What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-31 · 649 added, 713 removed, 857 unchanged (61% of the section changed)

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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

There were no changes in our internal control over financial reporting

during our fourth quarter ended December 31, 2022, that could significantly affect, that materially

affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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from December 2016 until May 2019.

He has served as President, Executive Chairman and

board member of Novelstem International Corp since July 2018.

Attributes, Experience and Skills.

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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 .

He is on the Board of Directors of Fields

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.

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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

Ms Clifford has served as a board member of Novelstem International Corp since

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.

Attributes, Experience and Skills.

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Further, we have implemented

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

measures to ensure 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 2022 our executive officers and directors complied

with the filing requirements of Section 16(a).

with the filing requirements of Section 16(a) other than Jan H.

Loeb, who filed a late Form 4 on January 3, 2023 to report purchases

made on December 1, 2022, December 27, 2022 and December 28, 2022.

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

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Compensation Table

Principal Position

President and CEO of the

Company and Acting CEO of OmniMetrix (1)

CFO of the Company and

COO of OmniMetrix (2)

and Principal Position

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

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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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.

(i) a risk-free interest rate of 2.9% (ii) an expected term of 3.69 years (iii) an assumed

volatility of 93% and (iv) no dividends.

Compensation for 2022 and 2021

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to the 2022 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

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 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 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;

remaining options vested 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 directors.

2022 Consulting Agreement expired on December 31, 2022;

the Company and Mr.

Loeb have entered into a new Consulting Agreement for 2023

as described below.

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

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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 2022

as described below.

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 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.

Twenty-five 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

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.

On June 1, 2018, Tracy S.

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Concurrent with the appointment of 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.

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

She received cash compensation from January

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

On June 1, 2022, the Company entered

into an Amended and Restated Consulting Agreement (the “New Consulting Agreement”) for the provision of Ms.

services as both CFO of Acorn and COO of OmniMetrix.

The New Consulting Agreement amends, restates and replaces in its entirety the Consulting

Agreement dated as of June 1, 2018.

The New Consulting Agreement began on June 1, 2022, has a one-year term, and automatically renews

for an additional year upon the expiration of each one-year term unless earlier terminated as provided therein.

Pursuant to the New Consulting

Agreement, Ms.

Clifford receives cash compensation of $17,500 per month, and received a grant on June 1, 2022 of options to purchase

50,000 shares of our common stock, with an exercise price of $0.44 per share, which was the closing price of the common stock on May

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

the remaining options vested in three equal increments on

September 1, 2022, December 1, 2022 and March 1, 2023, 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.

received 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 vested and became exercisable on the first anniversary of

the date of the grant and shall expire upon the earlier of (a) seven years from the date of the grant or (b) 18 months from the date

Clifford ceases to be a consultant to the Company.

input on executive compensation .

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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.

directly to our independent directors by emailing 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.

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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

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.

Clifford On June 1, 2022, the Company entered into an Amended and Restated Consulting Agreement (the “New Consulting

Agreement”) for the provision of Ms.

Clifford’s services as both CFO of Acorn and COO of OmniMetrix.

The New Consulting Agreement

amends, restates and replaces in its entirety her original Consulting Agreement dated as of June 1, 2018.

The New Consulting Agreement

began on June 1, 2022, has a one-year term, and automatically renews for an additional year upon the expiration of each one-year term

unless earlier terminated as provided therein.

Pursuant to the New Consulting Agreement, Ms.

Clifford receives cash compensation of $17,500

per month, and received a grant on June 1, 2022 of options to purchase 50,000 shares of our common stock, with an exercise price of $0.44

per share, which was the closing price of the common stock on May 31, 2022.

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

the remaining options vested in three equal increments on September 1, 2022, December 1, 2022 and March 1, 2023, 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

Equity Awards at 2022 Fiscal Year End

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Expiration Date

Warrants held by Leap Tide Capital Management, LLC.

were held by Leap Tide Capital Management, LLC.

