GNE US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Annual Report 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 under Item 1A to Part I “Risk Factors” in this Annual Report. The forward-looking statements are made as of the date of this Annual 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 Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.

Overview

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

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 Midwestern and Eastern United States and Texas.

GRE International holds the Company's REPs that serves retail customers in the United Kingdom under the name Orbit Energy and in Japan. It holds92.5% controlling interest in LumoEnergiaOjy ("Lumo Finland"), a REP serving residential customers in Finland and 100.0% of Lumo Energi AB ("Lumo Sweden"), which serves retail customers in Sweden. In October 2020, the Company acquired the remaining 23.0% interest in Shoreditch which increased the Company's interest to 100%.

GES holds Diversegy, a retail energy advisory and brokerage company that serves commercial and industrial customers throughout U.S. and our 60.0% controlling interest in Prism Solar. Prism is a solar solutions company that is engaged in solar project marketing, solar solution consultation, installation design and project management services.

In December 2020,AfekOil & Gas Ltd., the oil and gas exploration project in the Golan Heights in Northern Israel (“Afek”), completed the final planned testing on one of its completed exploratory wells. The test was conducted as prior analysis indicated that a zone within the well potentially contained evidence of hydrocarbons at levels sufficient to warrant additional testing. After analyzing the results of the test and subsequent activity, as no traces of light oil were found. As a result, Afekceased its exploratory operations. The remaining assets and liabilities and the results of operations are included within the corporate segment for reporting purposes.

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.

Coronavirus Disease (COVID 19)

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

For the year ended December 31, 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 year ended December 31, 2020, compared to the same period in 2019, increased by $64.0million equivalent to20.3%.

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 energy 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 and a flat growth in the U.S. domestic meters served. The reduction in gross meter acquisitions decreased our customer acquisition expense in the year ended December 31, 2020 compared to 2019. Churn the year ended December 31, 2020 decreased compared to 2019, in part, due to our competitors suspending 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.

Beginning the third quarter of 2020, public health restrictions have begun to ease in some of our markets which allow us to resume face-to-face sales and marketing. Looking ahead, we expect to see a modest rebound in meter acquisition, however, 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.

Genie Retail Energy

GRE operates REPs that resell electricity and/or natural gas to residential and small business customers in Connecticut, Delaware, Illinois, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Pennsylvania, Florida, Texas, Rhode Island, and Washington, D.C. GRE’s revenues represented approximately 80.5% and 90.9% of our consolidated revenues in the years ended December 31, 2020 and 2019, respectively

GRE’s cost of revenues consists primarily of natural gas and electricity purchased for resale. Certain of GRE’s REPs are party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is in effect through November 30, 2023. Those REPs ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants.

As an operator of REPs, GRE does not own electrical power generation, transmission, or distribution facilities, or natural gas production, pipeline or distribution facilities. Instead, GRE’s REPs contract with various pipeline and distribution companies for natural gas pipeline, storage and transportation services, and utilizes NYISO, PJM, ISO New England and MISO for electric transmission and distribution. GRE’s cost of revenues includes scheduling costs, ISO fees, pipeline costs and utility service charges for the purchase of these services.

For risk management purposes, GRE’s REPs utilize put and call options and swaps as hedges against unfavorable fluctuations in market prices of electricity and natural gas and to reduce exposure from price fluctuations. The put and call options and swaps are recorded at fair value as a current asset or liability and any changes in fair value are recorded in cost of revenues. The impact of these options and swaps on cost of revenues is relatively small in comparison to the purchases of gas and electricity for resale.

The electricity transmission and distribution operators perform real-time load balancing for each of the electrical power grids in which GRE’s REPs operate. Similarly, the utility or the local distribution company, or LDC, performs load balancing for each of the natural gas markets in which GRE’s REPs operate. Load balancing ensures that the amount of electricity and natural gas that GRE’s REPs purchase is equal to the amount necessary to service their customers’ demands at any specific point in time. GRE’s REPs manage the differences between the actual electricity and natural gas demands of its customers and its bulk or block purchases by buying and selling in the spot market, and through monthly cash settlements and/or adjustments to futures deliveries in accordance with the load balancing performed by utilities, LDCs, and electricity transmission and distribution operators. Suppliers and the LDC’s charge or credit GRE for balancing the electricity and natural gas purchased and sold for its account.

Local utilities generally meter and deliver electricity and natural gas to GRE’s REPs' customers. The local utilities also provide billing and collection services on GRE’s REPs behalf for most of customers and certain local utilities offer purchase of receivables, or POR, programs. GRE’s REPs receive the proceeds less the utility’s fees for purchase of receivables billing and other ancillary services, where applicable.

Volatility in the electricity and natural gas markets affects the wholesale cost of the electricity and natural gas that GRE’s REPs sell to customers. GRE’s REPs may not always choose to pass along increases in costs to their customers for various reasons including competitive pressures and for overall customer satisfaction. In addition, GRE’s REPs offer fixed rate products or guaranteed pricing and may be unable to change their sell rates offered to fixed rate and guaranteed pricing customers in response to volatility in the prices of the underlying commodities. This can adversely affect GRE’s gross margins and results of operations. Alternatively, increases in GRE’s REPs rates charged to customers may lead to increased customer churn.

GRE’s REPs’ selling expense consists primarily of sales commissions paid to independent agents and marketing costs, which are the primary costs associated with the acquisition of customers. Selling, general and administrative expense includes compensation, benefits, utility fees for billing and collection, professional fees, rent and other administrative costs.

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 and/or summers have the opposite effect. Unseasonable temperatures in other periods may also impact demand levels. Potential changes in global climate may produce, among other possible conditions, unusual variations in temperature and weather patterns, resulting in unusual weather conditions, more intense, frequent and extreme weather events and other natural disasters. Some climatologists believe that these extreme weather events will become more common and more extreme which will have a greater impact on our operations. Natural gas revenues typically increase in the first quarter due to increased heating demands and electricity revenues typically increase in the third quarter due to increased air conditioning use. Approximately 47.7% and 46.9% of GRE’s natural gas revenues for the relevant years were generated in the first quarter of 2020 and 2019, 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 % of GRE’s electricity revenues for 2020 and 2019, respectively, were generated in the third quarters of those years. GRE’sREPs’ 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.

Concentration of Customers and Associated Credit Risk

GRE’s REPs reduce their customer credit risk by participating in purchase of receivable programs for a majority of their receivables. In addition to providing billing and collection services, some utility companies purchase those REPs’ receivables and assume all credit risk without recourse to those REPs for those purchased receivables. GRE’s REPs primary credit risk with respect to those purchased receivables is therefore nonpayment by the utility companies. Certain of the utility companies represent significant portions of our consolidated revenues and consolidated gross trade accounts receivable balance during certain periods, and such concentrations increase our risk associated with nonpayment by those utility companies.

There was no single utility company or customer that accounted for 10% or greater of our consolidated revenues and gross trade accounts receivable for the year ended December 31, 2020 and at December 31, 2020 or 2019.

Purchase of Receivable

Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which we operate. GRE’sREPs 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’sREPs’ primary credit risk is therefore nonpayment by the utility companies. In the year ended December 31, 2020, the associated cost was approximately 1.0% of GRE's revenue. At December 31, 2020, 87.0% 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, 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 , 47 U.S.C. § 227 et seq.On November 17, 2020, IDT Energy settled with the named for plaintiffs in exchange for a minimal payment and the case has been dismissed.

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. Residents 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 December 31, 2020.On or around October 9, 2020, Residents Energy filed a preliminary motion to dismiss one of the counts in the complaint, and to dismiss Genie Retail Energy as a named defendant.

See Notes 16,Legal and Regulatory Proceedings,in this Annual Report on Form 10-K, 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 16,Legal and Regulatory Proceedings,in this Annual Report on Form 10-K, which is incorporated by reference, for further detail on agency and regulatory proceedings.

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 orders adopting the changes to the New York retail energy market, effective April 16, 2020 (“2020 Orders”).The 2020 Orders limit 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 Orders, 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 Orders. 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 Orders. As of December 31, 2020, New York represented 19.4% of GRE’s total meters served and 14.7% of the total residential customer equivalents (“RCEs”) of GRE’s customer base. For the years ended December 31, 2020 and 2019, gross revenue from New York was $56.7 million and $63.2 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 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. As of December 31, 2020, Town Square’s Connecticut customer base represented 11.6% of GRE’s total meters served and 12.8% of the total residential customer equivalents of GRE’s customer base. As of December 31, 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 the fourth quarter of 2020, the enforcement division of PURA contacted Residents Energy concerning customer complaints received in connection with alleged door-to-door marketing activities in violation of various rules and regulations, including a ban on door-to-door activities during the pertinent time period as a result of the COVID-19 pandemic. Residents Energy denies any allegations of wrongdoing. In January and February of 2021, Residents Energy responded to the limited information requests and discovery made by the enforcement division. On March 12, 2021, the enforcement division filed a motion against Resident Energy with the adjudicating body of PURA, seeking the assessment of $1.5 million in penalties, along with a suspension of license for eighteen months, auditing of marketing practices upon reinstatement and an invitation for settlement discussions. As noted above, Residents Energy denies any wrongdoing, and there is insufficient basis to deem or assess the probably amount of any loss. For the years ended December 31, 2020 and 2019, gross revenues from sales in Connecticut were $38.0 million and$35.6 million, respectively.

