June 2013
Connecting the world of energy
The Digital Energy Company
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Safe Harbor Statement
Certain of the matters discussed in this presentation contains statements that are forward-looking, such as statements relating to results of operations, financial condition, business development activities and market dynamics. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made on or behalf of Acorn Energy.
All statements other than statements of historical fact in this presentation regarding Acorn Energy’s future performance, revenues, margins, market share and any future events or prospects are forward-looking statements.
For more information regarding risks and uncertainties that could affect Acorn Energy’s results of operations or financial condition review Acorn Energy’s filings with the Securities and Exchange Commission (in particular, it’s most recently filed Form 10-K and Form 10-Q).
Acorn Energy’s forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material.
Acorn Energy undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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The Digital Energy Company
Why should you own Acorn Energy?
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Acorn History and Proven Track Record
September 2005 2007 August 2011
• April COMV IPO @ $250MM Valuation
• December Secondary @ $600MM Valuation
• Buy CoaLogix $10 M
• Sell CoaLogix $100 M
$16 million net of dividends raised to create $140 million of value
• $10MM Market Cap
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Acorn Energy Portfolio
• 4 strong businesses
• Great customer traction
• Strong management teams
• Huge revenue growth expected
• ACFN majority owner• We supply growth capital
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Highlights• Seven reference clients• Non-dilutive funding
Market Drivers• Global insecurity
• Secure infrastructure
• New tech needed
Financial Snapshot
• $13.6M Rev 2012• $9.6M in backlog • 37% Gross Margin • 84% Ownership Stake
TAM $3.5 B+
• 3,500 energy facilities on/near water
Sensing technologies to detect and alert security teams to the presence of U-W threats to critical energy infrastructure
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• Over 1500 American Tower sites monitored by Omnimetrix, all operated with 100% uptime• Unmonitored generators fail 10% of the time called on• FCC is holding hearings to improve power assurance for cell towers• 220,000 cell towers in USA
Remote monitoring solutions for back-power as well as pipelines
* Pre- management option pool
During Hurricane Sandy 25% of all Cell Towers were without power
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Highlights• Lowering costs• Increasing features• Recruited sales force
Market Drivers• Cell tower power
assurance • Dependence on
wireless• Aging grid
Financial Snapshot
• $661k Rev 2012
• $533k Rev Q1 2013
• 96% gross margin on renewals
• 100% ownership*
TAM $1B+
• Over 2M permanently-installed back-up generators (50:50 residential/C&I)• < 2% generators monitored• < 2% households have generator• 75% growth in connections and >5,000 monitors
Remote monitoring solutions for back-power as well as pipelines
* Pre- management option pool
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Highlights• Pilots with 46 utilities• Alain Steven on board• Web-based platform
Market Drivers• Demand for reliable
power/ 4 challenges• Aging grid• Power theft• Cyber security• Renewables
Financial Snapshot
• $3.7M Rev in 2012
• $1.5M Rev in Q1 2013
• 43% Gross Margin
• 100% ownership*
TAM $1B+
• 30M U.S. transformers (sensor locations)• Less than 2% transformers have sensors• >400 utility customers worldwide
Cost-effective sensors for transformers and power lines (easy retrofit) to help utilities improve electric grid
* 17% phantom option plan
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The 3D Seismic Imaging Revolution for Conventional Oil Predicts the Benefit of a 4D Seismic Revolution
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Evolution from 2D to 4D Seismic
History and Future of Seismic
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Unconventional Oil Frac Jobs Are Not Meeting Producers Expectations
“
- 50% of frac stages produce zero hydrocarbons
- 20% of frac stages responsible for 80% of production
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Oil Producers Need to Improve Productivity and NPV of Wells
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Solution: Revolutionary 4D Microseismic Monitoring
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Optical Fiber SensorElectronic-based Sensors
Replace This… With This
“..the industry is on the verge of a step change in well and reservoir monitoring capability”-Jorge Lopez et al, Shell Oil
Optical Fibers: The Neurons For Future Intelligent Wells
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Forbes: Big Data And Microseismic Imaging Will Accelerate The Smart Drilling Oil And Gas Revolution*
This (USSI) imaging technology does for seismic the equivalent of going from 20th century x-rays to 21st century MRI.
Microseismic brings radically enhanced navigation and, critically, the opportunity for a new era of dynamically controlled subsurface operations
…getting the stages to be productive can only come from far more precision and far higher resolution of the underground domain… Operators need to move from today’s static and episodic geophysics maps to dynamic models of how rocks and fluids change.
You need to see the micro-fractures from the real-time results of the fracking itself. Hearing the millimeter-scale cracks forming complex arrays in shale a mile away, then separating out the signals from confounding environmental noise is like hearing a whisper from the other side of a noisy auditorium. All of these “micro” events are not detectable with standard seismic.
…today’s best-in-class geophones cannot fully unlock the potential of microseismic. The sensors need to see (hear) signals at 100 times the bandwidth, and be at least 100 times more sensitive (quieter). And, in an ideal world - which eventually becomes the standard operating procedure - imaging has to move from snap-shots to continuous real-time monitoring…This will require a newclass of sensors both cheap and robust enough to survive for long periods, even permanently in the hot underground. Conventional electronics cannot deliver that combination.
