UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2020~~March 31, 2021

Commission file number: 001-33886

ACORN ENERGY, INC.

(Exact name of registrant as specified in charter)

Delaware

22-2786081

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

1000 N West, ~~Street,~~ Suite 1200, Wilmington, Delaware

19801

(Address of principal executive offices)

(Zip Code)

410-654-3315

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [ ]		Accelerated filer [ ]

	Non-accelerated filer [X]		Smaller reporting company [X]

	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at ~~November 9, 2020~~May 7, 2021
Common Stock, $0.01 par value per share		39,687,589

ACORN ENERGY, INC.

Quarterly Report on Form 10-Q

for the Quarterly Period Ended ~~September 30, 2020~~March 31, 2021

TABLE OF CONTENTS

	PAGE
PART I Financial Information	3

Item 1. Unaudited Condensed Consolidated Financial Statements:	3

Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3

Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

Condensed Consolidated Statements of Changes in Deficit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	6

Notes to Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1614

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2418

Item 4. Controls and Procedures	2519

PART II Other Information	20

Item 6. Exhibits	2620

Signatures	2721

Certain statements contained in this report are forward-looking in nature. These statements are generally identified by the inclusion of phrases such as “we expect”, “we anticipate”, “we believe”, “we estimate” and other phrases of similar meaning. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Many of these factors are described in our most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission.

PART I

ITEM 1.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ACORN ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

As of
September 30, 2020

As of
December 31, 2019

ASSETS
Current assets:
Cash and cash equivalents $ 1,966 $ 1,247
Accounts receivable, net 732 962
Inventory, net 299 291
Deferred charges 806 741
Other current assets 117 189
Total current assets 3,920 3,430
Property and equipment, net 264 189
Right-of-use assets, net 518 587
Other assets 670 778
Total assets $ 5,372 $ 4,984
LIABILITIES AND DEFICIT
Current liabilities:
Short-term credit $ 171 $ 136
Loan payable – current portion 256 ―
Accounts payable 273 197
Accrued expenses 55 136
Deferred revenue 3,289 3,004
Current operating lease liabilities 97 53
Other current liabilities 143 68
Total current liabilities 4,284 3,594
Non-current liabilities:
Loan payable 207 ―
Deferred revenue 1,357 1,491
Noncurrent operating lease liabilities 468 542
Other non-current liabilities 5 2
Total non-current liabilities 2,037 2,035
Commitments and contingencies
Deficit:
Acorn Energy, Inc. shareholders
Common stock - $0.01 par value per share:
Authorized – 42,000,000 shares; Issued – 39,687,589 and 39,591,339 shares at September 30, 2020 and December 31, 2019, respectively 397 396
Additional paid-in capital 102,718 101,655
Warrants 3 1,021
Accumulated deficit (101,030 ) (100,682 )
Treasury stock, at cost – 801,920 shares at September 30, 2020 and December 31, 2019 (3,036 ) (3,036 )
Total Acorn Energy, Inc. shareholders’ deficit (948 ) (646 )
Non-controlling interests (1 ) 1
Total deficit (949 ) (645 )
Total liabilities and deficit $ 5,372 $ 4,984
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~ACORN ENERGY, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~
~~(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)~~

Three months ended
September 30,

Nine months ended
September 30,

2020 2019 2020 2019

Revenue $ 1,517 $ 1,386 $ 4,323 $ 4,090
Cost of sales – products and services 460 465 1,322 1,417
Cost of sales – other (20 ) (1 ) (20 ) 29
Gross profit 1,077 922 3,021 2,644
Operating expenses:
Research and development expenses 160 137 453 420
Selling, general and administrative expense 940 906 2,887 2,815
Total operating expenses 1,100 1,043 3,340 3,235
Operating loss (23 ) (121 ) (319 ) (591 )
Finance expense, net (8 ) ― (28 ) 5
Loss before income taxes (31 ) (121 ) (347 ) (586 )
Income tax expense ― — ― —
Net loss (31 ) (121 ) (347 ) (586 )
Non-controlling interest share of net (income) loss (1 ) ― (1 ) 29
Net loss attributable to Acorn Energy, Inc. shareholders $ (32 ) $ (121 ) $ (348 ) $ (557 )

Basic and diluted net loss per share attributable to Acorn Energy, Inc. shareholders: $ (0.00 ) $ (0.00 ) $ (0.01 ) $ (0.02 )
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic and diluted 39,687 40,393 39,669 33,844
~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~
~~ACORN ENERGY, INC. AND SUBSIDIARIES~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT (UNAUDITED)~~
~~(IN THOUSANDS)~~
Three and Nine Months Ended September 30, 2020
Number of Shares Common Stock Additional Paid-In Capital Warrants Accumulated Deficit Number of Treasury Shares Treasury Stock
Total Acorn
Energy, Inc.
Shareholders’
Deficit
Non-
controlling interests Total Deficit
Balances as of December 31, 2019 39,591 $ 396 $ 101,655 $ 1,021 $ (100,682 ) 802 $ (3,036 ) $                    (646 ) $ 1 $ (645 )
Net loss — — — — (283 ) — — (283 ) (1 ) (284 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — —                (1 ) (1 )
Proceeds from stock option exercise 96 1 18 ― ― ― ― 19 ― 19
Stock option compensation — — 6 — — — — 6 — 6
Balances as of March 31, 2020 39,687 $ 397 $ 101,679 $ 1,021 $ (100,965 ) 802 $ (3,036 ) $ (904 ) $ (1 ) $ (905 )
Net loss — — — — (33 ) — — (33 ) 1 (32 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (1 ) (1 )
Value of expired warrants ― ―* 1,018 (1,018 ) ― — ― ― ― ―
Stock option compensation — — 13 — — — — 13 — 13
Balances as of June 30, 2020 39,687 $ 397 $ 102,710 $ 3 $ (100,998 ) 802 $ (3,036 ) $ (924 ) $ (1 ) $ (925 )
Net loss — — — — (32 ) — — (32 ) 1 (31 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (1 ) (1 )
Stock option compensation — — 8 — — — — 8 — 8
Balances as of September 30, 2020 39,687 $ 397 $ 102,718 $ 3 $ (101,030 ) 802 $ (3,036 ) $ (948 ) $ (1 ) $ (949 )
Three and Nine Months Ended September 30, 2019
Number of Shares Common Stock
Additional Paid-
In
Capital
Warrants Accumulated Deficit Number of Treasury Shares Treasury Stock
Total Acorn
Energy, Inc.
Shareholders’
Equity
(Deficit)

Non-
controlling interests
Total Deficit
Balances as of December 31, 2018 29,556 $ 296 $ 100,348 $ 1,118 $ (100,064 ) 802 $ (3,036 ) $              (1,338 ) $ 108 $ (1,230 )
Net loss — — — — (237 ) — — (237 ) (24 ) (261 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (20 ) (20 )
Stock option compensation — — 6 — — — — 6 — 6
Balances as of March 31, 2019 29,556 $ 296 $ 100,354 $ 1,118 $ (100,301 ) 802 $ (3,036 ) $ (1,569 ) $ 64 $ (1,505 )
Net loss — — — — (199 ) — — (199 ) (5 ) (204 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (20 ) (20 )
Shares granted in lieu of professional fees 60 * 18 ― ― — ― 18 ― 18
Rights offering, proceeds net of expenses 9,975 100 2,106 — — — — 2,206 — 2,206
Stock option compensation — — 6 — — — — 6 — 6
Balances as of June 30, 2019 39,591 $ 396 $ 102,484 $ 1,118 $ (100,500 ) 802 $ (3,036 ) $ 462 $ 39 $ 501
Net loss — — — — (121 ) — (121 ) ― (121 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (1 ) (1 )
Purchase of non-controlling interest ― ― (914 ) ― ― ― ― (914 ) (36 ) (950 )
Rights offering, proceeds net of expenses ― * (20 ) — — — — (20 ) — (20 )
Stock option compensation — — 7 — — — — 7 — 7
Balances as of September 30, 2019 39,591 $ 396 $ 101,557 $ 1,118 $ (100,621 ) 802 $ (3,036 ) $ (586 ) $ 2 $ (584 )
* Less than $1

As of
March 31, 2021

As of
December 31, 2020

ASSETS
Current assets:
Cash and cash equivalents $ 1,974 $ 2,063
Accounts receivable, net 647 608
Inventory, net 243 236
Deferred charges 722 764
Other current assets 141 126
Total current assets 3,727 3,797
Property and equipment, net 258 268
Right-of-use assets, net 471 494
Other assets 623 642
Total assets $ 5,079 $ 5,201
LIABILITIES AND DEFICIT
Current liabilities:
Short-term credit $ — $ 149
Accounts payable 298 229
Accrued expenses 191 168
Deferred revenue 3,181 3,214
Current operating lease liabilities 101 99
Other current liabilities 27 33
Total current liabilities 3,798 3,892
Non-current liabilities:
Deferred revenue 1,299 1,340
Noncurrent operating lease liabilities 417 443
Other long-term liabilities 48 45
Total long-term liabilities 1,764 1,828
Commitments and contingencies
Deficit:
Acorn Energy, Inc. shareholders
Common stock - $0.01 par value per share:
Authorized – 42,000,000 shares; Issued – 39,687,589 shares at March 31, 2021 and December 31, 2020 397 397
Additional paid-in capital 102,741 102,726
Warrants 3 3
Accumulated deficit (100,593 ) (100,613 )
Treasury stock, at cost – 801,920 shares at March 31, 2021 and December 31, 2020 (3,036 ) (3,036 )
Total Acorn Energy, Inc. shareholders’ deficit (488 ) (523 )
Non-controlling interests 5 4
Total deficit (483 ) (519 )
Total liabilities and deficit $ 5,079 $ 5,201

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

5 3

ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~OPERATIONS (UNAUDITED)
(IN ~~THOUSANDS)~~THOUSANDS, EXCEPT PER SHARE DATA)

Nine months ended September 30,
2020 2019
Cash flows provided by (used in) operating activities:
Net loss $ (347 ) $ (586 )
Depreciation and amortization 22 56
Non-cash lease expense 88 —
Stock-based compensation 27 19
Professional fees paid in common stock — 18
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable 230 (96 )
Increase in inventory (8 ) (97 )
Decrease in deferred charges 48 113
Decrease (increase) in other current assets and other assets 66 (26 )
Decrease in accounts payable and accrued expenses (3 ) (270 )
Increase in deferred revenue 151 304
Decrease in amounts due to DSIT and directors — (323 )
Decrease in operating lease liability (48 ) —
Increase (decrease) in other current liabilities and non-current liabilities 74 (45 )
Net cash provided by (used in) operating activities 300 (933 )

Cash flows used in investing activities:
Purchases of software (90 ) (60 )
Payments made for patent filings (7 ) —
Purchase of non-controlling interest in OmniMetrix — (950 )
Net cash used in investing activities (97 ) (1,010 )

Cash flows provided by financing activities:
Short-term credit, net 35 143
Proceeds from rights offering, net of expenses of $0 and $208 — 2,186
Loan proceeds 462 —
Stock option exercise proceeds 19 —
Net cash provided by financing activities 516 2,329

Net increase in cash, cash equivalents and restricted cash 719 386
Cash, cash equivalents and restricted cash at the beginning of the year 1,247 1,263
Cash, cash equivalents and restricted cash at the end of the period $ 1,966 $ 1,649

Cash, cash equivalents and restricted cash consist of the following:
End of period
Cash and cash equivalents $ 1,966 $ 1,338
Restricted cash — 311
$ 1,966 $ 1,649

Cash, cash equivalents and restricted cash consist of the following:
Beginning of period
Cash and cash equivalents $ 1,247 $ 973
Restricted cash — 290
$ 1,247 $ 1,263

Supplemental cash flow information:
Cash paid during the year for:
Interest $ 23 $ 15

Non-cash investing and financing activities:
Purchase of equipment under installment agreement $ — $ 7
Accrued preferred dividends to former Acorn director and/or former OmniMetrix CEO $ 3 $ 41
Three months ended March 31,
2021 2020

Revenue $ 1,705 $ 1,338
Cost of sales 495 416
Gross profit 1,210 922
Operating expenses:
Research and development expense 178 155
Selling, general and administrative expense 1,006 1,041
Total operating expenses 1,184 1,196
Operating income (loss) 26 (274 )
Finance expense, net (4 ) (10 )
Income (loss) before income taxes 22 (284 )
Income tax expense — —
Net income (loss) 22 (284 )
Non-controlling interest share of net (income) loss (2 ) 1
Net income (loss) attributable to Acorn Energy, Inc. shareholders $ 20 $ (283 )

Basic and diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
Total attributable to Acorn Energy, Inc. shareholders $ 0.00 $ (0.01 )
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic and diluted:
Basic 39,687 39,631
Diluted 39,860 39,631

