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PART I. FINANCIAL INFORMATION

Item 1.        Financial Statements (Unaudited)

 GENIE ENERGY LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	March 31, 2023				December 31, 2022
	(Unaudited)				(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	105,220			$	98,571
Restricted cash—short-term		3,791				6,007
Marketable equity securities		4,663				490
Trade accounts receivable, net of allowance for doubtful accounts of $5,383 and $4,826 at March 31, 2023 and December 31, 2022, respectively		65,203				55,134
Inventory		19,345				15,714
Prepaid expenses		7,855				6,822
Other current assets		5,363				6,207
Current assets of discontinued operations		35,750				38,688
Total current assets		247,190				227,633
Property and equipment, net		964				891
Goodwill		9,998				9,998
Other intangibles, net		3,033				3,133
Deferred income tax assets, net		5,799				5,799
Other assets		13,506				13,856
Noncurrent assets of discontinued operations		12,520				16,305
Total assets	$	293,010			$	277,615
Liabilities and equity
Current liabilities:
Trade accounts payable		19,894				25,313
Accrued expenses		38,568				35,659
Income taxes payable		27,580				22,576
Due to IDT Corporation, net		98				165
Other current liabilities		7,580				4,549
Current liabilities of discontinued operations		11,076				10,936
Total current liabilities		104,796				99,198
Other liabilities		1,894				4,087
Noncurrent liabilities of discontinued operations		686				686
Total liabilities		107,376				103,971
Commitments and contingencies		—				—
Equity:
Genie Energy Ltd. stockholders’ equity:
Preferred stock, $0.01 par value; authorized shares—10,000:
Series 2012-A, designated shares—8,750; at liquidation preference, consisting of 866 and 983 shares issued and outstanding at March 31, 2023 and December 31, 2022		7,359				8,359
Class A common stock, $0.01 par value; authorized shares—35,000; 1,574 shares issued and outstanding at March 31, 2023 and December 31, 2022		16				16
Class B common stock, $0.01 par value; authorized shares—200,000; 27,159 and 27,126 shares issued and 24,439 and 24,421 shares outstanding at March 31, 2023 and December 31, 2022, respectively		271				271
Additional paid-in capital		147,445				146,546
Treasury stock, at cost, consisting of 2,720 and 2,705 shares of Class B common stock at March 31, 2023 and December 31, 2022		(19,175	)			(19,010	)
Accumulated other comprehensive income		1,895				1,926
Retained earnings		61,333				49,010
Total Genie Energy Ltd. stockholders’ equity		199,144				187,118
Noncontrolling interests		(13,510	)			(13,474	)
Total equity		185,634				173,644
Total liabilities and equity	$	293,010			$	277,615

 See accompanying notes to consolidated financial statements.  

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 GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended March 31,
		2023				2022
		(in thousands, except per share data)
Revenues:
Electricity	$	74,487			$	59,380
Natural gas		26,925				24,504
Other		3,864				2,042
Total revenues		105,276				85,926
Cost of revenues		71,990				38,819
Gross profit		33,286				47,107
Operating expenses:
Selling, general and administrative (i)		22,011				20,145
Income from operations		11,275				26,962
Interest income		974				17
Interest expense		(19	)			(50	)
Loss on marketable equity securities and investments		(71	)			(652	)
Other income (loss), net		3,246				(498	)
Income before income taxes		15,405				25,779
Provision for income taxes		(4,068	)			(7,112	)
Net income from continuing operations		11,337				18,667
Income (loss) from discontinued operations, net of taxes		3,055				(1,932	)
Net income		14,392				16,735
Net loss attributable to noncontrolling interests, net		(39	)			(1,154	)
Net income attributable to Genie Energy Ltd.		14,431				17,889
Dividends on preferred stock		(157	)			(370	)
Net income attributable to Genie Energy Ltd. common stockholders	$	14,274			$	17,519
Amounts attributable to Genie Energy Ltd. common stockholders
Continuing operations	$	11,218			$	19,294
Discontinued operations		3,056				(1,775	)
Net income attributable to Genie Energy Ltd. common stockholders	$	14,274			$	17,519
Earnings per share attributable to Genie Energy Ltd. common stockholders:
Basic:
Continuing operations	$	0.44			$	0.75
Discontinued operations		0.12				(0.07	)
Earnings per share attributable to Genie Energy Ltd. common stockholders	$	0.56			$	0.68
Diluted
Continuing operations	$	0.42			$	0.74
Discontinued operations		0.12				(0.07	)
Earnings per share attributable to Genie Energy Ltd. common stockholders	$	0.54			$	0.67
Weighted-average number of shares used in calculation of earnings per share:
Basic		25,326				25,764
Diluted		26,620				26,128
Dividends declared per common share	$	0.075			$	0.075
(i) Stock-based compensation included in selling, general and administrative expenses	$	899			$	840

 

See accompanying notes to consolidated financial statements.

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GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

		Three Months Ended March 31,
	2023				2022
	(in thousands)
Net income	$	14,392			$	16,735
Other comprehensive loss:
Foreign currency translation adjustments		(28	)			303
Comprehensive income		14,364				17,038
Comprehensive gain attributable to noncontrolling interests		36				1,190
Comprehensive income attributable to Genie Energy Ltd.	$	14,400			$	18,228

  

See accompanying notes to consolidated financial statements.

 

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  GENIE ENERGY LTD. 

CONSOLIDATED STATEMENTS OF EQUITY

(in thousands, except dividend per share)

Genie Energy Ltd. Stockholders

		Preferred						Class A						Class B						Additional						Accumulated Other
		Stock						Common Stock						Common Stock						Paid-In			Treasury			Comprehensive			Retained			Noncontrolling			Total
		Shares			Amount			Shares			Amount			Shares			Amount			Capital			Stock			Income			Earnings			Interests			Equity
BALANCE AT JANUARY 1, 2023		983		$	8,359			1,574		$	16			27,126		$	271		$	146,546		$	(19,010	)	$	1,926		$	49,010		$	(13,474	)	$	173,644
Dividends on preferred stock ($ 0.1594 per share)		—			—			—			—			—			—			—			—			—			(157	)		—			(157	)
Dividends on common stock ($0.075 per share)		—			—			—			—			—			—			—			—			—			(1,951	)		—			(1,951	)
Stock-based compensation		—			—			—			—			33			—			899			—			—			—			—			899
Restricted Class B common stock purchased from employees		—			—			—			—			—			—			—			(165	)		—			—			—			(165	)
Redemption of preferred stock		(117	)		(1,000	)		—			—			—			—			—			—			—			—			—			(1,000	)
Other comprehensive income (loss)		—			—			—			—			—			—			—			—			(31	)		—			3			(28	)
Net income (loss) for three months ended March 31, 2023		—			—			—			—			—			—			—			—			—			14,431			(39	)		14,392
BALANCE AT  MARCH 31, 2023		866		$	7,359			1,574		$	16			27,159		$	271		$	147,445		$	(19,175	)	$	1,895		$	61,333		$	(13,510	)	$	185,634

 

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GENIE ENERGY LTD.
CONSOLIDATED STATEMENTS OF EQUITY
(in thousands, except dividend per share) — (Continued)

Genie Energy Ltd. Stockholders

		Preferred						Class A						Class B						Additional						Accumulated Other
		Stock						Common Stock						Common Stock						Paid-In			Treasury			Comprehensive			Accumulated			Noncontrolling			Total
		Shares			Amount			Shares			Amount			Shares			Amount			Capital			Stock			Income			Deficit			Interests			Equity
BALANCE AT JANUARY 1, 2022		2,322		$	19,743			1,574		$	16			26,633		$	266		$	143,249		$	(14,034	)	$	3,160		$	(29,115	)	$	(12,496	)	$	110,789
Dividends on preferred stock ($0.1594 per share)		—			—			—			—			—			—			—			—			—			(370	)		—			(370	)
Dividends on common stock ($0.075 per share)		—			—			—			—			—			—			—			—			—			(1,934	)		—			(1,934	)
Stock-based compensation		—			—			—			—			9			—			840			—			—			—			—			840
Issuance of Class B common stock to Howard Jonas		—			—			—			—			—			—			—			(71	)		—			—			—			(71	)
Other comprehensive (loss) income		—			—			—			—			—			—			—			—			339			—			(36	)		303
Net loss for three months ended March 31, 2022		—			—			—			—			—			—			—			—			—			17,889			(1,154	)		16,735
BALANCE AT MARCH 31, 2022		2,322		$	19,743			1,574		$	16			26,642		$	266		$	144,089		$	(14,105	)	$	3,499		$	(13,530	)	$	(13,686	)	$	126,292

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 GENIE ENERGY LTD. 

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) 

		Three Months Ended March 31,
		2023				2022
		(in thousands)
Operating activities
Net income		$	14,392			$	16,735
Net income (loss) from discontinued operations, net of tax			3,055				(1,932	)
Net income from continuing operations			11,337				18,667
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			96				96
Impairment of assets			19				—
Provision for doubtful accounts receivable			574				392
Unrealized loss on marketable equity securities and investment			71				652
Stock-based compensation			899				814
Equity in the net income in equity method investees			(195	)			(125	)
Change in assets and liabilities:
Trade accounts receivable			(10,643	)			(2,368	)
Inventory			(3,631	)			(1,145	)
Prepaid expenses			(1,032	)			(1,904	)
Other current assets and other assets			1,138				(5,638	)
Trade accounts payable, accrued expenses and other liabilities			(2,051	)			2,589
Due to IDT Corporation, net			(66	)			(391	)
Income taxes payable			5,004				6,560
Net cash provided by operating activities of continuing operations			1,520				18,199
Net cash provided by operating activities of discontinued operations			9,714				141
Net cash provided by operating activities			11,234				18,340
Investing activities
Capital expenditures			(98	)			(59	)
Proceeds from the sale of  marketable equity securities			343				—
Purchase of marketable equity securities and other investment			(4,559	)			(200	)
Proceeds from settlement of equity method investment			133				—
Investment in notes receivables with related party			—				(1,388	)
Repayment of notes receivable			19				19
Net cash used in investing activities of continuing operations			(4,162	)			(1,628	)
Net cash used in investing activities of discontinued operations			—				(21,832	)
Net cash used in investing activities			(4,162	)			(23,460	)
Financing activities
Dividends paid			(2,108	)			(2,304	)
Repurchases of Class B common stock from employees			(165	)			(71	)
Redemption of preferred stock			(1,000	)			—
Net cash used in financing activities			(3,273	)			(2,375	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash			(10	)			27
Net increase (decrease) in cash, cash equivalents, and restricted cash			3,789				(7,468	)
Cash, cash equivalents, and restricted cash (including discontinued operations) at beginning of period			106,080				102,149
Cash, cash equivalents and restricted cash (including discontinued operations) at end of the period			109,869				94,681
Less: Cash of discontinued operations at end of period			858				1,726
Cash, cash equivalents, and restricted cash (excluding discontinued operations) at end of period		$	109,011			$	92,955

See accompanying notes to consolidated financial statements.

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GENIE ENERGY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

Note 1—Basis of Presentation and Business Changes and Development

 

The accompanying unaudited consolidated financial statements of Genie Energy Ltd. and its subsidiaries (the “Company” or “Genie”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The balance sheet at December 31, 2022 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (the “SEC”).  

 

The Company owns 99.5% of Genie Energy International Corporation (“GEIC”), which owns 100% of Genie Retail Energy (“GRE”), 100% of Genie Retail Energy International ("GRE International") and varied interests in entities within Genie Renewables.   

