What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-06 compared with 2024-03-07 · 213 added, 284 removed, 106 unchanged (82% of the section changed)

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

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

power generation equipment.

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

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

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

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

market and pipeline operators.

The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations

OmniMetrix also offers the industry’s first RAD TM (Remote AC Mitigation Disconnect) that mounts onto

existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools which can drastically

reduce a company’s expense while increasing employee safety.

Generation (“PG”).

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

applications for residential and commercial/industrial power generation equipment.

This includes OmniMetrix’s TrueGuard power

generator monitors and AIRGuard product, which remotely monitors and controls industrial air compressors, and its Smart Annunciator

product, which is typically sold to commercial customers that require a visual representation of the generator’s status and

has a touchscreen display that indicates the current state of that generator.

Protection (“CP”).

OmniMetrix’s CP services provide remote monitoring and control products for cathodic protection

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

The CP product lineup includes solutions to remotely

monitor and control rectifiers, test stations and bonds.

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

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

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

following analysis should be read together with the segment information provided in Notes 12 and 13 to our consolidated financial statements

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Given that OmniMetrix monitors all major brands of critical equipment

and continues to invest in research and development in response to customer and potential customer feedback, OmniMetrix remains well-positioned

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

2023, the intercompany amount due to Acorn from OmniMetrix decreased by $1,020,000.

This included repayments of $1,285,000 offset by

interest of $164,000, dividends of $76,000 due to Acorn and $25,000 in shared expenses paid by Acorn.

During 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.

This intercompany balance is eliminated in

consolidation.

We believe that OmniMetrix will not need working capital support in 2024.

However, we have no assurance that this

will be the case.

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

equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof.

The availability and

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

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

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

of March 5, 2024, Acorn’s corporate operations (excluding cash at our OmniMetrix subsidiary) held a total of $1,236,000 in cash.

January 12, 2024, we entered into a new contract with our current primary data provider for Internet of Things (IoT) wireless services

for a 36-month contract term with automatic one-year extensions, subject to termination notice.

and continues to invest in research and development in response to customer and potential customer feedback, OmniMetrix remains well

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

June 1, 2024, we entered into a contract (the “Material Contract”) with one of the nation’s largest cell phone providers

to provide monitoring hardware and services.

Under the contract, OmniMetrix will provide monitoring devices and related remote monitoring

and control services for between 5,000 to 10,000 cell tower backup generators in the U.S.

The monitoring hardware and monitoring services,

which will be deployed over a two-year period.

Shipping of hardware commenced in the third quarter of 2024 and installation and monitoring

services commenced in the fourth quarter of 2024.

We have recognized $1,637,000 in hardware revenue and $24,000 in monitoring revenue

from this contract as of year-end 2024.

Our current expectation of total revenue over the life of the contract is approximately $5.4

million, which encompasses the revenue from the sales of the hardware and the first year of monitoring.

We have not included in this

estimate monitoring after the first year.

January 12, 2024, we entered into a new service contract with our current primary data provider for Internet of Things (IoT) wireless

services over a 36-month term with automatic one-year extensions, subject to termination notice.

The pricing structure involves account

setup, SIM charges, monthly revenue obligations, and various rate plans based on data usage and regions along with other optional services.

The monthly revenue obligation is $10,000 for the first 6 months and $15,000 thereafter.

We will also be eligible for volume discounts

The monthly revenue obligation was $10,000 for the first 6 months and is $15,000 thereafter.

We are also eligible for volume discounts

based on total monthly service revenue.

Additionally, the agreement includes an IoT Enhanced Support and Priority Care Services Rate

Additionally, the agreement includes an IoT Enhanced Support and a Priority Care Services Rate

Plan with various support service types and pricing tiers based on the number of devices and terms for SIM migrations, including tiered

pricing and conditions for waiver of certain charges during migration.

This new agreement will allow us to migrate our customers to higher

This agreement will allow us to migrate our customers to higher

tier data plans for nominal additional cost.

December 22, 2023, we entered into an agreement with a new Azure cloud hosting provider to move to their Cloud Reliability Platform and

utilize their premium cloud operations services.

The initial term of this agreement is twenty-four months with automatic renewal of successive

one-year terms unless ninety days written notice is given prior to the expiration of the initial term.

Through this relationship, we

will have unparalleled cloud management that provides a central location to access cloud operations metrics, configure services, set

up proactive monitoring, create backup policies and request access to certified cloud experts to ensure that our operating infrastructure

is healthy, resilient and operating efficiently.

