Genie Energy Ltd. - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED June 30, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-35327

GENIE ENERGY LTD.

(Exact Name of Registrant as Specified in its Charter)

Delaware		45-2069276
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

520 Broad Street, Newark, New Jersey		07102
(Address of principal executive offices)		(Zip Code)

(973) 438-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b)-2 of the Exchange Act:

Title of each Class	Trading Symbol	Name of exchange of which registered
Class B common stock, par value $0.01 per share	GNE	New York Stock Exchange
Series 2012-A Preferred stock, par value $0.01 per share	GNE-PRA	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

As of August 5, 2020, the registrant had the following shares outstanding:

Class A common stock, $0.01 par value:	1,574,326 shares
Class B common stock, $0.01 par value:	24,520,245 shares (excluding 1,285,128 treasury shares)

GENIE ENERGY LTD.

TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION			1

	Item 1.	Financial Statements (Unaudited)	1

		CONSOLIDATED BALANCE SHEETS	1

		CONSOLIDATED STATEMENTS OF OPERATIONS	2

		CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	3

		CONSOLIDATED STATEMENTS OF EQUITY	4

		CONSOLIDATED STATEMENTS OF CASH FLOWS	6

		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

	Item 3.	Quantitative and Qualitative Disclosures About Market Risks	#

	Item 4.	Controls and Procedures	#

PART II. OTHER INFORMATION			40

	Item 1.	Legal Proceedings	#

	Item 1A.	Risk Factors	40

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

	Item 3.	Defaults upon Senior Securities	40

	Item 4.	Mine Safety Disclosures	40

	Item 5.	Other Information	40

	Item 6.	Exhibits	41

SIGNATURES			42

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

GENIE ENERGY LTD.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

	June 30, 2020			December 31, 2019
	(Unaudited)			(Note 1)
Assets
Current assets:
Cash and cash equivalents	$	33,390		$	31,242
Restricted cash—short-term		7,876			6,792
Trade accounts receivable, net of allowance for doubtful accounts of $3,552 and $2,631 at June 30, 2020 and December 31, 2019, respectively		41,761			49,822
Inventory		14,702			16,632
Prepaid expenses		4,331			6,318
Other current assets		4,753			2,133
Total current assets		106,813			112,939
Property and equipment, net		435			3,607
Goodwill		12,137			12,135
Other intangibles, net		5,440			6,837
Investment in equity method investees		624			675
Restricted cash—long-term		493			520
Deferred income tax assets, net		9,617			12,154
Other assets		6,862			7,377
Total assets	$	142,421		$	156,244
Liabilities and equity
Current liabilities:
Loan payable	$	1,392		$	921
Trade accounts payable		21,578			24,387
Accrued expenses		28,652			26,116
Contract liability		834			13,426
Income taxes payable		2,206			1,591
Due to IDT Corporation, net		95			381
Short-term revolving line of credit		—			2,514
Other current liabilities		2,961			2,820
Total current liabilities		57,718			72,156
Long-term notes payable		—			777
Other liabilities		2,101			2,381
Total liabilities		59,819			75,314
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 2,322 shares issued and outstanding at June 30, 2020 and December 31, 2019		19,743			19,743
Class A common stock, $0.01 par value; authorized shares—35,000; 1,574 shares issued and outstanding at June 30, 2020 and December 31, 2019		16			16
Class B common stock, $0.01 par value; authorized shares—200,000; 25,805 and 25,785 shares issued and 24,562 and 24,755 shares outstanding at June 30, 2020 and December 31, 2019, respectively		258			258
Additional paid-in capital		140,470			139,615
Treasury stock, at cost, consisting of 1,243 and 1,030 shares of Class B common stock at June 30, 2020 and December 31, 2019		(9,221	)		(7,675	)
Accumulated other comprehensive income		2,553			2,519
Accumulated deficit		(56,831	)		(59,671	)
Total Genie Energy Ltd. stockholders’ equity		96,988			94,805
Noncontrolling interests		(14,386	)		(13,875	)
Total equity		82,602			80,930
Total liabilities and equity	$	142,421		$	156,244

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
	(in thousands, except per share data)
Revenues:
Electricity	$	65,906		$	52,055		$	135,877		$	114,669
Natural gas		5,396			5,194			21,467			23,900
Other		4,773			3,760			22,782			9,057
Total revenues		76,075			61,009			180,126			147,626
Cost of revenues		56,588			52,031			131,734			113,057
Gross profit		19,487			8,978			48,392			34,569
Operating expenses and losses:
Selling, general and administrative (i)		15,956			18,254			35,456			34,011
Impairment of assets		801			—			993			—
Income (loss) from operations		2,730			(9,276	)		11,943			558
Interest income		20			189			143			281
Interest expense		(58	)		(178	)		(175	)		(319	)
Equity in the net loss in equity method investees, net		(1,173	)		(1,071	)		(1,552	)		(1,868	)
Other (expenses) income, net		(52	)		157			98			232
Income (loss) before income taxes		1,467			(10,179	)		10,457			(1,116	)
(Provision for) benefit from income taxes		(587	)		1,678			(3,156	)		(1,225	)
Net income (loss)		880			(8,501	)		7,301			(2,341	)
Net loss attributable to noncontrolling interests		(1,083	)		(1,035	)		(494	)		(944)
Net income (loss) attributable to Genie Energy Ltd.		1,963			(7,466	)		7,795			(1,397	)
Dividends on preferred stock		(370	)		(370	)		(740	)		(740	)
Net income (loss) attributable to Genie Energy Ltd. common stockholders	$	1,593		$	(7,836	)	$	7,055		$	(2,137	)

Earnings (loss) per share attributable to Genie Energy Ltd. common stockholders:
Basic	$	0.06		$	(0.29	)	$	0.27		$	(0.08	)
Diluted	$	0.06		$	(0.29	)	$	0.26		$	(0.08	)
Weighted-average number of shares used in calculation of earnings (loss) per share:
Basic		26,087			26,595			26,098			26,614
Diluted		26,853			26,595			26,804			26,614

Dividends declared per common share	$	0.085		$	0.075		$	0.160		$	0.150
(i) Stock-based compensation included in selling, general and administrative expenses	$	401		$	323		$	884		$	772

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020		2019
	(in thousands)					(in thousands)
Net income (loss)	$	880	$	(8,501	)	$	7,301	$	(2,341	)
Other comprehensive income:
Foreign currency translation adjustments		135		153			41		249
Comprehensive income (loss)		1,015		(8,348	)		7,342		(2,092	)
Comprehensive loss attributable to noncontrolling interests		1,271		1,136			493		1,239
Comprehensive income (loss) attributable to Genie Energy Ltd.	$	2,286	$	(7,212	)	$	7,835	$	(853	)

See accompanying notes to consolidated financial statements.

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			Accumulated			Noncontrolling			Total
	Shares		Amount	Shares		Amount	Shares		Amount		Capital			Stock			Income			Deficit			Interests			Equity
BALANCE AT JANUARY 1, 2020	2,322	$	19,743	1,574	$	16	25,785	$	258	$	139,615		$	(7,675	)	$	2,519		$	(59,671	)	$	(13,875	)	$	80,930
Dividends on preferred stock ($ 0.01594 per share)	—		—	—		—	—		—		—			—			—			(370	)		—			(370	)
Dividends on common stock ($ 0.075 per share)	—		—	—		—	—		—		—			—			—			(1,975	)		—			(1,975	)
Stock-based compensation	—		—	—		—	20		—		483			—			—			—			—			483
Repurchase of Class B common stock from stock repurchase program	—		—	—		—	—		—		—			(88	)		—			—			—			(88	)
Noncontrolling interest from acquisition of Lumo	—		—	—		—	—		—		(29	)		—			—			—			29			—
Deconsolidation of subsidiaries	—		—	—		—	—		—		—			—			(6	)		—			(92	)		(98	)
Other comprehensive income	—		—	—		—	—		—		—			—			(283	)		—			189			(94	)
Net income for three months ended March 31, 2020	—		—	—		—	—		—		—			—			—			5,832			589			6,421
BALANCE AT MARCH 31, 2020	2,322		19,743	1,574		16	25,805		258		140,069			(7,763	)		2,230			(56,184	)		(13,160	)		85,209
Dividends on preferred stock ($0.01594 per share)	—		—	—		—	—		—		—			—			—			(370	)		—			(370	)
Dividends on common stock ($0.085 per share)	—		—	—		—	—		—		—			—			—			(2,240	)		—			(2,240	)
Stock-based compensation	—		—	—		—	—		—		401			—			—			—			—			401
Repurchase of Class B common stock from stock repurchase program	—		—	—		—	—		—		—			(1,458	)		—			—			—			(1,458	)
Purchase of subsidiary	—		—	—		—	—		—		—			—			—			—			45			45
Other comprehensive income	—		—	—		—	—		—		—			—			323			—			(188	)		135
Net income for three months ended June 30, 2020	—		—	—		—	—		—		—			—			—			1,963			(1,083	)		880
BALANCE AT JUNE 30, 2020	2,322	$	19,743	1,574	$	16	25,805	$	258	$	140,470		$	(9,221	)	$	2,553		$	(56,831	)	$	(14,386	)	$	82,602

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF EQUITY (in thousands) — (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, 2019	2,322	$	19,743	1,574	$	16	25,544	$	255	$	136,629	$	(1,624	)	$	2,591	$	(53,939	)	$	(11,009	)	$	92,662
Adoption of ASU 2018-07	—		—	—		—	—		—		312		—			—		(312)			—			—
Dividends on preferred stock ($0.01594 per share)	—		—	—		—	—		—		—		—			—		(370	)		—			(370	)
Dividends on common stock ($ 0.075 per share)	—		—	—		—	—		—		—		—			—		(2,006	)		—			(2,006	)
Stock-based compensation	—		—	—		—	198		2		446		—			—		—			—			448
Exercise of stock options	—		—	—		—	25		—		172		—			—		—			—			172
Option issues to Howard S. Jonas	—		—	—		—	—		—		325		—			—		—			—			325
Noncontrolling interest from acquisition of Lumo	—		—	—		—	—		—		—		—			—		—			884			884
Other comprehensive income	—		—	—		—	—		—		—		—			290		—			(194	)		96
Net income for three months ended March 31, 2019	—		—	—		—	—		—		—		—			—		6,069			91			6,160
BALANCE AT MARCH 31, 2019	2,322		19,743	1,574		16	25,767		257		137,884		(1,624	)		2,881		(50,558	)		(10,228	)		98,371
Dividends on preferred stock ($0.01594 per share)	—		—	—		—	—		—		—		—			—		(370	)		—			(370	)
Dividends on common stock ($ 0.075 per share)	—		—	—		—	—		—		—		—			—		(2,062	)		—			(2,062	)
Stock-based compensation	—		—	—		—	—		—		324		—			—		—			—			324
Exercise of stock options	—		—	—		—	116		1		792		—			—		—			—			793
Other comprehensive income	—		—	—		—	—		—		—		—			254		—			(101	)		153
Net income for three months ended June 30, 2019	—		—	—		—	—		—		—		—			—		(7,466	)		(1,035	)		(8,501	)
BALANCE AT JUNE 30, 2019	2,322	$	19,743	1,574	$	16	25,883	$	258	$	139,000	$	(1,624	)	$	3,135	$	(60,456	)	$	(11,364	)	$	88,708

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended June 30,
	2020			2019
	(in thousands)
Operating activities
Net income (loss)	$	7,301		$	(2,341	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,548			1,855
Impairment of assets		993			—
Deferred income taxes		2,537			777
Provision for doubtful accounts receivable		1,215			314
Loss on sale of assets held for sale		78			—
Stock-based compensation		884			772
Equity in the net loss in equity method investees		1,552			1,868
Gain on deconsolidation of subsidiaries		(98	)		—
Change in assets and liabilities:
Trade accounts receivable		6,847			2,917
Inventory		1,930			(961	)
Prepaid expenses		2,016			(2,069	)
Other current assets and other assets		223			(698	)
Trade accounts payable, accrued expenses and other current liabilities		(1,006	)		2,348
Contract liability		(12,707	)		(357)
Due to IDT Corporation		(286	)		(42	)
Income taxes payable		615			(511	)
Net cash provided by operating activities		13,642			3,872
Investing activities
Capital expenditures		(99	)		(329	)
Proceeds from disposal of assets held for sale		5			—
Payment for acquisition of intangible		(298	)		—
Investments in equity method investee		(1,502	)		—
Payments for business acquisition, net of cash acquired		—			(1,852	)
Investments in notes receivables		—			(177	)
Repayment of notes receivable		12			282
Net cash used in investing activities		(1,882	)		(2,076	)
Financing activities
Dividends paid		(4,955	)		(4,809	)
Repayment of short-term debt—Lumo		—			(2,260	)
Proceeds from revolving line of credit		1,000			—
Repayment of revolving line of credit		(3,514	)		—
Proceeds from loan		1,395			—
Repayment of notes payable		(930	)		—
Exercise of stock options		—			965
Purchases of Class B common stock		(1,546	)		—
Repayment of notes payable		(17	)		(28	)
Net cash used in financing activities		(8,567	)		(6,132	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		12			12
Net increase (decrease) in cash, cash equivalents, and restricted cash		3,205			(4,324	)
Cash, cash equivalents, and restricted cash at beginning of period		38,554			44,197
Cash, cash equivalents, and restricted cash at end of period	$	41,759		$	39,873

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1—Basis of Presentation

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 10 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 and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 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, 2019, as filed with the U.S. Securities and Exchange Commission (the “SEC”).