(2) Warrants were exercised in full on March 2, 2023.

and Warrant Exercises

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the terms of the consulting agreement with Ms.

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

Clifford, in the event of termination by the Company other than for cause, Ms.

shall be entitled to a continuation, for a period of six months following the date of such termination, of the monthly cash compensation

in effect at the time of such termination.

There are no other amounts due under any other termination scenario under the terms of her

consulting agreement.

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

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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)

following table and the notes thereto set forth information, as of March 14, 2023, 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

and Address of Beneficial Owner (1) (2)

Common Stock Beneficially

Outstanding (2)

8,025,737 (3)

1,151,813 (4)

2,882,974 (5)

All executive officers and directors of the

Company as a group (5 people)

11,482,807 (8)

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

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

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

shares held by Leap Tide Capital Acorn LLC, 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.

of 258,481 shares held by Mr.

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 65,250 shares underlying currently exercisable

shares held by Leap Tide Capital Acorn LLC, and 192,500 shares underlying currently exercisable options held by Mr.

is the sole manager of Leap Tide Capital Acorn LLC, with sole voting and dispositive power over the securities held by such entity.

Loeb disclaims beneficial ownership of the securities held by Leap Tide Capital Acorn LLC except to the extent of his pecuniary

interest therein.

of 1,091,813 shares beneficially held by Mr.

Mohr (including 833,332 shares held by UE Systems Inc.), and 70,000 shares underlying

currently exercisable options.

of 2,817,724 shares beneficially held by Mr.

Osterer (including 833,332 shares held by UE Systems Inc.), and 75,250 shares underlying

currently exercisable options.

of 90,615 shares and 65,000 shares underlying currently exercisable options.

solely of currently exercisable options.

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

of 10,000 shares and 260,000 shares underlying currently exercisable options.

of 11,163,435 shares and 662,750 shares underlying currently exercisable options.

COMPENSATION PLAN INFORMATION

table below provides certain information concerning our equity compensation plans as of December 31, 2022.

Plan Category

Securities to be

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Plans (Excluding

Equity Compensation Plans Approved

by Security Holders

Equity Compensation

Plans Not Approved by Security Holders

Compensation Plans Approved by Security Holders

Compensation Plans Not Approved by Security Holders

grants made under our equity compensation plans not approved by security holders includes 843,540 options which were granted under our

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The grants made

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

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

for services provided in connection capital raise transactions.

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PRINCIPAL ACCOUNTING FEES AND SERVICES

following table summarized the fees billed to Acorn for professional services rendered by Friedman LLP for the years ended December 31,

2021 and 2020.

All other fees

LLP and Marcum LLP

following table summarizes the fees billed to Acorn for professional services rendered by Friedman LLP (through September 8, 2022) and

its post-merger successor Marcum LLP (after September 8, 2022) for the years ended December 31, 2022 and 2021.

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

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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.

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

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

Report of Independent Registered Public Accounting Firm (PCAOB ID 688)

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

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations

Consolidated Statements of Changes in Deficit

Statements of Changes in Stockholders’ Deficit

Consolidated Statements of Cash Flows

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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.

Consent of Friedman LLP.

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

Agreement, dated as of January 1, 2023, by and between the Registrant and Jan H.

Amended and Restated Consulting Agreement, dated June 1, 2022, by and between the Registrant and Tracy Clifford Consulting, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed June 1, 2022).

of subsidiaries.

of Marcum LLP.

of Friedman LLP.

Certification

of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

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

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, 2022, filed on March 16, 2023,

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.

(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

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Report of Independent Registered Public Accounting Firm (PCAOB ID 688 )

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

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Changes in Deficit

Statements of Stockholders’ Changes in Deficit

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

Stockholders of Acorn Energy, Inc.

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, 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.