We will also have 24 x 7 x 365 monitoring and resolution support to timely resolve any

issues that may arise and reduce or potentially eliminate unplanned downtime for our customers on our data monitoring platform, OmniView.

We will pay monthly recurring fees of $4,000 plus 115% of actual Azure usage costs.

There may also be additional hourly fees from time

to time for projects or problem resolution outside the scope of the premium cloud operations services platform.

This agreement will replace

our current cloud hosting service provider to whom we pay monthly recurring fees of approximately $6,000 plus 100% of actual Azure usage

November 7, 2023, we entered into a non-exclusive reseller agreement with one of the nation’s largest commercial generator dealers

with regional dealerships throughout the United States.

We believe this agreement could yield 2,500 to 3,000 new monitoring connections

per year for OmniMetrix, which could represent hardware sales, start-up fees and monitoring revenue of $1 million to $2 million per year

in the aggregate.

Importantly, endpoints added from this relationship are expected to make a meaningful contribution to the growth of

our base of recurring monitoring revenue.

We expect initial revenue from this relationship to start in the first quarter of 2024 and

to build as the program is rolled out across their dealer network.

On October 1, 2023, we deployed our

new user interface to our customer data portal and made it available to customers.

On March 17, 2021, we entered into a master services

agreement for the development of a new user interface for our customer data portal.

Prior to deployment on October 1, 2023, we had invested

$194,000 in design, development and quality assurance services of the new user interface.

Since deployment, our customers have the option

to continue to use the “classic view” of our user interface, which is our original user interface, or our new user interface

known as “OV2” until March 4, 2024 when we will officially terminate our original user interface.

The cost of this project

was capitalized, and amortization began as of October 1, 2023.

We have continued to implement bug fixes and enhancements to OV2 , for which

any related IT costs have been expensed as incurred.

September 5, 2023, the Board of Directors of Acorn approved a Certificate of Amendment to Acorn’s Restated Certificate of Incorporation

(the “Certificate of Amendment”) that provided for a 1-for-16 reverse stock split of Acorn’s Common Stock (the “Reverse

Stock Split”).

Acorn filed the Certificate of Amendment with the Secretary of State of the State of Delaware on September 6, 2023,

and the Reverse Stock Split became effective at 5:00 p.m.

EDT on September 7, 2023.

The Reverse Stock Split increased the market price

of Acorn’s Common Stock and makes Acorn’s shares accessible to a broader range of investors, including institutions and those

unable to purchase or recommend low-priced stocks.

At the effective time of the Reverse Stock Split, every sixteen issued and outstanding

shares of Acorn’s Common Stock were automatically combined into one issued and outstanding share of Common Stock, without any change

in the par value per share.

Stockholders who would have otherwise been entitled to fractional shares of Common Stock as a result of the

Reverse Stock Split received a cash payment in lieu of receiving fractional shares.

The value of the fractional shares repurchased was

$347 and equated to fifty-eight shares.

All share and per-share amounts of common stock, options and warrants contained in this Management’s

Discussion and Analysis have been restated for all periods to give retroactive effect to the Reverse Stock Split and the related fractional

share repurchase for all prior periods presented.

September 1, 2023, we launched an updated version of our products that includes new functionality in our TrueGuard, AIRGuard,

Patriot and Hero products that allows our customers to have options as it relates to obtaining and utilizing the data that is

provided by our hardware devices.

This new functionality allows for SIM card options, configuration options regarding IP address

endpoints and DNS routes, and access to our over-the-air data protocol.

This product update allows customers to have the option to

purchase our monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring

provider if they so desire, whereas, historically, our standard products only functioned with our monitoring services.

Modifications

were made to the circuit boards and embedded firmware of hardware enclosures in stock as of August 31, 2023 such that only the new

versions of these products were sold subsequent to this date.

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

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

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

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

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

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

Homeowners are compensated for signing up and possibly supplying grid offload

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

We are currently assisting PSS to market the demand response program to generator

owners and will incentivize existing generator owners who sign up and satisfy certain terms and conditions by offering a one-time rebate

of $200 to anyone who signs up before March 31, 2024.

Accounting Estimates

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We make routine estimates and judgments

in determining net realizable value of accounts receivable, inventories, property and equipment, prepaid expenses, product warranties and other reserves as well

as the amortization period for deferred commissions payable.

