ACFN Acorn Energy, Inc. - 10-K

ITEM 1A. RISK FACTORS

We may from time to time make written or oral statements that contain forward-looking information. However, our actual results may differ materially from our expectations, statements or projections. The following risks and uncertainties, together with other factors not presently determinable, could cause actual results to differ from our expectations, statements or projections.

General Factors

We depend on key management for the success of our business.

Our success is largely dependent on the skills, experience and efforts of our senior management team, including Jan Loeb, CEO of Acorn and Acting CEO of OmniMetrix, who beneficially owns approximately 21% of the Company’s stock, and Tracy Clifford, CFO of Acorn and COO of OmniMetrix. The loss of the services of either of these key managers could materially harm our business, financial condition, future results and cash flow. We do not maintain “key person” life insurance policies on any members of senior management. We may also not be able to locate or employ on acceptable terms qualified replacements for our senior management if their services were no longer available.

Loss of the services of a few key employees could harm our operations.

We depend on key technical employees and sales personnel. The loss of certain personnel could diminish our ability to develop and maintain relationships with customers and potential customers. The loss of certain technical personnel could harm our ability to meet development and implementation schedules. The loss of key sales personnel could have a negative effect on sales to certain current customers. Our future success also depends on our continuing ability to identify, hire, train and retain other highly qualified technical and managerial personnel. If we fail to attract or retain highly qualified technical and managerial personnel in the future, our business could be disrupted.

Compliance with changing regulations of corporate governance, public disclosure and financial accounting standards may result in additional expenses and affect our reported results of operations.

Keeping informed of, and in compliance with, changing laws, regulations and standards relating to corporate governance, public disclosure and accounting standards, including the Sarbanes-Oxley Act, Dodd-Frank Act, as well as new and proposed SEC regulations and accounting standards, has required an increased amount of management attention and external resources. Compliance with such requirements may result in increased general and administrative expenses and an increased allocation of management time and attention to compliance activities.

We may not be able to successfully integrate companies which we may invest in or acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow.

Part of our business plan includes the possibility of acquiring new companies either as new platform companies or complimentary companies. Any failure to effectively integrate any future acquisitions into our controls, systems and procedures could materially adversely affect our business, results of operations, financial condition and cash flow.

Any significant acquisition could require substantial use of our capital and may require significant debt or equity financing. We anticipate the need to closely manage our cash for the foreseeable future and cannot provide any assurance as to the availability or terms of any such financing or its effect on our liquidity and capital resources.

Integrating acquisitions is often costly, and we may not be able to successfully integrate acquired companies with existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating acquired companies involves a number of risks that could materially and adversely affect our business, including:

failure of the acquired companies to achieve the results we expect;

inability to retain key personnel of the acquired companies;

dilution of existing stockholders;

potential disruption of our ongoing business activities and distraction of our management;

difficulties in retaining business relationships with suppliers and customers of the acquired companies;

difficulties in coordinating and integrating overall business strategies, sales and marketing, and research and development efforts; and

difficulties in establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures.

We have reported material weaknesses in internal controls over financial reporting as of December 31, 2025 and we cannot assure you that additional material weaknesses will not be identified in the future or that we can effectively remediate our reported weaknesses. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our consolidated financial statements that could require a restatement of our consolidated financial statements, or our filings may not be timely, and investors may lose confidence in our reported financial information.

Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate  the effectiveness of our internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of our internal control over financial reporting in each Annual Report on Form 10-K.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some people, by the collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding disclosure controls and the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The existence of a material weakness could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements, cause us to fail to timely meet our reporting obligations and cause investors to lose confidence in our reported financial information.

If we are unable to protect our intellectual property, or our intellectual property protection efforts are unsuccessful, others may duplicate our technology.

