Good morning and welcome to the Acorn Energy Fourth Quarter 2013 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today’s presentation there will be an opportunity to ask questions. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Ms. Heather Mallard, General Counsel. Please go ahead.

Thank you and good morning everyone. Please take note that 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 involve important risks and uncertainties that can significantly affect anticipated results in the future and accordingly such results may differ materially from those expressed in any forward-looking statements made by or on behalf of Acorn Energy or its subsidiaries. All statements other than statements of historical facts in this presentation regarding Acorn Energy or any of its subsidiaries, future performance, revenues, margins, market share and any future events or prospects are forward-looking statements. For more information regarding risks and uncertainties that can affect Acorn Energy or any of its subsidiary's results operations or financial conditions please review Acorn Energy’s filings with the Securities and Exchange Commission, in particular the 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 may be different due to 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. I will now turn the presentation over to John Moore, President and CEO of Acorn Energy.

Good morning and welcome to the Acorn Energy 2013 fourth quarter conference call. In 2013, we invested $17.8 million in cash in Acorn’s four companies as well as our corporate overhead. As a result of this investment we now have three businesses that need minimal working capital support and have terrific growth prospects. In 2014, only U.S. Seismic will require equity capital. We reduced current company overhead by 35% so that our 2014 corporate costs should run less than $3 million. Our plan for 2014 is to invest a total of $4.7 million in U.S. Seismic and as needed provide working capital loans to the other companies with the expectation that we will be repaid by the end of 2014. So our $15.8 million of cash is anticipated to meet to our expected needs for the foreseeable future. Each of Acorn’s business addresses a major macro trend. Now is when the money and time we’ve invested will pay off at DSIT, GridSense, and OmniMetrix. Joe Musanti, our new Chief Operating Officer of Acorn is doing a great job in cutting costs and growing revenue at GridSense and OmniMetrix. We believe they’re headed in the right direction and that with minimal capital support in 2014 they will continue growing. The growth of our backlog from $7.2 million at the end of the third quarter to $18.5 million at the end of the fourth quarter is a good indication of the pickup in our business. This trend has continued in the first quarter, especially in GridSense and OmniMetrix. I would like to discuss the portfolio of company's one by one beginning with U.S. Seismic and at the end discussing the three that are on the way to independence. First I would like to address questions, why it’s taking so long to commercialize…

Thank you. (Operator Instructions).

So I know that Charlie Sloane has questions for us. Charlie are you on the line? This is going to be our first.

Showing no questions in the queue I'd like to turn the conference back over to John Moore for any closing remarks.

Well, I want to thank our investors for their patience. We’re all working hard on execution. I’m spending a lot less time on Investor Relations than I've ever spent before. And I think we have the right team in each company to execute and meet our plans and looking forward to lots of success in the future. So thank you so much for our patient investors. We’ve got over 50 investors on the call today and we’re grateful for everybody’s time and attention. Jim McIlree just sent me a note saying that there are questions in the queue and that they are not being recognized. So this must be a Chorus Call issue.

My apologies, I do have a question queue open. (Operator Instructions).

Let Jim McIlree ask the first question since he saved the day there and I would have been getting a lot of heat if we hadn’t taken and answered the questions.

And our first question is from James McIlree with Chardan Capital. Go ahead sir. Mr. McIlree you’ve been promoted to the question queue. It appears as though he’s removed himself from the queue.

Okay, well we know that Bill Bremer is on the line, he just sent me an email. He’s in line.

Very good. Yes, he is, one moment please. Mr. Bremer, you have been promoted to the podium.

Can you hear me John?

I can, I can. Welcome Bill.

Success, wow, all right. Can we just get an update on USSI, with the super major the one that we’ve been speaking about all long, I know there has been some deferrals in terms of picking on an appropriate site, some order issues, can you just go through it and I know it’s slated now I believe for the second half of ’14, has the site been picked out at this point, give us an update on that? And then let's follow that up with the relative to the 4G reservoir that you spoke about in California, that technology.

Great, Bill thanks for asking that question. I’d like to hand that over to Jim Anderson, Jim would you mind taking that question?

Sure, sure. Yes so with the super major, as John noted in the comments leading into this, that we won that shootout, received an order for $2 million for two arrays. And this is for a full scale, high temperature frac monitoring job in the Eagle Ford. It has moved out, initially this was scheduled for, I’ll say April-May timeframe, but some service contractor brought on board to by the super major and these service company has asked for certain things be added to our system, such as longer cables, revised clamps, things like that. We implemented those changes that were asked for by the service company and now that test is scheduled, we’re going to deliver the equipment in June and the testing is going to start right after the 4th of July, first week in July.