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

and subsidiaries (the “Company”) as of

December 31, 2022, the related consolidated statement of operations , changes in stockholders’ deficit, and cash flows

for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2022 and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting

principles generally accepted in the United States of America.

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

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(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.

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 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.

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.

The Company 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.

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We believe that our audits

provide a reasonable basis for our opinion.

provides a reasonable basis for our opinion.

Period Financial Statements

consolidated financial statements of Acorn Energy, Inc.

as of and for the year ended December 31, 2021, were audited by Friedman LLP

whose practice was combined with Marcum LLP as of September 1, 2022, and whose report dated March 30, 2022, expressed an unmodified opinion

on those statements.

Audit Matters

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matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Recognition – Identifying and evaluating the timing of revenue recognition

of the Matter

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

recognition guidance and interpretations.

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

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

The principal considerations for our

determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of the timing

of revenue recognition, is a critical audit matter are that there was a significant amount of judgment exercised by management in identifying

and evaluating whether hardware sold has a standalone value and the period over which monitoring and hardware sales should be recognized.

Auditor judgement is involved in performing our audit procedures to evaluate whether the timing of revenue recognition on hardware and

monitoring sales was appropriately stated.

We Addressed the Matter in Our Audit

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

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

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

Other procedures performed included the evaluation

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

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

the appropriateness of management’s application of their accounting policies, testing the mathematical accuracy of management’s

calculations of revenue and the associated timing of revenue recognized in the financial statements.

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

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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.

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

ability to continue as a going concern is a critical audit matter due to the estimation 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

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.

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, a sensitivity analysis, 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 (such date takes into account the acquisition of certain assets of Friedman LLP

by Marcum LLP effective September 1, 2022)

Marlton New Jersey

ACORN ENERGY,

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

of Acorn Energy, Inc.

on the Financial Statements

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

and subsidiaries (the “Company”) as of

December 31 2021, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for

the year 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

the results of its operations and its cash flows for the year 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 audit.

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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the 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 audit,

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.

audit 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 audit 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 audit provides

a reasonable basis for our opinion.

have served as the Company’s auditor from 2010 to 2022.

AND SUBSIDIARIES

BALANCE SHEETS

(IN THOUSANDS,

EXCEPT SHARE AND PER SHARE DATA)

THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

As of December 31,

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Current liabilities:

Short-term credit

Accounts payable

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Total long-term liabilities

Commitments and contingencies

Commitments and contingencies (Note 7)

Stockholders’ Deficit:

Acorn Energy, Inc.

Common stock - $ 0.01 par value per share:

Authorized – 42,000,000 shares;

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

Authorized – 42,000,000

issued and outstanding – 39,722,589

and 39,687,589

shares at December 31, 2022 and 2021, respectively

Additional paid-in capital

Accumulated deficit

Accumulated stockholders’ deficit

Treasury stock, at cost – 801,920 shares at December 31, 2022 and 2021

Total Acorn Energy, Inc.

shareholders’ deficit

stockholders’ deficit

Non-controlling interests

Total deficit

Total liabilities and deficit

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

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

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

(IN THOUSANDS,

EXCEPT NET LOSS PER SHARE DATA)

THOUSANDS, EXCEPT NET LOSS PER SHARE DATA)

Year ended December 31,

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Selling, general and administrative expenses

Impairment of software

Total operating expenses

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Finance expense, net

Gain on SBA PPP loan extinguishment

income before income taxes

Loss before income taxes

Income tax expense

(loss) income after income taxes

Non-controlling interest share of income

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

shareholders.

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

Net loss attributable to Acorn Energy, Inc.

stockholders.