For the years ended December 31, 2020 and 2019, gross revenues from sales in Connecticut were $38.0 million and $35.6 million, respectively.

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 statement of operations. As of December 31, 2020, Illinois represented 2.5% of GRE’s total meters served and 1.2% of the total residential customer equivalents of GRE’s customer base. For the years ended December 31, 2020 and 2019, IDT Energy’s gross revenues from sales in Illinois were $7.0 million and $10.1 million, respectively.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue 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 the 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. See Note 1 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our significant accounting policies.

Revenue Recognition

Revenues from Sale of Electricity and Natural Gas

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.GRE and Genie Japan records unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends. Revenues from Shoreditch are accrued based on industry data flows and National Grid data. Revenue calculated from sale of electricity and natural gas includes an estimate of the quantity in units of electricity or natural gas supplied to customers by profile class. The estimate is made using historical consumption patterns, industry estimated consumption rates, and takes into consideration industry reconciliation processes. The estimated revenue is superseded when customer meter reads are received; at which point estimates are adjusted to actual usage.

Utility companies offer purchase of receivable, or POR, programs in most of the service territories in which we operate, and GRE’s REPs participate in POR programs for a majority of their receivables. We estimate variable consideration related to our REPs' rebate programs using the expected value method and a portfolio approach. Our 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 our sales and collected from customers are excluded from the transaction price.

We recognize 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. We determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, we apply 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 GRE International entities are capitalized and amortized over a range of eighteen and twenty-four months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain a contract was $0.8 million for the years ended December 31, 2020 and 2019. At December 31, 2020, capitalized customer acquisition cost of $0.6 million and $0.2 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.

Revenues from Sale of Solar Panels

Our 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, we allocate 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.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses that result from the inability or unwillingness of our customers to make required payments. The allowance for doubtful accounts was $8.8 million at December 31, 2020 and $2.6 million at December 31, 2019. Our allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Our estimates of recoverability of customer accounts may change due to new developments, changes in assumptions or changes in our strategy, which may impact our allowance for doubtful accounts balance. We continually assess the likelihood of potential amounts or ranges of recoverability and adjust our allowance accordingly, however, actual collections and write-offs of trade accounts receivable may materially differ from our estimates.

Acquisitions

The purchase price of each acquisition we consummate is allocated to the net assets acquired based on estimates of their fair values at the date of the acquisition. Any purchase price in excess of these net assets is recorded as goodwill. The allocation of purchase price in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date. Results of operations of acquired companies are included in our results of operations as of the respective acquisition dates.

The accounting for business combinations requires estimates and judgment as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets acquired and liabilities assumed. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, require acceleration of the amortization expense of finite lived intangible assets, or the recognition of additional consideration which would be expensed.

Goodwill

Our goodwill balances were $25.9 million and $12.1 million at December 31, 2020 and 2019, respectively. Goodwill is not amortized since it is deemed to have an indefinite life. It is reviewed annually (or more frequently under various conditions) for impairment using a fair value approach.

Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Goodwill and other indefinite lived intangible assets are not amortized. These assets are reviewed annually (or more frequently under various conditions) for impairment using a fair value approach.

The fair value of the reporting unit is estimated using discounted cash flow methodologies, as well as considering third party market value indicators. Calculating the fair value of the reporting units requires significant estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, the Company may be required to record impairments to its goodwill in future periods and such impairments could be material.

We perform our annual goodwill impairment test as of October 1. In reviewing goodwill for impairment, we have the option, for any or all of our reporting units that carry goodwill - to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (i.e. greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If we elect to perform a qualitative assessment and determines that an impairment is more likely than not, we then required to perform the quantitative impairment test, otherwise no further analysis is required. We also may elect not to perform the qualitative assessment and, instead, proceed directly to quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether we choose to perform the qualitative assessment or proceeds directly to the quantitative impairment test. In 2020, we elected to perform a qualitative analysis for our GRE and GRE International reporting units as of October 1, 2019. The Company determined, after performing a qualitative analysis, that there was no evidence that it is more likely than not that the fair value of any identified reporting unit was less that the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test.We determined, after performing qualitative analysis, that there was no evidence that it is more likely than not that the fair value of any identified reporting unit was less that the carrying amounts, therefore, it was not necessary to perform a quantitative impairment test. We performed quantitative impairment analysis for Prism reporting unit. As a result of this test, we concluded that the carrying value Prism reporting unit exceeded its fair value of reporting unit including the allocated goodwill. Therefore, we recognized a goodwill impairment charge of $0.4 million. There is no goodwill allocated to other reporting units as of October 1, 2019.

The determination of the fair value of our reporting units is based on an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820,Fair Value Measurements and Disclosure. Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for the reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, which are dependent on future sales, new customers, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as the expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. The estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on judgment of the rates that would be utilized by a hypothetical market participant.

Income Taxes

Our current and deferred income taxes and associated valuation allowance are impacted by events and transactions arising in the normal course of business as well as in connection with special and non-routine items. Assessment of the appropriate amount and classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets, the results of Internal Revenue Service audits of our federal income tax returns, and changes in tax laws or regulations.

The valuation allowance on our deferred income tax assets was $15.2 million and $44.8 million at December 31, 2020 and 2019, respectively. We employ a tax strategy that enables us to currently deduct losses from our foreign subsidiaries against our profitable U.S. operations and we assess the realizability of deferred taxes quarterly. Because of our current projections, we concluded that we meet the criteria of more likely than not in order to utilize our deferred federal income tax assets in the foreseeable future and have released the valuation on the assets that we will utilize.

We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. We determine whether it is more-likely-than-not that, a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, we presume that the appropriate taxing authority that has full knowledge of all relevant information will examine the position. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability. We review and adjust our liability for unrecognized tax benefits based on our best estimate and judgment given the facts, circumstances and information available at each reporting date. To the extent that the outcome of these tax positions is different from the amounts recorded, such differences may affect income tax expense and actual tax payments.

RECENTLY ISSUED ACCOUNTING STANDARDS

Information regarding new accounting pronouncement are included in Note 1 —Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements included in this Annual Report on Form 10-K,

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.

Year Ended December 31, 2020 compared to Year Ended December 31, 2019

Genie Retail Energy Segment

Year ended December 31, Change

Revenues:

nm — not meaningful

Revenues.GRE’s electricity revenues increased in 2020 compared to 2019. The increase in electricity revenues in 2020 compared to 2019 was the result of increase in electricity consumption partially offset by decrease in the average price charged to customers. Electricity consumption by GRE's REPs' customers increased 18.7% in 2020 compared to 2019. The increase in electricity consumption reflected an increase in average electricity consumption per meter, which increased by 12.3% in 2020 compared to 2019 and a 5.7% increase in average number of meters served. The increase in per meter consumption reflects a sustained focus on the acquisition of higher consumption meters, warmer weather during summer of 2020 compared to 2019 and increased residential electricity consumption resulting from COVID-19 "stay-at-home" orders. The average rate per kilowatt hour sold decreased by 7.5% in 2020 compared to 2019.

GRE’s natural gas revenues decreased in 2020 compared to 2019. The decrease in natural gas revenues in 2020 compared to 2019 was a result of decreases in average meters served, natural gas consumptions, average rate per therm sold and average consumption per meter. Natural gas consumption of GRE's REP's customers decreased by 6.7% in 2020 compared to 2019. Average meters served, decreased 3.6% in 2020 compared to 2019 and average consumption per meter decreased by 3.1%. The average rate per therm sold decreased 9.9% in 2020 compared to 2019.

Other revenue in 2020 included commission from selling third-party products to customers.

Meters at end of quarter:

Gross meter acquisitions in 2020 were 212,000 compared to 308,000 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 acquisitions in 2019 includes the impact of a municipal aggregation deal in New Jersey which added approximately 35,000 meters. The number of meters served was relatively flat at December 31, 2020 compared to December 31, 2019. In 2020, average monthly churn decreased to 4.4% compared to 5.3% in 2019. The reduction in churn reflects the impact of a shift in our customer mix related to channel, product and geography as well as continuing increase in the ratio of fixed rate to variable rate customers, where fixed rate customers generally have lower rates of churn. 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 residential customer equivalents, or 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.

