all of our common stock in Coreworx to a management buyout group consisting of Coreworx management and certain employees and other investors. Under the terms of the Letter of Intent: Coreworx remaining indebtedness owed to us of approximately $5.4 million will be reduced by approximately $1.4 million to $4.0 million in consideration of Acorn receiving at closing 10% of the outstanding shares of common stock of Coreworx (“New Coreworx Shares”); we will receive at closing warrants to acquire that number of additional shares of common stock of Coreworx equal to the number of New Coreworx Shares; the debt of $4.0 million owed by Coreworx to Acorn (the “Coreworx Debt”) will be non-interest bearing, and the first payment will be due January 31, 2012; the Coreworx Debt will be repaid in an amount equal to 4% of Coreworx gross revenues commencing at the date of closing, and payments for the period commencing on the closing date through December 31, 2011 will be paid in 12 equal monthly installments starting on January 31, 2012 and on the last day of each of the following 11 months; the payments of the Coreworx Debt for revenue periods subsequent to Coreworx 2011 fiscal year will be payable on a quarterly basis within 45 days following the end of Coreworx fiscal quarter-end periods; following repayment of the Coreworx Debt, Coreworx will pay us a royalty fee (the “Royalty”) equal to 4% of Coreworx gross revenues up to a maximum amount of $20 million; the Royalty will be paid on a quarterly basis within 45 days following the end of Coreworx fiscal quarter-end periods; and Coreworx will pay us a restructuring fee of $40,000 on or before July 1, 2011.

Revenues of $14.8 million represent an increase of approximately $2.1 million or 16% in the first nine months of 2010 as compared to the first nine months of 2009. During the third quarter of 2009, revenue related jobs were re-scheduled to the fourth quarter of 2009, also causing corresponding shift in revenue between these periods. As a result, third quarter 2010 revenues of $5.5 million reflected an increase of $2.7 million or 94% compared to third quarter 2009 revenues of $2.8 million. Third quarter 2010 revenues also reflected a $0.6 million or 13% increase over second quarter 2010 revenues. CoaLogix expects fourth quarter revenues to increase further over third quarter revenues as the Steele Creek facility is operational for the full quarter significantly increasing capacity and as efficiency is increased following a debugging of production line start-up issues. In addition to directing its resources to processing modules for revenue, some of CoaLogix' processing resources were directed to processing its own inventory of modules which increased by approximately $1.0 million in the first nine months of 2010. CoaLogix processing of its own inventory of modules slowed during the third quarter as more plant capacity was utilized for revenue related projects.

In April 2009, we entered into an agreement with CoaLogix, EnerTech and certain members of CoaLogix senior management pursuant to which Acorn and EnerTech each agreed to invest $5.6 million, and certain members of CoaLogix senior management agreed to invest an aggregate of approximately $260,000, in CoaLogix. Through September 30, 2010, CoaLogix received the entire $11.5 million (including the $5.6 million from Acorn) investment commitment from Acorn, EnerTech and CoaLogix' senior management, including $5.9 million invested ($2.9 million by Acorn) in 2010. Proceeds of the investment were used by CoaLogix primarily for development of CoaLogix new Steele Creek facility, technology development, legal expenses and computer software.

DSIT reported significantly increased revenues in the first nine months of 2010 as compared to the first nine months of 2009 as well as significantly increased gross profit, gross margin and net income. DSIT's revenues of $8.6 million for the first nine months of 2010 represents an increase of approximately $2.1 million or 33% as compared to the first nine months of 2009. Third quarter 2010 revenues also reflected increases compared to third quarter 2009 revenues of $2.3 million ($0.9 million or 41%) and second quarter 2010 revenues ($0.4 million or 13%). The increase in revenues was primarily due to increased revenues in our Naval and RT Solutions segment which reported nine month 2010 revenues of $7.7 million compared to $5.5 million in the first nine months of 2009 and $2.9 million in the third quarter of 2010 compared to $1.9 million in the third quarter of 2009. The increase in revenues was primarily due to the revenues recorded from the $4.4 million AquaShield DDS order received at the end of 2009 as well as the revenues from the recently announced orders totaling more than $6 million received from an Asian country for its underwater sonar systems. The combined value of the contracts is more than $6 million.

In 2010, DSIT increased its net income to $1.2 million as compared to $0.7 million in the first nine months of 2009 (an increase of 76%) due to the increased gross profit ($1.2 million) which more than offset the increased general and administrative costs ($0.4 million) and income tax expense ($0.4 million).

In March 2010, we raised approximately $11.5 million (after transaction costs) in a registered direct offering. In the first nine months of 2009, we invested an additional $2.9 million in CoaLogix, expended $1.7 million in completing our acquisition of GridSense, increased our investment in USSI ($0.8 million in cash) and funded capital calls of $0.9 million from EnerTech. In addition, during the year of 2010, we provided approximately $6.5 million of working capital to Coreworx as well as approximately $1.8 million of working capital support to GridSense following our acquisition of GridSense.

Read the The complete Report



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