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

stockholders:

Net loss per share attributable to Acorn Energy, Inc.

stockholders – basic and diluted

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

shareholders – basic

stockholders – 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,

stockholders – diluted

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

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN DEFICIT

(IN THOUSANDS)

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

Paid-In Capital

of Treasury Shares

Shareholders’

Stockholders’

controlling interests

as of December 31, 2020

from stock option exercise

$ ( 100,613 )

(loss) income

dividend in OmniMetrix preferred shares

of expired warrants

option compensation

as of December 31, 2021

(loss) income

Balance value

(loss) income

from stock option exercise

dividend in OmniMetrix preferred shares

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as of December 31, 2022

The accompanying

notes are an integral part of these consolidated financial statements.

ACORN ENERGY,

$ ( 101,267 )

Balance value

$ ( 101,267 )

* less than $1

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

AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

Year ended December 31,

Cash flows provided by operating activities:

Net (loss) income

Depreciation and amortization

Impairment of software

Impairment of inventory

Non-cash lease expense

Forgiveness of SBA PPP loan

Stock-based compensation

Change in operating assets and liabilities:

(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

Decrease (increase) in accounts receivable

Increase in inventory

Increase in deferred cost of goods sold

Increase in other current assets and other assets

Increase in deferred revenue

Decrease in operating lease liability

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

(Decrease) 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:

Investments in technology

Investments in Azure cloud hosting environment and other technology and software

Other capital investments

Net cash used in investing activities

Cash flows provided by financing activities:

Cash flows provided by (used in) financing activities:

Short-term credit, net

Proceeds from SBA PPP loans, net of repayments

Stock option exercise proceeds

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

Net cash provided by (used in) financing activities

Net decrease in cash

Cash at the beginning of the year

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Non-cash investing and financing activities:

Forgiveness of SBA PPP loan

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,

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

AND SUBSIDIARIES

Notes to Consolidated

Financial Statements

NOTE 1— NATURE

OF OPERATIONS

(a) Description

to Consolidated Financial Statements

1— NATURE OF OPERATIONS

Description of Business

and its subsidiaries, OMX Holdings, Inc.

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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.

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.

Protection (“CP”) monitoring.

OmniMetrix’s CP services provide 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

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

Notes 11 and 12 for segment information and major customers.

(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 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

of December 31, 2022, the Company had $ 1,450,000 of consolidated cash.

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

Its working capital included $ 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.

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.

of March 14, 2023, the Company had cash of $ 1,480,000 .

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 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

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”).

All dollar amounts are rounded to the nearest thousand and, thus, are approximate.

of Consolidation and Presentation

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interests are included in equity.

Use of Estimates

in Preparation of Financial Statements

Reclassifications

reclassifications have been made to the Company’s consolidated financial statements for the period ended December 31, 2021 to conform

to the current year’s consolidated financial statement presentation.

Approximately $ 22,000 in inventory that was written off in 2021 was reclassed

to its own line item to conform with current period presentation.

There was no effect on total assets, equity or net loss.

of Estimates in Preparation of Financial Statements

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

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receivable consists of trade receivables.

Trade receivables are recorded at the invoiced amount.

Trade receivables are recorded at the invoiced amount , net of any allowance for doubtful

for Doubtful Accounts

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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.

the years ended December 31, 2022 and 2021, $ 3,000 and $ 10,000 was charged to doubtful accounts expense, respectively.

At December 31,

2022 and 2021, the balance in allowance for doubtful accounts was $ 10,000 and $ 6,000 , 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.

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.

inventory valued at $ 41,000 and $ 22,000 for the years ended December 31, 2022 and 2021, respectively.

of Long-Lived Assets

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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.

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.

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

2019 and was ongoing.

As a result of this evaluation, the Company elected to terminate this project effective June 30, 2022 and recorded

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

Non-Controlling

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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 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.

accordance with 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.

During the years

ended December 31, 2022 and 2021, the Company capitalized internal-use software costs totaling $ 279,000

and $ 285,000 ,

respectively.

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

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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 $ 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.

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 $ 336,000 and $ 443,000 as of December 31, 2022 and December 31, 2021, respectively, which includes the

office space lease and an office equipment lease entered into in April 2019.

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

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Any excess is charged

to accumulated deficit.