The Company owns 99.3% of its subsidiary, Genie Energy International Corporation (“GEIC”), which owns 100% of Genie Retail Energy (“GRE”), 100% of Genie Retail Energy International LLC ("GRE International" or "GREI"), 100% of Genie Energy Services ("GES") and 97.0% of Genie Oil and Gas, Inc. (“GOGAS”).

GRE owns and operates retail energy providers (“REPs”), including IDT Energy, Inc. (“IDT Energy”), Residents Energy, Inc. (“Residents Energy”), Town Square Energy, LLC and Town Square Energy East, LLC (collectively, "TSE"), Southern Federal Power LLC ("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.

GRE International holds the Company's 77.0% interest in Shoreditch Energy Limited, its joint venture that serves retail customers in the United Kingdom ("U.K.") under the name Orbit Energy, its venture in Japan, which launched commercial operations in second quarter of 2019, the Company's 92.5% controlling interest in Lumo Energia Oyj ("Lumo"), a REP serving residential customers in Finland, and its 100% interest in Lumo Energi AB, which was formed in 2019 to serve retail energy customers in Sweden.

GES oversees Diversegy LLC ("Diversegy"), a retail energy advisory and brokerage company that serves commercial and industrial customers throughout the United States ("U.S.") and manages GRE's 60.0% interest in Prism Solar Technology, Inc. ("Prism"), a solar solutions company that is engaged in U.S.-based manufacturing of solar panels, solar installation design and solar energy project management.

GOGAS is an oil and gas exploration company and owns an interest in a contracted drilling services operation. GOGAS holds an 86.1% interest in Afek Oil and Gas, Ltd. (“Afek”), an oil and gas exploration project in the Golan Heights in Northern Israel. GOGAS also holds controlling interests in inactive oil and gas projects. GOGAS also holds a 37.5% interest in a contracted drilling services company in Israel ("Atid 613").

Seasonality and Weather

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 46.9% and 50.3% of GRE’s natural gas revenues for the relevant years were generated in the first quarters of 2019 and 2018, 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 31.8% and 29.5% of GRE’s electricity revenues for the relevant years were generated in the third quarters of 2019 and 2018, 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.

Coronavirus Disease (COVID-19)

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

For the three and six months ended June 30, 2020, the impacts of COVID-19 are evident in several key aspects of the Company's business operations and the corresponding financial impact has been mixed. The Company's customer base is predominantly residential, so the Company has benefited from the increased demand for electricity as customers are working from their homes. On the other hand, like other retail providers, the Company suspended its face-to-face customer acquisition programs in March 2020 as public health measures were implemented to combat COVID-19, resulting in a decrease in gross meter acquisitions. The reduction in gross meter acquisitions decreased customer acquisition expense in the second quarter of 2020. Churn for second quarter of 2020 decreased as the Company's competitors suspended their face to face marketing programs.

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

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 that equals the total of the same amounts reported in the consolidated statements of cash flows:

	June 30, 2020		December 31, 2019
	(in thousands)
Cash and cash equivalents	$	33,390	$	31,242
Restricted cash—short-term		7,876		6,792
Restricted cash—long-term		493		520
Total cash, cash equivalents, and restricted cash	$	41,759	$	38,554

Restricted cash—short-term includes amounts set aside in accordance with the Amended and Restated Preferred Supplier Agreement with BP Energy Company (“BP”) (see Note 18) and Credit Agreement with JPMorgan Chase (see Note 19). Restricted cash—long-term includes Afek’s security deposits for its exploration license from the Government of Israel, and its customs and other import duties for the import of exploration equipment.

Note 3—Inventories

Inventories consisted of the following:

	June 30, 2020		December 31, 2019
	(in thousands)
Natural gas	$	763	$	1,052
Renewable credits		12,504		14,940
Solar Panels:
Finished goods		1,219		424
Raw materials		216		216
Total solar panels inventory		1,435		640
Totals	$	14,702	$	16,632

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. Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which the Company operates, 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.

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 sale 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 received in a period 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. Incremental customer acquisition cost of Lumo are capitalized and amortized over eighteen months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain a contract were $0.2 million and $0.4 million for the three and six months ended June 30, 2020, respectively. Total capitalized customer acquisition costs to obtain a contract were $0.2 million and $0.4 million for the three and six months ended June 30, 2019, respectively. At June 30, 2020, customer acquisition costs of $0.6 million and $0.1 million were included in other current assets and other assets, respectively, on the consolidated balance sheet. The Company continuously monitors its customer relationship periods to ensure compliance with the application of the standard.

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 June 30, 2020
Fixed rate	$	30,031	$	738	$	—	$	30,769
Variable rate		35,875		4,658		—		40,533
Other		—		—		4,773		4,773
Total	$	65,906	$	5,396	$	4,773	$	76,075

Three Months Ended June 30, 2019
Fixed rate	$	24,716	$	534	$	—	$	25,250
Variable rate		27,339		4,660		—		31,999
Other		—		—		3,760		3,760
Total	$	52,055	$	5,194	$	3,760	$	61,009

Six Months Ended June 30, 2020
Fixed rate	$	57,550	$	2,568	$	—	$	60,118
Variable rate		78,327		18,899		—		97,226
Other		—		—		22,782		22,782
Total	$	135,877	$	21,467	$	22,782	$	180,126

Six Months Ended June 30, 2019
Fixed rate	$	48,033	$	1,785	$	—	$	49,818
Variable rate		66,636		22,115		—		88,751
Other		—		—		9,057		9,057
Total	$	114,669	$	23,900	$	9,057	$	147,626

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 June 30, 2020
Non-Commercial Channel	$	54,783	$	4,631	$	—	$	59,414
Commercial Channel		11,123		765		—		11,888
Other		—		—		4,773		4,773
Total	$	65,906	$	5,396	$	4,773	$	76,075

Three Months Ended June 30, 2019
Non-Commercial Channel	$	45,371	$	4,207	$	—	$	49,578
Commercial Channel		6,684		987		—		7,671
Other		—		—		3,760		3,760
Total	$	52,055	$	5,194	$	3,760	$	61,009

Six Months Ended June 30, 2020
Non-Commercial Channel	$	115,754	$	19,004	$	—	$	134,758
Commercial Channel		20,123		2,463		—		22,586
Other		—		—		22,782		22,782
Total	$	135,877	$	21,467	$	22,782	$	180,126

Six Months Ended June 30, 2019
Non-Commercial Channel	$	105,712	$	20,914	$	—	$	126,626
Commercial Channel		8,957		2,986		—		11,943
Other		—		—		9,057		9,057
Total	$	114,669	$	23,900	$	9,057	$	147,626

Contract Liabilities

Certain revenue contracts in GES include provisions that require advance payment from customers. These advance payments are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability.

	Six Months Ended June 30,
	2020		2019
		(in thousands)
Contract liability, beginning	$	13,426	$	1,137
Recognition of revenue included in the beginning of year contract liability		(12,971)		(510	)
Additions during the period, net of revenue recognized during the period		379		153
Contract liability, end	$	834	$	780

The increase in contract liabilities primarily related to a significant advance payment by a customer to purchase solar panels, which the Company expects to deliver in 2020.

Note 5—Acquisition

Acquisition of Lumo Energia, Oyj

On January 2, 2019 (the “Lumo Closing Date”), pursuant to a Stock Purchase Agreement dated December 17, 2018, the Company completed the purchase of an 80.0% controlling interest in Lumo Energia Oyj ("Lumo"), a Finnish public limited company. The Company paid the sellers a total of €1.6 million (equivalent to $1.9 million). The Company contributed €1.3 million (equivalent to $1.5 million) as a capital loan to fund Lumo's working capital requirements. The Company also provided Lumo with a secured loan for €2.0 million (equivalent to $2.3 million) to pay off and replace its remaining debt. The secured loan is payable in 4 years from inception and bears interest at annual rate of 4.0%, payable monthly. The Company also issued 176,104 shares of its Class B common stock to certain of the sellers which are subject to restrictions as described in the agreement (the “Lumo Restricted Shares”). The Lumo Restricted Shares are subject to vesting conditions related to employment and services to be provided by the recipients of up to two years following the Lumo Closing Date. The Lumo Restricted Shares are accounted for as a share-based compensation and is amortized to the consolidated statement of income over the vesting period of two years.

In November 2019, the Company acquired an additional 9.0% interest in Lumo for $0.2 million, increasing its aggregate ownership to 89.0%. In January 2020, Lumo paid off half of the secured loan to GREI in exchange for additional shares which resulted in GREI's interest in Lumo increasing to 92.5%. Of the remaining 7.5% noncontrolling interest retained by the sellers, 33.3% vested in January 2020 with the balance subject to restrictions, which will lapse over a period of up to two years following the initial annual anniversary of the Lumo Closing Date, subject to employment and service conditions.

The Company has a conditional continuing call option to purchase a portion or the entire noncontrolling interest from the sellers during the period beginning at the third anniversary of the Lumo Closing Date and ending three years later.

The sellers, as a group, have a one-time option to sell a portion or all of their noncontrolling interest to the Company, which subject to certain conditions, may be exercised on one occasion only, at any time during the two-year period beginning at the fourth anniversary of the Lumo Closing Date.

The Company recorded revenue for Lumo of approximately $3.3 million and $8.2 million in its consolidated statements of operations the three and six months ended June 30, 2020, respectively and approximately $2.8 million and $7.6 million for the three and six months ended June 30, 2019, respectively. The net income or loss attributable to this acquisition cannot be identified on a stand-alone basis because it is in the process of being integrated into the Company's operations.

The Company conducted an assessment of assets and liabilities related to the acquisition of Lumo. The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows:

(in thousands)
Cash	$	1,539
Trade accounts receivable		2,520
Other current assets		411
Intangible assets:
Trademark (5-year useful life)		294
Non-compete agreements (3-year useful life)		34
Customer relationship (2-year useful life)		1,924
Goodwill		1,744
Other assets		95
Accounts and other current liabilities		(2,403	)
Short-term debts		(2,260	)
Other liabilities		(97	)
Noncontrolling interest		(410	)
Net assets	$	3,391

(in thousands)
Supplemental information
Cash paid to sellers	$	1,869
Cash contributed to Lumo		1,522
Total consideration	$	3,391

Goodwill was allocated to the GRE International segment. Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes.

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)
June 30, 2020
Assets:
Derivative contracts	$	338	$	6	$	—	$	344
Liabilities:
Derivative contracts	$	1,339	$	—	$	—	$	1,339
December 31, 2019
Assets:
Derivative contracts	$	5	$	322	$	—	$	327
Liabilities:
Derivative contracts	$	1,569	$	410	$	—	$	1,979

(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 period ended June 30, 2020 and 2019.

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 and long-term, trade receivables, due to IDT Corporation, and other current liabilities. At June 30, 2020 and December 31, 2019, the carrying amounts of these assets and liabilities approximated fair value. The fair value estimate for restricted cash—short-term and long-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, revolving line of credit and notes payable. At June 30, 2020 and December 31, 2019, other assets included notes receivable. At June 30, 2020, the outstanding balance of the sellers of Lumo's one-time option was not significant and was included in other liabilities account in the consolidated balance sheet. The carrying amount of the note receivable, revolving line of credit and notes 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 following table presents the items measured at fair value on a non-recurring basis:

	Level 1		Level 2		Level 3		Total
	(in thousands)
June 30, 2020
Impairment of property and equipment	$	—	$	—	$	993	$	993
December 31, 2019
Impairment of goodwill	$	—	$	—	$	400	$	400

The primary non-recurring fair value estimates typically are in the context of business acquisitions (Note 5) which involve a combination of Level 2 and Level 3 inputs, goodwill impairment testing, which involves Level 3 inputs, and asset impairments (Note 8) 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 revenues from customers that equal or exceed 10% of the Company’s consolidated revenues in the period (no other single customer accounted for more than 10% of consolidated revenues in these periods):

	June 30,
	2020			2019
Customer A		10	%		na

na-less than 10% of consolidated revenue in the period

The following table summarizes the percentage of consolidated trade receivable by customers that equal or exceed 10% of consolidated trade receivables at June 30, 2020 and December 31, 2019 (no other single customer accounted for 10% or greater of our consolidated trade receivable as of June 30, 2020 or December 31, 2019):

	June 30,
	2020			2019
Customer B		14	%		na

na-less than 10% of consolidated revenue in the period

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 June 30, 2020, GRE’s swaps and options were traded on the Intercontinental Exchange. GRE International's swaps and options were traded through counterparties.

