Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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, 2025 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 table shows, for the periods indicated, the financial results (dollar amounts in thousands) attributable to each of our consolidated companies.

		Nine months ended September 30, 2026
		OmniMetrix				Acorn				Total
Revenue		$	7,307			$	-			$	7,307
COGS			1,385				-				1,385
Gross profit			5,922				-				5,922
Gross profit margin			81	%							81	%
R&D expenses			742				-				742
SG&A expenses			3,510				1,234				4,744
Operating income (loss)		$	1,670			$	(1,234	)		$	436

		Nine months ended September 30, 2025
		OmniMetrix				Acorn				Total
Revenue		$	9,101			$	-			$	9,101
COGS			2,191				-				2,191
Gross profit			6,910				-				6,910
Gross profit margin			76	%							76	%
R&D expenses			823				-				823
SG&A expenses			3,245				1,132				4,377
Operating income (loss)		$	2,842			$	(1,132	)		$	1,710

		Three months ended September 30, 2026
		OmniMetrix				Acorn				Total
Revenue		$	2,591			$	-			$	2,591
COGS			504				-				504
Gross profit			2,087				-				2,087
Gross profit margin			81	%							81	%
R&D expenses			248				-				248
SG&A expenses			1,286				363				1,649
Operating income (loss)		$	553			$	(363	)		$	190

		Three months ended September 30, 2025
		OmniMetrix				Acorn				Total
Revenue		$	2,478			$	-			$	2,478
COGS			533				-				533
Gross profit			1,945				-				1,945
Gross profit margin			78	%							78	%
R&D expenses			267				-				267
SG&A expenses			1,072				447				1,519
Operating income (loss)		$	606			$	(447	)		$	159

BACKLOG

As of September 30, 2026, OmniMetrix had a backlog of $4,054,000, primarily comprised of deferred revenue, of which $3,643,000 is expected to be recognized as revenue in the next twelve months. This compares to a backlog of $3,575,000 at September 30, 2025.

RECENT DEVELOPMENTS

On January 1, 2026, OmniMetrix entered into an agreement with AIO Systems, Ltd. to expand its infrastructure asset management technology offerings for telecommunications towers, energy sites and in North America. Under the agreement, OmniMetrix has exclusive rights to market, distribute, integrate, and sell AIO's cloud-based monitoring and analytics solutions under the OmniMetrix brand in the United States, Canada, and Mexico, significantly expanding Acorn's product portfolio and addressable market. The partnership leverages AIO's globally deployed technology and provides for shared equipment and monitoring revenues, with a phased rollout and limited near-term revenue contribution expected as integration and market expansion efforts progress.

On July 31, 2026, OmniMetrix entered into an agreement with Champion Power Equipment, LLC under which Champion will act as a non-exclusive reseller of OmniMetrix's residential monitoring products and related monitoring services in North America. Pricing under the agreement is based on an assumed purchase volume of 3,000 units per calendar year, but the agreement does not obligate Champion to purchase any minimum quantity. We expect the arrangement to broaden distribution of our residential power generation products.

On September 9, 2026, OmniMetrix acquired substantially all of the assets of Generator Solutions, Inc., a provider of remote monitoring systems for standby generators under the "Gen-Tracker" brand name, for total contractual consideration of $3.5 million, consisting of $1.0 million in cash paid at closing on September 9, 2026 (the "Acquisition Date") and deferred cash payments of $450,000 per year on each of the first four anniversaries of the Acquisition Date and $700,000 on the fifth anniversary of the Acquisition Date. Gen-Tracker monitors generator readiness through the automatic transfer switch rather than the generator's engine controller, which allows it to monitor generators of virtually any make, model or age, including older units that predate modern controllers. The acquisition expands our PG customer base and dealer network, and the four full-time Generator Solutions employees have joined OmniMetrix. Based on its unaudited historical records, Generator Solutions invoices approximately $1.1 million in annual recurring monitoring sales and approximately $400,000 in annual hardware sales. See Note 14 to the unaudited condensed consolidated financial statements included in this quarterly report.