Revenue Recognition

to accumulated stockholders’ deficit.

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

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(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.

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

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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 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.

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 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 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.

11 and 12 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

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.

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

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

December 31, 2021.

bank and amounted to $ 1,450,000 at December 31,

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.

See Note 11(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

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expenses are charged to operations as incurred.

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.

Advertising expense was $ 16,000 and $ 17,000 for each of the years ended December 31,

2022 and 2021, 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

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

On June 21, 2018, the U.S.

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.

2080 (2018), whereby the longstanding

Quill Corp v.

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

circumstances.

In 2020, the Company began collecting sales tax in nearly all states that have sales tax.

The Company accrued sales taxes

in the states with sales tax.

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, 2022 and December 31, 2021,

the amount of such accrual was $ 51,000 and $ 28,000 , respectively.

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 tax applies.

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.

These 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.

Deferred tax assets and liabilities are classified as non-current.

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

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

Uncertainties

Tax Uncertainties

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

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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 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.

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.

The Company recognizes interest and penalties as incurred in

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

of December 31, 2022 and 2021, no interest or penalties were accrued on the consolidated balance sheets related to uncertain tax positions.

the years ending December 31, 2022 and 2021, the Company had no changes in unrecognized tax benefits or associated interest and penalties

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

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 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

and Diluted Net Loss Per Share

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

by the weighted average number of shares outstanding

during the year, excluding treasury stock.

Diluted net loss per share is computed by dividing the net 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.

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 979,000 (which have a weighted average exercise price of $ 0.41 ) and 868,000 (which had a weighted average exercise price

of $ 0.38 ) for the years ending December 31, 2022 and 2021, respectively.

following data represents the amounts used in computing EPS and the effect on net loss 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

SCHEDULE OF EFFECT ON NET

INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES

Year ended December 31,

Net income (loss) available to common stockholders

Net loss available to common stockholders

Weighted average shares outstanding:

Stock options

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.

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

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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, 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

carrying amounts for cash, accounts receivable, and accounts payable approximate their fair value because of

their short-term maturity.

The Company determined that the carrying amount of the lease liabilities approximate fair value since the

applicable interest rate approximated fair value at the time the leases were entered into.

While the Company believes the carrying

value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value;

estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.

Issued Accounting Standards

than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting standards during the year ended December 31, 2022, 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

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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.

Adopted Accounting Standards

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

The amendments

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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

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

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

owns the remaining 1 % .

As of December 31,

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inventory net

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

NOTE 5— PROPERTY

AND EQUIPMENT, NET

December 31, 2022 and 2021, the Company’s inventory reserve was $ 4,000 and $ 0 , respectively.

5— PROPERTY AND EQUIPMENT, NET

and equipment consists of the following:

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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.

NOTE 6— LEASES

and amortization in respect of property and equipment amounted to $ 122,000 and $ 75,000 for 2022 and 2021, respectively.

leases office space and office equipment under operating lease agreements.

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Operating lease payments for 2022 and 2021 were

approximately $ 121,000 and $ 78,000 , respectively.

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

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.

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

SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES

Cash paid for operating lease liabilities

$ 124,000 and $ 121,000 , respectively.

The future minimum lease payments on non-cancelable operating leases as of December 31, 2022 using

a discount rate of 4.5 % are $ 336,000 .

The 4.5 % used is the incremental borrowing rate (established at the commencement of the lease)

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.

balance sheet information related to leases consisted of the following:

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Weighted average remaining lease terms for operating leases

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):

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, 2022 (in thousands):

SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS

Total undiscounted cash flows

undiscounted cash flows

Imputed interest

Present value of operating lease liabilities (a)

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 .

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 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

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 .

NOTE 8— COMMITMENTS AND CONTINGENCIES

value of operating lease liabilities (a)

current portion of $ 116,000 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 (plus an annual escalator each year of 3%) 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.

