What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-05 compared with 2025-03-06 · 119 added, 161 removed, 158 unchanged (64% of the section changed)

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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.

applications for commercial/industrial and residential power generation equipment.

In 2025, we launched the Omni family of products—the

OmniPro commercial monitor and the Omni residential monitor—built on a new proprietary common communications core called the

These products are replacing our legacy TrueGuard product lines, offering enhanced flexibility, expandability, and improved

connectivity with easier installation.

OmniMetrix also offers the Smart Annunciator product for commercial customers who require

a visual representation of generator status via a touchscreen display.

Protection (“CP”).

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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.

In 2025, we launched the RADex, an OCOM-based expansion of our RAD™

(Remote AC Mitigation Disconnect) that adds cathodic protection measurements while retaining the ability to remotely disconnect/connect

AC mitigation tools on solid-state decouplers, reducing expense and 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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continues to see a growing need for backup power infrastructure to secure critical military, government, and private sector assets against

emergency events including terrorist attacks, natural disasters, and cybersecurity threats.

Residential, commercial and industrial standby

generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure

emergency events including grid outages, natural disasters, cybersecurity threats and terrorist attacks.

Commercial, industrial and residential

standby generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure

increasingly becoming monitored in IoT applications.

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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 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 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 agreement will allow us to migrate our customers to higher

tier data plans for nominal additional cost.

Under the contract, OmniMetrix has provided monitoring devices and related remote monitoring

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

Shipping of hardware commenced in the third

quarter of 2024 and installation and monitoring services commenced in the fourth quarter of 2024.

During the year ended December 31,

2025, we recognized $2,293,000 in hardware revenue and $452,000 in first-year monitoring revenue from this contract.

During the year

ended December 31, 2024, we recognized $1,637,000 in hardware revenue and $21,000 in first-year monitoring revenue from this contract.

We have shipped all hardware that has been ordered under this contract to date.

We will continue to have annual renewal monitoring

revenue on these units each year for all connected units.

Accounting Estimates

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Management believes our most critical accounting

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

estimates and assumptions are in the area of valuation allowance.

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

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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.

future taxable income, management’s projections and beliefs are based upon a variety of estimates and numerous assumptions made

by our management with respect to, among other things, interest rates, forecasted revenue of the hardware sales and monitoring revenue

or revenue streams that could generate sufficient income.

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.

Company currently has a three-year cumulative income position which is positive evidence that it is more likely than not the deferred

tax assets will be realized.

As of December 31, 2025, we believe, based on our projections, that a partial valuation allowance of $10,326,000,

continues to be 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.

At this 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.

changes in the Company’s stock ownership, which may be outside of the Company’s control or future equity offerings or acquisitions

that have equity as a component of the purchase price consideration may trigger an “ownership change” and the utilization

of the Company’s federal and state net operating losses may be subject to a limitation under 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.

of Operations

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as of December 31, 2025 and 2024 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 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.

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$492,000 (5%).

As previously stated, OmniMetrix has two divisions:

The PG segment includes our monitoring device for generators,

industrial air compressors and our annunciator products.

The CP segment includes our monitoring device for cathodic protection systems

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

In 2024, revenue of $9,882,000 was attributed to the PG segment

and revenue of $1,104,000 was attributed to the CP segment, as compared to the 2023 revenue of $7,000,000 that was attributed to the

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

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:

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

The CP segment includes our monitoring device for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline

In 2025, revenue of $10,741,000 was attributed to the PG segment and revenue of $737,000 was attributed to the CP segment,

as compared to the 2024 revenue of $9,882,000 that was attributed to the PG segment and $1,104,000 that was attributed to the CP segment.

Hardware revenue decreased $515,000 (8%) from $6,433,000 during the year ended December 31, 2024 to $5,918,000 during the year ended

December 31, 2025.

The decrease in total hardware revenue during the year ended December 31, 2025 is further detailed in the table below:

Reconciliation of Hardware Revenue

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Hardware sales under the Material Contract

Hardware sales (new product versions)

Hardware sales

Other accessories, services, shipping and miscellaneous charges

Total hardware revenue

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

hardware revenue decreased $155,000 (3%) during the year ended December 31, 2025 to $5,424,000 compared to $5,579,000 during the year

ended December 31, 2024.

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

We also had a decrease in CP hardware revenue of $360,000 (42%) to $494,000 during the year ended December 31,

2025 from $854,000 during the year ended December 31, 2024.

Monitoring revenue increased $1,007,000 (22%) from $4,553,000 in the year

ended December 31, 2024 to $5,560,000 in the year ended December 31, 2025.

The increase in monitoring revenue was due to an increase

in the number of connections being monitored and growth in our customer base.

Gross profit was $8,815,000, reflecting a 77% gross margin on revenue in 2025, compared with a gross profit of $7,999,000,

reflecting a 73% gross margin on revenue in 2024.

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.

The gross margin increased to 77% in 2025 due to sales of the new Omni and OmniPro

products which have a higher gross margin than the older model hardware products and due to higher monitoring revenue, which has a 95%

gross margin, as a result of more connections.