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

6 4
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT (UNAUDITED)
(IN THOUSANDS)
Three Months Ended March 31, 2021
Number of Shares Common Stock Additional Paid-
In
Capital Warrants Accumulated Deficit Number of Treasury Shares Treasury Stock Total Acorn
Energy, Inc.
Shareholders’
Deficit Non-
controlling interests Total
Deficit
Balances as of December 31, 2020 39,687 $ 397 $ 102,726 $ 3 $ (100,613 ) 802 $ (3,036 ) $ (523 ) $ 4 $ (519 )
Net income — — — — 20 — — 20 2 22
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (1 ) (1 )
Stock option compensation — — 15 — — — — 15 — 15
Balances as of March 31, 2021 39,687 $ 397 $ 102,741 $ 3 $ (100,593 ) 802 $ (3,036 ) $ (488 ) $ 5 $ (483 )
Three Months Ended March 31, 2020
Number of Shares Common Stock Additional Paid-
In
Capital Warrants Accumulated Deficit Number of Treasury Shares Treasury Stock Total Acorn
Energy, Inc.
Shareholders’
Deficit Non-
controlling interests Total Deficit
Balances as of December 31, 2019 39,591 $ 396 $ 101,655 $ 1,021 $ (100,682 ) 802 $ (3,036 ) $ (646 ) $ 1 $ (645 )
Net loss — — — — (283 ) — — (283 ) (1 ) (284 )
Accrued dividend in OmniMetrix preferred shares — — — — — — — — (1 ) (1 )
Proceeds from stock option exercise 96 1 18 — — — — 19 — 19
Stock option compensation — — 6 — — — — 6 — 6
Balances as of March 31, 2020 39,687 $ 397 $ 101,679 $ 1,021 $ (100,965 ) 802 $ (3,036 ) $ (904 ) $ (1 ) $ (905 )
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (IN THOUSANDS)
Three months ended March 31,
2021 2020
Cash flows provided by operating activities:
Net income (loss) $ 22 $ (284 )
Depreciation and amortization 18 16
Non-cash lease expense 29 29
Stock-based compensation 15 6
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (39 ) 434
Increase in inventory (7 ) (18 )
Decrease in deferred charges 61 27
(Increase) decrease in other current assets (15 ) 53
Increase (decrease) in accounts payable and accrued expenses 92 (7 )
Decrease in deferred revenue (74 ) (9 )
Decrease in operating lease liability (30 ) (28 )
(Decrease) increase in other current liabilities and non-current liabilities (4 ) 18
Net cash provided by operating activities 68 237

Cash flows used in investing activities:
Purchases of hardware and software (8 ) (87 )
Payments made for patent filings — (3 )
Net cash used in investing activities (8 ) (90 )

Cash flows (used in) provided by financing activities:
Short-term credit, net (149 ) 3
Stock option exercise proceeds — 19
Net cash (used in) provided by financing activities (149 ) 22

Net (decrease) increase in cash (89 ) 169
Cash at the beginning of the year 2,063 1,247
Cash at the end of the period $ 1,974 $ 1,416

Supplemental cash flow information:
Cash paid during the year for:
Interest $ 4 $ 7

Non-cash investing and financing activities:
Accrued preferred dividends to former Omnimetrix CEO $ 1 $ 1
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6

ACORN ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED STATEMENTS
(UNAUDITED)

NOTE 1— BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Acorn Energy, Inc. and its subsidiaries, ~~(the “Company”~~OmniMetrix, LLC and OMX Holdings, Inc. (collectively, “Acorn” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the ~~three-and-nine-month periods~~three-month period ended ~~September 30, 2020~~March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2020.~~2021.

Certain reclassifications have been made to the Company’s unaudited condensed consolidated financial statements for the ~~nine-month~~three-month period ended ~~September 30, 2019~~March 31, 2020 to conform to the current period’s unaudited condensed consolidated financial statement presentation. There was no effect on total assets, equity and net loss. A reclassification of ~~$6,000~~$2,400 from ~~finance~~the parent company’s SG&A expense to the subsidiary’s SG&A expense was recorded to reclass the ~~Intuit processing fees for customer payments made through the Intuit portal via credit card or bank draft that was previously included in finance~~stock compensation expense as of ~~March 31, 2019 and is included in SG&A as of September 30, 2019.~~ subsidiary employees.
These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.
Basic and Diluted Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing the net income (loss) attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the year, excluding treasury stock. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise of stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net loss per share if doing so would be antidilutive. The weighted average number of options and warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was approximately 245,000 (which have a weighted average exercise price of $0.99) and approximately 2,987,000 (which have a weighted average exercise price of $1.36) for the three month periods ending March 31, 2021 and 2020, respectively.
The following data represents the amounts used in computing EPS and the effect on net income (loss) and the weighted average number of shares of dilutive potential common stock (in thousands):
Three months ended March 31,
2021 2020
Net income (loss) available to common stockholders $ 20 $ (283 )

Weighted average shares outstanding:
-Basic 39,687 39,631
Add: Warrants 26 —
Add: Stock options 147 —
-Diluted 39,860 39,631

Basic and diluted net income (loss) per share $ 0.00 $ (0.01 )
7

NOTE 2—RECENT AUTHORITATIVE GUIDANCE

Recently Issued Accounting Principles

Other than the pronouncement noted below, there have been no recent accounting pronouncements or changes in accounting pronouncements during the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, that are of material significance, or have potential material significance, to the Company.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (“ASC 326”), authoritative guidance amending how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance requires the application of a current expected credit loss model, which is a new impairment model based on expected losses. The new guidance is effective for interim and annual reporting periods beginning after December 15, 2022. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements and related disclosures.

7
~~Recently Adopted Accounting Principles~~
In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for nonemployee share-based payment transactions. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The standard was effective in the first quarter of fiscal year 2020, although early adoption was permitted (but no sooner than the adoption of Topic 606). The Company concluded that the adoption of this ASU did not ~~have a material impact on the Company’s unaudited condensed consolidated financial statements.~~
NOTE 3—LIQUIDITY

At ~~September 30, 2020,~~March 31, 2021, the Company had negative working capital of ~~$364,000.~~approximately $71,000. The Company’s working capital includes approximately ~~$1,966,000~~$1,974,000 of cash and deferred revenue of approximately ~~$3,289,000 and $256,000 representing the current portion of our PPP loans (see Note 6—Debt and Note 11—Subsequent Events).~~$3,181,000. The deferred revenue does not require significant cash outlay for the revenue to be recognized. During the first ~~nine~~three months of ~~2020,~~2021, the Company’s OmniMetrix, LLC subsidiary provided ~~$976,000~~approximately $342,000 from operations while the Company’s corporate headquarters used ~~$676,000~~approximately $274,000 during the same period.

OmniMetrix is considered an essential business because it provides infrastructure support to both government and commercial sectors and across key industries. The Company has experienced minimal negative impacts due to the COVID-19 pandemic to date. The Company has continued to realize new equipment sales (although not at the anticipated growth rate due to travel restrictions which have negatively impacted the sales closing timeline), has continued to collect its monthly recurring monitoring revenues and has retained its customer base. While the impacts of COVID-19 in the future are uncertain, the Company believes that due to the need for backup power and the desirability of remote monitoring services, it should be positioned for stable financial performance.

As of ~~November 9, 2020,~~May 7, 2021, the Company had cash of approximately ~~$2,006,000.~~$1,968,000. The Company believes that such cash, plus the cash generated from operations, ~~and borrowing from the OmniMetrix Loan and Security Agreement,~~ will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their current level of operations for the foreseeable future and for the twelve months from the issuance of these unaudited condensed consolidated financial statements in particular. The Company may, at some point, elect to obtain a new line of credit to fund additional investments in the business.

NOTE 4—~~INVESTMENT IN OMNIMETRIX~~
In 2015, one of the Company’s then-current directors (the “Investor”) acquired a 20% interest in the Company’s OMX Holdings, Inc. subsidiary (“Holdings”) through the purchase of $1,000,000 of OmniMetrix Preferred Stock (“Preferred Stock”). Holdings is the holder of 100% of the membership interests of OmniMetrix, LLC through which the Company operates its Power Generation and Cathodic Protection monitoring activities. The $1,000,000 investment by the Investor was recorded as an increase in non-controlling interests.
On July 1, 2019, in accordance with terms established in 2015 at the time of the original investment, the Company repurchased from the Investor the shares of Preferred Stock then held by the Investor for a purchase price of $1,273,000 in cash (which included $323,000 of unpaid accrued dividends through June 30, 2019). The repurchase raised the Company’s ownership in Holdings from 80% to 99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC.
~~NOTE 5—~~LEASES

OmniMetrix leases office space and office equipment under operating lease agreements. The office lease expires on September 30, 2025. The office equipment lease was entered into in April 2019 and has a sixty-month term. Operating lease payments for the three months ended ~~September 30,~~March 31, 2021 and 2020 were approximately $30,000 and ~~2019 were $10,000 and $42,000,~~$28,000, respectively. Operating lease payments for the nine months ended September 30, 2020 and 2019 were $48,000 and $96,000 respectively. The lease payments were less in the current year periods due to four months of rent abatement provided for in the new lease amendment that were in effect during the nine-month period ended September 30, 2020. The future minimum lease payments on non-cancellable operating leases as of ~~September 30, 2020~~March 31, 2021 using a discount rate of 4.5% are ~~$565,000.~~
~~Supplemental cash flow information related to leases consisted of the following (in thousands):~~
September,
2020 2019
Cash paid for operating lease liabilities $ 48 $ 96
$518,000. Supplemental balance sheet information related to leases consisted of the following:

~~2020~~2021
Weighted average remaining lease terms for operating leases ~~4.970~~4.47

The table below reconciles the undiscounted future minimum lease payments under ~~non-cancellable~~non-cancelable lease agreements having initial terms in excess of one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of ~~September 30, 2020~~March 31, 2021 (in thousands):

Twelve-month
period ended
September 30,

Twelve-month
period ended
March 31,

2021 $ 120
2022 124 $ 122
2023 127 125
2024 129 129
2025 132 130
Thereafter —
2026 66
Total undiscounted cash flows 632 572
Less: Imputed interest (67 ) (54 )
Present value of operating lease liabilities (a) $ 565 $ 518

(a) Includes current portion of ~~$97~~$101,000 for operating leases.

8
NOTE 6—5—DEBT
~~(a)~~ ~~Loans payable~~
~~On April 24, 2020, Acorn Energy, Inc. received Paycheck Protection Program (“PPP”) loan proceeds in the amount of $41,600.~~
~~On April 30, 2020, OmniMetrix, LLC received PPP loan proceeds in the amount $419,800.~~
Under the PPP of the Coronavirus Aid, Relief and Economic Security Act (the “Act”), up to the full principal amount of a loan and any accrued interest can be forgiven if the borrower uses all of the loan proceeds for forgivable purposes (payroll, benefits, lease/mortgage payments and/or utilities) required under the Act and any rule, regulation, or guidance issued by the SBA pursuant to the Act (collectively, the “Forgiveness Provisions”). The amount of forgiveness of the PPP loan depends on the borrower’s payroll costs over either an eight-week or twenty-four-week period beginning on the date of funding. Any processes or procedures established under the Forgiveness Provisions must be followed and any requirements of the Forgiveness Provisions must be fully satisfied to obtain such loan forgiveness. Pursuant to the provisions of the Act, the first six monthly payments of principal and interest will be deferred. Interest will accrue during the deferment period. The borrower must pay principal and interest payments on the fifth day of each month beginning seven months from the date of the applicable promissory note.
~~Aggregate interest expense on these loans for the three and nine months ended September 30, 2020 was approximately $1,000 (see Note 11—Subsequent Events).~~
~~(b) Line of credit~~

In March 2019, OmniMetrix reinstated its ~~Loan~~loan and ~~Security Agreement providing~~security agreement which provided OmniMetrix with access to accounts receivable formula-based financing of the lesser of 75% of eligible receivables or $1,000,000. Debt incurred under this financing arrangement ~~bears~~bore interest at the greater of 6% and prime ~~(3.25% at September 30, 2020)~~ plus 1.5% per year. In addition, OmniMetrix iswas to pay a monthly service charge of 0.75% of the average aggregate principal amount outstanding for the prior month, for an effective rate of interest on advances of 15% at ~~September 30, 2020.~~February 28, 2021. OmniMetrix also agreed to continue to maintain a minimum loan balance of $150,000 in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019. From time to time, the balance outstanding ~~may fall~~fell below $150,000 based on collections applied against the loan balance and the timing of loan draws. The monthly service charge and interest iswas calculated on the greater of the outstanding balance or $150,000. Interest expense for the ~~three-months-ended September 30, 2020 and 2019~~period January 1, 2021 to February 28, 2021, when the line expired, was ~~$6,000 and $6,000 respectively. Interest expense~~approximately $4,000 compared to approximately $7,000 for the ~~nine-months-ended September 30, 2020 and 2019 was $22,000 and $15,000, respectively.~~three months ended March 31, 2020.

