UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
or
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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| Large accelerated filer ☐ | Accelerated filer ☐ | ||
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| Emerging growth company |
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| Class | Outstanding at May 6, 2025 | |
| Common Stock, $ par value per share |
ACORN ENERGY, INC.
Quarterly Report on Form 10-Q
for the Quarterly Period Ended March 31, 2025
TABLE OF CONTENTS
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.
| 2 |
PART I
| ITEM 1. | UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| As of March 31, 2025 | As of December 31, 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Other current assets | ||||||||
| State income tax receivable | ||||||||
| Deferred cost of goods sold (COGS) | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right-of-use assets, net | ||||||||
| Deferred COGS | ||||||||
| Other assets | ||||||||
| Deferred tax assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Current operating lease liabilities | ||||||||
| Other current liabilities | ||||||||
| State income tax payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Deferred revenue | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| Deficit: | ||||||||
| Acorn Energy, Inc. stockholders | ||||||||
| Common stock - $ par value per share: Authorized - shares; issued - at March 31, 2025 and December 31, 2024; outstanding - at March 31, 2025 and December 31, 2024 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated stockholders’ deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares at March 31, 2025 and December 31, 2024 | ( | ) | ( | ) | ||||
| Total Acorn Energy, Inc. stockholders’ equity | ||||||||
| Non-controlling interests | ||||||||
| Total equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| COGS | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development (R&D) expenses | ||||||||
| Selling, general and administrative (SG&A) expenses | ||||||||
| Total operating expenses | ||||||||
| Operating income | ||||||||
| Interest income, net | ||||||||
| Income before income taxes | ||||||||
| Income tax expense | ||||||||
| Net income | ||||||||
| Non-controlling interest share of income | ( | ) | ( | ) | ||||
| Net income attributable to Acorn Energy, Inc. stockholders | $ | $ | ||||||
| Basic and diluted net income per share attributable to Acorn Energy, Inc. stockholders: | ||||||||
| Net income per share attributable to Acorn Energy, Inc. stockholders – basic and diluted | $ | $ | ||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – basic and diluted: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(UNAUDITED) (IN THOUSANDS)
| Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Number of Treasury Shares | Treasury Stock | Total Acorn Energy, Inc. Stockholders’ Equity | Non- controlling interests | Total Equity | ||||||||||||||||||||||||||||
| Balances as of December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | | $ | ||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
| Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||
Number of Shares Outstanding | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Number of Treasury Shares | Treasury Stock | Total Acorn Energy, Inc. Stockholders’ Deficit | Non- controlling interests | Total Deficit | ||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Proceeds from warrant exercise | * | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| * |
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, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows provided by operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Depreciation and amortization | ||||||||
| Deferred tax expense | ||||||||
| Decrease in the provision for credit loss | ( | ) | ( | ) | ||||
| Impairment of inventory | ||||||||
| Non-cash lease expense | ||||||||
| Stock-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| (Increase) decrease in inventory | ( | ) | ||||||
| Decrease in deferred COGS | ||||||||
| Decrease in other current assets and other assets | ||||||||
| Decrease in state income tax receivable | ||||||||
| Decrease in deferred revenue | ( | ) | ( | ) | ||||
| Decrease in operating lease liability | ( | ) | ( | ) | ||||
| Increase in state income tax payable | ||||||||
| Increase (decrease) in accounts payable, accrued expenses, other current liabilities and non-current liabilities | ( | ) | ||||||
| Net cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows used in investing activities: | ||||||||
| Purchases of furniture and equipment | ( | ) | ||||||
| Investments in technology | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Stock option exercise proceeds | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Accrued preferred dividends to former CEO of OmniMetrix | $ | $ | ||||||
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. (“Acorn”) and its subsidiaries, OmniMetrix, LLC (“OmniMetrix”) and OMX Holdings, Inc. (collectively, with Acorn and OmniMetrix, “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. The December 31, 2024 consolidated balance sheet data were derived from audited financial statements but do not include all disclosures required by accounting principles generally accepted in the United States of America. 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-month periods ended March 31, 2025 and 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.
All dollar amounts, except per share data, are rounded to the nearest thousand; thus, they are approximate.
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, 2024, filed with the Securities and Exchange Commission on March 6, 2025.
NOTE 2—ACCOUNTING POLICIES
Use of Estimates in Preparation of Financial Statements
The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.
As applicable to these unaudited consolidated financial statements, the most significant estimates and assumptions relate to uncertainties with respect to valuation allowance.
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 with a U.S. bank and amounted to $
Inventory
Inventories are comprised of components (raw materials) and finished goods, which are measured at the lower of cost or net realizable value.
| 7 |
Raw materials inventory is generally comprised of radios, cables, antennas, and electrical components. Finished goods inventory consists of fully assembled systems ready for final shipment to the customer. Costs are determined at cost of acquisition on a weighted average basis and include all outside production and applicable shipping costs.
All inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conducts an assessment at the end of each reporting period of the Company’s inventory reserve and writes off any inventory items that are deemed obsolete.
Management conducted an assessment
and determined there was
Revenue Recognition
The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations. The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied. The Company assesses whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring. The Company’s sales arrangements generally include standard payment terms. These terms effectively relate to all customers, products, and arrangements regardless of customer type, product mix or arrangement size. See Note 11, Revenue, for further discussion.
