What changed in this filing

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Item 1A. Risk Factors

2021-03-16 compared with 2020-03-25 · 134 added, 136 removed, 319 unchanged (46% of the section changed)

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have a history of operating losses and have used significant amounts of cash for operations and to fund our acquisitions and investments.

have a history of losses from our OmniMetrix subsidiary and corporate overhead and have used significant amounts of cash to fund

our operating activities over the years.

In 2019 and 2018, we had operating losses of $699,000 and $1.4 million, respectively.

Cash used in operating activities of continuing operations was $1.2 million in 2019 and $2.4 million in 2018.

we had a history of losses from our OmniMetrix subsidiary and corporate overhead and have used significant amounts of cash to

fund our operating activities over the years, we have had several consecutive quarters of profitability at our OmniMetrix subsidiary

and also were able to cover corporate overhead in the fourth quarter of 2020 resulting in consolidated net income For the full

year 2020 and 2019, we had operating losses of approximately $310,000 and $699,000, respectively.

Cash provided by operating activities

was approximately $464,000 in 2020 and cash used in operating activities was approximately $1.2 million in 2019.

March 11, 2021, we had approximately $1.8 million of consolidated cash and cash equivalents.

2019, we provided OmniMetrix $323,000 for the repayment of a loan to a former director in addition approximately $234,000 was

added to the intercompany amounts owed to Acorn for accrued interest and dividends net of repayments of approximately $52,000.

In 2018, we provided OmniMetrix with $300,000 of financing.

We believe that with OmniMetrix’s continued growth and increased

credit availability, that OmniMetrix will not need financing from us during 2020 and will be able to make nominal repayments each

month towards the balance outstanding but interest will continue to accrue.

Our corporate overhead has also been significantly

reduced and has stabilized.

Based on the above, we believe we have sufficient cash to finance our operations for at least twelve

months from the issuance of the financial statements contained in this Annual Report.

However, we may need to seek additional

sources of funding for long-term corporate costs or if OmniMetrix were not to grow at the rate anticipated and needed additional

funds for their operations.

Additional sources of funding may include additional loans from related and/or non-related parties,

partial sale of, or finding a strategic partner for, OmniMetrix or equity financings.

There can be no assurance additional funding

will be available at acceptable terms or that we will be able to successfully utilize any of these possible sources to provide

additional liquidity.

2019, we provided OmniMetrix $323,000 for the repayment of a loan to a former director, and approximately $234,000 was added to

the intercompany amounts owed to Acorn for accrued interest and dividends, net of repayments of approximately $52,000.

Our corporate

overhead has also been significantly reduced and has stabilized.

Based on the above, we believe we have sufficient cash to finance

our operations for at least twelve months from the issuance of the consolidated financial statements contained in this Annual

However, we may need to seek additional sources of funding for long-term corporate costs or if OmniMetrix were not to

grow at the rate anticipated and needed additional funds for their operations.

Additional sources of funding may include additional

loans from related and/or non-related parties, partial sale of, or finding a strategic partner for, OmniMetrix or equity financings.

There can be no assurance additional funding will be available at acceptable terms or that we will be able to successfully utilize

any of these possible sources to provide additional liquidity.

depend on key management for the success of our business.

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prices for securities traded solely on the OTCQB may be difficult to obtain.

on the OTCQB marketplace as opposed to a national securities exchange has resulted and may continue to result in a reduction in

some or all of the following, each of which could have a material adverse effect on the price of our common stock and our company:

on the OTCQB marketplace as opposed to a national securities exchange has resulted, and may continue to result, in a reduction

in some or all of the following, each of which could have a material adverse effect on the price of our common stock and our company:

liquidity of our common stock;

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stock rules will limit the ability of our stockholders to sell their stock.

Securities and Exchange Commission has adopted regulations which generally define “penny stock”

to be any equity security

that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain

Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers

who sell to persons other than established customers and “accredited investors”.

The term “accredited investor”

refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or

annual income exceeding $200,000 or $300,000 jointly with their spouse.

The penny stock rules require a broker-dealer, prior to

a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form

prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market.

The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of

the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny

stock held in the customer’s account.

The bid and offer quotations, and the broker-dealer and salesperson compensation information,

must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing

before or with the customer’s confirmation.

In addition, the penny stock rules require that prior to a transaction in a

penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny

stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.

disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that

is subject to these penny stock rules.