The summarized volume of GRE’s outstanding contracts and options at June 30, 2020 was as follows (MWh – Megawatt hour and Dth – Decatherm):

Settlement Dates	Volume
	Electricity (in MWH)		Gas (in Dth)
Third quarter 2020		69,200		72,961
Fourth quarter 2020		134,859		122,651
First quarter 2021		—		133,750
Second quarter 2021		—		89,800
Third quarter 2021		—		67,850
Fourth quarter 2021		—		68,700
First quarter 2022		—		67,300
Second quarter 2022		—		40,000
Third quarter 2022		—		8,650
Fourth quarter 2022		—		9,000
First quarter 2023		—		8,450
Second quarter 2023		—		1,700

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

Asset Derivatives	Balance Sheet Location	June 30, 2020		December 31, 2019
		(in thousands)
Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options¹	Other current assets	$	335	$	324
Energy contracts and options	Other assets		9		3
Total derivatives not designated or not qualifying as hedging instruments — Assets		$	344	$	327

Liability Derivatives

Derivatives not designated or not qualifying as hedging instruments:
Energy contracts and options¹	Other current liabilities	$	1,297		1,909
Energy contracts and options	Other liabilities		42		70
Total derivatives not designated or not qualifying as hedging instruments — Liabilities		$	1,339	$	1,979

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

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

		Amount of Loss Recognized on Derivatives
Derivatives not designated or not qualifying as	Location of Loss Recognized	Three Months Ended June 30,					Six Months Ended June 30,
hedging instruments	on Derivatives		2020		2019		2020		2019
		(in thousands)					(in thousands)
Energy contracts and options	Cost of revenues	$	(6,200)	$	(7,921	)	$	(18,589)	$	(10,830	)

Note 8—Assets and Liabilities Held for Sale

In March 2020, the Company initiated a plan to sell the property, plant and equipment of Prism. Prism's 4.75% notes payable to Catskill Hudson Bank are collateralized by Prism's land, building and improvements, and will be settled from the proceeds of the sale of the assets. In the first quarter of 2020, Prism's property, plant and equipment and notes payable were reclassified as assets and liabilities held for sale and reported at lower of fair value less cost to sell and net book value. In the first quarter of 2020, the Company recorded a $0.2 million write-down to the fair value of certain property and equipment. The Company used the market approach to estimate the fair values of assets and liabilities held for sale. The related inputs were corroborated by observable market data for similar assets and liabilities, therefore the estimated fair values were classified as Level 2 of the fair value hierarchy.

In the second quarter of 2020, Prism recorded $0.1 million loss on disposal of certain property and equipment classified as held for sale, included in the selling, general and administrative expenses in the consolidated statements of operations.

The pending disposition of Prism's assets and liabilities held for sale did not meet the criteria to be reported as a discontinued operation. At June 30, 2020, assets held for sale of $2.7 million and liabilities held for sale of $0.8 million were included in other current assets and other current liabilities, respectively, in the consolidated balance sheet.

On December 11, 2019, the Company refinanced the 5.95% notes payable to Catskill Hudson Bank that were due in November 2019. The outstanding balance of notes payable of $0.9 million at December 11, 2019 will be payable in monthly equal annual installments for period of ten years. The outstanding principal amount incurs fixed interest at 4.75% per annum. The notes payable are secured by Prism's commercial property in Highland, New York. In March 2020, the outstanding balance of the notes payable was transferred to liabilities held for sale as described above.

Note 9—Investment in Equity Method Investees

Investment in Shoreditch

On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. (“GEUK”), entered into a definitive agreement with Energy Global Investments Pty Ltd (“EGC”) to launch Shoreditch Energy Limited (“Shoreditch”), a joint venture to offer electricity and natural gas service to residential and small business customers in the U.K., under the trade name Orbit Energy. In three and six months ended June 30, 2020, the Company contributed $1.5 million to Shoreditch, which increased GEUK's total contribution to $9.5 million as of June 30, 2020. The Company owns 77.0% of the outstanding equity of Shoreditch.

EGC has significant participation rights in the management of Shoreditch that limits GEUK’s ability to direct the activities that most significantly impact Shoreditch’s economic performance. GEUK, therefore, accounts for its ownership interest in Shoreditch using the equity method since GEUK has the ability to exercise significant influence over its operating and financial matters, although it does not control Shoreditch.

In 2018, the Company extended a $0.2 million loan to EGC (“EGC Loan”), in connection with EGC’s contribution to Shoreditch. The EGC Loan, which is secured by EGC’s interest in Shoreditch, bears a fixed annual interest rate of 2.0% and is due, together with the principal amount, on September 17, 2023. As of June 30, 2020, the outstanding balance, including accrued interest, of the EGC Loan was $0.2 million.

At June 30, 2020, the net book value of the Company's investment in Shoreditch was nil. There were no other arrangements, events or circumstances that could expose the Company to additional loss, aside from the balance of EGC Loan discussed above.

Summarized unaudited statements of operations of Shoreditch are as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2020		2019			2020		2019
	(in thousands)					(in thousands)
Revenues	$	14,845	$	4,793		$	34,515	$	8,704
Operating expenses:
Cost of revenues		13,795		4,491			31,915		8,191
Selling, general and administrative		2,874		2,662			6,696		4,469
Loss from operations		(1,824)		(2,360	)		(4,096)		(3,956	)
Other		—		—			—		—
Net loss	$	(1,824)	$	(2,360	)	$	(4,096)	$	(3,956	)
Genie’s equity in net loss	$	1,502	$	867		$	1,502	$	1,938

Investment 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 accounts for using equity method of accounting.

Summarized unaudited statements of operations of Atid 613 are as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020		2019
	(in thousands)						(in thousands)
Revenues	$	1,528		$	670		$	1,760	$	2,725
Operating expenses		927			1,203			1,860		2,543
Income (loss) from operations		601			(533	)		(100)		182
Other		(13	)		(10	)		(6)		(18)
Net income	$	588			(543	)	$	(106)	$	164
Genie’s equity in net income (loss)	$	224			(204	)	$	(36)	$	70

The Company also entered into a Shareholder Agreement with Atid 613's other shareholders to govern certain issues regarding management of the new company. Under the Shareholder Agreement, among other things, Genie Israel has agreed to make available to Atid 613 working capital financing up to $0.4 million ("Credit Facility"). The credit Facility bears a variable interest rate as defined in the Shareholder Agreement. As of June 30, 2020, the outstanding balance of Credit Facility was nil.

On August 12, 2019, the Company, together with the other shareholders of Atid 613 signed a Funding Agreement to provide aggregate loans to Atid 613 in an amount of up to New Israeli Shekel or NIS 5.1 million (equivalent to $1.5 million at June 30, 2020), including the Company's commitment to extend up to NIS1.9 million (equivalent to $0.5 million at June 30, 2020) of such amount. In August 2019, the Company extended NIS 0.8 million (equivalent to $0.2 million) in loans. The loans which are secured by Atid 613’s assets bore no interest until March 1, 2020 and bear interest at 5.5% for all subsequent periods. At June 30, 2020, there were $0.2 million loan receivables from Atid 613, included in other current assets in the Company's consolidated balance sheet.

At June 30, 2020, the Company’s maximum exposure to loss as a result of its involvement with Atid 613 was the minimal net book value of the investment and $0.2 million of notes receivable, since there were no other arrangements, events or circumstances that could expose the Company to additional loss.

Note 10—Goodwill and Other Intangible Assets

The table below reconciles the change in the carrying amount of goodwill for the period from January 1, 2020 to June 30, 2020:

	GRE		GRE International			GES	Total
	(in thousands)
Balance at January 1, 2020	$	9,998	$	1,733	$	404	$	12,135
Cumulative translation adjustment		—		2		—		2
Balance at June 30, 2020	$	9,998	$	1,735	$	404	$	12,137

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)
June 30, 2020
Patents and trademarks		17.1 years	$	3,842	$	695	$	3,147
Non-compete agreements		3.0 years		34		17		17
Customer relationships		4.6 years		3,009		1,777		1,232
Licenses		10.0 years		1,224		180		1,044
Total			$	8,109	$	2,669	$	5,440
December 31, 2019
Trademark		17.1 years	$	3,842	$	560	$	3,282
Non-compete agreement		1.6 years		148		126		22
Customer relationships		3.9 years		6,706		3,941		2,765
Licenses		10.0 years		895		127		768
Total			$	11,591	$	4,754	$	6,837

In the second quarter of 2020, Prism renegotiated a contract with its main customer which resulted in impairment of customer relationship of $0.8 million included in the consolidated statements of operations.

Amortization expense of intangible assets (including minimal amounts reported in cost of revenues) was $0.4 million and $0.9 million in the three and six months ended June 30, 2020, respectively. Amortization expense of intangible assets (including minimal amounts reported in cost of revenues) was $0.5 million and $1.0 million in the three and six months ended June 30, 2019, respectively. The Company estimates that amortization expense of intangible assets will be $0.7 million, $0.5 million, $0.5 million, $0.5 million, $0.5 million and $2.7 million for the remainder of 2020, and for 2021, 2022, 2023, 2024 and thereafter, respectively.

Note11—Leases

The Company entered into operating lease agreements primarily for offices in domestic and foreign locations where it has operations with lease periods expiring between 2020 and 2030. The Company has no finance leases.

The Company determine if a contract is a lease at inception. Operating lease assets and liabilities are included on our consolidated balance sheet beginning January 1, 2019. Right-of-Use ("ROU") assets were included under other assets in the consolidated balance sheet. The current portion of the operating lease liabilities were 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 use 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.

	June 30, 2020		December 31, 2019
	(in thousands)
ROU Assets	$	2,114	$	2,357

Current portion of operating lease liabilities		476		479
Noncurrent portion of operating lease liabilities		1,684		1,917
Total	$	2,160	$	2,396

At June 30, 2020, the weighted average remaining lease term is 7.7 years and the weighted average discount rate is 6.9%.

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

	Six Months Ended June 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:	(in thousands)
Operating cash flows from operating activities	$	431	$	438

ROU assets obtained in the exchange for lease liabilities
Operating leases	$	—	$	168

Future lease payments under operating leases as of June 30, 2020 were as follows:

(in thousands)
Remainder of 2020	$	316
2021		557
2022		242
2023		221
2024		225
Thereafter		1,305
Total future lease payments		2,866
Less imputed interest		706
Total operating lease liabilities	$	2,160

Rental expenses under operating leases were $0.2 million and $0.4 million in the three and six months ended June 30, 2020 and 2019, respectively.

Note 12—Equity

Dividend Payments

The following table summarizes the quarterly dividends paid by the Company during the six months ended June 30, 2020 (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 8, 2020

0.1594

370

February 6, 2020

February 15, 2020

April 22, 2020

0.1594

370

May 4, 2020

May 15, 2020

Class A Common Stock and Class B Common Stock

March 11, 2020

0.0750

1,975

March 24, 2020

April 3, 2020

May 5, 2020

0.0850

2,240

May 19, 2020

May 29, 2020

On July 16, 2020, the Company’s Board of Directors declared a quarterly Base Dividend of $0.1594 per share on the Preferred Stock for the second quarter of 2020. The dividend will be paid on or about August 14, 2020 to stockholders of record as of the close of business August 6, 2020.

On August 3, 2020, the Company’s Board of Directors declared a quarterly dividend of $0.0850 per share on its Class A common stock and Class B common stock for the second quarter of 2020. The dividend will be paid on or about August 26, 2020 to stockholders of record as of the close of business on August 18, 2020.

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 Repurchase Program

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. In the three months ended June 30, 2020, the Company acquired 200,873 Class B common stock under the stock repurchase program for an aggregate amount of $1.5 million. In the six months ended June 30, 2020, the Company acquired 213,206 Class B common stock under the stock repurchase program for an aggregate amount of $1.5 million. There were no repurchases under this program in the three and six months ended June 30, 2019. At June 30, 2020, 6.0 million shares remained available for repurchase under the stock repurchase program.

As of June 30, 2020 and December 31, 2019, there were 1.2 million and 1.0 million shares of treasury stock outstanding, respectively, with a cost of $9.2 million and $7.7 million, respectively, at a weighted average cost per share of $7.42 and $7.46, respectively.

Sales of Shares and Warrants

On June 8, 2018, the Company sold to Howard S. Jonas, the Chairman of the Company’s Board of Directors and then a principal beneficial owner 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. As of June 30, 2020, there were outstanding 1,257,862 warrants to purchase the Company’s Class B common stock at $4.77 per share which will expire in June 2023.

Stock-Based Compensation

On May 8, 2019 and June 4, 2020, the Company’s stockholders approved an amendment to the Company’s 2011 Stock Option and Incentive Plan (the "2011 Plan") to reserve an additional 372,000 shares and 30,000 shares, respectively, of the Company’s Class B common stock for issuance thereunder.

On February 11, 2019, the Company issued options to Howard S. Jonas to purchase 126,176 shares of the Company’s Class B common stock at an exercise price of $8.05 per share in lieu of a cash bonus of $0.3 million. These options vest in three equal annual installments beginning on February 11, 2020.

In February 2020, the Company granted certain employees and members of its Board of Directors deferred stock units of 305,000 units, vesting in two tranches upon the achievement of a specified thirty-day average closing price of its common stock within a specified period of time ("market conditions") and the satisfaction of service-based vesting conditions. Each deferred stock unit is equivalent to two shares of Class B common stock of the Company upon achievement of 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.

As of June 30, 2020, there was approximately $3.0 million of total unrecognized compensation costs related to the unvested restricted stock awards. These costs are expected to be recognized over a weighted-average period of approximately 2.6 years.

