What changed in this filing

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Item 9A. Controls and Procedures

2021-03-16 compared with 2020-03-25 · 497 added, 675 removed, 1101 unchanged (52% of the section changed)

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of Disclosure Controls and Procedures

management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness

of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange

Act of 1934, as amended (the “Act”) as of the end of the period covered by this annual report on Form 10-K.

on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in

our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as

of December 31, 2019.

management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure

controls and procedures as of the end of the period covered by this annual report on Form 10-K.

Based on this evaluation, our

CEO and CFO concluded that, due to the material weaknesses in our internal control over financial reporting as described below,

our disclosure controls and procedures were not effective as of December 31, 2020.

Control Over Financial Reporting

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Exchange Act Rule 13a-15(f).

Under the supervision and with the participation of our management, including our Chief Executive

Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting

as of December 31, 2019 based upon the document “Internal Control - Integrated Framework (2013)”

issued by the Committee

of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based upon this assessment and those criteria, management

concluded that due to the material weaknesses described below, our internal control over financial reporting was not effective

as of December 31, 2019.

Company employs a decentralized internal control methodology, coupled with management’s oversight, whereby each subsidiary

Under the supervision and with the participation of our management, including our CEO and CFO, we

conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based upon

the document “Internal Control - Integrated Framework (2013)”

issued by the Committee of Sponsoring Organizations

of the Treadway Commission (“COSO”).

Based upon this assessment and those criteria, management concluded that due

to the material weaknesses described below, our internal control over financial reporting was not effective as of December 31,

Company employs a decentralized internal control methodology, coupled with management’s oversight, whereby its subsidiary

is responsible for mitigating its risks to financial reporting by implementing and maintaining effective control policies and

procedures and subsequently translating that respective risk mitigation up and through to the parent level and to the Company’s

external financial statements.

Also, as the Company’s subsidiary is not large enough to effectively mitigate certain risks

by segregating incompatible duties, management must employ compensating mechanisms throughout the Company in a manner that is

feasible within the constraints it operates.

external consolidated financial statements.

Also, as the Company’s subsidiary is not large enough to effectively mitigate

certain risks by segregating incompatible duties, management must employ compensating mechanisms throughout the Company in a manner

that is feasible within the constraints it operates.

material weaknesses management identified were caused by an insufficient complement of resources at the Company’s OmniMetrix

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a material weakness is defined as 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, this material weakness did not result in any material misstatements of the

Company’s consolidated financial statements and disclosures for any interim periods during, or for the annual period ended

December 31, 2019.

intends to strengthen the Company’s internal controls.

Management expects to make progress towards reducing the risk that

the material weakness could result in a material misstatement of the Company’s annual or interim financial statements.

business conditions allow and resources permit, management will systematically build the necessary capabilities and infrastructure

to implement corrective action.

such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated

financial statements will not be prevented or detected on a timely basis, this material weakness did not result in any material

misstatements of the Company’s consolidated financial statements and disclosures for any interim periods during, or for

the annual period ended December 31, 2020.

will continue to focus on strengthening the Company’s internal controls.

Management expects to make progress towards reducing

the risk that the material weakness could result in a material misstatement of the Company’s annual or interim consolidated

financial statements.

As business conditions allow and resources permit, management will continue to systematically build the

necessary capabilities and infrastructure to implement corrective action.

in Internal Control Over Financial Reporting

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From 1973 to 1978, Dr.

Zentman served in various capacities at American Motors Corporation.

Zentman served in various capacities in the Information Systems department at American Motors Corporation

including Director of the Corporate Data Center and the Engineering Computer Centers.

He holds a Ph.D.

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Based solely on our review of such forms or written representations from certain reporting persons, we believe that during 2020

our executive officers and directors complied with the filing requirements of Section 16(a) except for Mr.

failed to file on a timely basis a Form 4 reporting the shares of common stock he beneficially acquired in our 2019 Rights Offering.

our executive officers and directors complied with the filing requirements of Section 16(a).

have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers and employees.

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CFO of the Company and COO of OmniMetrix (2)

Walter Czarnecki

Former CEO and President of OmniMetrix (3)

Loeb began serving as President and CEO of the Company on January 28, 2016 and as Acting CEO of OmniMetrix on December 1,

Clifford began serving as CFO of the Company on June 1, 2018 and as COO of OmniMetrix on December 1, 2019.

Czarnecki resigned as CEO and President of OmniMetrix effective December 6, 2019.

the consulting fee paid for the provision of Mr.

Loeb’s services to the Company as President and CEO of the Company

and Acting CEO of OmniMetrix and of Ms.

Clifford’s services as CFO of the Company and COO of OmniMetrix, respectively.

of a bonus paid in connection with the closing of the sale of the remaining interest in DSIT.

and Acting CEO of OmniMetrix.

the consulting fee paid for the provision of Ms.

Clifford’s services as CFO of the Company and COO of OmniMetrix.

the grant date fair value calculated in accordance with applicable accounting principles with respect to 35,000 options granted

on May 1, 2018 with an exercise price of $0.35.

The fair value of the options was determined using the Black-Scholes option

pricing model using the following assumptions:

(i) a risk-free interest rate of 2.69% (ii) an expected term of 3.4 years (iii)

an assumed volatility of 129% and (iv) no dividends.

on January 30, 2020 with an exercise price of $0.37.

The fair value of the options was determined using the Black-Scholes

option pricing model using the following assumptions:

(i) a risk-free interest rate of 1.38% (ii) an expected term of 3.62

years (iii) an assumed volatility of 109% and (iv) no dividends.

the grant date fair value calculated in accordance with applicable accounting principles with respect to 50,000 options granted

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an assumed volatility of 122% and (iv) no dividends.

compensation for 2019 .

Changes in each named executive officer’s base compensation for 2019, together with the methodology

for determining their respective bonuses, if any, are described below.

The Board of Directors of OmniMetrix determined the compensation

of its own executive officers and other employees.

On April 9, 2018, the Company entered into a new consulting agreement (the “2018 Consulting Agreement”)

Compensation for 2019 and 2020

On April 9, 2018, the Company entered into a consulting agreement (the “2018 Consulting Agreement”)

Loeb extending its arrangements for compensation of Mr.

Loeb for his services as President and CEO of the Company.

the expiration of his 2017 Consulting Agreement on January 7, 2018, and through April 30, 2018, Mr.

Loeb continued to provide

the consulting and other services to the Company called for in the agreement, and was compensated at the rate of $17,000 per month

provided for in the 2017 Consulting Agreement.

to the 2018 Consulting Agreement, Mr.

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was increased to $26,000 effective December 1, 2019.

Loeb also received a bonus of $100,000 in recognition of his performance

in the sale of the Company’s shares of DSIT Solutions Ltd.

He was eligible for two additional bonuses during the term of

the 2018 Consulting Agreement:

$150,000 upon consummation of a corporate acquisition transaction approved by the Company’s

Board, and $150,000 upon consummation of a corporate financing/funding transaction approved by the Company’s Board.

13, 2019, Mr.

Loeb waived his right to receive the $150,000 bonus otherwise due to him under the terms of the 2018 Consulting

Agreement in connection with the consummation of the Company’s June 2019 Rights Offering.

Loeb also received a grant

on May 1, 2018, of options to purchase 35,000 shares of the Company’s common stock, which shall be exercisable at a price

of $0.35 per share (the closing price for the common stock on the last trading day preceding the date of the grant).

Fifty percent

(50%) of the options vested immediately;

the remaining options vested in two equal increments on July 1, 2018 and October 1, 2018.

The options will expire on the earlier of January 1, 2025 or 18 months from the date Mr.

Loeb ceases to be a director, officer,

employee or consultant of the Company.

He was eligible for bonuses during the term of the 2018 Consulting Agreement:

$150,000 upon consummation of a corporate acquisition transaction approved by the Company’s Board, and $150,000 upon consummation

of a corporate financing/funding transaction approved by the Company’s Board.

On August 13, 2019, Mr.

Loeb waived his right

to receive the $150,000 bonus otherwise due to him under the terms of the 2018 Consulting Agreement in connection with the consummation

of the Company’s June 2019 Rights Offering.

The 2018 Consulting Agreement expired on December 31, 2019.

January 30, 2020, the Company entered into a new consulting agreement (the “2020 Consulting Agreement”) with Mr.

extending its arrangements for compensation of Mr.

Loeb for his services as President and CEO of the Company and as principle

executive officer of the Company’s OmniMetrix subsidiary in the capacity of Acting CEO.

to the 2020 Consulting Agreement, Mr.

Loeb received cash compensation, effective retroactively as of January 1, 2020, of $16,000

per month for service as President and CEO of the Company, and an additional $10,000 per month for service as Acting CEO of OmniMetrix.

Loeb also received a grant of options on January 30, 2020, to purchase 35,000 shares of the Company’s common stock,

which are exercisable at an exercise price equal to the December 31, 2019, closing price of the common stock of $0.37 per share.

Twenty-five percent (25%) of the options were vested immediately;

the remaining options vested in three equal increments on April

1, 2020, July 1, 2020 and October 1, 2020.

The exercise period and other terms are otherwise substantially the same as the terms

of the options granted by the Company to its outside directors.

2020 Consulting Agreement expired on December 31, 2020;

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was increased to $16,500 effective December 1, 2019.

Clifford is not an employee of the Company.

Unless otherwise terminated

in accordance with its provisions, her consulting agreement with the Company automatically renews for an additional year upon

the expiration of each one-year term.

Clifford also received a grant on June 1, 2018 of options to purchase 30,000 shares

of our common stock, with an exercise price of $0.41 per share, which was the closing price of the common stock on May 31, 2018.

The options vested and became exercisable on the first anniversary of the date of grant and shall expire upon the earlier of (a)

seven years from the date of the grant or (b) 18 months from the date Ms.