Management believes our most critical accounting estimates and assumptions

are in the area of revenue recognition.

revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations.

The core principle of ASC

606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration

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

ASC 606 defines a five-step process to achieve this core principle, which

(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.

We assess whether payment

terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring.

Our 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.

A critical estimate is the estimated life of our units in determining the period over which the

hardware revenue was amortized for the units sold prior to September 1, 2023.

in determining net realizable value of accounts receivable, inventories, property and equipment, prepaid expenses, product warranties

and other reserves as well as the amortization period for deferred commissions payable.

Management believes our most critical accounting

estimates and assumptions are in the area of revenue recognition and valuation allowance.

regularly review our deferred tax assets for recoverability considering historically profitability, projected future taxable income,

the expected timing of the reversals of existing temporary differences and tax planning strategies.

In assessing the need for a valuation

allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets.

given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.

record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.

The net carrying amount of the Company’s deferred tax assets is based on the Company’s belief that it is more likely than

not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets.

ultimate realization of the deferred tax assets depends upon our ability to generate sufficient taxable income in the future.

In forecasting

future taxable income, management uses estimates and makes assumptions regarding significant future events, including the timing and

number of new hardware sales contracts and associated monitoring revenue.

In evaluating our ability to recover our deferred tax assets,

we consider and weigh all available positive and negative evidence, including our past operating results, the existence of cumulative

losses in the most recent years and our forecast of future taxable income.

When the likelihood of the realization of existing deferred

tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made.

If our estimates

and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax

assets, resulting in additional income tax expense in the Company’s Consolidated Statements of Operations, or conversely to reduce

the existing valuation allowance resulting in less income tax expense.

light of the Company’s generation of three-year cumulative positive income through December 31, 2024, the Company believes that

it is more-likely-than-not that a portion of the deferred tax assets will be utilized.

Therefore, the Company has released valuation

allowance on its deferred tax assets (other than as stated above) in the amount of $4,686,000 for the year ended December 31, 2024.

of December 31, 2024, we believe, based on our projections, that a partial valuation allowance of $11,400,000 is necessary against our

deferred tax assets.

Uncertainty exists related to the generation of future hardware and monitoring revenue, nonetheless the Company

believes sufficient positive evidence exists which supports the partial reversal of the valuation allowance.

In recent years, the Company

executed new contracts, growing hardware and monitoring revenue which resulted in cumulative pre-tax earnings of $1,476,000 over the

prior three years which we believe is significant positive evidence to support the reversal of valuation allowance during 2024.

time, however, we cannot assure you that we will be successful in doing so.

Accordingly, our management will continue to assess the need

for this valuation allowance and will make adjustments when appropriate.

As of December 31, 2024, the Company has completed a 382 analysis

and concluded that none of the unreserved net operating losses were subject to 382 limitations.

utilization of the Company’s federal and state net operating losses may be subject to a limitation due to the “change in

ownership provisions” under Section 382 of the Internal Revenue Code, as well as similar state provisions.

Such limitations may

result in the expiration of net operating loss (NOL) carryforwards before their utilization.

The Company has not completed a study to

assess whether an “ownership change” as defined in Section 382 has occurred or whether there have been multiple ownership

changes since the Company’s inception.

Future changes in the Company’s stock ownership, which may be outside of the Company’s

control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component

of the purchase price could result in an “ownership change.” The Company will complete a full analysis of the tax attribute

carryforwards prior to any utilization of tax attributes which may be subject to limitation.

of Operations

1 unchanged sentence

as of December 31, 2024 and 2023 has been derived from our audited consolidated financial statements included in this Annual Report.

September 1, 2023, OmniMetrix launched an updated version of its products that includes new functionality in its TrueGuard,

AIRGuard, Patriot and Hero products that allows its customers to have options as it relates to obtaining and utilizing the data that

is provided by its hardware devices.

This new functionality allows for SIM card options, configuration options regarding IP address

endpoints and DNS routes, and access to OmniMetrix’s over-the-air data protocol.

This product update allows customers to have

the option to purchase OmniMetrix’s monitoring service, monitor the products themselves if they have the ability in-house, or

choose another monitoring provider if they so desire.

OmniMetrix’s prior hardware product version could not function as a

distinct product from its monitoring services.

This new version’s functionality results in OmniMetrix’s hardware and

monitoring services being capable of being two distinct products and services.

