What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-16 compared with 2022-03-31 · 244 added, 272 removed, 129 unchanged (80% of the section changed)

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Risk Factors.”

dollar amounts in the discussion below are rounded to the nearest thousand and, thus, are approximate.

currently operate in two reportable operating segments, both of which are performed through our OmniMetrix subsidiary:

PG segment which provides wireless remote monitoring and control systems and services for critical assets as well as Internet of

Things applications;

CP segment which provides for remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

PG segment which provides wireless remote monitoring and control systems and IoT applications for residential and commercial/industrial

power generation equipment.

This includes our AIRGuard product, which remotely monitors and controls industrial air compressors and

our Smart Annunciator product which is typically sold to commercial customers that require a visual representation of the generator’s

status and has a touch-screen display that indicates the current state of that generator;

CP segment which provides remote monitoring and control products for cathodic protection systems on oil and gas pipelines serving

the gas utilities market and pipeline operators.

The CP product lineup includes solutions to remotely monitor and control

rectifiers, test stations and bonds.

OmniMetrix also offers the industry’s first RAD TM (Remote AC Mitigation

Disconnect) that mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation

tools which can drastically reduce a company’s expense while increasing employee safety.

following analysis should be read together with the segment information provided in Notes 11 and 12 to our consolidated financial statements

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increasingly becoming monitored in IoT applications.

OmniMetrix solutions monitor critical equipment used by cell towers, manufacturing plants, medical facilities, data

centers, retail stores, public transportation systems, energy distribution and federal, state and municipal government facilities, in

addition to residential back-up generators.

Given that OmniMetrix monitors all major brands of critical equipment and continues

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a competitive participant in this market to continue to grow its customer base and expand its product offerings.

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 million.

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%.

OmniMetrix also agreed 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.

service charge and interest was calculated on the greater of the outstanding balance or $150,000.

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.

had an outstanding balance of approximately $149,000 at December 31, 2020, pursuant to the loan and security agreement.

We repaid the

outstanding balance in February 2021 and elected not to renew this line of credit, which expired in accordance with its terms on February

Business Administration Paycheck Protection Program (“SBA PPP”)

April 24, 2020, Acorn Energy, Inc.

received SBA PPP loan proceeds in the amount of $41,600.

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

the SBA PPP of the Coronavirus Aid, Relief and Economic Security Act (the “CARES 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 CARES Act and any rule, regulation, or guidance issued by the SBA pursuant

to the CARES Act (collectively, the “Forgiveness Provisions”).

The amount of forgiveness of the SBA 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 CARES 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 SBA 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 SBA 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 SBA PPP loan proceeds received by 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.

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 $70,000.

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.

We believe that OmniMetrix will not need working capital support in 2022.

However, we have no assurance

that this will be the case.

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

an equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or a combination of the above.

The availability and

amount of any additional loans from Acorn to OmniMetrix may be limited by the working capital needs of our corporate activities.

Acorn will have the resources necessary to provide funding, or whether alternative funds, such as third-party loans or investments, will

be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.

of March 28, 2022, Acorn’s corporate operations (excluding cash at our OmniMetrix subsidiary) held a total of approximately

$64,000 in cash.

2022, the intercompany amount due to Acorn from OmniMetrix decreased by $540,000.

This included repayments of $985,000 offset by interest

of $179,000, dividends of $76,000 due to Acorn and $190,000 in shared expenses paid by Acorn.

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.

We believe that

OmniMetrix will not need working capital support in 2023.

However, we have no assurance that this will be the case.

Additional financing

for OmniMetrix may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn which could then facilitate

a loan by Acorn to OmniMetrix, or a combination of the above.

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

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

Whether Acorn will have the resources necessary to provide funding,

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

and OmniMetrix cannot be determined at this time.

of March 14, 2023, Acorn’s corporate operations (excluding cash at our OmniMetrix subsidiary) held a total of $1,480,000 in cash.

March 2, 2023, 35,000 warrants that were set to expire on March 16, 2023 were exercised at an exercise price of $0.13 per share by

our Chief Executive Officer.

February 27, 2023, 10,000 options in the aggregate were issued to the Director of Software Development and Technology with an exercise

price of $0.41 and that vested in equal increments over three years on the anniversary date of the grant, valued at $3,000 in the aggregate.