Clifford received a grant on June 25, 2019 of options to purchase 30,000

shares of our common stock, with an exercise price of $0.28 per share, which was the closing price of the common stock on June

The options vested and became exercisable on the first anniversary of the date of grant and shall expire upon the earlier

of (a) seven years from the date of the grant or (b) 18 months from the date Ms.

Clifford ceases to be a consultant to the Company.

the beginning of each additional one-year term, the Company shall grant Ms.

Clifford an additional 30,000 stock options, which

shall have an exercise price equal to the most recent closing price immediately preceding the grant date and otherwise have the

same terms as the options described above.

Clifford received a grant on June 25, 2019 of options to purchase 30,000 shares

of our common stock, with an exercise price of $0.28 per share, which was the closing price of the common stock on June 24, 2019,

and similar vesting and expiration terms as her 2018 option grant.

Czarnecki’s base compensation was increased to $242,000 from $220,000 effective June 1, 2018 pursuant

to the terms of his employment agreement.

Carnecki resigned from the Company effective December 6, 2019.

She also received a grant on June 8, 2020 of options to purchase 50,000 shares of our common stock, with an exercise price of

$0.23 per share, which was the closing price of the common stock on June 23, 2020, and similar vesting and expiration terms as

her 2019 option grant.

input on executive compensation .

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Company has made discretionary awards of management options as reflected in the table above.

On January 30, 2020, the Company entered into a new consulting agreement (the “2020 Consulting Agreement”)

On February 2, 2021, the Company entered into a new consulting agreement (the “2021 Consulting Agreement”)

Loeb, extending its arrangements for compensation of Mr.

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CEO of OmniMetrix.

Loeb also received a grant of options on January 30, 2020, to purchase 35,000 shares of the Company’s

common stock, which are exercisable at an exercise price equal to the December 31, 2019, closing price of the common stock of

$0.37 per share.

Loeb also received a grant of options on February 2, 2021, to purchase 35,000 shares of the Company’s

common stock, which are exercisable at an exercise price equal to the February 1, 2021, closing price of the common stock of $0.48

Twenty-five percent (25%) of the options were vested immediately;

the remaining options shall vest in three equal

increments on April 1, 2020, July 1, 2020 and October 1, 2020.

The exercise period and other terms are otherwise substantially

the same as the terms of the options granted by the Company to its outside directors.

the remaining options shall vest in three equal increments

on April 1, 2021, July 1, 2021 and October 1, 2021.

The exercise period and other terms are otherwise substantially the same as

the terms of the options granted by the Company to its outside directors.

Clifford serves as both CFO of the Company and COO of OmniMetrix pursuant to a Consulting Agreement with Tracy Clifford

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Clifford currently receives cash compensation of $16,500 per month.

Clifford also receives additional cash

compensation at the rate of $200 per hour for each hour worked in excess of an aggregate of five hundred twenty (520) hours during

any one-year term.

At the beginning of each one-year term of the Consulting Agreement, Ms.

Clifford also receives a grant of options

to purchase 30,000 shares of the Company’s common stock, with an exercise price equal to the closing price of the common

stock on trading day immediately preceding the commencement of such one-year term.

The options will vest and become exercisable

on the first anniversary of the date of grant and shall expire upon the earlier of (a) seven years from the date of grant or (b)

18 months from the date Ms.

Clifford ceases to be a consultant to the Company.

Czarnecki resigned as President and COO of OmniMetrix effective December 6, 2019.

Czarnecki served

as President and COO of OmniMetrix beginning in March 2014 and as CEO beginning in March 2015.

Until June 1, 2017, Mr.

had no employment agreement and was employed on an “at-will”

Czarnecki’s annual salary for 2016 and

until June 1, 2017 was $200,000.

Czarnecki and OmniMetrix entered into an Employment Agreement on June 19, 2017.

The Employment

Agreement had a three-year term and provided for a base annual salary of $220,000 which was increased to $242,000 on June 1, 2018.

Upon the achievement by OmniMetrix and Mr.

Czarnecki of certain performance goals established annually by the Board of OmniMetrix,

Czarnecki would have been entitled to increases in his annual salary and an annual bonus.

If his employment had been terminated

without Cause (as defined in the Employment Agreement), Mr.

Czarnecki would have been eligible for a severance payment equal to

six-months’

base salary at the rate in effect at the time of termination, to be paid in equal installments over a six-month

period subject to his continuing fulfillment of his ongoing obligations under the Agreement.

Czarnecki did not receive a bonus

for 2016 or 2017.

At the beginning of each one-year term of the

Consulting Agreement, Ms.

Clifford also receives a grant of options to purchase 30,000 shares of the Company’s common stock,

with an exercise price equal to the closing price of the common stock on trading day immediately preceding the commencement of

such one-year term.

The options will vest and become exercisable on the first anniversary of the date of grant and shall expire

upon the earlier of (a) seven years from the date of grant or (b) 18 months from the date Ms.

Clifford ceases to be a consultant

to the Company.

Equity Awards at 2020 Fiscal Year End

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January 1, 2025

January 1,2027

June 24, 2026

Walter Czarnecki

WARRANTS TO PURCHASE ACORN ENERGY, INC.

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March 16, 2023

Walter Czarnecki

Warrants held by Leap Tide Capital Management, LLC.

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officers for the year ended December 31, 2020.

Named Executive Officer

Executive Officer

Contributions in Last

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Distributions

Walter Czarnecki

and Benefits Upon Termination or Change in Control

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Loeb, there are no amounts due under any termination scenario.

the terms of the consulting agreement under which Ms.

Clifford serves as our CFO, there are no amounts due under any termination

Czarnecki resigned from the Company effective December 6, 2019.

He was not paid any severance or any other benefits in connection

with his resignation.

Under the terms of the employment agreement with Mr.

Czarnecki (which terminated upon his resignation),

we would have been obligated to make certain payments to him upon the termination of his employment not for cause.

following table describes the potential payments and benefits that would have been due upon termination of employment for Mr.

Czarnecki, as if his employment terminated as of December 31, 2018, the last day of our last fiscal year assuming that there had

been no earned, but unpaid base salary at the time of termination.

Circumstances of Termination

Payments and benefits

Voluntary resignation

not for cause

Change of control

Death or disability

Compensation:

$ 121,000 (1)

Benefits and perquisites:

Perquisites and other personal benefits

a payment of six months’

salary that would have been due, payable in equal installments over a six-month period to Mr.

the terms of the consulting agreement with Ms.

Clifford, there are no amounts due under any termination scenario.

Board reviews non-employee director compensation on an annual basis.

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Compensation ($)

February 5, 2019, Samuel M.

January 8, 2020, Samuel M.

Zentman, Gary Mohr, and Michael F.

Osterer were each granted 10,000 options to acquire stock in

The options had an exercise price of $0.31 and were to expire on February 5, 2026.

The options had an exercise price of $0.38 and were to expire on January 8, 2027.

The fair value of the options

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the annual retainer of $15,000 as a non-employee director plus $2,000 received for services rendered as a member of the Audit

Osterer waived his right to receive board fees for the first half of 2019.

Represents half of the annual retainer of $15,000

plus $1000 received for services rendered as a member of the Audit Committee.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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Loeb directly, 1,366,666 shares held by PENSCO Trust Company Custodian FBO JAN LOEB IRA, 4,372,017

shares held by Leap Tide Capital Acorn LLC, 112,500 shares underlying currently exercisable options held by Mr.

shares held by Leap Tide Capital Acorn LLC, 147,500 shares underlying currently exercisable options held by Mr.Loeb, and 35,000

currently exercisable warrants held by Leap Tide Capital Management LLC.

Loeb is the sole manager of each of Leap

Tide Capital Acorn LLC and Leap Tide Capital Management LLC, with sole voting and dispositive power over the securities held

by such entities.

Loeb is the sole manager of each of Leap Tide

Capital Acorn LLC and Leap Tide Capital Management LLC, with sole voting and dispositive power over the securities held by

such entities.

Loeb disclaims beneficial ownership of the securities held by Leap Tide Capital Acorn LLC and Leap Tide

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of 258,481 shares held by Mr.

Mohr, 833,332 shares held by UE Systems Inc., and 23,334 shares underlying currently exercisable

Mohr, 833,332 shares held by UE Systems Inc., and 41,667 shares underlying currently

exercisable options.

of 1,984,392 shares held by Mr.

Osterer, 833,332 shares held by UE Systems Inc., and 28,584 shares underlying currently exercisable

Osterer, 833,332 shares held by UE Systems Inc., and 46,917 shares underlying currently

exercisable options.

of 80,615 shares and 112,663 shares underlying currently exercisable options.

solely of currently exercisable options.

of 10,506,925 shares, 339,842 shares underlying currently exercisable options and 35,000 shares underlying currently exercisable

of 10,917,334 shares, 408,747 shares underlying currently exercisable options and 35,000 shares underlying currently

exercisable warrants.

COMPENSATION PLAN INFORMATION

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the Company’s Board ratified all option grants made under our 2006 Stock Incentive Plan following the original expiration

of the Plan on February 8, 2017 and extended the expiration date of the 2006 Stock Incentive Plan until December 31, 2024.

of the Plan on February 8, 2017 and extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

With Related Persons

June 28, 2019, we completed a rights offering, raising $2,184,000 in proceeds, net of $210,000 in expenses.

Pursuant to the rights

offering, our securityholders and parties to a backstop agreement purchased 9,975,553 shares of our common stock for $0.24 per

June 28, 2019, we completed a rights offering, raising approximately $2,184,000 in proceeds, net of approximately $210,000 in

Pursuant to the rights offering, our securityholders and parties to a backstop agreement purchased 9,975,553 shares

of our common stock for $0.24 per share.

the terms of the rights offering, each right entitled securityholders as of June 3, 2019, the record date for the rights offering,

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our ownership in Holdings from 80% to 99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC.

balance of the rights offering net proceeds provides OmniMetrix with additional sales and marketing resources to facilitate expansion

balance of the rights offering net proceeds provided OmniMetrix with additional sales and marketing resources to facilitate expansion

into additional geographic markets and new product applications, to support next-generation product development and for general

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of Non-Controlling Interest

2015, one of our then-current directors (the “Investor”) acquired a 20% interest in the our OMX Holdings, Inc.