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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)				(in thousands)
Net loss	$	(411)	$	(215)	$	(748)	$	(66)
Aggregate funding provided by the Company, net	$	(282)	$	(183)	$	(522)	$	(816)

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

	June 30, 2020			December 31, 2019
	(in thousands)
Assets
Cash and cash equivalents	$	260		$	250
Trade accounts receivable		339			586
Prepaid expenses and other current assets		378			381
Other assets		359			359
Total assets	$	1,336		$	1,576
Liabilities and noncontrolling interests
Current liabilities	$	453		$	467
Due to IDT Energy		3,120			2,598
Noncontrolling interests		(2,237	)		(1,489	)
Total liabilities and noncontrolling interests	$	1,336		$	1,576

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.

Note 14—Income Taxes

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020			2019
Reported tax rate	40.0	%	16.5	%		30.2	%		(109.8)	%

The increase in the reported tax rate for three months ended June 30, 2020 compared to the same period in 2019, is a result of higher taxable income on GRE business that is not offset by losses on other business. The provision for income taxes in the six months ended June 30, 2020 is a result of consolidated taxable income of GRE. The benefit from income taxes in the six months ended June 30, 2019 is a result of a loss during the period.

CARES Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into U.S. federal law, which is aimed at providing emergency assistance and health care for individuals, families, and businesses affected by the COVID-19 pandemic and generally supporting the U.S. economy. The CARES Act, among other things, includes provisions related to refundable payroll tax credits, deferment of the employer portion of social security payments, net operating loss carryback periods, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. For the three and six months ended June 30, 2020, the CARES Act did not have a significant impact on the consolidated financial statements.

On April 22, 2020, the Company obtained a Paycheck Protection Program Loan (the “PPP Note”) sponsored by the Small Business Administration (the “SBA”) under the CARES Act through a bank, providing for $2.4 million in proceeds, which were received on April 27, 2020. Based in part on additional guidance issued by the SBA, the Company returned the entire amount, plus minimal interest on May 6, 2020.

The Company expects to continue to assess the impact of the legislation to the consolidated financial statements.

Note 15—Earnings (Loss) Per Share

Basic earnings (loss) 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 increase 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 June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)				(in thousands)
Basic weighted-average number of shares		26,087		26,595		26,098		26,614
Effect of dilutive securities:
Stock options and warrants		629		—		583		—
Non-vested restricted Class B common stock		137		—		123		—
Diluted weighted-average number of shares		26,853		26,595		26,804		26,614

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
	(in thousands)				(in thousands)
Stock options		126		846		126		783
Non-vested deferred stock units		610		274		610		222

Stock options were excluded from the diluted earnings per share computation because the exercise prices of the stock options were greater that the average market prices of the Company's stock during the periods.

Non-vested deferred stock units that entitle the holders to be issued approximately 0.6 million shares of Class B common stock are excluded in the basic and diluted weighted average shares outstanding calculation because the market condition for vesting of those deferred stock units were not met as of June 30, 2020.

Note 16—Related Party Transactions

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. Also, the Company provides specified administrative services to certain of IDT’s foreign subsidiaries.

The Company leases office space and parking in New Jersey and Israel from Rafael Holdings, Inc. ("Rafael") a former subsidiary of IDT that was spun off from IDT in March 2018. Howard S. Jonas is the Chairman of the Board of Directors and Chief Executive Officer of Rafael. The leases expire in April 2025.

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 June 30,					Six Months Ended June 30,
		2020		2019			2020		2019
	(in thousands)					(in thousands)
Amount IDT charged the Company		$	249	$	255		$	520	$	438
Amount the Company charged IDT		$	41	$	42		$	79	$	79
Amount Rafael charged the Company		$	56	$	57		$	112	$	111

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

	June 30, 2020		December 31, 2019
	(in thousands)
Due to IDT	$	162	$	434
Due from IDT	$	65	$	45
Due to Rafael	$	—	$	—

The Company had minimal transactions with Zedge, Inc. (“Zedge”) related to certain employees of the Company providing services to Zedge. Zedge was a subsidiary of IDT that was spun-off from IDT in June 2016. Howard Jonas is a director of Zedge. There is minimal amount due from Zedge at June 30, 2020 and December 31, 2019

The Company had notes receivable outstanding from employees of a nominal amount and $0.2 million at June 30, 2020 and December 31, 2019, respectively, which were included in “Other assets” in the accompanying consolidated balance sheet.

From 2012 to 2015, the Company extended a series of loans to an employee with an aggregate principal amount of $0.5 million (“Promissory Notes”). The Promissory Notes bore interest equivalent to a minimum rate, in effect from time to time required by local regulations. The Notes and the related unpaid accrued interest were due on May 1, 2019. On August 31, 2018, the Company entered into a Loan Modification Agreement with the employee to restructure the Promissory Notes with outstanding balance of $0.5 million including $0.1 million of accrued interest. Pursuant to the Loan Modification Agreement, the employee paid the Company $0.4 million and the remaining outstanding balance of $0.1 million of the Promissory Notes and the related accrued interest is to be repaid between December 2020 and December 2052. The Company recorded minimal amounts of interest income for the six months ended June 30, 2020 and 2019 related to this debt. The outstanding balance, including accrued interest was $0.1 million as of June 30, 2020.

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, the Company’s Corporate Secretary. 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 $0.3 million in 2019 related to premium of various insurance policies that were brokered by IGM. There was no outstanding payable to IGM was as of June 30, 2020. 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.

See Note 9, Investment in Equity Method Investees, for details of notes receivables from Atid 613.

Note 17—Business Segment Information

The Company has 4 reportable business segments: GRE, GRE International, GES and GOGAS. GRE owns and operates REPs, including IDT Energy, Residents Energy, TSE, and Mirabito. Its REP businesses resell electricity and natural gas to residential and small business customers in the Eastern and Midwestern United States. GRE International, operates REPs in Japan, Finland and Sweden and manages the Company's share in operations of Shoreditch in the U.K. GES designs, manufactures and distributes solar panels, and also offers energy brokerage and advisory services. The GOGAS segment is comprised of the Company’s 86.1% interest in Afek, an oil and gas exploration project in the Golan Heights in Northern Israel, whose operations have been suspended. GOGAS segment also owns inactive oil shale projects and the Company's equity investment in Atid 613. 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.

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

(in thousands)	GRE			GRE International			GES			GOGAS			Corporate			Total
Three Months Ended June 30, 2020
Revenues	$	66,472		$	5,037		$	4,566		$	—		$	—		$	76,075
Income (loss) from operations		5,957			(607	)		(1,113	)		(172	)		(1,335	)		2,730
Impairment of assets		—			—			801			—			—			801
Equity in the net (loss) income of equity method investees		—			(1,502	)		—			224			105			(1,173	)

Three Months Ended June 30, 2019
Revenues	$	54,431		$	2,870		$	3,708		$	—		$	—		$	61,009
Loss from operations		(5,418	)		(1,607	)		(682	)		(381	)		(1,188	)		(9,276	)
Equity in net loss of equity method investees		—			(867	)		—			(204	)		—			(1,071	)

Six Months Ended June 30, 2020
Revenues	$	145,617		$	11,990		$	22,519		$	—		$	—		$	180,126
Income (loss) from operations		18,974			(3,127	)		(771	)		(395	)		(2,738	)		11,943
Impairment of assets		—			—			993			—			—			993
Equity in the net loss of equity method investees		—			(1,502	)		—			(36	)		(14	)		(1,552	)

Six Months Ended June 30, 2019
Revenues	$	130,949		$	7,713		$	8,964		$	—		$	—		$	147,626
Income (loss) from operations		8,085			(3,350	)		(914	)		(545	)		(2,718	)		558
Equity in net the (loss) income of equity method investees		—			(1,938	)		—			70			—			(1,868	)

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

(in thousands)	GRE		GRE International		GES		GOGAS		Corporate		Total
Total assets:
June 30, 2020	$	107,780	$	10,745	$	7,124	$	12,957	$	3,815	$	142,421
December 31, 2019		105,937		11,468		19,383		10,873		8,583		156,244

Note 18—Commitments and Contingencies

Legal Proceedings

On October 5, 2018, named plaintiffs Scott Mackey and Daniel Hernandez filed a putative class action complaint against IDT Energy in the United States District Court for the Northern District of Illinois alleging violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. The named plaintiffs filed the suit on behalf of: (1) a putative Cell Phone class consisting of all persons in the U.S. to whom IDT Energy and/or a third party acting on IDT Energy’s behalf allegedly made one or more telemarketing calls promoting IDT Energy’s goods or services to their cellular telephone number through the use of an automatic telephone dialing system or an artificial or prerecorded voice within the four year period preceding the filing of the complaint and (2) a putative Do-Not-Call class consisting of all persons in the U.S. who allegedly received more than one call from IDT Energy and/or some party acting on IDT Energy’s behalf promoting IDT Energy’s goods or services in a 12-month period on their cellular phone or residential telephone line and whose number appears on the National Do-Not-Call registry within the four year period preceding the filing of the complaint. On October 31, 2019, the court granted IDT Energy's motion to bifurcate individuals and class claims to expedite discovery and dispositive motions related to the named plaintiffs. On January 9, 2020, the court granted IDT Energy's motion for summary judgement to dismiss one of the named plaintiffs for lack of personal jurisdiction. The remaining named plaintiff filed a motion to compel class discovery which IDT Energy has opposed. On July 14, 2020, IDT Energy filed a motion for summary judgment to dismiss the remaining named plaintiff. IDT Energy denies the allegations in the complaint, which it believes to be meritless and plans to vigorously defend this action. Based upon the Company’s preliminary assessment of this matter, a loss is not considered probable, nor is the amount of loss, if any, estimable as of June 30, 2020.

On February 18, 2020, named Plaintiff Danelle Davis filed a putative class action complaint against Residents Energy and GRE in United States District of New Jersey alleging violations of the Telephone Consumer Protection Act, 47 U.S.C § 227 et seq. IDT energy denies allegations in the complaint and plans to vigorously defend this action. Based upon the Company's preliminary assessment of this matter, a loss is not considered probable, nor is the amount of loss if any, estimable as of June 30, 2020.

In 2018, the Company settled previously filed class actions alleging harm caused by unlawful sales and marketing practices. All payment obligations under the settlement agreement were satisfied by the Company by the second quarter of 2019.

On July 23, 2019, the Chapter 7 Trustee of the Aspirity Holdings, LLC bankruptcy filed an adversary complaint against Diversified Trading Company, LLC (f/k/a Kreiger Enterprises, LLC, "Krieger") and its subsidiaries and affiliates in connection with a note payable by Krieger to Aspirity. GRE purchased Retail Energy Holdings, LLC ("REH") which owns the TSE entities (which were subsidiaries of Krieger prior to the purchase) from Krieger in November 2016. One of the several counts in the complaints alleges that as subsidiaries of Kreiger at the time, REH and TSE, together with several other defendants, guaranteed Kreiger's obligations under the note. The Trustee is seeking combined damages of unpaid principal of approximately $16.0 million with unpaid accrued interest. The Company denies all allegations in the complaint and does not believe that REH or the TSE entities are liable for Krieger's obligations to Aspirity. On February 6, 2020, REH and the Trustee agreed to settle the dispute (withdrawal with full releases) in exchange for payment of $0.2 million by REH. On April 6, 2020, the parties signed a settlement agreement which was later approved by the Court. The Company has accrued $0.2 million in the fourth quarter of 2019 and paid the settlement amount in June 2020.

In addition to the matters disclosed above, 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.

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 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.

New York Public Service Commission Orders

In December 2017, the New York Public Service Commission (“PSC”) held an evidentiary hearing to assess the retail energy market in New York. On December 12, 2019, following the completion of post-hearing briefings in the proceedings, the PSC issued an order adopting the changes to the New York retail energy market, effective October 9, 2020 ("2020 Order"). The 2020 Order limits the types of the services energy retailer marketers may offer new customers or renewals, in terms of pricing for non-renewable commodities and renewable product offerings. Although the Company is working to ensure that its products and services are fully compatible with the 2020 Order, such compliance may adversely impact customer acquisition and renewal revenue and profitability. The Company is evaluating its options, both by itself and in tandem with other industry participants, to challenge or petition for additional clarity and changes to the 2020 Order. There is insufficient basis to deem any loss probable or to assess the amount of any possible loss based on the changes instituted by the 2020 Order. For the three and six months ended June 30, 2020 gross revenue from New York was $11.4 million and $28.8 million, respectively.

State of Connecticut Public Utilities Regulatory Authority

On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel has joined in the investigation. Although Town Square denies any basis for those complaints and any wrongdoing on its part, it is cooperating with the investigation and responding to subpoenas for discovery. On June 17, 2020, the Public Utilities Regulatory Authority (PURA or Authority) notified Town Square that it was advancing its investigation by assigning Prosecutorial (PRO) staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties that contains, but is not limited to, an appropriate civil penalty, extensive retraining of the supplier’s third-party agents, and retention of all sales calls with continued auditing. If a settlement is not achieved and PRO staff believe the Authority should take further action regarding alleged non-compliance, the Authority requests that PRO staff petition the Authority setting forth its recommendations citing to supporting facts and law. For the three and six months ended June 30, 2020, Town Square’s gross revenues from sales in Connecticut was $9.5 million and $17.1 million, respectively. As of June 30, 2020, no claims or demands have been made against Town Square by either agency, and there is insufficient basis to deem the loss probable or to the assess the amount of any possible loss.