January 3, 2023, 30,000 options in the aggregate were issued to directors with an exercise price of $0.35 and that vested in equal increments

on January 1, 2023, April 1, 2023, July 1, 2023 and October 1, 2023, valued at $9,000 in the aggregate.

January 1, 2023, 35,000 options were issued to the CEO with an exercise price of $0.35 and that vest in equal increments on January 1,

2023, April 1, 2023, July 1, 2023 and October 1, 2023 valued at $9,000.

November 22, 2022, 10,000 vested options were exercised by a board member with an exercise price of $0.14 per share or $1,400 in the

These options had an expiration date of January 1, 2023.

August 12, 2022, 25,000 vested options were exercised by the CEO with an exercise price of $0.20 per share or $5,000 in the aggregate.

These options had an expiration date of August 13, 2022.

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 grant.

These options are valued at $11,000.

June 1, 2022, 50,000 options were issued to the CFO with an exercise price of $0.44 and vesting in equal increments on June 1, 2022,

September 1, 2022, December 1, 2022 and March 1, 2023, valued at $16,000.

January 1, 2022, 30,000 options in the aggregate were issued to directors with an exercise price of $0.63 and that vested 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 vested in equal increments on January

1, 2022, April 1, 2022, July 1, 2022 and October 1, 2022, valued at $14,000.

June 2022, we conducted an evaluation of the status of an ERP software customization project that had been initiated in July 2019 and

As a result of this evaluation, we elected to terminate this project effective June 30, 2022 and recorded an impairment

against the capitalized investment in this project of $51,000.

July 2022, we announced a partnership between OmniMetrix, CPower Energy Management (“ CPower ”), and Power Solutions

Specialists TX (“PSS”) designed to help homeowners that install next-generation standby generators to earn compensation for

offering grid relief, known as “demand response,” to the Electric Reliability Council of Texas (“ERCOT”).

demand response solutions, combined with OmniMetrix’s remote control capabilities, allow the shifting of electricity production

to PSS’s best-in-class residential standby generators for a few hours each year when the grid is stressed or ERCOT energy pricing

is high, without the homeowner needing to take any action.

Homeowners are compensated for signing up and possibly supplying grid offload

by running their generators for up to 12 hours per year.

We do not expect this partnership to begin generating revenue until late 2023.

August 19, 2019, we entered into an agreement with a software development partner to create and license to us a new software platform

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to $4,450 effective October 1, 2021.

The annual licensing fee moving forward will be $17,800, which will be paid in quarterly increments

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.

The initial term of this agreement ended

on August 19, 2022 and would have automatically renewed for an additional year, but we delivered a written notice of termination to the

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

We are currently on a month-to-month arrangement paying a monthly licensing

fee of $1,500, and are working with the software development partner to negotiate more favorable terms for future periods.

entered into a new agreement effective May 1, 2020 for data hosting services, replacing an expiring agreement with the same vendor.

agreement has a twelve-month term.

agreement had a twelve-month term.

In January 2021, we elected to renew this agreement for an additional twelve months under the same

terms, extending the agreement to April 30, 2022.

Under the applicable data hosting services agreements, we paid approximately $158,000

and $137,000 in the years ended December 31, 2021 and 2020, respectively.

March 17, 2021, we entered into a master services agreement for the development of a new user interface for its customer data portal.

The cost of this project will be approximately $119,000 in design and development services ($14,000 was paid at the commencement of this

project and four equal installments of approximately $23,000 were paid monthly starting in July 2021 with the fourth and final installment

to be paid upon completion and launch of the new interface).

This project is substantially completed and the launch of the new customer

portal is expected in the second quarter of 2022.

We did not extend this agreement for an additional one-year term beyond the expiration

of the previous term on April 30, 2022 and were under a month-to-month arrangement which we terminated effective September 30, 2022.

Under the applicable data hosting services agreements, we paid $110,000 and $158,000 in the years ended December 31, 2022 and 2021, respectively.

March 17, 2021, we entered into a master services agreement for the development of a new user interface for our customer data portal.

The cost of this project is $126,000 in design and development services ($14,000 was paid at the commencement of this project and three

equal installments of $23,000 were paid monthly starting in July 2021 with the fourth and final installment to be paid upon completion

and launch of the new interface).

This project is substantially completed and the launch of the new customer portal is expected to occur

in the first half of 2023.