(“Holdings”) through the purchase of $1,000,000 of OmniMetrix Preferred Stock (“Preferred Stock”).

is the holder of 100% of the membership interests of OmniMetrix, LLC through which we operate our Power Generation and Cathodic

Protection monitoring activities.

The $1,000,000 investment by the Investor was recorded as an increase in non-controlling interests.

dividend of 10% per annum accrued on the Preferred Stock.

The dividend was payable on the first anniversary of the funding of

the investment and quarterly thereafter for so long as the Preferred Stock was outstanding and had not been converted to Common

Through December 31, 2016, a dividend payable of $115,000 was recorded with respect to the Preferred Stock.

31, 2016, the Investor agreed to treat the $115,000 of accrued dividends and all subsequent accrued and unpaid dividends as a

loan to Holdings which bore interest at 8% per year.

In December 2016, the Investor provided Holdings with an additional $50,000

loan under the same terms as the above-mentioned accrued dividends.

May 14, 2018, Holdings and the Investor entered into an agreement whereby effective May 1, 2018, the dividend on the Preferred

Stock was reduced to 8%.

In addition, all the amounts due to the Investor (accrued dividends, loan and accrued interest) and all

future dividends that would accrue on the Preferred Stock through June 30, 2020, were to be paid by Holdings pursuant to an agreed-upon

payment schedule which was scheduled to end on June 30, 2020.

During the three months ended June 30, 2019, the Company accrued

$20,000 for the quarterly dividend.

During the six months ended June 30, 2019, the Company accrued $40,000 in quarterly dividends

in the aggregate.

At June 30, 2019, the obligation to the Investor was $323,000, representing unpaid accrued dividends.

May 14, 2018, Holdings and one of our then current directors (the “Investor”) entered into an agreement whereby effective

May 1, 2018, the dividend on the Preferred Stock was reduced to 8%.

In addition, all the amounts due to the Investor (accrued

dividends, loan and accrued interest) and all future dividends that would accrue on the Preferred Stock through June 30, 2020,

were to be paid by Holdings pursuant to an agreed-upon payment schedule which was scheduled to end on June 30, 2020.

three months ended June 30, 2019, the Company accrued $20,000 for the quarterly dividend.

During the six months ended June 30,

2019, the Company accrued $40,000 in quarterly dividends in the aggregate.

At June 30, 2019, the obligation to the Investor was

$323,000, representing unpaid accrued dividends.

July 1, 2019, in accordance with terms established in 2015 at the time of the original investment, the Company repurchased from

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The repurchase raised the Company’s ownership in Holdings from 80% to

99%, with the remaining 1% owned by the CEO of OmniMetrix, LLC.

from Directors in 2017

February 16, 2017, we secured commitments for $1.9 million in funding in the form of loans from then-current members of our Board

of Directors, including $900,000 immediately funded.

The $900,000 of initially funded loans accrued interest at the rate of 12.5%

(payable at maturity) and was to mature at the earlier of April 30, 2018 or the receipt of proceeds from the sale of our 41.2%

remaining ownership in DSIT (see below).

addition to the $900,000 initially funded, one of our then-current directors agreed to loan up to an additional $1.0 million to

us on or after July 7, 2017 on substantially identical terms as the February 2017 director loans.

In the third quarter of 2017,

we received $400,000 from the director on the aforementioned $1.0 million commitment.

The $400,000 loan received in the third

quarter of 2017 was to mature at the earlier of April 30, 2018 or the receipt of proceeds from the sale of our41.2% ownership

in DSIT (see below) and accrued interest at the rate of 8.0% per annum, payable at maturity.

the year ended December 31, 2017, we accrued $107,000 of interest with respect to the 2017 director loans.

the closing of the 2018 DSIT Transaction, we paid off the $1.3 million of principal of outstanding 2017 director loans and the

accrued interest of $128,000 thereon (which included 2018 interest).

99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC.

the definition of independence provided under the NASDAQ rules, the Board has determined that with the exception of Jan H.

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consolidated financial statements of the Registrant and the report thereon of the Registrant’s Independent Registered Public

Accounting Firms are included in this Annual Report beginning on page F-1.

Accounting Firm is included in this Annual Report beginning on page F-1.

Report of Friedman LLP

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Form of Warrant, dated as of March 16, 2016, of Acorn Energy, Inc., issued to Leap Tide Capital Management LLC (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016).

2006 Stock Option Plan for Non-Employee Directors (incorporated herein by reference to the appendix to the Registrant’s

Definitive Proxy Statement on Schedule 14A filed July 26, 2012, and the Registrant’s Additional Definitive Proxy Soliciting

Materials on Schedule 14A filed August 28, 2012).

Acorn Energy, Inc.

2006 Stock Option Plan for Non-Employee Directors (incorporated herein by reference to the appendix to the Registrant’s Definitive Proxy Statement on Schedule 14A filed July 26, 2012, and the Registrant’s Additional Definitive Proxy Soliciting Materials on Schedule 14A filed August 28, 2012).

Acorn Energy, Inc.

Amended and Restated 2006 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Annual report on Form 10-K for the year ended December 31, 2018).

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the registrant, in the capacities and on the dates indicated.

Chief Executive Officer;

Chief Executive Officer and

(Principal Executive Officer)

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Consolidated Statements of Operations

Consolidated Statements of Changes in (Deficit)/Equity

Consolidated Statements of Changes in Deficit

Consolidated Statements of Cash Flows

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have audited the accompanying consolidated balance sheets of Acorn Energy, Inc.

and the subsidiaries (the “Company”)

as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in equity (deficit), and cash

flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as

the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in

the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States

and subsidiaries (the “Company”) as

of December 31, 2020 and 2019, and the related consolidated statements of operations, changes in deficit, and cash flows for each

of the years in the two-year period ended December 31, 2020, and the related notes (collectively referred to as the financial

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the two-year

period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

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conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

Those standards require that we plan and perform the audits

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

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We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the board of directors and that:

(1) relate to accounts or disclosures that are

material to the 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 financial statements, taken as a whole, and we are not,

by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts

or disclosures to which they relate.

Recognition –

Identifying and evaluating the timing of revenue recognition

of the Matter

described in Note 2 of the financial statements, the Company’s revenue recognition policy is consistent with applicable

revenue recognition guidance and interpretations.

Since the Company’s products are typically associated with a subscription

based service, revenue related to those products is deferred and recognized over the applicable service period.

The principal

considerations for our determination that performing procedures relating to revenue recognition, specifically the identification

and evaluation of the timing of revenue recognition, is a critical audit matter are that there was a significant amount of judgment

exercised by management in identifying and evaluating whether hardware sold has a standalone value and the period over which monitoring

and hardware sales should be recognized.

Auditor judgement is involved in performing our audit procedures to evaluate whether

the timing of revenue recognition on hardware and monitoring sales was appropriately stated.

We Addressed the Matter in Our Audit

audit procedures over determining the time period over which revenue is recognized involved, among others, review over management’s

analysis of estimated customer life, substantive testing of account balances through obtaining invoices, customer contracts and

bill of ladings, in order to evaluate whether revenue was recognized in the appropriate period.

Other procedures performed included

the evaluation of terms and conditions in contracts, obtaining an understanding of the technology behind the Company’s hardware,

and the determination of the appropriate amount and timing of revenue recognition based on the contractual terms, assessing the

recognition term and evaluated the appropriateness of management’s application of their accounting policies, testing the

mathematical accuracy of management’s calculations of revenue and the associated timing of revenue recognized in the financial

concern –

Assessing the probability of the Company’s ability to continue as a going concern

of the Matter

described in Note 1 of the financial statements, the Company has adequate cash on hand in addition to cash generated from operations,

which will provide sufficient liquidity to finance the operating activities of the Company at its current level of operations

for twelve months from the issuance of these financial statements.

We determined the Company’s ability to continue as a

going concern is a critical audit matter due to the estimation and execution uncertainty regarding the Company’s future

cash flows and the risk of bias in management’s judgments and assumptions in estimating these cash flows.

We Addressed the Matter in Our Audit

audit procedures related to the Company’s assertion on its ability to continue as a going concern included the following,

among others;

we reviewed the design and underlying factors relating to the preparation of forecasted information and considerations

of the Company’s obligations;

we tested the reasonableness of the forecasted revenue, operating expenses, and uses and sources

of cash used in management’s assessment of whether the Company has sufficient liquidity to fund operations for at least

one year from the financial statement issuance date.

This testing included inquiries with management, comparison of prior period

forecasts to actual results, consideration of positive and negative evidence impacting management’s forecasts, the Company’s

financing arrangements in place as of the report date, market and industry factors.

have served as the Company’s auditor since 2010.

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Current assets:

Cash and cash equivalents

Restricted cash

Accounts receivable, net

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Deferred revenue

Due to Acorn director (former director as of August 6, 2018)

Current operating lease liabilities

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Other long-term liabilities

Due to Acorn director (former director as of August 6, 2018)

Total long-term liabilities

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Operating expenses:

Research and development expenses, net

Research and development expenses

Selling, general and administrative expenses

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Finance expense, net

Loss before income taxes

Gain on SBA PPP loan extinguishment

Income (loss) before income taxes

Income tax expense

Net loss after income taxes

Share of income in DSIT

Impairment of investment in DSIT

Gain (loss) on sale of interest in DSIT, net of transaction costs and withholding taxes

Non-controlling interest share of loss

Net loss attributable to Acorn Energy, Inc.

Net income (loss) after income taxes

Gain on sale of interest in DSIT, net of transaction costs

Net income (loss)

Non-controlling interest share of (income) loss

Net income (loss) attributable to Acorn Energy, Inc.

shareholders.

Basic and diluted net loss per share attributable to Acorn Energy, Inc.