In December 2019, Connecticut’s Public Utility Regulatory Authority (PURA) issued a Proposed Final Decision that would require electric suppliers to return all of their “Hardship Customers” to the local utility company by March 1, 2020. In January 2020, PURA issued a Proposed Final Decision containing new marketing standards for electric suppliers to comply with. The supplier industry has filed opposition to both PURA decisions.

State of Illinois Office of the Attorney General

In response to complaints that IDT Energy enrolled consumers without their express consent and misrepresented the amount of savings those consumers would receive, the Office of the Attorney General of the State of Illinois (“IL AG”) has been investigating the marketing practices of IDT Energy and has alleged violations of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. and the Illinois Telephone Solicitations Act, 815 ILCS 413/1 et seq. Shortly thereafter, the Illinois Commerce Commission ("IL ICC") commenced a similar investigation. Although IDT Energy denies any wrongdoing in connection with those allegations, the parties (including IL ICC) settled the matter pursuant to a court approved consent decree that includes restitution payments in the amount of $3.0 million, temporary suspension of all marking activities directed at new customers through December 31, 2020, and implementation of various compliance and reporting procedures.

In third quarter of 2018, the Company recorded a liability of $3.0 million recorded as a reduction of electricity revenues in the consolidated statements of operations. For the three and six months ended June 30, 2020, IDT Energy’s gross revenues from sales in Illinois were $1.6 million and $3.4 million, respectively.

Other Informal Reviews or Investigations

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

The Massachusetts Department of Public Utilities opened an informal review and information requests to determine whether the disproportionate number of low-income customers of Town Square, Residents Energy and several other energy retailers in the industry evidences a pattern of misconduct. As of June 30, 2020, no claims or demands have been made against Town Square or Residents Energy by the agency, and there is insufficient basis to deem any loss probable or to the assess the amount of any possible loss.

On October 25, 2019, the Office of the IL AG notified Residents Energy (by way of subpoena) that it is conducting an investigation to assess compliance with the Illinois Consumer Fraud and Deceptive Business Practices Act. The notice was issued in the form of a subpoena in the course of the foregoing. The Company, which has responded in part, has challenged the merits of the subpoena and investigation which it believes is precluded by the broader settlement with IDT Energy. The IL AG is seeking to compel Residents Energy's response to its subpoena. Residents Energy denies any wrongdoing on its part. As of June 30, 2020, no claims or demands have been made against Residents Energy by the IL AG, and there is insufficient basis to deem any loss probable or to the assess the amount of any possible loss.

Other Commitments

Purchase Commitments

The Company had future purchase commitments of $143.9 million at June 30, 2020, of which $96.4 million was for future purchase of electricity. The purchase commitments outstanding as of June 30, 2020 are expected to be paid as follows:

(in thousands)
Remainder of 2020	$	43,860
2021		58,313
2022		26,721
2023		13,084
2024		1,880
Thereafter		—
Total payments	$	143,858

In three months ended June 30, 2020, the Company purchased $9.9 million and $2.9 million of electricity and renewable energy credits, respectively, under these purchase commitments. In the six months ended June 30, 2020, Company purchased $19.9 million and $6.5 million of electricity and renewable energy credit, respectively.

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 June 30, 2020, GRE had commitments to purchase renewable energy credits of $47.5 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 June 30, 2020, GRE had aggregate performance bonds of $13.6 million outstanding and unused letters of credit of $2.3 million.

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, 2020. 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. In addition, the REPs must pay an advance payment of $2.5 million to BP each month that BP will apply to the next invoiced amount due to 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 June 30, 2020, the Company was in compliance with such covenants. At June 30, 2020, restricted cash—short-term of $2.7 million and trade accounts receivable of $42.0 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $13.8 million at June 30, 2020.

Note 19—Debt

Loan with Tokyo Star Bank

On November 28, 2019, Genie Japan entered into a Loan Agreement with Tokyo Star Bank for a ¥100.0 million (equivalent to $0.9 million) short-term credit facility. Genie Japan provided a letter of credit issued by JPMorgan Chase amounting to ¥100.0 million (equivalent to $0.9 million) as collateral. The outstanding principal amount incurred interest at Tokyo Star Bank's short-term prime rate plus 0.25% per annum. Interest was payable monthly and all outstanding principal and any accrued and unpaid interest matured on May 13, 2020. Genie Japan settled the Loan agreement and paid the outstanding balance of ¥100.0 million (equivalent to $0.9 million) on May 13, 2020.

On May 13, 2020, Genie Japan entered into a new Loan Agreement with Tokyo Star Bank for a ¥150.0 million (equivalent to $1.4 million) short-term credit facility ("May 2020 Loan"). Genie Japan provided a letter of credit issued by JPMorgan Chase in the amount of ¥150.0 million (equivalent to $1.4 million) as collateral. The outstanding principal amount incurs interest at 3.0% per annum. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest mature on November 13, 2020. At June 30, 2020, $1.4 million was outstanding under the May 2020 Loan. At June 30, 2020, the effective interest rate was 3.0%.

Revolving Line of Credit with Vantage Commodities

On April 4, 2017, GRE, IDT Energy, and other GRE subsidiaries entered into a Credit Agreement with Vantage Commodities Financial Services II, LLC ("Vantage") for a $20 million revolving loan facility. The borrowers consist of the Company’s subsidiaries that operate REP businesses, and those subsidiaries’ obligations are guaranteed by GRE. The borrowers have provided as collateral a security interest in their receivables, bank accounts, customer agreements, certain other material agreements and related commercial and intangible rights. The outstanding principal amount incurred interest at LIBOR plus 4.5% per annum. Interest was payable monthly, and all outstanding principal and any accrued and unpaid interest was due on the maturity date of April 3, 2020. At December 31, 2019, $2.5 million was outstanding under the revolving line of credit with an effective interest rate of 6.41% per annum. The borrowers were required to comply with various affirmative and negative covenants, including maintaining a target tangible net worth during the term of the credit agreement. In April 2020, the revolving line of credit expired and the Company paid the outstanding balance of $3.5 million in exchange for the release and termination of any further obligations and security interest.

Credit Agreement with JP Morgan Chase Bank

On December 5, 2019, the Company entered into an amendment of its existing Credit Agreement with JPMorgan Chase Bank ( the “Credit Agreement”) to extend the maturity date of December 31, 2020. The Company continues to have the aggregate principal amount of $5.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on 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 $5.1 million. As of, June 30, 2020, JP Morgan Chase Bank issued $2.3 million letters of credit from the Credit Line. As of June 30, 2020, none of the letters of credits were drawn upon. At June 30, 2020, the cash collateral of $5.2 million was included in restricted cash—short-term in the consolidated balance sheet.

Note 20—Recently Issued Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), related to the accounting for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Subsequent to the issuance of ASU 2016-02, in July 2018, the FASB issued Accounting Standards Update No. 2018-10, Codification Improvements to Topic 842, Leases ("ASU 2018-10") and Accounting Standards Update No. 2018-11, Leases (Topic 842): Targeted Improvements ("ASU 2018-11"). The amendments in ASU 2018-10 clarify, correct or remove inconsistencies in the guidance provided under ASU 2016-02 related to sixteen specific issues identified. The amendments in ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under the new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity's reporting for the comparative periods presented in the financial statements in the period of adoption will continue to be in accordance with ASC 840, Leases ("ASC 840"). An entity that elects this additional (and optional) transition method must provide the required disclosures under ASC 840 for all periods that continue to be in accordance with ASC 840. ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if certain criteria are met. The effective date and transition requirements for these two standards are the same as the effective date and transition requirements of ASU 2016-02. The standards were effective for the Company beginning after December 15, 2018.

The Company adopted Topic 842 as of January 1, 2019 using a modified retrospective transition method. The financial results reported in periods prior to January 1, 2019 are not adjusted. The Company also elected the package of practical expedients, which among other things, does not require reassessment of lease classification. As most of the Company's leases do not provide an implicit rate, we used our collateralized incremental borrowing rate based on the information available at the lease implementation date in determining the present value of the lease payments. At January 1, 2019, the Company recognized $2.4 million of ROU assets related to the Company's operating leases. The ROU was included in other assets in the consolidated balance sheet. The Company also recognized $0.4 million and $2.0 million of current and noncurrent lease liabilities, included in other current liabilities and other liabilities in the consolidated balance sheets.

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 will adopt the new standard on January 1, 2023. The Company is evaluating the impact that the new standard will have on its consolidated financial statements.

In June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, to simplify several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of Topic 718, Compensation—Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The Company adopted this ASU on January 1, 2019. The Company recorded additional $0.3 million to accumulated deficit on January 1, 2019. There was no impact on the consolidated statements of operations and consolidated statements of cash flows.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, that eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The amendments in this ASU are effective for the Company on January 1, 2020. Early application is permitted. The guidance on changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 measurements, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively. The Company adopted the ASU on January 1, 2020. The adoption of the ASU does not have a significant impact on the consolidated financial statements.

In November 2018, the FASB issued ASU No. 2018-17, Targeted Improvements to Related Party Guidance for Variable Interest Entities, that changes how entities apply the variable interest entity ("VIE") guidance evaluate decision-making fees. The ASU provides guidance on whether these fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis rather than in their entirety. When evaluating whether decision-making fees are a variable interest, indirect interest will be evaluated in a similar manner to how they are considered when identifying the primary beneficiary of a VIE. The new guidance in this ASU are effective for the Company on January 1, 2020. Early adoption was permitted. The Company adopted the ASU on January 1, 2020. The adoption of the ASU does not have a significant impact on the consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU eliminates certain exceptions and adds guidance to reduce complexity in accounting for income taxes. Specifically, this guidance: (1) removes the intraperiod tax allocation exception to the incremental approach; (2) removes the ownership changes in investments exception in determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting and applies this provision on a modified retrospective basis through a cumulative-effect adjustment to retained earnings at the beginning of the period of adoption; and (3) removes the exception to using the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The ASU also simplifies accounting principles by making other changes, including requiring an entity to: (1) evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction; (2) make a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and to apply this provision retrospectively to all periods presented; and (3) recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and apply this provision either retrospectively for all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The provisions of this guidance (except as specifically mentioned above) are to be applied prospectively upon their effective date. The ASU is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those years. Early adoption is permitted but requires simultaneous adoption of all provisions of this guidance. The Company is currently evaluating the requirements of this guidance and has not yet determined the impact of its adoption on the Company's consolidated financial position, results of operations and cash flows.

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, 2018, 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, 2019. 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, 2019.

Coronavirus Disease (COVID 19)

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

For the three and six months ended June 30, 2020, the impacts of COVID-19 are evident in several key aspects of our business operations and the corresponding financial impact has been mixed. Our consolidated revenues for the three months ended June 30, 2020, compared to the same period in 2019, increased by $15.1 million equivalent to 24.7%. Our consolidated revenues for the three months ended June 30, 2020, compared to the same period in 2019, increased by $32.5 million equivalent to 22.0%.

Our customer base is predominantly residential, so we benefited from the increased demand for electricity when customers are working from their homes. On the other hand, like other retail providers, we suspended our face-to-face customer acquisition programs in March 2020 as public health measures were implemented to combat COVID-19, resulting in a decrease in gross meter acquisitions. The reduction in gross meter acquisitions decreased our customer acquisition expense in the second quarter of 2020. Churn for the second quarter of 2020 decreased as our competitors suspended their face to face marketing programs.

We did not experience any significant changes in our workforce composition and were able to implement our business continuity plans with no significant impact to our ability to maintain our operations. We continue to maintain strong physical and cybersecurity measures in order to both serve our operational needs with a remote workforce and to ensure that we continue to provide services to our customers. We face challenges due to the need to operate with a remote workforce and are continuing to address those challenges so as to minimize the impact on our ability to operate.

Looking ahead, we expect to see a modest rebound in meter acquisition beginning the third quarter, specially at GRE. Public health restrictions have begun to ease in some of our markets which allow us to resume face-to-face sales and marketing. Any reversal of the easing of restrictions would impact that expected rebound.

There are many uncertainties regarding the impacts of the COVID-19 pandemic, and we are closely monitoring those impacts of on all aspects of its business, including how it will impact our customers, employees, suppliers, vendors, and business partners. We are currently unable to predict the impact that COVID-19 will have on our financial position and operating results due to the complexities of the impacts and numerous uncertainties that are beyond the Company's control. We expect to continue to assess the evolving impact of COVID-19 on our business and assets and intend to make adjustments accordingly.

Overview

We are comprised of Genie Retail Energy ("GRE"), Genie Retail Energy International ("GRE International"), Genie Energy Services ("GES") and Genie Oil & Gas ("GOGAS").

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 REP businesses resell electricity and natural gas primarily to residential and small business customers, with the majority of the customers in the Eastern United States.

GRE International holds the Company's 77.0% interest in its joint venture that serves retail customers in the United Kingdom ("U.K."), our wholly-owned venture in Japan, its 92.5% controlling interest in Lumo Energia Oyj ("Lumo"), a REP serving residential customers in Finland, and 100% of Lumo Energi AB, which serves retail customers in Sweden.