GRE owns and operates retail energy providers (“REPs”), including IDT Energy (“IDT Energy”), Residents Energy (“Residents Energy”), Town Square Energy and Town Square Energy East (collectively, "TSE"), Southern Federal Power ("Southern Federal") and Mirabito Natural Gas (“Mirabito”). GRE's REP businesses resell electricity and natural gas to residential and small business customers primarily in the Eastern and Midwestern United States and Texas. 

Genie Renewables consists of 95.5% interest in Genie Solar, a solar energy company, a 92.8% interest in CityCom Solar, a marketer of community solar energy solutions, a 96.0% interest in Diversegy, a broker for commercial customers, and a 60.0% interest in Prism Solar Technology ("Prism"), a solar solutions company that is engaged in the manufacturing of solar panels, solar installation design and solar energy project management.

One-Time Tax Credit

In the first quarter of 2023, the Company received $3.1 million related to a one-time tax credit related to payroll taxes incurred in prior years, which the Company recognized as a gain included in other income (expense), net in the accompanying consolidated statements of operations for the three months ended March 31, 2023.

Discontinued Operations in Finland and Sweden

Previously, the Company had a third segment, Genie Retail Energy International, or GRE International, which supplied electricity to residential and small business customers in Scandinavia. However, as a result of volatility in the energy market in Europe, in the third quarter of 2022, the Company decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden"). In July 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden. The Company also entered into a series of transactions to transfer the customers of Lumo Finland and Lumo Sweden to other suppliers.

         The Company determined that the discontinued operations in Finland and Sweden represented a strategic shift that will have a major effect on the Company's operations and financial statements. The Company has accounted for these businesses as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.

In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrators"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.

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Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.

Discontinued Operations in United Kingdom

In October 2021, as part of the orderly exit process from the United Kingdom market, Orbit Energy Limited ("Orbit"), a REP owed by the Company that used to operate in U.K., and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell. 

Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, in which Genie retains a 100% interest, however, the management and control of Orbit was transferred to the Administrators. 

The Company determined that the discontinued operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financial statements. Since the appointment of the Administrators, the Company has accounted for the Orbit business as discontinued operations and accordingly, has presented the results of operations and related cash flows as discontinued operations. The results of operations and related cash flows are presented as discontinued operations for all periods presented. Any remaining assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Since the Company lost control of the management of Orbit in favor of the Administrators, the accounts of Orbit were deconsolidated effective December 1, 2021.

 

Seasonality and Weather; Climate Change and Volatility in Pricing

 

The weather and the seasons, among other things, affect GRE’s revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 39.7% and 44.5% of GRE’s natural gas revenues for the relevant years were generated in the first quarters 2022 and 2021, respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 30.5% and 30.3% of GRE’s electricity revenues were generated in the third quarters of 2022 and 2021, respectively. GRE’s REPs’ revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.

In addition to the direct physical impact that climate change may have on the Company's business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.

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Note 2—Cash, Cash Equivalents, and Restricted Cash

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet and the corresponding amounts reported in the consolidated statements of cash flows:

 

		March 31, 2023				December 31, 2022
		(in thousands)
Cash and cash equivalents		$	105,220			$	98,571
Restricted cash—short-term			3,791				6,007
Total cash, cash equivalents, and restricted cash		$	109,011			$	104,578

 

Restricted cash—short-term includes amounts set aside in accordance with GRE's Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19).

Included in the cash and cash equivalents as of March 31, 2023 and  December 31, 2022 is cash received from Lumo Sweden (see Note 5).   

 

Note 3—Inventories

 

Inventories consisted of the following: 

 

		March 31, 2023				December 31, 2022
		(in thousands)
Natural gas		$	315			$	3,302
Renewable credits			15,839				10,531
Solar Panels:
Finished goods			3,191				1,881
Totals		$	19,345			$	15,714

 

Note 4—Revenue Recognition

Revenue from the single performance obligation to deliver a unit of electricity and/or natural gas is recognized as the customer simultaneously receives and consumes the benefit. Variable quantities in requirements contracts are considered to be options for additional goods and services because the customer has a current contractual right to choose the amount of additional distinct goods to purchase. GRE record unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends. 

Incumbent utility companies in most of the service territories in which GRE's REPs operate offer purchase of receivable, or POR programs, and GRE’s REPs participate in POR programs for a majority of their receivables. The Company estimates variable consideration related to its rebate programs using the expected value method and a portfolio approach. The Company’s estimates related to rebate programs are based on the terms of the rebate program, the customer’s historical electricity and natural gas consumption, the customer’s rate plan, and a churn factor. Taxes that are imposed on the Company’s sales and collected from customers are excluded from the transaction price.

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Revenue from sales of solar panels are recognized at a point in time following the transfer of control of the solar panels to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For sales contracts that contain multiple performance obligations, such as the shipment or delivery of solar modules, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations. Revenues from sales of solar panels are included in other revenues in the consolidated statements of operations. 

The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less.

Disaggregated Revenues  

The following table shows the Company’s revenues disaggregated by pricing plans offered to customers: 

		Electricity				Natural Gas				Other				Total
		(in thousands)
Three Months Ended March 31, 2023
Fixed rate		$	29,505			$	5,615			$	—			$	35,120
Variable rate			44,982				21,310				—				66,292
Other			—				—				3,864				3,864
Total		$	74,487			$	26,925			$	3,864			$	105,276
Three Months Ended March 31, 2022
Fixed rate		$	18,618			$	3,784			$	—			$	22,402
Variable rate			40,762				20,720				—				61,482
Other			—				—				2,042				2,042
Total		$	59,380			$	24,504			$	2,042			$	85,926

Fixed and variable rate revenues are from GRE. Other revenues are revenues from Genie Renewables which includes revenues from solar projects by Genie Solar, commissions from marketing energy solutions by CityComm Solar and Diversegy and selling solar panels by Prism.

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The following table shows the Company’s revenues disaggregated by non-commercial and commercial channels:    

 

		Electricity				Natural Gas				Other				Total
		(in thousands)
Three Months Ended March 31, 2023
Non-Commercial Channel		$	60,123			$	20,783			$	—			$	80,906
Commercial Channel			14,364				6,142				—				20,506
Other			—				—				3,864				3,864
Total		$	74,487			$	26,925			$	3,864			$	105,276
Three Months Ended March 31, 2022
Non-Commercial Channel		$	50,622			$	19,638			$	—			$	70,260
Commercial Channel			8,758				4,866				—				13,624
Other			—				—				2,042				2,042
Total		$	59,380			$	24,504			$	2,042			$	85,926

 

Note 5—Discontinued Operations

Lumo Finland and Lumo Sweden Operations

As a result of the sustained volatility of the energy market in Europe, in July 2022, the Company initiated a plan to dispose of certain assets and liabilities of Lumo Finland and Lumo Sweden. From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden for a gross aggregate amount of €41.1 million (equivalent to approximately $41.4 million at the dates of the transactions) before fees and other costs. The sale price has been, and is expected to continue to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025. 

In July 2022, Lumo Sweden entered into a transaction to transfer, effective August 5, 2022, its customers to a third party for a nominal consideration. In August 2022, Lumo Finland entered into a transaction to transfer its variable rate customers to a third party for €1.9 million (equivalent to $2.0 million) and terminated the contracts of fixed rate customers.   

The Company determined that exiting operations in Lumo Finland and Lumo Sweden represented a strategic shift that will have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Lumo Finland and Lumo Sweden are continuing to liquidate their remaining receivables and settle any remaining liabilities.  

In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to the Lumo Administrators. All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrators. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrators, the accounts of Lumo Finland were deconsolidated effect November 9, 2022.

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The following table represents summarized balance sheet information of assets and liabilities of the discontinued operations of Lumo Sweden:  

		March 31, 2023				December 31, 2022
		(in thousands)
Assets
Cash		$	858			$	1,503
Receivables from the settlement of derivative contract—current			18,053				23,351
Current assets of discontinued operations		$	18,911			$	24,854
Receivables from the settlement of derivative contract—noncurrent		$	8,652			$	12,689
Other noncurrent assets			3,868				3,616
Noncurrent assets of discontinued operations		$	12,520			$	16,305
Liabilities
Income taxes payable			10,959				10,894
Other current liabilities			117				42
Current liabilities of discontinued operations		$	11,076			$	10,936
Deferred tax liabilities			686				686
Noncurrent liabilities of discontinued operations		$	686			$	686

 

The summary of the results of operations of the discontinued operations of Lumo Finland and Lumo Sweden were as follows:

		Three Months Ended March 31,
		2023				2022
		(in thousands)
Revenues	$	—			$	12,603
Cost of revenues		—				14,169
Gross loss		—				(1,566	)
Selling, general and administrative expenses		—				965
Loss from operations		—				(2,531	)
Other income		250				—
Income before income taxes		250				(2,531	)
(Provision for) benefit from income taxes		(68	)			599
Net income (loss) from discontinued operations, net of taxes	$	182			$	(1,932	)
Income (loss) before income taxes attributable to Genie Energy Ltd.	$	250			$	(2,343	)

 

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The following table presents a summary of cash flows of the discontinued operations: 

The summary of presents a summary of cash flows of the discontinued operations of Lumo Finland and Lumo Sweden:

		Three Months Ended March 31,
		2023				2022
		(in thousands)
Net income (loss)	$	182			$	(1,932	)
Non-cash items		62				132
Changes in assets and liabilities		9,470				1,941
Cash flows provided by operating activities of discontinued operations	$	9,714			$	141

In furtherance of the Company's exit from the retail energy markets in Finland and Sweden and to facilitate the maximization of value at Lumo Sweden, on November 3, 2022, the Company acquired additional minority interests in Lumo Finland and Lumo Sweden from an employee for 132,302 restricted Class B common stock of the Company, which will vest ratably from November 2022 to May 2025. The Company increased its interest in Lumo Finland from 91.6% to 96.6% and in Lumo Sweden from 98.8% to 100%.

Prior to being treated as discontinued operations or consolidated, the assets and liabilities of Lumo Finland and Lumo Sweden were included in GRE International segment.

United Kingdom Operations

In the third quarter of 2021, the natural gas and energy market in the U.K. deteriorated which prompted the Company to start the process of orderly withdrawal from the U.K. market. In October 2021, as part of the orderly exit process, Orbit and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell.  

Following the termination of the contract with Shell, Orbit filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered the current customers to be transferred to “supplier of last resort” and transfer the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit and the management and control of which was transferred to Administrators. The Company expects that the administration of Orbit will be completed in 2023.

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In the fourth quarter of 2021, Orbit transferred to GEIC a net amount of $49.7 million from the proceeds of the settlement of the contract with Shell which is included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2021. In January 2022, the Company transferred $21.5 million to the Administrators of Orbit Energy to fund the settlement of the expected remaining liabilities of Orbit of $30.8 million, which were included in the current liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. In February 2022, the Company deposited $28.3 million into an attorney trust account to hold, preserve, and dispense funds to the extent needed in connection with the administration process. On February 24, 2022, the Administrators filed a petition under Chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York seeking (i) recognition of the U.K. administration proceeding as a foreign main proceeding and the U.K. Administrators as its foreign representatives, and (ii) entrusting distribution of the funds the Company deposited into its attorney’s trust fund to the U.K. Administrators. In the second quarter of 2022, the Administrators filed an application to transfer the funds back to the Administrators’ control in the U.K. Subject to certain representations and expectations regarding use and application of the funds to efficiently and expeditiously pay off creditors and bring a timely close to the insolvency administration, the Company decided not to oppose the application, and the $28.3 million was transferred to the account of the Administrator. In August 2022, the Administrator paid the Company a partial return of its interest in Orbit of £4.6 million (equivalent to $5.4 million). The Company believes that the funds remaining with the Administrators are more than sufficient to pay any remaining creditors of Orbit (with any surplus, which the Company expects to be significant, to be returned to the Company). 