RCEs at end of quarter:

RCEs increased 9.1% at December 31, 2020 compared to December 31, 2019 primarily due to our recent focus on adding higher consumption meters, warmer than average weather in 2020 and COVID-19 driven shift to work-from-home which increased per-meter consumption.

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

Year ended December 31, Change

Cost of revenues:

Year ended December 31,

Gross margin percentage:

Total gross margin percentage 28.9% 28.1% 0.8%

Cost of revenues for electricity increased in 2020 compared to 2019 primarily because of increases in electricity consumption partially offset by a decrease in the average unit cost of electricity. Electricity consumption byGRE'sREPs' customers increased 18.7% in 2020 compared to 2019. The average unit cost of electricity decreased by 8.0% in 2020 compared to 2019. Gross margin on electricity sales increased in 2020 compared to 2019because 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 2020 compared to 2019 primarily because of decreases in total natural gas consumption and average unit cost of natural gas. Natural gas consumption by GRE’s REPs’ customers decreased by 6.7% in 2020 compared to 2019. The average unit cost of natural gas decreased 20.9% in 2020 compared to 2019. Gross margin on natural gas sales increased in 2020 compared to 2019 because the decrease in the average rate charged to customers decreased more than the average unit cost of natural gas.

Selling, General and Administrative.The decrease in selling, general and administrative expense in 2020 compared to 2019 was primarily due to decreases in marketing and customer acquisition costs and employee-related costs partially offset by increase in provision for doubtful accounts and costs related to POR programs. Marketing and customer acquisition expenses decreased by $4.1 million in 2020 compared to 2019 due to reduced pace of customer acquisition activities related to COVID-19 related public health restrictions. Employee-related expenses slightly decreased by $0.1 million in 2020 compared to 2019 primarily due to a reduction in the number of employees. Provision for doubtful accounts and costs related to POR programs increased by $2.8 million in 2020 compared to 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 increased from 18.6% in 2020 to 17.0% in 2019.

GRE International

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 through a wholly owned entity.

On October 8, 2020, the Company acquired 23.0% interest in Shoreditch that it did not previously own. The results of operations of GRE International include the accounts of Shoreditch from the date of acquisition through December 31, 2020.

Prior to the acquisition of the remaining 23.0% of Shoreditch, we accounted for our investment inShoreditch under the equity method of accounting. Under this method we recorded our share in the net income or loss ofShoreditch. Therefore, revenue generated, and expenses incurred were not reflected in our consolidated revenue and expenses. The accounts of Shoreditch are consolidated to the consolidated financial statements after the acquisition.

Year Ended December 31, Change

Revenues:

nm — not meaningful

Meters served by GRE International's REPs, including Shoreditch, increased to 195,000 at December 31, 2020 from 127,000 at December 31, 2019 primarily as a result growth in Shoreditch's and Lumo Finlands's customer bases. The Company also started the commercial operations of Lumo Sweden and Genie Japan in second quarter of 2020 and second quarter of 2019, respectively.

RCEs of GRE International's REPs, including Shoreditch at December 31, 2020 increased to 103,000 from 65,000 at December 31, 2019 primarily from the increase in meters served as discussed above.

Revenue and Cost of Revenue. GRE International's revenues and cost of revenue increased in 2020 compared to 2019 primarily due to the consolidation of Shoreditch in October 2020, increase in meters served in Lumo Finland and the start of commercial operations of Lumo Sweden and Japan in the second quarter of 2020 and 2019, respectively. Shoreditch increased GREI's revenue and cost of revenue in 2020 by $22.4 million and $19.8 million, respectively. Meters served by Lumo Finland increased by 73.5% at December 31, 2020 compared to December 31, 2019.

Selling, General and Administrative.The increase in selling, general and administrative expense in 2020 compared to 2019 was primarily due to the consolidation of Shoreditch in October 2020, increase in activity in level of operations in Lumo Finland and Japan and start of commercial operations of Lumo Sweden. Shoreditch increasedGREI's selling, general and administrative expenses in 2020 by $4.9million.

Equity in net loss of joint venture. Prior to the acquisition of the controlling interest in Shoreditch in October 2020, we accounted our ownership interest in Shoreditch using the equity method since we had the ability to exercise significant influence over Shoreditch's operating and financial matters, although we did not control Shoreditch. As of October 7, 2020, 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, and as result, the Company did not recognize a certain portion of its share in net losses Shoreditch prior to the acquisition in October 2020 as the Company had no obligation to fund the Shoreditch losses. The Company's share in Shoreditch’s net loss in 2020 was $1.5 million compared to $4.4 million in 2019. The decrease is primarily due to decrease in capital contributions to Shoreditch for the period from January 1, 2020 to October 7, 2020 compared to the year ended December 31, 2019.

GES Segment

The GES segment is composed of Prism, in which we acquired a 60.0% controlling interest in October 2018, Diversegy and Genie Solar.

Year Ended December 31, Change

Revenue. GES's revenues increased in 2020 compared to 2019. The increase in revenues was the result of the delivery of a large number of orders at Prism particularly in the first half of 2020. Prism discontinued the relationship with its principal customer in the second quarter of 2020 resulting to decrease in GES revenues by 91.7% in the second half of 2020 compared to the first half of 2020. Revenue from Diversegy includes commissions, entry fees and other fees from our energy brokerage and marketing services businesses.

Cost of Revenue. Cost of revenues increased in 2020compared to 2019. The increase in cost of revenues primarily the result of a significant increase in deliveries of solar panels in 2020. Cost of revenue related to Diversegy included commissions incurred by our energy brokerage and marketing services businesses.

Selling, General and Administrative and Impairment of Customer Relationship and Goodwill. Selling, general and administrative expenses decreased in 2020 compared to 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. Prism's property, plant and equipment with a net book value of $2.8 million and notes payable with net book value of $0.9 million 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.

In October 2020, Prism completed the sale of all assets held for sales and recorded a net loss from disposal of $0.3 million included in the selling, general and administrative expenses in the consolidated statements of operations. A portion of the net proceeds was used to settle the notes payable of Prism classified as liabilities held for sale at a carrying amount of $0.8 million.

In the fourth quarter of 2020, we recognized impairment charge of $0.4 million against the goodwill previously recognized when we acquired a controlling interest in Prism in October 2018 reducing the value of goodwill related to Prism to nil.

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.

Year Ended December 31, Change

The increase in Corporate general and administrative expense in 2020 compared to 2019 was primarily due to expenses incurred by GOGAS related to the final testing of exploratory well in Golan Heights as discussed above, partially offset by decreases in stock-based compensation and professional and consulting fees. As a percentage of our consolidated revenues, Corporate general and administrative expense decreased from 2.0% in 2019 to 1.8% in 2020.

Consolidated

Selling, General and Administrative. Stock-based compensation expense included in consolidated selling, general and administrative expense was $1.1in 2020 and 2019. At December 31, 2020, aggregate unrecognized compensation cost related to non-vested stock-based compensation was $1.7 million. The unrecognized compensation cost expected to be recognized over the average service period of 2.4 years.

As a percentage of our consolidated revenues, selling, general and administrative expense decreased from 23.0% in 2019 to 20.3% in 2020.

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

Year Ended December 31, Change

Equity in the net loss of equity method investees (1,443) (4,830) 3,387 (70.1)

Gain on the consolidation of subsidiary 5,473 — 5,473 nm

nm — not meaningful

Interest Income. The decrease in interest income in 2020 compared to 2019 was primarily due to a decrease in interest rates on cash and cash equivalents.

Interest Expense.The decrease in interest expense in 2020 compared to 2019 was primarily due to the settlement of a revolving line of credit in April 2020.

Other Income, net.Other expense, net in 2020 and 2019 consisted primarily foreign currency transaction gains and losses.

Provision for Income Taxes. The increase in provision for income tax in 2020 compared to 2019 is primarily due to the higher taxable income of GRE in 2020 compared to 2019.

Net (Income) Loss Attributable to Noncontrolling Interests. Income attributable to noncontrolling interest in 2020 was mainly consist of noncontrolling interest share in income resulting from write-off of intercompany payable of GOGAS entities within the Company. The income was offset by the share of noncontrolling interest in the losses mainly from Prism, Lumo Finland and Citizens Choice Energy. Loss attributable to noncontrolling interest in 2020 is primarily from the losses of Prism, Lumo Finland and Citizens Choice Energy.

Gain on Consolidation of Subsidiary. Gain on consolidation of subsidiary in 2020 was from the acquisition of the controlling interest of Shoreditch in October 2020. The gain pertains to the estimated fair value of the noncontrolling interest to Shoreditch immediately prior to acquisition. The carrying value of our investment in Shoreditch immediately before the acquisition was nil.