We expect to incur additional costs to execute the launch plan for the interface and to develop the corresponding

mobile application.

The cost of the design project is capitalized, and amortization will begin once the new interface is completed and

ready to deploy.

master services agreement also covers the design, set-up and deployment of a new Microsoft Azure cloud infrastructure to host our OmniView

data servers which will replace our existing Peak 10 datacenter hosting environment.

The new infrastructure will provide a more modern,

agile and cost effective environment in which to grow our IoT connections and services.

The new Microsoft Azure cloud infrastructure

environment is expected to be completed and deployed on or about May 1, 2022.

We invested approximately $166,000 in this initiative during

the year ended December 31, 2021.

Additional investment in this project is ongoing and the total investment is dependent on the professional

hours required to complete, test and successfully deploy the new environment.

cost of these projects are capitalized and amortization will begin once the new interface and the new infrastructure environment are

completed and ready to deploy.

data servers, which replaced our previous Peak 10 datacenter hosting environment.

The new infrastructure provides a more modern, agile

and cost-effective environment in which to grow our IoT connections and services.

We invested $272,000 in this initiative during the

year ended December 31, 2022 and $166,000 during the year ended December 31, 2021.

The new Microsoft Azure cloud infrastructure environment

was completed and launched on May 1, 2022.

The cost of this project was capitalized, and amortization over an estimated useful life of

seven years began on May 1, 2022.

ACCOUNTING POLICIES

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following discussion of critical accounting policies represents our attempt to report on those accounting policies, which we believe

are critical to our consolidated financial statements and other financial disclosure.

It is not intended to be a comprehensive list of

all of our significant accounting policies, which are more fully described in Note 2 of the Notes to the Consolidated Financial Statements

are critical to our consolidated financial statements and other financial disclosures.

It is not intended to be a comprehensive list

of all of our significant accounting policies, which are more fully described in Note 2 of the Notes to the Consolidated Financial Statements

included in this Annual Report.

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selection of an available alternative policy would not produce a materially different result.

We have identified the following

as critical accounting policies affecting our Company:

have identified the following as critical accounting policies affecting our Company:

revenue recognition and stock-based compensation.

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compensation expense to reflect these differences.

the years ended December 31, 2021 and 2020, we incurred stock compensation expense with respect to options of approximately $75,000 and

$35,000, respectively.

the years ended December 31, 2022 and 2021, we incurred stock compensation expense with respect to options of $80,000 and $75,000, respectively.

Note 8 to the consolidated financial statements for the assumptions used to calculate the fair value of share-based employee compensation

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the Years Ended December 31,

(in thousands,

except per share data)

Cost of sales

Research and development expenses, net

Selling, general and

administrative expenses

Finance expense, net

Gain on SBA loan extinguishment

Income before income taxes

Income tax expense

(loss) income

Non-controlling interest share of income

(loss) income attributable to Acorn Energy, Inc.

Basic and diluted net (loss) income per share

attributable to Acorn Energy, Inc.

shareholders:

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 – basic

Weighted average number

of shares outstanding attributable to Acorn Energy, Inc.

shareholders – diluted

thousands, except per share data)

and development expenses

general and administrative expenses

before income taxes

loss after income taxes

Non-controlling

interest share of loss

loss attributable to Acorn Energy, Inc.

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

stockholders:

loss per share attributable to Acorn Energy, Inc.

stockholders – basic and diluted

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

stockholders – basic

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

stockholders – diluted

following table sets forth certain information with respect to revenues and profits of our reportable business segments for the years

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Year ended December 31, 2022:

Revenues from

external customers

Percentage of total revenues

from external customers

Revenues from customers

Percentage of total revenues from customers

Segment gross profit

Year ended December 31, 2021:

Revenues from external

Percentage of total revenues

from external customers

Revenues from customers

Percentage of total revenues from customers

Segment gross profit

COMPARED TO 2021

In 2021, OmniMetrix recorded total revenue of approximately $6,776,000, as compared to total revenue of approximately $5,922,000

in 2020, for an increase of approximately $854,000 (14%).

In 2022, OmniMetrix recorded total revenue of $7,000,000, as compared to total revenue of $6,776,000 in 2021, for an increase of

$224,000 (3%).