 

The Company determined that exiting operations in the United Kingdom represented a strategic shift that will have a major effect on the Company's operations and financial statements and accordingly, the results of operations and related cash flows are presented as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022.

As a result of loss of control, the Company deconsolidated Orbit effective December 1, 2021 and estimated the remaining liability related to its ownership of Orbit.

In the three months ended March 31, 2023, the Company recognized income from discontinued operation, net of taxes of $2.9 million mainly from the increase in the estimated value of our investments in Orbit due to a change in estimated net assets of Orbit after the Administrator settles the liabilities. The carrying value of the Company's interest in Orbit was net investments of $16.8 million and $13.8 million as of March 31, 2023 and December 31, 2022, respectively. The carrying value was determined by estimating the net realizable values of assets and fair values of remaining liabilities which approximates its carrying values as of March 31, 2023 and December 31, 2022. 

Prior to being treated as discontinued operations and consolidated, the assets and liabilities of Orbit were included in the GRE International segment.

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Note 6—Fair Value Measurements 

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:  

 

		Level 1 (1)				Level 2 (2)				Level 3 (3)				Total
		(in thousands)
March 31, 2023
Assets:
Marketable equity securities		$	4,663			$	—			$	—			$	4,663
Derivative contracts		$	1,626			$	—			$	—			$	1,626
Liabilities:
Derivative contracts		$	3,559			$	—			$	—			$	3,559
December 31, 2022
Assets:
Marketable equity securities		$	490			$	—			$	—			$	490
Derivative contracts		$	4,060			$	—			$	—			$	4,060
Liabilities:
Derivative contracts		$	2,857			$	—			$	—			$	2,857

 

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

 

The Company’s derivative contracts consist of natural gas and electricity put and call options and swaps. The underlying asset in the Company’s put and call options is a forward contract. The Company’s swaps are agreements whereby a floating (or market or spot) price is exchanged for a fixed price over a specified period.

The Company did not have any transfers of assets or liabilities between Level 1, Level 2 or Level 3 of the fair value measurement hierarchy during the three months ended March 31, 2023 and 2022.

 

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 Fair Value of Other Financial Instruments

 

The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

 

Restricted cash—short-term, trade receivables, due to IDT Corporation, other current assets and other current liabilities. At March 31, 2023 and December 31, 2022, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term was classified as Level 1. The carrying value of other current assets, due to IDT Corporation, and other current liabilities approximated fair value.  

Other assets. At March 31, 2023 and December 31, 2022, other assets included notes receivable. At March 31, 2023, the carrying amount of the notes receivable and loans payable approximated fair value. The fair values were estimated based on the Company’s assumptions, and were classified as Level 3 of the fair value hierarchy.

The primary non-recurring fair value estimates typically are in the context of goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 9) which utilize Level 3 inputs.   

Concentration of Credit Risks

The Company holds cash, cash equivalents, and restricted cash at several major financial institutions, which may exceed Federal Deposit Insurance Corporation insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition. 

The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as March 31, 2023 or December 31, 2022):

		March 31, 2023				December 31, 2022
Customer A			10.9	%			10.2	%
Customer B			11.0				na

 

na—less than 10.0% of consolidated net trade receivables 

The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated revenues in these periods):

			Three Months Ended March 31,
		2022				2021
Customer A			na	%			10.4	%

na—less than 10.0% of consolidated revenue in the period 

 

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Note 7—Derivative Instruments

 

The primary risk managed by the Company using derivative instruments is commodity price risk, which is accounted for in accordance with Accounting Standards Codification 815 — Derivatives and Hedging. Natural gas and electricity put and call options and swaps are entered into as hedges against unfavorable fluctuations in market prices of natural gas and electricity. The Company does not apply hedge accounting to these options or swaps, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in commodity prices, the Company exposes itself to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes the Company, which creates credit risk. The Company minimizes the credit or repayment risk in derivative instruments by entering into transactions with high-quality counterparties. At March 31, 2023, GRE’s swaps and options were traded on the Intercontinental Exchange. 

The summarized volume of GRE’s outstanding contracts and options at March 31, 2023 was as follows (MWh – Megawatt hour and Dth – Decatherm):

 

Settlement Dates		Volume
		Electricity (in MWH)				Gas (in Dth)
Second quarter 2023			31,728				13,072
Third quarter 2023			45,056				—
Fourth quarter 2023			108,332				610,000
First quarter 2024			6,160				910,000
Second quarter 2024			—				—
Third quarter of 2024			16,592				—
Fourth quarter of 2024			—				—
First quarter of 2025			13,520				225,000
Second quarter of 2025			—				227,500
Third quarter of 2025			—				230,000
Fourth quarter of 2025			—				230,000
First quarter of 2026			—				—
Second quarter of 2026			—				—
Third quarter of 2026			3,520				—

 

The fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:

 

Asset Derivatives		Balance Sheet Location		March 31, 2023				December 31, 2022
				(in thousands)
Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options1		Other current assets		$	586			$	2,799
Energy contracts and options		Other assets			1,040				1,261
Total derivatives not designated or not qualifying as hedging instruments — Assets				$	1,626			$	4,060
Liability Derivatives		Balance Sheet Location		March 31, 2023				December 31, 2022
				(in thousands)
Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options1		Other current liabilities		$	3,444			$	1,800
Energy contracts and options		Other liabilities			115				1,057
Total derivatives not designated or not qualifying as hedging instruments — Liabilities				$	3,559			$	2,857

 

(1) The Company classifies derivative assets and liabilities as current based on the cash flows expected to be incurred within the following 12 months.

  

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The effects of derivative instruments on the consolidated statements of operations was as follows:

				Amount of (Loss) Gain Recognized on Derivatives
Derivatives not designated or not qualifying as		Location of Gain Recognized		Three Months Ended March 31,
hedging instruments		on Derivatives			2023				2022
				(in thousands)
Energy contracts and options		Cost of revenues		$	(11,175	)		$	37,512

 

Note 8—Other Assets

 

Other assets consisted of the following:  

		March 31, 2023				December 31, 2022
		(in thousands)
Security deposit		$	7,336			$	7,341
Right-of-use assets, net of amortization			1,796				1,892
Fair value of derivative contracts—noncurrent			1,040				1,261
Other assets			3,334				3,362
Total other assets		$	13,506			$	13,856

 

Note 9—Goodwill and Other Intangible Assets

 

The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2023 to March 31, 2023: 

 

		GRE				Genie Renewables				Total
		(in thousands)
Balance at January 1, 2023		$	9,998			$	—			$	9,998
Additions/deductions during the period			—				—				—
Balance at March 31, 2023		$	9,998			$	—			$	9,998

 

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The table below presents information on the Company’s other intangible assets:   

		Weighted Average Amortization Period				Gross Carrying Amount				Accumulated Amortization				Net Balance
		(in thousands)
March 31, 2023
Patents and trademarks			18.1  years			$	3,510			$	(1,212	)		$	2,298
Customer relationships			9.0  years				1,100				(682	)			418
Licenses			10.0  years				479				(162	)			317
Total						$	5,089			$	(2,056	)		$	3,033
December 31, 2022
Patent and trademark			18.1 years			$	3,510			$	(1,154	)		$	2,356
Customer relationships			9.0 years				1,100				(652	)			448
Licenses			10.0 years				479				(150	)			329
Total						$	5,089			$	(1,956	)		$	3,133

 

Amortization expense of intangible assets was $0.1 million for each of the three months ended March 31, 2023 and 2022. The Company estimates that amortization expense of intangible assets will be $0.3 million, $0.4 million, $0.4 million, $0.3 million, $0.3 million and $1.4 million for the remainder of 2023, and for 2024, 2025, 2026, 2027 and thereafter, respectively.

Note 10—Accrued Expenses

Accrued expenses consisted of the following:  

 

		March 31, 2023				December 31, 2022
		(in thousands)
Renewable energy		$	24,574			$	18,444
Liability to customers related to promotions and retention incentives			9,385				9,111
Payroll and employee benefit			2,054				4,251
Other accrued expenses			2,555				3,853
Total accrued expenses		$	38,568			$	35,659

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Note 11—Leases

The Company entered into operating lease agreements primarily for offices in domestic and foreign locations where it has operations and solar project with lease periods expiring between 2023 and 2052. The Company has no finance leases. 

 

The Company determines if a contract is a lease at inception. Right-of-Use ("ROU") assets are included under other assets in the consolidated balance sheet. The current portion of the operating lease liabilities are included in other current liabilities and the noncurrent portion is included in other liabilities in the consolidated balance sheet. 

 

ROU assets and operating lease liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value of the future lease payments is the incremental borrowing rate, because the interest rate implicit in most of our leases is not readily determinable. The incremental borrowing rate is estimated to approximate the interest rate on a collateralized borrowing rate based on information available at the lease commencement date. ROU assets also include any prepaid lease payments and lease incentives. The lease terms include periods under options to extend or terminate the lease when it is reasonably certain that we will exercise that option. The Company uses the base, non-cancelable, lease term when determining the lease assets and liabilities. Operating lease expense is recognized on a straight-line basis over the lease term.

 

		March 31, 2023			December 31, 2022
		(in thousands)
ROU Assets		$	1,796		$	1,892
Current portion of operating lease liabilities			258			250
Noncurrent portion of operating lease liabilities			1,599			1,699
Total		$	1,857		$	1,949

At March 31, 2023, the weighted average remaining lease term is 11.4 years and the weighted average discount rate is 7.2%.

Supplemental cash flow information for ROU assets and operating lease liabilities are as follows: 

		Three Months Ended March 31,
		2023			2022
Cash paid for amounts included in the measurement of lease liabilities:		(in thousands)
Operating cash flows from operating activities		$	130		$	119
ROU assets obtained in the exchange for lease liabilities
Operating leases		$	—		$	—

Future lease payments under operating leases as of March 31, 2023 were as follows:

(in thousands)
Remainder of 2023		$	295
2024			350
2025			277
2026			272
2027			277
Thereafter			1,616
Total future lease payments			3,087
Less imputed interest			1,230
Total operating lease liabilities		$	1,857

Rental expenses under operating leases were $0.1 million and $0.1 million in the three months ended March 31, 2023 and 2022, respectively.

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Note 12—Equity 

 

Dividend Payments

 

The following table summarizes the quarterly dividends declared by the Company during the three months ended March 31, 2023 (in thousands, except per share amounts):

 

Declaration Date

Dividend Per Share

Aggregate Dividend Amount

Record Date

Payment Date

Series 2012-A Preferred Stock ("Preferred Stock")

January 12, 2023

$

0.1594

$

157

February 7, 2023

February 15, 2023

Class A Common Stock and Class B Common Stock

February 9, 2023

$

0.0750

$

1,951

February 21, 2023

March 1, 2023

 

In the year ended December 31, 2022, the Company accrued Additional Dividends of $0.5301 per share on its Preferred Stock, equal to $0.5 million in the aggregate in respect of the GRE results of operations through December 31, 2022, which the Company expects to pay in May 2023.