LIQUIDITY AND CAPITAL RESOURCES

General

In February 2021, a series of severe winter storms (collectively, Winter Storm Uri) struck the mid-western United States.The storm triggered unprecedented increases in electricity demand in combination with significant reductions in supply within the Electric Reliability Council of Texas ("ERCOT") service area.Wholesale electricity prices reached or exceeded maximum allowed clearing prices for sustained periods and rolling blackouts impacted millions of residential and commercial customers across the State of Texas.

In January and February of 2021, the Company experienced unprecedented price volatility in the Japanese and Texas markets.These events are expected to have an estimated adverse impact on the first quarter of 2021 consolidated result of operations of $2.5 million in Japan and $12.8 million to $14.0 million in Texas.

We currently expect that our cash flows from operations in the next twelve months and the $36.9 million balance of unrestricted cash and cash equivalents that we held at December 31, 2020 will be sufficient to meet our currently anticipated cash requirements for at least the period from January 1, 2021 to March 16, 2022.

At December 31, 2020, we had working capital (current assets less current liabilities) of $36.3 million.

Year ended December 31,

Cash flows provided by (used in):

Effect of exchange rate changes on cash and cash equivalents (268) 1

Increase (decrease) in cash and cash equivalents $ 4,630 $ (6,277 )

Operating Activities

Cash provided by continuing operating activities was $23.1 million and $15.8 million in the years ended December 31, 2020 and 2019, respectively. Net income from continuing operations after non-cash adjustments decreased cash flows by $28.4 million for 2020 compared to $15.7 million in 2019. The increase is primarily the result of favorable results of continuing operations in 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 $5.0 million for 2020, compared to 2019. Changes in other assets decreased cash flows by $1.1 million for 2020, compared to 2019.

Certain ofGRE'sREPsare party to an Amended and Restated Preferred Supplier Agreement with BP Energy Company, or BP, which is to be in effect through November 30, 2023. Under the agreement, the REPspurchase 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 theREP’scustomer’s receivables, and in any cash deposits or letters of credit posted in connection with any collateral accounts with BP. The ability to purchase electricity and natural gas under this agreement is subject to satisfaction of certain conditions including the maintenance of certain covenants. At December 31, 2020, we were in compliance with such covenants. At December 31, 2020, restricted cash—short-term of $0.5 million and trade accounts receivable of $47.0 million were pledged to BP as collateral for the payment of trade accounts payable to BP of $16.7 million at December 31, 2020.

We had purchase commitments of $131.3 million at December 31, 2020, of which $85.3 million was for purchases of electricity.

Orbit Energy has an exclusive contract with Shell U.K. Limited ("Shell") to provide electricity and natural gas to Orbit Energy until June 2024, with an option (not an obligation) to extend through June 2027. Shell provides access to the forward market such that Orbit Energy can enter into a forward hedge for its customers which protects Orbit Energy from mark-to-market fluctuations. Shell also provide extended payment facilities of an additional 30 days compared to the U.K. payment terms up to a limit of £5.0 million at an interest of LIBOR plus 5.0%. Shell charges an additional £0.9 per therm of natural gas and Mwh of electricity for all delivered volume on top of the wholesale costs. The contract with Shell is secured by Orbit Energy's shares. The contract is also subject to satisfaction of certain conditions including the maintenance of certain covenants which includes minimum levels of cash, gross margin, net worth, as defined in the contract, earnings before tax, as defined in the contract and provision for bad debts on accounts receivable. At December 31, 2020, Orbit Energy was in compliance with such covenants. At December 31, 2020, Shoreditch was in compliance with all such covenants. AtDecember 31, 2020, Shoreditch total liability to Shell was $7.0million, which is included in trade accounts payable and accrued expenses in the consolidated balance sheet.

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

On July 17, 2017, the Company’s subsidiary, Genie Energy UK Ltd. ("GEUK), entered into a definitive agreement to launch Shoreditch, a joint venture to offer electricity and natural gas service to residential and small business customers in the United Kingdom, using the trade name Orbit Energy. In 2020 and 2019, the Company contributed $1.5 million and $3.2 million, respectively, to Shoreditch.

On October 8, 2020, the Company entered into an agreement (the “Purchase Agreement”) with Energy Global Investments Pty Ltd ("EGC") under which GEUK purchased EGC’s remaining interest in Shoreditch, in exchange for a cash payment of £1.3 million (equivalent to $1.7 million on the date of closing) offset by £0.2 million (equivalent to $0.2 million on the date of closing) in amounts owing from EGC to the Company under a loan provided to EGC in 2018 related to EGC’s capital contributions to Shoreditch. Prior to October 8, 2020, the net book value of the Company's investment in Shoreditch was nil. Following the transaction, Shoreditch is a wholly-owned subsidiary of GEUK. Shoreditch had $2.7 million of cash at the date of acquisition.

In December 2020, the Company invested $5.0 million in the Class B common stocks of Rafael Holdings, Inc., a publicly-traded company ("Rafael"). Rafael also issued warrants to purchase an additional 43,649 of Rafael's Class B common stock at $22.91 per share up to June 6, 2022. The Company does not exercise significant influence over the operating or financial policies of Rafael.

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 were collateralized by Prism's land, building and improvements. 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. In the first quarter of 2020, the Company recorded a $0.2 million write-down to the fair value of certain property and equipment.

In October 2020, the Prism completed the sale of all assets held for sale with an aggregate proceed $2.7 million of and recorded a net loss from disposal of $0.3 million included in the selling, general and administrative expenses in the consolidated statements of operations. In October 2020, Prism settled the 4.75% notes payable to Catskill Bank previously classified as liabilities held for sale with full payment of the principal amount of $0.9 million.

Our capital expenditures were $0.2 million and $0.4 million in 2020 and 2019, respectively. We currently anticipate that our total capital expenditures in the year ending December 31, 2021 will be between $0.5 million and $1.0 million.

In connection with the acquisition ofLumo Finland in January 2019, the Company has a conditional continuing call option to purchase a portion or the entirenoncontrollinginterest from the sellers during the period beginning at the third anniversary of theLumo Finland Closing Date and endingthreeyears later.

Financing Activities

In each of 2020 and 2019, we paid aggregate Base Dividends per share of $0.6376 on our Series 2012-A Preferred Stock. The aggregate preferred stock dividends paid in each of 2020 and 2019 were $1.5 million. On February 18, 2021, we paid a quarterly Base Dividend of $0.1594 per share on our Series 2012-A Preferred Stock for the fourth quarter of 2020 to stockholders of record as of the close of business on February 6, 2021.

In 2020 and 2019, we paid aggregate dividends per share of $0.33 and $0.30, respectively, to stockholders of our Class A common stock and Class B common stock. The aggregate dividends paid in 2020 and 2019 were $8.7 million and $8.1 million, respectively.

As announced on March 11, 2021, we suspended our dividends on our common stock to rebuild our cash position in light of the losses incurred from the effects of Winter Storm Uri as discussed above.

In 2020, we received minimal proceeds from the exercise of stock options for which we issued 4,133 shares of our Class B common stock. In 2019, we received $1.4 million from the exercise of stock options for which we issued 205,350 shares of our Class B common stock.

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 2020, we acquired 233,602 Class B common stock under the stock repurchase program for an aggregate amount of 1.7 million. In 2019, we acquired 732,869 Class B common stock under the repurchase program for an aggregate amount of $5.6 million. At December 31, 2020, 5.9 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¥100.0million (equivalent to $0.9million) short-term credit facility. Genie Japan provided a letter of credit issued byJPMorganChase amounting to¥100.0million (equivalent to $0.9million) as collateral. Theoutstanding 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 onMay 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 matured on November 13, 2020. On November 13, 2020, Genie Japan and Tokyo Star Bank amended the May 2020 Loan to extend the maturity date to March 13, 2021. At September 30, 2020, $1.4 million was outstanding under the May 2020 Loan. At December 31, 2020, the effective interest rate was 3.0%.

On December 5, 2019, we entered into the first amendment of Credit Agreement with JPMorgan Chase Bank (“Credit Agreement”) to extend the maturity date to December 31, 2020. On December 8, 2020, we entered into the second amendment of its existing Credit Agreement to extend the maturity date to December 31, 2021. 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 December 31, 2020, JP Morgan Chase Bank issued $2.3 million letter of credit from the Credit Line. As of December 31, 2020, none of the letters of credits were drawn upon. At December 31, 2020, the cash collateral of $5.2 million was included in restricted cash—short-term in the consolidated balance sheet.

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 $20.0 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 incurs interest at LIBOR plus 4.5% per annum. Interest was payable monthly and all outstanding principal and any accrued and unpaid interest matured on April 3, 2020. In April 2020, the revolving line of credit expired and we paid outstanding balance of $3.5 million.