Making practical fiber optic geophones has been devilishly difficult. The issue isn’t in the physics ... The challenge has been to come up with a design that is simple, easy to manufacture, yielding a highly reliable and reproducible product.
…the revolution really takes hold as the full power of U.S. Seismic’s richer data streams enable the emergence of better algorithms and…models that accommodate the complex mix of both plastic and brittle behavior of rocks in the subsurface…where correlations become possible now across the entire suite of hydrocarbon information - surface survey maps, drill-bit sensors, flow rates, pressures, temperatures, chemical analyses, etc. There is no chicken-egg uncertainty in which comes first; better and richer data flows will drive the emergence of new big data analytics.
Microseismic capabilities are not only economically exciting, they promise collateral opportunity for greater safety and environmental monitoring
* Mark Mills for Forbes. May 2013
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How Our Technology Works
Laser
Downhole Fiber OpticGeophone Array
-High performance-Lower cost-More reliable
Optical Interrogator
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How Microseismic Monitoring Works
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USSI Gaining Critical Field Experience
● Seven pilot trials two years● First commercial trial, big system December 25, 2012● Soon to announce major customer trial results
USSI Geophone
Electronic Geophone
Well Head
Fayetteville - ARK Devine - TXNew Iberia - LO
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Microseismic Needs a Higher Performance Sensor10x Better at Low Frequency-100x at High Frequency
US DOE Lawrence Berkeley National Laboratory (LBNL) Richmond Field test site
- highest sensitivity (improved signal to noise ratio) - lowest noise floor (detects quieter signals)- widest bandwidth (detects all signals of interest) - highest temperature capable
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Small Increase in Well Productivity Yields Huge ReturnsTwo different services for unconventional oil producers
Economics of 3D Vertical Seismic ProfilingCurrent SituationVertical well cost $1 million30 fracs cost $9 million
The Problem20% of frac spend is effective= $2.8 million
Upfront Investment:$500,000 to survey before fraccingEstimated savings by eliminating 50% unproductive frac stages= $3.1 million
ROIC +600%
Microseismic while frackingTo Improve Yields:$400,000 per well x 8 = $3,200,000
Results:-$33M @ 10% improvement-$65M @ 20% improvement-$100M @30% improvement
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Proven Fiber Optic Technology and TeamImproves Odds of Success
• Revolutionary fiber sensor emerged from DOD -USSI CEO started and led team-Built, installed world’s largest fiber sensor system-Key members of team now at USSI
• USSI commercialized technology
•USSI expanded IP• 7 issued and 17 patents filed
•USSI licensed DOD technology• 4 issued patents
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Acorn Energy Directors and Management Team
- Chris Clouser, Chairman
- John Moore, CEO
- Richard Rimer, Executive Vice President
- Rob McKee, Director
- Mannie Jackson, Director
- Ed Woolard, Advisor
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Income Statement (Q1 2013)
Three months ended March 31, 2013
DSITOmniMet
rixGridSense USSI Acorn Total
Revenues $ 3,315 $ 533 $ 1,543 $ 325 $ — $ 5,716
Cost of Sales 2,011 205 882 493 — 3,591
Gross profit 1,304 328 661 (168 ) — 2,125 Gross profit margin 39 % 62 % 43 % (52 )% 37 %
R& D expenses, net of credits
271 120 712 898 — 2,001
Selling, general and administrative expenses
836 1,151 1,096 781 1,392 5,256
Operating income (loss) $ 197
$ (943 ) $ (1,147 ) $ (1,847 ) $ (1,392 ) $ (5,132 )
Three months ended March 31, 2012
DSITOmniMet
rixGridSense USSI Acorn Total
Revenues $ 3,041 $ 103 $ 918 $ 121 $ — $ 4,183
Cost of Sales 2,014 63 574 332 — 2,983
Gross profit 1,027 40 344 (211 ) — 1,200 Gross profit margin 34 % 39 % 37 % (174 )% 29 %
R& D expenses, net of credits
176 16 218 908 — 1,318
Selling, general and administrative expenses
723 201 1,248 596 1,461 4,229
Operating income (loss) $ 128
$ (177 ) $ (1,122 ) $ (1,715 ) $ (1,461 ) $ (4,347 )
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Income Statement2012 2011
Revenues:
Projects $ 14,651 $ 11,368 Products 3,880 7,049
Services 888 511
Total revenues 19,419 18,928
Cost of sales:
Projects 10,749 7,886
Products 2,996 3,730
Services 471 399
Total cost of sales 14,216 12,015
Gross profit 5,203 6,913
Operating expenses:
Research and development expenses, net 6,590 2,995
Selling, general and administrative expenses 19,361 11,952
Total operating expenses 25,951 14,947
Operating loss (20,748) (8,034)
Finance expense, net 57 (26)
Gain on sale of HangXing - 492
Loss before taxes on income (20,691) (7,568)
Income tax benefit (expense) 2,956 12,767
Net income (loss) from continuing operations (17,735) 5,199
Loss from discontinued operations, net of income taxes - (1,948)
Gain on the sale of discontinued operations, net of income taxes - 31,069