OmniMetrix ~~had an~~paid off the outstanding balance in February 2021 and decided not to renew this line of ~~$171,000 and $136,000 as of September 30, 2020 and December 31, 2019, respectively, pursuant to the Loan and Security Agreement, and $253,000 was available to borrow at September 30, 2020.~~credit, which expired in accordance with its terms on February 28, 2021.

NOTE 7—6—COMMITMENTS AND CONTINGENCIES
On August 19, 2019, OmniMetrix entered into an agreement with a software development partner to create and license to OmniMetrix a new software platform and application. Pursuant to this agreement, OmniMetrix paid this partner equal monthly payments over the first seven months of the term of the agreement equal to $200,000 in the aggregate. In addition, OmniMetrix will pay the partner (i) a per-sensor monitoring fee for each sensor connected to the developed technology, or (ii) a percentage of any revenue received above a specified amount per sensor monitored per month in oil and gas applications only. Commencing on January 1, 2021, OmniMetrix pays the partner an annual licensing fee of $50,000 which is paid in quarterly increments of $12,500. The per-sensor monitoring fees have not yet commenced. The initial term of this agreement ends on August 19, 2022 but will automatically renew for one-year periods unless either party delivers a written notice of termination to the other party sixty days prior to the end of the respective term.

On April 28, 2020, the Company entered into a new agreement for data hosting services, replacing an expiring agreement with the same vendor, effective May 1, 2020. The agreement has a twelve-month term and the total payments under this agreement are approximately $148,000 in the aggregate. In January 2021, the Company elected to renew this agreement for an additional twelve-months under the same terms. The Company paid approximately $37,500 under this agreement in the three months ended March 31, 2021. The agreement will now expire on April 30, 2022.
On March 17, 2021, the Company entered into a master services agreement for the development of a new user interface for its customer data portal. The cost of this project is not expected to exceed approximately $85,000 and is expected to be completed by July 31, 2021. This ~~represents~~master services agreement also covers strategic enhancements to our technology infrastructure at an ~~increase~~estimated investment of approximately $21,000 ~~from~~that will be completed by year-end.
9
In addition to the ~~prior twelve-month term for additional~~above, the Company has approximately $600,000 in other contractual obligations related to software agreements, operating leases and contractual services, ~~including enhanced business continuity and disaster recovery services.~~payable through 2026.

NOTE 8—7—EQUITY

(a) General

At ~~September 30, 2020,~~March 31, 2021 the Company had issued and outstanding 39,687,589 shares of its common stock, par value $0.01 per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company. Holders of common stock do not have subscription, redemption, conversion or other preemptive rights. Holders of the common stock are entitled to elect all the Directors on the Company’s Board. Holders of the common stock do not have cumulative voting rights, meaning that the holders of more than 50% of the common stock can elect all the Company’s Directors. Except as otherwise required by Delaware General Corporation Law, all stockholder action is taken by vote of a majority of shares of common stock present at a meeting of stockholders at which a quorum (a majority of the issued and outstanding shares of common stock) is present in person or by proxy or by written consent pursuant to Delaware law (other than the election of Directors, who are elected by a plurality vote).

The Company is not authorized to issue preferred stock. Accordingly, no preferred stock is issued or outstanding.
~~(b) Rights Offering~~
On June 28, 2019, the Company completed a rights offering, raising $2,184,000 in proceeds (net of $210,000 in expenses) of which $1,628,000 was from related parties. Pursuant to the rights offering, Acorn securityholders and parties to a backstop agreement purchased 9,975,553 shares of Acorn common stock for $0.24 per share.
Under the terms of the rights offering, each right entitled securityholders as of June 3, 2019, the record date for the rights offering, to purchase 0.312 shares of Acorn common stock at a subscription price of $0.24 per whole share. No fractional shares were issued. The closing price of Acorn’s common stock on the record date of the rights offering was $0.2925. Distribution of the rights commenced on June 6, 2019 and were exercisable through June 24, 2019.
In connection with the rights offering, Acorn entered into a backstop agreement with certain of its directors and Leap Tide Capital Management LLC, the sole manager of which is Acorn’s President and CEO, pursuant to which they agreed to purchase from Acorn any and all unsubscribed shares of common stock in the rights offering, subject to the terms, conditions and limitations of the backstop agreement. The backstop purchasers did not receive any compensation or other consideration for entering into or consummating the backstop agreement.
On July 1, 2019, the Company utilized a portion of the rights offering proceeds to complete the planned reacquisition of a 19% interest in its OMX Holdings, Inc. subsidiary (“Holdings”) for $1,273,000, including accrued dividends. Holdings owns 100% of the membership interests of OmniMetrix, LLC. The purchase raised Acorn’s ownership in Holdings from 80% to 99%, with the remaining 1% owned by the former CEO of OmniMetrix, LLC. See Note 4 for further discussion.
The balance of the rights offering net proceeds provided OmniMetrix with additional sales and marketing resources to facilitate expansion into additional geographic markets and new product applications, to support next-generation product development and for general working capital purposes.
~~(c)~~(b) Summary Employee Option Information

The Company’s stock option plans provide for the grant to officers, directors and ~~other key~~ employees of options to purchase shares of common stock. The purchase price may be paid in cash or, if the option is “in-the-money” at the end of the option term, ~~if the option is “in-the-money”,~~ it is automatically exercised “net”. In a net exercise of an option, the Company does not require a payment of the exercise price of the option from the optionee, but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by the option exercised. Each option is exercisable for one share of the Company’s common stock. Most options expire within five to ten years from the date of the grant, and generally vest over a three-year period from the date of the grant. At the annual meeting of stockholders on September 11, 2012, the Company’s stockholders approved an Amendment to the Company’s 2006 Stock Incentive Plan to increase the number of available shares by 1,000,000 and an Amendment to the Company’s 2006 Stock Option Plan for Non-Employee Directors to increase the number of available shares by 200,000. In February 2019, the Company’s Board extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December 31, 2024.

At ~~September 30, 2020, 1,628,225~~March 31, 2021, 1,652,394 options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no options were available for grant under the 2006 Stock Option Plan for Non-Employee Directors. During the ~~nine~~three months ended ~~September 30, 2020, an aggregate of~~March 31, 2021, 30,000 options ~~was~~were issued to ~~non-employee~~ directors and 35,000 options were issued to the Company’s ~~CEO, 50,000 options~~CEO. In the three months ended March 31, 2021, there were ~~issued~~no grants to ~~the Company’s CFO and 115,000 options were issued to the Company’s other employees.~~non-employees. The fair value of the options issued was ~~$59,000.~~approximately $19,000.

~~96,250~~No options were exercised ~~during~~in the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The intrinsic value of options outstanding and of options exercisable at ~~September 30, 2020~~March 31, 2021 was approximately ~~$2,000.~~$197,000 and $102,000, respectively.
~~A summary of stock option activity~~
The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the ~~nine months ended September 30, 2020 is as follows:~~respective years (all in weighted averages):

Number
of Options
(in shares)

Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual Life Aggregate
Intrinsic
Value
Number
of Options
(in shares)

Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual Life Aggregate
Intrinsic
Value
Outstanding at December 31, 2019 1,364,490 $ 1.87 1.81 years $ 46,000
Outstanding at December 31, 2020 722,501 $ 0.62 4.4 years $ 29,000
Granted 230,000 0.36 65,000 0.43
Exercised (96,250 ) 0.19 — —
Forfeited or expired (560,936 ) 2.67 (16,255 ) 4.07
Outstanding at September 30, 2020 937,304 $ 1.19 3.6 years $ 15,000
Exercisable at September 30, 2020 628,386 $ 1.61 2.3 years $ 10,000
Outstanding at March 31, 2021 771,246 $ 0.53 4.5 years $ 197,000
Exercisable at March 31, 2021 429,828 $ 0.67 3.4 years $ 102,000
10

The fair value of the options granted of ~~$59,000~~approximately $19,000 was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

Risk-free interest rate ~~.63~~.25 %
Expected term of options ~~4.4~~ 3.7 years
Expected annual volatility ~~115~~102 %
Expected dividend yield — %

~~(d)~~(c) Stock-based Compensation Expense

Stock-based compensation expense included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations was ~~$27,000 and $19,000 for the nine-month periods and $8,000~~approximately $15,000 and $6,000 for the ~~three-month-periods~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

The total compensation cost related to non-vested awards not yet recognized was ~~$67,000~~approximately $64,000 as of ~~September 30, 2020.~~March 31, 2021.

~~(e)~~(d) Warrants

The Company previously issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows:

Number
of Warrants
(in shares)
Weighted
Average
Exercise
Price Per Share Weighted
Average
Remaining
Contractual Life
Number
of Warrants
(in shares)
Weighted
Average
Exercise
Price Per Share Weighted
Average
Remaining
Contractual Life
Outstanding at December 31, 2019 2,177,857 $ 1.28 4 months
Outstanding at December 31, 2020 35,000 $ 0.13 2.2 years
Granted — — — —
Exercised — — — —
Forfeited or expired (2,142,857 ) 1.30 — —
Outstanding at September 30, 2020 35,000 $ .13 2.4 years
Outstanding at March 31, 2021 35,000 $ 0.13 1.95 years

~~On May 5, 2020, 2,142,857 warrants with a fair value of $1,018,000 expired in accordance with their terms.~~
NOTE 9—8— SEGMENT REPORTING

As of ~~September 30, 2020,~~March 31, 2021, the Company operates in two reportable operating segments, both of which are performed through the Company’s OmniMetrix subsidiary:

● The PG (Power Generation) segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of Things applications. The PG segment includes OmniMetrix’s monitoring device for industrial air compressors and dryers, and a new line of ~~annuciators.~~annunciators.

● The CP (Cathodic Protection) segment provides remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

The Company’s reportable segments are strategic business units, offering different products and services, and are managed separately as each business requires different technology and marketing strategies.

The following tables represent segmented data for the ~~three-and-nine-month~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

PG CP Total
Three months ended March 31, 2021:
Revenues from external customers $ 1,458 $ 247 $ 1,705
Segment gross profit 1,068 142 1,210
Depreciation and amortization 16 2 18
Segment income (loss) before income taxes $ 276 $ (13 ) $ 263

Three months ended March 31, 2020:
Revenues from external customers $ 1,109 $ 229 $ 1,338
Segment gross profit 805 117 922
Depreciation and amortization 13 3 16
Segment income (loss) before income taxes $ 3 $ (62 ) $ (59 )
PG CP Total
Three months ended September 30, 2020:
Revenues from external customers $ 1,262 $ 255 $ 1,517
Segment gross profit 936 141 1,077
Depreciation and amortization — — —
Segment income (loss) before income taxes $ 210 $ (7 ) $ 203

Three months ended September 30, 2019:
Revenues from external customers $ 1,090 $ 296 $ 1,386
Segment gross profit 772 150 922
Depreciation and amortization 18 4 22
Segment income (loss) before income taxes $ 126 $ (26 ) $ 100

Nine months ended September 30, 2020:
Revenues from external customers $ 3,633 $ 690 $ 4,323
Segment gross profit 2,656 365 3,021
Depreciation and amortization 17 4 21
Segment income (loss) before income taxes $ 414 $ (79 ) $ 335

Nine months ended September 30, 2019:
Revenues from external customers $ 3,143 $ 947 $ 4,090
Segment gross profit 2,206 438 2,644
Depreciation and amortization 43 13 56
Segment income (loss) before income taxes $ 231 $ (160 ) $ 71
11

The Company does not currently break out total assets by reportable segment as there is a high level of shared utilization between the segments. Further, the Chief Decision Maker does not review the assets by segment.