On August 17, 2026, Acorn entered into a letter agreement with the former Chief Executive Officer of OmniMetrix under which he exchanged the 100 shares of Series A preferred stock of OMX Holdings, Inc. held by him, together with all of his other rights in the equity of OMX Holdings, Inc., including accrued and unpaid dividends of approximately $28,500, for 25,096 shares of Acorn common stock. No cash was exchanged. OMX holds 100% of the equity interests of OmniMetrix, and, as a result of this transaction, OmniMetrix is now wholly owned by Acorn and the Company no longer has a non-controlling interest. See Note 9 to the unaudited condensed consolidated financial statements included in this quarterly report.

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"). OmniMetrix's PG services provide wireless remote monitoring and control systems and Internet of Things ("IoT") applications for commercial/industrial and residential power generation equipment. In 2025, we launched the Omni family of products-the OmniPro commercial monitor and the Omni residential monitor-built on a new proprietary common communications core called the OCOM, a platform designed to enhance connectivity, reliability and performance in remote monitoring systems. These products are replacing our legacy TrueGuard and AIRGuard product lines, offering enhanced flexibility, expandability, and improved connectivity with easier installation. Following the Gen-Tracker Acquisition in September 2026, PG also includes the Gen-Tracker product line: the GTU Series, which monitors standby generators of virtually any make, model or age through the automatic transfer switch, and the MBX Series, which connects directly to the generator controller. OmniMetrix also offers the Smart Annunciator product for commercial customers who require a visual representation of generator status via a touchscreen display.
	●	Cathodic Protection ("CP"). OmniMetrix's CP services provide remote monitoring and control products for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators. The CP product lineup includes solutions to remotely monitor and control rectifiers, test stations and bonds. In 2025, we launched the RADex, an OCOM-based expansion of our RAD™ (Remote AC Mitigation Disconnect) that adds cathodic protection measurements while retaining the ability to remotely disconnect/connect AC mitigation tools on solid-state decouplers, reducing expense and increasing employee safety.

●

Infrastructure Solutions ("IS"). OmniMetrix's IS services provide smart infrastructure monitoring hardware, software and solutions for telecommunications, energy and data center infrastructure asset management in the North American market. Under a Technology Partnership Agreement effective January 1, 2026 with AIO Systems Ltd. ("AIO"), an Israel-based technology company, OmniMetrix has the exclusive right to market, distribute, integrate and sell, on a white-label basis, AIO's IoT monitoring controllers, sensors, power management devices, security products, environmental monitoring equipment, and a cloud-based Management-of-Management (MOM) platform that provides centralized monitoring, alerting, ticketing and workflow orchestration for telecommunications towers, energy sites and data centers. Revenue in the IS segment is expected to be derived from hardware product sales, recurring monitoring service contracts and other bundled arrangements. The IS segment had no revenue for the nine months ended September 30, 2026 as operations were in the pre-revenue stage.

Each of our PG, CP and IS activities represents a reportable segment. The following analysis should be read together with the segment and revenue information provided in Notes 11 and 12 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 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). OmniMetrix now also markets an infrastructure solutions product line that provides smart infrastructure monitoring hardware, software and solutions for telecommunications, energy and data center infrastructure asset management in the North American market as described above.

Since August 17, 2026, OmniMetrix has been wholly owned by Acorn. Prior to that date, Acorn owned 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 economic ecosystem. In addition, OmniMetrix continues to see 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.

OmniMetrix sells monitoring hardware devices and data monitoring services. Revenue from hardware sales is recognized upon shipment or upon acceptance (specific to the Material Contract). Revenues from the payment 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 areas of the valuation allowance and the purchase price allocation for the Gen-Tracker Acquisition.

Valuation Allowance

We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets. The weight given to the positive and negative evidence is commensurate with the extent to which the evidence may be objectively verified.