On April 17, 2023, the Company’s Board of Directors declared aggregate dividends of $0.6895 per share on its the Preferred Stock, consisting of a quarterly Base Dividend of $0.1594 per share for the first quarter of 2023, and Additional Dividends of $0.5301 per share in respect of the GRE results of operations during the year ended December 31, 2022 as discussed above. The dividend will be paid on or about May 15, 2023 to stockholders of record as of the close of business May 5, 2023 and to the holders of Preferred Stock that was redeemed by the Company in the three months ended March 31, 2023.  

On May 3, 2023, the Company’s Board of Directors declared a quarterly dividend of $0.0750 per share on its Class A common stock and Class B common stock for the first quarter of 2023. The dividend will be paid on or about May 31, 2023 to stockholders of record as of the close of business on May 20, 2023.

The Delaware General Corporation Law allows companies to declare dividends out of “Surplus,” which is calculated by deducting the par value of the company’s stock from the difference between total assets and total liabilities. The Company has elected to record dividends declared against accumulated deficit.

Stock Repurchases and Redemption; Treasury Shares

 

On March 11, 2013, the Board of Directors of the Company approved a program for the repurchase of up to an aggregate of 7.0 million shares of the Company’s Class B common stock. There were no purchases under this program in the three months ended March 31, 2023 or 2022. At March 31, 2023, 4.7 million shares of Class B common stock remained available for repurchase under the stock repurchase program.

As of March 31, 2023 and December 31, 2022, there were 2.7 million outstanding shares of Class B common stock held in the Company's treasury, respectively, with a cost of  $19,175 million and $19.0 million, respectively, at a weighted average cost per share of $7.05.and $7.03, respectively.

On February 7, 2022, the Board of Directors of the Company authorized a program to redeem up to $1.0 million per quarter of the Company's Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the three months ended March 31, 2023, the Company redeemed 117,647 Preferred Stock under this program for an aggregate amount of $1.0 million. There was no redemption under this program in the three months ended March 31, 2022.

On April 17, 2023, the Company's Board of Directors approved the redemption of 117,647 shares of outstanding Preferred Stock on May 15, 2023 (the "Redemption Date") at a price of $8.50 per share equivalent to approximately $1.0 million in the aggregate, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date.

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On May 3, 2022, the Board of Directors authorized the redemption of $2.0 million of the Company's Preferred Stock during the second quarter of 2022, which the Company redeemed on June 13, 2022.

Warrants to Purchase Class B Common Stock

 

On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and then the holder of the controlling portion of the Company's common stock, shares of the Company’s Class B common stock and warrants to purchase an additional 1,048,218 shares of the Company’s Class B common stock at an exercise price of $4.77 per share for an aggregate exercise price of $5.0 million. The warrants will expire in June 2023. In addition, on June 12, 2018, the Company sold to a third-party investor treasury shares of the Company’s Class B common stock for an aggregate sales price of $1.0 million and warrants to purchase an additional 209,644 shares of the Company’s Class B common stock at an exercise price of $4.77 per share, for an aggregate exercise price of $1.0 million.

In May 2022, a holder of warrants exercised warrants to purchase 209,644 shares of Class B common stock warrants through a cashless exercise and the Company issued 72,657 common shares with the remaining 136,987 warrants being cancelled in payment of the exercise price.

As of March 31, 2023, there were outstanding warrants to purchase 1,048,218 shares of the Company’s Class B common stock at $4.77 per share, all of which will expire in June 2023.

Purchase of Equity of Subsidiaries 

 

In November 2022, the Company purchased from a certain employee 5.1% and 2.3% interests in Lumo Finland and Lumo Sweden, respectively, by issuing 123,302 shares of the Company's Class B restricted common stock, which will ratably vest on a bi-annual basis between May 2023 and up to May 2025.

Stock-Based Compensation 

 

The Company’s 2011 Stock Option and Incentive Plan (as amended, the "2011 Plan") is intended to provide incentives to executives, employees, directors and consultants of the Company. Incentives available under the Plan include stock options, stock appreciation rights, limited rights, deferred stock units, and restricted stock. The 2011 Plan expired in 2021 and no new grants are to be issued thereunder, however, outstanding grants are not impacted by the expiration of the plan.

On March 8, 2021, the Board of Directors adopted the Company 2021 Stock Option and Incentive Plan (the "2021 Plan"), subject to the approval of the Company's stockholders. In May 2021, the 2021 Plan became effective and replaced the 2011 Plan. Similar to the 2011 Plan, the 2021 Plan provides incentives to executives, employees, directors and consultants of the Company. Incentives available under the 2021 Plan include stock options, stock appreciation rights, limited stock appreciation rights, deferred stock units, and restricted stock. The Plan is administered by the Compensation Committee of the Company’s Board of Directors. The maximum number of shares reserved for the grant of awards under the 2021 Plan is 1.0 million shares of Class B Common Stock.

In February 2022, the Company granted certain employees and members of its Board of Directors an aggregate of 290,000 deferred stock units which will vest in two tranches contingent upon the achievement of a specified thirty-day average closing price of the Company's Class B common stock within a specified period of time (the "2022 market conditions") and the satisfaction of service-based vesting conditions. Each deferred stock unit entitles the recipient to receive, upon vesting, up to two shares of Class B common stock of the Company depending on market conditions. The Company used a Monte Carlo simulation model to estimate the grant-date fair value of the awards. Assumptions and estimates utilized in the model include the risk-free interest rate, dividend yield, expected stock volatility based on a combination of the Company’s historical stock volatility. In the second quarter of 2022, the 2022 market conditions were partially achieved and the Company issued 290,000 shares of its restricted Class B common stock. In February 2023, the remaining portion of the 2022 market conditions was achieved and, subject to amending the Company's 2021 Stock Option and Incentive Plan to reserve additional shares for issuance thereunder, the Company will issue an additional 290,000 restricted shares of its Class B common stock. The restricted shares to be issued will be subject to service-based vesting conditions as described above.

As of March 31, 2023, there were approximately $2.9 million of total unrecognized stock-based compensation costs related to outstanding and unvested equity-based grants. These costs are expected to be recognized over a weighted-average period of approximately 1.2 years. 

   

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Note 13—Variable Interest Entity

 

Citizens Choice Energy, LLC (“CCE”) is a REP that resells electricity and natural gas to residential and small business customers in the State of New York. The Company does not own any interest in CCE. Since 2011, the Company has provided CCE with substantially all of the cash required to fund its operations. The Company determined that it has the power to direct the activities of CCE that most significantly impact its economic performance and it has the obligation to absorb losses of CCE that could potentially be significant to CCE on a stand-alone basis. The Company therefore determined that it is the primary beneficiary of CCE, and as a result, the Company consolidates CCE within its GRE segment. The net income or loss incurred by CCE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.

 

The Company has an option to purchase 100% of the issued and outstanding limited liability company interests of CCE for one dollar plus the forgiveness of $0.5 million that the Company loaned to CCE in October 2015. The option expires on October 22, 2023.

 

Net loss related to CCE and aggregate net funding provided by the Company were as follows:  

 

	Three Months Ended March 31,
	2023					2022
	(in thousands)
Net loss	$		92			$	986
Aggregate provided by the Company, net	$		79			$	1,458

 

Summarized combined balance sheet amounts related to CCE was as follows:

 

		March 31, 2023				December 31, 2022
		(in thousands)
Assets
Cash, cash equivalents and restricted cash		$	328			$	295
Trade accounts receivable			480				549
Prepaid expenses and other current assets			322				363
Other assets			359				359
Total assets		$	1,489			$	1,566
Liabilities and noncontrolling interests
Current liabilities		$	641			$	700
Due to IDT Energy			6,076				5,997
Noncontrolling interests			(5,228	)			(5,131	)
Total liabilities and noncontrolling interests		$	1,489			$	1,566

 

The assets of CCE may only be used to settle obligations of CCE, and may not be used for other consolidated entities. The liabilities of CCE are non-recourse to the general credit of the Company’s other consolidated entities.

 

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Note 14—Income Taxes

 

The following table provides a summary of Company's effective tax rate:   

		Three Months Ended March 31,
		2023			2022
Reported tax rate		26.4	%		27.6	%

 

The reported tax rate for the three months ended March 31, 2023 was 26.4%, a decrease compared to the same period in 2022. The decrease is mainly from the change in the mix of tax rates in the jurisdictions where the Company earned taxable income. 

 

Note 15—Earnings Per Share

 

Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increases is anti-dilutive.   

 

The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:

 

	Three Months Ended March 31,
	2023				2022
	(in thousands)
Basic weighted-average number of shares		25,326				25,764
Effect of dilutive securities:
Stock options and warrants		805				308
Non-vested restricted Class B common stock		441				56
Unissued vested deferred stock units		48				—
Diluted weighted-average number of shares		26,620				26,128

 

Unissued vested deferred stock units in three months ended March 31, 2023 pertain to the weighted average of restricted shares of the company's Class B common stock that the Company expects to issue related to satisfaction of 2022 market conditions (see Note 12 — Equity). 

The following shares were excluded from the diluted earnings per share computations:  

 

	Three Months Ended March 31,
	2023				2022
	(in thousands)
Shares underlying options and warrants		—				126
Non-vested deferred stock units		—				580

Stock options were excluded from the diluted earnings per share computation for the three months ended March 31, 2022 because the exercise prices of the stock options were greater than the average market prices of the Company's stock during the period.

Non-vested deferred stock units were excluded from the basic and diluted weighted average shares outstanding calculation because the market conditions for vesting of those deferred stock units were not met as of March 31, 2022.

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Note 16—Related Party Transactions  

 

On December 7, 2020, the Company invested $5.0 million to purchase 218,245 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company, is also a related party. Rafael is a former subsidiary of IDT that was spun off from IDT in March 2018. Howard S. Jonas is the Executive Chairman and Chairman of the Board of Directors of Rafael. In connection with the purchase, Rafael issued to the Company warrants to purchase an additional 43,649 shares of Rafael's Class B common stock with an exercise price of $22.91 per share. The warrants had a term expiring on June 6, 2022. The Company exercised the warrants in full on March 31, 2021 for a total exercise price of $1.0 million. The Company does not exercise significant influence over the operating or financial policies of Rafael. In the three months ended March 31, 2023, the Company sold 195,501 shares of Class B common stock of Rafael for $0.3 million. For the three months ended March 31, 2023 and 2022 the Company recognized losses on investment of $0.1 million and $0.7 million, respectively, in connection with the investment. At March 31, 2023, the carrying values of the remaining investment in the common stock of Rafael was $0.1 million.   

The Company was formerly a subsidiary of IDT Corporation (“IDT”). On October 28, 2011, the Company was spun-off by IDT. The Company entered into various agreements with IDT prior to the spin-off including an agreement for certain services to be performed by the Company and IDT. The Company also provides specified administrative services to certain of IDT’s foreign subsidiaries. Howard Jonas is the Chairman of the Board of IDT.

 

The Company leases office space and parking in New Jersey. Until August 2022, the space was leased from Rafael. The leases expire in April 2025. On August 22, 2022, Rafael completed the sale of the leased office space and parking in New Jersey, including the lease of the Company, to a third-party buyer. 

The charges for services provided by IDT to the Company, and rent charged by Rafael, net of the charges for the services provided by the Company to IDT, are included in “Selling, general and administrative” expense in the consolidated statements of operations.  