Reconciliation of Segment ~~Loss~~Net Income (Loss) to Consolidated Net ~~Loss~~Income (Loss) Before Income Taxes

Three months ended
September 30,

Nine months ended
September 30,

Three months ended
March 31,

2020 2019 2020 2019 2021 2020
Total net income (loss) before income taxes for reportable segments $ 203 $ 100 $ 335 $ 71 $ 263 $ (59 )
Unallocated cost of corporate headquarters (234 ) (221 ) (682 ) (657 ) (241 ) (225 )
Consolidated loss before income taxes $ (31 ) $ (121 ) $ (347 ) $ (586 )
Consolidated net income (loss) before income taxes $ 22 $ (284 )

NOTE ~~10—~~9—REVENUE

The following table disaggregates the Company’s revenue for the ~~three-and-nine-month~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ (in thousands):

Hardware Monitoring Total Hardware Monitoring Total
Three months ended September 30, 2020:
Three months ended March 31, 2021:
PG Segment $ 354 $ 908 $ 1,262 $ 517 $ 941 $ 1,458
CP Segment 193 62 255 180 67 247
Total Revenue $ 547 $ 970 $ 1,517 $ 697 $ 1,008 $ 1,705

Hardware Monitoring Total
Three months ended March 31, 2020:
PG Segment $ 277 $ 832 $ 1,109
CP Segment 166 63 229
Total Revenue $ 443 $ 895 $ 1,338
Hardware Monitoring Total
Three months ended September 30, 2019:
PG Segment $ 305 $ 785 $ 1,090
CP Segment 234 62 296
Total Revenue $ 539 $ 847 $ 1,386

Hardware Monitoring Total
Nine months ended September 30, 2020:
PG Segment $ 999 $ 2,634 $ 3,633
CP Segment 501 189 690
Total Revenue $ 1,500 $ 2,823 $ 4,323
Hardware Monitoring Total
Nine months ended September 30, 2019:
PG Segment $ 906 $ 2,237 $ 3,143
CP Segment 767 180 947
Total Revenue $ 1,673 $ 2,417 $ 4,090
Deferred revenue activity for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 can be seen in the table below (in thousands):

Hardware Monitoring Total
Balance at December 31, 2019 $ 2,663 $ 1,832 $ 4,495
Additions during the period 1,195 2,977 4,172
Recognized as revenue (1,198 ) (2,823 ) (4,021 )
Balance at September 30, 2020 $ 2,660 $ 1,986 $ 4,646

Amounts to be recognized as revenue in the twelve-month-period ending:
September 30, 2021 $ 1,512 $ 1,777 $ 3,289
September 30, 2022 881 205 1,086
September 30, 2023 and thereafter 267 4 271
$ 2,660 $ 1,986 $ 4,646
Hardware Monitoring Total
Balance at December 31, 2020 $ 2,576 $ 1,978 $ 4,554
Additions during the period 378 1,006 1,384
Recognized as revenue (449 ) (1,009 ) (1,458 )
Balance at March 31, 2021 $ 2,505 $ 1,975 $ 4,480

Amounts to be recognized as revenue in the twelve-month-period ending:
March 31, 2022 $ 1,432 $ 1,749 $ 3,181
March 31, 2023 819 219 1,038
March 31, 2024 and thereafter 254 7 261
$ 2,505 $ 1,975 $ 4,480
12

Other revenue of approximately ~~$302,000, net of certain sales rebates of $19,000,~~$247,000 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue when sold and are not deferred.

Deferred charges relate only to the sale of equipment. Deferred charges activity for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 can be seen in the table below (in thousands):

Balance at December 31, 2019 $ 1,433
Additions, net of adjustments, during the period 612
Recognized as cost of sales (663 )
Balance at September 30, 2020 $ 1,382

Amounts to be recognized as cost of sales in the twelve-month-period ending:
September 30, 2021 $ 806
September 30, 2022 446 *
September 30, 2023 and thereafter 130 *
$ 1,382
*Amounts included in other assets in the Company’s unaudited condensed consolidated balance sheets at September 30, 2020 and December 31, 2019
Balance at December 31, 2020 $ 1,306
Additions, net of adjustments, during the period 163
Recognized as cost of sales (237 )
Balance at March 31, 2021 $ 1,232

Amounts to be recognized as cost of sales in the twelve-month-period ending:
March 31, 2022 $ 722
March 31, 2023 397 *
March 31, 2024 and thereafter 113 *
$ 1,232

Other ~~cost of goods sold (COGS)~~COGS recognized of approximately ~~$188,000~~$121,000 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue when sold and are not deferred, in addition to ~~$451,000~~approximately $137,000 in monitoring COGS which is not deferred.
*Amounts included in other assets in the Company’s unaudited condensed consolidated balance sheets at March 31, 2021.

The following table provides a reconciliation of the Company’s sales commissions contract assets for the ~~nine-month~~three-month period ended ~~September 30, 2020~~March 31, 2021 (in thousands):

Hardware Monitoring Total Hardware Monitoring Total
Balance at December 31, 2019 $ 101 $ 37 $ 138
Balance at December 31, 2020 $ 136 $ 41 $ 177
Additions during the period 77 15 92 42 6 48
Amortization of sales commissions (49 ) (14 ) (63 ) (23 ) (5 ) (28 )
Balance at September 30, 2020 $ 129 $ 38 $ 167
Balance at March 31, 2021 $ 155 $ 42 $ 197

The capitalized sales commissions are included in other current assets ~~($87,000)~~(approximately $97,000) and other assets ~~($80,000)~~(approximately $100,000) in the Company’s unaudited condensed consolidated balance ~~sheet~~sheets at ~~September 30, 2020, and~~March 31, 2021. The capitalized sales commissions are included in other current assets ~~($60,000)~~(approximately $90,000) and other assets ~~($78,000)~~(approximately $87,000) in the Company’s unaudited condensed consolidated balance ~~sheet~~sheets at December 31, ~~2019.~~2020.

NOTE ~~11—~~10—SUBSEQUENT EVENTS

On ~~October 20, 2020, OmniMetrix, LLC submitted its PPP Loan Forgiveness Application~~May 10, 2021, the Company’s Chief Financial Officer was granted options to purchase 100,000 shares of the Company’s common stock, with an exercise price of $0.62 per share. The options vest and become exercisable on the first anniversary of the date of the grant and shall expire upon the earlier of (a) seven years from the date of the grant or (b) 18 months from the date she ceases to be a consultant to the ~~Small Business Administration (SBA). On November 5, 2020, the SBA confirmed that OmniMetrix’s application for forgiveness has been approved and that its PPP loan, in the amount~~Company. The fair value of ~~$419,800, has been forgiven.~~this option award was approximately $42,000.

The Company elected not to apply for forgiveness of the PPP loan proceeds received by its parent entity, Acorn Energy, Inc., in the amount of $41,600. This loan was repaid to the lender effective October 22, 2020.
~~ACORN ENERGY, INC.~~
13

ITEM 2. ~~ITEM 2.~~ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Form 10-Q contains “forward-looking statements” relating to the Company which represent the Company’s current expectations or beliefs including, but not limited to, statements concerning the Company’s operations, performance, financial condition and growth. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “anticipate”, “intend”, “could”, “estimate” or “continue” or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel, variability of quarterly results, and the ability of the Company to continue its growth strategy and the Company’s competition, certain of which are beyond the Company’s control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, or any of the other risks set out under the caption “Risk Factors” in the Company’s 10-K report for the year ended December 31, ~~2019~~2020 occur, actual outcomes and results could differ materially from those indicated in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

FINANCIAL RESULTS BY COMPANY

The following ~~table shows,~~tables show, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated companies.

Three months ended September 30, 2020 Three months ended March 31, 2021
OmniMetrix Acorn Total Continuing Operations OmniMetrix Acorn Total
Revenue $ 1,517 $ — $ 1,517 $ 1,705 $ — $ 1,705
Cost of Sales 440 — 440
Cost of sales 495 — 495
Gross profit 1,077 — 1,077 1,210 — 1,210
Gross profit margin 71 % 71 % 71 % 71 %
R&D expenses 160 — 160 178 — 178
Selling, general and administrative expenses 707 233 940 765 241 1,006
Operating income (loss) $ 210 $ (233 ) $ (23 ) $ 267 $ (241 ) $ 26

Three months ended September 30, 2019 Three months ended March 31, 2020
OmniMetrix Acorn Total Continuing Operations OmniMetrix Acorn Total
Revenue $ 1,386 $ — $ 1,386 $ 1,338 $ — $ 1,338
Cost of Sales 464 — 464
Cost of sales – other 416 — 416
Gross profit 922 — 922 922 — 922
Gross profit margin 67 % 67 % 69 % 69 %
R&D expenses 137 — 137 155 — 155
Selling, general and administrative expenses 679 227 906 820 221 1,041
Operating income (loss) $ 106 $ (227 ) $ (121 )
Operating loss $ (53 ) $ (221 ) $ (274 )

Nine months ended September 30, 2020
OmniMetrix Acorn Total Continuing Operations
Revenue $ 4,323 $ — $ 4,323
Cost of sales 1,302 — 1,302
Gross profit 3,021 — 3,021
Gross profit margin 70 % 70 %
R&D expenses 453 — 453
Selling, general and administrative expenses 2,210 677 2,887
Operating income (loss) $ 358 $ (677 ) $ (319 )
14

Nine months ended September 30, 2019
OmniMetrix Acorn Total Continuing Operations
Revenue $ 4,090 $ — $ 4,090
Cost of sales 1,417 — 1,417
Cost of sales - other 29 — 29
Gross profit 2,644 — 2,644
Gross profit margin 65 % 65 %
R&D expenses 420 — 420
Selling, general and administrative expenses 2,136 679 2,815
Operating income (loss) $ 88 $ (679 ) $ (591 )

BACKLOG

As of ~~September 30, 2020,~~March 31, 2021, our backlog of work to be completed (primarily deferred revenue) at our OmniMetrix subsidiary totaled approximately ~~$4.6~~$4.5 million.

RECENT DEVELOPMENTS

On ~~April 24, 2020, Acorn Energy, Inc. received Paycheck Protection Program (“PPP”) loan proceeds~~January 1, 2021, 30,000 options in the ~~amount~~aggregate were issued to directors with an exercise price of ~~$41,600.~~$0.37 and that vest in equal increments on January 1, 2021, April 1, 2021, July 1, 2021 and October 1, 2021, valued at $7,400 in the aggregate.

On February 2, 2021, 35,000 options were issued to the CEO with an exercise price of $0.48 and that vest in equal increments on February 2, 2021, April ~~30, 2020, OmniMetrix, LLC received PPP loan proceeds in the amount $419,800.~~1, 2021, July 1, 2021 and October 1, 2021, valued at approximately $11,500.

~~Under~~We paid off the ~~PPP~~outstanding balance of approximately $8,000 under the ~~Coronavirus Aid, Relief and Economic Security Act (the “Act”), up to the full principal amount of a~~OmniMetrix loan and ~~any accrued interest can be forgiven if the borrower uses all of the loan proceeds for forgivable purposes (payroll, benefits, lease/mortgage payments and/or utilities) required under the Act~~security agreement on February 26, 2021 and any rule, regulation, or guidance issued by the SBA pursuant to the Act (collectively, the “Forgiveness Provisions”). The amount of forgiveness of the PPP loan depends on the borrower’s payroll costs over either an eight-week or twenty-four-week period beginning on the date of funding. Any processes or procedures established under the Forgiveness Provisions must be followed and any requirements of the Forgiveness Provisions must be fully satisfied to obtain such loan forgiveness. Pursuant to the provisions of the Act, the first six monthly payments of principal and interest will be deferred. Interest will accrue during the deferment period. The borrower must pay principal and interest payments on the fifth day of each month beginning seven months from the date of the applicable promissory note.
On October 20, 2020, OmniMetrix, LLC submitted its PPP Loan Forgiveness Application to the Small Business Administration (SBA). On November 5, 2020, the SBA confirmed that OmniMetrix’s application for forgiveness has been approved and that its PPP loan, in the amount of $419,800, has been forgiven.
~~The Company~~ elected not to ~~apply for forgiveness~~renew this line of ~~the PPP loan proceeds received by~~credit, which expired in accordance with its ~~parent entity, Acorn Energy, Inc., in the amount of $41,600. This loan was repaid to the lender effective October 22, 2020.~~terms on February 28, 2021.

On April 28, 2020, we entered into a new agreement for data hosting services, replacing an expiring agreement with the same vendor, effective May 1, 2020. The agreement has a twelve-month term and the total payments under this agreement are approximately $148,000 in the aggregate. This ~~represents~~agreement was set to expire on April 28, 2021. In January 2021, we elected to renew this agreement for an ~~increase of $21,000 from the prior~~additional twelve-month ~~term for additional services including enhanced business continuity and disaster recovery services.~~term. The agreement will now expire on April 30, 2022.

On March 17, 2021, we entered into a master services agreement for the development of a new user interface for our customer data portal. The cost of this project is not expected to exceed $85,000 and is expected to be completed by July 31, 2021. This master services agreement also covers strategic enhancements to our technology infrastructure at an estimated investment of approximately $21,000 that will be completed by year-end.
On May ~~5, 2020, 2,142,857 warrants~~10, 2021, the monthly consulting fee for our Chief Financial Officer, Tracy S. Clifford, who also serves as Chief Operating Officer of our OmniMetrix subsidiary, was increased from $16,500 to $17,500, effective June 1, 2021. Ms. Clifford was also granted options to purchase 100,000 shares of our common stock, with an exercise price of $0.62 per share, which was the closing price of the common stock on May 7, 2021. The options vest and become exercisable on the first anniversary of the date of the grant and shall expire upon the earlier of (a) seven years from the date of the grant or (b) 18 months from the date Ms. Clifford ceases to be a ~~book value of $1,018,000 expired in accordance with their terms.~~consultant.

