Quarterly Report for Quarter Ending March 31, 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 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, 2026
		OmniMetrix				Acorn				Total
Revenue		$	2,227			$	-			$	2,227
Cost of sales			442				-				442
Gross profit			1,785				-				1,785
Gross profit margin			80	%							80	%
R&D expense			255				-				255
SG&A expense			1,135				524				1,659
Operating income (loss)		$	395			$	(524	)		$	(129	)

		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

BACKLOG

As of March 31, 2026, OmniMetrix had a backlog of $3,269,000, comprised of deferred revenue, of which $2,934,000 is expected to be recognized as revenue in the next twelve months. This compares to a backlog of $3,955,000 at March 31, 2025.

RECENT DEVELOPMENTS

On January 1, 2026, Acorn Energy entered into an agreement with AIO Systems, Ltd. to expand Acorn's infrastructure asset management technology offerings for cell towers, data centers, and utility assets in North America. Under the agreement, Acorn 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 Acorn expecting a phased rollout and limited near-term revenue contribution as integration and market expansion efforts progress.

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. 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 three months ended March 31, 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). 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 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 area of valuation allowance.

Valuation Allowance

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

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

The Company currently has a three-year cumulative income position which is positive evidence that it is more likely than not the deferred tax assets will be realized. As of March 31, 2026, we believe, based on our projections, that a partial valuation allowance of $10,326,000, continues to be necessary against our deferred tax assets. Uncertainty exists related to the generation of future hardware and monitoring revenue, nonetheless the Company believes sufficient positive evidence exists which supports the partial reversal of the valuation allowance. At this time, however, we cannot assure you that we will be successful in doing so. Accordingly, our management will continue to assess the need for this valuation allowance and will make adjustments when appropriate.

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

Results of Operations

The 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, 2026 and March 31, 2025, 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 11 and 12 to the unaudited condensed consolidated financial statements included in this quarterly report.

		Three months ended March 31,
		2026								2025								Change
			($000)				% of revenues				($000)				% of revenues				from 2025 to 2026
Revenue		$	2,227				100	%		$	3,098				100	%			(28	)%
Cost of sales			442				20	%			772				25	%			(43	)%
Gross profit			1,785				80	%			2,326				75	%			(23	)%
R&D expenses			255				11	%			291				9	%			(12	)%
SG&A expenses			1,659				74	%			1,431				46	%			16	%
Operating (loss) income			(129	)			(6	)%			604				19	%			(121	)%
Interest income, net			31				1	%			24				1	%			29	%
(Loss) income before income taxes			(98	)			(4	)%			628				20	%			(115	)%
Income tax (benefit) expense			(25	)			(1	)%			154				5	%			(116	)%
Net (loss) income			(73	)			(3	)%			474				15	%			(115	)%
Non-controlling interests share of net income			(4	)			(*	)%			(10	)			(*	)%			(60	)%
Net (loss) income attributable to Acorn Energy, Inc.		$	(77	)			(3	)%		$	464				15	%			(117	)%

*result is less than 1%

Revenue. Revenue in the first quarter of 2026 was $2,227,000 compared to $3,098,000 in the first quarter of 2025, which is a decrease of $871,000, or 28.1%. As discussed above, OmniMetrix has two reportable segments, PG and CP, that generated revenue in the three month periods ended March 31, 2026 and 2025. 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 $2,227,000 in revenue recognized in the three-month period ended March 31, 2026, $2,083,000 was attributed to PG activities and $144,000 was attributed to CP activities. As compared to the three-month period ended March 31, 2025, revenue from PG activities decreased $804,000, or 27.8%, and revenue from CP activities decreased $67,000, or 31.8%. As compared to the three-month period ended March 31, 2025, hardware revenue decreased $1,019,000, or 55.7%, while monitoring revenue increased $148,000, or 11.7%.

Hardware revenue during the three-month periods ended March 31, 2026 and 2025 is further detailed in the table below (in thousands):

		Three months ended March 31,
Reconciliation of Hardware Revenue		2026				2025
Amortization of deferred revenue		$	110			$	315
Sales of custom designed units and related accessories			19				58
Hardware sales			556				1,352
Other accessories, services, shipping and miscellaneous charges			125				104
Total hardware revenue		$	810			$	1,829

PG hardware revenue decreased $956,000, or 56.9% during the first three-month period ended March 31, 2026 to $725,000, as compared to $1,681,000 during the first three-month period ended March 31, 2025. 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 near the final recognition of the remaining balance of revenue that was previously deferred. PG monitoring revenue increased $152,000, or 12.6%, 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, 2026 was $1,785,000, reflecting a gross margin of 80.2% on revenue, compared with a gross profit during the three-month period ended March 31, 2025 of $2,326,000, reflecting a gross margin of 75.1%. The gross margin increased to 80.2% in the first quarter of 2026 due to higher monitoring revenue, which has a 94.1% gross margin, as a result of more connections.

R&D expense. During the three-month periods ended March 31, 2026 and 2025, R&D expense was $255,000 and $291,000, respectively. The decrease in R&D expense in the three-month period ended March 31, 2026 of approximately $36,000 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 first three months of 2026 reflected an increase of $228,000, or 15.9%, as compared to the first three months of 2025. OmniMetrix's SG&A expense increased $111,000, or 10.8%, from $1,024,000 in the first three months of 2025 to $1,135,000 in the first three months of 2026. This increase was primarily due to an increase of (i) $25,000 in personnel expenses due to compensation increases and staff additions, (ii) $43,000 in technology expenses, primarily consulting fees for staff augmentation and special projects, (iii) $27,000 in travel and trade show expenses, (iv) $26,000 in facility expenses, and an increase of (iv) $6,000 in other expenses in the aggregate offset by a decrease of (v) $16,000 in commission expenses. Corporate SG&A expense increased $117,000, or 28.7%, from $407,000 in the first three months of 2025 to $524,000 in the first three months of 2026. This increase was due to an increase of $136,000 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 $19,000 in other public company expenses in the aggregate.

Net (loss) income attributable to Acorn Energy. We recognized a net loss attributable to Acorn stockholders of $77,000 in the first three months of 2026 compared to net income attributable to Acorn stockholders of $464,000 in the first three months of 2025. Our net income during the three-month period ended March 31, 2026 is comprised of pre-tax net income at OmniMetrix of $426,000 plus a tax benefit of $25,000, corporate expenses, net of interest income, of $524,000, and $4,000 representing the non-controlling interest share of our income from OmniMetrix. 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 and state taxes of $154,000, in the aggregate, corporate expenses, net of interest income, of $406,000, and $10,000 representing the non-controlling interest share of our income from OmniMetrix.

Liquidity and Capital Resources

At March 31, 2026, we had working capital of $3,115,000. Our working capital includes $4,257,000 of cash and deferred revenue of $2,934,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized.

Liquidity

The Company expects that its existing cash as of March 31, 2026 of $4,257,000 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

The table below provides information concerning obligations under certain categories of our contractual obligations as of March 31, 2026.

CASH PAYMENTS DUE TO CONTRACTUAL OBLIGATIONS

		Twelve-month Periods Ending March 31, (in thousands)
		Total				2027				2028-2029				2030-2031
Operating leases*		$	1,151			$	218			$	493			$	440
Software agreements			16				16				-				-
Contractual services			220				220				-				-
Purchase obligations**			367				367				-				-
Total contractual cash obligations		$	1,754			$	821			$	493			$	440

*Reflects the gross amount of the operating lease liabilities. Imputed interest is $150,000 resulting in $163,000 included in current liabilities. Does not include rent amounts to be received under the sublease.

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