Consequently, these penny stock rules may affect the ability of broker-dealers to trade

SEC has adopted regulations which generally define “penny stock”

to be any equity security that has a market price

(as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions.

Our securities

We believe that the penny stock rules discourage investor interest in and limit the marketability of our common

however, we have the option to execute a reverse split which could mitigate this issue.

are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons

other than established customers and “accredited investors”.

The term “accredited investor”

refers generally

to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding

$200,000 or $300,000 jointly with their spouse.

The penny stock rules require a broker-dealer, prior to a transaction in a penny

stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which

provides information about penny stocks and the nature and level of risks in the penny stock market.

The broker-dealer also must

provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its

salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s

The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer

orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s

confirmation.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from

these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the

purchaser and receive the purchaser’s written agreement to the transaction.

These disclosure requirements may have the effect

of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules.

Consequently,

these penny stock rules may affect the ability of broker-dealers to trade our securities.

We believe that the penny stock rules

discourage investor interest in and limit the marketability of our common stock;

however, we have the option to execute a reverse

split which could mitigate this issue.

with changing regulation of corporate governance, public disclosure and financial accounting standards may result in additional

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of our business model includes the acquisition of new companies either as new platform companies or complimentary companies.

we do not presently foresee making such acquisitions in the near term unless they support our existing business, if we did so,

any failure to effectively integrate any future acquisition’s management into our controls, systems and procedures could

materially adversely affect our business, results of operations and financial condition.

order to grow, we may decide to pursue growth through acquisitions, although we do not currently plan any significant acquisitions.

Any significant acquisition could require substantial use of our capital and may require significant debt or equity financing.

We anticipate the need to closely manage our cash for the foreseeable future and cannot provide any assurance as to the availability

failure to effectively integrate any future acquisition’s management into our controls, systems and procedures could materially

adversely affect our business, results of operations, financial condition and cash flow.

significant acquisition could require substantial use of our capital and may require significant debt or equity financing.

anticipate the need to closely manage our cash for the foreseeable future and cannot provide any assurance as to the availability

or terms of any such financing or its effect on our liquidity and capital resources.

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If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors

in our financial statements that could require a restatement, or our filings may not be timely, and investors may lose confidence

in our reported financial information.

in our consolidated financial statements that could require a restatement, or our filings may not be timely, and investors may

lose confidence in our reported financial information.

404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting

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The existence of a material weakness could result in errors

in our financial statements that could result in a restatement of financial statements, cause us to fail to timely meet our reporting

obligations and cause investors to lose confidence in our reported financial information.

in our consolidated financial statements that could result in a restatement of consolidated financial statements, cause us to

fail to timely meet our reporting obligations and cause investors to lose confidence in our reported financial information.

we are unable to protect our intellectual property, or our intellectual property protection efforts are unsuccessful, others may

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able to procure and seek to terminate our existing contracts or cease to do business with us.

Concentrations

of credit risk

instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents,

restricted cash, and trade accounts receivable.

The Company’s cash and cash equivalents were deposited primarily with U.S.

banks and brokerage firms amounted to $1.2 million at December 31, 2019.

Approximately 35% of the accounts receivable at December

31, 2019 was due from two customers, 18% from one and 14% from another, who pay their receivables over usual credit periods.

Credit risk with respect to the balance of trade receivables is generally diversified due to the number of entities comprising

the Company’s customer base.

The Company does not believe there is significant risk of non-performance by these counterparties.

financial instruments could subject us to concentrations of credit risk.

financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade accounts

Our cash was deposited with a U.S.

bank and amounted to approximately $2.1 million at December 31, 2020.

Approximately

32% of the accounts receivable at December 31, 2020 was due from two customers, 20% from one and 12% from another, who pay their

receivables over usual credit periods.

Credit risk with respect to the balance of trade receivables is generally diversified due

to the number of entities comprising our customer base.

Although we do not believe there is significant risk of non-performance

by these counterparties, any failures or defaults on their part could negatively impact the value of our financial instruments

and could have a material adverse effect on our business, operations or financial condition.

COVID-19 pandemic could negatively affect various aspects of our business, including our workforce and supply chain, and make

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many employees from going to work, both around the world as well as in certain jurisdictions in the United States.

of these quarantines, travel bans, and other restrictions have been increasing at a rapid pace.