Revenue from sales of the hardware products that are distinct products are recorded when shipped (with the exception of the hardware products under a material contract with one customer for which revenue is recognized when the unit is accepted) while the revenue from sales of the hardware products (product versions sold prior to September 1, 2023) that were not separable from the Company’s monitoring services was deferred and amortized over the estimated unit life. Product revenues are recognized at the point in time when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the one customer under a material contract. To determine when control has transferred, the Company considers if there is a present right to payment and if legal title, physical possession, and the significant risks and rewards of ownership of the asset has transferred to the customer. Revenue from the prepayment of monitoring fees (generally paid twelve months in advance) are recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring service period. This method provides a faithful depiction of the transfer of services as it aligns the recognition of revenue with the period in which the monitoring services are provided. By deferring the revenue and recognizing it over the service period, the financial statements accurately reflect the company’s performance and obligations to its customers. See Notes 10 and 11 for the disaggregation of the Company’s revenue for the periods presented.
Any sales tax, value added tax, and other tax the Company collects concurrent with revenue producing activities are excluded from revenue.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and the tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred assets and liabilities is recognized in income in the period that includes the enactment date.
| 8 |
The Company recognizes deferred
tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the
Company considers all available positive and negative evidence, include future reversals of existing taxable temporary differences, projected
future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize
its deferred tax assets in the future in excess of their net recorded amount, the company would make an adjustment to the deferred tax
asset valuation allowance, which would reduce the provision for incomes taxes. During the year ended December 31, 2024, the Company recorded
a reduction in the valuation allowance of $
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the company recognizes the largest amount of tax benefit that more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. No accrued interest or penalties were required to be included in the related tax liability line in the unaudited condensed consolidated balance sheet as of March 31, 2025 and in the consolidated balance sheet as of December 31, 2024.
Basic net income per share is computed by dividing the net income attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the period, excluding treasury stock. Diluted net income per share is computed by dividing the net income 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 income per share if doing so would be antidilutive.
The combined weighted average number of options that were excluded from the computation of diluted income per share, as they had an antidilutive effect, was (which have a weighted average exercise price of $) and (which had a weighted average exercise price of $) for the three-month periods ended March 31, 2025 and 2024, respectively.
| 9 |
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Net income attributable to common stockholders | $ | $ | ||||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Add: Stock options | ||||||||
| -Diluted | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
Recent Accounting Pronouncements
In November 2024, the FASB issued Accounting Standards Update No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued Accounting Standards Update No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for us for our annual reporting for fiscal 2027 and for interim period reporting beginning in fiscal 2028 on a prospective basis. Both early adoption and retrospective application are permitted. The Company is currently evaluating the impact that the adoption of these standards will have on its consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and decision usefulness of income tax disclosures. This ASU will be effective for the annual period ending December 31, 2025. The Company is currently evaluating the timing and impacts of adoption of this ASU.
NOTE 3—LIQUIDITY
As of March 31, 2025, the Company
had $
At March 31, 2025, the Company
had working capital of $
| 10 |
As of May 6, 2025, the Company
had cash of $
NOTE 4—ALLOWANCE FOR CREDIT LOSSES
For the Company, ASC 326, “Financial Instruments – Credit Losses (Topic 326)” applies to its contract assets (deferred COGS and deferred sales commissions), lease receivables (sublease, see Note 6) and trade receivables. There are no expected or estimated credit losses on the Company’s contract assets or its lease receivable based on the Company’s analysis of ASC 326.
The Company’s trade receivables primarily arise from the sale of our products to independent residential dealers, industrial distributors and dealers, national and regional retailers, equipment distributors, and certain end users with payment terms generally ranging from 30 to 90 days. The Company evaluates the credit risk of a customer when extending credit based on a combination of various financial and qualitative factors that may affect the customer’s ability to pay. These factors include the customer’s financial condition and past payment experience.
The Company maintains an allowance for credit losses, which represents an estimate of expected losses over the remaining contractual life of its receivables considering current market conditions and estimates for supportable forecasts when appropriate. The Company measures expected credit losses on its trade receivables on an entity-by-entity basis. The estimate of expected credit losses considers a historical loss experience rate that is adjusted for delinquency trends, collection experience, and/or economic risk where appropriate. Additionally, management develops a specific allowance for trade receivables known to have a high risk of expected future credit loss.