Basic and diluted net income (loss) per share attributable to Acorn Energy, Inc.

shareholders:

Net loss per share attributable to Acorn Energy, Inc.

Net income (loss) per share attributable to Acorn Energy, Inc.

shareholders –

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shareholders –

basic and diluted

Weighted average number of shares outstanding attributable to Acorn

shareholders –

accompanying notes are an integral part of these consolidated financial statements.

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN (DEFICIT)/EQUITY

Paid-In Capital

of Treasury Shares

STATEMENTS OF CHANGES IN DEFICIT

Acorn Energy, Inc.

Number of Shares

Additional Paid-In Capital

Accumulated Deficit

Number of Treasury Shares

Treasury Stock

Shareholders’

controlling interests

Total Deficit

Balances as of December 31, 2018

Adjustment of retained earnings in accordance with ASC 606

Shares issued in lieu of director fees

Purchase of non-controlling interest

Rights offering, proceeds net of expenses (see Note 9)

Shares issued in lieu of professional fees

Accrued dividend in OmniMetrix preferred shares

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Balances as of December 31, 2019

Purchase of non-controlling interest

Rights offering, proceeds net of expenses (see Note 11)

Shares granted in lieu of professional fees

Proceeds from stock option exercise

Accrued dividend in OmniMetrix preferred shares

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Year ended December 31,

Cash flows used in operating activities:

Cash flows provided by (used in) operating activities:

Net income (loss)

Depreciation and amortization

Non-cash lease expense

(Gain)/loss on sale of investment in DSIT, net of income taxes and transaction costs

Impairment of investment in DSIT

Share of income in DSIT

Gain on sale of investment in DSIT, net of income taxes and transaction costs

Forgiveness of SBA PPP loan

Stock-based compensation

Professional fees paid in common stock

Director fees paid in common stock

Change in operating assets and liabilities:

Decrease (increase) in accounts receivable

Increase in inventory

Increase in other current assets and other assets

Decrease (increase) in inventory

Increase in deferred charges, other current assets and other assets

Increase in deferred revenue

Decrease in amounts due to DSIT and directors

Decrease in amounts due to former directors

Increase in operating lease liability

Decrease in accounts payable, accrued expenses, other current liabilities and non-current liabilities

Net cash used in operating activities

Cash flows provided by investing activities:

Increase (decrease) in accounts payable, accrued expenses, other current liabilities and non-current liabilities

Net cash provided by (used in) operating activities

Cash flows used in investing activities:

Purchases of software

Payments made for patent filings

Purchase of non-controlling interest in OmniMetrix

Proceeds from the sale of interests in DSIT, net of transaction costs

Net cash provided by (used in) investing activities

Cash flows provided by (used in) financing activities:

Cash flows provided by financing activities:

Short-term credit, net

Proceeds from rights offering, net of expenses of $208

Repayment of director loans

Repayments of loans from DSIT

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash, cash equivalents and restricted cash

Proceeds from SBA PPP loans, net of repayments

Stock option exercise proceeds

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at the beginning of the year

Cash, cash equivalents and restricted cash at the end of the period

Cash, cash equivalents and restricted cash at the end of the year

Cash, cash equivalents and restricted cash consist of the following:

End of period

Cash and cash equivalents

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Cash, cash equivalents and restricted cash consist of the following:

Beginning of period

Beginning of year

Cash and cash equivalents

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Purchase of equipment under installment agreement

Forgiveness of SBA PPP loan

Right-of-use assets, net of deferred rent

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Description of Business

(“Acorn”

or “the Company”) is a Delaware corporation which is holding company focused on

technology-driven solutions for energy infrastructure asset management., The Company provides the following services and products

through its OmniMetrix TM , LLC (“OmniMetrix”) subsidiary:

and its subsidiaries, OMX Holdings, Inc.

and OmniMetrix, LLC (collectively, “Acorn”

or “the Company”)

is a Delaware corporation which is holding company focused on technology-driven solutions for energy infrastructure asset management.

The Company provides the following services and products through its OmniMetrix , LLC (“OmniMetrix”) subsidiary:

Generation (“PG”) monitoring.

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systems and services for critical assets as well as Internet of Things applications.

This includes our AIRGuard product,

which remotely monitor and controls air compressors.

In 2020, the Company expanded its product offering

to its generator dealers with the introduction of an Annunciator.

The annunciator is typically sold with a new commercial

or industrial generator and indicates the current status of that generator.

In many instances having a generator annunciator

onsite is mandated by law.

Protection (“CP”) monitoring.

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systems on gas pipelines for gas utilities and pipeline companies.

Company’s operations were based in the United States and in Israel through its investment in DSIT until the closing of the

2018 DSIT Transaction.

Subsequent to February 14, 2018, the Company’s operations are based solely in the United States.

Acorn’s shares are traded on the OTCQB marketplace under the symbol ACFN.

January 18, 2018, the Company entered into a Share Purchase Agreement for the sale of its remaining interest in

DSIT Solutions Ltd.

(“DSIT”) to an Israeli investor group (the “2018 DSIT Transaction”).

Following the

closing of the 2018 DSIT Transaction on February 14, 2018, the Company no longer reported DSIT’s results on the equity

Acorn’s

shares are traded on the OTCQB marketplace under the symbol ACFN.

Notes 12 and 13 for segment information and major customers.

of December 31, 2019, the Company had approximately $1,247 of corporate cash and cash equivalents including $313 that was related

to a foreign tax settlement and held at a bank in Israel.

The balance in the Israel bank account was reclassed to operating cash

from restricted cash at December 31, 2019 as the funds were transferred to our operating bank account in the United States on

January 29, 2020 and thus, were not deemed restricted cash as of December 31, 2019.

of December 31, 2020, the Company had approximately $2,063,000 of corporate cash and cash equivalents.

December 31, 2020, we had a negative working capital of approximately $95,000.

Our working capital included approximately

$2,063,000 of cash and deferred revenue of approximately $3,214,000.

Such deferred revenue does not require significant cash outlay

for the revenue to be recognized.

Net cash increased during the year ended December 31, 2020 by approximately $816,000, of which

approximately $464,000 was provided by operating activities, approximately $101,000 was used in investing activities, and approximately

$453,000 was provided by financing activities, of which approximately $421,000 was net proceeds from the SBA PPP loan.

Company’s operations may be affected by the ongoing outbreak of the coronavirus disease 2019 (COVID-19) which was declared

a pandemic by the World Health Organization in March 2020.

The ultimate disruption which may be caused by the outbreak is uncertain;

however, it may result in a material adverse impact on the Company’s financial position, operations and cash flows.

effects may include, but are not limited to, disruption to the Company’s customers and revenue, absenteeism in the Company’s

labor workforce, unavailability of products and supplies used in operations, and a decline in value of assets held by the Company,

including inventories, property and equipment, and marketable securities.

of March 11, 2021, the Company had corporate cash of approximately $1,812,000.

Such cash plus the cash generated from operations and

borrowing from the OmniMetrix Loan and Security Agreement, will provide sufficient liquidity to finance the operating activities

of Acorn and OmniMetrix at their current level of operations for the foreseeable future and for the twelve months from the issuance

of these consolidated financial statements in particular.

Such cash plus the cash generated from operations,

will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their current level of operations

for the foreseeable future and for the twelve months from the issuance of these consolidated financial statements in particular.

2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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non-controlling interests are included in equity.

When the Company does not have a controlling interest in an

entity but exerts significant influence over the entity’s operating and financial decisions, the Company applies the equity

method of accounting in which it records in earnings its share of income or losses of the entity.

Reclassification

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and net loss.

A reclassification of $30 from interest expense to SG&A expense was recorded to reclass the Intuit processing

fees for customer payments made through the Intuit portal via credit card or bank draft that was previously included in interest

expense as of December 31, 2018 and is included in SG&A as of December 31, 2019.

A reclassification of approximately $6,000 from finance expense to SG&A expense was recorded to reclass the

Intuit processing fees for customer payments made through the Intuit portal via credit card or bank draft that was previously

included in finance expense and is included in SG&A as of December 31, 2019.

of Estimates in Preparation of Financial Statements

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applicable to these consolidated financial statements, the most significant estimates and assumptions relate to uncertainties

with respect to income taxes, inventories, account receivable allowances, contingencies and analyses of the possible impairments.

in the Notes to the Consolidated Financial Statements

dollar amounts in the notes to the consolidated financial statements are in thousands except for per share data.

Currency and Foreign Currency Transactions

currency of the primary economic environment in which the operations of Acorn and its U.S.

subsidiaries are conducted is the United

States dollar (“dollar”).

Accordingly, the Company and all of its U.S.

subsidiaries use the dollar as their functional

The financial statements of DSIT whose functional currency is the New Israeli Shekel (“NIS”) have been translated

in accordance with applicable accounting principles.

Assets and liabilities are translated at year-end exchange rates, while revenues

and expenses are translated at average exchange rates during the year.

Differences resulting from translation are presented in

equity as Accumulated Other Comprehensive Income.

Gains and losses on foreign currency transactions and exchange gains and losses

denominated in non-functional currencies are reflected in finance income (expense), net.

Subsequent to the sale of our DSIT equity

level investment, this is no longer applicable in the consolidated statements of operations.

Company considers all highly liquid investments, which include money market funds and short-term bank deposits (up to three months

from date of deposit or with maturity of three months from date of purchase) that are not restricted as to withdrawal or use,

to be cash equivalents.

with respect to income taxes, inventories, account receivable allowances, contingencies, revenue recognition, management’s

projections and analyses of the possible impairments.

receivable consists of trade receivables.

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does not require collateral.

the years ended December 31, 2019 and 2018, $14 and $0 was charged to expense, respectively.

At December 31, 2019 and 2018, the

balance in allowance for doubtful accounts was $11.

the years ended December 31, 2020 and 2019, approximately $21,000 and $14,000 was charged to expense, respectively.

31, 2020 and 2019, the balance in allowance for doubtful accounts was approximately $9,000 and $11,000, respectively.

are comprised of components (raw materials), work-in-process and finished goods, which are measured at net realizable value.