 

	Three Months Ended  March 31,
	2023				2022
	(in thousands)
Amount IDT charged the Company	$	322			$	406
Amount the Company charged IDT	$	37			$	37
Amount Rafael charged the Company	$	—			$	58

 

The following table presents the balance of receivables and payables to IDT and Rafael:  

 

		March 31, 2023				December 31, 2022
		(in thousands)
Due to IDT		$	118			$	185
Due from IDT		$	20			$	20
Due to Rafael		$	—			$	—

 

On August 31, 2018, the Company extended a loan to a former employee for $0.1 million. The loan agreement requires scheduled payments from December 31, 2020 to December 2052. The loan bears the same interest equivalent to a minimum rate, in effect from time to time required by local regulations and is compounded annually. The Company recorded nominal amounts of interest income for the three months ended March 31, 2023 and 2022 related to this debt. The outstanding balance, including accrued interest was $0.1 million as of March 31, 2023. 

The Company obtains insurance policies from several insurance brokers, one of which is IGM Brokerage Corp. (“IGM”). IGM is owned by the mother of Howard S. Jonas and Joyce Mason, who is a Director and Corporate Secretary of the Company. Jonathan Mason, husband of Joyce Mason and brother-in-law of Howard S. Jonas, provides insurance brokerage services via IGM. Based on information the Company received from IGM, the Company believes that IGM received commissions and fees from payments made by the Company (including payments from third party brokers). The Company paid IGM a total of $0.5 million in 2022 related to premium of various insurance policies that were brokered by IGM. There was no outstanding payable to IGM as of March 31, 2023. Neither Howard S. Jonas nor Joyce Mason has any ownership or other interest in IGM other than via the familial relationships with their mother and Jonathan Mason.  

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On February 21, 2022, the Company entered into a Loan and Security Agreement to extend up to 5.5 million New Israel Shekel, or NIS (equivalent to $1.5 million) with Natan Ohayon (the "Ohayon Loan"). Natan Ohayon holds a minority interest in Petrocycle Ltd ("Petrocycle"), a subsidiary of the Company. Petrocycle is a preoperating entity engaged in the development of a process to recycle used engine oil into usable gasoline.  The Ohayon Loan, which is secured by all assets that Mr. Ohayon acquired using the proceeds of the loan bears a minimum interest as set by the Income Tax Regulations of Israel and is due, together with the principal amount on or before December 31, 2023. In 2022, the Company extended an additional NIS0.7 million (equivalent to $0.2 million) to Mr. Ohayon related to his share of operations of Petrocycle. In December 2022, the Company suspended the development of business operations of Petrocycle after it was determined that it will not meet the expected results. Petrocycle provided full impairment of its property and equipment, the Ohayon Loan and advances to Mr. Ohayon for an aggregate amount of $2.1 million.

Investments in Atid 613

 

In September 2018, the Company divested a majority interest in Atid Drilling Ltd. in exchange for a 37.5% interest in a contracting drilling company in Israel ("Atid 613") which the Company accounted for using equity method of accounting. The Company did not recognize any equity in net loss from Atid 613 for the Three Months Ended March 31, 2023 and 2022. In March 2023, the Company received $0.1 million from Atid 613 for the full settlement of its investments in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended March 31, 2023. The carrying value of the Company's investments in Atid was $0.1 million at December 31, 2022 included in other noncurrent assets in the consolidated balance sheets. 

Note 17—Business Segment Information 

 

The Company has two reportable business segments: GRE and Genie Renewables. Prior to In the third quarter 2022, following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate. GRE owns and operates REPs, including IDT Energy, Residents Energy, TSE, Southern Federal and Mirabito. GRE's REP businesses resell electricity and natural gas to residential and small business customers in the Eastern and Midwestern United States and Texas. Genie Renewables designs, manufactures and distributes solar panels, offers energy brokerage and advisory services and also sells third-party products to customers. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expenses and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any cost of revenues.

The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision-maker. 

The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.  

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Operating results for the business segments of the Company were as follows:

(in thousands)		GRE			Genie Renewables				Corporate				Total
Three Months Ended March 31, 2023
Revenues		$	101,412		$	3,864			$	—			$	105,276
Income (loss) from operations			16,445			(1,148	)			(4,022	)			11,275
Depreciation and amortization			83			13				—				96
Stock-based compensation			273			1				575				849
Provision for doubtful accounts receivables			574			—				—				574
Provision for (benefit from) income taxes			4,650			(315)				(267	)			4,068
Three Months Ended March 31, 2022
Revenues		$	83,884		$	2,042			$	—			$	85,926
Income (loss) from operations			30,176			(479	)			(2,735	)			26,962
Depreciation and amortization			85			11				—				96
Stock-based compensation			246			—				558				840
Provision for doubtful accounts receivables			392			—				—				392
Provision for (benefit from) income taxes			7,833			—				(721	)			7,112

Total assets for the business segments of the Company were as follows:

(in thousands)		GRE				Genie Renewables				Corporate				Total
Total assets:
March 31, 2023		$	209,483			$	15,680			$	67,847			$	293,010
December 31, 2022			191,839				12,191				73,585				277,615

The total assets of corporate segment includes total assets of discontinued operations of Orbit, Lumo Finland and Lumo Sweden with aggregate net book value of $48.3 million and $55.0 million at March 31, 2023 and December 31, 2022, respectively.

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Note 18 — Commitments and Contingencies

 

Legal Proceedings 

The Company may from time to time be subject to legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Refer to Note 5—Discontinued Operations and Divestiture, for discussion related to the administration of Orbit. 

 

Agency and Regulatory Proceedings 

From time to time, the Company receives inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and the Company responds to those inquiries or requests. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made.  

        

State of Connecticut Public Utilities Regulatory Authority

Residents Energy

 

In August 2020, Residents Energy began marketing retail energy services to Connecticut. For the year ended December 31, 2021, Residents Energy's gross revenues from sales in Connecticut was $0.2 million. During the fourth quarter of 2020, the enforcement division of PURA contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license, auditing of marketing practices upon reinstatement and an invitation for settlement discussions.

In June 2022, the parties settled the dispute. Pursuant to the terms of the settlement agreement, Residents Energy paid $0.3 million and volunteered to withdraw from the market in Connecticut for a period of 36 months.

 

Other Reviews or Investigations

From time to time regulators may initiate reviews, compliance checks or issue subpoenas for information as means to evaluate the Company and its subsidiaries’ compliance with applicable laws, rules, regulations and practices.

In 2019, the Office of the Attorney General of the State of Illinois ("IL AG") notified Residents Energy (by way of subpoena) that it was conducting an investigation to assess compliance with the Illinois Consumer Fraud and Deceptive Business Practices Act. Following a dispute between the Company and the IL AG regarding the merits of the subpoena and investigation, the IL AG filed and complaint in the Circuit Court of Cook County, Illinois (Chancery Division) seeking to enforce compliance. The scope of the subpoena was later modified in response to subsequent negotiations between the Company and the IL AG, and the Company has satisfied the requirements of the subpoena. In April 2023, the IL AG dismissed its complaint against the Company. For the three months ended March 31, 2023 and 2022, Resident Energy’s gross revenues from sales in Illinois were $13.6 million and $8.3 million, respectively.

 

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In response to certain customer complaints, the State of Maine Public Utility Commission ("MPUC") has opened a review of the door to door marketing practices of Town Square. In connection with the review, the MPUC has requested information from Town Square demonstrating compliance in the form of an order to show cause as to why its marketing practices are in compliance and it should be permitted to continue licensed operations in Maine. In August 2021, the parties settled the dispute without any obligation for payment by Town Square. In connection with the settlement, Town Square has agreed to voluntarily refrain from door-to-door marketing activities in Maine through June 30, 2023, and to voluntarily refrain from outbound telemarketing to obtain new residential customers for a period of six months, along with certain compliance procedures. For the three months ended March 31, 2023 and 2022, Town Square’s gross revenues from sales in Maine were $0.8 million and $0.4million, respectively.

Other Commitments

 

Purchase Commitments

 

The Company had future purchase commitments of $132.5 million at March 31, 2023, of which $114.8 million was for future purchase of electricity. The purchase commitments outstanding as of March 31, 2023 are expected to be paid as follows: 

(in thousands)
Remainder of 2022		$	71,164
2023			41,673
2024			16,701
2025			2,964
2026			—
Thereafter			—
Total payments		$	132,502

 

In the three months ended March 31, 2023, the Company purchased $15.8 million and $8.2 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the three months ended March 31, 2022, the Company purchased $20.1 million and $4.1 million of electricity and renewable energy credits, respectively, under these purchase commitments. 

Renewable Energy Credits 

 

GRE must obtain a certain percentage or amount of its power supply from renewable energy sources in order to meet the requirements of renewable portfolio standards in the states in which it operates. This requirement may be met by obtaining renewable energy credits that provide evidence that electricity has been generated by a qualifying renewable facility or resource. At March 31, 2023, GRE had commitments to purchase renewable energy credits of $17.7 million.

Performance Bonds and Unused Letters of Credit

 

GRE has performance bonds issued through a third party for certain utility companies and for the benefit of various states in order to comply with the states’ financial requirements for REPs. At March 31, 2023, GRE had aggregate performance bonds of $14.9 million outstanding and minimal amount of unused letters of credit.  

BP Energy Company Preferred Supplier Agreement

 

Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REPs’ customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2023, the Company was in compliance with such covenants. At March 31, 2023, restricted cash—short-term of $0.6 million and trade accounts receivable of $63.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $14.2 million at March 31, 2023.

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Note 19—Debt

On December 13, 2018, the Company entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On December 27, 2022, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date to December 31, 2023. The aggregate principal amount was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. The Company agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $3.1 million. As of March 31, 2023, there are no letters of credit issued by JP Morgan Chase Bank. At March 31, 2023, the cash collateral of $3.8 million was included in restricted cash—short-term in the consolidated balance sheet.

Note 20—Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company adopted the new standard on January 1, 2023 with no significant impact on its consolidated financial statements.  

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Item 2.       Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the U.S. Securities and Exchange Commission (or SEC).

 

As used below, unless the context otherwise requires, the terms “the Company,” “Genie,” “we,” “us,” and “our” refer to Genie Energy Ltd., a Delaware corporation, and its subsidiaries, collectively.

 

Forward-Looking Statements

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed below under Part II, Item IA and under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the year ended December 31, 2022.

Overview

 

We are comprised of Genie Retail Energy ("GRE") and Genie Renewables. In the third quarter of 2022, we discontinued the operations of Lumo Finland and Sweden as discussed below. Following this discontinuance of operations, Genie Retail Energy International ("GRE International") ceased to be a segment and the remaining assets and liabilities and results of any continuing operations of GRE International were combined with corporate.

GRE owns and operates retail energy providers ("REPs"), including IDT Energy, Residents Energy, Town Square Energy ("TSE"), Southern Federal and Mirabito Natural Gas. GRE's REPs' businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern and Midwestern United States and Texas.

Genie Renewables holds a 95.5% interest in  Genie Solar, a solar energy company, a 92.8% interest in CityCom Solar, a marketer of community solar energy solutions, a 96.0% interest in Diversegy, a broker for commercial customers, and a 60.0% interest in Prism Solar Solar Technology ("Prism"), a solar solutions company that is engaged in manufacturing of solar panels, solar installation design and solar energy project management.

As part of our ongoing business development efforts, we seek out new opportunities, which may include complementary operations or businesses that reflect horizontal or vertical expansion from our current operations. Some of these potential opportunities are considered briefly and others are examined in further depth. In particular, we seek out acquisitions to expand the geographic scope and size of our REP businesses.