The Company has historically experienced
immaterial write-offs given the nature of the customers that receive credit. As of March 31, 2025, the Company had gross receivables of
$
| As of | ||||||||
March 31, 2025 | December 31, 2024 | |||||||
| (in thousands) | ||||||||
| Accounts Receivable, net, beginning of period | $ | $ | ||||||
| Accounts Receivable, net, end of period | $ | $ | ||||||
The following is a tabular reconciliation of the Company’s allowance for credit losses:
| As of | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| (in thousands) | ||||||||
| Balance at beginning of period | $ | | $ | | ||||
| Decrease in provision for credit losses | ( | ) | ||||||
| Net charge-offs | ( | ) | ||||||
| Balance at end of period | $ | $ | ||||||
| 11 |
NOTE 5—INVENTORY
| As of | ||||||||
| March 31, 2025 | December 31, 2024 | |||||||
| (in thousands) | ||||||||
| Raw materials | $ | | $ | | ||||
| Finished goods | ||||||||
| $ | $ | |||||||
At March 31, 2025 and December
31, 2024, the Company’s inventory reserve for obsolescence was $
NOTE 6—LEASES
OmniMetrix leases office space
and office equipment under operating lease agreements. The office lease has an expiration date of
Supplemental cash flow information related to leases consisted of the following (in thousands):
|
For the three months ending March 31, |
||||||||
| 2025 | 2024 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
Supplemental balance sheet information related to leases consisted of the following:
|
As of March 31, 2025 |
||||
| Weighted average remaining lease terms for operating leases | ||||
The table below reconciles the undiscounted future minimum lease payments under non-cancelable lease agreements having initial terms of more than one year to the total operating lease liabilities recognized on the unaudited condensed consolidated balance sheet as of March 31, 2025 (in thousands):
| Year ended March 31, |
||||
| 2026 | $ | |
||
| Less: Imputed interest | ( |
) | ||
| Present value of operating lease liabilities (a) | $ | |||
| 12 |
| (a) |
On July 6, 2021, the Company entered
into an agreement with King Industrial Realty, Inc., to sublease from the Company
| Year ended March 31, |
||||
| 2026 | $ | |||
NOTE 7—COMMITMENTS AND CONTINGENCIES
The Company
has $
NOTE 8—STOCKHOLDERS’ EQUITY
(a) General
At March 31, 2025, Acorn had shares issued and shares outstanding of its common stock, par value $ per share. Holders of outstanding common stock are entitled to receive dividends when 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.
The Company is not authorized to issue preferred stock. Accordingly, no preferred stock is issued or outstanding.
(b) Summary Employee Option Information
The Company’s stock option plans provide for the grant to officers, directors and 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, 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 option holder 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 March 31, 2025, options were available for grant under the Amended and Restated 2006 Stock Incentive Plan (the “Plan”) and no options were available for grant under the 2006 Stock Option Plan for Non-Employee Directors. The Plan was amended effective January 1, 2025 to extend the duration of the Plan until December 31, 2034 unless sooner terminated. During the three-month period ended March 31, 2025, options were issued. The options were issued as follows: an aggregate of to directors (excluding the CEO), to the CEO and to the CFO. In the three-month period ended March 31, 2025, there were grants to non-employees (other than the directors, CEO and CFO).
| 13 |
During the three-month period ended March 31, 2025, options were exercised. The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective years (all in weighted averages):
Number of Options (in shares) | Weighted Average Exercise Price Per | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||
| Outstanding at December 31, 2024 | $ | years | $ | |||||||||||
| Granted | ||||||||||||||
| Exercised | ||||||||||||||
| Forfeited or expired | ||||||||||||||
| Outstanding at March 31, 2025 | $ | years | $ | |||||||||||
| Exercisable at March 31, 2025 | $ | years | $ | |||||||||||
| Risk-free interest rate | % | |||
| Expected term of options | years | |||
| Expected annual volatility | % | |||
| Expected dividend yield | % |
(c) Stock Option Compensation Expense
Stock option compensation expense included in selling, general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations was $ and $ for the three-month periods ended March 31, 2025 and 2024, respectively.
The total compensation cost related to non-vested awards not yet recognized was $ as of March 31, 2025 which will be recognized over the next seven months.
NOTE 9— INCOME TAXES
The Company’s quarterly provision for income taxes is measured using an annual effective tax rate, adjusted for discrete items within the period presented. To determine the annual effective tax rate, the Company estimates both the total income (loss) before income taxes for the full year and the jurisdictions in which that income (loss) is subject to tax. The actual effective tax rate for the full year may differ from these estimates if income (loss) before income taxes is greater than or less than what was estimated or if the allocation of income (loss) to jurisdictions in which it is taxed is different from the estimated allocations.
For
the three months ended March 31, 2025 and March 31, 2024 the Company recognized income tax expense of $
The
difference between the Company’s effective tax rate and the U.S. statutory tax rate of
| 14 |
The Company files a consolidated U.S. income tax return and tax returns in certain state and local jurisdictions. As of March 31, 2025, the Company is no longer subject to federal examination for years before 2021, or for years before 2020 for state income taxes. However, our tax attribute carryforwards from closed tax years may be subject to examination to the extent utilized in an open tax year. The Company does not expect that our unrecognized tax benefits will change within the next twelve months due to statute of limitation lapses.
NOTE 10— SEGMENT REPORTING
(a) General Information
As of March 31, 2025, the Company
operates in
| ● | Power Generation (“PG”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT applications for residential and commercial/industrial power generation equipment. This includes OmniMetrix’s TrueGuard power generator monitors and AIRGuard product, which remotely monitors and controls industrial air compressors, and its Smart Annunciator product, which is typically sold to commercial customers that require a visual representation of the generator’s status and has a touchscreen display that indicates the current state of that generator. | |
| ● | Cathodic Protection (“CP”). OmniMetrix’s CP services provide remote monitoring and control products for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators. The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations and bonds. OmniMetrix also offers the industry’s first RADTM (Remote AC Mitigation Disconnect) that mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools, which can drastically reduce a company’s expense while increasing employee safety. |
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 CODM is the Company’s Chief Executive Officer (CEO).