Okay, all right, that’s good to hear and then the update on the enhanced technology, sort of geared for…

Yeah, I think that’s really a big deal because I think most people think California and oil are kind of not that important, but in reality this Monterey shale which is a big oilfield in California is about 1,700 square miles and it’s been rated at over 15 billion barrels of we call it reserves so it’s really the most prolific shale field in the entire United States. And a lot of it is in this material called diatomite. It's kind of like a fossil, plants and things like that, that are very porous, almost like a sponge but there -- where a lot of oil gets trapped in it, but it doesn't flow because it's not like a sponge where stuff flows in between, if the oil gets trapped in there. So it has to be fractured to be removed. And so we just started a -- we installed a permanent monitoring array in one of these diatomite fields and it's undergoing a three month trial. And it's really is a high visibility trial, as John was mentioning in the opening comments in that the -- I think the whole California legislation, all that would like to see more oil production but there is a lot of safety regulations and things they want to implement to make sure it's produced safely. So there has been regulations have come out, that are requiring monitoring, starting as John said in 2015. And so the industry is kind of scrambling on how they are to perform this monitoring and that's the purpose of this test that we are in for a three month monitoring job because the current technology, tiltmeters and temperature sensors and conventional technology just hasn't been able to give them what they are looking for. So this a side-by-side comparison with the conventional technology and a three month evaluation and we have just as John said the regulators, the major oil companies and other operators, all watching because they really need a solution. And it's -- and the technology gets picked for this it's a gigantic opportunity, just realizing it's probably the biggest shale field in the U.S. and I think [inaudible] said it's three times the size of the Bakken which is a huge field that’s driving all that oil production in the South Dakota, Montana area. So we're really pleased with the opportunity.

Right. Jim just the 4.7 million that John specified in terms of CapEx for 2014, does that include this opportunity as well, getting it ready for 2015?

Yes. One of things, like I was saying is that we went out there and the beauty is that in the last year, every time we've gone out, we put the system in the well, there is no question the clients believe the performance is outstanding. So our systems do work and work well and provide much higher definition than previous technologies. But they also come back and said we like -- we would like some improvements to it, some improvements to how we clamp it in the well and we have always not taken any development money from our clients, such that we could own the intellectual property. So we have orders but we go back and if there is some modifications that we need to make to our system, we have historically done that on our own dollar. So that it's clear that we own the intellectual property at the end. So all that $4.7 million is a lot of that I'd guess I'd say is paying for this development of these peripheral equipment that our clients are asking for and making improvements over conventional technology and all on our own investment.

Okay. Let's move to a GridSense now, John.

Okay.

Congratulations on the orders. Five different utilities some small, some large, the bulk I believe if I am reading this correctly is from Australia, is that correct?

That is correct.

Okay. And GridSense now seems to -- can you give us a sense -- it feels that you have turned the corner there and have a real strategic plan for 2014?

Yeah, I think that the previous year GridSense had a great vision but I think that we what Joe brings to the story was an ability to be able to focus. You know we got 50 pilot programs now up from 40 at the beginning of the year but what Joe has done is he has focused this around, you know the ten most promising most near term opportunities and we saw one major deployment last year, which is a Southeast Asian opportunity and they really took up a lot of our development time. On the first quarter call in about three weeks we’ll be talking about another major deployment that we have landed in Pennsylvania for the Line IQ, which is a smart switching program and so -- Jim, Joe I don't know if there’s anything you want to add to that but I think that the company is on the right track and I think could be terrific growth company for us.

Yeah, I think the only thing I would add that as far as the path going forward is the addition of Brett Sargent to the team, who has extensive experience in the electricity grid and understands the product and the customers. So from the growth perspective we are looking at him to sort of take us to the next level from the sales and marketing and from the engineering side.

And one of the things that Bret points out -- Bret background was at GE, what he points out is that we really haven’t had a chance to grow that fast because there wasn’t really communication networks in the electric grid. Now that there has been this big build out of smart meters and all the different communication systems on the grid, now all these utilities are sort of saying how else can we amortize the investment in the communication system, while it’s monitoring the pole top transformers and the small wall transformer. So there is so much of this CleanTech business is about surviving until the world comes your way and once does that’s when you see a lot of growth and that’s when the strategic start getting extremely interested and so as we go from these sort of $100,000 pilots to million dollar deployments, you know we are working on some big $20 million and $30 million programs that’s when the GE, [Meatball] or Schneider ABB come along and say if these guys can get five major deployments we can get 500. We want to own that space. So it’s been a patient time for our investors as we put money into this company but Joe has got it to the point where it’s really not consuming anything other than occasional working capital loans.