GES holds Diversegy, a retail energy advisory and brokerage company that serves commercial and industrial customers throughout U.S., manages our 60.0% controlling interest in Prism and 100% interest in Genie Solar Energy. Prism is a solar solutions company that is engaged in U.S. based manufacturing of solar panels, solar installation design and solar energy project management. Genie Solar Energy sells rooftop solar system to commercial and industrial clients.

We also operate (and own 97.0% of the equity of) GOGAS, an oil and gas exploration company and owns a minority interest in a contracted drilling services company ("Atid 613"). GOGAS’ four exploration projects are inactive. GOGAS holds 86.1% interest in Afek Oil and Gas ("Afek"), an oil and gas exploration project in the Golan Heights in Northern Israel. GOGAS also holds a 37.5% interest in a contracted drilling services company in Israel ("Atid 613").

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.

Genie Retail Energy

GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Georgia, Illinois, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Florida, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 87.4% and 89.2% of our consolidated revenues in the three months ended June 30, 2020 and 2019, respectively, and 80.8% and 88.7% in the six months ended June 30, 2020 and 2019, respectively.

Seasonality and Weather

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 or summers have the opposite effects. 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 46.9% and 50.3% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2019 and 2018, 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 31.8% and 29.5% of GRE’s electricity revenues for 2019 and 2018, 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.

Purchase of Receivables

Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which we operate. 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 and six months ended June 30, 2020 the associated cost was approximately 1.3% and 1.2% of GRE's revenue, respectively. In both the three and six months ended June 30, 2019 the associated cost was approximately 1.1% of GRE's revenue. At June 30, 2020, 87.9% of GRE’s net accounts receivables were under a POR program.

Class Action Lawsuits

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

On October 5, 2018, two named plaintiffs filed a putative class action complaint against IDT Energy alleging violations of the Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. in connection with its telemarketing practices. IDT Energy denies the allegations in the complaint, which it believes to be meritless and is vigorously defending this action. On October 31, 2019, the court granted IDT Energy’s motion to bifurcate individual from class claims to expedite discovery and dispositive motions related to the named plaintiffs. On January 9, 2020, the Court granted IDT Energy’s motion for summary judgment to dismiss one of the named plaintiffs for lack of personal jurisdiction. The remaining named plaintiff filed a motion to compel class discovery which IDT Energy has opposed. On July 14, 2020, IDT Energy filed a motion for summary judgment to dismiss the remaining named plaintiff. Based upon the Company’s assessment of this matter, a loss based on the merits is not considered probable, nor is the amount of loss, if any, estimable as of June 30, 2020.

On February 18, 2020, named Plaintiff Danelle Davis filed a putative class action complaint against Residents Energy and GRE in United States District of New Jersey alleging violations of the Telephone Consumer Protection Act, 47 U.S.C § 227 et seq. IDT energy denies allegations in the complaint which it to be meritless and plans to vigorously defend this action. Based upon the Company's preliminary assessment of this matter, a loss is not considered probable, nor is the amount of loss, nor is the amount of loss if any, estimable.

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

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.

New York Public Service Commission Proceedings

In December 2017, the New York Public Service Commission (“PSC”) held an evidentiary hearing to assess the retail energy market in New York. On December 12, 2019, following the completion of post-hearing briefings in the proceedings, the PSC issued an order adopting changes to the New York retail energy market, effective October 9, 2020 (“2020 Order”). The 2020 Order limits the types of services energy retailer marketers may offer new customers or renewals, in terms of pricing for non-renewable commodities, and renewable product offerings. Although the Company is working to ensure that its products and services are fully compatible with the 2020 Order, such compliance may adversely impact customer acquisition and renewal revenue and profitability. The Company is evaluating its options, both by itself and in tandem with other industry participants, to challenge or petition for additional clarity and changes to the 2020 Order. There is insufficient basis to deem any loss probable or to assess the amount of any possible loss based on the changes instituted by the 2020 Order. As of June 30, 2020, New York represented 20.6% of GRE’s total meters served and 15.6% of the total residential customer equivalents (“RCEs”) of GRE’s customer base. For the three and six months ended June 30, 2020, New York gross revenues were $11.4 million and $28.8 million, respectively.

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.

State of Connecticut Public Utilities Regulatory Authority

On September 19, 2018, the State of Connecticut Public Utilities Regulatory Authority (“PURA”) commenced an investigation into Town Square following customer complaints of allegedly misleading and deceptive sales practices on the part of Town Square. The Connecticut Office of Consumer Counsel has joined in the investigation. Although Town Square denies any basis for those complaints and any wrongdoing on its part, it is cooperating with the investigation and responding to subpoenas for discovery. On June 17, 2020, the Public Utilities Regulatory Authority (PURA or Authority) notified Town Square that it was advancing it’s investigation by assigning Prosecutorial (PRO) staff for the purpose of investigating Town Square’s compliance with licensed electric supplier billing, marketing, and licensing requirements, and, if appropriate, facilitating settlement discussions among the parties that contains, but is not limited to, an appropriate civil penalty, extensive retraining of the supplier’s third-party agents, and retention of all sales calls with continued auditing. If a settlement is not achieved and PRO staff believe the Authority should take further action regarding alleged non-compliance, the Authority requests that PRO staff petition the Authority setting forth its recommendations citing to supporting facts and law. As of June 30, 2020, Town Square’s Connecticut customer base represented 13.1% of GRE’s total meters served and 14.2% of the total RCEs of GRE’s customer base. For three and six months ended June 30, 2020, Town Square’s gross revenues from sales in Connecticut were $9.5 million and $17.1 million, respectively. As of June 30, 2020, no claims or demands have been made against Town Square by either agency, and there is insufficient basis to deem the loss probable or to assess the amount of any possible loss.

State of Illinois Office of the Attorney General

In response to complaints that IDT Energy enrolled consumers without their express consent and misrepresented the amount of savings those consumers would receive, the Office of the Attorney General of the State of Illinois (“IL AG”) has been investigating the marketing practices of IDT Energy and has alleged violations of the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. and the Illinois Telephone Solicitations Act, 815 ILCS 413/1 et seq. Shortly thereafter, the Illinois Commerce Commission ("IL ICC") commenced a similar investigation. Although IDT Energy denies any wrongdoing in connection with those allegations, the parties (including the IL ICC) settled the matter pursuant to a court approved consent decree that includes restitution payments in the amount of $3.0 million, temporary suspension of all marking activities directed at new customers through December 1, 2020, and implementation of various compliance and reporting procedures.

In third quarter of 2018, the Company recorded a liability of $3.0 million recorded as a reduction of electricity revenues in the consolidated statements of operations. As of June 30, 2020, IDT Energy in Illinois represented 3.1% of GRE’s total meters served and 1.5% of the total RCEs of GRE’s customer base. For the six months ended June 30, 2020 and 2019, IDT Energy’s gross revenues from sales in Illinois were $1.6 million and $3.4 million, respectively.

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, 2019. 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 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, 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, 2019.

Recently Issued Accounting Standards

Information regarding new accounting pronouncements is included in Note 19—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.

Three and Six Months Ended June 30, 2020 Compared to Three and Six Months Ended June 30, 2019

Genie Retail Energy Segment

		Three months ended June 30,			Change					Six months ended June 30,				Change
(amounts in thousands)		2020	2019		$		%			2020		2019			$		%
Revenues:
Electricity	$	61,076	$	49,237	$	11,839		24.0	%	$	124,150	$	107,049		$	17,101		16.0	%
Natural gas		5,396		5,194		202		3.9			21,467		23,900			(2,433)		(10.2)
Total revenues		66,472		54,431		12,041		22.1			145,617		130,949			14,668		11.2
Cost of revenues		49,420		46,188		3,232		7.0			100,963		98,027			2,936		3.0
Gross profit		17,052		8,243		8,809		106.9			44,654		32,922			11,732		35.6
Selling, general and administrative expenses		11,095		13,661		(2,566)		(18.8)			25,680		24,837			843		3.4
Income (loss) from operations	$	5,957	$	(5,418)	$	11,375		209.9	%	$	18,974	$	8,085		$	10,889		134.7	%

Revenues. Electricity revenues increased by 24.0% in three months ended June 30, 2020 compared to the same period in 2019. The increase is due to an increase in electricity consumption partially offset by a decrease in the average rate per kilowatt hour sold in the three months ended June 30, 2020 compared to the same period in 2019. Electricity consumption by GRE’s REPs' customers increased by 35.0% in the three months ended June 30, 2020, compared to the same period in 2019. The increase in electricity consumption reflected a 7.4% increase in the average number of meters served and a 25.7% increase in average consumption per meter. The increase in consumption reflects a sustained focus on the acquisition of higher consumption meters, warmer weather in the 2020 period compared to 2019 and increased residential electricity consumption resulting from COVID-19 "stay-at-home" orders. The average rate per kilowatt hour sold decreased 8.1% in the three months ended June 30, 2020 compared to the same period in 2019.

Electricity revenues increased by 16.0% in six months ended June 30, 2020 compared to the same period in 2019. The increase is due to an increase in electricity consumption partially offset by a decrease in the average rate per kilowatt hour sold in the six months ended June 30, 2020 compared to the same period in 2019. Electricity consumption by GRE’s REPs' customers increased 25.4% in the six months ended June 30, 2020, compared to the same period in 2019. The increase in electricity consumption reflected an increase in the average number of meters served which increased by 12.3% and in the average consumption per meter which increased by 11.6% in the six months ended June 30, 2020 compared to the same period in 2019. The average rate per kilowatt hour sold decreased 7.5% in the six months ended June 30, 2020 compared to the same period in 2019.

GRE’s natural gas revenues increased by 3.9% in the three months ended June 30, 2020 compared to the same period in 2019. Natural gas consumption by GRE’s REPs’ customers increased by 14.1% in the three months ended June 30, 2020 compared to the same period in 2019 reflecting a 14.9% increase in average consumption per meter in the three months ended June 30, 2020 compared to the same period in 2019 partially offset by a decrease of 0.7% in average meters served in the three months ended June 30, 2020 compared to the same period in 2019. The increase was also partially offset by a decrease in average rate per therm sold which decreased by 8.9% in the three months ended June 30, 2020, compared to the same period in 2019.

GRE’s natural gas revenues decreased in the six months ended June 30, 2020 compared to the same period in 2019. The decrease is due to decreases in natural gas consumption by GRE's REPs' customers and average rate per therm sold in the six months ended June 30, 2020, compared to the same period in 2019. Natural gas consumption by GRE’s REPs’ customers decreased 4.1% in the six months ended June 30, 2020 compared to the same period in 2019 reflecting a 7.0% decrease in average consumption per meter in the six months ended June 30, 2020 compared to the same period in 2019 partially offset by an increase of 3.2% in average meters served in the six months ended June 30, 2020 compared to the same period in 2019. Average rate per therm sold decreased by 6.4% in the six months ended June 30, 2020, compared to the same period in 2019.

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

(in thousands)	June 30, 2020	March 31, 2020		December 31, 2019		September 30, 2019		June 30, 2019
Meters at end of quarter:
Electricity customers	310		313		297		314		307
Natural gas customers	64		71		73		74		71
Total meters	374		384		370		388		378

Gross meter acquisitions in three months ended June 30, 2020, were 40,000 compared to 91,000 for the same period in 2019. Gross meter acquisitions in six months ended June 30, 2020, were 109,000 compared to 176,000 for the same period in 2019. The decreases reflect reduced sales activity in the second quarter of 2020 as a result of COVID-19 related public health restrictions on certain sales channels. Gross meter acquisition in six months ended June 30, 2019 includes the impact of a municipal aggregation deal in New Jersey which added approximately 35,000 meters.

Meters served decreased by 10,000 or 2.6% from March 31, 2020 to June 30, 2020. Meters served increased by 4,000 or 1.1% from December 31, 2019 to June 30, 2020. In three months ended June 30, 2020, average monthly churn decreased to 3.9% compared to 4.4% for same period in 2019. In six months ended June 30, 2020, average monthly churn decreased to 4.3% compared to 4.8% for the same period in 2019. The reduction in churn reflects the impact of a shift in our customer mix related to channel, product and geography. The reduction in churn also reflects decreased sales activity by competitors as a result of COVID-19 related restrictions.

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)	June 30, 2020	March 31, 2020		December 30, 2019		September 30, 2019		June 30, 2019
RCEs at end of quarter:
Electricity customers	288		272		248		266		259
Natural gas customers	55		58		61		61		59
Total RCEs	343		330		309		327		318

RCEs increased 7.9% at June 30, 2020 compared to June 30, 2019 reflects our recent focus on adding higher consumption meters, warmer than average weather in 2020 and COVID-19 driven shift to work-from-home.