Non-controlling interest share of loss from discontinued operations - 540
Net income (loss) (17,735) 34,860
Net loss attributable to non-controlling interests 1,024 549
Net income (loss) attributable to Acorn Energy, Inc. shareholders $ (16,711) $ 35,409
Basic net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
From continuing operations $ (0.93) $ 0.33
From discontinued operations $ - $ 1.70
Basic net income (loss) per share attributable to Acorn Energy, Inc. shareholders $ (0.93) $ 2.03
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic 17,891 17,462
Diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
From continuing operations $ (0.93) $ 0.32
From discontinued operations $ - $ 1.67
Diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders $ (0.93) $ 1.99
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – diluted 17,891 17,743
Dividends declared per common share $ 0.140 $ 0.085
Year ended December 31,
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Balance Sheet2012 2011
LIABILITIES AND EQUITYCurrent liabilities:Short-term bank credit and current maturities of long-term debt
$ 153 $ 677
Accounts payable 2,631 2,052 Accrued payroll, payroll taxes and social 2,420 1,907 Deferred revenue 3,323 2,876 Other current liabilities 1,708 4,544
Total current liabilities 10,235 12,056
Non-current liabilities:
Accrued severance 4,491 3,837 Long-term debt - 141 Other long-term liabilities 665 204
Total non-current liabilities 5,156 4,182
Commitments and contingencies
Equity:Acorn Energy, Inc. shareholdersCommon stock - $0.01 par value per share:Authorized – 30,000,000 shares; Issued –18,870,526 and 18,325,529 shares at December 31, 2012 and 2011, respectively
188 183
Additional paid-in capital 83,469 84,614 Warrants 55 427 Accumulated deficit (29,733) (13,022)Treasury stock, at cost – 801,920 shares at December 31, 2012 and 2011
(3,036) (3,036)
Accumulated other comprehensive income 716 485
Total Acorn Energy, Inc. shareholders’ equity 51,659 69,651
Non-controlling interests 286 (84)
Total equity 51,945 69,567
Total liabilities and equity $ 67,336 $ 85,805
As of December 31,
2012 2011
ASSETSCurrent assets:Cash and cash equivalents $ 26,147 $ 34,280 Short-term deposits - 18,000 Restricted deposit 699 2,223 Funds held in escrow - 5,961 Accounts receivable 5,481 4,965 Unbilled revenue 5,213 3,778 Inventory 5,106 2,144 Other current assets 3,547 922
Total current assets 46,193 72,273
Property and equipment, net 927 635
Severance assets 3,165 2,620 Restricted deposit 115 271 Intangible assets, net 9,561 4,780 Goodwill 6,630 4,637 Other assets 745 589
Total assets $ 67,336 $ 85,805
As of December 31,
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Cash Flows2012 2011
Cash flows used in operating activities:
Net income (loss) before non-controlling interests $ (17,735) $ 34,320 Less net loss from discontinued operations - (29,121)
Net income (loss) from continuing operations (17,735) 5,199
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization 1,406 851 Change in deferred taxes (1,832) (14,657)Inventory write-off 357 - Increase in liability for accrued severance 573 390 Gain on sale of HangXing - (492)Stock and stock option compensation 855 458 Other 15 (87) Changes in operating assets and liabilities:Decrease in accounts receivable, unbilled revenue, other current assets and other assets (3,981) (89)Increase in inventory (3,076) (1,027)Increase in accounts payable, accrued payroll, payroll taxes and social benefits, other current liabilities and other non-current liabilities 1,175 1,615
Net cash used in operating activities – continuing operations (22,243) (7,839)
Cash flows provided by (used in) investing activities:Acquisitions of property and equipment (684) (502)Acquisition of license (150) - Restricted deposits, net 1,680 (1,091)Advances to CoaLogix prior to sale - (278)Amounts funded for severance assets (476) (315)Proceeds from the sale of Coreworx debt and shares - 100 Proceeds from the sale of CoaLogix net of CoaLogix cash - 62,117 Proceeds from the sale of HangXing - 492 Escrow deposits from CoaLogix sale - (6,308)Release of escrow deposits 5,961 347 Short-term deposits, net 18,000 (18,000)Acquisition of OmniMetrix net of cash acquired (7,835) -
Net cash provided by investing activities – continuing operations 16,496 36,562
Cash flows provided by (used in) financing activities:
Proceeds from employee stock option and warrant exercises 1,355 211 Short-term bank credit, net (510) (557)Proceeds from borrowings of long-term debt 16 68 Repayments of long-term debt (173) (342)Dividends paid (3,208) (613)Other - 30
Net cash used in financing activities – continuing operations (2,520) (1,203)
Net cash used in discontinued operations - (524)
Effect of exchange rate changes on cash and cash equivalents 134 (72)
Net increase (decrease) in cash and cash equivalents (8,133) 26,924
Cash and cash equivalents at beginning of the year of discontinued operations - 807 Cash and cash equivalents at beginning of year of continuing operations 34,280 6,549
Cash and cash equivalents at end of year $ 26,147 $ 34,280
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