We record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized. The net carrying amount of the Company's deferred tax assets is based on the Company's belief that it is more likely than not that the Company will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. The ultimate realization of the deferred tax assets depends upon our ability to generate sufficient taxable income in the future. In forecasting future taxable income, management's projections and beliefs are based upon a variety of estimates and numerous assumptions made by our management with respect to, among other things, interest rates, forecasted revenue of the hardware sales and monitoring revenue or revenue streams that could generate sufficient income. In evaluating our ability to recover our deferred tax assets, we consider and weigh all available positive and negative evidence, including our past operating results, the existence of cumulative losses in the most recent years and our forecast of future taxable income. When the likelihood of the realization of existing deferred tax assets changes, adjustments to the valuation allowance are charged in the period in which the determination is made. If our estimates and assumptions change in the future, the Company may be required to record additional valuation allowances against its deferred tax assets, resulting in additional income tax expense in the Company's Consolidated Statements of Operations, or conversely to reduce the existing valuation allowance resulting in less income tax expense.

The Company currently has a three-year cumulative income position which is positive evidence that it is more likely than not the deferred tax assets will be realized. During the three months ended September 30, 2026, we recorded a discrete reduction in the valuation allowance of $780,000 associated with the realizability of deferred tax assets due to the tax treatment of capitalized research and development costs and changes to the forecast. As of September 30, 2026, we believe, based on our projections, that a partial valuation allowance of $9,546,000 continues to be necessary against our deferred tax assets. Uncertainty exists related to the generation of future hardware and monitoring revenue, nonetheless the Company believes sufficient positive evidence exists which supports the partial reversal of the valuation allowance. At this time, however, we cannot assure you that we will be successful in doing so. Accordingly, our management will continue to assess the need for this valuation allowance and will make adjustments when appropriate.

Future changes in the Company's stock ownership, which may be outside of the Company's control or future equity offerings or acquisitions that have equity as a component of the purchase price consideration may trigger an "ownership change" and the utilization of the Company's federal and state net operating losses may be subject to a limitation under the Internal Revenue Code, as well as similar state provisions. Such limitations may result in the expiration of net operating loss (NOL) carryforwards before their utilization.

Purchase Price Allocation

We accounted for the Gen-Tracker Acquisition as a business combination under ASC 805, which requires us to allocate the purchase consideration to the assets acquired and liabilities assumed based on their estimated fair values at the Acquisition Date, with any excess recorded as goodwill. With the assistance of an independent valuation firm, we estimated the fair values of the acquired intangible assets using income-based approaches. Customer relationships ($1,730,000) were valued based on the present value of the projected cash flows attributable to the acquired customer base, after charges for the contributory assets used to generate those cash flows. The trade name ($67,000) was valued using the relief-from-royalty method, and the non-compete agreement ($50,000) was valued based on the estimated cash flows that would be lost if the sellers were to compete, weighted by the probability that they would compete and succeed in doing so. The deferred purchase consideration was recorded at its present value of $2,059,000, using a discount rate of 6.38% that reflects our estimated borrowing rate.

The most significant assumptions used in these valuations include projected revenue and operating margins of the acquired business, an annual customer attrition rate of 2%, a royalty rate of 1.0% for the trade name, the estimated probabilities of competition by the sellers, a discount rate of 12.6% applied to the intangible assets, and the estimated useful lives of the acquired intangible assets. These assumptions are inherently uncertain. Different assumptions, particularly about customer attrition, projected cash flows or the discount rate, could have materially changed the amounts allocated to identifiable intangible assets and goodwill ($1,443,000), as well as future amortization expense.

The purchase price allocation is preliminary because the independent valuation of the acquired intangible assets had not been finalized as of the date of this report. During the measurement period, which will not exceed one year from the Acquisition Date, we may adjust the provisional amounts if we obtain new information about facts and circumstances that existed at the Acquisition Date. Any such adjustments would change the amounts recorded for intangible assets and goodwill and could affect future amortization expense. See Note 14 to the condensed consolidated financial statements.