On December 11, 2019, Prism refinance the 5.95% notes payable to Catskill Hudson Bank that were due in November 2019. The outstanding balance of notes payable of $0.9million December 11, 2019 was payable in monthly equal installments for period of ten years. The outstanding principal amount incurred fixed interest at4.75% per annum.The notes payable were 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. On October 16, 2020, Prism settled the notes payable to Catskill Bank previously classified as liabilities held for sale with full payment of the principal amount of $0.8 million

In 2020, we paid $0.5 million to repurchase 58,650 shares of our Class B common stock, and, in 2019, we paid $0.5 million to repurchase 48,197 shares of our Class B common stock tendered by our employees to satisfy tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.

Series 2012-A Preferred Stock

At December 31, 2020, there were 2.3 million shares of our Series 2012-A Preferred Stock issued and outstanding with an aggregate liquidation preference of $19.7 million. Each share of our Series 2012-A Preferred Stock has a liquidation preference of $8.50 (the “Liquidation Preference”), and is entitled to receive an annual dividend per share equal to the sum of (i) $0.6375 (the “Base Dividend”) plus (ii) seven and one-half percent (7.5%) of the quotient obtained by dividing (A) the amount by which the EBITDA for a fiscal year of our retail energy provider business exceeds $32 million by (B) 8,750,000 (the “Additional Dividend”), payable in cash. EBITDA consists of income (loss) from operations exclusive of depreciation and amortization and other operating gains (losses).

The Series 2012-A Preferred Stock is redeemable, in whole or in part, at our option following October 11, 2017 at 101% of the Liquidation Preference plus accrued and unpaid dividends, and 100% of the Liquidation Preference plus accrued and unpaid dividends following October 11, 2018.

During any period when we have failed to pay a dividend on the Series 2012-A Preferred Stock and until all unpaid dividends have been paid in full, we are prohibited from paying dividends or distributions on our Class B or Class A common stock.

The Base Dividend is payable (if declared by our Board of Directors, and accrued, if not declared) quarterly on each February 15, May 15, August 15 and November 15, and to the extent that there is any Additional Dividend payable with respect to a fiscal year, it will be paid to holders of Series 2012-A Preferred Stock with the May dividend. With respect to the payment of dividends and amounts upon liquidation, dissolution or winding up, the Series 2012-A Preferred Stock is equal in rank to all other equity securities we issue, the terms of which specifically provide that such equity securities rank on a parity with the Series 2012-A Preferred Stock with respect to dividend rights or rights upon our liquidation, dissolution or winding up; senior to our common stock; and junior to all of our existing and future indebtedness.

Each share of Series 2012-A Preferred Stock has the same voting rights as a share of Class B common stock, except on certain matters that only impact our common stock, as well as additional voting rights on specific matters or upon the occurrence of certain events.

On March 21, 2020, the Board of Directors of the Company approved a program to redeem up to $4.0 million worth of the Company's Preferred Stock in accordance with the Certificate of Designations for the preferred stock. There was no redemption under this program in 2020.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table quantifies our future contractual obligations and other commercial commitments at December 31, 2020:

Payments Due by Period

Other liabilities (1) (2) (3) 30 30 — — —

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 December 31, 2020, the Company had outstanding aggregate performance bonds of $13.7 million and $2.3 million of unused letters of credit.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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 2020 had remained the same as in 2019, due to changes in the price of natural gas and electricity, our gross profit from electricity sales would have increased by $4.9 million in 2020 and our gross profit from natural gas sales would have decreased by $1.3 million in 2020.

Hypothetically, for our GRE International segment, if our gross profit per unit in 2020 had remained the same as in 2019, our gross profit from electricity sales would have decreased by $6.6 million in 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 cost 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 swaps or options, therefore the mark-to-market change in fair value is recognized in cost of revenue in our consolidated statements of operations. Refer to Note 5 – Derivative Instruments, for details of the hedging activities.

Item 8. Financial Statements and Supplementary Data.

Our Consolidated Financial Statements and supplementary data and the report of the independent registered public accounting firm thereon set forth starting on page F-1 herein are incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of December 31, 2020. Based on our evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were ineffective as of December 31, 2020 due to the material weakness described below.

Management's Annual Report on Internal Control Over Financial Reporting

We, the management of Genie Energy Ltd. and subsidiaries (the “Company”), are responsible for establishing and maintaining adequate internal control over financial reporting of the Company.

The Company’s internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:

Management has assessed the effectiveness of the Company’s internal control over financial reporting as ofDecember 31, 2020. In making this assessment, the Company’s management used the criteria established inInternal Control — Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our internal control over financial reporting, as prescribed above, as ofDecember 31, 2020. Based on our evaluation, our principal executive officer and principal financial officer concluded that the review of our income tax provision was not designed and maintained at an appropriate level of precision to prevent or detect a material misstatement on a timely basis. Accordingly, management has determined that this control deficiency constitutes a material weakness.

Because of this material weakness, management has concluded that our internal control over financial reporting was not effective as of December 31, 2020. This material weakness could result in misstatements of financial statement accounts and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected.

Notwithstanding the material weaknesses discussed below, our management has concluded that the consolidated financial statements included in this Annual Report on Form 10-K fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 has been audited by BDO USA LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Management Action Plan and Progress to Date

In response to the material weaknesses, we have taken certain actions and will continue to take further steps to strengthen our control processes and procedures in order to remediate such material weaknesses. We will continue to evaluate the effectiveness of our internal controls and procedures on an ongoing basis and will take further action as appropriate. Management has formed multiple aspects of an overall remediation plan, which will be implemented in the second quarter of 2021.

The preliminary plan includes:

Engaging a third party tax consultant with specific expertise in international taxation and business acquisitions; and

Perform a formal detailed review of tax implications for all business acquisitions as part of the management review and diligence process.

Acquisition of Shoreditch

We acquired a controlling interest in Shoreditch in October 2020. Management has excluded the operations of this business from our evaluation of, and conclusion on, the effectiveness of our internal controls over financial reporting as of December 31, 2020. Shoreditch constituted 24.8% and 12.9% of our total assets and net assets, respectively, as of December 31, 2020, and 5.9% of our consolidated revenue for the year then ended.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) or 15d-15(f) of the Exchange Act) that occurred during the fourth quarter period that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

None.

Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The following is a list of our directors and executive officers along with the specific information required by Rule 14a-3 of the Securities Exchange Act of 1934:

Executive Officers

Howard S. Jonas — Chairman of the Board

Michael Stein — Chief Executive Officer

Avi Goldin — Chief Financial Officer

Directors

Howard S. Jonas — Chairman of the Board of the Company

James A. Courter — Vice Chairman of the Board of the Company

W. Wesley Perry — Owner and operator of S.E.S. Investments, Ltd., an oil and gas investment company

Alan B. Rosenthal — Founder and managing partner of ABR Capital Financial Group LLC, an investment fund

Allan Sass — Former President and Chief Executive Officer of Occidental Oil Shale Corporation, a subsidiary of Occidental Petroleum

The remaining information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, and which is incorporated by reference herein.

Corporate Governance

We have included as exhibits to this Annual Report on Form 10-K certificates of our Chief Executive Officer and Chief Financial Officer certifying the quality of our public disclosure.

We make available free of charge through the investor relations page of our web site (www.idt.net/ir) our Annual Reports on Form 10–K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, and all beneficial ownership reports on Forms 3, 4 and 5 filed by directors, officers and beneficial owners of more than 10% of our equity, as soon as reasonably practicable after such reports are electronically filed with the Securities and Exchange Commission. We have adopted codes of business conduct and ethics for all of our employees, including our principal executive officer, principal financial officer and principal accounting officer. Copies of the codes of business conduct and ethics are available on our web site.

Our web site and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K or our other filings with the SEC.

Item 11. Executive Compensation.

The information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, and which is incorporated by reference herein.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, and which is incorporated by reference herein.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, and which is incorporated by reference herein.

Item 14. Principal Accounting Fees and Services.

The information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 2020, and which is incorporated by reference herein.

Part IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The following documents are filed as part of this Report:

(b) Exhibits.

ExhibitNumber Description of Exhibits

3.01(1) Amended and Restated Certificate of Incorporation of the Registrant.

3.03(3) Fourth Amended and Restated By-Laws of the Registrant.

21.01* Subsidiaries of the Registrant.

23.01* Consent of BDO USA, LLP

ExhibitNumber Description of Exhibits

101.INS* XBRL Instance 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

* filed herewith.

(1) Incorporated by reference to Form 10-12G/A, filed October 7, 2011.

(3) Incorporated by reference to Form 8-K filed March 19, 2021.