(b) Information about profit or loss and assets
The accounting policies of all the segments are those described in the summary of significant accounting policies. The Company evaluates performance by segment based on revenue (driven by the number of connections), gross profit and net income or loss before taxes.
The Company does not systematically allocate assets to the divisions of the subsidiaries constituting its consolidated group, unless the division constitutes a significant operation. Accordingly, where a division of a subsidiary constitutes a segment that does not meet the quantitative thresholds of applicable accounting principles, depreciation expense is recorded against the operations of such segment, without allocating the related depreciable assets to that segment. However, where a division of a subsidiary constitutes a segment that does meet the quantitative thresholds, related depreciable assets, along with other identifiable assets, are allocated to such division.
Segment expenses that are routinely provided to the CODM are COGS and R&D expense. R&D expense may be allocated to each segment based on the percentage of segment revenue to total revenue or based on estimated time on dedicated projects within the segment. SG&A expense and interest income is allocated to each segment based on the percentage of segment revenue to total revenue instead of being specifically identified to each segment since the Company’s resources have a high level of shared utilization between the segments. Further, the CODM does not review the assets by segment.
| 15 |
The following tables represent segmented data for the three-month periods ended March 31, 2025 and 2024 (in thousands):
| PG | CP | Total | ||||||||||
| Three months ended March 31, 2025: | ||||||||||||
| Revenues from external customers | $ | $ | $ | |||||||||
| COGS | ||||||||||||
| Segment gross profit | ||||||||||||
| R&D expense | ||||||||||||
| SG&A expense | ||||||||||||
| Segment operating income | ||||||||||||
| Interest income, net | ||||||||||||
| Segment income before income taxes | $ | $ | $ | |||||||||
| Three months ended March 31, 2024: | ||||||||||||
| Revenues from external customers | $ | $ | $ | |||||||||
| COGS | ||||||||||||
| Segment gross profit | ||||||||||||
| R&D expense | ||||||||||||
| SG&A expense | ||||||||||||
| Segment operating income (loss) | ( | ) | ||||||||||
| Interest income, net | ||||||||||||
| Segment income (loss) before income taxes | $ | $ | ( | ) | $ | |||||||
Reconciliation of Segment Net Income to Consolidated Net Income Before Income Taxes
Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| (in thousands) | ||||||||
| Total net income before income taxes for reportable segments | $ | $ | ||||||
| Unallocated cost of corporate headquarters | ( | ) | ( | ) | ||||
| Consolidated net income before income taxes | $ | $ | ||||||
NOTE 11—REVENUE
Prior to September 1, 2023, sales of OmniMetrix equipment typically did not qualify as a separate unit of accounting. As a result, revenue (and related costs) associated with sale of equipment was recorded to deferred revenue (and deferred cost of goods sold) upon shipment of PG and CP monitoring units. Revenue and related costs with respect to the sale of equipment were recognized over the estimated life of the units which was estimated to be three years. On September 1, 2023, OmniMetrix launched an updated version of its products that includes new functionality in its TrueGuard, AIRGuard, Patriot and Hero products that allows its customers to have options as it relates to obtaining and utilizing the data that is provided by its hardware devices. This new functionality allows for SIM card options, configuration options regarding IP address endpoints and DNS routes, and access to OmniMetrix’s over-the-air data protocol. This product update allows customers to have the option to purchase OmniMetrix’s monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring provider if they so desire. OmniMetrix’s prior hardware product version could not function as a distinct product independent from its monitoring services. This new version’s functionality results in OmniMetrix’s hardware and monitoring services being capable of being two distinct products and services. OmniMetrix recognizes revenue, COGS and commissions from the sale of the new version of its hardware products when the product is shipped rather than over the estimated time that the unit is in service for the customer. The remaining balance of deferred hardware revenue from the prior version of these products will continue to be amortized each period until it is fully amortized. The modifications to the circuit boards and embedded firmware of hardware enclosures in inventory as of August 31, 2023 were made such that only the new version of these products was sold subsequent to that date.