Gross margin on hardware revenue for the year ended December 31, 2025 was 60% compared

to 57% for the year ended December 31, 2024.

Gross margin on monitoring revenue was 94% for the year ended December 31, 2025 compared

to 94% for the year ended December 31, 2024.

During 2025, OmniMetrix recorded $1,094,000 of R&D expense as compared to $1,012,000 in 2024, an increase of $82,000

The increase in R&D expense in 2025 is related to increases in wages and bonuses paid to our engineering personnel in 2025

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.

as well as an addition to our engineering team in the fourth quarter of 2024.

This increase was offset by the reduction of third-party

consultant expenses due to the completion of the recent launch of the Omni and OmniPro, which had been a significant development project,

and an addition to our in-house senior engineering staff.

We expect a moderate increase in R&D expense for 2026 due to engineering

salary increases granted effective January 1, 2026, and for continued investment in work on certain initiatives to continue to redesign

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

Consolidated SG&A expense increased $682,000 from 2024 to 2025.

Corporate overhead increased by $360,000 (35%), from

$1,020,000 in 2024 to $1,380,000 in 2025.

The increase in corporate overhead was due to an increase of (i) $128,000 in tax professional

fees from the preparation of the 2024 and the quarterly 2025 income tax provision, the calculations related to the release of the income

tax valuation allowance, and the preparation of an updated 382 Study, (ii) $115,000 in expenses related to uplisting to NASDAQ which

includes the NASDAQ application fee, the prorated listing fee and the legal fees associated with the uplisting process, (iii) $75,000

in stock compensation expense, (iv) $19,000 in audit fees primarily related to the work on the release of the income tax valuation allowance

at December 31, 2024, and (v) a net increase of $23,000, in the aggregate, of other public company expenses.

SG&A expense increased $322,000 (8%), from $4,030,000 in 2024 to $4,352,000 in 2025.

This increase was primarily due to increases

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

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

of (i) $215,000 in personnel expenses, (ii) $66,000 in IT consulting and staff augmentation fees, (iii) $58,000 in facilities expense

due to the lease amendment for our office space, and (iv) $57,000 in net aggregate expenses in other categories offset by decreases in

(i) commission expenses of $61,000 and (ii) $13,000 in travel and trade show expenses.

We anticipate that our annual SG&A costs in

2026 will increase by approximately 9% primarily due to the increase in our facility lease expense pursuant to the lease amendment executed

in June 2025 to extend the lease to November 2030 and also to increasing wage and benefit expenses as a result of merit increases effective

in January 2026.

Interest income in the year ended December 31, 2025 was $121,000 compared to $73,000 in the year ended December 31,

The increase was due to higher average cash balances during the year on which interest was earned.

For the year ended December 31, 2025, the Company recorded an income tax benefit of $464,000, 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.

tax expense of $30,000, compared to an income tax benefit of $4,435,000, offset by current state income tax expense of $123,000, for

the year ended December 31, 2024.

The change in the income tax benefit was due to changes in the Company’s valuation allowance.

The recorded income tax benefit contributed $0.19 to our basic earnings per share of $1.01, and $0.18 of our diluted earnings per share

of $0.99, at December 31, 2025.

At December 31, 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.

income attributable to Acorn Energy.

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Our net income in 2025 is comprised of net income at OmniMetrix of $3,488,000, corporate expense of $1,378,000, 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.

tax expense of $30,000, the non-controlling interest share of our net income in OmniMetrix of $34,000 offset by deferred income tax benefit

as a result of the release of our valuation allowance of $464,000.

Our 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.

operating income increased by $100,000 but net income decreased by $3,784,000 primarily due to the decrease in the positive impact of

the valuation allowance.

and Capital Resources

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$824,000, from $4,233,000 at December 31, 2024 to $3,409,000 at December 31, 2025, 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.

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

Net cash increased during the year ended December 31, 2025 by $2,128,000, of which $2,090,000 was provided by operating activities,

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from its operations while our corporate headquarters used $1,423,000 in its operating activities during the period.

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.

inventory balance increased by $818,000 at December 31, 2025 as compared to December 31, 2024 primarily related to purchases made for

production of our recently launched redesigned product versions, Omni and OmniPro.

During the year ended December 31, 2024, our operating

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Our OmniMetrix subsidiary provided $1,991,000 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.

used $1,086,000 in its operating activities during the period.

the year ended December 31, 2025, net cash of $33,000 was used in investing activities, primarily related to computer equipment purchases

for technology upgrades.

During the year ended December 31, 2024, net cash of $56,000 was used in investing activities.

cash of $71,000 and $28,000 was provided by financing activities during the years ended December 31, 2025 and 2024, respectively, which

represents proceeds from the exercise of stock options and warrants.

represents proceeds from the exercise of stock options, net of $16,000 used for stock repurchases in the year ended December 31,2025.

Liquidity Matters

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(in thousands)

Software agreements

Operating leases*

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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