Acorn Energy, Inc 10-K for FY2024
Acorn Energy, Inc. (ACFN)
About this 10-K
Acorn Energy, Inc filed this 10-K on March 6, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $10.99M
- up 36.3% from $8.06M a year earlier
- Net income
- $6.29M
- up 5189.1% from net income of $119K a year earlier
- Diluted EPS
- $2.51
- up 4920.0% from $0.05 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
or
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As
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of the registrant was $
DOCUMENTS INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
Certain statements contained in this report are forward-looking in nature. These statements can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “should” or “anticipates”, or the negatives thereof, or comparable terminology, or by discussions of strategy. You are cautioned that our business and operations are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected by any forward-looking statements. Certain of such risks and uncertainties are discussed below under the heading “Item 1A. Risk Factors.”
OmniMetrix®, OmniView®, ScopeViewTM, SmartServiceTM, TrueGuardTM and TrueShieldTM are trademarks of OmniMetrix, LLC.
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PART I
ITEM 1. BUSINESS
OVERVIEW
Acorn Energy, Inc. and its subsidiaries, OMX Holdings, Inc. and OmniMetrix, LLC (collectively, “Acorn” or “the Company”) is a Delaware corporation which is a holding company focused on technology-driven solutions for energy infrastructure asset management. We provide the following products and Internet of Things (“IoT”) applications and services through our OmniMetrix, 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. |
During 2024, each of our PG and CP activities represented a reportable segment.
We continually evaluate opportunities related to our activities, and our goal is to maximize shareholder value and position our holdings for a strategic event, which may include co-investment by one or more third parties and/or a synergistic acquisition of another company.
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.
| Year ended December 31, 2024 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenues | $ | 10,986 | $ | — | $ | 10,986 | ||||||
| Cost of goods sold (COGS) | 2,987 | — | 2,987 | |||||||||
| Gross profit | 7,999 | — | 7,999 | |||||||||
| Gross profit margin | 73 | % | 73 | % | ||||||||
| Research and development (R&D) expense | 1,012 | — | 1,012 | |||||||||
| Selling, general and administrative (SG&A) expense | 4,030 | 1,020 | 5,050 | |||||||||
| Operating income (loss) | $ | 2,957 | $ | (1,020 | ) | $ | 1,937 | |||||
| Year ended December 31, 2023 | ||||||||||||
| OmniMetrix | Acorn | Total | ||||||||||
| Revenues | $ | 8,059 | $ | — | $ | 8,059 | ||||||
| COGS | 2,055 | — | 2,055 | |||||||||
| Gross profit | 6,004 | — | 6,004 | |||||||||
| Gross profit margin | 74 | % | 74 | % | ||||||||
| R&D expense | 875 | — | 875 | |||||||||
| SG&A expense | 3,998 | 1,057 | 5,055 | |||||||||
| Operating income (loss) | $ | 1,131 | $ | (1,057 | ) | $ | 74 | |||||
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OMNIMETRIX – POWER GENERATION MONITORING AND CONTROL AND CATHODIC PROTECTION MONITORING AND CONTROL
OmniMetrix is a Georgia limited liability company based in Buford, Georgia that develops and markets wireless remote monitoring and control systems and services for critical assets (including stand-by power generators, pumps, pumpjacks, light towers, turbines, compressors, fire pumps and other industrial equipment) and multiple markets in the IoT ecosystem, as well as cathodic protection solutions for the pipeline industry (gas utilities and pipeline companies). Acorn owns 99% of OmniMetrix, with the remaining 1% owned by OmniMetrix’s former CEO.
Following the emergence of 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 within the sectors in which it operates. 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, other impacts of climate change, demand response and cybersecurity threats. Residential and industrial standby generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure increasingly being monitored in IoT applications. OmniMetrix solutions monitor critical equipment used by cell towers, manufacturing plants, medical facilities, data centers, retail stores, public transportation systems, energy distribution and federal, state and municipal government facilities, in addition to residential back-up generators. Given that OmniMetrix monitors all major brands of critical equipment and continues to invest in research and development in response to customer and potential customer feedback, OmniMetrix is well-positioned to grow its customer base and expand its product offerings in this market.
Products & Services
In the PG segment, OmniMetrix sells a line of devices and services built on our baseline TrueGuard wireless remote monitor. These devices are broadly applicable across all brands and models of emergency power generators and industrial engine applications. The TrueGuard product family connects directly to the engine’s control panel and captures all data flowing through the control panel. As a result, the product provides the ability to identify whether an emergency generator is capable of operating as expected. OmniMetrix also sells our AIRGuard product which remotely monitors and controls industrial air compressors and our Smart Annunciator product which is typically sold to commercial customers that require a visual representation of the generator’s status and has a large touch-screen display.
In the CP segment, OmniMetrix offers three primary product lines: the Hero 2 Rectifier Monitor, the Patriot Plus Test Station Monitor, and the RADTM (Remote AC Mitigation Disconnect). All of these products are used to monitor cathodic protection systems, a process which reduces rust and corrosion on pipelines used to transport natural gas. As the name suggests, the Hero 2 Rectifier product monitors and controls the operation of the rectifiers, which are a critical component in the effort to prevent corrosion and are also the most common point of failure in the pipeline system. The Patriot Plus Test Station Monitor is also used to provide data points along the pipeline segment powered by the rectifier including AC current density. Additionally, the industry’s first and patented RAD mounts onto existing Solid-state Decouplers in the field and can remotely disconnect/connect these AC mitigation tools which drastically reduces company expense while increasing employee safety.