OVERVIEW AND TREND INFORMATION

Acorn Energy, Inc. (“Acorn” or “the Company”) is a holding company focused on technology driven solutions for energy infrastructure asset management. We provide the following services and products through our OmniMetrix,^TM, LLC (“OmniMetrix”) subsidiary:

● Power Generation (“PG”) monitoring. OmniMetrix’s PG segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of Things applications. The PG ~~segments~~segment includes our monitoring device for industrial air compressors and dryers, and a new line of annunciators.

● Cathodic Protection (“CP”) monitoring. OmniMetrix’s CP segment provides remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

Each of our PG and CP activities represents a reportable segment. The following analysis should be read together with the segment information provided in Note 98 to the interim unaudited condensed consolidated financial statements included in this quarterly report.

OmniMetrix

OmniMetrix LLC is a Georgia limited liability company based in Buford, Georgia that develops and markets wireless remote monitoring and control systems and services for multiple markets in the Internet of Things (“IoT”) ecosystem: critical assets (including stand-by power generators, pumps, pumpjacks, light towers, turbines, compressors, as well as other industrial equipment) as well as cathodic protection for the pipeline industry (gas utilities and pipeline companies). Acorn owns 99% of OmniMetrix with 1% owned by the former CEO of OmniMetrix.

15
Following the emergence of machine-to-machine (M2M) and ~~Internet of Things (IoT)~~IoT applications whereby companies aggregate multiple sensors and monitors into a simplified dashboard for customers, OmniMetrix believes it plays a key role in this new economic ecosystem. In addition, OmniMetrix sees a rapidly 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. As residential and industrial standby generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure increasingly becoming monitored in ~~Internet of Things~~IoT applications, and given that OmniMetrix monitors all major brands of critical equipment, OmniMetrix believes it is well-positioned as a competitive participant in this new market.
Sales of OmniMetrix monitoring systems include the sale of equipment and of monitoring services. Revenue (and related costs) associated with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. Revenue and related costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently estimated to be three years. Revenues from the prepayment of monitoring fees (generally paid twelve months in advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring service period.

~~Results of Operations~~
The following table sets forth certain information with respect to the consolidated results of operations of the Company for the three-month periods ended September 30, 2020 and 2019, including the percentage of total revenues during each period attributable to selected components of the operations statement data and for the period-to-period percentage changes in such components. For segment data, see Notes 9 and 10 to the unaudited condensed consolidated financial statements included in this quarterly report.
Three months ended September 30,
2020 2019 Change
($,000) % of revenues ($,000) % of revenues from 2019
to 2020
Revenue $ 1,517 100 % $ 1,386 100 % 9 %
Cost of sales 440 29 % 464 33 % (5 )%
Gross profit 1,077 71 % 922 67 % 17 %
R&D expenses 160 11 % 137 10 % 17 %
SG&A expenses 940 62 % 906 65 % 4 %
Operating loss (23 ) (2 )% (121 ) (9 )% (81 )%
Finance expense, net (8 ) (1 )% — * 700 %
Loss before income taxes (31 ) (2 )% (121 ) (9 )% (74 )%
Income tax expense — — % — — % —
Net loss (31 ) (2 )% (121 ) (9 )% (74 )%
Non-controlling interests share of net loss (1 ) * % — * (100 )%
Net loss attributable to Acorn Energy, Inc. $ (32 ) (2 )% $ (121 ) (9 )% (74 )%
*result is less than 1%.
The following table sets forth certain information with respect to the consolidated results of operations of the Company for the nine-month periods ended September 30, 2020 and 2019, including the percentage of total revenues during each period attributable to selected components of the operations statement data and for the period-to-period percentage changes in such components. For segment data, see Notes 9 and 10 to the unaudited condensed consolidated financial statements included in this quarterly report.
Nine months ended September 30,
2020 2019 Change
($,000) % of revenues ($,000) % of revenues from 2019
to 2020
Revenue $ 4,323 100 % $ 4,090 100 % 6 %
Cost of sales 1,302 30 % 1,446 35 % (10 )%
Gross profit 3,021 70 % 2,644 65 % 14 %
R&D expense 453 10 % 420 10 % 8 %
SG&A expense 2,887 67 % 2,815 69 % 3 %
Operating loss (319 ) (7 )% (591 ) (14 )% (45 )%
Finance expense, net (28 ) (1 )% 5 * (2,700 )%
Loss before income taxes (347 ) (8 )% (586 ) (14 )% (41 )%
Income tax expense — — — — % —
Net loss (347 ) (8 )% (586 ) (14 )% (41 )%
Non-controlling interests share of net loss (1 ) — % 29 1 % (103 )%
Net loss attributable to Acorn Energy, Inc. $ (348 ) (8 )% $ (557 ) (14 )% (38 )%
*result is less than 1%.
~~Revenue.~~ Revenue increased by $131,000 or 9%, from $1,386,000 in the third quarter of 2019 to $1,517,000 in the third quarter of 2020. OmniMetrix’s increased revenue during the quarter was primarily attributable to increased monitoring, which increased $123,000, or 15%, from $847,000 in the third quarter of 2019 to $970,000 in the third quarter of 2020. This increase was offset by a decrease in hardware revenue of $8,000, or 1%. These fluctuations are attributed to the same reasons as the increase in the nine-month period ended September 30, 2020 discussed below. OmniMetrix has two divisions: PG and CP.
In the nine months ended September 30, 2020, OmniMetrix recorded revenue of $4,323,000 ($3,633,000 in its PG activities and $690,000 in its CP activities) as compared to revenue of $4,090,000 recorded in the nine months ended September 30, 2019 ($3,143,000 in its PG activities and $947,000 in its CP activities). The period-over-period increase in revenue of $233,000, or 6%, in the nine months ended September 30, 2020 was due to an increase in monitoring revenue of $406,000, or 17%, offset by a decrease in hardware revenue of $173,000, or 10%. The increase in monitoring revenue from $2,417,000 in the first nine months of 2019 to $2,823,000 in the first nine months of 2020 is the result of an increase in the number of units being monitored. The period-over-period decrease in hardware revenue from $1,673,000 to $1,500,000 is primarily due to a decrease in the CP segment of $266,000 as a result of the longer sales and closing cycle of a CP sale compared to a PG sale and the impact of COVID-19 on our ability to meet with potential customers and to act timely and effectively on sales leads. A CP sales cycle can typically take twelve to eighteen months from customer introduction to closing.
~~Gross Profit.~~ Gross margin on hardware revenue for the three months ended September 30, 2020 was 44%, which was a 5% improvement as compared to 39% for the three months ended September 30, 2019. Gross margin on monitoring revenue remained strong at 84% during the three months ended September 30, 2020, which was flat as compared to 84% for the three months ended September 30, 2019.
Gross profit during the nine months ended September 30, 2020 was $3,021,000, reflecting a gross margin of 70% on revenue, compared with a gross profit of $2,644,000, reflecting a 65% gross margin, in the nine months ended September 30, 2019. The increased gross profit period-over-period in 2020 was due to a change in the revenue mix, with a higher percentage of our total revenue being monitoring revenue which has a higher gross margin. Gross margin on hardware revenue for the nine months ended September 30, 2020 was 42%, compared to 39% for the nine months ended September 30, 2019. Gross margin on monitoring revenue remained strong at 84% during the nine months ended September 30, 2020 which was flat as compared to 84% for the nine months ended September 30, 2019. OmniMetrix’s gross profit increased $155,000, or 17%, from $922,000 in the three months ended September 30, 2019 to $1,077,000 in the three months ended September 30, 2020.
~~Research and development expenses.~~ During the three months ended September 30, 2020 and 2019, R&D expense was $160,000 and $137,000, respectively. During the nine months ended September 30, 2020, OmniMetrix recorded $453,000 of R&D expense, as compared to $420,000 in the nine months ended September 30, 2019. The period-over-period increases in R&D expense in 2020 are related to the continued development of next generation PG and CP products and exploration into new possible product lines. We expect a moderate increase in R&D expense during the remainder of 2020 as we continue to work on certain initiatives to redesign products and expand product lines to increase the level of innovation and to reduce their costs in order to increase our future margins.
~~Selling, general and administrative (“SG&A”) expenses.~~ SG&A expenses increased $28,000, or 4%, to $707,000 for the three months ended September 30, 2020, from $679,000 for the three months ended September 30, 2019, primarily due to an increase in personnel costs. We gave performance-based salary increases to our employees effective September 1, 2020, our sales team has resumed travel where customers and potential customers are open and willing to receive outside guests, and we continue to make investments in our IT infrastructure.
During the nine months ended September 30, 2020, OmniMetrix recorded $2,209,000 of SG&A costs, compared to SG&A costs of $2,136,000 in the nine months ended September 30, 2019, an increase of $73,000 or 3%. This increase was primarily due to increases in occupancy expense (in 2019 these expenses were primarily applied to a restructuring accrual), and personnel costs offset by a reduction in sales tax expenses. We anticipate that our annual SG&A costs throughout 2020 will increase approximately 10% as a result of these actions.
~~Corporate~~
Corporate SG&A expense for the three months ended September 30, 2020 increased $6,000, or 3%, to $233,000 from $227,000 for the three months ended September 30, 2019, primarily due to the timing of certain expenses. Third quarter 2020 SG&A expense was $233,000, compared to second quarter 2020 SG&A expense of $222,000. SG&A expense of $678,000 in the first nine months of 2020 was flat as compared to SG&A expense of $679,000 in the first nine months of 2019. We do not expect the quarterly corporate overhead to change materially except as may be required to support the growth of our OmniMetrix subsidiary.
~~Net loss attributable to Acorn Energy.~~ We recognized a net loss attributable to Acorn shareholders of $32,000 in the three months ended September 30, 2020, compared to a net loss of $121,000 in the three months ended September 30, 2019. Our loss in the third quarter 2020 is comprised of net income at OmniMetrix of $203,000 offset by corporate expense of $233,000 and $1,000 attributed to the non-controlling interest share of our income in OmniMetrix.
We recognized a net loss attributable to Acorn shareholders of $348,000 in the first nine months of 2020, compared to a net loss of $557,000 in the first nine months of 2019. Our loss in 2020 is comprised of net income at OmniMetrix of $334,000 plus corporate expense of $682,000.
~~Liquidity and Capital Resources~~
At September 30, 2020, we had negative working capital of $364,000. Our working capital includes approximately $1,966,000 of cash, deferred revenue of approximately $3,289,000 and $256,000 representing the current portion of our PPP loans which we expect to be substantially forgiven. The deferred revenue does not require significant cash outlay for the revenue to be recognized.
~~During the first nine months of 2020, our OmniMetrix subsidiary provided $976,000 from operations while our corporate headquarters used $676,000 during the same period.~~
~~Also, during the first nine months of 2020, we invested $90,000 in software and $7,000 in patent related expenses.~~
Net cash of $516,000 was provided by financing activities during the first nine months of 2020, comprising $19,000 in proceeds from the exercise of stock options, net proceeds from borrowings on our line of credit of $35,000 and proceeds from our PPP loans of $462,000.
~~See discussion of the proceeds we received from the PPP loans above under~~ ~~Recent Developments~~.
OmniMetrix Line of Credit

In March 2019, OmniMetrix reinstated its ~~Loan~~loan and ~~Security Agreement providing~~security agreement which provided OmniMetrix with access to accounts receivable formula-based financing of the lesser of 75% of eligible receivables or $1 million. Debt incurred under this financing arrangement ~~bears~~bore interest at the greater of 6% and prime ~~(3.25% at November 9, 2020)~~ plus 1.5% per year. In addition, OmniMetrix iswas to pay a monthly service charge of 0.75% of the average aggregate principal amount outstanding for the prior month, for ~~a current~~an effective rate of interest on advances of 15%. OmniMetrix also agreed to maintain a minimum loan balance of $150,000 in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019. The monthly service charge and interest iswas calculated on the greater of the outstanding balance or $150,000. From time to time, the balance outstanding ~~may~~could fall below $150,000 based on collections applied against the loan balance and the timing of loan draws.

OmniMetrix had an outstanding balance of ~~$171,000~~approximately $149,000 at ~~September 30,~~December 31, 2020, pursuant to the ~~Loan~~loan and ~~Security Agreement.~~security agreement. We repaid the outstanding balance in February 2021 and elected not to renew this line of credit, which expired in accordance with its terms on February 28, 2021.