Results of Operations

The following tables set forth certain information with respect to the unaudited condensed consolidated results of operations of the Company for the nine- and three-month periods ended September 30, 2026 and 2025, including the percentage of total revenues during each period attributable to selected components of the operations statements data and for the period-to-period percentage changes in such components. For segment data, see Notes 11 and 12 to the unaudited condensed consolidated financial statements included in this quarterly report.

		Nine months ended September 30,
		2026								2025								Change
		($,000)				% of revenues				($,000)				% of revenues				From 2025 to 2026
Revenue		$	7,307				100	%		$	9,101				100	%			(20	)%
COGS			1,385				19	%			2,191				24	%			(37	)%
Gross profit			5,922				81	%			6,910				76	%			(14	)%
R&D expenses			742				10	%			823				9	%			(10	)%
SG&A expenses			4,744				65	%			4,377				48	%			8	%
Operating income			436				6	%			1,710				19	%			(75	)%
Interest income, net			87				1	%			85				1	%			2	%
Income before income taxes			523				7	%			1,795				20	%			(71	)%
Income tax (benefit) expense			(650	)			(9	)%			331				4	%			(296	)%
Net income			1,173				16	%			1,464				16	%			(20	)%
Non-controlling interest share of net income			(16	)			*	%			(28	)			*	%			(43	)%
Net income attributable to Acorn Energy, Inc.		$	1,157				16	%		$	1,436				16	%			(19	)%

*Result is less than 1% or not meaningful.

		Three months ended September 30,
		2026								2025								Change
		($,000)				% of revenues				($,000)				% of revenues				from 2025 to 2026
Revenue		$	2,591				100	%		$	2,478				100	%			5	%
COGS			504				19	%			533				22	%			(5	)%
Gross profit			2,087				81	%			1,945				78	%			7	%
R&D expenses			248				10	%			267				11	%			(7	)%
SG&A expense			1,649				64	%			1,519				61	%			9	%
Operating income			190				7	%			159				6	%			19	%
Interest income, net			24				1	%			34				1	%			(29	)%
Income before income taxes			214				8	%			193				8	%			11	%
Income tax (benefit) expense			(730	)			(28	)%			(65	)			(3	)%			1,023	%
Net income			944				36	%			258				10	%			266	%
Non-controlling interest share of net income			(4	)			*	%			(6	)			*	%			(33	)%
Net income attributable to Acorn Energy, Inc.		$	940				36	%		$	252				10	%			273	%

*Result is less than 1% or not meaningful.

Revenue for the nine- and three-month periods ended September 30, 2026 and 2025

Revenue decreased by $1,794,000, or 19.7%, from $9,101,000 in the nine-month period ended September 30, 2025 to $7,307,000 in the nine-month period ended September 30, 2026. Hardware revenue decreased by $2,037,000, or 41.1%, from $4,952,000 in the nine-month period ended September 30, 2025 to $2,915,000 in the nine-month period ended September 30, 2026. The decrease was primarily due to a $1,779,000 decrease in sales under the Material Contract and a $632,000 decrease in amortization of deferred hardware revenue, from $800,000 to $168,000, as the remaining balance of hardware revenue deferred on legacy product versions was fully recognized during the period. These decreases were partially offset by increases of $199,000 in other hardware sales, $139,000 in accessories, services, shipping and miscellaneous charges, and $36,000 in sales of custom designed units and related accessories. Monitoring revenue increased by $243,000, or 5.9%, from $4,149,000 in the nine-month period ended September 30, 2025 to $4,392,000 in the nine-month period ended September 30, 2026. The increase in monitoring revenue was due to an increase in the number of connections being monitored and growth in our customer base, including the customers acquired in the Gen-Tracker Acquisition. Revenue for the nine- and three-month periods ended September 30, 2026 includes $78,000 attributable to the Gen-Tracker operations from the September 10, 2026 acquisition date, consisting of $68,000 of monitoring revenue and $10,000 of hardware revenue, with related gross profit of $62,000.