The following table disaggregates the Company’s revenue for the three-month periods ended March 31, 2025 and 2024 (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Three months ended March 31, 2025: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
| Hardware | Monitoring | Total | ||||||||||
| Three months ended March 31, 2024: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
| 16 |
Deferred revenue activity for the three-month period ended March 31, 2025 can be seen in the table below (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Recognized as revenue | ( | ) | ( | ) | ( | ) | ||||||
| Balance at March 31, 2025 | $ | $ | $ | |||||||||
| Amounts to be recognized as revenue in the twelve-month-period ending: | ||||||||||||
| March 31, 2026 | $ | $ | $ | |||||||||
| March 31, 2027 | ||||||||||||
| March 31, 2028 and thereafter | ||||||||||||
| $ | $ | $ | ||||||||||
The amount of hardware revenue
recognized during the three-month period ended March 31, 2025 that was included in deferred revenue at the beginning of the fiscal year
was $
The following table provides a reconciliation of the Company’s hardware revenue for the three-month periods ended March 31, 2025 and 2024 (in thousands):
Three months ended March 31, | ||||||||
| Reconciliation of Hardware Revenue | 2025 | 2024 | ||||||
| Amortization of deferred revenue | $ | $ | ||||||
| Sales of custom designed units and related accessories | ||||||||
| Hardware sales (new product versions) | ||||||||
| Other accessories, services, shipping and miscellaneous charges | ||||||||
| Total hardware revenue | $ | $ | ||||||
Deferred COGS relate only to the sale of equipment. Deferred COGS activity for the three-month period ended March 31, 2025 can be seen in the table below (in thousands):
| Balance at December 31, 2024 | $ | |||
| Additions, net of adjustments, during the period | ||||
| Recognized as COGS | ( | ) | ||
| Balance at March 31, 2025 | $ | |||
| Amounts to be recognized as COGS in the twelve-month-period ending: | ||||
| March 31, 2026 | $ | |||
| March 31, 2027 | ||||
| $ |
| 17 |
The following table provides a reconciliation of the Company’s COGS expense for the three-month periods ended March 31, 2025 and 2024 (in thousands):
Three months ended March 31, | ||||||||
| Reconciliation of COGS Expense | 2025 | 2024 | ||||||
| Amortization of deferred COGS | $ | $ | ||||||
| COGS of custom designed equipment sold with no monitoring | ||||||||
| COGS of hardware sales (new product versions) | ||||||||
| Data costs for monitoring | ||||||||
| Other COGS of accessories, services, shipping and miscellaneous charges | ||||||||
| Total COGS expense | $ | $ | ||||||
The following table provides a reconciliation of the Company’s sales commissions contract assets for the three-month period ended March 31, 2025 (in thousands):
| Hardware | Monitoring | Total | ||||||||||
| Balance at December 31, 2024 | $ | | $ | | $ | |||||||
| Additions during the period | ||||||||||||
| Amortization of sales commissions | ( | ) | ( | ) | ( | ) | ||||||
| Balance at March 31, 2025 | $ | $ | $ | |||||||||
The capitalized sales commissions
are included in other current assets ($
Amounts to be recognized as sales commission expense in the twelve-month-period ending (in thousands):
| March 31, 2026 | $ | |||
| March 31, 2027 | ||||
| March 31, 2028 and thereafter | ||||
| $ |
NOTE 12—RELATED PARTY BALANCES AND TRANSACTIONS
Officer and Director Fees
The
Company recorded consulting service fees to officers of $
The
Company recorded fees to directors of $
| 18 |
| 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 Annual Report on Form 10-K for the year ended December 31, 2024 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 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.
All dollar amounts in the tables and discussion below are rounded to the nearest thousand, except per share data; thus, they are approximate.
FINANCIAL RESULTS BY COMPANY
The following tables show, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated companies.
| Three months ended March 31, 2025 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 3,098 | $ | — | $ | 3,098 | ||||||
| Cost of sales | 772 | — | 772 | |||||||||
| Gross profit | 2,326 | — | 2,326 | |||||||||
| Gross profit margin | 75 | % | 75 | % | ||||||||
| R&D expense | 291 | — | 291 | |||||||||
| SG&A expense | 1,024 | 407 | 1,431 | |||||||||
| Operating income (loss) | $ | 1,011 | $ | (407 | ) | $ | 604 | |||||
| Three months ended March 31, 2024 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenue | $ | 2,132 | $ | — | $ | 2,132 | ||||||
| Cost of sales | 541 | — | 541 | |||||||||
| Gross profit | 1,591 | — | 1,591 | |||||||||
| Gross profit margin | 75 | % | 75 | % | ||||||||
| R&D expense | 238 | — | 238 | |||||||||
| SG&A expense | 970 | 305 | 1,275 | |||||||||
| Operating income (loss) | $ | 383 | $ | (305 | ) | $ | 78 | |||||
| 19 |
BACKLOG
As of March 31, 2025, OmniMetrix had a backlog of $3,955,000, comprised of deferred revenue, of which $3,394,000 is expected to be recognized as revenue in the next twelve months. This compares to a backlog of $5,028,000 at March 31, 2024. Now that we are selling hardware units that are capable of being distinct, the hardware backlog will no longer continue to grow and will be fully amortized by August 31, 2026, while the monitoring backlog will continue to be deferred and amortized over the period of service.
RECENT DEVELOPMENTS
On June 1, 2024, we entered into a contract (the “Material Contract”) with one of the nation’s largest cell phone providers to provide monitoring hardware and services. Under the contract, OmniMetrix will provide monitoring devices and related remote monitoring and control services for between 5,000 to 10,000 cell tower backup generators in the U.S. The monitoring hardware and monitoring services, which are being deployed over a one-to-two-year period. Shipping of hardware commenced in the third quarter of 2024 and installation and monitoring services commenced in the fourth quarter of 2024. We recognized $876,000 in hardware revenue and $69,000 in monitoring revenue from this contract in the three months ended March 31, 2025.
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 OmniMetrixTM, LLC (“OmniMetrix”) subsidiary:
| ● | Power Generation (“PG”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT applications for residential and commercial/industrial power generation equipment. This includes OmniMetrix’s TrueGuard power generator monitors and AIRGuard product, which remotely monitors and controls industrial air compressors, and its Smart Annunciator product, which is typically sold to commercial customers that require a visual representation of the generator’s status and has a touchscreen display that indicates the current state of that generator. | |
| ● | Cathodic Protection (“CP”). OmniMetrix’s CP services provide remote monitoring and control products for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators. The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations and bonds. OmniMetrix also offers the industry’s first RADTM (Remote AC Mitigation Disconnect) that mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools, which can drastically reduce a company’s expense while increasing employee safety. |
Each of our PG and CP activities represents a reportable segment. The following analysis should be read together with the segment and revenue information provided in Notes 10 and 11 to the unaudited condensed consolidated financial statements included in this quarterly report.