~~Rights Offering~~
~~On June 28, 2019, we completed a rights offering, raising $2,186,000 in proceeds, net~~Results of ~~$210,000 in expenses. Pursuant to the rights offering, our securityholders and parties to a backstop agreement purchased 9,975,553 shares of our common stock for $0.24 per share.~~
Under the terms of the rights offering, each right entitled securityholders as of June 3, 2019, the record date for the rights offering, to purchase 0.312 shares of our common stock at a subscription price of $0.24 per whole share. No fractional shares were issued. The closing price of our common stock on the record date of the rights offering was $0.2925. Distribution of the rights commenced on June 6, 2019 and were exercisable through June 24, 2019.
In connection with the rights offering, we entered into a backstop agreement with certain of our directors and Leap Tide Capital Management LLC, the sole manager of which is our President and CEO, pursuant to which they agreed to purchase from us any and all unsubscribed shares of common stock in the rights offering, subject to the terms, conditions and limitations of the backstop agreement. The backstop purchasers did not receive any compensation or other consideration for entering into or consummating the backstop agreement.
~~On July 1, 2019, we utilized a portion of the rights offering proceeds to complete the planned reacquisition of a 19% interest in our OMX Holdings, Inc. subsidiary for $1,273,000 discussed below.~~Operations

The ~~balance~~following table sets forth certain information with respect to the condensed consolidated results of operations of the ~~rights offering net proceeds provided OmniMetrix with additional sales~~Company for the three-month periods ended March 31, 2021 and ~~marketing resources~~March 31, 2020, including the percentage of total revenues during each period attributable to ~~facilitate expansion into additional geographic markets and new product applications, to support next-generation product development~~selected components of the operations statement data and for ~~general working capital purposes.~~the period-to-period percentage changes in such components. For segment data, see Notes 8 and 9 to the unaudited condensed consolidated financial statements included in this quarterly report.
Three months ended March 31,
2021 2020 Change
($,000) % of revenues ($,000) % of revenues
from
2020 to 2021

Revenue $ 1,705 100 % $ 1,338 100 % 27 %
Cost of sales 495 29 % 416 31 % 19 %
Gross profit 1,210 71 % 922 69 % 31 %
R&D expenses 178 10 % 155 12 % 15 %
SG&A expenses 1,006 59 % 1,041 78 % (3 )%
Operating income (loss) 26 2 % (274 ) (20 )% 109 %
Finance expense, net (4 ) * % (10 ) (1 )% (60 )%
Income (loss) before income taxes 22 1 % (284 ) (21 )% 108 %
Income tax expense — — % — — % — %
Net income (loss) 22 1 % (284 ) (21 )% 108 %
Non-controlling interests share of net (income) loss (2 ) * % 1 * % 300 %
Net income (loss) attributable to Acorn Energy, Inc. $ 20 1 % $ (283 ) (21 )% 107 %
*result is less than 1%.
16

~~Purchase~~Revenue. Revenue increased by approximately $367,000, or 27%, from approximately $1,338,000 in the first quarter of ~~Non-Controlling Interest~~2020 to approximately $1,705,000 in the first quarter of 2021. OmniMetrix’s increased revenue during the quarter was primarily attributable to increased hardware and accessories sales, which increased approximately $254,000, or 57%, from approximately $443,000 in the first quarter of 2020 to approximately $697,000 in the first quarter of 2021. The increase in hardware revenue was due to an increase in the sale of custom TG Pro units that are designed to large customer specifications and monitored by the customer and thus the revenue is not deferred, an increase in the sale of unit accessories for which the revenue is not deferred, and an increase in Hero-2 revenue from units sold. Monitoring revenue increased by approximately $113,000, or 13%, from approximately $895,000 in the first quarter of 2020 to approximately $1,008,000 in the first quarter of 2021. The increase in monitoring revenue is due to an increase in the number of installed billable connections.

~~In 2015, one of our then-current directors (the “Investor”) acquired a 20% interest~~As discussed above, OmniMetrix has two reportable segments, PG and CP. Of the approximately $1,705,000 in ~~our OMX Holdings, Inc. subsidiary (“Holdings”) through~~revenue recognized in the purchase of $1,000,000 of OmniMetrix Preferred Stock (“Preferred Stock”). Holdings is the holder of 100% of the membership interests of OmniMetrix, LLC through which we operate our Power Generationthree months ended March 31, 2021, approximately $1,458,000 was generated by PG activities and ~~Cathodic Protection monitoring~~approximately $247,000 was generated by CP activities. ~~The $1,000,000 investment by the Investor was recorded as~~This represents an increase in ~~non-controlling interests.~~revenue from PG activities of approximately $349,000, or 31%, from approximately $1,109,000 in the three months ended March 31, 2020, and an increase in revenue from CP activities of approximately $18,000, or 8%, from approximately $229,000 in the three months ended March 31, 2020.

~~On July 1, 2019,~~Gross Profit. Gross profit during the three months ended March 31, 2021 was approximately $1,210,000 reflecting a gross margin of 71% on revenue compared with a gross profit during the three months ended March 31, 2020 of $922,000 reflecting a gross margin of 69% on revenue. The increased gross profit in ~~accordance with terms established~~2021 was due to an increase in ~~2015~~sales to commercial and industrial customers over residential customers, an increase in accessory sales and an increase in monitoring revenue. Gross margin on hardware revenue for the three months ended March 31, 2021 was 49% compared to 39% for the three months ended March 31, 2020. Gross margin on monitoring revenue remained strong at 86% during the ~~time~~three months ended March 31, 2021 compared to 84% during the three months ended March 31, 2020.
Selling, general and administrative expense. SG&A expense in the first three months of 2021 reflected a decrease of approximately $35,000, or 3%, as compared to the ~~original investment,~~first three months of 2020. OmniMetrix’s SG&A expense decreased approximately $55,000, or 7%, from approximately $820,000 in the ~~Company utilized~~first three months of 2020 to approximately $765,000 in the first three months of 2021. This decrease was due to a ~~portion~~decrease in travel and trade show expenses. Now that companies are reopening for sales calls and air travel is beginning to return to pre-COVID levels, these trade show and travel expenses will increase in future quarters. Corporate SG&A expense increased approximately $20,000, or 10%, from approximately $221,000 in the first three months of 2020 to approximately $241,000 in the ~~rights offering proceeds~~first three months of 2021. This increase was due to ~~repurchase~~increases in stock compensation expense and audit and tax fees, offset by a decrease in travel expenses.
Net income (loss) attributable to Acorn Energy. We recognized net income attributable to Acorn shareholders of approximately $20,000 in the first three months of 2021 compared to a net loss attributable to Acorn shareholders of approximately $283,000 in the first three months of 2020. Our net income during the three months ended March 31, 2021 is comprised of net income at OmniMetrix of approximately $263,000 plus corporate expenses of approximately $241,000 offset by approximately $2,000 representing the non-controlling interest share of our income from OmniMetrix. Our loss in the ~~Investor~~three months ended March 31, 2020 is comprised of net loss at OmniMetrix of approximately $59,000 plus corporate expense of approximately $225,000 offset by approximately $1,000 representing the ~~shares~~non-controlling interest share of ~~Preferred Stock then held by~~our loss in OmniMetrix.
17
Liquidity and Capital Resources
At March 31, 2021, we had a negative working capital of approximately $71,000. Our working capital includes approximately $1,974,000 of cash and deferred revenue of approximately $3,181,000. Such deferred revenue does not require significant cash outlay for the ~~Investor for a purchase price~~revenue to be recognized.
During the first three months of ~~$1,273,000 (which included $323,000~~2021, our OmniMetrix subsidiary provided approximately $342,000 from its operations, while our corporate headquarters used approximately $274,000 during the same period.
We invested approximately $8,000 in hardware purchases during the first three months of ~~unpaid accrued dividends through June 30, 2019). The repurchase raised~~2021.
Net cash of approximately $149,000 was used in financing activities during the ~~Company’s ownership~~first three months of 2021 in ~~Holdings from 80% to 99%, with the remaining 1% owned by the former CEO~~repayments on our line of ~~OmniMetrix, LLC.~~credit described above.

Other Liquidity Matters

OmniMetrix owes Acorn approximately ~~$4,604,000~~$4,468,000 for loans, accrued interest ~~dividends~~ and expenses advanced to it by Acorn. ~~Such amounts will only be repaid~~OmniMetrix made repayments to Acorn ~~when OmniMetrix is generating sufficient cash to allow such repayment.~~of $225,000 in the first quarter of 2021 offset by interest, dividends and other advances of approximately $118,000 in the aggregate.

~~We had approximately $1,966,000~~As of ~~cash on September 30, 2020, and approximately $2,006,000 on November 9, 2020. On November 9, 2020,~~May 7, 2021, we had ~~$136,000 outstanding on our line~~cash of ~~credit and $165,000 available to borrow.~~approximately $1,968,000. We believe that ~~our current~~such cash, plus the cash ~~expected to be~~ generated from operations, ~~and borrowing from available lines of credit~~ will provide sufficient liquidity to finance the operating activities of Acorn and OmniMetrix at their current level of operations for the ~~operations~~foreseeable future and for the twelve months from the issuance of ~~its operating subsidiaries for~~these unaudited condensed consolidated financial statements in particular. We may, at ~~least~~some point, elect to obtain a new line of credit to fund additional investments in the ~~next twelve months.~~business.

Contractual Obligations and Commitments

The table below provides information concerning obligations under certain categories of our contractual obligations as of ~~September 30, 2020.~~March 31, 2021.

CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS

Twelve Month Periods Ending September 30,
(in thousands)

Total 2020 2021-2022 2023-2024 2025 and thereafter
Debt * $ 634 $ 427 $ 207 $ — $ —
Software agreements 128 71 57 — —
Operating leases 632 120 251 261 —
Contractual services 110 105 5 — —
Total contractual cash obligations $ 1,504 $ 723 $ 520 $ 261 $ —
Twelve Month Periods Ending March 31, (in thousands)
Total 2022 2023-2024 2025-2026 2027 and thereafter
Software agreements $ 84 $ 67 $ 17 $ — $ —
Operating leases 572 122 254 196 —
Contractual services 171 159 12 — —
Total contractual cash obligations $ 827 $ 348 $ 283 $ 196 $ —

* Includes $461,400 in proceeds from the PPP loans of which $419,800 was formally forgiven by the SBA and $41,600 was repaid subsequent to September 30, 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

COVID-19 Risk

The COVID-19 pandemic could negatively affect various aspects of our business, including our workforce and supply chain, ~~could~~and make it more difficult and expensive to meet our obligations to our customers, and could result in reduced demand from our customers.

The outbreak of the COVID-19 Coronavirus pandemic ~~has~~ caused governments around the world to implement quarantines of certain geographic areas and implement significant restrictions on travel. Several governments ~~have~~ also implemented work restrictions that prohibit many employees from going to work, both around the world as well as in certain jurisdictions in the United States. ~~The number of these quarantines, travel bans, and other restrictions has been fluctuating at a rapid pace.~~ At this time, it is unclear if foreign governments or U.S. federal, state or local governments will further extend any of the current restrictions or if further restrictions will be put into place. In addition, many countries, including the United States, have placed significant bans on international travel. It is possible that restrictions or bans on domestic travel may be implemented by U.S. federal, state or local governments. As a result of the pandemic, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.
~~Although~~ However, OmniMetrix is considered an essential business ~~because~~due to the fact that it provides infrastructure support to both government and commercial sectors and across key industries ~~and~~so it has not been forced to shut down to ~~date, governmental~~date.
18
Governmental mandates may require forced shutdowns of our facilities for extended or indefinite periods. In addition, the pandemic could adversely affect our workforce resulting in serious health issues and absenteeism. The pandemic could also substantially interfere with general commercial activity related to our supply chain and customer base, which could have a material adverse effect on our financial condition, results of operations, business, or prospects. Although OmniMetrix has continued to collect its monthly recurring monitoring revenues, has retained its customer base and has continued to realize new equipment sales, the rate of such new sales has not met our anticipated growth rate. Restrictions related to the pandemic have had a negative impact on our ability to meet with potential customers and to act timely and effectively on sales leads, which has had a negative impact on the length of our CP sales cycle. Some of the electronic devices and hardware we purchase, like antennas, radios, and GPS modules are very specific to our application; there are not likely to be practical alternatives. In some cases, our circuit boards were designed around specific electronic hardware that met our specifications. We are working closely with our contract manufacturers and suppliers in order to mitigate as much as possible the risks to our supply chain for these critical devices and hardware, including identifying any lead-time issues and any potential alternate sources. We are also examining all currently open purchase orders in an effort to identify whether we need to issue additional orders to secure product that is critical, already has questionable lead times and/or is unique to our requirements.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade accounts receivable. The Company’s cash was deposited ~~primarily~~ with a U.S. ~~banks and brokerage firms~~bank and amounted to approximately ~~$1,966,000~~$1,974,000 at ~~September 30, 2020.~~March 31, 2021. The Company does not believe there is significant risk of non-performance by these counterparties. ~~Approximately 16%~~For the three-month periods ended March 31, 2021 and ~~10%~~2020, one customer represented approximately 11% and 15%, respectively, of total invoiced sales. Approximately 11% of the accounts receivable at ~~September 30, 2020~~March 31, 2021 was due from ~~two customers~~one customer who ~~both pay their~~pays its receivables over usual credit ~~periods (the~~periods. As of May 7, 2021, the Company has collected ~~89%~~the full outstanding amount of the ~~$188,000~~approximately $73,000 due from ~~these two customers, in the aggregate,~~this customer as of ~~November 9, 2020 ).~~March 31, 2021. Credit risk with respect to the balance of trade receivables is generally diversified due to the number of entities comprising the Company’s customer base.