As discussed above, OmniMetrix has three reportable segments, PG, CP and IS. Of the $7,307,000 in revenue recognized in the nine-month period ended September 30, 2026, $6,892,000 was generated by PG activities and $415,000 was generated by CP activities. This represents a decrease in revenue from PG activities of $1,615,000, or 19%, from $8,507,000 in the nine-month period ended September 30, 2025, and a decrease in revenue from CP activities of $179,000, or 30%, from $594,000 in the nine-month period ended September 30, 2025. The IS segment remained in a pre-revenue stage and generated no revenue in either period. The decrease in PG revenue was primarily due to the sales under our Material Contract in the prior year period and the decrease in revenue recognized from amortization of deferred hardware, as we recognized the remaining balance of revenue that was previously deferred of $5,000 and $168,000, during the three and nine-month periods ended September 30, 2026, respectively. The decrease in CP revenue was due to fewer CP hardware sales in the current-year period as compared to the prior-year period.

Revenue increased by $113,000, or 4.6%, from $2,478,000 in the three-month period ended September 30, 2025 to $2,591,000 in the three-month period ended September 30, 2026. As compared to the three-month period ended September 30, 2025, hardware revenue increased $123,000, or 13.4%, while monitoring revenue decreased $10,000, or 0.6%. These amounts include $10,000 of hardware revenue and $68,000 of monitoring revenue from the acquired Gen-Tracker operations. Excluding the acquired operations and the impact of the policy we implemented in 2025 of recognizing the deferred monitoring revenue of units sold more than 24 months earlier that had not been installed, monitoring revenue increased $70,000, or 5.1%, from $1,382,000 in the three-month period ended September 30, 2025 to $1,452,000 in the three-month period ended September 30, 2026, primarily due to an increase in the number of connections being monitored. Under our policy, deferred monitoring revenue for units sold more than 24 months earlier that have not yet been installed is recognized into revenue at that point. Revenue recognized for these units was $30,000 in the three- and nine-month periods ended September 30, 2026, compared to $178,000 in the three- and nine-month periods ended September 30, 2025. Hardware revenue increased $323,000, or 45.9%, from $703,000 in the three-month period ended September 30, 2025 to $1,026,000 in the three-month period ended September 30, 2026, excluding the acquired operations and amortization of deferred hardware revenue of $5,000 and $215,000 in the three-month periods ended September 30, 2026 and 2025, respectively. The increase was due to an increase of $129,000 in general hardware sales, $98,000 in accessories, services, shipping and miscellaneous charges, $79,000 from sales under the Material Contract, and $17,000 from custom designed units and related accessories. The decrease in amortization of deferred hardware revenue reflects the September 1, 2023 launch of updated product versions whose hardware functions independently of our monitoring services and is therefore recognized as revenue upon shipment. Revenue from the prior product versions, which could not function independently of our monitoring services, was deferred and recognized over the estimated three-year life of the units. The remaining balance of deferred hardware revenue was fully recognized as of September 30, 2026. Despite the return to year-over-year growth in the third quarter, revenue for the nine-month period was below the prior-year period, primarily due to $2,214,000 in sales under the Material Contract and the impact of the decreasing amortization of deferred hardware revenue in the current year period as reflected in the table below. Of the $2,591,000 in revenue recognized in the three-month period ended September 30, 2026, $2,442,000 was generated by PG activities and $149,000 was generated by CP activities. In the three-month period ended September 30, 2026, as compared to the three-month period ended September 30, 2025, revenue from PG activities increased $182,000, or 8%, from $2,260,000, and revenue from CP activities decreased $69,000, or 32%, from $218,000.

Hardware revenue during the nine- and three-month periods ended September 30, 2026 and 2025 is further detailed in the table below (in thousands):

		Nine months ended September 30,								Three months ended September 30,
Reconciliation of Hardware Revenue		2026				2025				2026				2025
Amortization of deferred revenue		$	168			$	800			$	5			$	215
Sales of custom designed units and related accessories			94				58				17				-
Hardware sales			2,128				3,708				766				548
Other accessories, services, shipping and miscellaneous charges			525				386				253				155
Total hardware revenue		$	2,915			$	4,952			$	1,041			$	918

Gross profit for the nine- and three-month periods ended September 30, 2026 and 2025

Gross profit for the nine-month period ended September 30, 2026 was $5,922,000, reflecting a gross margin of 81.0%, compared with a gross profit of $6,910,000, reflecting a gross margin of 75.9%, for the nine-month period ended September 30, 2025.