Okay gentlemen. Thank you.

Thank you, Bill.

Our next question is from James McIlree with Chardan Capital. Go ahead please.

Yeah, thanks and sorry about that earlier, John.

No problem, Jim. Thanks for being on the call.

Can you walk me through the cash flow for the year? I am not exactly sure I am understanding how you are looking at the cash. First of all you said I thought you said $15 million give or take of cash?

Yeah we ended…

Is that end of day balance or is that -- am I looking at the balance sheet?

Michael Barth, you correct me if I am wrong, but our ending cash balance as of December 31st was $15.8 million and we’re just sort of giving you some perspective on where we are going to be spending that money. We feel less than $3 million will be spent on SG&A at the parent company level and $4.7 million will be spent on US Seismic.

And the other $3 million that would be cash flow breakeven or slightly positive you know right around breakeven, let's call it?

Yeah and one of the things that we have said just to give you a little bit more clarity, we expect to loan OmniMetrix $0.5 million this year, you know it will pass the money back in the current calendar year but they are going to have some pretty substantial growth this year. GridSense we expect that we will lend them up to $750,000 and it will be paid back before the end of the year and DSIT again is going to be I think entirely self-sufficient as they normally are.

And what kind of revenue do you need out of U.S. Seismic in order to hit that -- in order to only have advanced them $4.5 million or $5 million?

That is an easy question to answer because we had a substantial negative gross margin in the past. As we look at those, we look at U.S. Seismic as pretty much as a development stage business and what we expect is that there will be marginal gross margin this year. So we’re not really counting on, we do have a revenue number in our mind that we want to accomplish because of the number of deployments but it's not a big contributor to gross margin. I think it’s like somewhere between 5% and 15% gross margin this year, but that’s really going to be dependent upon, Jim continuing to actually commercialize the Interrogator which I should mention we’ve gotten -- we’ve done the optical, the software and the hardware integration and we’re now in the process of field testing. So that’s going to be a huge driver of our ability to be able to generate gross margin at U.S. Seismic.

All right, so I just want to make sure I got it correctly here. So your current U.S. Seismic or the 2013 U.S. Seismic cash outflow was a function of both native gross margin as well as the operating expenses and then even if you have lower operating expenses and similar revenue this year you’re going to have a much lower cash outflow simply because your gross margins will be positive?

Yes that’s correct. That’s -- now I’ll let Joe and Michael Barth and Jim, if you feel there is any correction or modification then please get in.

No, I think you hit it, it's Joe.

Okay and then I'm a little bit confused about the SR 2020 timeline, there is a test on another observation well first and then you go to a producing well or you’ve completed the observation testing and now you’re going to producing?

Jim can you give color on that?

Sure, yes so we have a couple of jobs lined up through SR 2020 over the next I'm going to say two months, 2.5 months. And what we want to do is we want to go to a well near us and actually our team is going to be leaving at the end of this week and do a final shakedown test of the whole 40 level system in a well, within maybe I'm going to say an hour and half from our facility and we’re going out there to prove our equipment and make sure it all works well before we get these actual frac jobs in Oklahoma and Permian basin. But there is also this client wanted to see our equipment in their well. So they are providing this well for us because we may have additional opportunities with them. So that test is probably going to happen starting this weekend, run maybe four or five days and then we’re expecting everything to work out well and then we’d be heading to the first monitoring job in Oklahoma with that job starting right around 7th I think of April.

And with all those dates being asked of us, these little companies can change things but we believe that us monitoring a frac jobs, somebody actually letting us do that with our tool and then proving they can improve the amount of oil they get out of the ground, we think that’s the big inflection, a big inflection point for a company and then I think there are other ones but in fact nobody wants to be first. So if you can get somebody to be first, everybody wants to be first, to be second.

Okay great, and so if I understand it correctly then the big super major deployments or test is let's call April or May and then if everything comes up great then you get second half orders from them, that sets our 2020 thing also in my result second half orders, additional orders from them if I'm getting it right. And then there are a few other things that you’re working on, but those are the two real near term order items and that’s they are both likely second half.

Yeah why don’t you go ahead Jim and answer that.

Yeah, correct.

No I just want to I guess we stated a little earlier that the actual super major test was originally scheduled for May we are going to deliver now the system in June and they are going to install in the first week in July.

Okay.

So that's what's going on with the super major. But over the next two to four months we have monitoring projects lined up in the Woodford Shale, which we talked about in Oklahoma which is right now planned for the seventh, Permian Basin following that. We have a project lined up in the Barnett Shale there is another frac monitoring job. All of those that I just mentioned are through SR2020. And then like the super major of that project is in the Eagle Ford which is a high temperature shale field, like that would be in July and then we have that permanent monitoring project in the diatomite which we have everybody in the industry looking at and that's going to run three months. But all these things like I said are geared towards putting the foundation for future orders in the second half of the year.

Yeah I'd -- to hitchhike on that I'd not expect much revenue out of this out of U.S Seismic in the first half?

Yeah, exactly.

Okay. That's very helpful, I appreciate it. Good luck with everything.

Thank you, Jim

Our next question is from [Ted Lou][ph] with BFG. Go ahead, please.

Hi, good morning. Just to give you some possible color in the Monterey and California my understanding is a lot of the geology is overstressed which results in vertical columns where you can drill a vertical well, get the equivalent of a horizontal well production and with the diatomite rock you are going to need various kinds of fracking exercises to optimize it and as everyone probably knows it took George Mitchell 20 to 30 years to figure out how to frac the Barnett Shale. So your system with USSI ought to be able to help the companies drilling under the Monterey to figure the best way to break-up the diatomite to get maximum production. And if I am off base Jim I am sorry.

No, that's correct. Yes.

That's great I think the other color on that Ted is that even though the Monterey Shale is probably the widest shale, I mean it's like a caisson like it's 1,800 feet wide,

It's vertical, John. It's been over stressed into a vertical column so they can drill a vertical well.

Interesting.

As if you would have to go horizontal in most shale deposits.

And also it's complex, they are still figuring it out but there is apparently the frac fluid that they are using Ted is acid which of course saying the word acid, the [Sierra] club is up in arms and naturally one of the biggest reasons why California is mandating permanent basically monitoring for every frac job or every stimulation because they don't want to see that acid leach out of the pace.

I think diatomite basically is a limestone, so acid would certainly be involved and the amount of the acid probably would be pretty minimum. But that requires keeping careful track of it necessitates micro seismic controls…

Right and steam. Exactly, the diatomite's all about steam as well and that's the analogue for SAGD. So we are grateful to have knowledgeable inventors like you Ted and your clients in Acorn. Thank you very much.

Keep up the good work, John.

Thank you.

The next question is from Bob [Zizik] [ph], a private investor.

Good morning, John.

Hey, good morning, Bob. Thanks for calling in.

I have a question. Can you please give us some color on when USSI does all this testing in the field, who pays all the expense load? Is it shared, is it -- is that where USSI needs all the money from or can you explain upon that?

Sure. Jim you want to answer that question. Yeah why don't you go ahead and answer that Jim.

For the jobs that we get paid for like with the super major and some of these other major oil companies and oil service companies we charge for our people to be in the field and so there is day rate and it's all paid for. The major part of our expenditure is have to do and we do some in testing ourselves in wells but primarily it’s a client driven and clients have fund that. A major expense has really been any kind of improvements the system needed that say our clients ask for and we look at and determine that’s really practical and necessary and we make the determination internally that we will fund that ourselves and the main reason is we want to control the intellectual property as you know we have a very-very strong intellectual property portfolio we’re building with over seven patents issued to-date, have another dozen being process. So we think that’s very important to keep that intellectual property and own it ourselves 100%.

How about when you do other monitoring in the Monterey shale, is that customer paid labor or is that you guys making that…

That one job that we installed in the Monterey, we installed an array it’s cemented in a well. We provided that array ourselves and the client are called installed and submitted it in. and we were provided the system there and he's going monitor that data for three months. So what we provided for that one is we actually provided the array.

So it doesn’t sound like when you’re in the field and doing all this testing that is causing USSI a ton of money.

No typically we get paid for that.

Okay good. Okay, thank you very much and good luck.

Thanks.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. John Moore for any closing comments.

Great, my closing comments are that we’re glad that we’ve made the investments in 2013. We’re cautiously optimistic about 2014. We’re extremely excited about the business prospects that company have, we’re cognitive in to the fact that we want our shareholders be cognitive of fact that our business is very lumpy, its lumpy because our customers tend to be very large companies and decision making cycles tend to be very wrong and -- but the orders that we are stocking tend to be very, very large. So we appreciate our investors' patience and hopefully the message is clear to everybody that we have done some major belt tightening to make certain that we extend out the runaway of our cash and we hope that 2014 will be a great year to be a shareholder in Acorn Energy. Thank you very much.

The conference has now concluded. Thank you for attending today’s presentation. Please disconnect your lines.