(4) Incorporated by reference to Form 8-K, filed November 6, 2020.

(5) Incorporated by reference to the Schedule 14A, filed April 28, 2020.

Item 16. Form 10-K Summary

None.

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

GENIE ENERGY LTD.

By: /s/ Michael Stein

Chief Executive Officer

Date: March 16, 2021

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Titles Date

/s/ Howard S. Jonas Chairman of the Board and Director March 16, 2021

Howard S. Jonas

Michael Stein

Avi Goldin Principal Accounting Officer)

/s/ James A. Courter Vice Chairman of the Board and Director March 16, 2021

James A. Courter

/s/ W. Wesley Perry Director March 16, 2021

W. Wesley Perry

/s/ Alan B. Rosenthal Director March 16, 2021

Alan B. Rosenthal

/s/ Allan Sass Director March 16, 2021

Allan Sass

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Board of Directors and Stockholders of

Genie Energy Ltd.

Newark, New Jersey

Opinion on Internal Control over Financial Reporting

We have audited Genie Energy Ltd.’s (the “Company’s”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the period ended December 31, 2020 and 2019, and the related notes (collectively referred to as “the consolidated financial statements) and our report dated March 16, 2021, expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A. Controls and Procedures”, Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

As indicated in the accompanying “Item 9A. Controls and Procedures”, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Shoreditch Energy Limited(“Shoreditch”), which was acquired on October 8, 2020, and which is included in the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for the period then ended. Shoreditch constituted 24.8% and 12.9% of total assets and net assets, respectively, as of December 31, 2020 and 5.9% of revenues, for the period then ended. Management did not assess the effectiveness of internal control over financial reporting of Shoreditch because of the timing of the acquisition. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Shoreditch.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness regarding management’s failure to design and maintain controls over accounting for income taxes has been identified and described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2020 financial statements, and this report does not affect our report dated March 16, 2021 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

Woodbridge, New Jersey

March 16, 2021

GENIE ENERGY LTD.

Index to Consolidated Financial Statements

​

Reports of Independent Registered Public Accounting Firms F-2

Consolidated Balance Sheets F-3

Consolidated Statements of Operations F-4

Consolidated Statements of Comprehensive Income (Loss) F-5

Consolidated Statements of Equity F-7

Consolidated Statements of Cash Flows F-8

Notes to Consolidated Financial Statements F-9

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Genie Energy Ltd.

Newark, New Jersey

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Genie Energy Ltd. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013)issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 16, 2021 expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Unbilled Revenue

As described in Note 1 to the consolidated financial statements, the Company recognizes revenue from units of electricity and natural gas delivered, but not invoiced (“unbilled revenue”) based on estimated amounts customers will be billed for services rendered from the time meters were last read to the end of the reporting period. The unbilled revenue is estimated based on available per day usage data, the number of unbilled days in the period adjusted for seasonality-based cooling and heating degree-days and historical trends. Revenue from the sale of units of electricity and natural gas recognized for the year amounted to approximately $353.5 million in 2020, including approximately $26.0 million of unbilled revenue.

We identified estimated unbilled revenue as a critical audit matter. Our principal considerations included management’s significant estimates and inputs, including available per day usage data, the number of unbilled days in the period adjusted for seasonality-based cooling and heating degree-days and historical trends. Because changes in those estimates could have a material effect on the amount of unbilled revenue, auditing these significant estimates and inputs involved a high degree of auditor judgement and effort in performing audit procedures.

The primary procedures we performed to address this critical audit matter included:

Testing the design and operating effectiveness of certain controls related to management’s process to estimate and record unbilled revenue.

Assessing management’s inputs in the estimate such as per day, year over year usage data, the number of unbilled days in the period and seasonality adjustments for reasonableness.

Evaluating the reasonableness of the unbilled revenue during the year by comparing the estimated unbilled revenue from sale of units of electricity and natural gas to revenue billed in the subsequent period. In cases where estimated revenue by product was significantly higher or lower than expected, we obtained further explanations and corroborating supporting documentation to evaluate the impact to the estimated unbilled revenue.

/s/ BDO USA LLP

We have served as the Company’s auditor since 2019.

BDO USA, LLP

Woodbridge, New Jersey

March 16, 2021

GENIE ENERGY LTD.

CONSOLIDATED BALANCE SHEETS

December 31

(in thousands, except per share amounts) 2020 2019

ASSETS

CURRENT ASSETS:

Marketable equity securities 5,089 —

Property and equipment, net 259 3,607

Investment in equity method investees 747 675

Restricted cash—long-term — 520

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Short-term revolving line of credit — 2,514

Long-term notes payable — 777

Commitments and contingencies (Note 15 and Note 16)

EQUITY:

Genie Energy Ltd. stockholders’ equity:

Preferred stock, $0.01 par value; authorized shares – 10,000:

Accumulated other comprehensive income 3,827 2,519

Total Genie Energy Ltd. stockholders’ equity 98,095 94,805

Noncontrolling interests:

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended December 31,

(in thousands, except per share data) 2020 2019

REVENUES:

OPERATING EXPENSES AND LOSSES:

Selling, general and administrative (i) 76,951 72,674

Equity in the net loss in equity method investees (1,443 ) (4,830 )

Gain on acquisition of a subsidiary 5,473 —

Provision for income taxes (8,314 ) (4,600 )

Net (income) loss attributable to noncontrolling interests (2,399 ) 2,796

NET INCOME ATTRIBUTABLE TO GENIE ENERGY LTD. 13,155 4,175

Dividends on preferred stock (1,481 ) (1,481 )

Earnings per share attributed to Genie Energy Ltd. common stockholder

Weighted-average number of shares used in the calculation of earnings per share

Dividends declared per common share $ 0.33 $ 0.30

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year ended December 31,

Other comprehensive income (loss):

Foreign currency translation adjustments 792 (519 )

COMPREHENSIVE INCOME ATTRIBUTABLE TO GENIE ENERGY LTD. $ 14,469 $ 4,103

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF EQUITY (in thousands)

Genie Energy Ltd. Stockholders

Preferred Class A Class B Additional Accumulated Other

Dividends on preferred stock — — — — — — — — — (1,481 ) — (1,481 )

Purchase of Lumo — — — — — — — — — — 410 410

Stock-based compensation — — — — 36 1 1,102 — — — — 1,103

Options issued to Howard S. Jonas — — — — — — 325 — — — — 325

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF EQUITY (in thousands) — (Continued)

Genie Energy Ltd. Stockholders

Preferred Class A Class B Additional Accumulated Other

Purchase of equity of subsidiary — — — — — — (158 ) — — — (33 ) (191 )

Other comprehensive loss — — — — — — — — (72 ) — (447 ) (519 )

Dividends on preferred stock — — — — — — — — — (1,481 ) — (1,481 )

Deconsolidation of subsidiaries — — — — — — — — (6 ) — (92 ) (98 )

Stock-based compensation — — — — 22 2 1,132 — — — — 1,134

Exercise of stock options — — — — 4 — 28 — — — — 28

Purchase of equity of subsidiaries — — — — — — (29 ) — — — 74 45

Other comprehensive loss — — — — — — — — 1,314 — (522 ) 792

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended December 31,

OPERATING ACTIVITIES

Depreciation and amortization 3,548 3,627

Provision for doubtful accounts receivable 3,734 658

Equity in the net loss of equity method investees 1,443 4,830

Loss on sale disposal of assets, net 262 —

Gain on consolidation of subsidiary (5,473 ) —

Unrealized gain on marketable equity securities and investment (348 ) —

Gain on deconsolidation of subsidiaries (98 ) —

Change in assets and liabilities, net of effect of acquisition:

Other current assets and other assets (3,208 ) 1,137

Due to IDT Corporation (124 ) 147

Net cash provided by operating activities 23,119 15,752

INVESTING ACTIVITIES

Capital expenditures (167 ) (404 )

Investments in notes receivable — (214 )

Proceeds from sale of assets 2,672 —

Purchase of marketable equity security and investment (5,000 ) —

Cash acquired from acquisition of Shoreditch, net of cash payment 958 —

Payment for acquisition of Lumo Energia, net of cash acquired — (2,044 )

Repayment of notes receivable 12 124

Investments in equity method investees (1,502 ) (3,235 )

Net cash used in investing activities (3,027 ) (5,773 )

FINANCING ACTIVITIES

Purchases of Class B common stock (1,704 ) (5,584 )

Repayment of short-term debt—Lumo Energia — (2,260 )

Repayment of notes payable (867 ) (45 )

Proceeds from exercise of stock options 28 1,407

Proceeds from revolving line of credit 1,000 —

Repayment of revolving line of credit (3,514 ) —

Repayment of loan payable (930 ) —

Repurchases of Class B common stock from employees (460 ) (467 )

Net cash used in financing activities (15,194 ) (15,623 )

Cash, cash equivalents and restricted cash at beginning of year 38,554 44,197

Cash, cash equivalents and restricted cash at end of year $ 43,184 $ 38,554

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash payments made for interest $ 333 $ 529

Cash payments made for income taxes $ 741 $ 702

See accompanying notes to consolidated financial statements.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Description of Business and Summary of Significant Accounting Policies

Description of Business

Genie Energy Ltd. (“Genie”), a Delaware corporation, was incorporated in January 2011. Genie owns 100% of Genie Energy International Corporation (“GEIC”), which owns 100% of Genie Retail Energy (“GRE”), 100% of Genie Energy International LLC ("GRE International" or "GREI"), and 100% of Genie Energy Services ("GES"). The “Company” in these financial statements refers to Genie, GRE, GRE International and GES and their respective subsidiaries, on a consolidated basis.