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Discontinued Operations in Finland and Sweden

As a result of continued volatility in the energy market in Europe, in the third quarter of 2022, we decided to discontinue the operations of Lumo Energia Oyj ("Lumo Finland") and Lumo Energi AB ("Lumo Sweden"). From July 13, 2022 to July 19, 2022, the Company entered into a series of transactions to sell most of the electricity swap instruments held by Lumo Sweden for a gross aggregate amount of €41.1 million (equivalent to approximately $41.4 million at the dates of the transactions) before fees and other costs. The sale price is to be settled monthly based on the monthly commodity volume specified in the instruments from September 2022 to March 2025. The net book value of the instruments sold was €34.2 million (equivalent to $35.8 million).

In July 2022, Lumo Sweden entered into a transaction to transfer, effective August 5, 2022, its customers to a third party for nominal consideration. In August 2022 Lumo Finland entered in a transaction to transfer its variable rate customers to a third party for €$1.9 million (equivalent to $2.0 million), and transferred the fixed rate customers to other utilities with no considerations. 

We determined that exiting Finland and Sweden markets represented a strategic shift that would have a major effect on our operations and accordingly, presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022. Lumo Finland and Lumo Sweden will continue to liquidate their remaining receivables and settle any remaining liabilities.

In November 2022, Lumo Finland declared bankruptcy and the administration of Lumo Finland was transferred to an administrator (the "Lumo Administrator"). All assets and liabilities of Lumo Finland remain with Lumo Finland, in which Genie retains its interest, however, the management and control of Lumo Finland were transferred to the Lumo Administrator. Since the Company lost control of the management of Lumo Finland in favor of the Lumo Administrator, the accounts of Lumo Finland were deconsolidated effective November 9, 2022.

On November 3, 2022, we acquired additional minority interests in Lumo Finland and Lumo Sweden from an employee for 132,302 of our restricted Class B common stock, which will vest ratably from November 2022 to May 2025. We increased our interest in Lumo Finland from 91.6% to 96.6% and increased from 97.1% to 100% in Lumo Sweden.

Net loss from discontinued operations of Lumo Finland and Lumo Sweden, net of taxes was $0.2 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively. 

Following the discontinuance of operations of Lumo Finland and Lumo Sweden, GRE International ceased to be a segment and the remaining assets and liabilities and results of continuing operations of GRE International were combined with corporate.

 

Discontinued Operations in United Kingdom

 

In 2021, the natural gas and energy market in the United Kingdom deteriorated which prompted us to suspend the then contemplated spin-off of our international operations and start the process of orderly withdrawal from the U.K. market. In October 2021, as part of the orderly exit process from the U.K. market, Orbit Energy Limited ("Orbit"), a REP that used to operate in the U.K., and Shell U.K. Limited ("Shell") agreed to terminate the exclusive supply contract between them. As part of the termination agreement, Orbit was required to unwind all physical forward hedges with Shell which resulted in net cash proceeds after settlement of all related liabilities with Shell. A portion of the net cash proceeds was transferred to us (see Note 5, Discontinued Operations and Divestiture, to our financial statements included elsewhere in this Quarterly Report on Form 10-Q).

Following the termination of the contract between Orbit and Shell, we filed a petition with the High Court of Justice Business and Property of England and Wales (the “Court”) to declare Orbit insolvent based on the Insolvency Act of 1986. On November 29, 2021, the Court declared Orbit insolvent based on the Insolvency Act of 1986, revoked Orbit's license to supply electricity and natural gas in the United Kingdom, ordered that Orbit's current customers be transferred to a “supplier of last resort” and transferred the administration of Orbit to Administrators effective December 1, 2021. All of the customers of Orbit were transferred to a third-party supplier effective December 1, 2021 as ordered by the Court. All assets and liabilities of Orbit, including cash and receivables remain with Orbit, the management and control of which was transferred to Administrators.

We determined that exiting the United Kingdom represented a strategic shift that would have a major effect on our operations and accordingly, presented the results of operations and related cash flows as discontinued operations for all periods presented. The assets and liabilities of the discontinued operations have been presented separately, and are reflected within assets and liabilities from discontinued operations in the accompanying consolidated balance sheets as of March 31, 2023 and December 31, 2022.

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Coronavirus Disease (COVID-19)

Starting in the first quarter 2020, the world and the United States experienced the unprecedented impact of the coronavirus disease 2019 (COVID-19) pandemic.

The COVID-19 pandemic has impacted our business, however, as we progressed through 2022 and have entered 2023, our service territories have reopened, and we expect the impacts of the pandemic will be less severe than in prior years. This was the case in the three months period ended March 31, 2023. COVID-19 pandemic has affected and may continue to affect our results of operations, financial conditions and cash flows in the future.

There are many uncertainties regarding the impact of the COVID-19 pandemic, and we are closely monitoring those impacts on all aspects of our business, including how it will impact our customers, employees, suppliers, vendors and business partners. 

Genie Retail Energy

 

GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 96.3% and 97.6% of our consolidated revenues in the three months ended March 31, 2023 and 2022, respectively.

.

Seasonality and Weather; Climate Change and Volatility in Pricing

 

The weather and the seasons, among other things, affect GRE’s REPs' revenues. Weather conditions have a significant impact on the demand for natural gas used for heating and electricity used for heating and cooling. Typically, colder winters increase demand for natural gas and electricity, and hotter summers increase demand for electricity. Milder winters and/or summers have the opposite effects. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme, which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 39.7% and 44.5% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2022 and 2021 respectively, when demand for heating was highest. Although the demand for electricity is not as seasonal as natural gas (due, in part, to usage of electricity for both heating and cooling), approximately 30.5% and 30.3% of GRE’s electricity revenues for 2022 and 2021 respectively, were generated in the third quarters of those years. GRE's REP's revenues and operating income are subject to material seasonal variations, and the interim financial results are not necessarily indicative of the estimated financial results for the full year.

In addition to the direct physical impact that climate change may have on our business, financial condition and results of operations because of the effect on pricing, demand for our offerings and/or the energy supply markets, we may also be adversely impacted by other environmental factors, including: (i) technological advances designed to promote energy efficiency and limit environmental impact; (ii) increased competition from alternative energy sources; (iii) regulatory responses aimed at decreasing greenhouse gas emissions; and (iv) litigation or regulatory actions that address the environmental impact of our energy products and services.

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Purchase of Receivables and Concentration of Credit Risk

 

Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which GRE operates. GRE’s REPs reduce their customer credit risk by participating in POR programs for a majority of their receivables. In addition to providing billing and collection services, utility companies purchase those REPs’ receivables and assume all credit risk without recourse to those REPs. GRE’s REPs’ primary credit risk is therefore nonpayment by the utility companies. In the three months ended March 31, 2023 the associated cost was approximately 0.9% of GRE revenue. At March 31, 2023, 83.8% of GRE’s net accounts receivable were under a POR program. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.

The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10.0% of consolidated net trade receivables at March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated net trade receivable as of March 31, 2023 or December 31, 2022).

		March 31, 2023				December 31, 2022
Customer A			10.9	%			10.2	%
Customer B			11.0				na

na—less than 10.0% of consolidated net trade receivables

The following table summarizes the percentage of revenues by customers that equal or exceed 10.0% of consolidated revenues for the March 31, 2023 and December 31, 2022 (no other single customer accounted for 10.0% or greater of our consolidated revenues for the March 31, 2023 and December 31, 2022):

			Three Months Ended September 30
		2023				2022
Customer A			na	%			10.4	%

na—less than 10.0% of consolidated revenue in the period 

Legal Proceedings

Although GRE endeavors to maintain best sales and marketing practices, such practices have been the subject of class action lawsuits in the past.

See Note 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference. 

 

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Agency and Regulatory Proceedings

From time to time, the Company responds to inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes. The Company cannot predict whether any of those matters will lead to claims or enforcement actions or whether the Company and the regulatory parties will enter into settlements before a formal claim is made. See Notes 18, Commitments and Contingencies, in this Quarterly Report on Form 10-Q, which is incorporated by reference, for further detail on agency and regulatory proceedings.

 

State of Connecticut Public Utilities Regulatory Authority

Residents Energy

In August of 2020, Residents Energy began marketing retail energy services in Connecticut. For the year ended December 31, 2021 Residents Energy's gross revenues from sales in Connecticut was $0.2 million. During the fourth quarter of 2020, the enforcement division of the State of Connecticut Public Utilities Regulatory Authority ("PURA") contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license for eighteen months, auditing of marketing practices upon reinstatement and an invitation for settlement discussions. 

In May 2021, the parties reached a settlement, pursuant to which Residents will pay $0.3 million. Residents Energy has also volunteered to withdraw from the market in Connecticut for a period of 36 months.

 

Critical Accounting Policies

 

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require the application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, allowance for doubtful accounts, acquisitions, goodwill, and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Issued Accounting Standards

 

Information regarding new accounting pronouncements is included in Note 20—Recently Issued Accounting Standards, to the current period’s consolidated financial statements.

 

Results of Operations

 

We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations. 

 

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Three Months Ended March 31, 2023  Compared to Three Months Ended March 31, 2022

 

Genie Retail Energy Segment

  

 

		Three months ended March 31,								Change
(amounts in thousands)		2023				2022				$				%
Revenues:
Electricity		$	74,487			$	59,380			$	15,107				25.4	%
Natural gas			26,925				24,504				2,421				9.9
Total revenues			101,412				83,884				17,528				20.9
Cost of revenues			68,874				37,301				31,573				84.6
Gross profit			32,538				46,583				(14,045	)			(30.2	)
Selling, general and administrative expenses			16,093				16,407				(314	)			(1.9	)
Income from operations		$	16,445			$	30,176			$	(13,731	)			(45.5	)%

 

Revenues. Electricity revenues increased by 25.4% in the three months ended March 31, 2023 compared to the same period in 2022. The increase was due to increases in electricity consumption and the average price per kilowatt hour charged to customers in the three months ended March 31, 2023 compared to the same period in 2022. Electricity consumption by GRE’s REPs' customers increased by 4.5% in the three months ended March 31, 2023, compared to the same period in 2022, reflecting a 16.2% increase in the average number of meters served partially offset by a 10.1% decrease in average consumption per meter. Electricity consumption per meter decreased in the three months ended March 31, 2023 due to milder weather conditions in our service areas compared to the same period in 2022. The increase in meters served was driven by a restart of customer acquisition efforts. The average rate per kilowatt hour sold increased 20.1% in the three months ended March 31, 2023 compared to the same period in 2022  due to increases in the average wholesale price of electricity.   

 

GRE’s natural gas revenues increased by 9.9% in the three months ended March 31, 2023 compared to the same period in 2022.  The increase in natural gas revenues in the three months ended March 31, 2023 compared to the same period in 2022 was a result of an increase in average revenue per therm sold partially offset by a slight decrease in natural gas consumption. The average revenue per therm sold increased by 10.8% in the three months ended March 31, 2023, compared to the same period in 2022. Natural gas consumption by GRE’s REPs’ customers decreased by 0.8% in the three months ended March 31, 2023 compared to the same period in 2022, reflecting an 8.1% decrease in average consumption per meter partially offset by 7.9% increase in average meters served in the three months ended March 31, 2023 compared to the same period in 2022. 