We rely on a combination of patents, trademarks, copyrights, trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our ability to compete effectively will depend, in part, on our ability to protect our proprietary technology, systems’ designs and manufacturing processes. The ability of others to use our intellectual property could allow them to duplicate the benefits of our products and reduce our competitive advantage. We could incur substantial costs in prosecuting patent and other intellectual property infringement suits and defending the validity of our patents and other intellectual property. While we have attempted to safeguard and maintain our property rights, we do not know whether we have been or will be completely successful in doing so. These actions could place our patents, trademarks and other intellectual property rights at risk and could result in the loss of patent, trademark or other intellectual property rights protection for the products, systems and services on which our business strategy partly depends. Furthermore, it is not practical from a cost/benefit perspective to file for patent or trademark protection in every jurisdiction where we now or in the future may conduct business. In those territories where we do not have the benefit of patent or trademark protections, our competitors may be able to prevent us from selling our products or otherwise limit our ability to advertise under our established product names.

We rely, to a significant degree, on contractual provisions to protect our trade secrets and proprietary knowledge. These trade secrets either cannot be protected by patent protection, or we have determined that seeking a patent is not in our interest. These agreements may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of such agreements or may be independently developed by competitors.

Our financial instruments could subject us to concentrations of credit risk.

Our financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade accounts receivable. Our cash was deposited with a U.S. bank and amounted to $4,454,000 at December 31, 2025. We had one customer, the party to the Material Contract, as defined below under Other Matters in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which represented approximately 42% of the accounts receivable at December 31, 2025. As of March 3, 2026, 58% of this balance had been collected, with the remainder not yet due. Typically, credit risk with respect to the balance of trade receivables is generally diversified due to the number of entities comprising our customer base. However, at December 31, 2025, the balance of accounts receivable under the Material Contract represented more than 40% of the total outstanding balance of accounts receivable. Although we do not believe there is a significant risk of non-performance by this customer, any failures or defaults on their part could negatively impact the value of our financial instruments and could have a material adverse effect on our business, operations or financial condition.

International trade policies, including tariffs, sanctions and trade barriers may adversely affect our business, financial condition, results of operations and prospects.

We operate in a global economy, and our business depends on a global supply chain for the manufacturing of our products. There is inherent risk, based on the complex relationships among the U.S. and the countries in which we conduct our business, that political, diplomatic, and national security factors can lead to global trade restrictions and changes in trade policies and export regulations that may adversely affect our business and operations. The current international trade and regulatory environment is subject to significant ongoing uncertainty.

We source certain components and specialized equipment from international suppliers, with reliance on foreign manufacturers, including from China, Taiwan and Mexico. While we have not experienced a material impact to date from tariffs, any changes in tariff policies, particularly those affecting the locations of our suppliers and/or electronics and related materials, could materially increase our costs and reduce our profitability. Recent and potential future changes in international trade policies, including U.S.-China trade relations and electronics-specific tariffs, could present material risks to our operations and financial performance.

We are dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity breaches and data leakage.

We rely extensively on information technology systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used for third-parties or their vendors, to assist in conducting our business. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact our operations. The ever-increasing use and evolution of technology, including cloud-based computing and AI, creates opportunities for the unintentional dissemination or intentional destruction or modification of confidential information stored in our, or our third-party providers’ systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. We have invested in appropriate industry protections and monitoring practices of our data and IT and have established a Cybersecurity Steering Committee to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any losses incurred. Moreover, as cyber-attacks increase in frequency and magnitude, including by actors using AI, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as appropriate for our operations. There can be no assurance that our continuing efforts will prevent breakdowns or breaches of our and/or our third-party providers’ databases or systems that could adversely affect our business.

Risks Related to OmniMetrix

An increase in customer terminations would negatively affect our business by reducing OmniMetrix’s revenue or requiring us to spend more money to grow our customer base.

Although our historical renewal rate is greater than 90%, non-renewals or other monitoring service terminations could increase in the future due to customer dissatisfaction with our products and services, increased competition from other providers or alternative technologies.

If we have an increase in our non-renewal rate, we will have to acquire new customers on an ongoing basis just to maintain our existing level of customers and revenues. As a result, marketing expenditures are an ongoing requirement of our business. We incur costs to acquire new customers, and those costs are a factor in determining our net profitability. Therefore, if we are unsuccessful in retaining customers or are required to spend significant amounts to acquire new customers, our revenue could decrease and/or our operating results could be affected.