As previously stated, OmniMetrix has two divisions:

The PG segment

includes our monitoring device for generators, industrial air compressors and our annunciator products.

The CP segment includes our monitoring

device for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators.

In 2021, revenue of

approximately $5,787,000 was attributed to the PG segment and revenue of approximately $989,000 was attributed to the CP segment, as

compared to the 2020 revenue of approximately $4,988,000 that was attributed to the PG segment and approximately $934,000 that was attributed

to the CP segment.

Increased revenue in PG was due to an increase in hardware revenue of 31% from approximately $2,103,000 in 2020 to

approximately $2,746,000 in 2021.

In addition to the increase in hardware revenue, monitoring revenue increased 6% from approximately

$3,819,000 in 2020 to approximately $4,030,000 in 2021.

The increase in hardware revenue is primarily due to an increase of hardware

sales in the PG segment.

However, we also had an increase in CP hardware revenue of approximately $48,000 (7%).

The overall increase

in hardware revenue was due to a higher percentage of commercial and industrial (C&I) customers versus residential (RESI) customers

in our customer mix and an increase in the number of monitoring devices sold on a consolidated segment basis in 2021, when compared to

2020, which is, in part, as a result of the sunsetting of 3G units which are replaced with LTE units.

The C&I products have a higher

price point than the RESI products;

thus, the customer concentration of increasing C&I customers has a positive impact on our revenue

Monitoring revenue did not increase ratably with hardware revenue due to the sale of hardware units that replace sunsetting

3G units and our dealers focus on the impact to their business of the 3G sunsetting.

These replacement units assume the remaining prepaid

monitoring plan of the sunsetting unit at the time of the physical replacement of the unit.

Gross profit for 2021 was approximately $4,899,000 reflecting a gross margin of 72% on revenue, compared with a gross profit

of approximately $4,131,000 reflecting a 70% gross margin on revenue in 2020.

The 2021 gross margin slightly outpaced the 2020 gross

margin despite increases in our cost of sales due to supply chain constraints, as we implemented a price increase to help offset the

increasing cost of sales, in addition to the impact of the strengthening margin on our monitoring revenue, which increased from 84% to

The increase in our margin on monitoring revenue is a result of the successful negotiation with our carrier of a more favorably-structured

cellular data rate plan for our business in the first quarter of 2021.

The PG segment includes our monitoring device for generators,

industrial air compressors and our annunciator products.

The CP segment includes our monitoring device for cathodic protection systems

on gas pipelines serving the gas utilities market and pipeline operators.

In 2022, revenue of $5,894,000 was attributed to the PG segment

and revenue of $1,106,000 was attributed to the CP segment, as compared to the 2021 revenue of $5,787,000 that was attributed to the

PG segment and $989,000 that was attributed to the CP segment.

Increased revenue in PG was due to an increase in hardware revenue.

the year ended December 31, 2021, we recorded $112,000 in revenue from the sale of custom TG Pro units that were designed to large customer

specifications and monitored by the customer;

thus, the revenue was not deferred.

We did not have any custom unit orders in the year

ended December 31, 2022.

The PG hardware revenue during the year ended December 31, 2021, excluding the revenue from the sale of the

custom units, was $1,906,000 compared to $2,234,000 during the year ended December 31, 2022;

thus, the increase in PG hardware revenue

excluding the custom units was 17%.

We also had an increase in CP hardware revenue of $126,000 (17%) from $728,000 during the year ended

December 31, 2021 to $854,000 during the year ended December 31, 2022.

The overall increase in hardware revenue was due to a higher percentage

of commercial and industrial (C&I) customers in our customer mix for which the products have a higher price point versus residential

(RESI) customers.

With respect to the specific products, this increase was attributed to Hero-2 and TG Pro revenue and to a lesser extent

TG-2 revenue in addition to engineering service income realized, offset by a decrease in revenue from the Hero-1, Patriot and TG-1 products.

Monitoring revenue decreased $118,000 (3%) from $4,030,000 during the year ended December 31, 2021 to $3,912,000 during the year ended

December 31, 2022.

The decrease in monitoring revenue was due to the impact of the connections for which monitoring was discontinued

as a result of sunsetting 3G technology in addition to certain monitoring rebates applied for two of our larger customers, one in CP

and one in PG.