Gross margin on hardware revenue for the nine-month period ended September 30, 2026 was 60.0% compared to 60.2% for the nine-month period ended September 30, 2025. Gross margin on monitoring revenue for the nine-month periods ended September 30, 2026 and 2025 was 95.0% and 94.7%, respectively.

Gross profit for the three-month period ended September 30, 2026 was $2,087,000, reflecting a gross margin of 80.5%, compared with a gross profit for the three-month period ended September 30, 2025 of $1,945,000, reflecting a gross margin of 78.5%. Gross margin on hardware revenue for the three-month period ended September 30, 2026 was 58.6% compared to 50.0% for the three-month period ended September 30, 2025. Gross margin on monitoring revenue was 95.3% for both of the three-month periods ended September 30, 2026 and 2025.

Operating expenses for the nine- and three-month periods ended September 30, 2026 and 2025

R&D expense. During the nine-month periods ended September 30, 2026 and 2025, R&D expense was $742,000 and $823,000, respectively. During the three-month period ended September 30, 2026, OmniMetrix recorded $248,000 of R&D expense as compared to $267,000 in the three-month period ended September 30, 2025. The decrease in R&D expense in the nine-month period ended September 30, 2026 of approximately $81,000 is related to a decrease in expenses and materials paid to third-party consultants offset by salary increases granted to our engineering personnel effective January 1, 2026.

Selling, general and administrative expense. SG&A expense of the consolidated entities in the nine-month period ended September 30, 2026 reflected an increase of $367,000, or 8.4%, as compared to the nine-month period ended September 30, 2025. OmniMetrix's SG&A expense increased $265,000, or 8.2%, from $3,245,000 in the nine-month period ended September 30, 2025 to $3,510,000 in the nine-month period ended September 30, 2026. This increase was primarily due to an increase of (i) $188,000 in personnel expenses due to compensation increases and staff additions, (ii) $57,000 in facility expenses due to the rate increase in our office space lease which was amended June 20, 2025 and the addition of the short-term lease for the Gen-Tracker office in Minnesota, (iii) $54,000 in travel and trade show expenses, (iv) $14,000 in expenses related to our pursuit of ISO 27001 certification, (v) $71,000 in acquisition-related costs for the Gen-Tracker Acquisition and (vi) $67,000 in other expenses in the aggregate, offset by decreases of (vii) $176,000 in commission expenses as the prior year period was significantly higher due to the commissions earned related to the Material Contract and (viii) $10,000 in technology expenses. Corporate SG&A expense increased $102,000, or 9.0%, from $1,132,000 in the nine-month period ended September 30, 2025 to $1,234,000 in the nine-month period ended September 30, 2026. This increase was due to an increase of $272,000 in stock compensation expense due to a higher number of options being issued to our officers and directors in January 2026 than in historical periods and the higher stock price and related volatility offset by a net decrease of $170,000 in other public company expenses due to the 2025 period having higher legal fees related to our NASDAQ listing and higher tax professional fees related to our 382 study.