OmniMetrix recognizes revenue, COGS and commissions

from the sale of the new version of its hardware products sold when the product is shipped rather than over the estimated time that

the unit is in service for the customer.

Monitoring revenue continues to be deferred and amortized over the period that the

monitoring services are rendered.

The remaining balance of deferred revenue from the prior version of these products will continue

to be amortized each period until it is fully amortized.

Modifications were made to the circuit boards and embedded firmware of

hardware enclosures in stock as of August 31, 2023, such that only the new versions of these products were sold subsequent to this

September 1, 2023, OmniMetrix launched an updated version of its products that includes new functionality in its TrueGuard, AIRGuard,

Patriot and Hero products that allows its customers to have options as it relates to obtaining and utilizing the data that is provided

by its hardware devices.

This new functionality allows for SIM card options, configuration options regarding IP address endpoints and

DNS routes, and access to OmniMetrix’s over-the-air data protocol.

This product update allows customers to have the option to purchase

OmniMetrix’s monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring

provider if they so desire.

OmniMetrix’s prior hardware product version could not function as a distinct product independent from

its monitoring services.

This new version’s functionality results in OmniMetrix’s hardware and monitoring services being

capable of being two distinct products and services.

OmniMetrix, therefore, recognizes revenue, COGS and commissions from the sale of

the new version of its hardware products when the product is shipped rather than over the estimated time that the unit is in service

for the customer.

Monitoring revenue continues to be deferred and amortized over the period that the monitoring services are rendered.

The remaining balance of deferred revenue from the prior version of these products will continue to be amortized each period until it

is fully amortized.

Modifications were made to the circuit boards and embedded firmware of hardware enclosures in stock as of August

31, 2023, such that only the new versions of these products were sold subsequent to that date.

data should be read in conjunction with our consolidated financial statements and related notes included herein.

2 unchanged sentences

(in thousands, except per share data)

Cost of sales

Research and development expenses

Selling, general and administrative expenses

Impairment of software

Operating income (loss)

Finance income (expense), net

Income (loss) before income taxes

Income tax expense

Net income (loss) after income taxes

Operating income

Interest income, net

Income before income taxes

Current state tax expense

Deferred income tax benefit

Net income after income taxes

Non-controlling interest share of income

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

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

Net income attributable to Acorn Energy, Inc.

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

stockholders:

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

stockholders – basic and diluted*

Net income per share attributable to Acorn Energy, Inc.

stockholders – basic

Net income per share attributable to Acorn Energy, Inc.

stockholders – diluted

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

2 unchanged sentences

stockholders – diluted

adjusted to account for the September 2023 1-for-16 reverse stock split.

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

10 unchanged sentences

Compared to 2023

For the Years Ended December 31,

(in thousands, except per share data)

Cost of sales

Research and development expenses

Selling, general and administrative expenses

Impairment of software

Operating income (loss)

In 2024, OmniMetrix recorded total revenue of $10,986,000, as compared to total revenue of $8,059,000 in 2023, for an increase of

8 unchanged sentences

PG segment and $1,059,000 that was attributed to the CP segment.

Hardware revenue increased $709,000 from $3,088,000 during the year

ended December 31, 2022 to $3,797,000 during the year ended December 31, 2023.

During the year ended December 31, 2023, we recorded $259,000

in revenue from the sale of custom TG Pro units that were designed to large customer specifications and monitored by the customer;

the revenue was not deferred.

We did not have any custom unit orders in the year ended December 31, 2022.

The hardware revenue during

the years ended December 31, 2023 and 2022 is further detailed in the table below:

Hardware revenue increased $2,636,000 (69%) from $3,797,000 during the

year ended December 31, 2023 to $6,433,000 during the year ended December 31, 2024.

The hardware revenue during the years ended December

31, 2024 and 2023 is further detailed in the table below:

Reconciliation of Hardware Revenue

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Sales of custom designed units and related accessories

Hardware sales under the Material Contract

Hardware sales (new product versions)

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Total hardware revenue

PG hardware revenue during the year ended December 31, 2022 was $2,234,000 compared to $2,735,000, excluding the sale of custom units,

during the year ended December 31, 2023;

thus, the increase in PG hardware revenue excluding the custom units was 22%.

We also had a

decrease in CP hardware revenue of $51,000 (6%) to $803,000 during the year ended December 31, 2023 from $854,000 during the year ended

December 31, 2022.