As of December 31, 2022, after the offset of the investment in leasehold improvements and other expenses related

to the sublease, the Company owes its landlord $ 6,000 for its share of the sublease profit since the lease commencement.

The estimated

amount the Company expects to remit to the landlord each year of the sublease subsequent to December 31, 2022 is $ 6,100 per year.

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 net of the estimated annual service cost of $ 2,220 (gross of

the estimated amount expected to be remitted to our landlord):

undiscounted cash flows

7— 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 .

platform and application for our CP customers.

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 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

The initial term of this agreement ended on August 19, 2022 and would have automatically renewed for an additional year, but OmniMetrix

delivered a written notice of termination to the other party sixty days prior to the end of the initial term.

OmniMetrix is currently

on a month-to-month arrangement through December 31, 2022, paying a monthly licensing fee of $ 1,500 , and is working with the software

development partner to negotiate more favorable terms for future periods.

addition to the above, the Company has $ 336,000 in operating lease obligations payable through 2026 and $ 64,000 in other contractual

The Company also has $ 255,000 in open purchase order commitments payable through April 2023.

December 31, 2022 the Company had issued and outstanding 39,722,589 shares of its common stock, par value $ 0.01 per share.

3 unchanged sentences

Accordingly, no preferred stock is issued or outstanding.

Employee Option Information

Summary Employee Option Information

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

10 unchanged sentences

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.

In 2022 and 2021, 145,770 ( 115,000 to directors

and executive officers and 30,770 to other employees) and 232,770 ( 165,000 to directors and executive officers and 67,770 to other employees)

options, respectively, were granted .

In 2022 and 2021, there were no grants to non-employees (other than the non-employee directors

and executive officers).

The fair value of the options issued was $ 54,000 and $ 89,000 in 2022 and 2021, respectively.

options were exercised in the year ended December 31, 2022.

No options were exercised in the year ended December 31, 2021.

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.

value of options outstanding and of options exercisable at December 31, 2022 was $ 16,000 and $ 13,000 , respectively.

The intrinsic value

of options outstanding and of options exercisable at December 31, 2021 was $ 291,000 and $ 217,000 , 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

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

Risk-free interest rate

14 unchanged sentences

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 Option Information

summary of the Company’s option plans as of December 31, 2022 and 2021, as well as changes during each of the years then ended,

8 unchanged sentences

SUMMARY OF INFORMATION REGARDING TO OPTIONS OUTSTANDING AND EXERCISABLE

Exercise Prices

$ 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

was $ 80,000 and $ 75,000 in the years ending December 31, 2022 and 2021, respectively.

total compensation cost related to non-vested awards not yet recognized was $ 33,000 as of December 31, 2022.

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

A summary of warrant activity follows:

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Outstanding and exercisable at end of year

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

NOTE 10— INCOME

(a) Composition

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

warrants outstanding at December 31, 2022 had a weighted average remaining contractual life of 2.5 months.

9— INCOME TAXES

(a) Composition of loss 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):

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

* less than 1

(b) Effective

Income Tax Rates

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

SUMMARY OF RECONCILIATION BETWEEN FEDERAL TAX RATE

Year ended December 31,

Statutory Federal rates

Increase (decrease) in income tax rate resulting from:

Other, net (primarily permanent differences)

Valuation allowance

Effective income tax rates

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

ended December 31,

Federal rates

(decrease) in income tax rate resulting from:

net (primarily permanent differences)

income tax rates

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

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

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Employee benefits and deferred compensation

Investments and asset impairments

Other temporary differences

Section 174 Expenditures

Net operating loss and capital loss carryforwards

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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, 2021, the valuation allowance decreased by approximately $ 33,000 .

of Tax Loss Carryforwards

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, 2022, the gross deferred tax asset and the valuation

allowance decreased by $ 945,000 .

Summary of Tax Loss Carryforwards

of December 31, 2022, the Company had various operating loss carryforwards expiring as follows (in thousands):

OF TAX LOSS CARRYFORWARDS

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.