- Raw materials inventory is generally comprised of radios, cables, antennas, and electrical components.

Finished goods inventory

consists of fully assembled systems ready for final shipment to the customer.

Costs are determined at cost of acquisition on a

weighted average basis and include all outside production and applicable shipping costs.

materials inventory is generally comprised of radios, cables, antennas, and electrical components.

Finished goods inventory consists

of fully assembled systems ready for final shipment to the customer.

Costs are determined at cost of acquisition on a weighted

average basis and include all outside production and applicable shipping costs.

inventories are periodically reviewed for impairment related to slow-moving and obsolete inventory.

Management conducted an assessment

and there were no impairment charges for the years ended December 31, 2020 or 2019.

Non-Controlling

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while repairs and maintenance are charged to operations as incurred.

Capitalization

August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2018-15 (“ASU 2018-15”), Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40):

Customer’s

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

ASU 2018-15 aligns the

requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements

for capitalizing implementation costs incurred to develop or obtain internal-use software.

The Company elected to early adopt

ASU 2018-15 for the period beginning in the second quarter of 2019, applying the guidance under ASU 2018-15 prospectively.

the years ended December 31, 2020 and 2019, the Company capitalized costs totaling approximately $87,000 and $163,000, respectively,

related to such contracts.

Company determines if a contractual arrangement is a lease at inception.

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(“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s

consolidated balance sheet.

consolidated balance sheets.

The Company evaluates and classifies leases as operating or finance leases for financial reporting

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for lease classification, recognition, and measurement purposes.

lease obligation liability was $595 as of December 31, 2019, which includes the original office space lease, an amendment to this

lease entered in to in November 2019 that becomes effective with the period beginning May 1, 2020 and an office equipment lease

entered in to in April 2019.

lease obligation liability was approximately $542,000 and $595,000 as of December 31, 2020 and December 31, 2019, respectively,

which includes the original office space lease, an amendment to this lease entered into in November 2019 that became effective

with the period beginning May 1, 2020, and an office equipment lease entered into in April 2019.

of common stock repurchased are recorded at cost as treasury stock.

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of OmniMetrix monitoring systems include the sale of equipment (“HW”) and of monitoring services (“Monitoring”).

Sales of OmniMetrix equipment do not qualify as a separate unit of accounting.

As a result, revenue (and related costs) associated

with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units.

and related costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently

estimated to be three years (two years up to December 31, 2017).

Revenues from the prepayment of monitoring fees (generally paid

twelve months in advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized

to revenue over the monitoring service period.

See Notes 14 and 15 for the disaggregation of the Company’s revenue for the

periods presented.

The majority of the sales of OmniMetrix equipment do not qualify as a separate unit of accounting.

As a result, revenue (and related

costs) associated with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring

Revenue and related costs with respect to the sale of equipment are recognized over the estimated life of the units which

are currently estimated to be three years.

In the rare instance that a specific sale of OmnMetrix equipment does qualify as a

separate unit of accounting (the unit is custom designed and sold without monitoring), the revenue is recognized when the unit

is shipped to the customer and not deferred.

Revenues from the prepayment of monitoring fees (generally paid twelve months in

advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over

the monitoring service period.

See Notes 12 and 13 for the disaggregation of the Company’s revenue for the periods presented.

generally grants their customers a one-year warranty on their products.

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of Credit Risk

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

escrow deposits and trade accounts receivable.

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

banks and brokerage firms and amounted to $1,247 at December 31, 2019.

The Company does not believe there is significant risk

of non-performance by these counterparties.

Company’s financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally

of cash, escrow deposits and trade accounts receivable.

The Company’s cash was deposited with a U.S.

and amounted to approximately $2,063,000 at December 31, 2020.

The Company does not believe there is significant

risk of non-performance by these counterparties.

See Note 12(d) with respect to revenue from significant customers and concentrations

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expenses are charged to operations as incurred.

Advertising expense was $17 and $23 for each of the years ended December 31, 2019

and 2018, respectively.

Advertising expense was approximately $15,000 and $17,000 for each of the years

ended December 31, 2020 and 2019, respectively, and are included in selling, general and administrative expenses on the consolidated

statements of operations.

Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation

expense related to share-based transactions, including employee stock options, to be measured and recognized in the financial

statements based on a determination of the fair value of the stock options.

The grant date fair value is determined using the

Black-Scholes-Merton (“Black-Scholes”) pricing model.

For all employee stock options, the Company recognizes expense

over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting

period of the equity grant).

The Company’s option pricing model requires the input of highly subjective assumptions, including

the expected stock price volatility, expected term, and forfeiture rate.

Any changes in these highly subjective assumptions significantly

impact stock-based compensation expense.

expense related to share-based transactions, including employee stock options, to be measured and recognized in the consolidated

financial statements based on a determination of the fair value of the stock options.

The grant date fair value is determined

using the Black-Scholes-Merton (“Black-Scholes”) pricing model.

For all employee stock options, the Company recognizes

expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally

the vesting period of the equity grant).

Stock compensation expense is included in selling, general and administrative expenses.

The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price

volatility, expected term, and forfeiture rate.

Any changes in these highly subjective assumptions significantly impact stock-based

compensation expense.

awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards

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Such options are valued using the Black-Scholes option pricing model.

Note 11(e) for the assumptions used to calculate the fair value of stock-based employee compensation.

Upon the exercise

of options, it is the Company’s policy to issue new shares rather than utilizing treasury shares.

Note 9(c) for the assumptions used to calculate the fair value of stock-based employee compensation.

Upon the exercise of options,

it is the Company’s policy to issue new shares rather than utilizing treasury shares.

income taxes reflects the net tax effects of temporary differences between the carrying amounts of assets and liabilities for

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Company recognizes interest and penalties as incurred in finance income (expense), net in the consolidated statements of operations.

of December 31, 2020 and 2019, no interest or penalties were accrued on the consolidated balance sheets related to uncertain tax

the years ending December 31, 2020 and 2019, the Company had no changes in unrecognized tax benefits or associated interest and

penalties as a result of tax positions made during the current or prior periods with respect to its continuing or discontinued

Company is subject to U.S.

Federal and state income tax.

As of January 1, 2020, the Company is no longer subject to examination

Federal taxing authorities for years before 2017, or for years before 2016 for state income taxes.

and Diluted Net Income (Loss) Per Share

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warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was approximately

3,368,013 (which have a weighted average exercise price of $1.57) and 3,778,631 for the years ending December 31, 2019 and 2018,

respectively.

409,626 (which have a weighted average exercise price of $0.84) and 3,368,013 for the years ending December 31,

2020 and 2019, respectively.

following data represents the amounts used in computing EPS and the effect on net income and the weighted average number of shares

of dilutive potential common stock:

of dilutive potential common stock (in thousands):

Year ended December 31,

Net loss available to common stockholders

Net income (loss) available to common stockholders

Weighted average shares outstanding:

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during the year ended December 31, 2020, that are of material significance, or have potential material significance, to the Company.

June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions.

amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services

to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

The standard will be effective

in the first quarter of fiscal year 2020, although early adoption is permitted (but no sooner than the adoption of Topic 606).

The Company is currently evaluating the effect the adoption of this ASU will have on its consolidated financial statements.

June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASC 326”), authoritative guidance amending

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value through net income.

The guidance requires the application of a current expected credit loss model, which is a new

impairment model based on expected losses.

The new guidance is effective for interim and annual reporting periods beginning

after December 15, 2022.

The Company is currently evaluating the impact of the new guidance on its consolidated financial

statements and related disclosures.

The guidance requires the application of a current expected credit loss model, which is a new impairment

model based on expected losses.

The new guidance is effective for interim and annual reporting periods beginning after December

The Company is currently evaluating the impact of the new guidance on its consolidated financial statements and related

Adopted Accounting Principles

February 2016, the FASB issued ASU 2016-02, Leases, which is effective for fiscal years beginning as of December 15, 2018, and

interim periods within those years with early adoption permitted.

Under ASU 2016-02, lessees will be required to recognize for

all leases at the commencement date a lease liability, which is a lessee’s obligation to make lease payments arising from

a lease measured on a discounted basis, and a right-to-use asset, which is an asset that represents the lessee’s right to

use or control the use of a specified asset for the lease term.

Company adopted this standard on January 1, 2019 and applied the transition guidance as of the date of adoption, under the current

period adjustment method.

As a result, the Company recognized right-of-use assets and lease liabilities associated with its leases

on January 1, 2019, with an adjustment to the opening balance of accumulated deficit, while the comparable prior periods in its

consolidated financial statements will continue to be reported in accordance with Topic 840, including the disclosures of Topic

standard includes a number of optional practical expedients under the transition.

The Company has elected the package of practical

expedients which allows it to not reassess prior conclusions about lease identification, lease classification, and initial direct

Upon adoption of the standard, the Company recognized a lease obligation liability of $44 and a right-of-use asset of $44.

An adjustment of $26 was made to reduce the right-of-use asset and deferred rent to reflect the impact of the retrospective approach

on adopting this guidance.

August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2018-15 (“ASU 2018-15”), Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40):

Customer’s

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.

ASU 2018-15 aligns the

requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements

for capitalizing implementation costs incurred to develop or obtain internal-use software.

The updated guidance is effective for

annual periods beginning after December 15, 2019 and interim periods within those fiscal years.

Early adoption is permitted.

Company elected to early adopt ASU 2018-15 for the period beginning in the second quarter of 2019, applying the guidance under

ASU 2018-15 prospectively.

During the year ended December 31, 2019, the Company capitalized costs totaling $163 related to such

June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions.

amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services

to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

This standard was effective

in the first quarter of fiscal year 2020, and the adoption did not have a material impact on the consolidated financial statements.

recently issued accounting updates are not expected to have a material impact on the Company’s consolidated financial statements.

3—DSIT SOLUTIONS, LTD.