OmniMetrix is a relatively small company with limited resources compared to some of its current and potential competitors, which may hinder its ability to compete effectively.

Some of OmniMetrix’s current and potential competitors have significantly greater resources and broader name recognition than it does. As a result, these competitors may have greater credibility with OmniMetrix’s existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products, which would allow them to respond more quickly to new or emerging technologies or changes in customer requirements. In particular, at the present time we are facing significant competition from certain generator manufacturers who offer their own monitoring solutions. The leveraging of any of such advantages by our current and/or potential competitors could hinder OmniMetrix’s ability to compete effectively.

OmniMetrix may not be able to access sufficient capital to support growth.

While we believe we have sufficient cash to finance our operations for at least twelve months from the issuance of the audited consolidated financial statements contained in this Annual Report, we may need to seek additional sources of funding for long-term corporate costs or if OmniMetrix were not to grow at the rate anticipated and needed additional funds for their operations. 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 us to OmniMetrix may be limited by the working capital needs of our corporate activities. Whether Acorn will have the resources necessary to provide funding, or whether alternative funds, such as third-party loans or investments, will be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.

OmniMetrix sells equipment and services which monitor third-party products; thus, its revenues are dependent on the continued sales of such third-party products.

OmniMetrix’s end-user customer base is comprised exclusively of parties who have chosen to purchase either generators or construct gas pipelines. OmniMetrix has no ability to control the rate at which new generators or cathodic protection systems are acquired. If purchases of such products decline, the associated need for OmniMetrix’s products and services would be expected to decline as well.

If OmniMetrix is unable to keep pace with changing markets or customer-mandated product and service improvements, OmniMetrix’s results of operations and financial condition may suffer.

Many of OmniMetrix’s existing products may require ongoing engineering and upgrades in conjunction with market developments as well as specific customer needs. There can be no assurance that OmniMetrix will continue to be successful in its engineering efforts regarding the development of its products, and future technological difficulties could adversely affect its business, results of operations and financial condition.

The cellular networks used by OmniMetrix are also subject to periodic technical updates that may require corresponding updates to, or replacement of, OmniMetrix’s monitoring equipment.

Cellular networks have evolved over time to offer more robust technical capabilities in both voice and data transmission. As new capabilities come online, it will be necessary to have equipment that can readily interface with the newer cellular networks to avoid negative impacts on customer service. Not all of the costs associated with OmniMetrix’s corresponding equipment upgrades can be passed on to customers, and any increased expenses are expected to have a negative impact on OmniMetrix’s operating results.

A substantial portion of OmniMetrix’s revenues is expected to be generated not from product sales, but from periodic monitoring fees and thus it is continually exposed to risks associated with its customers’ financial stability.

OmniMetrix sells on-going monitoring services to both PG and CP customers. It is therefore dependent on these customers continuing to timely pay service fees on an on-going basis. If a significant portion of these fees are not paid on a timely basis and/or are not renewed from year-to-year, OmniMetrix could expect to experience deterioration in its financial condition.

OmniMetrix’s ability to provide, and to collect revenues from, monitoring services is dependent on the reliability of cellular networks not controlled by OmniMetrix.

OmniMetrix provides monitoring services through the use of cellular and satellite technology utilizing the networks of third-party providers. These providers generally do not warrantee their services to either OmniMetrix or the end users, and any dropped transmissions could result in the loss of customer renewals and potential claims against OmniMetrix. There is no assurance that customers will not cancel monitoring services due to network issues.

OmniMetrix’s business is dependent on its ability to reliably store and manage data, but there can be no guarantee that it has sufficient capabilities to mitigate potential data loss in all cases.