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

	Three months ended June 30,				Change					Six months ended June 30,				Change
(amounts in thousands)	2020		2019		$		%			2020		2019		$			%
Cost of revenues:
Electricity	$	46,181	$	41,309	$	4,872		11.8	%	$	89,253	$	81,909	$	7,344			9.0	%
Natural gas		3,239		4,879		(1,640)		(33.6)			11,710		16,118		(4,408	)		(27.3	)
Total cost of revenues	$	49,420	$	46,188	$	3,232		7.0	%	$	100,963	$	98,027	$	2,936			3.0	%

	Three months ended June 30						Six months ended June 30,
(amounts in thousands)	2020		2019		Change		2020			2019			Change
Gross margin percentage:
Electricity	24.4	%	16.1	%	8.3	%		28.1	%		23.5	%		4.6	%
Natural gas	40.0		6.1		33.9			45.5			32.6			12.9
Total gross margin percentage	25.7	%	15.1	%	10.5	%		30.7	%		25.1	%		5.6	%

Cost of revenues for electricity increased in the three months ended June 30, 2020 compared to the same period in 2019 primarily because of an increase in electricity consumption by GRE’s REPs’ customers partially offset by a decrease in the average unit cost of electricity. The average unit cost of electricity decreased 17.2% in the three months ended June 30, 2020 compared to the same period in 2019. Gross margin on electricity sales increased in the three months ended June 30, 2020 compared to the same period in 2019 because the average rate charged to customers decreased less than the decrease in the average unit cost of electricity.

Cost of revenues for electricity increased in the six months ended June 30, 2020 compared to the same period in 2019 primarily because of an increase in electricity consumption by GRE’s REPs’ customers partially offset by a decrease in the average unit cost of electricity. The average unit cost of electricity decreased 13.1% in the six months ended June 30, 2020 compared to the same period in 2019. Gross margin on electricity sales increased in the six months ended June 30, 2020 compared to the same period in 2019 because the average rate charged to customers decreased less than the decrease in the average unit cost of electricity.

Cost of revenues for natural gas decreased in the three months ended June 30, 2020 compared to the same period in 2019 primarily because of a decrease in the average unit cost of natural gas partially offset by increase in natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased 42.1% in the three months ended June 30, 2020 compared to the same period in 2019. Gross margin on natural gas sales increased in the three months ended June 30, 2020 compared to the same period in 2019 because the average rate charged to customers decreased less than the decrease in the average unit cost of natural gas.

Cost of revenues for natural gas decreased in the six months ended June 30, 2020 compared to the same period in 2019 primarily because of decreases in both the average unit cost of natural gas and natural gas consumption by GRE's REPs' customers. The average unit cost of natural gas decreased 24.4% in the six months ended June 30, 2020 compared to the same period in 2019. Gross margin on natural gas sales increased in the six months ended June 30, 2020 compared to the same period in 2019 because the average rate charged to customers decreased less than the decrease in the average unit cost of natural gas.

Selling, General and Administrative. The decrease in selling, general and administrative expense in the three months ended June 30, 2020 compared to the same period in 2019 was primarily due to a decrease in marketing and customer acquisition costs partially offset by increases in employee-related costs, provision for doubtful accounts and costs related to POR programs. Marketing and customer acquisition expenses decreased by $3.5 million in the three months ended June 30, 2020, compared to the same period in 2019 due to reduced pace of customer acquisition activities related to COVID-19 related public health restrictions. Employee-related expenses increased by $0.2 million in the three months ended June 30, 2020 compared to the same period in 2019 primarily due to an increase in accrued bonuses resulting from improved results of operations. Provision for doubtful accounts and costs related to POR program increased by $0.7 million in three months ended June 30, 2020 compared to the same period in 2019 as a result of entrance to non-POR markets (which led to an increase in the provision for doubtful accounts) and increase in revenue. As a percentage of GRE’s total revenues, selling, general and administrative expense decreased from 25.1% in the three months ended June 30, 2019 to 16.7% in the three months ended June 30, 2020.

The increase in selling, general and administrative expense in the six months ended June 30, 2020 compared to the same period in 2019 was primarily due to increases in employee-related costs, provision for doubtful accounts expense and costs related to POR programs partially offset by decrease in marketing and customer acquisition costs. Employee-related expenses increased by $0.6 million in the six months ended June 30, 2020 compared to the same period in 2019 primarily due to an increase in accrued bonuses resulting from improved results of operations. Provision for doubtful accounts and costs related to POR program increase by $1.2 million in six months ended June 30, 2020 compared to the same period in 2019. Marketing and customer acquisition expenses decreased by $1.0 million in the six months ended June 30, 2020, compared to the same period in 2019. As a percentage of GRE’s total revenues, selling, general and administrative expense slightly decreased from 25.1% in the six months ended June 30, 2019 to 16.7% in the six months ended June 30, 2020.

GRE International Segment

	Three Months Ended June 30,				Change					Six Months Ended June 30,						Change
(amounts in thousands)	2020		2019		$		%			2020			2019			$	%
Revenues	$	5,037	$	2,870	$	2,167		75.5	%	$	11,990	$	7,713		$	4,277	55.5	%
Cost of revenue		3,122		2,629		493		18.8			10,363		7,491			2,872	38.3
Gross profit		1,915		241		1,674		694.6			1,627		222			1,405	632.9
Selling, general and administrative expenses		2,522		1,848		674		36.5			4,754		3,572			1,182	33.1
Loss from operations	$	(607)	$	(1,607)	$	(1,000)		(62.2)	%	$	(3,127)	$	(3,350	)	$	(223)	(6.7)	%
Equity in net loss of Shoreditch	$	1,502	$	867	$	635		73.2	%	$	1,502	$	1,938		$	(436)	(22.5)	%

GRE International holds our stakes in REPs outside of North America. These businesses currently include our stake in Shoreditch, which operates as Orbit Energy in the U.K., Genie Japan, and our controlling stake in Lumo, which operates in certain portions of Scandinavia. In the second quarter of 2020, we started commercial operations in Sweden.

We account for our investments in Shoreditch under the equity method of accounting. Under this method, we record our share in the net income or loss of Shoreditch. Therefore, revenue generated, and expenses incurred are not reflected in our consolidated revenue and expenses.

Meters served by GRE International's REPs, including Shoreditch, increased to 161,000 at June 30, 2020 from 148,000 at March 31, 2020 primarily as a result of the growth Shoreditch's and Lumo's customer bases. Meters served by GRE International's REPs, including Shoreditch, increased by 34,000 or 26.7% from December 31, 2019 to June 30, 2020, primarily as a result of growth in Shoreditch's and Lumo's customer bases. The Company also started the commercial operations of Genie Japan in second quarter of 2019.

RCEs at June 30, 2020, including Shoreditch, increased to 79,000 from 72,000 at March 30, 2020 primarily from the increase in meters served as discussed above. RCEs at June 30, 2020 increased by 13,000 or 20.6% from December 31, 2019 to June 30, 2020, primarily as a result of growth in Shoreditch, Japan and Lumo.

Revenue and Cost of Revenue. GRE International's revenues and cost of revenue increased in the three and six months ended June 30, 2020 compared to the same period in 2019 primarily because of the start of commercial operations of Genie Japan in second quarter of 2019 and increase in meters served of Lumo. In second quarter of 2020, our wholly-owned subsidiary, Lumo Energi AB, began its commercial operations serving customers in Sweden.

Equity in net loss of joint venture. We account for our ownership interest in Shoreditch using the equity method since we have the ability to exercise significant influence over Shoreditch's operating and financial matters, although we do not control Shoreditch. In fourth quarter of 2019, the book value the Company's investment in Shoreditch was reduced to nil as a result of the Company's share in accumulated losses of Shoreditch using the equity method of accounting. The Company recognized $1.5 million share in net losses Shoreditch for the three and six months ended June 30, 2020. equivalent to the total capital contribution for the same periods. The Company's share in Shoreditch’s net loss for the three and six months ended June 30, 2019 were $0.9 million and $1.9 million, respectively.

GES Segment

		Three Months Ended June 30,				Change			Six Months Ended June 30,						Change
(amounts in thousands)		2020		2019		$	%		2020			2019			$		%
Revenues	$	4,566	$	3,708	$	858	23.1	%	$	22,519	$	8,965		$	13,554		151.2	%
Cost of revenue		4,045		3,214		831	25.9			20,408		7,540			12,868		170.7
Gross profit		521		494		27	5.5			2,111		1,425			686		48.1
Selling, general and administrative expenses		833		1,176		(343)	(29.2)			1,889		2,338			(449	)	(19.2	)
Impairment of assets		801		—		801	nm			993		—			993		nm
Loss from operations	$	(1,113)	$	(682)	$	431	63.2	%	$	(771)	$	(913	)	$	(142)		(15.6)	%

nm—not meaningful

Revenue. GES' revenues increased in the three and six months ended June 30, 2020 compared to the same period in 2019. The increase in revenues was the result of the delivery of a large number of orders at Prism particularly in the first quarter of 2020. Revenues from Diversegy includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses.

Cost of Revenues. Cost of revenues increased in the three and six months ended June 30, 2020 compared to the same periods in 2019 primarily as a result of the significant increase in deliveries of solar panels. Cost of revenues in the three and six months ended June 30, 2020 also includes commissions incurred by our energy brokerage and marketing services businesses.

Selling, General and Administrative. Selling, general and administrative expenses decreased the three and six months ended June 30, 2020 compared to the same period in 2019 primarily because of the streamlining of operations of Prism in first quarter of 2020.

In March 2020, we initiated a plan to sell the property, plant and equipment of Prism. Prism's 4.75% notes payable to Catskill Hudson Bank are collateralized by Prism's land and building and improvements and will be settled from the proceeds of the sale of the property. At June 30, 2020, Prism's property, plant and equipment and notes payable were reclassified as assets and liabilities held for sale and reported at lower of fair value less cost to sell and net book value. In the first quarter of 2020, the Company recorded a $0.2 million write-down to fair value of certain property and equipment.

In second quarter of 2020, Prism renegotiated a contract with a customer which resulted in impairment of customer relationship of $0.8 million included in the consolidated statements of operation.

We are currently exploring options to reduce overhead at Prism due to changes in market conditions.

The pending disposition of Prism's assets and liabilities held for sale did not meet the criteria to be reported as a discontinued operation. At June 30, 2020, assets held of sale of $2.2 million and liabilities held for sale of $0.8 million were included in other current assets and other current liabilities, respectively, in the consolidated balance sheet.

Genie Oil and Gas Segment

		Three Months Ended June 30,			Change				Six Months Ended June 30,				Change
(amounts in thousands)		2020		2019		$	%		2020		2019		$		%
Revenue	$	—	$	—	$	—	nm	%	$	—	$	—	$	—		nm	%

General and administrative		172		381		(209)	(54.9)			395		545		(150)		(27.5)
Loss from operations	$	172	$	381	$	(209)	(54.9)	%	$	395	$	545	$	(150)		(27.5)	%
Equity in net loss of Atid 613	$	224	$	(204)	$	428	(209.8)	%	$	(36)	$	70	$	(106)		(151.4	)%

nm—not meaningful

General and Administrative. General and administrative expense decreased in the three and six months ended June 30, 2020 compared to the same periods in 2020 because of decrease in payroll and related expenses and consulting fees.

Exploration. In 2017, we suspended drilling operations at Afek. Subsequent analysis indicates that a zone within the well contains evidence of hydrocarbons at levels sufficient to warrant additional testing. Accordingly, Afek requested and received a renewal of its exploratory license from the Ministry of Energy for the Northern portion of its former license area. Because of COVID-19 restrictions, an essential member of our technical team has not been able to get a visa, which makes it difficult to determine a new time-frame for completion of the tests since the execution depends on factors outside our span of control, however, we will provide an update in our third quarter of 2020 report

Corporate

Corporate does 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 expense.

(amounts in thousands)		Three months ended June 30,			Change				Six months ended June 30,				Change
		2020		2019		$	%		2020		2019			$		%
General and administrative expenses and loss from operations	$	1,335	$	1,188	$	147	12.4	%	$	2,738	$	2,718		$	20		0.7	%

Corporate general and administrative expenses increased in three and six months ended June 30, 2020 compared to the same periods in 2019 primarily because of an increase in stock-based compensation expense. As a percentage of our consolidated revenues, Corporate general and administrative expense decreased from 1.9% in the three months ended June 30, 2019 to 1.8% in the three months ended June 30, 2020 and decreased from 1.8% in the six months ended June 30, 2019 to 1.5% in the six months ended June 30, 2020.

Consolidated

Selling, general and administrative expenses. Stock-based compensation expense included in consolidated selling, general and administrative expense was $0.4 million and $0.3 million in the three months ended June 30, 2020 and 2019, respectively and $0.9 million and $0.8 million in the six, respectively. At June 30, 2020, aggregate unrecognized compensation cost related to non-vested stock-based compensation was $3.0 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 June 30,				Change					Six months ended June 30,					Change
(amounts in thousands)	2020		2019		$		%			2020		2019			$		%
Income (loss) from operations	$	2,730	$	(9,276)	$	12,006		129.4	%	$	11,943	$	558		$	11,385		2,040.3	%
Interest income		20		189		(169)		(89.4)			143		281			(138)		(49.1)
Interest expense		(58)		(178)		120		(67.4)			(175)		(319	)		144		(45.1	)
Equity in net loss in equity method investees		(1,173)		(1,071)		(102)		9.5			(1,552)		(1,868)			316		(16.9)
Other (loss) income, net		(52)		157		(209)		(133.1)			98		232			(134)		(57.8)
(Provision for) benefit from income taxes		(587)		1,678		(2,265)		(135.0)			(3,156)		(1,225)			(1,931)		157.6
Net income (loss)		880		(8,501)		9,381		110.4			7,301		(2,341)			9,642		411.9
Net loss attributable to noncontrolling interests		(1,083)		(1,035)		48		4.6			(494)		(944)			(450)		(47.7)
Net income (loss) attributable to Genie	$	1,963	$	(7,466)	$	9,429		126.3	%	$	7,795	$	(1,397)		$	10,092		722.4

Other Income (Expense), net. Other expense, net in the three months ended June 30, 2020 consisted primarily of foreign currency transaction and loss on deconsolidation of subsidiary. Other income, net in the six months ended June 30, 2020 consisted primarily of foreign currency transaction gains.