Gross profit was $5,071,000, reflecting a gross margin of 72% on revenue, in 2022 compared with a gross profit of $4,899,000,

also reflecting a 72% gross margin on revenue, in 2021.

Gross margin on hardware revenue for the year ended December 31, 2022 was 48%

compared to 44% for the year ended December 31, 2021.

Gross margin on monitoring revenue was 92% for the year ended December 31, 2022

compared to 91% for year ended December 31, 2021.

and development (“R&D”) expense.

During 2021, OmniMetrix recorded approximately $739,000 of R&D expense as compared

to approximately $619,000 in 2020, an increase of approximately $120,000 (19%).

The increase in R&D expense in 2021 is related to

increases in wages and bonuses paid to our engineering personnel in 2021 and the expenses and materials paid to third party consultants

in the continued development of next generation PG and CP products and exploration into new possible product lines.

We expect an increase

of approximately 15% in R&D expense in 2022 as we continue to work on certain initiatives to redesign products and expand product

lines to increase the level of innovation and gain more market share.

During 2022, OmniMetrix recorded $845,000 of R&D expense as compared to $739,000

in 2021, an increase of $106,000 (14%).

The increase in R&D expense in 2022 is related to increases in wages and bonuses paid to

our engineering personnel in 2022 and the expenses and materials paid to third-party consultants in the continued development of next-generation

PG and CP products and exploration into new possible product lines.

We expect a moderate increase in R&D expense for 2023 due to

engineering salary increases granted effective October 1, 2022 and for continued investment in work on certain initiatives to redesign

products and expand product lines to increase our level of innovation ahead of our competitors.

general and administrative (“SG&A”) expense.

Consolidated SG&A expense in 2021 increased by approximately $346,000

(9%) from approximately $3,822,000 in 2020 to approximately $4,168,000 in 2021.

Corporate overhead increased by approximately

$43,000 from approximately $890,000 in 2020 to approximately $933,000 in 2021, due to increases in the cost of insurance and audit fees.

OmniMetrix’s SG&A expense increased approximately $303,000 (10%) from approximately $2,932,000 in 2020 to approximately

$3,235,000 in 2021.

This increase was primarily due to increases of (i) $151,000 in personnel expenses related to bonuses, promotional

wage increases, staff additions and stock compensation expense, (ii) $83,000 in software license fees due to the launch of our enhanced

customer interface software for CP customers in 2021 and additional fees from the increase in the number of users of certain accounting

and operations software, (iii) $53,000 in depreciation and amortization expenses attributed to the launch of the customer interface software

for CP customers and also the depreciation of new office equipment and computers purchased in 2021 and (iv) $38,000 in commissions

due to the increase in cash-basis sales in 2021 and the achievement of established sales targets.

The increases in these categories were offset by decreases in occupancy expense, travel and entertainment expenses

and dues and subscription expenses.

We anticipate that our annual SG&A costs in 2022 will increase approximately 15% due to increasing

wage and benefit expenses and due to our continuing investments in technology and operations.

Consolidated SG&A expense in 2022 increased by $636,000 (15%), from

$4,168,000 in 2021 to $4,804,000 in 2022.

Corporate overhead increased by $26,000, from $933,000 in 2021 to $959,000 in 2022, due to

increases in audit fees and investor relations expenses offset by a decrease in tax professional fees.

OmniMetrix’s SG&A expense

increased $610,000 (19%), from $3,235,000 in 2021 to $3,845,000 in 2022.

This increase was primarily due to increases of (i) $248,000

in personnel expenses related to bonuses, promotional wage increases, staff additions and stock compensation expense, (ii) $212,000 in

technology expenses related to technology consulting, amortization of technology investments and increased managed services expenses,

(iii) $55,000 in sales commissions, (iv) $53,000 in travel related expenses, and (v) $45,000 increase in depreciation related to additional

office equipment and computers purchased in 2021 and 2022 and a net decrease of $3,000 in other expense accounts.

We anticipate that

our annual SG&A costs in 2023 will increase by approximately 15% due to increasing wage and benefit expenses and due to our continuing

investments in technology and operations.

June 2022, we conducted an evaluation of the status of an ERP software customization project that had been initiated in July 2019 and

As a result of this evaluation, we elected to terminate this project effective June 30, 2022 and recorded an impairment

against the capitalized investment in this project of $51,000.

expense, net.