The increase in total hardware revenue was due to the sale of custom PG units (as noted above) and increased sales

of other PG products as well as from installation income realized, offset by a decrease in revenue from Hero products in the CP segment.

Monitoring revenue increased $350,000 (9%) from $3,912,000 in the year ended December 31, 2022

to $4,262,000 in the year ended December 31, 2023.

The increase in monitoring revenue was due to an increase in the number of connections

being monitored and growth in our c ustomer base.

Gross profit was $6,004,000, reflecting a gross margin of 74% on revenue, in 2023 compared with a gross profit

of $5,071,000, reflecting a 72% gross margin on revenue, in 2022.

Gross margin on hardware revenue for the year ended December 31, 2023

was 54% compared to 48% for the year ended December 31, 2022.

The increase in gross margin was due to a higher gross margin realized

in 2023 on a large volume of sales to two large commercial customers to whom there were no sales in 2022.

Gross margin on monitoring

revenue was 93% for the year ended December 31, 2023 compared to 92% for year ended December 31, 2022.

and development (“R&D”) expense.

During 2023, OmniMetrix recorded $875,000 of R&D expense as compared to

$845,000 in 2022, an increase of $30,000 (4%).

The increase in R&D expense in 2023 is related to increases in wages and bonuses

paid to our engineering personnel in 2023 and the expenses and materials paid to third-party consultants in the continued

development of next-generation PG and CP products and exploration into potential new product lines.

We expect a moderate

increase in R&D expense for 2024 due to engineering salary increases granted effective October 1, 2023 and for continued

investment in work on certain initiatives to redesign products and expand product lines to increase our level of innovation ahead of

our competitors.

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

Consolidated SG&A expense in 2023 increased by $251,000 (5%), from

$4,804,000 in 2022 to $5,055,000 in 2023.

Corporate overhead increased by $98,000 (10%), from $959,000 in 2022 to $1,057,000 in 2023,

primarily due to $102,000 in expenses related to the execution of the reverse stock split in 2023.

hardware revenue increased $2,585,000 (86%) during the year ended December 31, 2024 to $5,579,000 compared to $2,994,000 during the year

ended December 31, 2023.

Hardware sales under the Material Contract represented 63% of the 86% increase.

We also had an increase in CP

hardware revenue of $51,000 (6%) to $854,000 during the year ended December 31, 2024 from $803,000 during the year ended December 31,

The increase in total hardware revenue was due to recognition of sales revenue from the Material Contract as well as increased

sales of other PG products, offset by a decrease in service revenue and custom designed units.

Monitoring revenue increased $291,000

(7%) from $4,262,000 in the year ended December 31, 2023 to $4,553,000 in the year ended December 31, 2024.

The increase in monitoring

revenue was due to an increase in the number of connections being monitored and growth in our c ustomer

Gross profit was $7,999,000, reflecting a 73% gross margin on revenue, in 2024 compared with a gross profit of $6,004,000,

reflecting a 74% gross margin on revenue, in 2023.

The gross margin was a percentage point lower in 2024 due to a greater volume of hardware

sales which have a lower gross margin than monitoring.

Gross margin on hardware revenue for the year ended December 31, 2024 was 57%

compared to 54% for the year ended December 31, 2023.

Gross margin on monitoring revenue was 94% for the year ended December 31, 2024

compared to 93% for the year ended December 31, 2023.

During 2024, OmniMetrix recorded $1,012,000 of R&D expense as compared to $875,000 in 2023, an increase of $137,000

The increase in R&D expense in 2024 is related to increases in wages and bonuses paid to our engineering personnel in 2024

and the expenses and materials paid to third-party consultants in the continued development of next-generation PG and CP products and

exploration into potential new product lines.

We expect a moderate increase in R&D expense for 2025 due to the hiring of another

senior level engineer, as well as engineering salary increases granted effective October 1, 2024, and for continued investment in work

on certain initiatives to redesign products and expand product lines to increase our level of innovation ahead of our competitors.

Consolidated SG&A expense was essentially flat from 2023 to 2024, decreasing only $5,000.

Corporate overhead decreased

by $37,000 (3%), from $1,057,000 in 2023 to $1,020,000 in 2024, primarily due to the non-recurring expenses of $102,000 related to the

execution of the reverse stock split in 2023 and a net decrease in other expense categories of $2,000 in the aggregate offset by an increases

in (i) legal fees of $24,000, (ii) tax professional fees of $28,000, and (iii) audit fees of $15,000.