At this time, it is unclear if

foreign governments or U.S.

federal, state or local governments will further extend any of the current restrictions or if further

restrictions will be put into place.

In addition, many countries, including the United States, have placed significant bans on

international travel.

At this time,

it is unclear if foreign governments or U.S.

federal, state or local governments will further extend any of the current restrictions

or if further restrictions will be put into place.

In addition, many countries, including the United States, have placed significant

bans on international travel.

It is possible that restrictions or bans on domestic travel may be implemented by U.S.

federal, state or

local governments.

As a result of the pandemic, businesses can be shut down, supply chains can be interrupted, slowed, or rendered

inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental

restrictions.

state or local governments.

As a result of the pandemic, businesses can be shut down, supply chains can be interrupted, slowed,

or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons

or governmental restrictions.

mandates may require forced shutdowns of our facilities for extended or indefinite periods.

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condition, results of operations, business, or prospects.

of the electronic devices and hardware we purchase, like antennas, radios, and GPS modules are very specific to our application;

Some of the electronic devices and hardware we purchase, like antennas,

radios, and GPS modules are very specific to our application;

there are not likely to be practical alternatives.

In some cases, our circuit boards were designed around specific electronic

hardware that met our specifications.

We are working closely with our contract manufacturers and

suppliers in order to mitigate as much as possible the risks to our supply chain for these critical devices and hardware, including

identifying any lead-time issues and any potential alternate sources.

We are also examining all currently open purchase orders

in an effort to identify whether we need to issue additional orders to secure product that is critical, already has questionable

lead times and/or is unique to our requirements.

our operations are curtailed, we may need to seek alternate sources of supply for services and staff, which may be more expensive.

Alternate sources may not be available or may result in delays in shipments to us from our supply chain and subsequently to our

customers, each of which would affect our results of operations.

In some cases,

our circuit boards were designed around specific electronic hardware that met our specifications.

We are working closely with

our contract manufacturers and suppliers in order to mitigate as much as possible the risks to our supply chain for these critical

devices and hardware, including identifying any lead-time issues and any potential alternate sources.

We are also examining all

currently open purchase orders in an effort to identify whether we need to issue additional orders to secure product that is critical,

already has questionable lead times and/or is unique to our requirements.

to date, has been deemed an essential business;

however, if this were to change and our operations are curtailed, we may need

to seek alternate sources of supply for services and staff, which may be more expensive.

Alternate sources may not be available

or may result in delays in shipments to us from our supply chain and subsequently to our customers, each of which would affect

our results of operations.

Further, if our customers’

businesses are similarly affected,

they might delay or reduce purchases from us, which could adversely affect our results of operations.

businesses are similarly affected, they might delay or reduce purchases

from us, which could adversely affect our results of operations.

RELATED TO OMNIMETRIX

has a history of incurring net losses since our acquisition of the company and may never achieve sustained profitability.

has a history of incurring operating losses since our acquisition of the company in 2012, including operating losses of $0.2 million

OmniMetrix did realize an operating profit of $0.2 million in 2019.

OmniMetrix has reported quarterly net income since the second quarter of 2020, OmniMetrix has had a history of incurring net losses

since it was acquired by us and may never achieve sustained profitability.

OmniMetrix realized an operating profit of approximately $0.6 million in 2020 and $0.2 million in 2019, OmniMetrix has a history

of incurring operating losses since OmniMetrix was acquired by Acorn in 2012.

While OmniMetrix has significantly reduced its losses

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They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and

sale of their products which would allow them to respond more quickly to new or emerging technologies or changes in customer requirements.

In particular at the present time we are facing significant competition from generator manufacturers who offer their own monitoring

sale of their products, which would allow them to respond more quickly to new or emerging technologies or changes in customer

requirements.

In particular, at the present time we are facing significant competition from generator manufacturers who offer

their own monitoring solutions.

may not be able to access sufficient capital to support growth.

has been dependent on Acorn’s ability and willingness to provide funding to support its business and growth strategy.

our acquisition of OmniMetrix in February 2012, we have invested approximately $14.0 million and, through March 20, 2020, have

lent $3,234,000, net of repayments to OmniMetrix, not including $1,271,000 of accrued interest and expenses advanced to it by

Acorn since 2014.

The loans included $323,000 lent in 2019 to repay a loan from a former director.