Finance expense in 2021 was comprised of interest expense and service charges of approximately $4,000 associated with

OmniMetrix’s line of credit and miscellaneous net interest expense of approximately $1,000.

Finance expense in 2020 was comprised

of interest expense and service charges of approximately $28,000 associated with OmniMetrix’s line of credit, miscellaneous net

interest expense of approximately $3,000 and currency exchange loss of approximately $4,000.

on SBA PPP loan extinguishment .

On April 24, 2020, Acorn Energy, Inc.

received SBA PPP loan proceeds in the amount of $41,600.

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

the PPP of the CARES 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 CARES Act

and any rule, regulation, or guidance issued by the SBA pursuant to the CARES 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 CARES 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

elected not to apply for forgiveness of the PPP loan proceeds received by Acorn Energy, Inc., in the amount of $41,600 plus accrued interest

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

Finance expense in 2022 was $2,000, compared to $5,000 in 2021, primarily related to insurance financing arrangements.

loss attributable to Acorn Energy.

We had net loss attributable to Acorn Energy of approximately $21,000 in 2021 as compared

to net income of approximately $69,000 in 2020.

Our income in 2021 is comprised of net income at OmniMetrix of approximately $921,000,

corporate expense of approximately $934,000, offset by approximately $8,000 representing the non-controlling interest share of our

income in OmniMetrix.

income in 2020 is comprised of net income at OmniMetrix of approximately $549,000, corporate expense of approximately $894,000 offset

by the gain on the extinguishment of the PPP loan of approximately $421,000 and approximately $7,000 representing the non-controlling

interest share of our income in OmniMetrix.

We had a net loss attributable to Acorn of $633,000 in 2022 as compared to net loss attributable

to Acorn of $21,000 in 2021.

Our loss in 2022 is comprised of net income at OmniMetrix of $331,000, corporate expense of $962,000, offset

by $2,000 representing the non-controlling interest share of our income in OmniMetrix.

Our loss in 2021 is comprised of net income at

OmniMetrix of $921,000, corporate expense of $934,000, offset by $8,000 representing the non-controlling interest share of our income

in OmniMetrix.

AND CAPITAL RESOURCES

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

Our working capital includes 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.

Total deferred revenue increased approximately $839,000 at December 31, 2021 from approximately $4,554,000 at December

31, 2020 as a result of a significant increase in cash sales which we have to amortize over a three-year period in accordance with GAAP.

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.

the year ended December 31, 2021, our operating activities provided approximately $132,000 of net cash.

December 31, 2022, we had a negative working capital of $561,000.

Our working capital includes $1,450,000 of cash and deferred

revenue of $3,984,000.

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

deferred revenue increased by $778,000, from $5,393,000 at December 31, 2021 to $6,171,000 at December 31, 2022,

as a result of the increase in cash sales which we amortize over a three-year period in accordance with GAAP.

Net cash decreased

during the year ended December 31, 2022 by $272,000, of which $31,000 was provided by operating activities, $308,000 was used in

investing activities, and $5,000 was provided by financing activities.

the year ended December 31, 2022, our operating activities provided $31,000 of net cash.

Our OmniMetrix subsidiary provided $916,000

approximately $1,035,000 from its operations while our corporate headquarters used approximately $903,000 in its operating activities

during the period.

OmniMetrix’s inventory balance increased $381,000 at December 31, 2021 due to our efforts to mitigate the

supply chain challenges and have adequate safety stock on hand.

from its operations while our corporate headquarters used $885,000 in its operating activities during the period.

inventory balance increased by $172,000 at December 31, 2022 as compared to December 31, 2021, due to our continuing efforts to mitigate

the supply chain challenges and have adequate safety stock on hand.

During the year ended December 31, 2021, our operating activities

provided approximately $464,000.

Our OmniMetrix subsidiary provided approximately $1,366,000 from its operations while our corporate

headquarters used approximately $902,000 in its operating activities during the same period.

the year ended December 31, 2021, net cash of approximately $324,000 was used in investment activities, primarily in our technology infrastructure.

These investments include the development of a new user interface for our PG customers and the design of a new cloud server environment,

as well as investments in hardware and software upgrades.

In addition, we had capital expenditures of approximately $7,000 related to

minor leasehold improvements.