SG&A expense increased $32,000 (0.8%), from $3,998,000 in 2023 to $4,030,000 in 2024.

This increase was primarily due to increases

of (i) $102,000 in personnel expenses related to staff additions, promotions, bonuses and cost of living wage increases, (ii) $101,000

in commission expenses, (iii) $42,000 in depreciation and amortization primarily related to IT assets, (iv) $16,000 in travel and trade

show expenses, and offset by a decrease of $107,000 in technology expenses primarily in technology consulting and $1,000 in net aggregate

of $251,000 in commission expenses and $100,000 in IT consulting and staff augmentation fees offset by decreases in (i) personnel expenses

of $153,000, which was due to the elimination of the vice president of sales position offset by increases related to staff additions,

promotions, bonuses and cost of living wage increases, (ii) $69,000 in travel and trade show expenses, (iii) $46,000 in other consulting

and contract labor expenses, (iv) $39,000 in depreciation and amortization primarily related to IT assets and (v) $12,000 in net aggregate

decreases in other expense categories.

We anticipate that our annual SG&A costs in 2025 will increase by approximately 6% due to

increasing wage and benefit expenses as a result of merit increases, promotions and hiring a higher level skill

set in certain roles in 2023 as well as other inflationary increases in other operational costs.

income/expense, net.

Interest income in the year ended December 31, 2023 was $67,000 due to high interest rates on cash balances

offset by interest expense of $3,000, compared to interest expense of $2,000 in 2022.

The interest expense is primarily related

to insurance financing arrangements.

State income tax expense was $9,000 for the year ended December 31, 2023 reflecting estimates for certain state taxes.

There was no state income tax estimated/accrued for the year ended December 31, 2022.

income (loss) attributable to Acorn Energy.

We had net income attributable to Acorn of $119,000 in 2023 compared to net loss attributable

to Acorn of $633,000 in 2022.

Our income in 2023 is comprised of net income at OmniMetrix of $1,185,000, corporate expense of $1,056,000,

offset by $10,000 representing the non-controlling interest share of our income in OmniMetrix.

Our loss in 2022 is comprised of net income

at OmniMetrix of $331,000, corporate expense of $962,000, offset by $2,000 representing the non-controlling interest share of our income

in OmniMetrix.

The positive change in net income (loss) was due to the increase in gross margin as described above.

increasing wage and benefit expenses as a result of merit increases, promotions and hiring a higher-level skill set in certain roles

Interest income in the year ended December 31, 2024 was $74,000 due to high interest rates on cash balances offset by

interest expense of $1,000, compared to interest income in the year ended December 31, 2023 of $67,000 offset by interest expense of

For the year ended December 31, 2024, the Company recorded an income tax benefit of $4,435,000, offset by current state income

tax expense of $123,000 compared to state income tax expense for the year ended December 31, 2023 of $9,000.

The change in the tax expense

was primarily due to the partial release of the Company’s valuation allowance in 2024.

The recorded income tax benefit contributed

$1.78 to our basic earnings per share of $2.53 and $1.77 of our diluted earnings per share of $2.51 at December 31, 2024.

income attributable to Acorn Energy.

We had net income attributable to Acorn of $6,294,000 in 2024 compared to $119,000 in 2023.

Our net income in 2024 is comprised of net income at OmniMetrix of $3,027,000, corporate expense of $1,017,000, current state income

tax expense of $123,000, the non-controlling interest share of our net income in OmniMetrix of $28,000 offset by deferred income tax

benefit as a result of the release of our valuation allowance of $4,435,000.

Our income in 2023 is comprised of net income at OmniMetrix

of $1,185,000, corporate expense of $1,056,000, offset by $10,000 representing the non-controlling interest share of our income in OmniMetrix.

The positive change in net income was due to the increase in gross profit as a result of the Material Contract while managing SG&A

expenses as described above.

and Capital Resources

December 31, 2023, we had a negative working capital of $571,000.

Our working capital includes $1,449,000 of cash and deferred revenue

of $4,034,000.

December 31, 2024, we had working capital of $1,115,000.

Our working capital includes $2,326,000 of cash and deferred revenue of $3,521,000.