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

GRE International holds the Company's 100% interest (which was 77.0% prior to October 8, 2020) in Shoreditch Energy Limited (see Note 2), a REP that serves customers in the United Kingdom under the name Orbit Energy, and its 98.8% interest in venture in Japan, which launched commercial operations in second quarter of 2019, the Company's 92.5% controlling interest in Lumo Energia Oyj ("Lumo Finland"), a REP serving residential customers in Finland, and its 100% interest in Lumo Energi AB ("Lumo Sweden"), which was formed in 2019 to serve retail energy customers in Sweden.

GES overseesDiversegy LLC ("Diversegy"), a retail energy advisory and brokerage company that serves commercial and industrial customers throughout the United States, managesGRE'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 and Genie Solar Energy, a rooftop solar system sales and general contracting company.

In December 2020, Afek Oil & Gas Ltd., the oil and gas exploration project in the Golan Heights in Northern Israel (“Afek”), completed the final planned testing on one of its completed exploratory wells. The test was conducted as prior analysis indicated that a zone within the well potentially contained evidence of hydrocarbons at levels sufficient to warrant additional testing. After analyzing the results of the test and subsequent activity, as no traces of light oil were found. As a result, Afek ceased operations. The related assets, liabilities, results of operations and cash flows are combined with corporate for all periods presented.

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 and/or summers have the opposite effect. Unseasonal 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 47.7% and 46.9% of GRE’s natural gas revenues for the relevant years were generated in the first quarters of 2020 and 2019, 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% of GRE’s electricity revenues for the relevant years were generated in the third quarters of 2020 and 2019. 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.

Basis of Consolidation

The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled subsidiaries and the variable interest entity in which the Company is the primary beneficiary (see Note 14). All significant intercompany accounts and transactions between the consolidated entities are eliminated. See Note 2, Acquisitions, for details of the new subsidiaries included in the consolidation.

Equity Method Investments

Investments in businesses that the Company does not control, but in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. The Company periodically evaluates its equity method investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded, and a new basis in the investment is established.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant estimates affecting amounts reported or disclosed in the consolidated financial statements include revenues, marketable equity securities and other investments, accounts receivables, allowances for doubtful accounts receivable, net realizable value of inventories, valuation of intangible assets, depreciation and amortization periods for long-lived assets, valuation allowances recorded against deferred tax assets, the valuation of stock-based compensation, valuation of derivative instruments, valuation of debt instruments and loss contingencies. These estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the current circumstances. Actual results may differ from those estimates.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Revenue Recognition

Revenues from the Sale of Electricity and Natural Gas

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.GRE and Genie Japan records unbilled revenues for the estimated amount customers will be billed for services rendered from the time meters were last read to the end of the respective accounting period. The unbilled revenue is estimated each month based on available per day usage data, the number of unbilled days in the period and historical trends.

Revenues from Shoreditch are accrued based on an estimate of the quantity in units of electricity or natural gas supplied to customers by profile class. The estimate is made using historical consumption patterns, industry estimated consumption rates, and takes into consideration industry reconciliation processes.

Utility companies in the U.S. 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.

The Company recognizes the incremental costs of obtaining a contract with a customer as an asset if it expects the benefit of those costs to be longer than one year. The Company determined that certain sales commissions to acquire customers meet the requirements to be capitalized. For GRE, the Company applies a practical expedient to expense costs as incurred for sales commissions to acquire customers as the period would have been one year or less. Incremental customer acquisition cost of certain GRE International entities are capitalized and amortized over the range of between eighteen and twenty-four months. These costs and the related amortization are recorded within sales and marketing expenses. Total capitalized customer acquisition costs to obtain a contract was $0.8 million in each of the years ended December 31, 2020 and 2019. At December 31, 2020 and 2019 customer acquisition costs of $0.6 million and $0.2 million were included in other current assets and other assets, respectively, on the consolidated balance sheet. The Company recognized $0.8 million and $0.6 million of amortization of capitalized customer acquisition cost, for the years ended December 31, 2020 and 2019, respectively. The Company continuously monitors its customer relationship periods to ensure compliance with the application of the standard.

Revenues from Sale of Solar Panels

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 panels, we allocate the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer, in satisfaction of the corresponding performance obligations.

Revenues from sales of solar panels are included under the Other Revenues in the consolidated statements of operations.

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

Electricity Natural Gas Other Total

(in thousands)

For the year ended December 31, 2020

For the year ended December 31, 2019

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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

Electricity Natural Gas Other Total

(in thousands)

For the year ended December 31, 2020

For the year ended December 31, 2019

Contract Liabilities

Certain revenue contracts in GES include provisions that require advance payment from customers. These advance payments received under revenue contracts 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.

Customers of Shoreditch can elect to be on a budget plan. Under this type of plan, a monthly installment amount is calculated based on estimated annual usage. Contract liabilities are adjusted monthly based on actual and estimated usage of the customers. Annually, the budget plan is reconciled to actual annual usage.

The following table summarized the changes in the liabilities for the years ended December 31, 2020 and 2019.

December 31,

(in thousands)

Contract liability, beginning $ 13,426 $ 1,137

Contract liabilities from the acquisition of Shoreditch 5,152 —

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

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 statement of cash flows:

December 31,

(in thousands)

Restricted cash—long-term — 520

Total cash, cash equivalents, and restricted cash $ 43,184 $ 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 16) and Credit Agreement with JPMorgan Chase (see Note 10).

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Marketable Equity Securities and Other Investment

Marketable equity securities that are traded in the public market are carried at fair value using the quoted price at the end of each reporting period. Investments in warrants to purchase additional equity securities are carried at their fair value using Black-Scholes valuation model. Changes in the fair value are recorded as unrealized gains or losses on investments in the consolidated statements of operations.

In December 2020, the Company invested $5.0million to purchase 218,245 shares of Class B common stocks of Rafael Holdings,Inc., a publicly-traded company ("Rafael"), also a related party (See Note 17). Rafael also issued warrants to purchase an additional43,649of Rafael's Class B common stock at $22.91per share up to June 6, 2022. The Company does not exercise significant influence over the operating or financial policies of Rafael. For the year ended December 31, 2020, the Company recognized unrealized gain on investment of $0.3million. At December 31, 2020, the carrying values of investments in the common stock and warrants were $5.1million and $0.3million, respectively. The investment in the warrants is included in the other current assets account in the consolidated balance sheet. For the year ended December 31, 2020, the Company recognized $0.3 million unrealized gain from marketable securities and other investments, included in other income, net in the consolidated statement of operations.

The fair value of the warrants was estimated at December 31, 2020 using a Black-Scholes valuation model and the assumptions in the following table (dollar amount in thousands).

Risk-free interest rate 0.11 %

Expected dividend yield —

Expected volatility 72.71 %

Expected term 0.75 year

Fair value of the warrants $ 5.93

In determining the value of the investment in the warrants, the Company considered that Rafael has never paid cash dividends and does not currently intend to pay cash dividends, and thus has assumed a 0% dividend yield. Expected volatilities are based on the historical volatility of Rafael’s stock price. The expected life of the warrants is estimated based on the exercise period. The risk-free interest rates are derived from the U.S. Treasury yield curve in effect as of December 31, 2020 with a remaining term similar to the expected life of the warrants.

Trade Accounts Receivable, Net

Trade accounts receivable, net is reported in the balance sheet as gross outstanding amounts adjusted for doubtful accounts.

Inventories

Inventory consists of natural gas, renewable energy credits and solar panels.

Natural Gas

Natural gas inventory is stored at various third parties’ underground storage facilities and is stated at lower of cost or net realizable value. The Company’s natural gas inventory was valued at weighted average cost, which was based on the purchase price of the natural gas and the cost to transport, plus or minus injections or withdrawals.