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.

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

for separate return limitation years.

for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental

to research and experimentation (R&E) activities under IRC Section 174.

While taxpayers historically had the option of deducting

these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses

for tax years beginning after December 31, 2021.

Expenses incurred in connection with R&E activities in the US must be amortized

over a 5-year period if incurred.

R&E activities are broader in scope than qualified research activities considered under IRC Section

41 (relating to the research tax credit).

For the year ended December 31, 2022, the Company performed an analysis based on available

guidance and determined that it will continue to be in a loss position even after the required capitalization and amortization of its

R&E expenses.

The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization

and amortization to require it to pay cash taxes now or in the near future.

a holding company without other business activity in Delaware, the Company is exempt from Delaware state income tax.

1 unchanged sentence

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.

10— RELATED PARTY BALANCES AND TRANSACTIONS

Officer and Director Fees

Company recorded fees to officers of $ 522,000 and $ 517,000 for the years ended December 31, 2022 and 2021, respectively, which is included

in selling, general and administrative expenses.

Company recorded fees to directors of $ 59,000 for the years ended December 31, 2022 and 2021, which is included in selling, general and

administrative expenses.

Company issued 145,770 ( 115,000 to directors and executive officers and 30,770 to other employees) and 232,770 ( 165,000 to directors

and executive officers and 67,770 to other employees) options, in 2022 and 2021, respectively.

35,000 options were exercised in the year

ended December 31, 2022.

No options were exercised in the year ended December 31, 2021.

See Note 8 for further discussion.

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:

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.

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.

intercompany balance due to Acorn from OmniMetrix is $ 3,677,000 for amounts loaned, accrued interest and expenses paid by Acorn on Omni’s

behalf as of December 31, 2022 as compared to $ 4,217,000 as of December 31, 2021.

This balance is eliminated in consolidation.

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 $ 359,000 .

This included repayments of $ 677,000 offset by interest of $ 194,000 , dividends of $ 76,000

due to Acorn and $ 48,000 in shared expenses paid by Acorn.

11— SEGMENT REPORTING AND GEOGRAPHIC INFORMATION

General Information

of December 31, 2022, 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

as each business requires different technology and marketing strategies.

(b) Information

about profit or loss and assets

by the Chief Decision Maker (CDM) as each business requires different technology and marketing strategies.

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, 2022 and 2021 (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.

Further, 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.

the CDM does not review the assets by segment.

SUMMARY OF SEGMENTED DATA

Year ended December 31, 2022:

Revenues from external customers

Revenues from customers

Segment gross profit

2 unchanged sentences

Year ended December 31, 2021:

Revenues from external customers

Revenues from customers

Segment gross profit

1 unchanged sentence

Segment income (loss) before income taxes

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):

software impairment of $ 51,000

recorded during 2022 is not related to a specific segment and, thus, is not included in the

“Segment income (loss) before income taxes” for the year ended December 31, 2022.

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, 2022 and 2021 (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

net cost of corporate headquarters

net (loss) income before taxes on income

Unallocated net cost of corporate headquarters

Consolidated net loss before taxes on income

SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT BALANCE SHEET

As of December 31,

(in thousands)

Total assets for OmniMetrix subsidiary

Assets of corporate headquarters

Total consolidated assets

of December 31,

assets for OmniMetrix subsidiary

of corporate headquarters

consolidated assets

SCHEDULE OF REVENUE FROM CUSTOMERS BY GEOGRAPHICAL AREAS

(in thousands)

Revenues based on location of customer :

United States

based on location of customer:

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

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

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

SCHEDULE OF REVENUES, ACCOUNTS RECEIVABLE FROM MAJOR CUSTOMERS

Invoiced Sales

Accounts Receivable

* Balance is not significant.