Provision for Income Taxes. The increase in the reported tax rate for the three months ended June 30, 2020 compared to the same period in 2019, is a result of higher taxable income on GRE business that is not offset by losses on other business. The provision for income taxes in the six months ended June 30, 2020 is a result of consolidated taxable income GRE. The benefit from income taxes in the six months ended June 30, 2019 is a result of loss during the period.

Net Income Attributable to Noncontrolling Interests. The change in the net loss attributable to noncontrolling interests in the three months ended June 30, 2020 compared to the similar periods in 2019 was primarily due to the increase in the share of noncontrolling interest from net losses of Prism and CCE offset by decrease in share in net loss of noncontrolling interest related to Afek.

The change in the net loss attributable to noncontrolling interests in the six months ended June 30, 2020compared to the similar periods in2019was primarily due to the share of noncontrolling interest from deconsolidation of non-operating subsidiaries and decrease in net loss of Lumo and Afek offset by increase in share in net loss of noncontrolling interest related to Prism.

Liquidity and Capital Resources

General

We currently expect that our cash flow from operations and the $33.4 million balance of unrestricted cash and cash equivalents that we held at June 30, 2020 will be sufficient to meet our currently anticipated cash requirements for at least the period from July 1, 2020 to August 7, 2021.

At June 30, 2020, we had working capital (current assets less current liabilities) of $49.1 million.

	Six Months Ended June 30,
	2020		2019
	(in thousands)
Cash flows provided by (used in):
Operating activities	$	13,642	$	3,872
Investing activities		(1,882)		(2,076	)
Financing activities		(8,567)		(6,132	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		12		12
Increase (decrease) in cash, cash equivalents, and restricted cash	$	3,205	$	(4,324)

Operating Activities

Cash, cash equivalents and restricted cash provided by operating activities was $13.6 million compared to net cash provided by operating activities of $3.9 million in the six months ended June 30, 2020 and 2019, respectively. Net income after non-cash adjustments increased cash flows by $12.8 million for the six months ended June 30, 2020, compared to the same period in 2019. The increase in operating cash flows is primarily the result of favorable results of operations in six months ended June 30, 2020 compared to the same period in 2019.

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 working capital decreased cash flows by $5.3 million for the six months ended June 30, 2020, compared to the same period in 2019. Changes in other assets increased cash flows by $2.3 million for the six months ended June 30, 2020, compared to the same period in 2019.

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, 2020. 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. In addition, the REPs must pay an advance payment of $2.0 million to BP each month that BP will apply to the next invoiced amount due to 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 June 30, 2020, we were in compliance with such covenants. At June 30, 2020, restricted cash—short-term of $2.7 million and trade accounts receivable of $42.0 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $13.8 million at June 30, 2020.

We had purchase commitments of $143.9 million at June 30, 2020, of which $96.4 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 in the six months ended June 30, 2020 compared to $0.3 million in the six months ended June 30, 2019. We currently anticipate that our total capital expenditures in the twelve months ending December 31, 2020 will be between $0.5 million and $1.0 million.

We received minimal amount and $0.3 million from an employee for the repayment of notes receivable in the six months ended June 30, 2020 and 2019, respectively.

On January 2, 2019, we completed the purchase of an 80.0% controlling interest in Lumo. We paid the sellers a total of €1.6 million (equivalent to $1.9 million at that time). The Company contributed €1.3 million (equivalent to $1.5 million at that time) as a capital loan to fund Lumo's working capital requirements. We also provided Lumo with a secured loan for €2.0 million (equivalent to $2.3 million at that time) to pay off and replace its remaining debt. In November 2019 and January 2020, we acquired additional 9.0% and 3.5% interest in Lumo, respectively, increasing our total interest to 92.5%

The remaining 7.5% noncontrolling interest retained by the sellers is subject to restrictions, which will lapse over a period of up to three years following the Lumo Closing Date, subject to employment and service conditions. The Company has a conditional continuing call option to purchase a portion or the entire noncontrolling interest from the sellers during the period beginning at the third anniversary of the Lumo Closing Date and ending three years later.

The sellers of Lumo, as a group, have a one-time option to sell a portion or all of their noncontrolling interest to the Company, which subject to certain conditions, may be exercised on one occasion only, at any time during the two-year period beginning at the fourth anniversary of the closing date of the acquisition.

Financing Activities

In each of the six months ended June 30, 2020 and 2019, we paid aggregate quarterly Base Dividends of $0.3188 per share, $0.7 million in the aggregate, on our Series 2012-A Preferred Stock, or Preferred Stock. On July 16, 2020, our Board of Directors declared a quarterly Base Dividend of $0.1594 per share on our Preferred Stock. The dividend will be paid on or about August 14, 2020 to stockholders of record as of the close of business on August 6, 2020.

In the six months ended June 30, 2020 and 2019, we paid aggregate quarterly dividends of $0.160 per share and $0.150 per share, respectively, to stockholders of our Class A common stock and Class B common stock. The Company paid $4.1 million in aggregate dividends on our common stock for the six months ended June 30, 2020 and 2019. In the second quarter of 2020, we increased the quarterly dividends from $0.075 to $0.085 per share on our Class A common stock and Class B common stock. On August 3, 2020, our Board of Directors declared a quarterly dividend of $0.085 per share on our Class A common stock and Class B common stock. The dividend will be paid on or about August 26, 2020 to stockholders of record as of the close of business on August 18, 2020.

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. In six months ended June 30, 2020, the Company acquired 213,206 Class B common stock under the stock repurchase program for an aggregate amount of $1.5 million. There were no repurchases under this program in six months ended June 30, 2020. At June 30, 2020, 6.0 million shares remained available for repurchase under the stock repurchase program.

On November 28, 2019, Genie Japan entered into a Loan Agreement with Tokyo Star Bank for a ¥100.0 million (equivalent to $0.9 million) short-term credit facility. Genie Japan provided a letter of credit issued by JPMorgan Chase amounting to ¥100.0 million (equivalent to $0.9 million) as collateral. The outstanding principal amount incurred interest at Tokyo Star Bank's short-term prime rate plus 0.25% per annum. Interest was payable monthly and all outstanding principal and any accrued and unpaid interest matured on of May 13, 2020. Genie Japan settled the Loan agreement and paid the outstanding balance of ¥100.0 million (equivalent to $0.9 million) on May 13, 2020.

On April 4, 2017, GRE, IDT Energy, and other GRE subsidiaries entered into a Credit Agreement with Vantage Commodities Financial Services II, LLC ("Vantage"), for a $20 million revolving loan facility. The borrowers consist of our subsidiaries that operate REP businesses, and those subsidiaries’ obligations are guaranteed by GRE. The borrowers have provided as collateral a security interest in their receivables, bank accounts, customer agreements, certain other material agreements and related commercial and intangible rights. The outstanding principal amount incurred interest at LIBOR plus 4.5% per annum. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest was due on the maturity date of April 3, 2020. The borrowers are required to comply with various affirmative and negative covenants, including maintaining a target tangible net worth during the term of the credit agreement. At June 30, 2020, we were in compliance with such covenants. In April 2020, the revolving line of credit expired and the Company paid outstanding balance of $3.5 million.

On December 5, 2019, we entered into an amendment of its existing Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”) to extend the maturity date to December 31, 2020. The Company continues to have the aggregate principal amount of $5.0 million credit line facility (“Credit Line”). The Company pays a commitment fee of 0.1% per annum on 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 $5.1 million. As of June 30, 2020, JP Morgan Chase Bank issued $2.3 million letter of credit from the Credit Line. As of June 30, 2020, none of the letters of credits were drawn upon. At June 30, 2020, the cash collateral of $5.2 million was included in restricted cash—short-term in the consolidated balance sheet.

In December 11, 2019, the Company refinanced the 5.95% notes payable from Catskill Hudson Bank that was due in November 2019. The outstanding balance of notes payable of $0.9 million at December 11, 2019 will be payable in equal monthly installments for period of ten years starting January 2020. The outstanding principal amount incurs fixed interest at 4.75% per annum. The notes payable are secured by Prism's commercial property in Highland, New York. In March 2020, the outstanding balance of the notes payable was transferred to liabilities held for sale as described above. At June 30, 2020, the outstanding balance of liabilities held for sale was $0.8 million.

There were no stock option exercises in the six months ended June 30, 2020. In the six months ended June 30, 2019, we received proceeds of $0.1 million from the exercise of stock options for which we issued 23,150 shares of our Class B common stock.

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 June 30, 2020, GRE had outstanding aggregate performance bonds of $13.6 million and $2.3 million of unused letters of credit.

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 June 30, 2020 had remained the same as in the three months ended June 30, 2019, our gross profit from electricity sales would have decreased by $4.2 million and our gross profit from natural gas sales would have decreased by $1.8 million in the three months ended June 30, 2020. Hypothetically, for our GRE segment, if our gross profit per unit in the six months ended June 30, 2020 had remained the same as in the six months ended June 30, 2019, our gross profit from electricity sales would have decreased by $3.4 million and our gross profit from natural gas sales would have decreased by $2.3 million in the six months ended June 30, 2020.

Hypothetically, for our GRE International segment, if our gross profit per unit in the three months ended June 30, 2020 had remained the same as in the three months ended June 30, 2019, our gross profit from electricity sales would have decreased by $1.6 million in the three months ended June 30, 2020. Hypothetically, for our GRE International segment, if our gross profit per unit in the six months ended June 30, 2020 had remained the same as in the six months ended June 30, 2019, our gross profit from electricity sales would have decreased by $1.3 million in the six months ended June 30, 2020.

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. 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 June 30, 2020.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Legal proceedings in which we are involved are more fully described in Note 17 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

The risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and Quarterly Report on Form 10-Q for the period ended March 31, 2020, have not materially changed except the following:

Our business, results of operation and financial conditions could be adversely affected by the coronavirus COVID-19 pandemic and the restrictions put in place in connection therewith.

We are responding to the global outbreak of COVID-19 by taking steps to mitigate the potential risks to us posed by its spread and the impact of the restrictions put in place by governments to protect the population. We continue to execute our business continuity plan and have implemented a comprehensive set of actions for the health and safety of our customers, employees and business partners We have implemented work from home policies where appropriate.

We continue to implement strong physical and cyber-security measures to ensure our systems remain functional to both serve our operational needs with a remote workforce and to provide uninterrupted service to our customers. We face challenges due to the need to operate with the remote workforce and are addressing those challenges so as to minimize the impact on our ability to operate.

For the three and six months ended June 30, 2020, the impacts of COVID-19 on our operations and financial results have been mixed. Our consolidated revenues for the three months ended June 30, 2020, compared to the same period in 2019, increased by $15.1 million equivalent to 24.7%. Our consolidated revenues for the three months ended June 30, 2020, compared to the same period in 2019, increased by $32.5 million equivalent to 22.0%.

We benefited from the increased demand for electricity when residential customers are working from their homes. On the other hand, like other retail providers, we suspended our face-to-face customer acquisition programs in March 2020 as public health measures were implemented to combat COVID-19, resulting in a decrease in gross meter acquisitions. The reduction in gross meter acquisitions decreased our customer acquisition expense in the second quarter of 2020. Churn for the second quarter of 2020 decreased as our competitors suspended their face to face marketing programs.

If the COVID-19 pandemic continues for a prolonged period, or impact the territories we serve more significantly than it has today, our business, operations and financial condition could be impacted in more significant ways. The continued spread of COVID-19 and efforts to contain the virus could have the following impacts, in addition to exacerbating the impacts described above:

●

Adversely impact our strategic business plans and growth strategy;

●

Result in increases in purchase of receivable, or POR fees and allowance for credit bad debt expense as a result of delayed or non-payment from our customers, both of which could be magnified by Federal or state government legislation that requires us to extend suspensions of disconnections for non-payment;

●

Reduce the availability and productivity of our employees and third-party resources;

●

Cause us to experience an increase in costs as a result of our emergency measures;

●

Cause a deterioration of the credit quality of our counterparties, including power purchase agreement counterparties, contractors or retail customers, that could result in credit losses

●

Cause impairment of long-lived assets; and

●

Cause a deterioration in our financial metrics or the business environment that adversely impacts our credit ratings.

The situation remains fluid and it is difficult to predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition and cash flows.

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

The following table provides information with respect to purchases by us of our shares during the first quarter of 2020:

	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)
April 1–30, 2020		—	$	—		—		6,152,567
May 1–31, 2020		—		—		—		6,152,567
June 1–30, 2020		200,873		7.26		200,873		5,951,694
Total		200,873	$	7.28		200,873

(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.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

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.

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.

August 7, 2020	By:	/s/ Michael M. Stein
		Michael M. Stein Chief Executive Officer

August 7, 2020	By:	/s/ Avi Goldin
		Avi Goldin Chief Financial Officer

Genie Energy Ltd. - Quarter Report: 2020 June (Form 10-Q)

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