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. GRE holds renewable energy credits for both sale and use, and treats the credits as a government incentive to encourage the construction of renewable power plants. Renewable energy credits are valued at the lower of cost and net realizable value. Gains and losses from the sale of renewable energy credits are recognized in cost of revenues when the credits are transferred to the buyer.

Solar Panels

Inventories related to solar panels are stated at the lower of cost or net realizable value. The cost is determine using the first-in, first-out basis and includes both the costs of acquisition and the costs of manufacturing. These costs include direct material, direct labor, and indirect manufacturing costs.

The Company regularly reviews the cost of inventories against their estimated net realizable value and records write-downs if any inventories have costs in excess of their net realizable values. The Company also regularly evaluates the quantities and values of inventories, in light of current market conditions and trends among other factors and records write-downs for any quantities in excess of demand or for any obsolescence. This evaluation considers the use of modules in the systems business, expected demand, anticipated sales prices, strategic raw material requirements, new product development schedules, the effect new products might have on the sale of existing products, product obsolescence, product merchantability, and other factors. Market conditions are subject to change, and actual consumption of our inventory could differ from forecasted demand.

Inventories consisted of the following:

December 31,

(in thousands)

Solar Panels:

Raw materials — 216

Total solar panels inventory 335 640

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Long-lived Assets

Property, plant and equipment - net is stated at historical cost less accumulated depreciation and any impairment. The Company provides for depreciation using a straight-line method over estimated useful life of the assets. Any leasehold improvements are amortized over the lesser of the lease term or the useful life. The cost of major additions and improvements are capitalized, while maintenance and repair costs that do not improve or extend the lives of the respective assets are charged to operations as incurred.

The estimated useful life of property plant and equipment as follows:

Years

Building and improvements 4 - 27

Machinery and equipment 2 - 9

Computer software and development 2 - 5

Computers and computer hardware 2 - 5

Office equipment and other 5 - 7

The fair value of patents and trademarks, non-compete agreements and customer relationships acquired in a business combination accounted for under the purchase method are amortized over their estimated useful lives as follows: patents and trademarks are amortized on a straight-line basis over 5 to 20-year period; non-compete agreements are amortized on a straight-line basis over 2 to 3-year term; and customer relationships are amortized ratably over at 2 to 9-year period.

The Company tests the recoverability of its long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company tests the recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss based on excess of carrying value over fair value of the assets. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material.

Acquisitions

Results of operations of acquired companies are included in the Company’s results of operations as of the respective acquisition dates. The purchase price of each acquisition is allocated to the net assets acquired based on estimates of their fair values at the date of the acquisition. Any purchase price in excess of these net assets is recorded as goodwill. The allocation of purchase price in certain cases may be subject to revision based on the final determination of fair values during the measurement period, which may be up to one year from the acquisition date.

For each acquisition, the Company undertakes a detailed review to identify other intangibles assets and a valuation is performed for all such identified assets. The Company uses several market participant measures to determine estimated value. This approach includes consideration of similar recent transactions, as well as utilizing discounted expected cash flow methodologies. A substantial portion of the intangible asset value that the Company acquired is the specialized know-how of the workforce, which is treated as part of goodwill and is not required to be valued separately. The majority of the value of the identifiable intangible assets acquired is derived from customer relationships, including the related customer contracts, non-compete agreements, trademarks, patents as well as licenses. If the actual results differ from the estimates, the amount recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill, or require acceleration of the amortization expenses of finite-lived intangible assets.

Goodwill and Indefinite Lived Intangible Assets

Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired. Goodwill and other indefinite lived intangible assets are not amortized. These assets are reviewed annually (or more frequently under various conditions) for impairment using a fair value approach.

The Company has three reportable segments with four underlying reporting units: GRE, GRE International, and GES, which is comprised of Prism and Diversegy.

The fair value of each reporting unit is estimated using discounted cash flow methodologies, as well as considering third party market value indicators. Calculating the fair value of the reporting units requires significant estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, the Company may be required to record impairments to its goodwill in future periods and such impairments could be material.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The Company performs its annual goodwill impairment test as of October 1. In reviewing goodwill for impairment, the Company has the option, for any or all of its reporting units that carry goodwill - to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (i.e. greater than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, the Company is then required to perform the quantitative impairment test, otherwise no further analysis is required. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same whether the Company chooses to perform the qualitative assessment or proceeds directly to the quantitative impairment test.

The determination of the fair value of our reporting units is based on an income approach, that utilizes discounted cash flows for each reporting unit and other Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820,Fair Value Measurements and Disclosure. Under the income approach, we determine fair value based on the present value of the most recent cash flow projections for the reporting unit as of the date of the analysis and calculate a terminal value utilizing a terminal growth rate. The significant assumptions under this approach include, among others: income projections, which are dependent on future sales, new customers, customer behavior, competitor pricing, operating expenses, the discount rate, and the terminal growth rate. The cash flows used to determine fair value are dependent on a number of significant management assumptions such as the expectations of future performance and the expected future economic environment, which are partly based upon our historical experience. The estimates are subject to change given the inherent uncertainty in predicting future results. Additionally, the discount rate and the terminal growth rate are based on judgment of the rates that would be utilized by a hypothetical market participant.

Derivative Instruments and Hedging Activities

The Company records its derivatives instruments at their respective fair values. The accounting for changes in the fair value (that is, gains or losses) of a derivative instrument is dependent upon whether the derivative has been designated and qualifies as part of a hedging relationship and on the type of hedging relationship.

Due to the volatility of electricity and natural gas prices, GRE and GRE International enter into futures contracts, swaps and put and call options as hedges against unfavorable fluctuations in market prices of electricity and natural gas and to reduce exposure from price fluctuations. The Company does not designate its derivative instruments to qualify for hedge accounting, accordingly the futures contracts, swaps and put and call options are recorded at fair value as a current asset or liability and any changes in fair value are recorded in “Cost of revenues” in the consolidated statements of operations.

In addition to the above, GRE and GRE International utilize forward physical delivery contracts for a portion of their purchases of electricity and natural gas, which are defined as commodity derivative contracts. Using the exemption available for qualifying contracts, GRE and GRE International apply the normal purchase and normal sale accounting treatment to its forward physical delivery contracts, thereby these contracts are not adjusted to fair value. GRE and GRE International also apply the normal purchase and normal sale accounting treatment to forward contracts for the physical delivery of electricity in nodal energy markets that result in locational marginal pricing charges or credits, since this does not constitute a net settlement, even when legal title to the electricity is conveyed to the ISO during transmission. Accordingly, GRE and GRE International recognize revenue from customer sales, and the related cost of revenues, at the contracted price, as electricity and natural gas is delivered to retail customers.

Shipping and Handling Fees and Costs

Amounts billed to customers for shipping and handling are included in revenues. The related minimal amount of shipping and freight charges incurred by the Company are included in cost of goods sold. Distribution and handling costs of $0.2 million and $0.3 million were recorded in selling, general and administrative expense during the years ended December 31, 2020 and 2019, respectively.

Foreign Currency

Assets and liabilities of foreign subsidiaries denominated in foreign currencies are translated to U.S. Dollars at end-of-period rates of exchange, and their monthly results of operations are translated to U.S. Dollars at the average rates of exchange for that month. Gains or losses resulting from such foreign currency translations are recorded in “Accumulated other comprehensive income” in the consolidated balance sheets. Foreign currency transaction gains and losses are reported in “Other (expense) income, net” in the consolidated statements of operations.

Advertising Expense

Cost of advertising for customer acquisitions is charged to selling, general and administrative expense in the period in which it is incurred. In the years ended December 31, 2020 and 2019, advertising expense included in selling, general and administrative expense was $6.8 million and $4.1 million, respectively.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.

The Company classifies interest and penalties on income taxes as a component of income tax expense.

Contingencies

The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred.

Earnings Per Share

Basic earnings per share is computed by dividing net income or loss attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock issued and outstanding during the applicable period. Diluted earnings per share is determined 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 and warrants 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:

Year ended December 31,

(in thousands)

Basic weighted-average number of shares $ 26,109 $ 26,607

Effect of dilutive securities

Stock options and warrants 628 718

Non-vested restricted Class B common stock 76 139

Diluted weighted-average number of shares $ 26,813 $ 27,464

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

Year ended December 31,

Shares underlying stock options 112 126

Non-vested deferred stock units 610 —

Stock options were excluded from the diluted earnings per share computation in the years ended December 31, 2020 and 2019 because the exercise prices of the stock options were greater than the average market prices of the Company's Class B common stock during the periods.

Non-vested deferred stock units were excluded from the basic and diluted weighted average shares outstanding calculation because the market condition for vesting of those deferred stock units was not met as of December 31, 2020.

GENIE ENERGY LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Stock-Based Compensation