OmniMetrix
OmniMetrix 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, and 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.
Following the emergence of machine-to-machine (M2M) and IoT applications, whereby companies aggregate multiple sensors and monitors into a simplified dashboard for customers, OmniMetrix believes it plays a key role in this 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, cybersecurity threats, and other issues related to the reliability of the electric power grid. As residential and industrial standby generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure increasingly monitored in 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 market.
| 20 |
OmniMetrix sells monitoring hardware devices and data monitoring services. On September 1, 2023, we launched an updated version of our products that includes new functionality in our TrueGuard, AIRGuard, Patriot and Hero products that allows our customers to have options as it relates to obtaining and utilizing the data that is provided by our hardware devices. This new functionality allows for SIM card options, configuration options regarding IP address endpoints and DNS routes, and access to our over-the-air data protocol. This product update allows customers to have the option to purchase our monitoring service, monitor the products themselves if they have the ability in-house, or choose another monitoring provider if they so desire, whereas, historically, our standard products only functioned with our monitoring services. The modification to the circuit boards and embedded firmware of hardware enclosures in stock as of August 31, 2023 were made such that only the new version of these products was sold subsequent to that date. Prior to such product modification, revenue (and related costs) associated with sale of equipment was recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. This deferred revenue and the deferred cost of the hardware with respect to the sale of new equipment was recognized over the life of the units, which was estimated to be three years. Revenue from hardware sales subsequent to August 31, 2023 is recognized upon shipment or upon acceptance (specific to the material contract), instead of being deferred. Revenues from the prepayment of monitoring fees (generally paid 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 (typically twelve-month, renewable periods).
Critical Accounting Estimates
In preparing the financial statements, management is required to make estimates and assumptions that have an impact on the asset, liability, revenue and expense amounts reported. These estimates can also affect our supplemental information disclosures, including information about contingencies, risk and financial condition. We believe, given current facts and circumstances, that our estimates and assumptions are reasonable, adhere to U.S. GAAP, and are consistently applied. Inherent in the nature of an estimate or assumption is the fact that actual results may differ from estimates and estimates may vary as new facts and circumstances arise. We make routine estimates and judgments in determining net realizable value of accounts receivable, inventories, property and equipment, prepaid expenses, product warranties and other reserves as well as the amortization period for deferred commissions payable. Management believes our most critical accounting estimates and assumptions are in the area of revenue recognition and valuation allowance.
Valuation Allowance
We regularly review our deferred tax assets for recoverability considering historically profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.
We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. The net carrying amount of the Company’s deferred tax assets is based on the Company’s belief that it is more likely than not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. The ultimate realization of the deferred tax assets depends upon our ability to generate sufficient taxable income in the future. In forecasting future taxable income, management uses estimates and makes assumptions regarding significant future events, including the timing and number of new hardware sales contracts and associated monitoring revenue. In evaluating our ability to recover our deferred tax assets, we consider and weigh all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. When the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made. If our estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company’s Consolidated Statements of Operations, or conversely to reduce the existing valuation allowance resulting in less income tax expense.
| 21 |
The Company generated a three-year cumulative positive income through December 31, 2024. Based on its earnings, the Company released a portion of its valuation allowance on its deferred tax assets (other than as stated above) during the year ended December 31, 2024. As of March 31, 2025, we believe, based on our projections, that a partial valuation allowance of $11,400,000 continues to be necessary against our deferred tax assets. Uncertainty exists related to the generation of future hardware and monitoring revenue, nonetheless the Company believes sufficient positive evidence exists which supports the partial reversal of the valuation allowance. In recent years, the Company executed new contracts, growing hardware and monitoring revenue which resulted in cumulative pre-tax earnings over the prior three years which we believe is significant positive evidence to support the reversal of valuation allowance during 2024. At this time, however, we cannot assure you that we will be successful in doing so. Accordingly, our management will continue to assess the need for this valuation allowance and will make adjustments when appropriate.
The utilization of the Company’s federal and state net operating losses may be subject to a limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code, as well as similar state provisions. Such limitations may result in the expiration of net operating loss (NOL) carryforwards before their utilization. The Company has not completed a study to assess whether an “ownership change” as defined in Section 382 has occurred or whether there have been multiple ownership changes since the Company’s inception. Future changes in the Company’s stock ownership, which may be outside of the Company’s control, may trigger an “ownership change.” In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” The Company will complete a full analysis of the tax attribute carryforwards prior to any utilization of tax attributes which may be subject to limitation.