Net cash of approximately $101,000 was used in investing activities in 2020 which was primarily investments

cash of approximately $149,000 was used by financing activities during the year ended December 31, 2021 as repayments on our line of

Net cash of approximately $453,000 was provided by financing activities which was comprised of approximately $421,000 in proceeds,

net of repayments, from the SBA PPP loan, approximately $13,000 in net proceeds from OmniMetrix’s line of credit described above

under the heading “OVERVIEW AND TREND INFORMATION — OmniMetrix Line of Credit”, and approximately $19,000 in proceeds

from the exercise of stock options.

previously discussed, we elected not to renew OmniMetrix’s line of credit and it expired in accordance with its terms on February

If we decide to pursue additional financing for OmniMetrix in the future, it may be in the form of a bank line, a new loan

or investment by others, an equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or a combination of the

The availability and amount of any additional loans from Acorn to OmniMetrix may be limited by the working capital needs of our

corporate activities.

Whether Acorn will have the resources necessary to provide funding, or whether alternative funds, such as third-party

loans or investments, will be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.

provided $132,000.

Our OmniMetrix subsidiary provided $1,035,000 from its operations while our corporate headquarters used $903,000 in

its operating activities during the same period.

the year ended December 31, 2022, net cash of $308,000 was used in investing activities, primarily in our technology infrastructure.

These investments were primarily related to the design of our new Azure cloud server environment, as well as investments in the development

of our new user interface for our PG customers and hardware and software upgrades.

Net cash of $324,000 was used in investing activities

in 2021 which was also related to the technology investments in which we continued to invest in 2022.

cash of $5,000 was provided by financing activities during the year ended December 31, 2022 which represents proceeds from the exercise

of stock options.

cash of $149,000 was used by financing activities during the year ended December 31, 2021 as repayments on our line of credit.

not to renew OmniMetrix’s line of credit and it expired in accordance with its terms on February 28, 2021.

If we decide to pursue

additional financing for OmniMetrix in the future, it may be in the form of a bank line, a new loan or investment by others, an equity

raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or a combination of the above.

The availability and amount

of any additional loans from Acorn to OmniMetrix may be limited by the working capital needs of our corporate activities.

Whether Acorn

will have the resources necessary to provide funding, or whether alternative funds, such as third-party loans or investments, will be

available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.

Liquidity Matters

owes Acorn approximately $4,217,000 for loans, accrued interest and expenses advanced to it by Acorn.

OmniMetrix has made monthly payments

to Acorn of varying amounts since the second quarter of 2019.

In 2021, OmniMetrix made payments to Acorn of $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.

OmniMetrix will

continue to make payments to Acorn against this balance as long as OmniMetrix is generating sufficient cash to allow such repayments.

This intercompany balance is eliminated in consolidation.

had approximately $1,722,000 of cash on December 31, 2021, and approximately $1,825,000 on March 28, 2022.

that such cash, plus the cash expected to be 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.

We may, at some point, elect to obtain a new line of credit or other source of

financing to fund additional investments in the business.

owes Acorn $3,677,000 for loans, accrued interest and expenses advanced to it by Acorn.

OmniMetrix has made monthly payments to Acorn

of varying amounts since the second quarter of 2019.

In 2022, OmniMetrix made payments to Acorn of $985,000 offset by interest of $179,000,

dividends of $76,000 due to Acorn and $190,000 in shared expenses paid by Acorn.

OmniMetrix will continue to make payments to Acorn against

this balance as long as OmniMetrix is generating sufficient cash to allow such repayments.

This intercompany balance is eliminated in

consolidation.

had $1,450,000 of cash on December 31, 2022, and $1,480,000 on March 14, 2023.

We believe that such cash, plus the cash expected to

be generated from operations, will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their

current level of operations for the twelve months from the issuance of these consolidated financial statements

in particular.

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

in the business.

Obligations and Commitments

1 unchanged sentence

PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS

Ending December 31,

Years Ending December 31,

(in thousands)

2 unchanged sentences

Contractual services

obligations**

Total contractual cash

Purchase obligations**

Total contractual cash obligations

the gross amount of the operating lease liabilities.

Does not include rent amounts to be received under the sublease.

**Reflects open purchase orders for components/parts to be delivered

over the next twelve months as sales forecast requires.

open purchase orders for components/parts to be delivered over the next twelve months as sales forecast requires.

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 7. Management’s Discussion and Analysis