(“DSIT”)

February 14, 2018, the Company closed on the sale of its remaining interest in DSIT to a group of Israeli investors for

$5,800 before transaction costs and withholding taxes.

Accordingly, the Company adjusted its equity investment

balance in DSIT to be equal to the gross proceeds received from the sale and recorded an impairment charge in 2017 of $308.

2018, the Company recorded its 41.2% share of DSIT’s income or loss through the closing of the 2018 DSIT

Transaction as well as the Company’s estimated transaction costs and withholding taxes on the transaction ($441 and

$388, respectively) offset by $222, net of professional fees less interest income, refunded by the Israel Tax Authorities related

to its 2016 Israeli tax return.

From the proceeds, the Company also repaid $1,600 of amounts due to DSIT and $1,428 of

loan principal and interest due to directors.

Company’s share of DSIT’s net income for the period from January 1, 2018 to the Closing Date is shown below:

January 1, 2018

Cost of sales

Acorn’s share of net income in DSIT

activity of the Company’s Investment in DSIT for the period from January 1, 2018 to December 31, 2018 can be seen below:

Balance at December 31, 2017

Acorn’s share of net income in DSIT for the period from January 1, 2018 to the Closing Date

Sale of Investment in DSIT

Balance at December 31, 2018

the Company’s sale of its shares of DSIT Solutions Ltd.

(“DSIT”), the Israel Tax Authorities (“ITA”)

withheld tax of NIS 1,008, NIS 146 and NIS 1,359 in 2016, 2017 and 2018, respectively.

Such amounts were recorded as expense ($266,

$41 and $388) in each of those years.

In August 2018, the Company received back from the ITA NIS 1,087 ($293 at the then exchange

rate) consisting of $266 of tax, $21 of interest income and $6 of exchange gain.

The Company received the refund following the

filing of its 2016 Israeli tax return in which the Company claimed that it was due a refund of the withheld taxes in full as it

believes that each of the sale transactions is exempt from tax under Israeli tax law.

Company recorded the $222, net of fees of $65 offset by interest income of $21, as part of the gain (loss) on sale of interest

of DSIT in the third quarter of 2018 relating to the 2016 DSIT transaction withholding.

This offsets the loss on the 2018 DSIT

transaction which reduced the loss recorded in 2018 to $607.

The Company committed not to transfer those funds out of Israel until

the completion of the ITA’s review, such funds were deemed to be restricted and were reflected as such on the Company’s

balance sheet as of December 31, 2018.

By statute, the funds would no longer be restricted the earlier of December 31, 2022 or

the completion of the ITA’s review of the Company’s tax position which occurred at the end of 2019 as discussed below.

Company filed its Israeli return for 2017 and requested a refund of the NIS 146 tax withheld (valued at $40 before interest)

and filed its 2018 return and requested a refund of the NIS 1,358 tax withheld (valued at $375 before interest).

December 24, 2019, the Company signed on an income tax assessment agreement for tax years 2013-2018, with the Israeli Tax Authority,

according to which, the Company had additional tax liability in the amount of NIS 1,306 (approximately $373), in tax year 2018,

with respect to its sale of DSIT Solutions Ltd.

a result, the Company received a tax refund in the amount of NIS 146 (approximately $42) and NIS 44 (approximately $12.5) as

principal, with interest and linkage in the amount of approximately NIS 14.5 (approximately $4) and approximately NIS 1.9

(approximately $0.55), for the tax years 2017 and 2018, respectively.

Prior to receiving this refund, the balance in

the Company’s bank account in Israel was $313 which represented the $287 refund received for 2016 plus interest income

of $21 and exchange gain of $5 (the fees of $65 were paid out of our US bank account).

Subsequent to year-end December 31,

2019, the aggregate tax refunds held in the bank account in Israel of approximately $371 were transferred from the

Company’s bank account in Israel to the Company’s bank account in the US with exemption from withholding tax and

the Company’s corporate income tax file was closed as of January 1, 2020.

3—INVESTMENT IN OMNIMETRIX

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Holdings is the holder of 100% of the membership interests of OmniMetrix, LLC through which the Company operates

its Power Generation and Cathodic Protection monitoring activities.

The $1,000 investment by the Investor was recorded as an increase

in non-controlling interests.

dividend of 10% per annum accrued on the Preferred Stock.

The dividend was payable on the first anniversary of the funding of

the investment and quarterly thereafter for so long as the Preferred Stock was outstanding and had not been converted to Common

Through December 31, 2016, a dividend payable of $115 was recorded with respect to the Preferred Stock.

On December 31,

2016, the Investor agreed to treat the $115 of accrued dividends and all subsequent accrued and unpaid dividends as a loan to

Holdings which bore interest at 8% per year.

In December 2016, the Investor provided Holdings with an additional $50 loan under

the same terms as the abovementioned accrued dividends.

May 14, 2018, Holdings and the Investor entered into an agreement whereby effective May 1, 2018, the dividend on the Preferred

Stock was reduced to 8%.

In addition, all the amounts due to the Investor (accrued dividends, loan and accrued interest) and all

future dividends that would accrue on the Preferred Stock through September 30, 2020, were to be paid by Holdings pursuant to

an agreed-upon payment schedule which was scheduled to end on June 30, 2020.

During the six months ended June 30, 2019, the Company

accrued $40 for quarterly dividends in the aggregate.

At June 30, 2019, the obligation to the Investor was $323, representing

unpaid accrued dividends.

its PG and CP monitoring activities.

The $1,000,000 investment by the Investor was recorded as an increase in non-controlling

July 1, 2019, in accordance with terms established in 2015 at the time of the original investment, the Company repurchased from

the Investor the shares of Preferred Stock then held by the Investor for a purchase price of $1,273 in cash (which included the

the Investor the shares of Preferred Stock then held by the Investor for a purchase price of $1,273,000 in cash (which included

$323,000 of unpaid accrued dividends through June 30, 2019).

The repurchase raised the Company’s ownership in Holdings from

80% to 99%, with the remaining 1% owned by the then-CEO of OmniMetrix, LLC.

80% to 99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC.

4—INVENTORY

As of December 31,

(in thousands)

Raw materials

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As of December 31,

(in thousands)

Computer hardware and software

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Property and equipment, net

and amortization in respect of property and equipment amounted to $56 and $66 for 2019 and 2018, respectively.

and amortization in respect of property and equipment amounted to approximately $22,000 and $56,000 for 2020 and 2019, respectively.

6—LEASES

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Operating lease payments for 2020 and 2019 were

$109 and $97, respectively.

The future minimum lease payments on non-cancelable operating leases as of December 31, 2019 using

a discount rate of 4.5% are $595

cash flow information related to leases consisted of the following:

Cash paid for operating lease liabilities

approximately $78,000 and $109,000, respectively.

The future minimum lease payments on non-cancelable operating leases as of December

31, 2020 using a discount rate of 4.5% are approximately $542,000.

The 4.5% used is the incremental borrowing rate which,

as defined in ASC 842, is the rate of interest that a lessee would have to pay to borrow, on a collateralized basis,

over a similar term and in a similar economic environment, an amount equal to the lease payments.

cash flow information related to leases consisted of the following (in thousands):

paid for operating lease liabilities

balance sheet information related to leases consisted of the following:

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in excess of one year to the total operating lease liabilities recognized on the consolidated balance sheet as of December 31,

2020 (in thousands):

Total undiscounted cash flows

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Present value of operating lease liabilities (a)

current portion of $53 for operating leases.

February 2016, OmniMetrix signed a Loan and Security Agreement with a lender providing OmniMetrix with access to accounts receivable

formula-based financing of up to $500.

In connection with this financing arrangement, OmniMetrix granted the lender a security

interest in OmniMetrix’s receivables, inventory and certain other assets.

October 2017, OmniMetrix renewed its Loan and Security Agreement providing OmniMetrix with access to accounts receivable formula-based

financing of the lesser of 75% of eligible receivables or $1,000.

Debt incurred under this financing arrangement bore interest

at the greater of prime (4.50% at December 31, 2017) plus 2% or 6% per year.

In addition, OmniMetrix paid a monthly service charge

of 0.9% of the average aggregate principal amount outstanding for the prior month, for a then-current effective rate of interest

on advances of 17.3%.

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

the lender for a minimum of one year beginning November 1, 2017.

The line-of-credit expired in accordance with its terms on October

31, 2018 and OmniMetrix did not renew at that time.

OmniMetrix accounts receivable payments were applied to the outstanding balance

until it was paid in full on November 6, 2018.

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 $1,000.

Debt incurred under this financing arrangement bears interest

at the greater of 6% and prime (4.75% at December 31, 2019) 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 an effective rate of interest on

advances of 15.8% during the year ended December 31, 2019.

OmniMetrix also agreed to continue to maintain a minimum loan balance

of $150 in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019.

From time to time, the balance

outstanding may fall below $150 based on collections applied against the loan balance and the timing of loan draws.

service charge and interest is calculated on the greater of the outstanding balance or $150.

Interest expense for the year ended

December 31, 2019 and 2018 was $21 and $47, respectively.

had an outstanding balance of $136 and $0 as of December 31, 2019 and 2018, respectively, pursuant to the Loan and Security Agreement

and $291 was available to borrow.

9—OTHER CURRENT LIABILITIES

current liabilities consist of the following:

As of December 31,

Warranty provision

Restructuring liabilities

current portion of approximately $99,000 for operating leases.

Loans payable

April 24, 2020, Acorn Energy, Inc.

received Paycheck Protection Program (“PPP”) loan proceeds in the amount of $41,600.

April 30, 2020, OmniMetrix, LLC received PPP loan proceeds in the amount $419,800.

the PPP of the Coronavirus Aid, Relief and Economic Security Act (the “Act”), up to the full principal amount of a

loan and any accrued interest can be forgiven if the borrower uses all of the loan proceeds for forgivable purposes (payroll,

benefits, lease/mortgage payments and/or utilities) required under the Act and any rule, regulation, or guidance issued by the

Small Business Administration (the “SBA”) pursuant to the Act (collectively, the “Forgiveness Provisions”).

The amount of forgiveness of the PPP loan depends on the borrower’s payroll costs over either an eight-week or twenty-four-week

period beginning on the date of funding.

Any processes or procedures established under the Forgiveness Provisions must be followed

and any requirements of the Forgiveness Provisions must be fully satisfied to obtain such loan forgiveness.

Pursuant to the provisions

of the Act, the first six monthly payments of principal and interest will be deferred.

Interest will accrue during the deferment

The borrower must pay principal and interest payments on the fifth day of each month beginning seven months from the date

of the applicable promissory note.

October 20, 2020, OmniMetrix submitted its PPP Loan Forgiveness Application to the SBA.

On November 5, 2020, the SBA confirmed

that OmniMetrix’s application for forgiveness had been approved and that its PPP loan, in the amount of $419,800

plus accrued interest of $2,162, had been forgiven.

Company elected not to apply for forgiveness of the PPP loan proceeds received by its parent entity, Acorn Energy, Inc., in the

amount of $41,600 plus accrued interest of $206.

This loan was repaid to the lender effective October 22, 2020.

interest expense on these loans at the time of forgiveness/repayment was approximately $1,000.

Line of credit

March 2019, OmniMetrix reinstated its loan and security agreement which provided OmniMetrix with access to accounts receivable

formula-based financing of the lesser of 75% of eligible receivables or $1,000.

Debt incurred under this financing arrangement

bore interest at the greater of 6% and prime plus 1.5% per year.

In addition, OmniMetrix was to pay a monthly service charge of

0.75% of the average aggregate principal amount outstanding for the prior month, for an effective rate of interest on advances

of 15% at December 31, 2020.

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.

From time to time, the balance outstanding could fall below

$150,000 based on collections applied against the loan balance and the timing of loan draws.

The monthly service charge and interest

was calculated on the greater of the outstanding balance or $150,000.

Interest expense for the year ended December 31, 2020 and

2019 was approximately $28,000 and $21,000, respectively.

had an outstanding balance of approximately $149,000 and $136,000 as of December 31, 2020 and 2019, respectively, pursuant to

the loan and security agreement and approximately $191,000 was available to borrow.

paid off the outstanding balance in February 2021 and decided not to renew this line of credit, which expired in accordance with

its terms on February 28, 2021.

8—COMMITMENTS AND CONTINGENCIES

April 28, 2020, the Company entered into a new agreement for data hosting services, replacing an expiring agreement with the same

vendor, effective May 1, 2020.

The agreement has a twelve-month term and the total payments under this agreement are approximately

$148,000 in the aggregate.

This represents an increase of approximately $21,000 from the prior twelve-month term for additional

services including enhanced business continuity and disaster recovery services.

See Note 14-Subsequent Events.

August 19, 2019, OmniMetrix entered into an agreement with a software development partner to create and license to OmniMetrix

a new software platform and application.

Pursuant to this agreement, OmniMetrix will pay the partner equal monthly payments over

Pursuant to this agreement, OmniMetrix paid this partner equal monthly payments over

the first seven months of the term of the agreement equal to $200,000 in the aggregate.

In addition, OmniMetrix will pay the partner

a sensor monitoring fee equal to the greater of (i) $1 per sensor connected to the developed technology, or (ii) 25% of any revenue

received above $10 per sensor monitored per month in oil and gas applications only.

Commencing on the first anniversary of the

agreement, OmniMetrix will pay the partner an annual licensing fee of $50 to be paid out on a monthly or quarterly basis as determined

by OmniMetrix.

a per sensor monitoring fee for each sensor connected to the developed technology, or (ii) a percentage of any revenue received

above a specified amount per sensor monitored per month in oil and gas applications only.

Commencing on January 1, 2021, OmniMetrix

will pay the partner an annual licensing fee of $50,000 to be paid out on a monthly or quarterly basis as determined by OmniMetrix.

No sensor monitoring fees or license fees were paid in 2019 or 2020.

These fees commenced in 2021.

9—EQUITY

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assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.

Holders of common stock do not have subscription, redemption, conversion or other preemptive rights.

Holders of the common stock

are entitled to elect all of the Directors on the Company’s Board.

Holders of the common stock do not have cumulative voting

rights, meaning that the holders of more than 50% of the common stock can elect all of the Company’s Directors.

otherwise required by Delaware General Corporation Law, all stockholder action is taken by vote of a majority of shares of common

stock present at a meeting of stockholders at which a quorum (a majority of the issued and outstanding shares of common stock)

is present in person or by proxy or by written consent pursuant to Delaware law (other than the election of Directors, who are

elected by a plurality vote).

Company is not authorized to issue preferred stock.

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Rights Offering

June 28, 2019, the Company completed a rights offering, raising $2,184 in proceeds of which $1,628 was from related parties,

net of $210 in expenses.

Pursuant to the rights offering, Acorn securityholders and parties to a backstop agreement purchased

9,975,553 shares of Acorn common stock for $0.24 per share.

June 28, 2019, the Company completed a rights offering, raising approximately $2,184,000 in proceeds of which approximately $1,628,000

was from related parties, net of approximately $210,000 in expenses.

Pursuant to the rights offering, Acorn securityholders and

parties to a backstop agreement purchased 9,975,553 shares of Acorn common stock for $0.24 per share.

the terms of the rights offering, each right entitled securityholders as of June 3, 2019, the record date for the rights offering,

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subsidiary (“Holdings”) for $1,273,000, including accrued dividends.

Holdings owns 100% of the

membership interests of OmniMetrix, LLC.

The purchase price was based on terms established in November 2015 at the time of the

original investment.

The purchase raised Acorn’s ownership in Holdings from 80% to 99%, with the remaining 1% owned by the

former CEO of OmniMetrix, LLC.

Holdings owns 100%

of the membership interests of OmniMetrix, LLC.

The purchase price was based on terms established in November 2015 at the time

of the original investment.

The purchase raised Acorn’s ownership in Holdings from 80% to 99%, with the remaining 1% owned

by the former CEO of OmniMetrix, LLC.

See Note 3 for further discussion.

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working capital purposes.

Shares issued in lieu of director’s fees –

See Note 13(a).

Conversion of director loan to common stock –

See Note 13(b).

Summary Employee Option Information

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an Amendment to the Company’s 2006 Stock Incentive Plan to increase the number of available shares by 1,000,000 and an Amendment

to the Company’s 2006 Stock Incentive Plan for Non-Employee Directors to increase the number of available shares by 200,000.

In February 2019, the Company’s Board extended the expiration date of the 2006 Stock Incentive Plan until December 31, 2024.

to the Company’s 2006 Stock Option Plan for Non-Employee Directors to increase the number of available shares by 200,000.

In February 2019, the Company’s Board extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan

until December 31, 2024.

December 31, 2020, 1,717,394 options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no

options were available for grant under the 2006 Director Plan.

In 2019 and 2018, 227,500 and 175,000 options were granted to directors

and employees, respectively.

In 2019, there were no grants to non-employees.

In 2018, there were 5,000 grants to non-employees.

The fair value of the options issued was $58 and $43 in 2019 and 2018, respectively.

options were exercised in the years ended December 31, 2019 or 2018.

The intrinsic value of options outstanding and of options

exercisable at December 31, 2019 was $46 and $13, respectively.

options were available for grant under the 2006 Stock Option Plan for Non-Employee Directors.

In 2020 and 2019, 230,000 and 227,500

options, respectively, were granted to directors, executive officers and employees.

In 2020 and 2019, there were no grants to

non-employees (other than the non-employee directors and executive officers).

The fair value of the options issued was approximately

$59,000 and $58,000 in 2020 and 2019, respectively.

options were exercised in the year ended December 31, 2020.

No options were exercised in the year ended December 31, 2019.

The intrinsic value of options outstanding and of options exercisable at December 31, 2020 was approximately $29,000 and $46,000,

respectively.

Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective

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information regarding the options outstanding and exercisable at December 31, 2020 is as follows:

Range of Exercise Prices

$0.14 –

$0.97 –

$3.51 –

Exercise Prices

$0.14 –

$7.60 - $11.42

compensation expense included in selling, general and administrative expense in the Company’s Consolidated Statements of

Operations was $22 and $15 in the years ending December 31, 2019 and 2018, respectively.

total compensation cost related to non-vested awards not yet recognized was $30 for the year ended December 31, 2018.

Operations was approximately $35,000 and $22,000 in the years ending December 31, 2020 and 2019, respectively.

total compensation cost related to non-vested awards not yet recognized was approximately 61,000 as of December 31, 2020.

Company has issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the

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Outstanding and exercisable at end of year

warrants outstanding at December 31, 2019 have a weighted average remaining contractual life of approximately four months.

warrants outstanding at December 31, 2020 have a weighted average remaining contractual life of approximately 26.5 months.

10—INCOME TAXES

Composition of loss from continuing operations before income taxes is as follows:

tax expense consists of the following:

Composition of loss from continuing operations before income taxes is as follows (in thousands):

tax expense consists of the following (in thousands):

State and local

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Increase (decrease) in income tax rate resulting from:

Tax on foreign activities

Other, net (primarily permanent differences)

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Effective income tax rates

Analysis of Deferred Tax Assets and (Liabilities)

Analysis of Deferred Tax Assets and (Liabilities) (in thousands):

As of December 31,

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compensation expense of the Company.

During the year ended December 31, 2019, the valuation allowance decreased by $737.

was primarily the result of the decrease in the capital loss carryforwards.

During the year ended December 31, 2020, the valuation allowance increased by approximately

Summary of Tax Loss Carryforwards

of December 31, 2019, the Company had various operating loss carryforwards expiring as follows:

of December 31, 2020, the Company had various operating loss carryforwards expiring as follows (in thousands):

The utilization of a portion of these net operating loss carryforwards is limited due to limits on utilizing net operating loss

carryforwards under Internal Revenue Service regulations following a change in control.

carryforwards under Internal Revenue Service regulations when or if a change of control were to occur

Taxation in the United States

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Company’s statutory income tax rate on domestic earnings is the federal rate of 21%.