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The customer base for GRE’s REPs as measured by meters served consisted of the following: 

 

(in thousands)		March 31, 2023			December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
Meters at end of quarter:
Electricity customers		271				196				193				203				209
Natural gas customers		78				79				77				77				77
Total meters		349				275				270				280				286

 

Gross meter acquisitions in the three months ended March 31, 2023, were 129,000 compared to 44,000 for the same period in 2022. The increase in the gross meter acquisitions for the three months ended March 31, 2023 compared to the same period in 2022 was due to a “strategic pause” on certain customer acquisition channels that started in the fourth quarter 2021. In the first quarter of 2023, we resumed customer acquisition activities using a variety of new channels. 

Meters served increased by 74,000 meters or 26.9% from December 31, 2022 to March 31, 2023. Meters served increased by 63,000 meters or 22.0% from March 31, 2022 to March 31, 2023. The increases in the number of meters served at March 31, 2023 compared to December 31, 2022 and March 31, 2022 was due to the resumption of customer acquisition activities as discussed above. In the three months ended March 31, 2023, average monthly churn increased to 4.4% compared to 4.5% for same period in 2022. 

The average rates of annualized energy consumption, as measured by RCEs, are presented in the chart below. An RCE represents a natural gas customer with annual consumption of 100 mmbtu or an electricity customer with annual consumption of 10 MWh. Because different customers have different rates of energy consumption, RCEs are an industry standard metric for evaluating the consumption profile of a given retail customer base. 

 

(in thousands)		March 31, 2023			December 31, 2022				September 30, 2022				June 30, 2022				March 31, 2022
RCEs at end of quarter:
Electricity customers		276				181				174				185				182
Natural gas customers		77				81				77				77				78
Total RCEs		353				262				251				262				260

 

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RCEs increased 35.8% at March 31, 2023 compared to March 31, 2022. RCEs increased by 34.7% at March 31, 2023 compared to December 31, 2022. The increase is due to the resumption of customer acquisition activities as discussed above.

 

Cost of Revenues and Gross Margin Percentage. GRE’s cost of revenues and gross margin percentage were as follows:  

		Three Months Ended March 31,								Change
(amounts in thousands)		2023				2022				$				%
Cost of revenues:
Electricity		$	45,766			$	25,197			$	20,569				81.6	%
Natural gas			23,108				12,104				11,004				90.9
Total cost of revenues		$	68,874			$	37,301			$	31,573				84.6	%

 

		Three months ended March 31,
(amounts in thousands)		2023				2022				Change
Gross margin percentage:
Electricity		38.6	%			57.6	%			(19.0	)%
Natural gas		14.2				50.6				(36.4	)
Total gross margin percentage		32.1	%			55.5	%			(23.4	)%

Cost of revenues for electricity increased in the three months ended March 31, 2023 compared to the same period in 2022 primarily because of increases in electricity consumption by GRE’s REPs’ customers and the average unit cost of electricity. The average unit cost of electricity increased 73.9% in the three months ended March 31, 2023 compared to the same period in 2022. The significant increase is due to a rise in the wholesale price of electricity during the three months ended March 31, 2023 compared to the same period in 2022. The gross margin on electricity sales decreased in the three months ended March 31, 2023 compared to the same period in 2022 because the average rate charged to customers increased less than the increase in the average unit cost of electricity.   

 

Cost of revenues for natural gas increased in the three months ended March 31, 2023 compared to the same period in 2022 primarily because of increases in natural gas consumption by GRE's REPs' customers and in the average unit cost of natural gas. The average unit cost of natural gas increased by 92.5% per therm in the three months ended March 31, 2023 compared to the same period in 2022. The significant increase is due to a rise in the wholesale price of natural gas during the three months ended March 31, 2023 compared to the same period in 2022. Gross margin on natural gas sales decreased in the three months ended March 31, 2023 compared to the same period in 2022 because the average rate charged to customers increased less than the increase in the average unit cost of natural gas.

 

Selling, General and Administrative. The decrease in selling, general and administrative expenses in the three months ended March 31, 2023 compared to the same period in 2022 was primarily due to decreases in employee-related costs and POR program fees, partially offset by an increase in marketing and customer acquisition cost. Employee-related expenses decreased by $0.5 million in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to a decrease in accrued bonuses as a result of a decrease in the income from operations of GRE. Marketing and customer acquisition expenses increased by $0.3 million in the three months ended March 31, 2023 compared to the same period in 2022 as a result of an increase in the number of meters acquired. POR program fees decreased by $0.1 million in the three months ended March 31, 2023 compared to the same period in 2022 as a result of changes in rates implemented by several utilities. As a percentage of GRE’s total revenues, selling, general and administrative expense increased from 19.6% in the three months ended March 31, 2022 to 15.9% in the three months ended March 31, 2023. 

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Genie Renewables Segment

 

The Genie Renewables (formerly GES) segment is composed of Genie Solar, CityCom Solar, Diversegy and Prism. Genie Solar is an integrated solar energy company. CityComm Solar is a marketer of community solar energy solutions. Diversegy provides energy brokerage and advisory services to commercial customers. Prism provides solar and manufacturing of solar panels, solar installation design and solar energy project management.

		Three Months Ended March 31,								Change
(amounts in thousands)		2023				2022				$				%
Revenues		$	3,864			$	2,042			$	1,822				89.2	%
Cost of revenue			3,116				1,518				1,598				105.3
Gross profit			748				524				224				42.7
Selling, general and administrative expenses			1,896				1,003				893				89.0
Loss from operations		$	(1,148	)		$	(479	)		$	669				139.7	%

Revenue. Genie Renewables' revenues increased in the three months ended March 31, 2023 compared to the same period in 2022. The increase in revenues was the result of increases in revenues from commissions from selling third-party products to customers by CityCom Solar and revenues from Diversegy that includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses.

Cost of Revenues. Cost of revenue increased in the three months ended March 31, 2023 compared to the same period in 2022. The increase in the cost of revenues reflects the increase in revenues of CityCom Solar and Diversegy.

Selling, General and Administrative. Selling, general and administrative expenses increased in the three months ended March 31, 2023 compared to the same period in 2022 primarily due to increases in headcount in Genie Solar and Diversegy and consulting fees and warehousing costs at Genie Solar.

Corporate

 

As discussed above, the remaining accounts of GRE International were transferred to corporate starting in the third quarter of 2022. Entities under corporate do not generate any revenues, nor does it incur any cost of revenues. Corporate costs include unallocated compensation, consulting fees, legal fees, business development expense and other corporate-related general and administrative expenses. 

		Three Months Ended March 31,								Change
(amounts in thousands)		2023				2022				$				%
General and administrative expenses and loss from operations		$	(4,022	)		$	(2,735	)		$	1,287				47.1	%

Corporate general and administrative expenses increased in the three months ended March 31, 2023 compared to the same period in 2022 primarily because of increase in employee related cost. As a percentage of our consolidated revenues, Corporate general and administrative expense increased to 3.8% in the three months ended March 31, 2023 from 3.2% in the three months ended March 31, 2022.

 

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Consolidated

 

Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expense was $0.9 million in each of the three months ended March 31, 2023 and 2022. At March 31, 2023, the aggregate unrecognized compensation cost related to non-vested stock-based compensation was $4.1 million. The unrecognized compensation cost is recognized over the expected service period.

 

The following is a discussion of our consolidated income and expense line items below income from operations: 

 

		Three Months Ended March 31,								Change
(amounts in thousands)		2023				2022				$				%
Income from operations		$	11,275			$	26,962			$	(15,687	)			(58.2	)%
Interest income			974				17				957				nm
Interest expense			(19	)			(50	)			(31	)			(62.0	)
Other income (loss), net			3,246				(498	)			3,744				nm
Loss on marketable equity securities and investments			(71	)			(652	)			(581	)			(89.1	)
Provision for benefit from income taxes			(4,068	)			(7,112	)			(3,044	)			(42.8	)
Net income from continuing operations			11,337				18,667				(7,330	)			(39.3	)
Income (loss) from discontinued operations, net of tax			3,055				(1,932	)			4,987				258.1
Net income			14,392				16,735				(2,343	)			(14.0	)
Net loss attributable to noncontrolling interests			(39	)			(1,154	)			(1,115	)			(96.6	)
Net income attributable to Genie Energy Ltd.		$	14,431			$	17,889			$	(3,458	)			(19.3	)%

 

nm—not meaningful

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Interest income.  Interest income increased in the three months ended March 31, 2023, compared to the same period in 2022 primarily due to increases in average cash and cash equivalents during the period and significant increases in average effective interest rates on those balances.

Other Income (Loss), net.  Other income (loss), net in the three months ended March 31, 2023 consisted primarily of on-time tax credit related to payroll taxes incurred in prior years. Other income (loss), net in the three months ended March 31, 2023 also includes net equity in net income of equity methods investees. Other income (loss), net in the three months ended March 31, 2022 consisted primarily of foreign currency transactions and equity in net loss in equity method investees. 

 

Provision for Income Taxes. The change in the reported tax rate for the three months ended March 31, 2023 compared to the same periods in 2022, is the result of changes in the mix of jurisdiction in which taxable income was earned.

Net Loss Attributable to Noncontrolling Interests. The decrease in net loss attributable to noncontrolling interests in the three months ended March 31, 2023 compared to the same periods in 2022 was primarily due to a decrease in the share of noncontrolling interest in the net income of Lumo Sweden and Lumo Finland as well as a decrease in losses incurred by Citizens Choice Energy.

Loss on Marketable Equity Securities and Investments. The loss on marketable equity securities and investment for the three months ended March 31, 2023 pertains to the change in fair value of the Company's investments in common stock of Rafael Holdings, Inc. ("Rafael") which the Company acquired in December 2020. As discussed above, we sold a large portion of our holdings in the common stock of Rafael in the first quarter of 2023.

Income (Loss) from Discontinued Operations, net of tax. Income from discontinued operations, net of tax in the three months ended March 31, 2023 is mainly from an increase in the estimated value of our investments in Orbit and foreign exchange gain in Lumo Sweden. Loss from discontinued operations, net of tax in the three months ended March 31, 2022 is mainly due to results of operations of Lumo Finland and Lumo Sweden. 

 

Liquidity and Capital Resources  

 

General

 

We currently expect that our cash flow from operations and the $105.2 million balance of unrestricted cash and cash equivalents that we held at March 31, 2023 will be sufficient to meet our currently anticipated cash requirements for at least the period to May 9, 2024.

 

At March 31, 2023, we had working capital (current assets less current liabilities) of $142.4 million.

 

		Three Months Ended March 31,
		2023				2022
		(in thousands)
Cash flows provided by (used in):
Operating activities		$	1,520			$	18,199
Investing activities			(4,162	)			(1,628	)
Financing activities			(3,273	)			(2,375	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash			(10	)			27
Increase in cash, cash equivalents and restricted cash of continuing operations			(5,925	)			14,223
Cash flows provided by (used in) discontinued operations			9,714				(21,691	)
Net increase (decrease) in cash, cash equivalents and restricted cash		$	3,789			$	(7,468	)

 

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Operating Activities

 

Cash, cash equivalents and restricted cash provided by operating activities of continuing operations was $1.5 million in the three months ended March 31, 2023 compared to net cash used in operating activities of continuing operations of $18.2 million in the three months ended March 31, 2022. The decrease is primarily the fluctuation in the results of operations in the three months ended March 31, 2023 compared to the same period in 2022.

 

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Changes in assets and liabilities decreased cash flows by $9.0 million for the three months ended March 31, 2023, compared to the same period in 2022. 