SG&A expense of the consolidated entities in the three-month period ended September 30, 2026 reflected an increase of $130,000, or 8.6%, as compared to the three-month period ended September 30, 2025. OmniMetrix's SG&A expense increased $214,000, or 20.0%, from $1,072,000 in the three-month period ended September 30, 2025 to $1,286,000 in the three-month period ended September 30, 2026. This increase was primarily due to increases of (i) $71,000 in acquisition-related costs for the Gen-Tracker Acquisition, (ii) $62,000 in personnel expenses, (iii) $30,000 in travel and trade show expenses, (iv) $14,000 in expenses related to our pursuit of ISO 27001 certification, (v) $10,000 in facility expenses, (vi) $8,000 in commission expenses and (vii) $54,000 in other expenses in the aggregate, offset by a decrease of (viii) $35,000 in technology expenses. Corporate SG&A expense decreased $84,000, or 18.8%, from $447,000 in the three-month period ended September 30, 2025 to $363,000 in the three-month period ended September 30, 2026. This decrease was due to a decrease of $153,000 in other corporate overhead expenses, primarily because the 2025 period included higher legal fees related to our NASDAQ listing and higher tax professional fees related to our Section 382 Study, offset by an increase of $69,000 in stock compensation expense.

Net income attributable to Acorn Energy. We recognized net income attributable to Acorn stockholders of $1,157,000 in the nine-month period ended September 30, 2026, compared to net income attributable to Acorn stockholders of $1,436,000 in the nine-month period ended September 30, 2025. Our net income during the nine-month period ended September 30, 2026 is comprised of pre-tax net income at OmniMetrix of $1,756,000 plus a federal income tax benefit of $671,000, less state income taxes of $21,000 offset by corporate expenses, net of interest income, of $1,233,000, and the non-controlling interest share of our income from OmniMetrix of $16,000. Our net income during the nine-month period ended September 30, 2025 is comprised of pre-tax net income at OmniMetrix of $2,924,000 less federal income taxes of $253,000 and state income taxes of $78,000 offset by corporate expenses, net of interest income, of $1,129,000, and the non-controlling interest share of our income from OmniMetrix of $28,000. Income before income taxes decreased $1,272,000, from $1,795,000 in the nine-month period ended September 30, 2025 to $523,000 in the nine-month period ended September 30, 2026, primarily due to lower pre-tax income at OmniMetrix and higher corporate expenses. This decrease was largely offset by a $981,000 favorable change in income taxes, from net income tax expense of $331,000 in the 2025 period to a net income tax benefit of $650,000 in the 2026 period, primarily as a result of the discrete valuation allowance release described below. As a result, net income decreased by only $291,000 (and net income attributable to Acorn stockholders by $279,000).

For the three-month period ended September 30, 2026, we recognized net income attributable to Acorn stockholders of $940,000, compared to a net income attributable to Acorn stockholders of $252,000 for the three-month period ended September 30, 2025. Our net income during the three-month period ended September 30, 2026 is comprised of pre-tax net income at OmniMetrix of $577,000 plus a federal income tax benefit of $736,000, less state income taxes of $6,000 offset by corporate expenses, net of interest income, of $363,000, and the non-controlling interest share of our income from OmniMetrix of $4,000. Our net income during the three-month period ended September 30, 2025 is comprised of pre-tax net income at OmniMetrix of $639,000 plus a federal income tax benefit of $84,000, less state income taxes of $19,000 offset by corporate expenses, net of interest income, of $446,000, and the non-controlling interest share of income from OmniMetrix of $6,000. Net income attributable to Acorn stockholders for the three-month period ended September 30, 2026 increased $688,000, from $252,000 to $940,000, compared to the three-month period ended September 30, 2025, while income before income taxes increased only $21,000, from $193,000 to $214,000. The majority of the increase in net income resulted from the increase in the income tax benefit from $65,000 in the 2025 period to $730,000 in the 2026 period. Accordingly, the significant increase in net income for the quarter was primarily driven by income taxes, principally the discrete valuation allowance release described below.

The income tax benefits recognized in the nine- and three-month periods ended September 30, 2026 were primarily due to a discrete tax benefit of approximately $780,000 from a partial release of the valuation allowance on our deferred tax assets. Excluding this discrete item, we would have recognized income tax expense of approximately $130,000 and $50,000 in the nine- and three-month periods ended September 30, 2026, respectively. It is our current position to elect under Section 59(e) of the Internal Revenue Code to amortize our domestic research and experimental expenditures over a longer recovery period. This lowers our annual tax amortization of these costs and increases our projected taxable income in the near term. In addition, our updated forecasts reflect higher expected future earnings due to the recent acquisition. As a result, we now expect to use certain federal net operating loss carryforwards that were previously expected to expire unused. Based on this positive evidence, we concluded that it is more likely than not that approximately $780,000 of the related net operating loss deferred tax assets will be realized, and we therefore released the corresponding valuation allowance as a discrete item in the period. We continue to maintain a valuation allowance of $9,546,000 against deferred tax assets whose realization remains uncertain.