NOTE 13— REVENUE

is not significant.

following table disaggregates the Company’s revenue for the years ended December 31, 2022 and 2021 (in thousands):

2 unchanged sentences

Total Revenue

Year ended December 31, 2020:

Total Revenue

ended December 31, 2021:

revenue activity for the year ended December 31, 2022 can be seen in the table below (in thousands):

SCHEDULE OF DEFERRED REVENUE ACTIVITY

Balance at December 31, 2020

Additions during the period

Recognized as revenue

Balance at December 31, 2021

Amounts to be recognized as revenue in the year ending:

December 31, 2022

December 31, 2023

December 31, 2024 and thereafter

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.

at December 31, 2021

during the period

at December 31, 2022

to be recognized as revenue in the year ending:

31, 2025 and thereafter

revenue of $ 780,000 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, 2021 can be seen in the table below (in thousands):

Balance at December 31, 2019

at December 31, 2020

Deferred revenue, beginning balance

Additions during the period

Recognized as revenue

Balance at December 31, 2020

during the period

at December 31, 2021

Deferred revenue ending balance

Amounts to be recognized as revenue in the year ending:

December 31, 2021

December 31, 2022

December 31, 2023 and thereafter

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.

to be recognized as revenue in the year ending:

31, 2024 and thereafter

revenue of $ 890,000 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.

2 unchanged sentences

SCHEDULE OF DEFERRED CHARGES ACTIVITY

Balance at December 31, 2020

Additions during the period

Recognized as cost of sales

Balance at December 31, 2021

Amounts to be recognized as cost of sales in the year ending:

December 31, 2022

December 31, 2023

December 31, 2024 and thereafter

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.

at December 31, 2021

during the period

as cost of sales

at December 31, 2022

to be recognized as cost of sales in the year ending:

31, 2025 and thereafter

costs paid to AT&T and the COGS related to sales of upgrade kits, accessories and repairs of $ 843,000 in the aggregate are expensed

as incurred and are not deferred.

charges activity for the year ended December 31, 2021 can be seen in the table below (in thousands):

Balance at December 31, 2019

at December 31, 2020

Deferred charges beginning balance

Additions during the period

Recognized as cost of sales

Balance at December 31, 2020

during the period

as cost of sales

at December 31, 2021

Deferred charges ending balance

Amounts to be recognized as cost of sales in the year ending:

December 31, 2021

December 31, 2022

December 31, 2023 and thereafter

* 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.

to be recognized as cost of sales in the year ending:

31, 2024 and thereafter

costs paid to AT&T and the COGS related to sales of custom design hardware, accessories and repairs of $ 929,000 in the aggregate

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).

4 unchanged sentences

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.

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, 2022

1 unchanged sentence

SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS

Balance at December 31, 2020

Additions during the period

Amortization of sales commissions

Balance at December 31, 2021

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, 2021.

at December 31, 2021

during the period

of sales commissions

at December 31, 2022

capitalized sales commissions are included in other current assets ($ 196,000 ) and other assets ($ 203,000 ) in the Company’s Consolidated

Balance Sheets at December 31, 2022.

following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December 31, 2021

(in thousands):

Balance at December 31, 2019

at December 31, 2020

Sales commissions contract assets beginning balance

Additions during the period

Amortization of sales commissions

Balance at December 31, 2020

during the period

of sales commissions

at December 31, 2021

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

capitalized sales commissions are included in other current assets ($ 138,000 ) and other assets ($ 157,000 ) in the Company’s Consolidated

Balance Sheets at December 31, 2021.

13— SUBSEQUENT EVENTS

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 .

January 3, 2023, 30,000 options in the aggregate were issued to directors 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 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 .

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 .

February 27, 2023, 10,000 options were issued to the new Director of Software Development and Technology with an exercise price of $ 0.41

and that vest in equal increments over three years on the anniversary date of the issuance with the last tranche vesting on February

These options are valued at $ 3,000 .

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 the

Chief Executive Officer.

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