 

Certain of GRE's REPs are party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is to be in effect through November 30, 2023. Under the agreement, the REPs purchase electricity and natural gas at market rate plus a fee. The obligations to BP are secured by a first security interest in deposits or receivables from utilities in connection with their purchase of the REP’s customer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At March 31, 2023, we were in compliance with such covenants. At March 31, 2023, restricted cash—short-term of $0.6 million and trade accounts receivable of $63.1 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $14.2 million at March 31, 2023.

We had purchase commitments of $132.5 million at March 31, 2023, of which $114.8 million was for purchases of electricity.

From time to time, we receive inquiries or requests for information or materials from public utility commissions or other governmental regulatory or law enforcement agencies related to investigations under statutory or regulatory schemes, and we respond to those inquiries or requests. We cannot predict whether any of those matters will lead to claims or enforcement actions.

 

Investing Activities

 

Our capital expenditures were $0.1 million for each of the three months ended March 31, 2023 and 2022. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2023 will be between $15.0 to $20.00 million mostly related to the solar projects of Genie Renewables.

In 2020 and 2021, we invested an aggregate of $6.0 million for 261,984 shares of Class B common stock of Rafael Holdings, Inc. ("Rafael"). Rafael, a publicly-traded company, that is also a related party. We do not exercise significant influence over the operating or financial policies of Rafael. In the three months ended March 31, 2023, we sold 195,501 shares of our Class B common stock of Rafael for $0.3 million. At March 31, 2023, the carrying value of the remaining investments in the Class B common stock of Rafael was $0.1 million.

In the three months ended March 31, 2023, we invested $4.6 million to purchase the common stock of a publicly traded company. At March 21, 2023, the carrying value of our investments in the marketable equity securities was $4.6 million.

In March 2023, the Company received $0.1 million from Atid 613 Drilling Ltd. ("Atid 613") for the full settlement of its investment in Atid 613. The Company recognized a minimal gain from settlement of investment included in other income (loss), net in its consolidated statements of operations for the three months ended March 31, 2023.

In the three months ended March 31, 2022, we acquired minimal interests in various ventures for an aggregate amount of investments of $0.2 million.

On February 21, 2022, we entered into a Loan and Security Agreement to extend up to 5.5 million New Israel Shekel, or NIS (equivalent to $1.5 million as at March 31, 2023) with Natan Ohayon (the "Ohayon Loan"). Natan Ohayon holds a minority interest in Petrocycle Ltd ("Petrocycle"), a subsidiary of the Company. Petrocycle is a preoperating entity engaged in the development of a process to recycle used engine oil into usable gasoline.  The Ohayon Loan, which is secured by all assets that Mr. Ohayon acquired using the proceeds of the loan bears a minimum interest as set by the Income Tax Regulations of Israel (3.23% in 2022) and is due, together with the principal amount on or before December 31, 2023. In December 2022, the Company suspended the development of business operations of Petrocycle after it was determined that the current operations will not meet the expected results. Petrocycle provided full impairment of its property and equipment and notes and other receivables from its minority interest partner for an aggregate amount of $2.1 million.

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In the fourth quarter of 2021, Orbit transferred to GEIC a net amount of $49.7 million from the proceeds of the settlement of the contract with Shell which is included in cash and cash equivalents in the consolidated balance sheet as of December 31, 2021. In January 2022, we transferred $21.5 million to the Administrators of Orbit to fund the settlement of the expected remaining liabilities of Orbit of $30.8 million, which were included in the current liabilities of discontinued operations in the consolidated balance sheet as of December 31, 2021. In February 2022, we deposited $28.3 million into an attorney trust account to hold, preserve, and dispense funds to the extent needed in connection with the administration process. On February 24, 2022, the Administrators filed a petition under Chapter 15 of the U.S. Bankruptcy Code with the Bankruptcy Court of the Southern District of New York seeking (i) recognition of the U.K. administration proceeding as a foreign main proceeding and the U.K. Administrators as its foreign representatives, and (ii) entrusting distribution of the funds the Company deposited into its attorney’s trust fund to the U.K. Administrators. In the second quarter of 2022, the Administrators filed an application to transfer the funds back to the Administrators’ control in the U.K. Subject to certain representations and expectations regarding use and application of the funds to efficiently and expeditiously pay off creditors and bring a timely close to the insolvency administration, we decided not to oppose the application, and the Court transferred the $28.3 million to the Administrator. In August 2022, the Administrator paid the Company a partial return of its interest in Orbit of  £4.6 million (equivalent to $5.4 million). In the three months ended March 31, 2023, the Administrator paid a partial return of its interest in Orbit of £0.4 million (equivalent to $0.5 million). We believe that the funds are more than sufficient to pay any remaining creditors of Orbit (with any surplus, which we expect to be significant, to be returned to us).

Financing Activities

 

In the three months ended March 31, 2023 and 2022, we paid aggregate quarterly Base Dividends of $0.1594 per share of our 2021-A Preferred Stock or Preferred Stock. We paid $0.2 million and $0.4 million for the three months ended March 31, 2023 and 2022, respectively. On April 17, 2023, our Board of Directors declared aggregate dividends of $0.6895 per share on the Preferred Stock, consisting of a quarterly Base Dividend of $0.1594 per share for the first quarter of 2023, and Additional Dividends of $0.5301 per share in respect of the GRE results of operations during the year ended December 31, 2022. The dividend will be paid on or about May 15, 2023 to stockholders of record as of the close of business May 5, 2023 and to the holders of Preferred Stock that we redeemed in the three months ended March 31, 2023.

In the three months ended March 31, 2023 and 2022, we paid aggregate quarterly dividends of $0.075 per share to stockholders of our Class A common stock and Class B common stock. The Company paid $2.0 million and $1.9 million for the three months ended March 31, 2023 and 2022. On May 3, 2023, our Board of Directors declared a quarterly dividend of $0.075 per share on our Class A common stock and Class B common stock. The dividend will be paid on or about May 31, 2023 to stockholders of record as of the close of business on May 20, 2023.

On March 11, 2013, our Board of Directors approved a program for the repurchase of up to an aggregate of 7.0 million shares of our Class B common stock. There were no repurchases under this program in the three months ended March 31, 2023 and 2022. At March 31, 2023, 4.7 million shares of Class B common stock remained available for repurchase under the stock repurchase program.

On February 7, 2022, our Board of Directors of the Company authorized a program to redeem up to $1.0 million per quarter of our Preferred Stock at the liquidation preference of $8.50 per share beginning in the second quarter of 2022. In the three months ended March 31, 2023, the Company redeemed 117,647 Preferred Stock under the stock purchase program for an aggregate amount of $1.0 million. 

On April 17, 2023,the Company's Board of Directors approved the redemption of 117,647 shares of outstanding Preferred Stock on May 15, 2023 (the "Redemption Date") at a price of $8.50 per share equivalent to approximately $1.0 million, together with an amount equal to all dividends accrued and unpaid up to, but not including, the Redemption Date.

 

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On December 13, 2018, we entered into a Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”). On December 27, 2022, the Company entered into the third amendment of its existing Credit Agreement to extend the maturity date of December 31, 2023. The aggregate principal amount was reduced to $3.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on the unused portion of the Credit Line as specified in the Credit Agreement. The borrowed amounts will be in the form of letters of credit which will bear interest of 1.0% per annum. The Company will also pay a fee for each letter of credit that is issued equal to the greater of $500 or 1.0% of the original maximum available amount of the letter of credit. We agreed to deposit cash in a money market account at JPMorgan Chase Bank as collateral for the line of credit equal to $3.1 million. As of March 31, 2023, there is no issued letter of credit from the Credit Line. At March 31, 2023, the cash collateral of $3.8 million was included in restricted cash—short-term in the consolidated balance sheet. 

In the three months ended March 31, 2023, we paid $0.2 million to repurchase 15,986 shares of our Class B common stock of our Class B common stock tendered by our employees and an officer to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.  

Off-Balance Sheet Arrangements

 

We do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following. GRE has performance bonds issued through a third party for the benefit of certain utility companies and for various states in order to comply with the states’ financial requirements for retail energy providers. At March 31, 2023, the Company had outstanding aggregate performance bonds of $14.9 million and a minimal amount of unused letters of credit.  

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Item 3.        Quantitative and Qualitative Disclosures About Market Risks.

 

Our primary market risk exposure is the price applicable to our natural gas and electricity purchases and sales. The sales price of our natural gas and electricity is primarily driven by the prevailing market price. Hypothetically, for our GRE segment, if our gross profit per unit in the three months ended March 31, 2023 had remained the same as in the three months ended March 31, 2022, our gross profit from electricity sales would have increased by $7.0 million and our gross profit from natural gas sales would have increased by $8.5 million in the three months ended March 31, 2023. 

The energy markets have historically been very volatile, and we can reasonably expect that electricity and natural gas prices will be subject to fluctuations in the future. In an effort to reduce the effects of the volatility of the price of electricity and natural gas on our operations, we have adopted a policy of hedging electricity and natural gas prices from time to time, at relatively lower volumes, primarily through the use of put and call options and swaps. While the use of these hedging arrangements limits the downside risk of adverse price movements, it also limits future gains from favorable movements. We do not apply hedge accounting to these options or swaps, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. We recognized losses from derivative instruments of $11.2 million for the three months ended March 31, 2023 and gains of $37.5 million in the three months ended March 31, 2022 from our derivative instruments. Refer to Note 7 – Derivative Instruments, for details of the hedging activities.

 

Item 4.             Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 

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PART II. OTHER INFORMATION

 

Item 1.       Legal Proceedings

 

Legal proceedings in which we are involved are more fully described in Note 18 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Item 1A.       Risk Factors

 

There are no material changes from the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

 

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

 

The following table provides information with respect to purchases by us of shares of our Class B common stock during the first quarter of 2023:

 

		Total Number of  Shares Purchased				Average Price per Share				Total Number  of Shares Purchased as  part of Publicly  Announced Plans or  Programs				Maximum  Number of  Shares that  May Yet Be Purchased Under the  Plans or Programs (1)
January 1–31, 2023			14,217			$	10.14				—				4,668,973
February 1–28, 2023			—	(2)			—				—				4,668,973
March 1–31, 2023			1,769				11.59				—				4,668,973
Total			15,986			$	10.30				—

 

(1)	Under our existing stock repurchase program, approved by our Board of Directors on March 11, 2013, we were authorized to repurchase up to an aggregate of 7.0 million shares of our Class B common stock.
(2)	Consists of Class B Common stock that we tendered by the employees of ours to satisfy the tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.

 

The following table provides information with respect to redemption by us of shares of our Preferred stock during the first quarter of 2023:

 

		Total Number of  Shares Redeemed				Average  Redemption Price per Share				Total Number  of Shares Redeemed as  part of Publicly  Announced Plans or  Programs				Maximum  Number of  Shares that  May Yet Be Redeemed Under the  Plans or Programs
January 1–31, 2023			—			$	—				—			$	983,835
February 1–28, 2023			117,647				8.50				117,647				866,188
March 1–31, 2023			—				—				—				866,188
Total			117,647			$	8.50				117,647

Item 3.         Defaults upon Senior Securities

 

None

 

Item 4.          Mine Safety Disclosures

 

Not applicable

 

Item 5.           Other Information

 

None 

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Item 6.       Exhibits

 

Exhibit Number		Description
31.1*		Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Label Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Filed or furnished herewith.

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	Genie Energy Ltd.
May 9, 2023	By:	/s/ Michael M. Stein
		Michael M. Stein Chief Executive Officer
May 9, 2023	By:	/s/ Avi Goldin
		Avi Goldin Chief Financial Officer

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