Liquidity and Capital Resources

At September 30, 2026, we had working capital of $2,449,000. Our working capital includes $4,458,000 of cash and deferred revenue of $3,643,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized. Deferred revenue at September 30, 2026 includes $522,000 related to the Gen-Tracker Acquisition, representing the $590,000 of deferred revenue assumed at the Acquisition Date less $68,000 recognized as monitoring revenue through September 30, 2026. Generator Solutions collected the cash for these services before the Acquisition Date, so the Company will incur the cost of providing them without receiving the related cash.

Net cash increased by $4,000 during the nine-month period ended September 30, 2026, compared to an increase of $1,841,000 during the nine-month period ended September 30, 2025. Net cash provided by operating activities was $1,276,000 in the nine-month period ended September 30, 2026, compared to $1,795,000 in the nine-month period ended September 30, 2025. Net cash used in investing activities was $1,282,000 in the nine-month period ended September 30, 2026, which included $1,000,000 of cash paid at closing for the Gen-Tracker Acquisition and $250,000 paid pursuant to the technology partnership agreement with AIO executed January 1, 2026, compared to $25,000 in the nine-month period ended September 30, 2025. Net cash provided by financing activities was $10,000 in the nine-month period ended September 30, 2026, consisting of stock option exercise proceeds, compared to $71,000 in the nine-month period ended September 30, 2025.

Liquidity

The Company expects that its existing cash as of September 30, 2026 of $4,458,000 will be sufficient to fund our planned operating expenses and capital expenditure requirements for at least the next 12 months from the issuance date of these financial statements.

Contractual Obligations and Commitments

In connection with the Gen-Tracker Acquisition described in Note 14 to the unaudited condensed consolidated financial statements included in this quarterly report, OmniMetrix paid $1.0 million in cash at closing on September 9, 2026 (the "Acquisition Date"), which is included in cash used in investing activities for the nine-month period ended September 30, 2026, and is obligated to make deferred cash payments totaling $2.5 million, consisting of $450,000 per year on each of the first four anniversaries of the Acquisition Date and $700,000 on the fifth anniversary of the Acquisition Date. These deferred payments are guaranteed by Acorn and are subject to acceleration upon certain events, including a sale of OmniMetrix or the acquired business, in which case the remaining payments would become due earlier than scheduled. We expect to fund these payments from existing cash and cash generated from operations. These deferred payments are included in the table below.

The table below provides information concerning obligations under certain categories of our contractual obligations as of September 30, 2026.

CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS

		Twelve-Month Periods Ending September 30, (in thousands)
		Total				2027				2028-2029				2030-2031				2032 and thereafter
Software agreements		$	5			$	5			$	-			$	-			$	-
Operating leases*			1,153				339				502				312				-
Contractual services			175				175				-				-				-
Purchase commitments**			1,007				1,007				-				-				-
Deferred acquisition consideration***			2,500				450				900				1,150				-
Total contractual cash obligations		$	4,840			$	1,976			$	1,402			$	1,462			$	-

*Reflects the gross (undiscounted) payments due under the Company's operating leases, including a short-term lease that is not recognized as an operating lease liability on the condensed consolidated balance sheet. Excludes rent 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.

***Represents undiscounted deferred cash payments due to Generator Solutions, Inc. under the asset purchase agreement for the Gen-Tracker Acquisition (see Note 14 to the unaudited condensed consolidated financial statements included in this quarterly report). The present value of these payments, $2,067,000, is recorded as deferred consideration on the condensed consolidated balance sheet at September 30, 2026.