Results of Operations
The following table sets forth certain information with respect to the unaudited condensed consolidated results of operations of the Company for the three-month periods ended March 31, 2025 and March 31, 2024, 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 10 and 11 to the unaudited condensed consolidated financial statements included in this quarterly report.
| Three months ended March 31, | ||||||||||||||||||||
| 2025 | 2024 | Change from 2024 |
||||||||||||||||||
| ($000) | % of revenues | ($000) | % of revenues | to 2025 | ||||||||||||||||
| Revenue | $ | 3,098 | 100 | % | $ | 2,132 | 100 | % | 45 | % | ||||||||||
| Cost of sales | 772 | 25 | % | 541 | 25 | % | 43 | % | ||||||||||||
| Gross profit | 2,326 | 75 | % | 1,591 | 75 | % | 46 | % | ||||||||||||
| R&D expenses | 291 | 9 | % | 238 | 11 | % | 22 | % | ||||||||||||
| SG&A expenses | 1,431 | 46 | % | 1,275 | 60 | % | 12 | % | ||||||||||||
| Operating income | 604 | 19 | % | 78 | 4 | % | 674 | % | ||||||||||||
| Interest income, net | 24 | 1 | % | 15 | 1 | % | 60 | % | ||||||||||||
| Income before income taxes | 628 | 20 | % | 93 | 4 | % | 575 | % | ||||||||||||
| Income tax expense | 154 | 5 | % | 25 | 1 | % | 516 | % | ||||||||||||
| Net income | 474 | 15 | % | 68 | 3 | % | 597 | % | ||||||||||||
| Non-controlling interests share of net income | (10 | ) | (*) | % | (3 | ) | (*) | % | 233 | % | ||||||||||
| Net income attributable to Acorn Energy, Inc. | $ | 464 | 15 | % | $ | 65 | 3 | % | 614 | % | ||||||||||
*result is less than 1%
| 22 |
Revenue. Revenue in the first quarter of 2025 was $3,098,000 compared to $2,132,000 in the first quarter of 2024, which is an increase of $966,000, or 45.3%. As discussed above, OmniMetrix has two reportable segments, PG and CP. The PG segment includes our monitoring devices for generators, industrial air compressors and our annunciator products. The CP segment includes our monitoring devices for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators. Of the $3,098,000 in revenue recognized in the three-month period ended March 31, 2025, $2,887,000 was attributed to PG activities and $211,000 was attributed to CP activities. As compared to the three-month period ended March 31, 2024, revenue from PG activities increased $1,093,000, or 60.9%, and revenue from CP activities decreased $127,000, or 37.6%. As compared to the three-month period ended March 31, 2024, hardware revenue increased $799,000, or 78%, while monitoring revenue increased $167,000, or 15%.
Hardware revenue during the three-month periods ended March 31, 2025 and 2024 is further detailed in the table below (in thousands):
Three months ended March 31, | ||||||||
| Reconciliation of Hardware Revenue | 2025 | 2024 | ||||||
| Amortization of deferred revenue | $ | 315 | $ | 535 | ||||
| Sales of custom designed units and related accessories | 58 | — | ||||||
| Hardware sales (new product versions) | 1,352 | 376 | ||||||
| Other accessories, services, shipping and miscellaneous charges | 104 | 119 | ||||||
| Total hardware revenue | $ | 1,829 | $ | 1,030 | ||||
PG hardware revenue increased $928,000, or 123.2%, during the first three-month period ended March 31, 2025 to $1,681,000, as compared to $753,000 during the first three-month period ended March 31, 2024. The increase in PG revenue was due to sales under our material contract described above under “Recent Developments,” and sales of custom-designed units. PG monitoring revenue in the first quarter of 2025 increased $165,000, or 15.9%, compared to the first quarter of 2024 due to an increase in the number of connections being monitored and growth in our customer base.
Gross Profit. Gross profit during the three-month period ended March 31, 2025 was $2,326,000, reflecting a gross margin of 75.1% on revenue, compared with a gross profit during the three-month period ended March 31, 2024 of $1,591,000, also reflecting a gross margin of 74.6%.
R&D expense. During the three-month periods ended March 31, 2025 and 2024, R&D expense was $291,000 and $238,000, respectively. The increase in R&D expense in the three-month period ended March 31, 2025 of approximately $53,000 is related to salary increases granted to our engineering personnel effective October 1, 2024, the hiring of another senior level engineer in November 2024 and the expenses and materials paid to third-party consultants in the continued development of next-generation PG and CP products and exploration into potential new product lines. We expect a moderate increase in R&D expense throughout 2025 for continued investment in work on certain initiatives to launch the next generation of our products and expand product lines to increase our level of innovation ahead of our competitors.
Selling, general and administrative expense. SG&A expense of the consolidated entities in the first three months of 2025 reflected an increase of $156,000, or 12.2%, as compared to the first three months of 2024. OmniMetrix’s SG&A expense increased $54,000, or 5.6%, from $970,000 in the first three months of 2024 to $1,024,000 in the first three months of 2025. This increase was primarily due to an increase of (i) $41,000 in personnel expenses due to compensation increases and staff additions, (ii) $18,000 in technology expenses, primarily consulting fees, (iii) $28,000 in sales commissions, offset by decreases of (iv) $23,000 in travel and trade show expenses and (v) a net decrease of $10,000 in other expenses in the aggregate. Corporate SG&A expense increased $102,000, or 33.4%, from $305,000 in the first three months of 2024 to $407,000 in the first three months of 2025. This increase was due to an increase of (i) $22,000 in audit fees incurred in the first quarter of 2025 primarily related to the audit work on the release of the income tax valuation allowance at December 31, 2024, (ii) $46,000 in tax professional fees from the preparation of the 2024 income tax provision and the calculations related to the release of the income tax valuation allowance and (iii) $36,000 in stock compensation expense due to the increase in the Company’s stock price, offset by a net decrease of $2,000 in other public company expenses.
