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June 2013 Connecting the world of energy The Digital Energy Company.

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Presentation on theme: "June 2013 Connecting the world of energy The Digital Energy Company."— Presentation transcript:

1 June 2013 Connecting the world of energy The Digital Energy Company

2 Confidential 2 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 Energys 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 Energys results of operations or financial condition review Acorn Energys filings with the Securities and Exchange Commission (in particular, its most recently filed Form 10-K and Form 10-Q). Acorn Energys 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.

3 Confidential 3 Leveraging digital technology vastly improves, protects energy infrastructure Controlling position in four energy tech portfolio companies with TAM 0f >$4 Billion History of getting macro bets right and generating attractive exits with modest capital Strong cash position of $20m in cash as of March 31, 2013 and debt-free The Digital Energy Company Why should you own Acorn Energy?

4 Confidential 4 Acorn History and Proven Track Record September August 2011 April COMV $250MM Valuation December $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

5 Confidential 5 Acorn Energy Portfolio 4 strong businesses Great customer traction Strong management teams Huge revenue growth expected ACFN majority owner We supply growth capital

6 Confidential 6 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

7 Confidential 7 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

8 Confidential 8 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 Q % 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

9 Confidential 9 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 Q % 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

10 Confidential 10 The 3D Seismic Imaging Revolution for Conventional Oil Predicts the Benefit of a 4D Seismic Revolution

11 Confidential 11 Evolution from 2D to 4D Seismic History and Future of Seismic

12 Confidential 12 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

13 Confidential 13 Oil Producers Need to Improve Productivity and NPV of Wells

14 Confidential 14 Solution: Revolutionary 4D Microseismic Monitoring

15 Confidential 15 Optical Fiber Sensor Electronic-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

16 Confidential 16 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 todays 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. …todays 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 new class 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 isnt 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. Seismics 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

17 Confidential 17 How Our Technology Works Laser Downhole Fiber Optic Geophone Array -High performance -Lower cost -More reliable Optical Interrogator

18 Confidential 18 How Microseismic Monitoring Works

19 Confidential 19 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 - TX New Iberia - LO

20 Confidential 20 Microseismic Needs a Higher Performance Sensor 10x 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

21 Confidential 21 Small Increase in Well Productivity Yields Huge Returns Two different services for unconventional oil producers Economics of 3D Vertical Seismic Profiling Current Situation Vertical well cost $1 million 30 fracs cost $9 million The Problem 20% of frac spend is effective= $2.8 million Upfront Investment: $500,000 to survey before fraccing Estimated savings by eliminating 50% unproductive frac stages= $3.1 million ROIC +600% Microseismic while fracking To Improve Yields: $400,000 per well x 8 = $3,200,000 Results: 10% improvement 20% improvement improvement

22 Confidential 22 Proven Fiber Optic Technology and Team Improves Odds of Success Revolutionary fiber sensor emerged from DOD -USSI CEO started and led team -Built, installed worlds 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

23 Confidential 23 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

24 Confidential 24 Income Statement (Q1 2013) Three months ended March 31, 2013 DSIT OmniMetri x GridSenseUSSIAcornTotal Revenues$3,315$533$1,543$325$$5,716 Cost of Sales 2, ,591 Gross profit1, (168) 2,125 Gross profit margin39%62%43%(52)%37% R& D expenses, net of credits ,001 Selling, general and administrative expenses 8361,1511, ,392 5,256 Operating income (loss) $197 $(943)$(1,147)$(1,847)$(1,392)$(5,132) Three months ended March 31, 2012 DSIT OmniMetri x GridSenseUSSIAcornTotal Revenues$3,041$103$918$121$$4,183 Cost of Sales 2, ,983 Gross profit1, (211) 1,200 Gross profit margin34%39%37%(174)%29% R& D expenses, net of credits ,318 Selling, general and administrative expenses , ,4614,229 Operating income (loss) $128 $(177)$(1,122)$(1,715)$(1,461)$(4,347)

25 Confidential 25 Income Statement

26 Confidential 26 Balance Sheet

27 Confidential 27 Cash Flows

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