24
Fair Value of Financial Instruments

Fair values of financial instruments included in current assets and current liabilities are estimated to approximate their book values due to the short maturity of such investments.

Interest Rate Risk

~~In March 2019, OmniMetrix reinstated its~~OmniMetrix’s Loan and Security Agreement ~~providing OmniMetrix~~expired in accordance with ~~access~~its terms on February 28, 2021 and we elected not to ~~accounts receivable formula-based financing~~renew this line of credit. Subsequent to this date, we were not subject to any interest rate risk as of the ~~lesser~~date of ~~75% of eligible receivables or $1 million. Debt incurred under~~ this financing arrangement bears interest at the greater of 6% and prime (3.25% at November 9, 2020) plus 1.5% per year. In addition, OmniMetrix is to pay a monthly service charge of 0.75% of the average aggregate principal amount outstanding for the prior month, for a current effective rate of interest on advances of 15%. OmniMetrix also agreed to maintain a minimum loan balance of $150,000 in its line-of-credit with the lender for a minimum of two years beginning March 1, 2019.filing.

ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective due to material weaknesses noted in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, to ensure that the information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) accumulated and communicated to our management (including our Chief Executive Officer and Chief Financial Officer) in a timely manner, and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

As noted in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, we employ a decentralized internal control methodology, coupled with management’s oversight, whereby our OmniMetrix subsidiary is responsible for mitigating its risks to financial reporting by implementing and maintaining effective control policies and procedures and subsequently translating that respective risk mitigation up and through to the parent level and to our external financial statements. In addition, as our operating subsidiary is not large enough to effectively mitigate certain risks by segregating incompatible duties, management must employ compensating mechanisms throughout our company in a manner that is feasible within the constraints in which it operates.

The material weaknesses management identified were caused by an insufficient complement of resources at our OmniMetrix subsidiary and limited IT system capabilities, such that individual control policies and procedures at the subsidiary could not be implemented, maintained, or remediated when and where necessary. As a result, a majority of the significant process areas management identified for our OmniMetrix subsidiary had one or more material weaknesses present.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

19
PART II

ITEM 6. EXHIBITS.

10.1* Consulting Agreement, dated as of January 1, 2021, by and between Acorn Energy, Inc. and Jan H. Loeb (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020).
#31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

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

#101.1 The following financial statements from Acorn Energy’s Form 10-Q for the ~~nine months and~~ quarter ended ~~September 30, 2020,~~March 31, 2021, filed on ~~November~~May 12, ~~2020,~~2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

* This exhibit includes a management contract, compensatory plan or arrangement in which one or more directors or executive officers of the Registrant participate.
# This exhibit is filed or furnished herewith.
20
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by its principal financial officer thereunto duly authorized.

ACORN ENERGY, INC.

Dated: ~~November~~May 12, ~~2020~~2021

By: /s/ TRACY S. CLIFFORD
Tracy S. Clifford
Chief Financial Officer

2721

	As of September 30, 2020			As of December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,966		$	1,247
Accounts receivable, net		732			962
Inventory, net		299			291
Deferred charges		806			741
Other current assets		117			189
Total current assets		3,920			3,430
Property and equipment, net		264			189
Right-of-use assets, net		518			587
Other assets		670			778
Total assets	$	5,372		$	4,984
LIABILITIES AND DEFICIT
Current liabilities:
Short-term credit	$	171		$	136
Loan payable – current portion		256			―
Accounts payable		273			197
Accrued expenses		55			136
Deferred revenue		3,289			3,004
Current operating lease liabilities		97			53
Other current liabilities		143			68
Total current liabilities		4,284			3,594
Non-current liabilities:
Loan payable		207			―
Deferred revenue		1,357			1,491
Noncurrent operating lease liabilities		468			542
Other non-current liabilities		5			2
Total non-current liabilities		2,037			2,035
Commitments and contingencies
Deficit:
Acorn Energy, Inc. shareholders
Common stock - $0.01 par value per share:
Authorized – 42,000,000 shares; Issued – 39,687,589 and 39,591,339 shares at September 30, 2020 and December 31, 2019, respectively		397			396
Additional paid-in capital		102,718			101,655
Warrants		3			1,021
Accumulated deficit		(101,030	)		(100,682	)
Treasury stock, at cost – 801,920 shares at September 30, 2020 and December 31, 2019		(3,036	)		(3,036	)
Total Acorn Energy, Inc. shareholders’ deficit		(948	)		(646	)
Non-controlling interests		(1	)		1
Total deficit		(949	)		(645	)
Total liabilities and deficit	$	5,372		$	4,984

	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019

Revenue	$	1,517		$	1,386		$	4,323		$	4,090
Cost of sales – products and services		460			465			1,322			1,417
Cost of sales – other		(20	)		(1	)		(20	)		29
Gross profit		1,077			922			3,021			2,644
Operating expenses:
Research and development expenses		160			137			453			420
Selling, general and administrative expense		940			906			2,887			2,815
Total operating expenses		1,100			1,043			3,340			3,235
Operating loss		(23	)		(121	)		(319	)		(591	)
Finance expense, net		(8	)		―			(28	)		5
Loss before income taxes		(31	)		(121	)		(347	)		(586	)
Income tax expense		―			—			―			—
Net loss		(31	)		(121	)		(347	)		(586	)
Non-controlling interest share of net (income) loss		(1	)		―			(1	)		29
Net loss attributable to Acorn Energy, Inc. shareholders	$	(32	)	$	(121	)	$	(348	)	$	(557	)

Basic and diluted net loss per share attributable to Acorn Energy, Inc. shareholders:	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.02	)
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic and diluted		39,687			40,393			39,669			33,844

	Three and Nine Months Ended September 30, 2020
	Number of Shares		Common Stock		Additional Paid-In Capital		Warrants			Accumulated Deficit			Number of Treasury Shares		Treasury Stock			Total Acorn Energy, Inc. Shareholders’ Deficit			Non- controlling interests			Total Deficit
Balances as of December 31, 2019		39,591	$	396	$	101,655	$	1,021		$	(100,682	)		802	$	(3,036	)	$	(646	)	$	1		$	(645	)
Net loss		—		—		—		—			(283	)		—		—			(283	)		(1	)		(284	)
Accrued dividend in OmniMetrix preferred shares		—		—		—		—			—			—		—			—			(1	)		(1	)
Proceeds from stock option exercise		96		1		18		―			―			―		―			19			―			19
Stock option compensation		—		—		6		—			—			—		—			6			—			6
Balances as of March 31, 2020		39,687	$	397	$	101,679	$	1,021		$	(100,965	)		802	$	(3,036	)	$	(904	)	$	(1	)	$	(905	)
Net loss		—		—		—		—			(33	)		—		—			(33	)		1			(32	)
Accrued dividend in OmniMetrix preferred shares		—		—		—		—			—			—		—			—			(1	)		(1	)
Value of expired warrants		―		―*		1,018		(1,018	)		―			—		―			―			―			―
Stock option compensation		—		—		13		—			—			—		—			13			—			13
Balances as of June 30, 2020		39,687	$	397	$	102,710	$	3		$	(100,998	)		802	$	(3,036	)	$	(924	)	$	(1	)	$	(925	)
Net loss		—		—		—		—			(32	)		—		—			(32	)		1			(31	)
Accrued dividend in OmniMetrix preferred shares		—		—		—		—			—			—		—			—			(1	)		(1	)
Stock option compensation		—		—		8		—			—			—		—			8			—			8
Balances as of September 30, 2020		39,687	$	397	$	102,718	$	3		$	(101,030	)		802	$	(3,036	)	$	(948	)	$	(1	)	$	(949	)

	As of March 31, 2021			As of December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,974		$	2,063
Accounts receivable, net		647			608
Inventory, net		243			236
Deferred charges		722			764
Other current assets		141			126
Total current assets		3,727			3,797
Property and equipment, net		258			268
Right-of-use assets, net		471			494
Other assets		623			642
Total assets	$	5,079		$	5,201
LIABILITIES AND DEFICIT
Current liabilities:
Short-term credit	$	—		$	149
Accounts payable		298			229
Accrued expenses		191			168
Deferred revenue		3,181			3,214
Current operating lease liabilities		101			99
Other current liabilities		27			33
Total current liabilities		3,798			3,892
Non-current liabilities:
Deferred revenue		1,299			1,340
Noncurrent operating lease liabilities		417			443
Other long-term liabilities		48			45
Total long-term liabilities		1,764			1,828
Commitments and contingencies
Deficit:
Acorn Energy, Inc. shareholders
Common stock - $0.01 par value per share:
Authorized – 42,000,000 shares; Issued – 39,687,589 shares at March 31, 2021 and December 31, 2020		397			397
Additional paid-in capital		102,741			102,726
Warrants		3			3
Accumulated deficit		(100,593	)		(100,613	)
Treasury stock, at cost – 801,920 shares at March 31, 2021 and December 31, 2020		(3,036	)		(3,036	)
Total Acorn Energy, Inc. shareholders’ deficit		(488	)		(523	)
Non-controlling interests		5			4
Total deficit		(483	)		(519	)
Total liabilities and deficit	$	5,079		$	5,201

	Nine months ended September 30,
	2020			2019
Cash flows provided by (used in) operating activities:
Net loss	$	(347	)	$	(586	)
Depreciation and amortization		22			56
Non-cash lease expense		88			—
Stock-based compensation		27			19
Professional fees paid in common stock		—			18
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable		230			(96	)
Increase in inventory		(8	)		(97	)
Decrease in deferred charges		48			113
Decrease (increase) in other current assets and other assets		66			(26	)
Decrease in accounts payable and accrued expenses		(3	)		(270	)
Increase in deferred revenue		151			304
Decrease in amounts due to DSIT and directors		—			(323	)
Decrease in operating lease liability		(48	)		—
Increase (decrease) in other current liabilities and non-current liabilities		74			(45	)
Net cash provided by (used in) operating activities		300			(933	)

Cash flows used in investing activities:
Purchases of software		(90	)		(60	)
Payments made for patent filings		(7	)		—
Purchase of non-controlling interest in OmniMetrix		—			(950	)
Net cash used in investing activities		(97	)		(1,010	)

Cash flows provided by financing activities:
Short-term credit, net		35			143
Proceeds from rights offering, net of expenses of $0 and $208		—			2,186
Loan proceeds		462			—
Stock option exercise proceeds		19			—
Net cash provided by financing activities		516			2,329

Net increase in cash, cash equivalents and restricted cash		719			386
Cash, cash equivalents and restricted cash at the beginning of the year		1,247			1,263
Cash, cash equivalents and restricted cash at the end of the period	$	1,966		$	1,649

Cash, cash equivalents and restricted cash consist of the following:
End of period
Cash and cash equivalents	$	1,966		$	1,338
Restricted cash		—			311
	$	1,966		$	1,649

Cash, cash equivalents and restricted cash consist of the following:
Beginning of period
Cash and cash equivalents	$	1,247		$	973
Restricted cash		—			290
	$	1,247		$	1,263

Supplemental cash flow information:
Cash paid during the year for:
Interest	$	23		$	15

Non-cash investing and financing activities:
Purchase of equipment under installment agreement	$	—		$	7
Accrued preferred dividends to former Acorn director and/or former OmniMetrix CEO	$	3		$	41

	Three months ended March 31,
	2021			2020

Revenue	$	1,705		$	1,338
Cost of sales		495			416
Gross profit		1,210			922
Operating expenses:
Research and development expense		178			155
Selling, general and administrative expense		1,006			1,041
Total operating expenses		1,184			1,196
Operating income (loss)		26			(274	)
Finance expense, net		(4	)		(10	)
Income (loss) before income taxes		22			(284	)
Income tax expense		—			—
Net income (loss)		22			(284	)
Non-controlling interest share of net (income) loss		(2	)		1
Net income (loss) attributable to Acorn Energy, Inc. shareholders	$	20		$	(283	)