The efficient operation of OmniMetrix’s business is dependent on its information technology systems. In addition, OmniMetrix’s ability to assist customers in analyzing data related to the performance of such customers’ power and cathodic protection monitoring systems is an important component of its customer value proposition. OmniMetrix utilizes Microsoft Azure cloud-hosted data servers utilizing accepted data and power monitoring and protection processes, but whether a data loss can be avoided cannot be assured in every case. OmniMetrix’s information technology systems are vulnerable to damage or interruption from natural disasters, sabotage (including theft and attacks by computer viruses or hackers), power outages, and computer systems, Internet, telecommunications or data network failure. Any interruption of OmniMetrix’s information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on its results of operations and financial condition.

Risks Related to Our Securities

Our stock price is highly volatile, and we do not expect to pay dividends on shares of our common stock for the foreseeable future. Investors may never obtain a return on their investment.

The market price of our common stock has fluctuated substantially in the past and is likely to continue to be highly volatile and subject to wide fluctuations. During 2025, our common stock traded at prices as low as $12.42 and as high as $33.00 per share. Fluctuations in our stock price may continue to occur in response to various factors, many of which we cannot control, including:

general economic and political conditions and specific conditions in the markets we address;

quarter-to-quarter variations in our operating results;

strategic investments or divestments;

announcements of changes in our senior management;

the gain or loss of one or more significant customers or suppliers;

announcements of technological innovations or new products by our competitors, customers or us;

the gain or loss of market share in any of our markets;

changes in accounting rules;

changes in investor perceptions; or

changes in expectations relating to our products, plans and strategic position or those of our competitors or customers.

We do not intend to pay dividends to our stockholders in the foreseeable future. We intend to reinvest earnings, if any, in the development and expansion of our business. Accordingly, investors will need to rely on sales of their common stock after price appreciation, which may never occur, in order to realize a return on their investment.

Our share price may decline due to the large number of shares of our common stock eligible for future sale in the public market including shares underlying options.

Almost all of our outstanding shares of common stock are, or could upon exercise of options become, eligible for sale in the public market as described below. Sales of a substantial number of shares of our common stock in the public market, or the possibility of these sales, may adversely affect our stock price.

As of March 3, 2026, 2,506,501 shares of our common stock were issued and outstanding. As of that date, we had 66,758 options outstanding and exercisable with a weighted average exercise price of $9.06 per share, which if exercised would result in the issuance of additional shares of our common stock. In addition to the options noted above, at March 3, 2026, there were 57,178 options outstanding that have not yet vested and are not yet exercisable.

Substantially all of our currently outstanding shares and shares issuable under our outstanding options are or would be freely tradable.

We may have to offer additional securities for sale in the near future.

As of March 3, 2026, we had consolidated cash of $4,131,000  which we believe is sufficient for at least the next twelve months. Despite this, we may ultimately not have sufficient cash to allow us to execute our plans, and the occurrence of one or more unanticipated events may require us to make significant expenditures. Accordingly, we may need to raise additional amounts to finance our operations. If we were to do so by selling shares of our common stock and/or other securities convertible into shares of our common stock, current investors may incur dilution in the value of their shares.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview and Trend Information

The following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Certain of these factors are discussed in “Item 1A. Risk Factors.”

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

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

Power Generation (“PG”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT 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 OCOM. 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.

Cathodic 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. 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.

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

OmniMetrix

Following the emergence of machine-to-machine (“M2M”) and IoT applications whereby companies aggregate multiple sensors and monitors into a simplified dashboard for customers, OmniMetrix believes it plays a key role in this economic ecosystem. In addition, OmniMetrix continues to see a growing need for backup power infrastructure to secure critical military, government, and private sector assets against 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. OmniMetrix solutions monitor critical equipment used by cell towers, manufacturing plants, medical facilities, data centers, retail stores, public transportation systems, energy distribution and federal, state and municipal government facilities, in addition to residential back-up generators. Given that OmniMetrix monitors all major brands of critical equipment and continues 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.

Other Matters

On 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 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.

Critical Accounting Estimates

In preparing the financial statements, management is required to make estimates and assumptions that have an impact on the asset, liability, revenue and expense amounts reported. These estimates can also affect our supplemental information disclosures, including information about contingencies, risk and financial condition. We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to U.S. GAAP, and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise. 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 valuation allowance.