OmniMetrix borrowed $300,000

from Acorn in 2018.

OmniMetrix is not expected to need funding support from us in 2020 to support its growth and working capital

March 2019, OmniMetrix reinstated its Loan and Security Agreement providing OmniMetrix with access to accounts receivable formula-based

financing of the lesser of 75% of eligible receivables or $1 million.

Debt incurred under this financing arrangement bears interest

at the greater of 6% and prime (4.25% at March 20, 2020) plus 1.5% per year.

In addition, OmniMetrix is to pay a monthly service

charge of 0.75% of the average aggregate principal amount outstanding for the prior month, for a current effective rate of interest

on advances of 15%.

OmniMetrix also agreed to continue to maintain a minimum loan balance of $150,000 in its line-of-credit with

the lender for a minimum of two years beginning March 1, 2019.

have no assurance that this financing arrangement will provide sufficient liquidity for OmniMetrix’s working capital needs

Additional financing for OmniMetrix may be in the form of a bank line, a new loan or investment by others, a loan by

Acorn, or a combination of the above.

The availability and amount of any additional loans from us to OmniMetrix may be limited

by the working capital needs of our corporate activities.

Whether Acorn will have the resources necessary to provide funding,

or whether alternative funds, such as third-party loans, will be available at the time and on terms acceptable to Acorn and OmniMetrix

cannot be determined.

OmniMetrix is not expected to need funding from us in 2021 to support its growth and working capital needs, OmniMetrix has historically

been dependent on Acorn’s ability and willingness to provide funding to support its business and growth strategy.

our acquisition of OmniMetrix in February 2012, we have invested approximately $14.0 million and, as of December 31, 2020, have

lent approximately $2,985,000, net of repayments of approximately $570,000 in the aggregate made in 2019 and 2020, to OmniMetrix,

not including approximately $1,590,000 of accrued interest and expenses advanced to it by Acorn since 2014.

The loans included

$323,000 lent in 2019 to repay a loan from a former director.

The advances include $114,000 in accrued preferred dividends for

preferred OmniMetrix stock purchased by Acorn from a former director in connection with Acorn’s reacquisition of 19% of

OmniMetrix in 2019.

have no assurance that current cash balances plus cash flow from operations will provide sufficient liquidity for OmniMetrix’s

working capital needs in 2021.

Additional financing for OmniMetrix may be in the form of a bank line, a new loan or investment

by others, a loan by Acorn, or a combination of the above.

The availability and amount of any additional loans from us to OmniMetrix

may be limited by the working capital needs of our corporate activities.

Whether Acorn will have the resources necessary to provide

funding, or whether alternative funds, such as third-party loans, will be available at the time and on terms acceptable to Acorn

and OmniMetrix cannot be determined.

sells equipment and services which monitor third-party products, thus its revenues are dependent on the continued sales of such

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of March 11, 2021, 39,687,589 shares of our common stock were issued and outstanding.

As of that date we had 2,177,857 warrants

outstanding and exercisable with a weighted average exercise price of $1.28 per share and 1,190,156 options outstanding and exercisable

with a weighted average exercise price of $2.10 per share, which if exercised would result in the issuance of additional shares

of our common stock.

In addition to the options noted above, at March 20, 2020, 239,334 options are outstanding, but have not

yet vested and are not yet exercisable.

As of that date we had 35,000 warrants outstanding

and exercisable with a weighted average exercise price of $0.13 per share and 429,828 options outstanding and exercisable with

a weighted average exercise price of $0.67 per share, which if exercised would result in the issuance of additional shares of

our common stock.

In addition to the options noted above, at March 11, 2021, there were 341,418 options are outstanding, but have

not yet vested and are not yet exercisable.

Substantially

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may have to offer additional securities for sale in the near future.

of March 20, 2020, we had consolidated cash of approximately $1.2 million which we believe is sufficient for at least the next

twelve months.

Despite this, we may ultimately not have sufficient cash to allow us to execute our plans and the occurrence of

one or more unanticipated events may require us to make significant expenditures.

of March 11, 2021, we had consolidated cash of approximately $1.8 million which we believe is sufficient for at least the

next twelve months.

Despite this, we may ultimately not have sufficient cash to allow us to execute our plans, and the occurrence

of one or more unanticipated events may require us to make significant expenditures.

Accordingly, we may need to raise additional

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors