What changed in this filing

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Item 9A. Controls and Procedures

2022-03-31 compared with 2021-03-16 · 1131 added, 1159 removed, 439 unchanged (84% of the section changed)

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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.

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, 2021.

Control Over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in

Exchange Act Rule 13a-15(f).

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 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

subsidiary and limited IT system capabilities, such that individual control policies and procedures could not be implemented,

maintained, or remediated when and where necessary.

As a result, a majority of the significant process areas management identified

for the Company’s OmniMetrix subsidiary had one or more material weaknesses present.

This condition was further exacerbated

as the Company could not demonstrate that each of the principles described within COSO’s document “Internal Control

- Integrated Framework (2013)”

were present and functioning.

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 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.

is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange

Act Rule 13a-15(f).

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, 2021, 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, 2021.

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 consolidated financial

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

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

and limited IT system capabilities, such that individual control policies and procedures could not be implemented, maintained, or remediated

when and where necessary.

As a result, a majority of the significant process areas management identified for the Company’s OmniMetrix

subsidiary had one or more material weaknesses present.

This condition was further exacerbated as the Company could not demonstrate that

each of the principles described within COSO’s document “Internal Control - Integrated Framework (2013)” were present

and functioning.

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 consolidated financial statements

will not be prevented or detected on a timely basis.

The material weakness identified, however, 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, 2021.

intends 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

than those changes associated with our material weakness described above and the corresponding remediation actions, there was

no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of

1934, as amended), during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our

internal control over financial reporting.

than those changes associated with our material weakness described above and the corresponding remediation actions, there was no change

in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended),

during our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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forth below is certain information concerning the directors and certain officers of the Company:

President and Chief Executive Officer of the Company and Acting CEO of OmniMetrix

President and Chief Executive Officer of Acorn Energy, Inc.

and Acting CEO of OmniMetrix

and member of our Audit, Nominating and Compensation Committees

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Chairman of our Audit Committee and member of our Nominating and Compensation Committees

Financial Officer of the Company and COO of OmniMetrix

Financial Officer of Acorn Energy, Inc.

and COO of OmniMetrix

Loeb has served as our President and CEO since January 28, 2016 and as Acting CEO of OmniMetrix since December 1, 2019.

He was appointed to our Board in August 2015 pursuant to the terms of our loan and security agreement with Leap Tide Capital Partners

III, LLC (the “Leap Tide Loan Agreement”).

He was also appointed to the Board of our then subsidiary DSIT in August

2015 pursuant to the terms of the Leap Tide Loan Agreement and held that position until the sale of our remaining interest in

DSIT in February 2018.

appointed to our Board in August 2015 pursuant to the terms of our loan and security agreement with Leap Tide Capital Partners III, LLC

(the “Leap Tide Loan Agreement”).

He was also appointed to the Board of our then subsidiary DSIT in August 2015 pursuant

to the terms of the Leap Tide Loan Agreement and held that position until the sale of our remaining interest in DSIT in February 2018.

Loeb has more than 40 years of money management and investment banking experience.

He has been the

Managing Member of Leap Tide Capital Management LLC since 2007.

From 2005 to 2007, he served as the President of Leap Tide’s

predecessor, Leap Tide Capital Management Inc., which was formerly known as AmTrust Capital Management Inc.

He served as a Portfolio

Manager of Chesapeake Partners from February 2004 to January 2005.

From January 2002 to December 2004, he served as Managing Director

at Jefferies & Company, Inc.

From 1994 to 2001, he served as Managing Director at Dresdner Kleinwort Wasserstein, Inc.

Wasserstein Perella & Co., Inc.).

He served as a Lead Director of American Pacific Corporation from July 8, 2013 to February

27, 2014, and also served as its Director from January 1997 to February 27, 2014.

He served as an Independent Director of Pernix

Therapeutics Holdings Inc.

(formerly, Golf Trust of America, Inc.) from 2006 to August 31, 2011.

He served as a Director of TAT

Technologies, Ltd.

He has been the Managing Member of Leap Tide Capital

Management LLC since 2007.

From 2005 to 2007, he served as the President of Leap Tide’s predecessor, Leap Tide Capital Management

Inc., which was formerly known as AmTrust Capital Management Inc.

He served as a Portfolio Manager of Chesapeake Partners from February

2004 to January 2005.

From January 2002 to December 2004, he served as Managing Director at Jefferies & Company, Inc.

2001, he served as Managing Director at Dresdner Kleinwort Wasserstein, Inc.

(formerly Wasserstein Perella & Co., Inc.).

as a Lead Director of American Pacific Corporation from July 8, 2013 to February 27, 2014, and also served as its Director from January

1997 to February 27, 2014.

He served as an Independent Director of Pernix Therapeutics Holdings Inc.

(formerly, Golf Trust of America,

Inc.) from 2006 to August 31, 2011.

He served as a Director of TAT Technologies, Ltd.

from August 2009 to December 21, 2016.

He served as a Director of Keweenaw Land Association, Ltd.

from December

2016 until May 2019.

as a Director of Keweenaw Land Association, Ltd.

from December 2016 until May 2019.

Attributes, Experience and Skills.

Loeb brings to the Acorn Board significant financial expertise, cultivated over more

than 40 years of money management and investment banking experience, together with a background in public company management and

audit committee experience.

Loeb brings to the Acorn Board significant financial expertise, cultivated over more than

40 years of money management and investment banking experience, together with a background in public company management and audit committee

Mohr was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees.

is President of UE Systems, Incorporated, an international technology company specializing in the field of plant asset reliability

through ultrasound.

Mohr started with UE Systems in 1988 as a salesman and rapidly progressed through the ranks as regional

sales manager, National Sales Manager, Vice President and eventually President of the company.

Mohr is President

of UE Systems, Incorporated, an international technology company specializing in the field of plant asset reliability through ultrasound.

Mohr started with UE Systems in 1988 as a salesman and rapidly progressed through the ranks as regional sales manager, National Sales

Manager, Vice President and eventually President of the company.

It is through Mr.

stewardship that UE Systems has grown from a national brand to an international company with offices in Toronto, Mexico City,

Hong Kong, India and the Netherlands, and developed a list of loyal customers, including those in the Fortune 500.

Mohr’s stewardship that UE Systems has grown

from a national brand to an international company with offices in Toronto, Mexico City, Hong Kong, India and the Netherlands, and developed

a list of loyal customers, including those in the Fortune 500.

Attributes, Experience and Skills.

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Osterer was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees.

served as an advisor to our Board from October 2017 until his election as director.

as an advisor to our Board from October 2017 until his election as director.

Since 1973, Mr.

Osterer has served as Chairman

of the Board of UE Systems, Incorporated, a leader in the field of plant asset reliability through ultrasound, which he founded

He also served as President of UE Systems from 1973 to 1985.

Osterer has served as Chairman of the Board

of UE Systems, Incorporated, a leader in the field of plant asset reliability through ultrasound, which he founded in 1973.

He also served

as President of UE Systems from 1973 to 1985.

Since 1987, Mr.

Osterer has served as President of Libom

Oil, an oil exploration, drilling and purchasing company, which he founded in 1987.

He is the Acting Chairman of the Board of

Radon Testing Corporation of America, Inc., which he founded in 1985 and where he served as President from 1985 through 1989.

Osterer also founded Westchester Consultants, a general business consultancy nationally recognized for branding expertise

of food products.

He served in the United States Air Force/Air National Guard, 105th Airborne Division, from 1964 through 1970.

Osterer graduated from Fordham University with a BA in Social Sciences, Magna Cum Laude .

Osterer has served as President of Libom Oil, an oil exploration, drilling

and purchasing company, which he founded in 1987.

He is the Acting Chairman of the Board of Radon Testing Corporation of America, Inc.,

which he founded in 1985 and where he served as President from 1985 through 1989.

Osterer also founded Westchester Consultants, a

general business consultancy nationally recognized for branding expertise of food products.

He served in the United States Air Force/Air

National Guard, 105th Airborne Division, from 1964 through 1970.

Osterer graduated from Fordham University with a BA in Social Sciences,

Magna Cum Laude .

Attributes, Experience and Skills.

Osterer brings to Acorn a wealth of operational and managerial experience gained over

his long history of successful entrepreneurial pursuits, corporate leadership and oversight.

Zentman has been one of our directors since November 2004 and currently serves as Chairman of our Audit Committee and as

a member of our Compensation and Nominating Committees.

Osterer brings to Acorn a wealth of operational and managerial experience gained over his

long history of successful entrepreneurial pursuits, corporate leadership and oversight.

Zentman has been one of our directors since November 2004 and currently serves as Chairman of our Audit Committee and as a member

of our Compensation and Nominating Committees.

From 1980 until 2006, Dr.

Zentman was the president and chief executive

officer of a privately-held textile firm, where he also served as vice president of finance and administration from 1978 to 1980.

Zentman was the president and chief executive officer of a privately

held textile firm, where he also served as vice president of finance and administration from 1978 to 1980.

From 1973 to 1978, Dr.

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.

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.

in Complex Analysis.

Zentman serves on the board of Hinson & Hale Medical Technologies, Inc., as well as several national charitable organizations

devoted to advancing the quality of education.

Zentman serves on the board of Hinson &

Hale Medical Technologies, Inc., as well as several national charitable organizations devoted to advancing the quality of education.

Attributes, Experience and Skills.

Zentman’s long-time experience as a businessman together with his experience

with computer systems and software enables him to bring valuable insights to the Board.

Zentman has a broad, fundamental understanding

of the business drivers affecting our Company and also brings leadership and oversight experience to the Board.

Clifford has served as the Company’s Chief Financial Officer since June 1, 2018 and as the COO of OmniMetrix since

December 1, 2019.

She serves in such positions pursuant to a Consulting Agreement between the Company and Tracy Clifford Consulting,

Clifford is President and Owner of Tracy Clifford Consulting, LLC, through which she has been providing contract CFO/COO

services and other advisory services and project engagements since June 2015.

Between October 1999 and May 2015, she served as

CFO, Principal Accounting Officer, Corporate Controller and Secretary for a publicly-traded pharmaceutical company and a publicly-traded

Her prior experience includes accounting leadership positions at United Healthcare (Atlanta) and the North Broward Hospital

District (Fort Lauderdale) and work on the audit team of Deloitte & Touche (Miami).

Clifford obtained a Bachelor of Science

Degree in Accounting from the College of Charleston and a Master’s Degree in Business Administration with a concentration

in Finance from Georgia State University.

Clifford is a licensed CPA in the state of South Carolina and holds a Certification

in the Fundamentals of Forensic Accounting from the AICPA.

Zentman’s long-time experience as a businessman together with his experience with computer

systems and software enables him to bring valuable insights to the Board.

Zentman has a broad, fundamental understanding of the business

drivers affecting our Company and also brings leadership and oversight experience to the Board.

Clifford has served as the Company’s Chief Financial Officer since June 1, 2018 and as the COO of OmniMetrix since December

She serves in such positions pursuant to a Consulting Agreement between the Company and Tracy Clifford Consulting, LLC.

Clifford is President and Owner of Tracy Clifford Consulting, LLC, through which she has been providing contract CFO/COO services and

other advisory services and project engagements since June 2015.

Between October 1999 and May 2015, she served as CFO, Principal Accounting

Officer, Corporate Controller and Secretary for a publicly traded pharmaceutical company and a publicly traded REIT.

Her prior experience

includes accounting leadership positions at United Healthcare (Atlanta) and the North Broward Hospital District (Fort Lauderdale) and

work on the audit team of Deloitte & Touche (Miami).

Clifford obtained a Bachelor of Science Degree in Accounting from the College

of Charleston and a master’s degree in Business Administration with a concentration in Finance from Georgia State University.

Clifford is a licensed CPA in the state of South Carolina and holds a Certification in the Fundamentals of Forensic Accounting from the

Attributes, Experience and Skills.

Clifford brings to the Company over 20+ years as a public company chief financial/accounting

officer together with Big 4 public accounting experience and a broad scope of operational experience.

Audit Committee Financial Expert

Company has a separate designated standing Audit Committee established and administered in accordance with SEC rules.

members of the Audit Committee are Samuel M.

The three members

of the Audit Committee are Samuel M.

Zentman (who serves as Chairman of the Audit Committee), Gary Mohr and Michael F.

The Board of Directors has determined that each member of the Audit Committee meets the independence criteria prescribed

by NASDAQ governing the qualifications for audit committee members and each Audit Committee member meets NASDAQ’s financial

knowledge requirements.

Our Board has determined that Dr.

Zentman qualifies as an “audit committee financial expert,”

as defined in the rules and regulations of the SEC.

executive compensation is administered by the Compensation Committee of the Board of Directors, which was reconstituted in 2017.

The members of the Compensation Committee are Gary Mohr, Michael F.

of Directors has determined that each member of the Audit Committee meets the independence criteria prescribed by NASDAQ governing the

qualifications for audit committee members and each Audit Committee member meets NASDAQ’s financial knowledge requirements.

Board has determined that Dr.

Zentman qualifies as an “audit committee financial expert,” as defined in the rules and regulations

executive compensation is administered by the Compensation Committee of the Board of Directors.

The members of the Compensation Committee

are Gary Mohr, Michael F.

Osterer and Samuel M.

Zentman, all of whom have been determined

by the Board to be independent in accordance with NASDAQ’s requirement for independent director oversight of executive officer

compensation.

Nominating Committee of our Board of Directors, which was reconstituted in 2017, has overall responsibility for identifying, evaluating,

recruiting and selecting qualified candidates for election, re-election or appointment to the Board.

The Members of the Nominating

Committee are Gary Mohr, Samuel M.

Zentman and Michael Osterer all of whom have been determined by the Board to meet the independence

criteria prescribed by NASDAQ governing the qualifications of nominating committee members.

Zentman, all of whom have been determined by the Board to be independent in accordance

with NASDAQ’s requirement for independent director oversight of executive officer compensation.

Nominating Committee of our Board of Directors has overall responsibility for identifying, evaluating, recruiting and selecting qualified

candidates for election, re-election or appointment to the Board.

The Members of the Nominating Committee are Gary Mohr, Samuel M.

and Michael Osterer, all of whom have been determined by the Board to meet the independence criteria prescribed by NASDAQ governing the

qualifications of nominating committee members.

stockholders may recommend potential director candidates by contacting the Secretary of the Company to receive a copy of the procedure

to recommend a potential director candidate for consideration by the Nominating Committee, who will evaluate recommendations from

stockholders in the same manner that they evaluate recommendations from other sources.

to recommend a potential director candidate for consideration by the Nominating Committee, who will evaluate recommendations from stockholders

in the same manner that they evaluate recommendations from other sources.

16(a) Beneficial Ownership Reporting Compliance;

Delinquent Section 16(a) Reports

16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers and directors, and

persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership

with the SEC.

16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers and directors, and persons

who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC.

These persons are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

Further, we have implemented measures to assure timely filing of Section 16(a) reports by our executive officers and directors.

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).

Further, we have implemented

measures to assure timely filing of Section 16(a) reports by our executive officers and directors.

Based solely on our review of such

forms or written representations from certain reporting persons, we believe that during 2021 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.

This code of ethics

is designed to comply with the NASDAQ marketplace rules related to codes of conduct.

Our code of ethics may be accessed on the Internet under “Investor Relations”

on our website at www.acornenergy.com.

We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision

of our code of ethics by posting such information on our website, www.acornenergy.com .

This code of ethics is

designed to comply with the NASDAQ marketplace rules related to codes of conduct.

code of ethics may be accessed on the Internet under “Investor Relations” on our website at www.acornenergy.com.

to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of our code

of ethics by posting such information on our website, www.acornenergy.com .

EXECUTIVE COMPENSATION

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Compensation Table

Name and Principal Position

Option Awards

President and CEO of the Company and Acting CEO of OmniMetrix (1)

CFO of the Company and COO of OmniMetrix (2)

Principal Position

President and CEO of the

Company and Acting CEO of OmniMetrix (1)

CFO of the Company and

COO of OmniMetrix (2)

Loeb began serving as President and CEO of the Company on January 28, 2016 and as Acting CEO of OmniMetrix on December 1, 2019.

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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.

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

on June 8, 2020 with an exercise price of $0.23.

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 .4% (ii) an expected term of 4.0 years (iii)

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

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

February 2, 2021 with an exercise price of $0.48.

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 0.26% (ii) an expected term of 3.61 years (iii) an assumed

volatility of 102% and (iv) no dividends.

the grant date fair value calculated in accordance with applicable accounting principles with respect to 35,000 options granted 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 100,000 options granted

on June 25, 2019 with an exercise price of $0.28.

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 1.7% (ii) an expected term of 4.0 years (iii)

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

on May 10, 2021 with an exercise price of $0.62.

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 0.6% (ii) an expected term of 4.0 years (iii) an assumed

volatility of 100% and (iv) no dividends.

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

June 8, 2020 with an exercise price of $0.23.

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 .4% (ii) an expected term of 4.0 years (iii) an assumed volatility

of 109% and (iv) no dividends.

Compensation for 2020 and 2021

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

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

Loeb, extending its arrangements for compensation of Mr.

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

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 of $12,000 per month commencing May 1, 2018, and $16,000

per month commencing August 15, 2019.

When he assumed the additional position of Acting CEO of OmniMetrix, his monthly cash compensation

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

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.

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

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.

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

Loeb, 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 2021 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.

Loeb received cash compensation, effective retroactively as of January 1, 2021, of $16,000 per

month for service as President and CEO of the Company, and an additional $10,000 per month for so long as he serves as Acting CEO of

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 per share.

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

the remaining options vested 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.

2021 Consulting Agreement expired on December 31, 2021;

the Company and Mr.

Loeb have entered into a new Consulting Agreement

for 2021 as described below.

Loeb have entered into a new Consulting Agreement for 2022

as described below.

On June 1, 2018, Tracy S.

Clifford was appointed CFO of the Company, replacing outgoing CFO, Michael Barth,

who resigned from this position as of that date.

Clifford was appointed CFO of the Company.

Concurrent with the appointment of Ms.

Clifford as CFO, the Company entered into

a consulting arrangement with Ms.

Clifford pursuant to which she initially received a monthly fee of $8,500, increased to $9,500

effective November 1, 2018 as allowed by the agreement for the additional hours worked in excess of the average monthly hours

covered by the original retainer, in exchange for her services as CFO.

Her monthly fee was increased to $11,500 effective August

Clifford was appointed to the additional position of COO of OmniMetrix on November 18, 2019 and her monthly fee

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

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.

as CFO, the Company entered into a consulting arrangement for the provision of her services as described below.

She received cash

compensation in 2020 and through May 31, 2021, of $16,500 per month, and, effective June 1, 2021, $17,500 per month.

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 a grant on May 10, 2021 of options to purchase 100,000 shares of our common

stock, with an exercise price of $0.62 per share, which was the closing price of the common stock on May 9, 2021.

The options 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

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

Clifford ceases to be a consultant to the Company.

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 .

Stockholders can provide the Company with their views on executive compensation matters

at each year’s annual meeting through the stockholder advisory vote on executive compensation and during the interval between

stockholder advisory votes.

The Company welcomes stockholder input on our executive compensation matters, and stockholders are

able to reach out directly to our independent directors by emailing to samzentman@yahoo.com to express their views on executive

compensation matters.

Stockholders can provide the Company with their views on executive compensation matters at each

year’s annual meeting through the stockholder advisory vote on executive compensation and during the interval between stockholder

advisory votes.

The Company welcomes stockholder input on our executive compensation matters, and stockholders are able to reach out

directly to our independent directors by emailing to samzentman@yahoo.com to express their views on executive compensation matters.

employment arrangements of each named executive officer and certain other officers are described below.

From time to time, the

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

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

From time to time, the Company

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

On January 1, 2022, the Company entered into a new consulting agreement (the “2022 Consulting Agreement”)

Loeb, 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.

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 2022 Consulting Agreement, Mr.

Loeb will receive cash compensation, effective retroactively as of January 1, 2021, of $16,000

per month for service as President and CEO of the Company, and an additional $10,000 per month for so long as he serves as Acting

CEO of OmniMetrix.

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, 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

Consulting, LLC, for the provision of Ms.

Clifford’s services.

Loeb will continue to receive cash compensation of $16,000 per month for service as President and

CEO of the Company, and an additional $10,000 per month for so long as he serves as Acting CEO of OmniMetrix.

Loeb also received

a grant of options on January 1, 2022, to purchase 35,000 shares of the Company’s common stock, which are exercisable at an exercise

price equal to the December 31, 2021, closing price of the common stock of $0.63 per share.

Twenty-five percent (25%) of the options

were vested immediately;

the remaining options shall vest in three equal increments on April 1, 2022, July 1, 2022 and October 1, 2022.

The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside

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

LLC, for the provision of Ms.

Clifford’s services.

In such capacity, Ms.

Clifford acts as a consultant to, and

not an employee of, Acorn.

The current term of the Consulting Agreement began on June 1, 2020, and expires on June 1, 2021.

Consulting Agreement automatically renews for an additional year upon the expiration of each one-year term.

Pursuant to the Consulting

Agreement, Ms.

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

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.

Clifford acts as a consultant to, and not an employee

The Consulting Agreement began on June 1, 2018, and automatically renews for an additional year upon the expiration of each

one-year term.

The current term expires on June 1, 2022.

Pursuant to the Consulting Agreement, Ms.

Clifford currently receives cash compensation

of $17,500 per month.

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

Clifford also receives a grant of options

(50,000 were granted in June 2020 and 100,000 were granted in May 2021) to purchase 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

The options 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 2021 Fiscal Year End

following tables set forth all outstanding equity awards made to each of the Named Executive Officers that were outstanding at

December 31, 2020.

OPTIONS TO PURCHASE ACORN ENERGY, INC.

following tables set forth all outstanding equity awards made to each of the Named Executive Officers that were outstanding at December

TO PURCHASE ACORN ENERGY, INC.

Unexercisable

Expiration Date

August 13, 2022

January 8, 2024

January 1, 2025

January 1,2027

June 24, 2026

WARRANTS TO PURCHASE ACORN ENERGY, INC.

TO PURCHASE ACORN ENERGY, INC.

Unexercisable

Expiration Date

March 16, 2023

Warrants held by Leap Tide Capital Management, LLC.

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Deferred Compensation

following table provides information on the executive non-qualified deferred compensation activity for each of our named executive

officers for the year ended December 31, 2020.

following table provides information on the executive non-qualified deferred compensation activity for each of our named executive officers

for the year ended December 31, 2021.

Executive Officer

8 unchanged sentences

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

Our compensation policy for non-employee Directors for 2020

was as follows:

non-employee Director (other than the Executive Chairman) receives an annual retainer of $15,000, plus an annual grant on January

1 of an option to purchase 10,000 shares of Company Common Stock.

a non-employee Director’s first election or appointment to the Board, such newly elected/appointed Director will be granted

Our compensation policy for non-employee Directors for 2021 was

non-employee Director (other than the Executive Chairman) receives an annual retainer of $15,000, plus an annual grant on January 1 of

an option to purchase 10,000 shares of Company Common Stock.

Each option so granted to a newly elected/appointed Director shall

vest for the purchase of one-third of the shares purchasable under such option on each of the three anniversaries following the

date of first election or appointment.

options granted to non-employee Directors shall have an exercise price equal to closing price of the Company’s Common Stock

on its then-current trading platform or exchange on the last trading day immediately preceding the date of grant, and shall, except

as described in the preceding paragraph, vest in four installments quarterly in advance.

a non-employee Director’s first election or appointment to the Board, such newly elected/appointed Director will be granted an

option to purchase 25,000 shares of Company Common Stock.

Each option so granted to a newly elected/appointed Director shall vest for

the purchase of one-third of the shares purchasable under such option on each of the three anniversaries following the date of first

election or appointment.

options granted to non-employee Directors shall have an exercise price equal to the closing price of the Company’s Common Stock

on its then-current trading platform or exchange on the last trading day immediately preceding the date of grant, and shall, except as

described in the preceding paragraph, vest in four installments quarterly in advance.

Once vested, such options shall be exercisable

in whole or in part at all times until the earliest of (i) seven years from the date of grant or (ii) 18 months from the date

such Director ceases to be a Director, officer, employee of, or consultant to, the Company.

in whole or in part at all times until the earliest of (i) seven years from the date of grant or (ii) 18 months from the date such Director

ceases to be a Director, officer, employee of, or consultant to, the Company.

chair of the Audit Committee receives an additional annual retainer of $10,000;

each Audit Committee member other than the chair

receives an additional annual retainer of $2,000.

Director may, in his or her discretion, elect by written notice delivered on or before the first day of each calendar year whether

to receive, in lieu of some or all of his or her retainer and board fees, that number of shares of Company Common Stock as shall

have a value equal to the applicable retainer and board fees, based on the closing price of the Company’s Common Stock on

its then-current trading platform or exchange on the last trading day immediately preceding the first day of the applicable year.

Once made, the election shall be irrevocable for such election year and the shares subject to the election shall vest and be issued

one-fourth upon the first day of the election year and one-fourth as of the first day of each of the second through fourth calendar

quarters thereafter during the remainder of the election year.

A newly-elected or appointed Director may, in his or her discretion,

make such an election for the balance of the year in which he or she was elected/appointed by written notice delivered on or before

the tenth day after his or her election/appointment to the Board, with the number of shares of Company Common Stock subject to

such newly elected/appointed Director’s election to be based on closing price of the Company’s Common Stock on its

then-current trading platform or exchange on the last trading day immediately preceding the day of such newly elected/appointed

Director’s election/appointment.

following table sets forth information concerning the compensation earned for service on our Board of Directors during the fiscal

year ended December 31, 2020 by each individual (other than Mr.

Loeb who was not separately compensated for his Board service)

who served as a Director at any time during the fiscal year.

each Audit Committee member other than the chair receives

an additional annual retainer of $2,000.

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

in lieu of some or all of his retainer and board fees, that number of shares of Company Common Stock as shall have a value equal to the

applicable retainer and board fees, based on the closing price of the Company’s Common Stock on its then-current trading platform

or exchange on the last trading day immediately preceding the first day of the applicable year.

Once made, the election shall be irrevocable

for such election year and the shares subject to the election shall vest and be issued one-fourth upon the first day of the election

year and one-fourth as of the first day of each of the second through fourth calendar quarters thereafter during the remainder of the

election year.

A newly-elected or appointed Director may, in his or her discretion, make such an election for the balance of the year

in which he or she was elected/appointed by written notice delivered on or before the tenth day after his or her election/appointment

to the Board, with the number of shares of Company Common Stock subject to such newly elected/appointed Director’s election to

be based on closing price of the Company’s Common Stock on its then-current trading platform or exchange on the last trading day

immediately preceding the day of such newly elected/appointed Director’s election/appointment.

following table sets forth information concerning the compensation earned for service on our Board of Directors during the fiscal year

ended December 31, 2021 by each individual (other than Mr.

Loeb who was not separately compensated for his Board service) who served

as a director at any time during the fiscal year.

COMPENSATION IN 2021

Fees Earned or

Paid in Cash ($)

Awards ($) (1)

Compensation ($)

January 1, 2021, Samuel M.

Zentman, Gary Mohr, and Michael F.

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

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

The options had an exercise price of $0.37 and were to expire on January 1, 2028.

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 1.6% (ii) an expected term of 3.7 years (iii) an assumed volatility of 111% and (iv) no dividends.

the annual retainer of $15,000 as a non-employee director and $10,000 received for services rendered as Chairman of the Audit

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

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 0.24% (ii) an expected term

of 3.7 years (iii) an assumed volatility of 103% and (iv) no dividends.

the annual retainer of $15,000 as a non-employee director and $10,000 received for services rendered as Chairman of the Audit Committee.

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

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

OF THE COMPANY’S COMMON STOCK

following table and the notes thereto set forth information, as of March 28, 2022, concerning beneficial ownership (as defined

in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock by (i) each director of the Company, (ii) each executive

officer (iii) all executive officers and directors as a group, and (iv) each holder of 5% or more of the Company’s outstanding

shares of common stock.

Name and Address of Beneficial Owner (1) (2)

Number of Shares of

in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock by (i) each director of the Company, (ii) each executive officer

(iii) all executive officers and directors as a group, and (iv) each holder of 5% or more of the Company’s outstanding shares of

common stock.

Name and Address of Beneficial

Owner (1) (2)

Common Stock Beneficially

Percentage of

Outstanding (2)

2 unchanged sentences

2,882,974 (5)

All executive officers and directors of the Company as a group (5 people)

All executive officers and directors of the

Company as a group (5 people)

11,482,807 (8)

otherwise indicated, the address for each of the beneficial owners listed in the table is in care of the Company, 1000 N West

Street, Suite 1200, Wilmington, Delaware 19801.

otherwise indicated, the address for each of the beneficial owners listed in the table is in care of the Company, 1000 N West Street,

Suite 1200, Wilmington, Delaware 19801.

otherwise indicated, each person has sole investment and voting power with respect to the shares indicated.

For purposes of

this table, a person or group of persons is deemed to have “beneficial ownership”

of any shares as of a given

date which such person has the right to acquire within 60 days after such date.

Percentage information is based on the 39,687,589

shares outstanding as of March 11, 2021.

For purposes of this

table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date which such

person has the right to acquire within 60 days after such date.

Percentage information is based on the 39,687,589 shares outstanding

as of March 28, 2022.

of 2,069,554 shares held by Mr.

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, 147,500 shares underlying currently exercisable options held by Mr.Loeb, and 35,000

shares held by Leap Tide Capital Acorn LLC, 182,500 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 disclaims beneficial ownership of the securities held by Leap Tide Capital Acorn LLC and Leap Tide

Capital Management LLC except to the extent of his pecuniary interest therein.

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 Capital Management LLC

except to the extent of his pecuniary interest therein.

of 258,481 shares held by Mr.

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

exercisable options.

Mohr, 833,332 shares held by UE Systems Inc., and 60,000 shares underlying currently exercisable options.

of 1,984,392 shares held by Mr.

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

exercisable options.

Osterer, 833,332 shares held by UE Systems Inc., and 65,250 shares underlying currently exercisable

of 80,615 shares and 65,000 shares underlying currently exercisable options.

solely of currently exercisable options.

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

exercisable warrants.

of 10,965,057 shares, 482,750 shares underlying currently exercisable options and 35,000 shares underlying currently exercisable

COMPENSATION PLAN INFORMATION

1 unchanged sentence

Plan Category

Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)

Weighted-average Exercise Price of Outstanding Options, Warrants and Rights

Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in

Equity Compensation Plans Approved by Security Holders

Equity Compensation Plans Not Approved by Security Holders

grants made under our equity compensation plans not approved by security holders includes 476,000 options which were granted under

our 2006 Stock Incentive Plan following the original expiration of the Plan on February 8, 2017, and 1,879 options granted in

2015 under our 2006 Stock Option Plan for Non-Employee Directors but in excess of the maximum number of options available for

grant under such plan as approved by stockholders.

These grants were made to directors and officers at exercise prices equal to

the fair market value on the date of the grant.

The options generally vest over a one-year period and expire seven years from

the date of the grant.

The grants made under our equity compensation plans not approved by security holders also includes 35,000

warrants issued as compensation to underwriters for services provided in connection capital raise transactions.

In February 2019,

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 Amended and Restated 2006 Stock Incentive Plan until December

Securities to be

Options, Warrants

and Rights (a)

Weighted-average

Exercise Price of

Options, Warrants

Available for

Future Issuance

Plans (Excluding

Equity Compensation Plans Approved

by Security Holders

Equity Compensation

Plans Not Approved by Security Holders

grants made under our equity compensation plans not approved by security holders includes 697,770 options which were granted under our

2006 Stock Incentive Plan following the original expiration of the Plan on February 8, 2017, and 1,879 options granted in 2015 under

our 2006 Stock Option Plan for Non-Employee Directors but in excess of the maximum number of options available for grant under such plan

as approved by stockholders.

These grants were made to directors and officers at exercise prices equal to the fair market value on the

date of the grant.

The options generally vest over a one-year period and expire seven years from the date of the grant.

The grants made

under our equity compensation plans not approved by security holders also includes 35,000 warrants issued as compensation to underwriters

for services provided in connection capital raise transactions.

In February 2019, 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 Amended and Restated 2006 Stock Incentive Plan until December 31, 2024.

CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

With Related Persons

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,

to purchase 0.312 shares of our common stock at a subscription price of $0.24 per whole share.

No fractional shares were issued.

The closing price of our common stock on the record date of the rights offering was $0.2925.

Distribution of the rights commenced

on June 6, 2019 and were exercisable through June 24, 2019.

connection with the rights offering, we entered into a backstop agreement with certain of our directors and Leap Tide Capital

Management LLC, the sole manager of which is our President and CEO, pursuant to which they agreed to purchase from us any and

all unsubscribed shares of common stock in the rights offering, subject to the terms, conditions and limitations of the backstop

The backstop purchasers did not receive any compensation or other consideration for entering into or consummating the

backstop agreement.

July 1, 2019, we utilized a portion of the rights offering proceeds to complete the planned reacquisition of a 19% interest in

our OMX Holdings, Inc.

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

Holdings owns 100% of the membership interests of OmniMetrix,

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

The purchase raised

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 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

working capital purposes.

of Non-Controlling Interest

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

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

all of the members of the Board of Directors are independent.

The Board has also determined that all of the members of the Audit

Committee, the Compensation Committee and the Nominating Committee are independent under the NASDAQ independence standards for

such committees.

of the members of the Board of Directors are independent.

The Board has also determined that all of the members of the Audit Committee,

the Compensation Committee and the Nominating Committee are independent under the NASDAQ independence standards for such committees.

PRINCIPAL ACCOUNTING FEES AND SERVICES

1 unchanged sentence

2021 and 2020.

Audit –

All other fees

Fees were for professional services rendered for the audits of the consolidated financial statements of the Company, assistance

with review of documents filed with the SEC, consents, and other assistance required to be performed by our independent accountants.

Audit-Related

Fees were for travel costs and administrative fees associated with our audit.

Fees were for professional services rendered for the audits of the consolidated financial statements of the Company, assistance with

review of documents filed with the SEC, consents, and other assistance required to be performed by our independent accountants.

Policies and Procedures

Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to

be charged by our independent auditor to assure that the provision of these services does not impair the independence of the auditor.

The Audit Committee pre-approved all audit and non-audit services rendered by our principal accountant in 2020 and 2019.

Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged

by our independent auditor to assure that the provision of these services does not impair the independence of the auditor.

Committee pre-approved all audit and non-audit services rendered by our principal accountant in 2021 and 2020.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

List of Financial Statements of the Registrant

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

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

Report of Friedman LLP

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

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

Report of Independent Registered Public Accounting Firm (PCAOB ID 711)

Consolidated Balance Sheets as of December 31, 2021 and 2020

Consolidated Statements of Operations

Consolidated Statements of Changes in (Deficit)/Equity

Consolidated Statements of Changes in Deficit

Consolidated Statements of Cash Flows

2 unchanged sentences

List of Exhibits

Amended and Restated Certificate of Incorporation of the Registrant (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2015).

laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Registration Statement on

Form S 1 (File No.

33 44027) (the “1992 Registration Statement”)).

to the By Laws of the Registrant adopted December 27, 1994 (incorporated herein by reference to Exhibit 3.3 of the Registrant’s

laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form

S 1 (File No.

33 44027) (the “1992 Registration Statement”)).

to the By Laws of the Registrant adopted December 27, 1994 (incorporated herein by reference to Exhibit 3.3 of the Registrant’s

Current Report on Form 8-K dated January 10, 1995).

certificate for the common stock (incorporated herein by reference to Exhibit 4.2 to the 1992 Registration Statement).

Form of Representative Warrant (incorporated herein by reference to Exhibit 4.1 of Registrant’s Current Report on Form 8-K filed October 15, 2013)

Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed December 20, 2010).

Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.01 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Form of Investor Warrant (incorporated herein by reference to Exhibit 4.02 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Registration Rights Agreement, dated as of October 31, 2014 (incorporated herein by reference to Exhibit 4.03 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Form of Representative Warrant (incorporated herein by reference to Exhibit 4.1 of Registrant’s Current Report on Form 8-K filed October 15, 2013)

Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed December 20, 2010).

Form of Placement Agent Warrant (incorporated herein by reference to Exhibit 4.01 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Form of Investor Warrant (incorporated herein by reference to Exhibit 4.02 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Registration Rights Agreement, dated as of October 31, 2014 (incorporated herein by reference to Exhibit 4.03 of the Registrant’s Current Report on Form 8-K/A filed November 6, 2014).

Amended and Restated Articles of Incorporation of OMX Holdings, Inc.

(incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016)

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).

(incorporated herein by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016)

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).

Forms of Option Award Certificate and Option Award Agreement under the Registrant’s Amended and Restated 2006 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Annual report on Form 10-K for the year ended December 31, 2018).

Forms of Option Award Certificate and Option Award Agreement under the Registrant’s Amended and Restated 2006 Stock Option Plan for Non-Employee Directors (incorporated herein by reference to Exhibit 10.53 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 2009).

Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.47 to the Registrant’s Annual report on Form 10-K for the year ended December 31, 2011).

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).

Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.47 to the Registrant’s Annual report on Form 10-K for the year ended December 31, 2011).

Form of Registration Rights Agreement between Acorn Energy, Inc.

and the Backstop Purchasers (incorporated by reference to Exhibit 10.2 of the Registrant’s Registration Statement on Form S-1/A filed on June 4, 2019).

Consulting Agreement, dated as of January 1, 2021, by and between Acorn Energy, Inc.

Consulting Agreement, dated as of June 1, 2018, by and between Acorn Energy, Inc.

and Tracy Clifford Consulting, LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018).

List of subsidiaries.

4 unchanged sentences

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

following financial statements from Acorn Energy’s Form 10-K for the year ended December 31, 2020, filed on March 16,

2021, formatted in XBRL (eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets, (ii) Consolidated Statements

of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Equity,

(v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.

exhibit includes a management contract, compensatory plan or arrangement in which one or more directors or executive officers

of the Registrant participate.

following financial statements from Acorn Energy’s Form 10-K for the year ended December 31, 2021, filed on March 30,

2022, formatted in Inline XBRL (eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets, (ii) Consolidated

Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in

Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text.

exhibit includes a management contract, compensatory plan or arrangement in which one or more directors or executive officers of

the Registrant participate.

exhibit is filed or furnished herewith.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on March

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on March 30, 2022.

and Chief Executive Officer

to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of

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

to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant,

in the capacities and on the dates indicated.

Chief Executive Officer and

4 unchanged sentences

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 711 )

Consolidated Balance Sheets

3 unchanged sentences

Notes to Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

of Acorn Energy, Inc.

Stockholders of Acorn Energy, Inc.

on the Financial Statements

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

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.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

and subsidiaries (the “Company”) as of December

31, 2021 and 2020, 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, 2021, 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, 2021 and

2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity

with accounting principles generally accepted in the United States of America.

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

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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

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

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

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 or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

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.

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

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 statements.

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.

described in Note 1 of the financial statements, the Company believes it 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 the foreseeable future and for the 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.

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

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.

/s/ Friedman LLP

We have served as the Company’s auditor since 2010.

Marlton, New Jersey

ACORN ENERGY,

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

BALANCE SHEETS

(IN THOUSANDS,

EXCEPT SHARE AND PER SHARE DATA)

As of December 31,

Current assets:

2 unchanged sentences

Other current assets

Deferred charges

Deferred cost of goods sold

Total current assets

1 unchanged sentence

Right-of-use assets, net

Deferred cost of goods sold

LIABILITIES AND DEFICIT

Current liabilities:

Short-term bank credit

Short-term credit

Accounts payable

9 unchanged sentences

Total long-term liabilities

Commitments and contingencies (Note 8)

Commitments and contingencies

Acorn Energy, Inc.

Common stock - $ 0.01 par value per share:

Authorized –

42,000,000 shares;

Issued –

39,687,589 and 39,591,339 shares at December 31, 2020 and 2019, respectively

Authorized – 42,000,000 shares;

Issued – 39,687,589 shares at December 31,

2021 and 2020

Additional paid-in capital

Accumulated deficit

Treasury stock, at cost –

801,920 shares at December 31, 2020 and 2019

Treasury stock, at cost – 801,920 shares at December 31, 2021 and 2020

Total Acorn Energy, Inc.

shareholders’

shareholders’ deficit

Non-controlling interests

1 unchanged sentence

Total liabilities and deficit

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

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

THOUSANDS, EXCEPT NET LOSS PER SHARE DATA)

(IN THOUSANDS,

EXCEPT NET LOSS PER SHARE DATA)

Year ended December 31,

7 unchanged sentences

Gain on SBA PPP loan extinguishment

Income (loss) before income taxes

income before income taxes

Income tax expense

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.

(loss) income after income taxes

Non-controlling interest share of income

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

shareholders.

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

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

shareholders:

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

shareholders –

basic and diluted

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

shareholders – basic and diluted

Weighted average number of shares outstanding attributable to Acorn Energy, Inc.

shareholders –

Weighted average number of shares outstanding attributable to Acorn

shareholders –

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

shareholders – basic

Weighted average number of shares outstanding attributable to Acorn Energy, Inc.

shareholders – diluted

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN DEFICIT

Acorn Energy, Inc.

Number of Shares

Additional Paid-In Capital

Accumulated Deficit

Number of Treasury Shares

Treasury Stock

Shareholders’

(IN THOUSANDS)

Paid-In Capital

of Treasury Shares

Shareholders’

controlling interests

Total Deficit

Balances as of December 31, 2018

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

Value of expired warrants

Stock option compensation

Balances as of December 31, 2019

Proceeds from stock option exercise

Accrued dividend in OmniMetrix preferred shares

Value of expired warrants

Stock option compensation

Balances as of December 31, 2020

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

as of December 31, 2019

from stock option exercise

dividend in OmniMetrix preferred shares

of expired warrants

option compensation

as of December 31, 2020

(loss) income

dividend in OmniMetrix preferred shares

option compensation

as of December 31, 2021

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

Year ended December 31,

Cash flows provided by (used in) operating activities:

Net income (loss)

Cash flows provided by operating activities:

Net (loss) income

Depreciation and amortization

Non-cash lease expense

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

Change in operating assets and liabilities:

Decrease (increase) in accounts receivable

Decrease (increase) in inventory

Increase in deferred charges, other current assets and other assets

(Increase) decrease in accounts receivable

(Increase) decrease in inventory

(Increase) decrease in deferred cost of goods sold

(Increase) decrease in other current assets and other assets

Increase in deferred revenue

Decrease in amounts due to former directors

Increase in operating lease liability

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

Net cash provided by (used in) operating activities

Decrease in operating lease liability

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

Net cash provided by operating activities

Cash flows used in investing activities:

Purchases of software

Payments made for patent filings

Purchase of non-controlling interest in OmniMetrix

Net cash provided by (used in) investing activities

Investments in technology

Other capital investments

Net cash used in investing activities

Cash flows provided by financing activities:

Short-term credit, net

Proceeds from rights offering, net of expenses of $208

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 year

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

Cash and cash equivalents

Restricted cash

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

Beginning of year

Cash and cash equivalents

Restricted cash

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Cash at the beginning of the year

Cash at the end of the year

Supplemental cash flow information:

1 unchanged sentence

Non-cash investing and financing activities:

Purchase of equipment under installment agreement

Forgiveness of SBA PPP loan

Right-of-use assets, net of deferred rent

Operating lease liability

Accrued preferred dividends to former Acorn director and former CEO of OmniMetrix (see Note 3)

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

Accrued preferred dividends to former CEO of OmniMetrix (see Note 3)

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

AND SUBSIDIARIES

to Consolidated Financial Statements

1—NATURE OF OPERATIONS

Description of Business

Notes to Consolidated

Financial Statements

NOTE 1— NATURE

OF OPERATIONS

(a) Description

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.

OmniMetrix’s PG activities provide wireless remote monitoring and control

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.

OmniMetrix’s CP activities provide for remote monitoring of cathodic protection

systems on gas pipelines for gas utilities and pipeline companies.

Acorn’s

and OmniMetrix, LLC (collectively, “Acorn” or “the Company”)

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

The Company provides the following products and Internet of Things (“IoT”) applications and services through its OmniMetrix,

LLC (“OmniMetrix”) subsidiary:

Generation (“PG”) monitoring.

OmniMetrix’s PG services provide wireless remote monitoring and control systems

and IoT applications for residential and commercial/industrial power generation equipment.

This includes the Company’s AIRGuard

product, which remotely monitors and controls air compressors, and its Smart Annunciator product which is typically sold with

a new commercial or industrial generator and has a display screen that indicates the current status of that generator.

Cathodic Protection (“CP”) monitoring.

OmniMetrix’s CP activities provide for remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

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

Notes 12 and 13 for segment information and major customers.

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

(b) Liquidity

of December 31, 2021, the Company had approximately $ 1,722,000 of consolidated cash.

December 31, 2021, the Company had a negative working capital of approximately $ 60,000 .

Its working capital included approximately $ 1,722,000

of cash and deferred revenue of approximately $ 3,541,000 .

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,

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

of Presentation

consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United

States of America (“GAAP”).

Such deferred revenue does not require significant cash outlay for the revenue to be recognized.

Net cash decreased during the year ended

December 31, 2021 by approximately $ 341,000 ,

of which approximately $ 132,000

was provided by operating activities, approximately $ 324,000

was used in investing activities, and approximately $ 149,000

was used in financing activities.

is considered an essential business because it provides infrastructure support to both government and commercial sectors and across key

The Company has experienced minimal negative impacts due to the COVID-19 pandemic to date.

Throughout the pandemic, the Company

has continued to realize new equipment sales (although not at the anticipated growth rate due to travel and meeting restrictions which

have negatively impacted the sales closing timeline), has continued to collect its monthly recurring monitoring revenues and has retained

its customer base.

While the impacts of COVID-19 in the future are uncertain, the Company believes that due to the need for backup power

and the desirability of remote monitoring services, it should continue to be positioned for stable financial performance.

of March 28, 2022, the Company had cash of approximately $ 1,825,000 .

The Company believes that 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 audited consolidated financial

statements in particular.

The Company may, at some point, elect to obtain a new line of credit or other source of financing to fund additional

investments in the business.

NOTE 2— SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States

of America (“GAAP”).

of Consolidation and Presentation

1 unchanged sentence

In these consolidated financial statements,

“subsidiaries”

are companies that are over 50% controlled, the accounts of which are consolidated with those of the

Significant intercompany transactions and balances are eliminated in consolidation;

profits from intercompany sales are

also eliminated;

non-controlling interests are included in equity.

Reclassification

reclassifications have been made to the Company’s consolidated financial statements for the year ended December 31, 2019

to conform to the current period’s consolidated financial statement presentation.

There was no effect on total assets, equity

and net loss.

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

preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial

statements, and the reported amounts of revenues and expenses during the reporting periods.

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, revenue recognition, management’s

projections and analyses of the possible impairments.

“subsidiaries” are companies that are over 50 % controlled, the accounts of which are consolidated with those of the Company.

Intercompany transactions and balances are eliminated in consolidation;

profits from intercompany sales are also eliminated;

non-controlling

interests are included in equity.

Use of Estimates

in Preparation of Financial Statements

preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts

of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements,

and the reported amounts of revenues and expenses during the reporting periods.

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, revenue recognition, management’s projections and analyses

of the possible impairments.

receivable consists of trade receivables.

1 unchanged sentence

for Doubtful Accounts

Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required

Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of customers to make required payments.

This allowance is based on specific customer account reviews and historical collections experience.

If the financial

condition of the Company’s funding parties or customers were to deteriorate, resulting in an impairment of their ability

to make payments, additional allowances may be required.

The Company performs ongoing credit evaluations of its customers and

does not require collateral.

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.

If the financial condition of the

Company’s funding parties or customers were to deteriorate, resulting in an impairment of their ability to make payments, additional

allowances may be required.

The Company performs ongoing credit evaluations of its customers and does not require collateral.

the years ended December 31, 2021 and 2020, approximately $ 10,000 and $ 21,000 was charged to doubtful accounts expense, respectively.

At December 31, 2021 and 2020, the balance in allowance for doubtful accounts was approximately $ 6,000 and $ 9,000 , respectively.

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

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.

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 to identify slow-moving and obsolete inventory.

Management conducted an assessment and wrote-off

inventory valued at approximately $ 22,000 and $ 17,000 for the years ended December 31, 2021 and 2020, respectively.

of Long-Lived Assets

Company reviews long-lived assets, such as property and equipment, intangible assets subject to amortization, and right-of-use assets

on operating leases for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset

group may not be recoverable.

These events or changes in circumstances include, but are not limited to, significant underperformance relative

to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for

the overall business, and significant negative industry or economic trends.

Recoverability of assets to be held and used is measured by

a comparison of the carrying amount of the asset group to the estimated undiscounted cash flows over the estimated remaining useful life

of the primary asset included in the asset group.

If the asset group is not recoverable, the impairment loss is calculated as the excess

of the carrying value over the fair value.

Non-Controlling

Financial Accounting Standards Board (“FASB”) requires that non-controlling interests be reported as a component of

equity, changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity

transactions, and upon a loss of control, retained ownership interest be re-measured at fair value, with any gain or loss recognized

The Company attributes the applicable percentage of income and losses to the non-controlling interests associated

with OmniMetrix (see Note 3).

Financial Accounting Standards Board (“FASB”) requires that non-controlling interests be reported as a component of equity,

changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions,

and upon a loss of control, retained ownership interest be re-measured at fair value, with any gain or loss recognized in earnings.

Company attributes the applicable percentage of income and losses to the non-controlling interests associated with OmniMetrix (see Note

and Equipment

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Depreciation and amortization are calculated based on the straight-line

method over the estimated useful lives of the depreciable assets, or in the case of leasehold improvements, the shorter of the

lease term or the estimated useful life of the asset, a portion of which is allocated to cost of sales.

Improvements are capitalized

while repairs and maintenance are charged to operations as incurred.

method over the estimated useful lives of the depreciable assets, or in the case of leasehold improvements, the shorter of the lease term

or the estimated useful life of the asset, a portion of which is allocated to cost of sales.

Improvements are capitalized 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.

August 2018, the 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

During the years ended December 31, 2021 and 2020, the Company capitalized internal-use software costs totaling

approximately $ 285,000 and $ 87,000 , respectively.

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

Operating leases are included in operating lease right-of-use

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

consolidated balance sheets.

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

The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the

non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when

the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty.

All the Company’s real estate leases are classified as operating leases.

assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s

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

balance sheets.

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

The classification

evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the

Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably

certain and failure to exercise such option would result in an economic penalty.

All the Company’s real estate leases are classified

as operating leases.

assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s

obligation to make lease payments arising from the lease.

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date of the lease based on the present value of the lease payments over the lease term.

The lease payments included in the present

value are fixed lease payments.

As most of the Company’s leases do not provide an implicit rate, the Company estimates its

collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present

value of lease payments.

The lease payments included in the present value

are fixed lease payments.

As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized

incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments.

The Company applies the portfolio approach in applying discount rates to its classes of leases.

The operating

lease ROU assets include any payments made before the commencement date.

Lease expense for lease payments is recognized on a straight-line

basis over the lease term.

The operating lease ROU assets include

any payments made before the commencement date.

Lease expense for lease payments is recognized on a straight-line basis over the lease

The Company does not currently have subleases.

The Company does not currently have residual value guarantees

or restrictive covenants in its leases.

Company also made accounting policy elections by class of underlying asset to not apply the recognition requirements of the standard

to leases with terms of 12 months or less and to not separate non-lease components from lease components.

Consequently, each separate

lease component and the non-lease components associated with that lease component will be accounted for as a single lease component

for lease classification, recognition, and measurement purposes.

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.

The Company does not currently have residual value guarantees or restrictive covenants

in its leases.

Company also made accounting policy elections by class of underlying asset to not apply the recognition requirements of the standard to

leases with terms of 12 months or less and to not separate non-lease components from lease components.

Consequently, each separate lease

component and the non-lease components associated with that lease component will be accounted for as a single lease component for lease

classification, recognition, and measurement purposes.

lease obligation liability was approximately $ 443,000 and $ 542,000 as of December 31, 2021 and December 31, 2020, 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.

When shares are reissued, the cost method is used for determining

In accordance with GAAP, the excess of the acquisition cost over the reissuance price of the treasury stock, if any, is

charged to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any.

is charged to accumulated deficit.

Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations.

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.

The Company assesses whether payment terms are customary or extended in accordance with normal practice

relative to the market in which the sale is occurring.

The Company’s sales arrangements generally include standard payment

In accordance with GAAP, the excess of the acquisition cost over the reissuance price of the treasury stock, if any, is charged

to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any.

Any excess is charged

to accumulated deficit.

Revenue Recognition

Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations.

The core principle

of Accounting Standards Codification (“ASC”) 606:

Revenue from Contracts with Customers 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.

The Company assesses whether payment terms are customary or extended in accordance

with normal practice relative to the market in which the sale is occurring.

The Company’s sales arrangements generally include standard

payment terms.

These terms effectively relate to all customers, products, and arrangements regardless of customer type, product mix or

arrangement size.

revenue recognition criteria are not satisfied, amounts received from customers are classified as deferred revenue on the balance

sheet until such time as the revenue recognition criteria are met.

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

revenue recognition criteria are not satisfied, amounts received from customers are classified as deferred revenue on the balance sheet

until such time as the revenue recognition criteria are met.

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

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.

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.

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 OmniMetrix 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

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.

sales tax, value added tax, and other tax, the Company collects concurrent with revenue producing activities are excluded from revenue.

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

Estimated warranty obligations are provided for as a cost

of sales in the period in which the related revenues are recognized, based on management’s estimate of future potential

warranty obligations and limited historical experience.

Adjustments are made to accruals as warranty claim data and historical

experience warrant.

Company’s warranty obligations may be materially affected by product or service failure rates and other costs incurred in

correcting a product or service failure.

Should actual product or service failure rates or other related costs differ from the

Company’s estimates, revisions to the accrued warranty liability would be required.

Estimated warranty obligations are provided for as a cost of sales

in the period in which the related revenues are recognized, based on management’s estimate of future potential warranty obligations

and historical experience.

Adjustments are made to accruals as warranty claim data and historical experience warrant.

Company’s warranty obligations may be materially affected by product or service failure rates and other costs incurred in correcting

a product or service failure.

Should actual product or service failure rates or other related costs differ from the Company’s estimates,

revisions to the accrued warranty liability would be required.

Concentration

of Credit Risk

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

of trade accounts receivables.

values of financial instruments included in current assets and current liabilities are estimated to approximate their book values,

due to the short maturity of such instruments.

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

cash and trade accounts receivable.

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

bank and amounted to approximately $ 1,722,000 at

December 31, 2021.

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 of trade accounts receivables.

values of financial instruments included in current assets and current liabilities are estimated to approximate their book values, due

to the short maturity of such instruments.

and Development Expenses

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expenses are charged to operations as incurred.

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.

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

December 31, 2021 and 2020, 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 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).

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

in accordance with applicable accounting principles.

The Company’s option pricing model requires

the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate.

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 in accordance

with applicable accounting principles.

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

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

financial reporting purposes and the amounts used for income tax purposes, as well as operating loss, capital loss and tax credit

carryforwards.

Deferred tax assets and liabilities are classified as non-current in accordance with ASU 2015-17, Income Taxes

Balance Sheet Classification of Deferred Taxes.

Valuation allowances are established against deferred tax assets

if it is more likely than not that the assets will not be realized.

Deferred tax assets and liabilities are measured using enacted

tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or

The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the

period that includes the enactment date.

See Note 10(e) for the impact of the Tax Cuts and Jobs Act of 2017.

Tax Uncertainties

calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations.

The Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed by applicable accounting

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence

indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals

or litigation processes, if any.

The second step requires the Company to estimate and measure the tax benefit as the largest amount

that is more likely than not being realized upon ultimate settlement.

It is inherently difficult and subjective to estimate such

amounts, as this requires the Company to determine the probability of various possible outcomes.

The Company reevaluates these

uncertain tax positions on a quarterly basis.

This evaluation is based on factors including, but not limited to, changes in facts

or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity.

Such a change in recognition

or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period.

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

Note 9(b) 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.

On June 21, 2018, the U.S.

Supreme Court issued an opinion in South Dakota v.

Wayfair, Inc., 138 S.

2080 (2018), whereby the longstanding Quill Corp v.

Dakota sales tax case was overruled, and states may now require remote sellers to collect sales tax under certain circumstances.

the Company began collecting sales tax in nearly all states that have sales tax.

The Company accrued sales taxes in the states with sales

The Company accrued the liability from the effective date of a state’s adoption of the Wayfair decision up to the date the Company

began collecting and filing sales taxes in the various states.

At December 31, 2021 and December 31, 2020, the amount of such accrual

was approximately $ 28,000 and $ 8,000 , respectively.

The Company accrues sales

taxes based on determination of which of its products/services are subject to sales tax, and in which states and jurisdictions the

Further, the Company must determine which of its customers are exempt from the Company charging sales tax because the customer

is a reseller or self-assesses and direct pays to states and other jurisdictions on purchases the customer makes from the Company.

determinations contain estimates and are subject to judgment and interpretation by taxing authorities in various states and other jurisdictions,

which could result in recognizing materially different amounts in future periods.

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

reporting purposes and the amounts used for income tax purposes, as well as operating loss, capital loss and tax credit carryforwards.

Deferred tax assets and liabilities are classified as non-current in accordance with ASU 2015-17, Income Taxes (Topic 740):

Balance Sheet

Classification of Deferred Taxes.

Valuation allowances are established against deferred tax assets if it is more likely than not that

the assets will not be realized.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable

income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and

liabilities of a change in tax rates or laws is recognized in operations in the period that includes the enactment date.

See Note 10(e)

for the impact of the Tax Cuts and Jobs Act of 2017.

Uncertainties

calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations.

The Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed by applicable accounting principles.

The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is

more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if

The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more likely than not being

realized upon ultimate settlement.

It is inherently difficult and subjective to estimate such amounts, as this requires the Company to

determine the probability of various possible outcomes.

The Company reevaluates these uncertain tax positions on a quarterly basis.

evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled

issues under audit, and new audit activity.

Such a change in recognition or measurement would result in the recognition of a tax benefit

or an additional charge to the tax provision in the period.

The Company recognizes interest and penalties as incurred in finance income

(expense), net in the consolidated statements of operations.

of December 31, 2021 and 2020, no interest or penalties were accrued on the consolidated balance sheets related to uncertain

tax positions.

the years ending December 31, 2021 and 2020, 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 operations.

Company is subject to U.S.

Federal and state income tax.

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

As of January 1, 2021, the Company is no longer subject to examination by U.S.

Federal taxing authorities for years before 2018, or for years before 2017 for state income taxes.

and Diluted Net Income (Loss) Per Share

Diluted Net Income (Loss) Per Share

net income (loss) per share is computed by dividing the net income (loss) attributable to Acorn Energy, Inc.

by the weighted average

number of shares outstanding during the year, excluding treasury stock.

Diluted net income (loss) per share is computed by dividing

the net income (loss) by the weighted average number of shares outstanding plus the dilutive potential of common shares which

would result from the exercise of stock options and warrants.

The dilutive effects of stock options and warrants are excluded

from the computation of diluted net loss per share if doing so would be antidilutive.

The weighted average number of options and

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

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 (in thousands):

by the weighted average number

of shares outstanding during the year, excluding treasury stock.

Diluted net income (loss) per share is computed by dividing the net income

(loss) by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise

of stock options and warrants.

The dilutive effects of stock options and warrants are excluded from the computation of diluted net loss

per share if doing so would be antidilutive.

The combined number of options and warrants that were excluded from the computation of diluted

net loss per share, as they had an antidilutive effect, was approximately 868,000 (which have a weighted average exercise price of $ 0.38 )

and 409,626 (which had a weighted average exercise price of $ 0.84 ) for the years ending December 31, 2021 and 2020, 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 (in thousands):

OF EFFECT ON NET INCOME AND WEIGHTED AVERAGE NUMBER OF SHARES

Year ended December 31,

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Stock options

Basic and diluted net loss per share

Value Measurement

Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair

value and enhances fair value measurement disclosure.

Under these provisions, fair value is defined as the price that would be

received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between

market participants at the measurement date.

standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes

the use on unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs

that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent

of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants

would use in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy

is described below:

Basic and diluted net (loss) income per share

Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and

enhances fair value measurement disclosure.

Under these provisions, fair value is defined as the price that would be received to sell

an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at

the measurement date.

standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the

use on unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market

participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company.

Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing

the asset or liability developed based on the best information available in the circumstances.

The hierarchy is described below:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

value hierarchy gives the highest priority to Level 1 inputs.

The fair value

hierarchy gives the highest priority to Level 1 inputs.

Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Unobservable inputs are used when little or no market data is available.

The fair value hierarchy gives the lowest priority

to Level 3 inputs.

The fair value hierarchy gives the lowest priority to Level

Issued Accounting Principles

than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting pronouncements

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

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

how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair

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.

than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting pronouncements during

the year ended December 31, 2021, that are of material significance, or have potential material significance, to the Company.

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

entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through

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

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

The Company is currently

evaluating the impact of the new guidance on its consolidated financial statements and related disclosures.

Adopted Accounting Principles

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—INVESTMENT IN OMNIMETRIX

2015, one of the Company’s then-current directors (the “Investor”) acquired a 20% interest in the Company’s

OMX Holdings, Inc.

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

Stock”).

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

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 $1,273,000 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 former CEO of OmniMetrix, LLC.

4—INVENTORY

The amendments

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

in a grantor’s own operations by issuing share-based payment awards.

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.

are no recently issued accounting updates that are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3— INVESTMENT

IN OMNIMETRIX

Company owns 99 % of the Company’s OMX Holdings, Inc.

subsidiary (“Holdings”) and the former CEO of OmniMetrix, LLC owns

the remaining 1 %.

NOTE 4— INVENTORY

As of December 31,

2 unchanged sentences

Finished goods

December 31, 2020 and 2019, the Company’s inventory reserve was $0.

5—PROPERTY AND EQUIPMENT, NET

inventory net

December 31, 2021 and 2020, the Company’s inventory reserve was $ 0 .

NOTE 5— PROPERTY

AND EQUIPMENT, NET

and equipment consists of the following:

OF PROPERTY AND EQUIPMENT

As of December 31,

9 unchanged sentences

Property and equipment, net

less than $1,000

and amortization in respect of property and equipment amounted to approximately $ 75,000 and $ 22,000 for 2021 and 2020, respectively.

6—LEASES

NOTE 6— LEASES

leases office space and office equipment under operating lease agreements.

The office lease, which had an expiration date of April

30, 2020, was amended in November 2019 and the term was extended to September 30, 2025.

The office equipment lease was entered

into in April 2019, previously it was month-to-month, and has a sixty-month term.

The office lease has an expiration date of September 30, 2025 .

The office equipment lease was entered into in April 2019 and has a sixty-month term .

Operating lease payments for 2021 and 2020 were

2 unchanged sentences

31, 2021 using a discount rate of 4.5 % are approximately $ 443,000 .

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.

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

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES

Cash paid for operating lease liabilities

balance sheet information related to leases consisted of the following:

SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES

Weighted average remaining lease terms for operating leases

table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms

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

2020 (in thousands):

The table below

reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms in excess of one

year to the total operating lease liabilities recognized on the consolidated balance sheet as of December 31, 2021 (in thousands):

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Total undiscounted cash flows

1 unchanged sentence

Present value of operating lease liabilities (a)

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

Loans payable

Includes current portion of approximately $ 107,000 for operating leases.

July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc.

to sublease from the Company 1,900

square feet of office space of the Company’s 21,000

square feet of office and production space in the Hamilton Mill Business Park located in Buford, Georgia for a monthly sublease

payment of $ 2,375 which includes the base

rent plus a pro-rata share of utilities, property taxes and insurance.

Fifty percent of any excess rent received above the per square

foot amount that the Company pays will be remitted to the Company’s landlord less the allocation of any shared expenses and leasehold

improvements specific to the sublease.

The Company invested approximately $ 7,000

on leasehold improvements related to the sublease.

Due to the offset of the capital expenditures, the Company does not expect

to have any net rent due to its landlord for the first twelve months of the sublease.

The estimated amount the Company expects to remit

to the landlord each year of the sublease subsequent to the first twelve months is approximately $ 6,700

The sublease commenced on October 1, 2021 and will run through September 30, 2025 which is the end of the Company’s

lease term with its landlord.

Below are the future payments expected under the sublease (in thousands) net of the estimated annual service

cost of $ 2,220 (gross of the estimated amount the Company expects

to remit to its landlord):

Total undiscounted cash flows

(a) 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 $ 1,000,000 .

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 February 28, 2021.

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 fell 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 period January 1, 2021 to February 28, 2021, when the line expired, was approximately $ 4,000 compared

to approximately $ 28,000 for the year ended December 31, 2020.

paid off the outstanding balance of approximately $ 149,000 in February 2021 and decided not to renew this line of credit, which expired

in accordance with its terms on February 28, 2021 .

(b) Loans payable

April 24, 2020, Acorn Energy, Inc.

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

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.

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 period.

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.

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

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 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 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

NOTE 8— COMMITMENTS AND CONTINGENCIES

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 paid this partner equal monthly payments over the first seven months

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

OmniMetrix will also pay the partner (i) 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 gas applications only.

Commencing on January 1, 2021, OmniMetrix paid the partner a quarterly licensing fee of

$ 12,500 which was renegotiated to $ 4,450 effective October 1, 2021.

The annual licensing fee moving forward will be $ 17,800 , which will

be paid in quarterly increments of $ 4,450 .

The per-sensor monitoring fees have not yet commenced.

The initial term of this agreement ends

on August 19, 2022 but will automatically renew for one-year periods unless either party delivers a written notice of termination to the

other party sixty days prior to the end of the respective term.

addition to the above, the Company has approximately $ 443,000 in operating lease obligations payable through 2026 and approximately $ 151,000

in other contractual obligations.

The Company also has approximately $ 1.2 million in open purchase order commitments payable through 2022.

NOTE 9— EQUITY

December 31, 2021 the Company had issued and outstanding 39,687,589 shares of its common stock, par value $ 0.01 per share.

of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the

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

outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of

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

Company is not authorized to issue preferred stock.

Accordingly, no preferred stock is issued or outstanding.

Rights Offering

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,

to purchase 0.312 shares of Acorn common stock at a subscription price of $0.24 per whole share.

No fractional shares were issued.

The closing price of Acorn’s common stock on the record date of the rights offering was $0.2925.

Distribution of the rights

commenced on June 6, 2019 and were exercisable through June 24, 2019.

connection with the rights offering, Acorn entered into a backstop agreement with certain of its directors and Leap Tide Capital

Management LLC, the sole manager of which is Acorn’s President and CEO, pursuant to which they agreed to purchase from Acorn

any and all unsubscribed shares of common stock in the rights offering, subject to the terms, conditions and limitations of the

backstop agreement.

The backstop purchasers did not receive any compensation or other consideration for entering into or consummating

the backstop agreement.

July 1, 2019, the Company utilized a portion of the rights offering proceeds to complete the planned reacquisition of a 19% interest

in its OMX Holdings, Inc.

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.

See Note 3 for further discussion.

balance of the rights offering net proceeds provides 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

working capital purposes.

Summary Employee Option Information

Company’s stock option plans provide for the grant to officers, directors and other key employees of options to purchase

shares of common stock.

The purchase price may be paid in cash or at the end of the option term, if the option is “in-the-money”,

it is automatically exercised “net”.

In a net exercise of an option, the Company does not require a payment of the

exercise price of the option from the optionee but reduces the number of shares of common stock issued upon the exercise of the

option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise

price for the option shares covered by the option exercised.

Each option is exercisable to one share of the Company’s common

Most options expire within five to ten years from the date of the grant, and generally vest over three-year period from

the date of the grant.

At the annual meeting of stockholders on September 11, 2012, the Company’s stockholders approved

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 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 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.

Employee Option Information

Company’s stock option plans provide for the grant to officers, directors and employees of options to purchase shares of common

The purchase price may be paid in cash or, if the option is “in-the-money” at the end of the option term, it is automatically

exercised “net”.

In a net exercise of an option, the Company does not require a payment of the exercise price of the option

from the optionee but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole

shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by

the option exercised.

Each option is exercisable for one share of the Company’s common stock.

Most options expire within five to

ten years from the date of the grant, and generally vest over a three-year period from the date of the grant.

December 31, 2021, 1,580,620 options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no options

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

In 2021 and 2020, 232,770 and 230,000 options, respectively,

were granted to directors, executive officers and employees.

In 2021 and 2020, 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 $ 89,000 and $ 59,000 in 2021 and 2020, respectively.

options were exercised in the year ended December 31, 2021.

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.

96,250 options were exercised in the year ended December 31, 2020.

The intrinsic

value of options outstanding and of options exercisable at December 31, 2021 was approximately $ 291,000 and $ 217,000 , respectively.

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

years (all in weighted averages):

SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES PRICING MODEL

Risk-free interest rate

4 unchanged sentences

expected term of the options is the length of time until the expected date of exercising the options.

With respect to determining

expected exercise behavior, the Company has grouped its option grants into certain groups in order to track exercise behavior

and establish historical rates.

The Company estimated volatility by considering historical stock volatility over the expected

term of the option.

The risk-free interest rates are based on the U.S.

Treasury yields for a period consistent with the expected

The Company expects no dividends to be paid.

The Company believes that the valuation technique and the approach utilized

to develop the underlying assumptions are appropriate in determining the estimated fair value of the Company’s stock options

granted in the years ended December 31, 2020 and 2019.

Estimates of fair value are not intended to predict actual future events

or the value ultimately realized by persons who receive equity awards.

Summary Option Information

summary of the Company’s option plans as of December 31, 2020 and 2019, as well as changes during each of the years then

ended, is presented below:

With respect to determining expected

exercise behavior, the Company has grouped its option grants into certain groups in order to track exercise behavior and establish historical

The Company estimated volatility by considering historical stock volatility over the expected term of the option.

The risk-free

interest rates are based on the U.S.

Treasury yields for a period consistent with the expected term.

The Company expects no dividends

The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate

in determining the estimated fair value of the Company’s stock options granted in the years ended December 31, 2021 and 2020.

of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.

Option Information

summary of the Company’s option plans as of December 31, 2021 and 2020, as well as changes during each of the years then ended,

is presented below:

SUMMARY OF STOCK OPTION ACTIVITY

Outstanding at beginning of year

4 unchanged sentences

information regarding the options outstanding and exercisable at December 31, 2021 is as follows:

SUMMARY OF INFORMATION REGARDING TO OPTIONS OUTSTANDING AND EXERCISABLE

Exercise Prices

$0.14 –

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

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

$ 0.14 – $ 0.38

$ 0.40 – $ 0.62

compensation expense included in selling, general and administrative expense in the Company’s consolidated statements of operations

was approximately $ 75,000 and $ 35,000 in the years ending December 31, 2021 and 2020, respectively.

total compensation cost related to non-vested awards not yet recognized was approximately $ 59,000 as of December 31, 2021.

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

date of issuance.

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

A summary of warrant activity follows:

SUMMARY OF WARRANT ACTIVITY

Outstanding at beginning of year

2 unchanged sentences

warrants outstanding at December 31, 2021 have a weighted average remaining contractual life of approximately 14.5 months.

10—INCOME TAXES

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

tax expense consists of the following (in thousands):

NOTE 10— INCOME

(a) Composition

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

COMPOSITION OF LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES

Income tax expense

consists of the following (in thousands):

COMPONENTS OF INCOME TAX EXPENSE

State and local

Current Income Tax Expense

State and local

Deferred Income Tax Expense

Total income tax expense

Effective Income Tax Rates

forth below is a reconciliation between the federal tax rate and the Company’s effective income tax rates with respect to

continuing operations:

* less than 1

(b) Effective

Income Tax Rates

forth below is a reconciliation between the federal tax rate and the Company’s effective income tax rates with respect to continuing

SUMMARY OF RECONCILIATION BETWEEN FEDERAL TAX RATE

Year ended December 31,

4 unchanged sentences

Effective income tax rates

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

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

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

As of December 31,

4 unchanged sentences

Net operating loss and capital loss carryforwards

Deferred tax assets, gross

Valuation allowance

Net deferred tax assets

allowances relate principally to net operating loss carryforwards related to the Company’s consolidated tax losses as well

as state tax losses related the Company’s OmniMetrix subsidiary and book-tax differences related asset impairments and stock

compensation expense of the Company.

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

allowances relate principally to net operating loss carryforwards related to the Company’s consolidated tax losses as well as state

tax losses related the Company’s OmniMetrix subsidiary and book-tax differences related asset impairments and stock compensation

expense of the Company.

During the year ended December 31, 2021, the valuation allowance decreased by approximately $ 33,000 .

of Tax Loss Carryforwards

SUMMARY OF TAX LOSS CARRYFORWARDS

of December 31, 2021, 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 when or if a change of control were to occur

Taxation in the United States

Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

2025 – 2031 *

* 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 when or if a change of control were to

in the United States

Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017.

The Act reduces the U.S.

federal corporate tax

rate from 35% to 21%, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were

previously tax deferred and creates new taxes on certain foreign sourced earnings.

The most significant impact of the legislation

for the Company was a reduction of the value of the Company’s net deferred tax assets (which represent future tax benefits)

as a result of lowering the U.S.

corporate income tax rate from 35% to 21%.

The Act also includes a requirement to pay a one-time

transition tax (the “Transition Tax”) on the cumulative value of earnings and profits that were previously not repatriated

federal corporate tax rate from

35 % to 21 %, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred

and creates new taxes on certain foreign sourced earnings.

The most significant impact of the legislation for the Company was a reduction

of the value of the Company’s net deferred tax assets (which represent future tax benefits) as a result of lowering the U.S.

income tax rate from 35 % to 21 %.