Basic and diluted net income (loss) per share attributable to Acorn Energy, Inc. shareholders:
Total attributable to Acorn Energy, Inc. shareholders	$	0.00		$	(0.01	)
Weighted average number of shares outstanding attributable to Acorn Energy, Inc. shareholders – basic and diluted:
Basic		39,687			39,631
Diluted		39,860			39,631

	Three Months Ended March 31, 2021
	Number of Shares		Common Stock		Additional Paid- In Capital		Warrants		Accumulated Deficit			Number of Treasury Shares		Treasury Stock			Total Acorn Energy, Inc. Shareholders’ Deficit			Non- controlling interests			Total Deficit
Balances as of December 31, 2020		39,687	$	397	$	102,726	$	3	$	(100,613	)		802	$	(3,036	)	$	(523	)	$	4		$	(519	)
Net income		—		—		—		—		20			—		—			20			2			22
Accrued dividend in OmniMetrix preferred shares		—		—		—		—		—			—		—			—			(1	)		(1	)
Stock option compensation		—		—		15		—		—			—		—			15			—			15
Balances as of March 31, 2021		39,687	$	397	$	102,741	$	3	$	(100,593	)		802	$	(3,036	)	$	(488	)	$	5		$	(483	)

	Three Months Ended March 31, 2020
	Number of Shares		Common Stock		Additional Paid- In Capital		Warrants		Accumulated Deficit			Number of Treasury Shares		Treasury Stock			Total Acorn Energy, Inc. Shareholders’ Deficit			Non- controlling interests			Total Deficit
Balances as of December 31, 2019		39,591	$	396	$	101,655	$	1,021	$	(100,682	)		802	$	(3,036	)	$	(646	)	$	1		$	(645	)
Net loss		—		—		—		—		(283	)		—		—			(283	)		(1	)		(284	)
Accrued dividend in OmniMetrix preferred shares		—		—		—		—		—			—		—			—			(1	)		(1	)
Proceeds from stock option exercise		96		1		18		—		—			—		—			19			—			19
Stock option compensation		—		—		6		—		—			—		—			6			—			6
Balances as of March 31, 2020		39,687	$	397	$	101,679	$	1,021	$	(100,965	)		802	$	(3,036	)	$	(904	)	$	(1	)	$	(905	)

	September,
	2020		2019
Cash paid for operating lease liabilities	$	48	$	96

		~~2020~~2021
Weighted average remaining lease terms for operating leases			~~4.970~~4.47

	Twelve-month period ended September 30,			Twelve-month period ended March 31,
2021	$	120
2022		124		$	122
2023		127			125
2024		129			129
2025		132			130
Thereafter		—
2026					66
Total undiscounted cash flows		632			572
Less: Imputed interest		(67	)		(54	)
Present value of operating lease liabilities (a)	$	565		$	518

	Number of Options (in shares)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value		Number of Options (in shares)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
Outstanding at December 31, 2019		1,364,490		$	1.87		1.81 years	$	46,000
Outstanding at December 31, 2020											722,501		$	0.62	4.4 years	$	29,000
Granted		230,000			0.36						65,000			0.43
Exercised		(96,250	)		0.19						—			—
Forfeited or expired		(560,936	)		2.67						(16,255	)		4.07
Outstanding at September 30, 2020		937,304		$	1.19		3.6 years	$	15,000
Exercisable at September 30, 2020		628,386		$	1.61		2.3 years	$	10,000
Outstanding at March 31, 2021											771,246		$	0.53	4.5 years	$	197,000
Exercisable at March 31, 2021											429,828		$	0.67	3.4 years	$	102,000

Risk-free interest rate	~~.63~~.25	%
Expected term of options	~~4.4~~ 3.7 years
Expected annual volatility	~~115~~102	%
Expected dividend yield	—	%

	Number of Warrants (in shares)			Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life		Number of Warrants (in shares)		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life
Outstanding at December 31, 2019		2,177,857		$	1.28		4 months
Outstanding at December 31, 2020									35,000	$	0.13	2.2 years
Granted		—			—				—		—
Exercised		—			—				—		—
Forfeited or expired		(2,142,857	)		1.30				—		—
Outstanding at September 30, 2020		35,000		$	.13		2.4 years
Outstanding at March 31, 2021									35,000	$	0.13	1.95 years

	●	The PG (Power Generation) segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of Things applications. The PG segment includes OmniMetrix’s monitoring device for industrial air compressors and dryers, and a new line of ~~annuciators.~~annunciators.

	●	The CP (Cathodic Protection) segment provides remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

	PG		CP			Total
Three months ended March 31, 2021:
Revenues from external customers	$	1,458	$	247		$	1,705
Segment gross profit		1,068		142			1,210
Depreciation and amortization		16		2			18
Segment income (loss) before income taxes	$	276	$	(13	)	$	263

Three months ended March 31, 2020:
Revenues from external customers	$	1,109	$	229		$	1,338
Segment gross profit		805		117			922
Depreciation and amortization		13		3			16
Segment income (loss) before income taxes	$	3	$	(62	)	$	(59	)

	PG		CP			Total
Three months ended September 30, 2020:
Revenues from external customers	$	1,262	$	255		$	1,517
Segment gross profit		936		141			1,077
Depreciation and amortization		—		—			—
Segment income (loss) before income taxes	$	210	$	(7	)	$	203

Three months ended September 30, 2019:
Revenues from external customers	$	1,090	$	296		$	1,386
Segment gross profit		772		150			922
Depreciation and amortization		18		4			22
Segment income (loss) before income taxes	$	126	$	(26	)	$	100

Nine months ended September 30, 2020:
Revenues from external customers	$	3,633	$	690		$	4,323
Segment gross profit		2,656		365			3,021
Depreciation and amortization		17		4			21
Segment income (loss) before income taxes	$	414	$	(79	)	$	335

Nine months ended September 30, 2019:
Revenues from external customers	$	3,143	$	947		$	4,090
Segment gross profit		2,206		438			2,644
Depreciation and amortization		43		13			56
Segment income (loss) before income taxes	$	231	$	(160	)	$	71

	Three months ended September 30,						Nine months ended September 30,						Three months ended March 31,
	2020			2019			2020			2019			2021			2020
Total net income (loss) before income taxes for reportable segments	$	203		$	100		$	335		$	71		$	263		$	(59	)
Unallocated cost of corporate headquarters		(234	)		(221	)		(682	)		(657	)		(241	)		(225	)
Consolidated loss before income taxes	$	(31	)	$	(121	)	$	(347	)	$	(586	)
Consolidated net income (loss) before income taxes													$	22		$	(284	)

	Hardware		Monitoring		Total		Hardware		Monitoring		Total
Three months ended September 30, 2020:
Three months ended March 31, 2021:
PG Segment	$	354	$	908	$	1,262	$	517	$	941	$	1,458
CP Segment		193		62		255		180		67		247
Total Revenue	$	547	$	970	$	1,517	$	697	$	1,008	$	1,705

Balance at December 31, 2019	$	1,433
Additions, net of adjustments, during the period		612
Recognized as cost of sales		(663	)
Balance at September 30, 2020	$	1,382

Amounts to be recognized as cost of sales in the twelve-month-period ending:
September 30, 2021	$	806
September 30, 2022		446	*
September 30, 2023 and thereafter		130	*
	$	1,382

Balance at December 31, 2020	$	1,306
Additions, net of adjustments, during the period		163
Recognized as cost of sales		(237	)
Balance at March 31, 2021	$	1,232

Amounts to be recognized as cost of sales in the twelve-month-period ending:
March 31, 2022	$	722
March 31, 2023		397	*
March 31, 2024 and thereafter		113	*
	$	1,232

	Three months ended September 30, 2020									Three months ended March 31, 2021
	OmniMetrix			Acorn			Total Continuing Operations			OmniMetrix			Acorn			Total
Revenue	$	1,517		$	—		$	1,517		$	1,705		$	—		$	1,705
Cost of Sales		440			—			440
Cost of sales											495			—			495
Gross profit		1,077			—			1,077			1,210			—			1,210
Gross profit margin		71	%					71	%		71	%					71	%
R&D expenses		160			—			160			178			—			178
Selling, general and administrative expenses		707			233			940			765			241			1,006
Operating income (loss)	$	210		$	(233	)	$	(23	)	$	267		$	(241	)	$	26

	Three months ended September 30, 2019									Three months ended March 31, 2020
	OmniMetrix			Acorn			Total Continuing Operations			OmniMetrix			Acorn			Total
Revenue	$	1,386		$	—		$	1,386		$	1,338		$	—		$	1,338
Cost of Sales		464			—			464
Cost of sales – other											416			—			416
Gross profit		922			—			922			922			—			922
Gross profit margin		67	%					67	%		69	%					69	%
R&D expenses		137			—			137			155			—			155
Selling, general and administrative expenses		679			227			906			820			221			1,041
Operating income (loss)	$	106		$	(227	)	$	(121	)
Operating loss										$	(53	)	$	(221	)	$	(274	)

	Nine months ended September 30, 2020
	OmniMetrix			Acorn			Total Continuing Operations
Revenue	$	4,323		$	—		$	4,323
Cost of sales		1,302			—			1,302
Gross profit		3,021			—			3,021
Gross profit margin		70	%					70	%
R&D expenses		453			—			453
Selling, general and administrative expenses		2,210			677			2,887
Operating income (loss)	$	358		$	(677	)	$	(319	)

	Nine months ended September 30, 2019
	OmniMetrix			Acorn			Total Continuing Operations
Revenue	$	4,090		$	—		$	4,090
Cost of sales		1,417			—			1,417
Cost of sales - other		29			—			29
Gross profit		2,644			—			2,644
Gross profit margin		65	%					65	%
R&D expenses		420			—			420
Selling, general and administrative expenses		2,136			679			2,815
Operating income (loss)	$	88		$	(679	)	$	(591	)

	●	Power Generation (“PG”) monitoring. OmniMetrix’s PG segment provides wireless remote monitoring and control systems and services for critical assets as well as Internet of Things applications. The PG ~~segments~~segment includes our monitoring device for industrial air compressors and dryers, and a new line of annunciators.

	●	Cathodic Protection (“CP”) monitoring. OmniMetrix’s CP segment provides remote monitoring of cathodic protection systems on gas pipelines for gas utilities and pipeline companies.

	Three months ended September 30,
	2020						2019						Change
	($,000)			% of revenues			($,000)			% of revenues			from 2019 to 2020
Revenue	$	1,517			100	%	$	1,386			100	%		9	%
Cost of sales		440			29	%		464			33	%		(5	)%
Gross profit		1,077			71	%		922			67	%		17	%
R&D expenses		160			11	%		137			10	%		17	%
SG&A expenses		940			62	%		906			65	%		4	%
Operating loss		(23	)		(2	)%		(121	)		(9	)%		(81	)%
Finance expense, net		(8	)		(1	)%		—			*			700	%
Loss before income taxes		(31	)		(2	)%		(121	)		(9	)%		(74	)%
Income tax expense		—			—	%		—			—	%		—
Net loss		(31	)		(2	)%		(121	)		(9	)%		(74	)%
Non-controlling interests share of net loss		(1	)		*	%		—			*			(100	)%
Net loss attributable to Acorn Energy, Inc.	$	(32	)		(2	)%	$	(121	)		(9	)%		(74	)%

	Twelve Month Periods Ending September 30, (in thousands)
	Total		2020		2021-2022		2023-2024		2025 and thereafter
Debt *	$	634	$	427	$	207	$	—	$	—
Software agreements		128		71		57		—		—
Operating leases		632		120		251		261		—
Contractual services		110		105		5		—		—
Total contractual cash obligations	$	1,504	$	723	$	520	$	261	$	—

	Twelve Month Periods Ending March 31, (in thousands)
	Total		2022		2023-2024		2025-2026		2027 and thereafter
Software agreements	$	84	$	67	$	17	$	—	$	—
Operating leases		572		122		254		196		—
Contractual services		171		159		12		—		—
Total contractual cash obligations	$	827	$	348	$	283	$	196	$	—

10.1*	Consulting Agreement, dated as of January 1, 2021, by and between Acorn Energy, Inc. and Jan H. Loeb (incorporated herein by reference to Exhibit 10.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2020).

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

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

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

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

#101.1	The following financial statements from Acorn Energy’s Form 10-Q for the ~~nine months and~~ quarter ended ~~September 30, 2020,~~March 31, 2021, filed on ~~November~~May 12, ~~2020,~~2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text.

*	This exhibit includes a management contract, compensatory plan or arrangement in which one or more directors or executive officers of the Registrant participate.

#	This exhibit is filed or furnished herewith.