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

Total deferred revenue

decreased by $587,000, from $6,171,000 at December 31, 2022 to $5,584,000 at December 31, 2023, as a result of the sales mix of products

Based on the current products being sold, the Company expects continued decreases in the deferred revenue balance in the foreseeable

Net cash decreased during the year ended December 31, 2023 by $1,000, of which $72,000 was provided by operating activities,

Total deferred revenue decreased by

$1,351,000, from $5,584,000 at December 31, 2023 to $4,233,000 at December 31, 2024, as a result of the sales mix of products sold.

on the current products being sold, the Company expects continued decreases in the deferred revenue balance in the foreseeable future.

Net cash increased during the year ended December 31, 2024 by $877,000, of which $905,000 was provided by operating activities, $56,000

was used in investing activities, and $28,000 was provided by financing activities.

2 unchanged sentences

from its operations while our corporate headquarters used $1,086,000 in its operating activities during the period.

inventory balance increased by $173,000 at December 31, 2023 as compared to December 31, 2022, due to purchase orders placed to have

sufficient safety stock on hand for anticipated growth in 2024.

We expect to sell through the excess inventory in 2024.

During the year

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

Our OmniMetrix subsidiary provided $916,000 from its

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

the year ended December 31, 2023, net cash of $78,000 was used in investing activities, primarily related to the continued development

of our new user interface for our customer monitoring data portal (OmniView 2.0).

During the year ended December 31, 2022, net cash of

$308,000 was used in investing activities, primarily in our technology infrastructure.

These investments were primarily related to the

design of our new Azure cloud server environment, as well as investments in the development of OmniView 2.0 and hardware and software

cash of $5,000 was provided by financing activities during the years ended December 31, 2023 and 2022 which represents proceeds from

the exercise of warrants and proceeds from the exercise of stock options, respectively.

inventory balance decreased by $514,000 at December 31, 2024 as compared to December 31, 2023 due to inventory shipped under the Material

Contract and selling through safety stock to return to pre-COVID par inventory levels.

During the year ended December 31, 2023, our operating

activities provided $72,000 of net cash.

Our OmniMetrix subsidiary provided $1,147,000 from its operations while our corporate headquarters

spent $1,075,000 in its operating activities during the period.

the year ended December 31, 2024, net cash of $56,000 was used in investing activities, primarily related to the continued investment

in our technology infrastructure.

During the year ended December 31, 2023, net cash of $78,000 was used in investing activities.

cash of $28,000 and $5,000 was provided by financing activities during the years ended December 31, 2024 and 2023, respectively, which

represents proceeds from the exercise of stock options and warrants.

Liquidity Matters

owes Acorn $2,657,000 for loans, accrued interest, dividends and expenses advanced to it by Acorn.

OmniMetrix has made monthly payments

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

In 2023, OmniMetrix made payments to Acorn of $1,285,000 offset by interest

of $164,000, dividends of $76,000 due to Acorn and $25,000 in shared expenses paid by Acorn.

OmniMetrix will continue to make payments

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

This intercompany balance

is eliminated in consolidation.

had $2,326,000 of cash on December 31, 2024, and $2,800,000 on March 4, 2025.

We believe that such cash, plus the cash

expected to be generated from operations, will provide sufficient liquidity to finance the corporate activities of Acorn and the

operating activities of OmniMetrix at their current level of operations for at least the twelve-month period from the issuance of

the audited consolidated financial statements contained in this Annual Report.

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

of financing to fund additional investments in the business.

If we decide to pursue additional financing in the future, it may be in

the form of a bank line, a new loan or investment by others, an equity raise by Acorn which could then facilitate a loan by Acorn to

OmniMetrix, or any combination thereof.

Whether alternative funds, such as third-party loans or investments, will be available at

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

We believe that such cash, plus the cash expected

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

of OmniMetrix at their current level of operations for at least the twelve-month period from the issuance of the audited consolidated

financial statements contained in this Annual Report.

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

financing to fund additional investments in the business.

If we decide to pursue additional financing in the future, it may be in the

form of a bank line, a new loan or investment by others, an equity raise by Acorn, which could then facilitate a loan by Acorn to OmniMetrix,

or any combination thereof.

Whether alternative funds, such as third-party loans or investments, will be available at the time required

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

Obligations and Commitments

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the gross amount of the operating lease liabilities.

Imputed interest is $1,000 resulting in $98,000 included in current liabilities.

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

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

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

a smaller reporting company, we are not required to provide information required by this Item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

at the end of this report commencing on page F-1.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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

What changed 10-K

Item 7. Management’s Discussion and Analysis