| 23 |
Net income attributable to Acorn Energy. We recognized net income attributable to Acorn stockholders of $464,000 in the first three months of 2025 compared to net income attributable to Acorn stockholders of $65,000 in the first three months of 2024. Our net income during the three-month period ended March 31, 2025 is comprised of pre-tax net income at OmniMetrix of $1,034,000 less federal taxes of $131,000 and state taxes of $23,000 on OmniMetrix income, corporate expenses, net of interest income, of $406,000, and $10,000 representing the non-controlling interest share of our income from OmniMetrix. Our net income during the three-month period ended March 31, 2024 is comprised of pre-tax net income at OmniMetrix of $364,000 less state taxes of $25,000 on OmniMetrix income, corporate expenses of $271,000, and $3,000 representing the non-controlling interest share of our income from OmniMetrix.
Liquidity and Capital Resources
At March 31, 2025, we had working capital of $1,731,000. Our working capital includes $2,591,000 of cash and deferred revenue of $3,394,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized.
During the three-month period ended March 31, 2025, our OmniMetrix subsidiary provided cash flow from operations of $646,000, while our corporate headquarters used $375,000 for operations during the same period.
During the three-month period ended March 31, 2025, we invested $6,000 in technology. We did not have any cash flow from financing activities.
Liquidity
As of May 6, 2025, we had cash of $2,724,000. We believe that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance the corporate activities of Acorn and the operating activities of OmniMetrix at their current level of operations for at least the twelve-month period from the issuance of the unaudited condensed consolidated financial statements contained in this Quarterly Report. We may, at some point, elect to obtain a new line of credit or other source of financing to fund additional investments in the business. If we decide to pursue additional financing in the future, it may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn, which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof. Whether alternative funds, such as third-party loans or investments, will be available at the time required and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
Contractual Obligations and Commitments
The table below provides information concerning obligations under certain categories of our contractual obligations as of March 31, 2025.
CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS
| Total | 2026 | 2027-2028 | ||||||||||
| Software agreements | $ | 15 | $ | 15 | $ | — | ||||||
| Operating leases* | 66 | 66 | ||||||||||
| Contractual services | 391 | 234 | 157 | |||||||||
| Purchase commitments** | 1,457 | 1,457 | — | |||||||||
| Total contractual cash obligations | $ | 1,929 | $ | 1,772 | $ | 157 | ||||||
*Reflects the gross amount of the operating lease liabilities. Does not include rent amounts to be received under the sublease.
**Reflects open purchase orders for components/parts to be delivered over the next twelve months as sales forecast requires.
| 24 |
| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Not applicable.
| ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our CEO and CFO, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our CEO and CFO concluded that, due to the material weaknesses in our internal control over financial reporting as described in our Annual Report on Form 10-K for the year ended December 31, 2024, our disclosure controls and procedures were not effective as of March 31, 2025.
As noted in our Annual Report on Form 10-K for the year ended December 31, 2024, we employ a decentralized internal control methodology, coupled with management’s oversight, whereby its 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 the Company’s external consolidated financial statements. Also, as the Company’s subsidiary is not large enough to effectively mitigate certain risks by segregating incompatible duties, management must employ compensating mechanisms throughout the Company in a manner that is feasible within the constraints it operates.
The material weaknesses management identified were caused by an insufficient complement of resources at the Company’s OmniMetrix subsidiary and limited IT system capabilities, such that individual control policies and procedures could not be implemented, maintained, or remediated when and where necessary. Management identified the following material weaknesses set forth below in our internal control over financial reporting:
| ● | The Company had ineffective design and operation of information technology general controls (ITGCs) over logical access, program change management, and vendor management controls. | |
| ● | The Company had ineffective design and operation of internal controls over financial reporting related to segregation of duties and journal entries. The weakness related to segregation of duties arises due to insufficient segregation of duties within the Company’s ERP system. Specifically, two individuals currently have access to both the recording and approval of financial transactions, which increases the risk of unauthorized adjustments. The weakness related to journal entries stems from the ERP’s functionality that allows users to modify journal entries after they have been posted. This capability creates a risk of unauthorized changes to financial records. | |
| ● | The Company had ineffective design and operation of controls including management review controls, over the Company’s projected financial information within the Company’s deferred tax asset valuation allowance analysis. |
Changes in Internal Control Over Financial Reporting
During the latter six months of 2024, we implemented the following (i) provisioning/termination controls with signed and authenticated authorizations, (ii) change controls for development processes that require authorizations, peer review, quality assurance documentation, ticket matching of changes to work authorizations and overall change controls, and (iii) a more detailed review process of our valuation allowance analysis. It is our belief that these added controls and related actions will effectively remediate the existing material weaknesses detailed in bullets one and three above. The material weaknesses will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Other than the remediation actions described above, there were no other changes 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.
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PART II
| ITEM 5. | OTHER INFORMATION |
During the first
quarter of fiscal year 2025, none of our directors or officers
| ITEM 6. | EXHIBITS |
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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: May 8, 2025 | ||
| By: | /s/ TRACY S. CLIFFORD | |
| Tracy S. Clifford | ||
| Chief Financial Officer | ||
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