Valuation Allowance

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

We 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. The 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’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.

The 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.

Future 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.

Results of Operations

The selected consolidated statement of operations data for the years ended December 31, 2025 and 2024 and consolidated balance sheet data as of December 31, 2025 and 2024 has been derived from our audited consolidated financial statements included in this Annual Report.

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

Selected Consolidated Statement of Operations Data:

For the Years Ended December 31,

(in thousands, except per share data)

Revenue

COGS

Gross profit

R&D expense

SG&A expense

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 attributable to Acorn Energy, Inc. stockholders

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

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. stockholders – basic

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

The following table sets forth certain information with respect to revenues and profits of our reportable business segments for the years ended December 31, 2025 and 2024 (dollars in thousands), including the percentages of revenues attributable to such segments. (See Note 12 to our consolidated financial statements for the definitions of our reporting segments).

Total

Year ended December 31, 2025:

Revenues from customers

Percentage of total revenues by segment

Segment gross profit

Year ended December 31, 2024:

Revenues from customers

Percentage of total revenues by segment

Segment gross profit

2025 Compared to 2024

Revenue. In 2025, OmniMetrix recorded total revenue of $11,478,000, as compared to total revenue of $10,986,000 in 2024, for an increase of $492,000 (5%). 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 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

Amortization of deferred revenue

Sales of custom designed units and related accessories

Hardware sales under the Material Contract

Hardware sales

Other accessories, services, shipping and miscellaneous charges

Total hardware revenue

PG 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. 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 . 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 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.

R&D expense. During 2025, OmniMetrix recorded $1,094,000 of R&D expense as compared to $1,012,000 in 2024, an increase of $82,000 (8%). The increase in R&D expense in 2025 is related to increases in wages and bonuses paid to our engineering personnel in 2025 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.

SG&A expense. 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.

OmniMetrix’s 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 (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, net. Interest income in the year ended December 31, 2025 was $121,000 compared to $73,000 in the year ended December 31, 2024. The increase was due to higher average cash balances during the year on which interest was earned.

Income taxes. 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 $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.

Net income attributable to Acorn Energy. We had net income attributable to Acorn of $2,510,000 in 2025 compared to $6,294,000 in 2024. 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 $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. Net 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.

Liquidity and Capital Resources

At December 31, 2025, we had working capital of $3,157,000. Our working capital includes $4,454,000 of cash and deferred revenue of $3,097,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized. Total deferred revenue decreased by $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. Based on the current products being sold, the Company expects continued decreases in the deferred hardware revenue balance in the foreseeable future. Net cash increased during the year ended December 31, 2025 by $2,128,000, of which $2,090,000 was provided by operating activities, $33,000 was used in investing activities, and $71,000 was provided by financing activities.

During the year ended December 31, 2025, our operating activities provided $2,090,000 of net cash. Our OmniMetrix subsidiary provided $3,513,000 from its operations while our corporate headquarters used $1,423,000 in its operating activities during the period. OmniMetrix’s 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 activities provided $905,000 of net cash. Our OmniMetrix subsidiary provided $1,991,000 from its operations while our corporate headquarters used $1,086,000 in its operating activities during the period.

During 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.

Net 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, net of $16,000 used for stock repurchases in the year ended December 31,2025.

Other Liquidity Matters

We had $4,454,000 of cash on December 31, 2025, and $4,131,000 on March 3, 2026. 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.

Contractual Obligations and Commitments

The table below provides information concerning obligations under certain categories of our contractual obligations as of December 31, 2025.

Cash Payments Due to Contractual Obligations

Years Ending December 31,

(in thousands)

Total

Operating leases*

Contractual services

Purchase obligations**

Total contractual cash obligations

*Reflects the gross amount of the operating lease liabilities. Imputed interest is $166,000 resulting in $158,000 included in current liabilities. Does not include rent amounts to be received under the sublease.

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