Uncertain Tax Positions (UTP)

of December 31, 2019 and 2018, no interest or penalties were accrued on the balance sheet related to UTP.

the years ending December 31, 2019 and 2018, the Company had no changes in unrecognized tax benefits or associated interest and

penalties as a result of tax positions made during the current or prior periods with respect to its continuing or discontinued

Company is subject to U.S.

Federal and state income tax.

As of January 1, 2019, the Company is no longer subject to examination

Federal taxing authorities for years before 2016, or for years before 2015 for state income taxes.

11—RELATED PARTY BALANCES AND TRANSACTIONS

Director Fees

Company recorded fees to directors of $50 and $166 (including a bonus to the former board chairman of $50) for the years ended

December 31, 2019 and 2018, respectively, which is included in Selling, general and administrative expenses.

Company recorded fees to directors of approximately $59,000 and $50,000 for the years ended December 31, 2020 and 2019, respectively,

which is included in Selling, general and administrative expenses.

Director of the Company may elect by written notice delivered on or before the first day of each calendar year whether to receive,

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thereafter during the remainder of the election year.

For the 2018 calendar year, Mr.

Woolard elected to receive Common Stock

in lieu of retainer and board fees of $13, which is included in the fees to directors above.

Accordingly, Mr.

Woolard was issued

55,435 shares of common stock for 2018.

2017 Director Loans

February 16, 2017, the Company secured commitments for $1,900 in funding in the form of loans from members of the Company’s

Board of Directors, of which $900 was immediately funded and an additional $400 was funded in the third quarter of 2017.

22, 2018, following the receipt of the proceeds from the 2018 DSIT Transaction (see Note 3), the Company repaid in full $1,300

of principal and $128 accrued interest due through that date with respect to these loans.

to the repayment of these loans on February 22, 2018, the Company accrued $21 of interest expense in the year ended December 31,

See Note 3 for information related to the sale of OmniMetrix Preferred Stock to one of the Company’s former directors and

a loan from the director to OmniMetrix and the subsequent repurchase of this Preferred Stock on July 1, 2019.

The related party balance due to Acorn from OmniMetrix is $4,506 for amounts loaned, accrued interest and expenses paid by Acorn

on Omni’s behalf as of December 31, 2019 as compared to $3,948 as of December 31, 2018.

The related party balance due to Acorn from OmniMetrix is approximately $4,575,000 for amounts loaned, accrued interest and expenses

paid by Acorn on Omni’s behalf as of December 31, 2020 as compared to approximately $4,506,000 as of December 31, 2019.

OmniMetrix made gross repayments in the aggregate of $435,000 and $135,000 in the years ended December 31, 2020 and 2019, respectively.

This balance is eliminated in consolidation.

12—SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

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are allocated to such division.

following tables represent segmented data for the years ended December 31, 2019 and 2018.

The Company does not currently break

out total assets by reportable segment as there is a high level of shared utilization between the segments.

Further, the Chief

Decision Maker (CDM) does not review the assets by segment.

following tables represent segmented data for the years ended December 31, 2020 and 2019 (in thousands).

The Company does not

currently break out total assets by reportable segment as there is a high level of shared utilization between the segments.

the Chief Decision Maker (CDM) does not review the assets by segment.

Year ended December 31, 2020:

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The following tables represent a reconciliation of the segment data to consolidated statement of operations and balance sheet

data for the years ended and as of December 31, 2019 and 2018:

Total net income (loss) before income taxes for reportable segments

Loss on sale of interest in DSIT, net of transaction costs

data for the years ended and as of December 31, 2020 and 2019 (in thousands):

Total net income before income taxes for reportable segments

Gain on PPP loan extinguishment

Gain on sale of interest in DSIT

Unallocated net cost of corporate headquarters*

Consolidated net loss before taxes on income

Includes $22 and $26 of stock compensation expense for the years ended December 31, 2019 and 2018, respectively.

Also includes

$26 of interest expense with respect to former director loans for the year ended December 31, 2018.

Consolidated net income (loss) before taxes on income

Includes approximately $35,000 and $22,000 of stock compensation expense for the years ended December 31, 2020 and 2019, respectively.

As of December 31,

(in thousands)

Total assets for OmniMetrix subsidiary

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Total consolidated assets

Revenues based on location of customer:

Revenues based on location of customer (in thousands):

United States

of the Company’s long-lived assets are located in the United States.

Revenues and Accounts Receivable Balances from Major Customers

Revenues and Accounts Receivable Balances from Major Customers (in thousands):

Invoiced Sales

Accounts Receivable

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13—REVENUE

core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that

reflects the consideration that is expected to be received for those goods or services.

ASC 606 defines a five-step process to

achieve this core principle, which includes:

(1) identifying contracts with customers, (2) identifying performance obligations

within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation

in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance

obligation is satisfied.

of OmniMetrix monitoring systems include the sale of hardware (“HW”) and of monitoring services (“Monitoring”).

Sales of OmniMetrix equipment do not qualify as a separate unit of accounting.

As a result, revenue (and related costs) associated

with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units.

and related costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently

estimated to be three years (two years up to December 31, 2017).

Revenues from the prepayment of monitoring fees (generally paid

twelve months in advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized

to revenue over the monitoring service period.

following table disaggregates the Company’s revenue for the years ended December 31, 2019 and 2018:

following table disaggregates the Company’s revenue for the years ended December 31, 2020 and 2019 (in thousands):

Year ended December 31, 2020:

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Total Revenue

revenue activity for the year ended December 31, 2019 can be seen in the table below:

revenue activity for the year ended December 31, 2020 can be seen in the table below (in thousands):

Balance at December 31, 2019

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December 31, 2023 and thereafter

revenue of approximately $196 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue

when sold and are not deferred.

revenue activity for the year ended December 31, 2018 can be seen in the table below:

revenue of approximately $414,000 is related to custom design hardware, accessories, repairs, and other miscellaneous charges

that are recognized to revenue when sold and are not deferred.

revenue activity for the year ended December 31, 2019 can be seen in the table below (in thousands):

Balance at December 31, 2018

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December 31, 2022 and thereafter

revenue of approximately $206 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue

when sold and are not deferred.

revenue of approximately $196,000 is related to revenue from sales of custom design hardware, accessories, repairs, and other

miscellaneous charges that are recognized to revenue when sold and are not deferred.

charges relate only to the sale of equipment.

Deferred charges activity for the year ended December 31, 2020 can be seen in the

table below (in thousands):

Balance at December 31, 2019

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Amounts included in Other Assets in the Company’s Consolidated Balance Sheets at December 31, 2020.

costs (COGS) for monitoring services of approximately $544 and the COGS for the miscellaneous revenue from sales of accessories

and repairs of approximately $110 are expensed as incurred and are not deferred.

charges activity for the year ended December 31, 2018 can be seen in the table below:

costs (COGS) for monitoring services of approximately $608,000 and the COGS for the miscellaneous revenue from sales of custom

design hardware, accessories and repairs of approximately $262,000 are expensed as incurred and are not deferred.

charges activity for the year ended December 31, 2019 can be seen in the table below (in thousands):

Balance at December 31, 2018

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services are amortized over the expected monitoring life including renewals.

The contract asset balance at December 31, 2017 of

$152 has been recorded as an adjustment to retained earnings in adopting ASC 606 under the modified retrospective method.

following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December

31, 2020 (in thousands):

Balance at December 31, 2019

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Balance at December 31, 2020

capitalized sales commissions are included in Other Current Assets ($60) and Other Assets ($78) in the Company’s Consolidated

Balance Sheets at December 31, 2019.

capitalized sales commissions are included in Other Current Assets (approximately $90,000) and Other Assets (approximately $87,000)

in the Company’s Consolidated Balance Sheets at December 31, 2020.

following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December

31, 2019 (in thousands):

Balance at December 31, 2018

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Balance at December 31, 2019

capitalized sales commissions are included in Other Current Assets ($76) and Other Assets ($67) in the Company’s Consolidated

Balance Sheets at December 31, 2018.

capitalized sales commissions are included in Other Current Assets (approximately $60,000) and Other Assets (approximately $78,000)

in the Company’s Consolidated Balance Sheets at December 31, 2019.

14—SUBSEQUENT EVENTS

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increments on January 1, 2021, April 1, 2021, July 1, 2021 and October 1, 2021 valued at $7,400 in the aggregate.

January 30, 2020, 35,000 options were issued to the CEO with an exercise price of $0.37 and that vest in equal increments on January

30, 2020, April 1, 2020, July 1, 2020 and October 1, 2020 valued at $5.

February 6, 2020, 96,250 vested options, in the aggregate, were exercised by former directors.

These options had an aggregate

exercise price of $18.

Company’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease 2019 (COVID-19)

which was declared a pandemic by the World Health Organization in March 2020.

The ultimate disruption which may be

caused by the outbreak is uncertain;

however it may result in a material adverse impact on the Company’s financial

position, operations and cash flows.

Possible effects may include, but are not limited to, disruption to the Company’s

customers and revenue, absenteeism in the Company’s labor workforce, unavailability of products and supplies used in

operations, and a decline in value of assets held by the Company, including inventories, property and equipment, and

marketable securities.

February 2, 2021, 35,000 options were issued to the CEO with an exercise price of $0.48 and that vest in equal increments on February

2, 2021, April 1, 2021, July 1, 2021 and October 1, 2021 valued at approximately $11,500.

Company paid off the outstanding balance of $7,974 under the OmniMetrix loan and security agreement on February 26, 2021 and elected

not to renew this line of credit, which expired in accordance with its terms on February 28, 2021.

Company’s data hosting agreement that was due to expire on April 28, 2021 was renewed at its existing terms for an additional

one-year term.

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 9A. Controls and Procedures