Unassociated Document

The Unaudited Pro Forma Condensed Consolidated Balance Sheet (the "Pro Forma Balance Sheet") as of June 30, 2008 has been prepared as if the acquisition occurred on June 30, 2008. The Pro Forma Balance Sheet combines the historical consolidated balance sheet of Acorn, which is the historical unaudited consolidated balance sheet of Acorn included in Acorn’s Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2008 and the uanaudited balance sheet of Coreworx, which is included herein, at June 30, 2008, and gives effect to the unaudited pro forma adjustments necessary to account for the acquisition as a purchase.

The Unaudited Pro Forma Condensed Consolidated Statements of Operations (the "Pro Forma Statements of Operations") have been prepared as if the acquisition had occurred on January 1, 2007. These Pro Forma Statements of Operations combine the historical consolidated statements of operations of Acorn for the year ended December 31, 2007 included in Acorn’s Form 10-K for the Fiscal Year Ended December 31, 2007 and the historical consolidated statement of operations the six months ended June 30, 2008 included in Acorn’s Quarterly Report on Form 10-Q for the Quarterly Period Ended June 30, 2008, , with the historical consolidated statements of operations of Coreworx for the year ended December 31, 2007 and the six months ended June 30, 2008, respectively, which are included herein, and give effect to the unaudited pro forma adjustments necessary to account for the acquisition as a purchase.

The unaudited pro forma adjustments are based on an estimated purchase price and preliminary purchase price allocation made based on available information and assumptions that Acorn believes are reasonable. Therefore, the amounts in the Pro Forma Statements of Operations and Pro Forma Balance Sheet and accompanying notes (collectively, the "Pro Forma Financial Information") are subject to change which could be material. In the opinion of management, all adjustments have been made that are necessary to present fairly the Pro Forma Financial Information. The Pro Forma Financial Information is provided for illustrative purposes only and does not purport to represent what Acorn’s results of operations or financial position would actually have been, had the acquisition occurred on such dates, nor does it purport to project the results of operations or financial position of Acorn for any future period or date.

	Acorn		Coreworx		Pro Forma Adjustments			Note		Pro Forma
ASSETS
Cash and cash equivalents	$	16,708	$	822	$	(2,500 (101	) )		1 1	$	14,929
Restricted cash		2,303		--							2,303
Accounts receivable, net		1,547		344							1,891
Unbilled work-in-process		1,443		--							1,443
Inventory		527		--							527
Other current assets		2,473		257							2,730
Total current assets		25,001		1,423							23,823

Property and equipment, net		1,446		202							1,648
Available for sale - Investment in Comverge		14,068		--							14,068
Investment in GridSense		996		--							996
Investment in Paketeria		909		--							909
Other investments		400		--							400
Funds in respect of employee termination		1,940		--							1,940
Restricted cash		618		--							618
Goodwill		4,154		196		(196) 3,693			1 1		7,847
Other intangible assets, net		7,408		762		(762) 3,509			1 1		10,917
Other assets		2,086		--		(92 (1,540	) )		1 2		454
Total assets	$	59,026	$	2,583						$	63,620

LIABILITIES
Short-term debt and current maturities of long-term debt	$	70	$	30						$	100
Trade accounts payable		907		240							1,147
Promissory note payable						3,400			1		3,400
Accrued payroll, payroll taxes and social benefits		934		--							934
Other payables and accrued expenses		2,109		894		(653	)		1		2,350
Total current liabilities		4,020		1,164							7,931

Long-term debt		12		1							13
Due to Acorn		--		1,540		(1,540	)		2		--
Senior secured debentures and interest payable		--		3,975		(3,975	)		1		--
Deferred tax liability		1,550		--							1,550
Liability for employee termination benefits		2,888		--							2,888
Other liabilities		424		--							424
Total long-term liabilities		4,874		5,516							4,875

Minority interests		2,143									2,143


SHAREHOLDERS' EQUITY
Common stock		121			17,909		3 (17,909	)	1 1		124
Additional paid in capital		52,672			2,018		1,230 (2,018	)	1 1		53,902


Warrants		1,023			--						1,023
Accumulated deficit		(9,181	)		(24,024	)	(551) 24,024		1 1		(9,732	)
Treasury stock		(3,592	)		--						(3,592	)
Accumulated other comprehensive income		6,946			--						6,946
		47,689			(4,097	)					48,671
Total liabilities and equity	$	59,026		$	2,583					$	63,620

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2008
(in thousands, except per share data)

	Acorn			Coreworx			Pro Forma Adjustments			Note		Pro Forma

Sales	$	7,902		$	749							$	8,651
Cost of sales		5,472			1,202								6,674
Gross profit (loss)		2,430			(453	)							1,977

Research and development expenses		108			1,395								1,503
Selling, general and administrative expenses		5,239			1,395			126			3		6,760
Operating loss		(2,917	)		(3,243	)							(6,286	)

Finance expense, net		(2,900	)		(577	)		563			4
								(136	)		5		(3,050	)
Gain on early redemption of convertible debentures		1,259			--								1,259
Gain on sale of Comverge shares		5,782			--								5,782
Income (loss) before provision for income taxes		1,224			(3,820	)							(2,295	)

Tax benefit		2			--			46			6		48
		1,226			(3,820	)							(2,247	)

Minority interests		80			--								80
Share of losses in GridSense		(134	)		--								(134	)
Share of losses in Paketeria		(661	)		--								(661	)
Net income (loss)	$	511		$	(3,820	)						$	(2,962	)

Income (loss) per share - basic	$	0.05										$	(0.26	)
Income (loss) per share - diluted	$	0.04										$	(0.26	)

Weighted average number of shares outstanding - basic		11,138											11,425
Weighted average number of shares outstanding - diluted		11,995											11,425

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2007
(in thousands, except per share data)

	Acorn			Coreworx			Pro Forma Adjustments		Note		Pro Forma

Sales	$	5,660		$	2,960						$	8,620
Cost of sales		4,248			2,266							6,514
Gross profit		1,412			694							2,106

Research and development expenses		415			1,031							1,446
Selling, general and administrative expenses		5,390			3,371			252		3		9,013
Operating loss		(4,393	)		(3,708	)						(8,353	)

Finance expense, net		(1,585	)		(1,353	)		(272) 543		5 4		(2,667	)
Settlement expense		--			(3,034	)						(3,034	)
Gain on sale of shares in Comverge		23,124			--							23,124
Gain on Public offering of Comverge		16,169			--							16,169
Loss on private placement in Paketeria		(37	)		--							(37	)
Income (loss) before taxes on income		33,278			(8,095	)						25,202

Tax benefit		445						109		6		554
		33,723			(8,095	)						25,756

Share of losses in Paketeria		(1,206	)		--							(1,206	)
Net income (loss)	$	32,517		$	(8,095	)					$	24,550


Income per share - basic	$	3.30									$	2.42
Income per share - diluted	$	2.80									$	2.10

Weighted average number of shares outstanding - basic		9,848										10,135
Weighted average number of shares outstanding - diluted		12,177										12,464

In accordance with FASB Statement No. 141, Business Combinations, the assets and liabilities of Coreworx are required to be adjusted to their fair values. The estimated purchase price of $7,326 is the sum of the following: (i) $2,500 representing the cash consideration for the shares of Coreworx, (ii) $3,400 representing the principal amount of 8% one-year promissory notes (iii) $1,233 representing the market value of the 287,500 shares of Acorn common stock issued to the former shareholders of Coreworx (based on the average market price of Acorn shares on the date of the announcement of the transaction and for the two days before and after the announcement in accordance with EITF 99-12 “Determination of the Measurement Date for the Market Price of Acquirer Securities Issued in a Purchase Business Combination”) and (iv) $193 of estimated transaction costs (of which $92 is included in Other Assets at June 30, 2008 and $101 is deemed paid from cash). The $2,500 of cash and the $3,400 principal amount of the one-year notes were contributed by Acorn to the capital of Coreworx and were delivered by Coreworx to the holders of Coreworx’s debentures in full payment and satisfaction of all principal and accrued interest outstanding on such debentures.

A contingent payment of one-half of the expected net receipt (less fees) by Coreworx of monies due from the Canada Revenue Agency or the Ontario Ministry of Finance in connection with Coreworx’s 2007 scientific research and experimental development tax credit refund claim or Ontario innovation tax credit refund claim for 2007 (collectively, the “SRED Claim”) during the six (6) months immediately following the closing date, is not included in the purchase price as the receipt of the SRED Claim is less than beyond a reasonable doubt.

The following pro forma adjustments give effect to the preliminary allocation of the purchase price to the estimated fair value of the net assets acquired based upon available information. These adjustments are subject to the determination of the final purchase price as described above and completion of the valuations as of the date of consummation of the acquisition. Valuations of the specifically identifiable intangible assets are in progress. Consequently, the actual allocation of the purchase price could differ materially from that presented below.

Under the purchase method of accounting, the total consideration and subsequent investment totaling $7,326 is allocated to Coreworx’s identifiable tangible and intangible assets and liabilities assumed based on their estimated fair values as of the date of the completion of the transaction. The purchase price is preliminarily allocated to Coreworx’s assets acquired and liabilities assumed, as follows:

Estimated purchase price			$	7,326

Book value of Coreworx’s net liabilities	4,097
Adjustments to historical net book value:
Elimination of existing intangibles and goodwill	958
Adjustment of deferred revenues	(653	)
Senior Secured Debentures and interest payable	(3,975	)
				427
Balance to allocate				7,753

Allocation to:
In process research and development (immediately expensed)				(551	)
Customer contracts and relationships				(881	)
Software				(2,628	)
Purchase price in excess of fair value of net liabilities acquired (Goodwill)			$	3,693

Under US GAAP, in a business combination, revenue that appropriately has been deferred by the acquired enterprise may not represent an assumed liability, or the fair value of the assumed liability may be different from the amount of the deferred revenue on the acquired enterprise's balance sheet. The acquiring enterprise should recognize a liability for the deferred revenue only if the deferredrevenue represents a legal performance obligation assumed by the acquiring enterprise. The amount assigned to that liability should be based on its fair value at the date of acquisition. The fair value of an assumed liability related to deferred revenue, would include the direct and incremental cost of fulfilling the obligation plus a normal profit margin. Accordingly, deferred revenues on Coreworx’s balance sheet have been reduced by $653.

Prior to the purchase of the Coreworx shares, Acorn contributed to the capital of Coreworx $2,500 in cash and $3,400 aggregate principal amount of its 8% one-year promissory notes. The cash and notes were delivered by Coreworx to the holders of Coreworx’s debentures in full payment and satisfaction of all principal and accrued interest outstanding on such debentures. Accordingly, the $3,975 balance of Senior Secured Debentures and interest payable were removed from the June 30, 2008 balance sheet of Coreworx prior to the transaction.

In-process research and development, or IPRD, represents Coreworx’s research and development projects that had not reached technological feasibility and had no alternative future use when acquired. The Company estimates that approximately $551 of the purchase price may represent purchased in-process technology. This is a preliminary estimate that is subject to change. Due to its non-recurring nature, the IPRD expense has been excluded from the unaudited pro forma combined condensed statements of operations. The IPRD cost (if any) will be expensed in the Company’s consolidated statement of operations in year ended December 31, 2008.

For purposes of the Pro Forma Financial Information, the estimated amount of goodwill generated by the transaction of $3,693 is not amortized in accordance with FASB Statement No. 142, “Goodwill and Other Intangible Assets”. Any adjustment to the estimated purchase price of $7,326 would result in a similar adjustment to the estimated goodwill generated by the transaction. Intangible assets with estimable useful lives are amortized over that period. The acquired intangible assets with estimable useful lives include approximately $881 for the estimated fair market value of Coreworx’s customer contracts and relationships and approximately $2,628 for the estimated fair market value of Coreworx’s software. The weighted average estimated useful life of these amortizable intangible assets is approximately 14.5 years. For every $1,000 increase or decrease, amortization expense may increase or decrease by approximately $69 based on the estimated weighted average useful life of intangible assets of 14.5 years.

	Canadian GAAP⁽²⁾			US GAAP adjustment⁽³⁾			US GAAP Total			US GAAP Total ⁽¹⁾
	C$			C$			C$			US$

Cash and cash equivalents	$	838					$	838		$	822
Accounts receivable		351						351			344
Other current assets		262						262			257
Property and equipment, net		206						206			202
Goodwill		200						200			196
Other intangibles assets, net		777						777			762
Total assets		2,634						2,634			2,583

Accounts payable		245						245			240
Current portion of capital leases and maturities of term loan		31						31			30
Other payables and accrued expenses		911						911			894
Long-term debt		1						1			1
Senior secured debentures and interest payable		4,053						4,053			3,975
Due to Acorn		1,570						1,570			1,540
Total liabilities		6,811						6,811			6,680

Common stock		18,979			(717	)		18,262			17,909
Additional paid in capital		640			1,417			2,057			2,018
Accumulated deficit		(23,796	)		(700	)		(24,496	)		(24,024	)
Capital deficiency		(4,177	)		--			(4,177	)		(4,097	)

Total liabilities and capital deficiency	$	2,634					$	2,634		$	2,583

(2)

The Coreworx balance sheet statement was reclassified to conform to Acorn’s financial statements presentation. The main reclassifications are: 1) accrued liabilities are presented under the item Other payables and accrued expenses; and 2) current portion of obligations under capital leases and demand loan are presented under the item Short-term debt and current maturities of long-term debt.

	Canadian GAAP⁽⁶⁾			US GAAP adjustment⁽⁵⁾			US GAAP Total			US GAAP Total ⁽⁴⁾
	C$			C$			C$			US$

Sales	$	755					$	755		$	749
Cost of sales		1,211						1,211			1,202
Gross loss		(456	)					(456	)		(453	)
Research and development expenses		1,405						1,405			1,395
Selling, general and administrative expenses		1,385			20			1,405			1,395
Operating loss		(3,246	)		(20	)		(3,266	)		(3,243	)
Finance expense, net		(581	)					(581	)		(577	)
Net loss	$	(3,827	)	$	(20	)	$	(3,847	)	$	(3,820	)

(5)

The Coreworx statement of operations was reclassified to conform to Acorn’s financial statements presentation. The main reclassifications are: 1)Sales and marketing, amortization of capital assets and stock-based compensation are presented under the item Selling, general and administrative expenses; and 2) Foreign exchange loss, interest expense and interest and other income is presented under the item Finance expense, net.

	Canadian GAAP⁽⁸⁾			US GAAP adjustment⁽⁹⁾			US GAAP Total			US GAAP Total ⁽⁷⁾
	C$			C$			C$			US$

Sales	$	3,179					$	3,179		$	2,960
Cost of sales		2,434						2,434			2,266
Gross profit		745						745			694
Research and development expenses		1,107						1,107			1,031
Selling, general and administrative expenses		3,545			75			3,620			3,371
Operating loss		(3,907	)		(75	)		(3,982	)		(3,708	)
Finance expense, net		(1,677	)		224			(1,453	)		(1,353	)
Gain on early extinguishment of convertible debentures		265			(265	)		--			--
Settlement expense		--			(3,258	)		(3,258	)		(3,034	)
Net loss	$	(5,319	)	$	(3,374	)	$	(8,693	)	$	(8,095	)

(8)

	Six months ended June 30, 2008		Year ended December 31, 2007

Interest expense eliminated	$	563	$	543

UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
As of June 30, 2008
(in thousands)

	Six months ended June 30, 2008		Year ended December 31, 2007		Estimated useful life (in years)

Software	$	82	$	164		16
Customer contracts and related customer relationships		44		88		10
	$	126	$	252