The Act also includes a requirement to pay a one-time transition tax (the “Transition Tax”)

on the cumulative value of earnings and profits that were previously not repatriated for U.S.

income tax purposes.

The Company does not believe that it will be required to pay any Transition Tax on its previously

unrepatriated earnings and profits of its previously consolidated foreign subsidiaries.

The Company does not

believe that it will be required to pay any Transition Tax on its previously unrepatriated earnings and profits of its previously consolidated

foreign subsidiaries.

a holding company without other business activity in Delaware, the Company is exempt from Delaware state income tax.

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

11—RELATED PARTY BALANCES AND TRANSACTIONS

Director Fees

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,

in lieu of some or all of his or her retainer and board fees, that number of shares of Company common stock as shall have a value

equal to the applicable retainer and board fees, based on the closing price of the Company’s common stock on its then-current

trading platform or exchange on the last trading day immediately preceding the first day of the applicable year.

Once made, the

election shall be irrevocable for such election year and the shares subject to the election shall vest and be issued one-fourth

upon the first day of the election year and one-fourth as of the first day of each of the second through fourth calendar quarters

thereafter during the remainder of the election year.

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 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

General Information

of December 31, 2020, the Company operates in two reportable operating segments, both of which are performed though the Company’s

Thus, the Company’s

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

NOTE 11— RELATED

PARTY BALANCES AND TRANSACTIONS

and Director Fees

The Company recorded fees

to officers of approximately $ 517,000

and $ 510,000 for the years ended December 31, 2021 and 2020, respectively, which is included in selling, general and administrative

Company recorded fees to directors of approximately $ 59,000 for the years ended December 31, 2021 and 2020, 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, in

lieu of some or all of his or her retainer and board fees, that number of shares of Company common stock as shall have a value equal to

the applicable retainer and board fees, based on the closing price of the Company’s common stock on its then-current trading platform

or exchange on the last trading day immediately preceding the first day of the applicable year.

Once made, the election shall be irrevocable

for such election year and the shares subject to the election shall vest and be issued one-fourth upon the first day of the election year

and one-fourth as of the first day of each of the second through fourth calendar quarters thereafter during the remainder of the election

3 for information related to the sale of OmniMetrix Preferred Stock to one of the Company’s former directors in 2015 and the subsequent

repurchase of this Preferred Stock on July 1, 2019.

c) The related

party balance due to Acorn from OmniMetrix is approximately $ 4,217,000 for amounts loaned, accrued interest and expenses paid by Acorn

on Omni’s behalf as of December 31, 2021 as compared to approximately $ 4,575,000 as of December 31, 2020.

This balance is eliminated

in consolidation.

During 2021, the intercompany amount due to Acorn from OmniMetrix decreased by approximately $ 359,000 .

This included

repayments of approximately $ 677,000 offset by interest of approximately $ 194,000 , dividends of $ 76,000 due to Acorn and approximately

$ 48,000 in shared expenses paid by Acorn.

During 2020, the intercompany amount due to Acorn from OmniMetrix increased by approximately

This included repayments of approximately $ 435,000 offset by interest of approximately $ 253,000 , dividends of $ 76,000 due to

Acorn and approximately $ 176,000 in shared expenses paid by Acorn.

NOTE 12— SEGMENT

REPORTING AND GEOGRAPHIC INFORMATION

of December 31, 2021, the Company continues to operate in two reportable operating segments, both of which are performed through the Company’s

OmniMetrix subsidiary:

PG segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of

Things applications.

CP segment provides for remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

Company’s reportable segments are strategic business units, offering different products and services and are managed separately

The PG segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of Things applications.

The CP segment provides for remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

Company’s reportable segments are strategic business units, offering different products and services and are managed separately

as each business requires different technology and marketing strategies.

Information about profit or loss and assets

(b) Information

about profit or loss and assets

accounting policies of all the segments are those described in the summary of significant accounting policies.

The Company evaluates

performance based on net income or loss before taxes.

Company does not systematically allocate assets to the divisions of the subsidiaries constituting its consolidated group, unless

the division constitutes a significant operation.

Accordingly, where a division of a subsidiary constitutes a segment that does

not meet the quantitative thresholds of applicable accounting principles, depreciation expense is recorded against the operations

of such segment, without allocating the related depreciable assets to that segment.

However, where a division of a subsidiary

constitutes a segment that does meet the quantitative thresholds, related depreciable assets, along with other identifiable assets,

are allocated to such division.

The Company evaluates performance

based on net income or loss before taxes.

Company does not systematically allocate assets to the divisions of the subsidiaries constituting its consolidated group, unless the division

constitutes a significant operation.

Accordingly, where a division of a subsidiary constitutes a segment that does not meet the quantitative

thresholds of applicable accounting principles, depreciation expense is recorded against the operations of such segment, without allocating

the related depreciable assets to that segment.

However, where a division of a subsidiary constitutes a segment that does meet the quantitative

thresholds, related depreciable assets, along with other identifiable assets, are allocated to such division.

following tables represent segmented data for the years ended December 31, 2021 and 2020 (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.

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.

SUMMARY OF SEGMENTED DATA

Year ended December 31, 2021:

Revenues from external customers

Intersegment revenues

Segment gross profit

3 unchanged sentences

Revenues from external customers

Intersegment revenues

Segment gross profit

1 unchanged sentence

Segment income (loss) before income taxes

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, 2020 and 2019 (in thousands):

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, 2021 and 2020 (in thousands):

SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT OF OPERATIONS

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 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.

net cost of corporate headquarters

net (loss) income before taxes on income

SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT BALANCE SHEET

As of December 31,

3 unchanged sentences

Total consolidated assets

Revenues based on location of customer (in thousands):

SCHEDULE OF REVENUE FROM CUSTOMERS BY GEOGRAPHICAL AREAS

(in thousands)

Revenues based on location of customer :

United States

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

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

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

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

SCHEDULE OF REVENUES, ACCOUNTS RECEIVABLE FROM MAJOR CUSTOMERS

Invoiced Sales

1 unchanged sentence

* Balance is not significant.

13—REVENUE

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

NOTE 13— REVENUE

following table disaggregates the Company’s revenue for the years ended December 31, 2021 and 2020 (in thousands):

SCHEDULE OF DISAGGREGATES OF REVENUE

Year ended December 31, 2021:

3 unchanged sentences

revenue activity for the year ended December 31, 2021 can be seen in the table below (in thousands):

SCHEDULE OF DEFERRED REVENUE ACTIVITY

Balance at December 31, 2020

6 unchanged sentences

December 31, 2024 and thereafter

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 of approximately $ 890,000 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, 2020 can be seen in the table below (in thousands):

Balance at December 31, 2019

Deferred revenue, beginning balance

Additions during the period

1 unchanged sentence

Balance at December 31, 2020

Deferred revenue ending balance

Amounts to be recognized as revenue in the year ending:

2 unchanged sentences

December 31, 2023 and thereafter

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.

revenue of approximately $ 414,000 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):

Deferred charges activity for the year ended December 31, 2021 can be seen in the table

below (in thousands):

SCHEDULE OF DEFERRED CHARGES ACTIVITY

Balance at December 31, 2020

6 unchanged sentences

December 31, 2024 and thereafter

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

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.

included in other assets in the Company’s Consolidated Balance Sheets at December

costs (COGS) for monitoring services of approximately $ 349,000 and the COGS for the miscellaneous revenue from sales of custom design

hardware, upgrade kits, accessories and repairs of approximately $ 580,000 are expensed as incurred and are not deferred.

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

Balance at December 31, 2019

Deferred charges beginning balance

Additions during the period

1 unchanged sentence

Balance at December 31, 2020

Deferred charges ending balance

Amounts to be recognized as cost of sales in the year ending:

2 unchanged sentences

December 31, 2023 and thereafter

Amounts included in Other Assets in the Company’s Consolidated Balance Sheets at December 31, 2019.

costs (COGS) for monitoring services of approximately $544,000 and the COGS for the miscellaneous revenue from sales of accessories

* Amounts included in other assets in the Company’s Consolidated Balance Sheets at December

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.

Company pays its employees sales commissions for sales of HW and for first sales of monitoring services (not for renewals).

accordance with Topic 606, Revenue from Contracts with Customers, of the FASB Accounting Standards Codification (“ASC 606”),

the Company capitalizes as a contract asset the sales commissions on these sales.

Contract assets associated with HW are amortized

over the estimated life of the units which are currently estimated to be three years.

Contract assets associated with monitoring

services are amortized over the expected monitoring life including renewals.

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

In accordance

with Topic 606, Revenue from Contracts with Customers, of the FASB Accounting Standards Codification (“ASC 606”), the Company

capitalizes as a contract asset the sales commissions on these sales.

Contract assets associated with HW are amortized over the estimated

life of the units which are currently estimated to be three years.

Contract assets associated with monitoring services are amortized over

the expected monitoring life including renewals.

following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December 31, 2021

(in thousands):

SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS

Balance at December 31, 2020

3 unchanged sentences

capitalized sales commissions are included in other current assets (approximately $ 138,000 ) and other assets (approximately $ 157,000 )

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

in the Company’s Consolidated Balance Sheets at December 31, 2021.

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

Sales commissions contract assets beginning balance

Additions during the period

1 unchanged sentence

Balance at December 31, 2020

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

January 1, 2021, 30,000 options in the aggregate were issued to directors with an exercise price of $0.37 and that vest in equal

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

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

Sales commissions contract assets ending balance

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.

NOTE 14— SUBSEQUENT

January 1, 2022, 30,000 options in the aggregate were issued to directors with an exercise price of $ 0.63 and that vest in equal increments

on January 1, 2022, April 1, 2022, July 1, 2022 and October 1, 2022 valued at $ 12,000 in the aggregate.

January 1, 2022, 35,000 options were issued to the CEO with an exercise price of $ 0.63 and that vest in equal increments on January 1,

2022, April 1, 2022, July 1, 2022 and October 1, 2022 valued at approximately $ 14,000 .

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.

February 1, 2022, the Company’s agreement with Sales Force renewed for an additional one-year term .

The monthly payments during

the term of this agreement are approximately $ 2,000 .

February 7, 2022, the Company entered into a Mobile Business Agreement with AT&T for business communications services including new

phone equipment for all office-based employees.

The agreement has a term of two years .

The monthly recurring charges under this agreement

are $ 675 and the total nonrecurring fee paid at the inception of the agreement was $ 2,475 .

March 4, 2022, 30,770

options were issued to the Vice President of Sales with an exercise price of $ 0.55

and that vest

in equal increments over three years on the anniversary date of the issuance with the last tranche vesting on March 4, 2025 .

options are valued at approximately $ 10,000 .

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