Customers and Markets
At its core, the OmniMetrix family of PG monitors (TrueGuard PRO and TrueGuard 2) can remotely monitor and control a variety of industrial engine applications, including engines, standby generators, air and gas compressors, fire pumps, batteries, turbines, pumps and other equipment. Early in the company’s history, a strategic decision was made to focus primarily on the standby power generation market. In the past several years, the company has expanded its focus to add several additional applications where it sees demand. Standby generator monitoring is part of the IoT ecosystem, whereby multiple sensing and monitoring devices are aggregated into one simple dashboard for customers.
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As OmniMetrix can monitor and control all major brands of standby generators and continues to innovate, it is well-positioned to compete in this market.
In the early stages of OmniMetrix’s PG product and market development, relatively unsophisticated generator controls and early generation cellular and satellite communication processes limited the applications to alarm delivery. Customers were notified that some event had taken place after the fact. There was no diagnostic data opportunity, but service organizations could practice a reactive service approach.
With the advent of second-generation cellular systems and newer, computerized engine controls, OmniMetrix migrated to a design point of collecting large amounts of performance data from remote machinery, which allows service organizations to perform diagnostics on equipment before dispatching service. These enhanced control panels allowed the service organization to put the right person in the right truck with appropriate parts to affect a one-trip or even a zero-trip solution. At this phase, service organizations could be efficient, proactive, and provide a higher level of customer satisfaction. They could also manage more customers by using remote monitoring. Service providers have provided OmniMetrix feedback regarding how customer service teams are able to work “smarter” and more efficiently by going directly to problem sites with the appropriate people, parts and solutions, thus increasing the value of their businesses.
OmniMetrix is now focused on expanding its product offerings while also executing the development and launch of new advanced versions of its existing power generation monitoring products. This includes maturing the high-performance data collection design point into the first provider offering of automated prognostic solutions. For example, as most generator failures are the result of consumables, and as those consumables can be monitored, the consumption trends can be extrapolated into predictions of the most common failure modes.
OmniMetrix’s PG monitors have been installed on commercial, industrial and residential generators from original equipment manufacturers (“OEMs”) such as Caterpillar, Kohler, Generac, Cummins, Briggs & Stratton, MTU Solutions and other generator manufacturers. OmniMetrix provides dual value propositions to the generator dealer service organizations as well as to the machine owner. The dealers benefit from the receipt of performance data and status conditions from the generators they service for their customers, which allows the dealer service organization to be proactive in their delivery of service to their customers, as well as in analyzing the remote machines before dispatching a service truck. Since the majority of service and warranty costs are incurred by the service providers, preemptive analysis of customer site conditions prior to dispatch can significantly reduce their labor cost. From the machine owner’s perspective, the OmniMetrix product provides a powerful tool to be used in their efforts to avoid failures that come from consumables such as batteries and fuel. With proper monitoring, 95% of machine failures can be avoided completely. This migration from failure reporting to failure prevention is fundamentally OmniMetrix’s focus and is the result of a strong data collection and analysis design point. We believe that this transition to prognostics sets OmniMetrix apart from its competitors, many of whom are still in the failure reporting phase of application development. OmniMetrix has also shifted its primary focus to commercial and industrial segments from residential due, in part, to the ability to customize our products to the customers’ specifications. We have also increased our marketing efforts to end users in an effort to increase demand for our services. These efforts have proven to be successful, and OmniMetrix continues to execute that strategy.
Competition
OmniMetrix is a vertical market company, deeply focused on providing excellent customer experience and product and service designs for a complete end-to-end program for its customers. Having been the first provider of wireless remote monitoring systems for standby generators, the Company has had the opportunity to mature its offering to a level not offered by others who compete in our two segments. This long experience working with key brand and project partners over the years has resulted in product offerings that are highly competitive.
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There are two types of competitors in the PG marketplace:
| (1) | Independent monitoring organizations produce monitoring systems, but not the equipment being monitored. Aside from OmniMetrix, such companies include Ayantra, FleetZOOM, Gen-Tracker, and PowerTelematics in the high-performance power generation monitoring segment. Other competitors operate in the reactive “failure notification” mode described in the early stages of the OmniMetrix business model. These competitors position themselves in a lower performance, lower-price quadrant of the market typically due to the lesser amount of data their products can collect from the generator’s control panel compared to OmniMetrix. | |
| (2) | OEMs such as generator manufacturers or generator controls manufacturers that offer customer connectivity to their machinery. They offer a current generation connectivity replacing telephone dial-up modems that had been used in the past. Their offerings are limited to their own brands, so they do not fit into broad customer applications like the OmniMetrix products that service all brands. They are also generally designed for the machine owners’ use, in a reactive application, similar to lower-performance, lower-priced market competitors. |
We believe OmniMetrix has a well-established and well-defended position in the high-performance PG monitoring segment, due to its long history and numerous industry partner projects. While the execution of our aggressive sales strategy was interrupted by the impact of COVID-19, the Company subsequently resumed its comprehensive marketing efforts, developing more sophisticated, diagnostic products and custom solutions for commercial and industrial clientele and pursuing the market segment that requires less technology and lower price points (the extremely large and growing residential generator market).
Within the CP marketplace, there are no OEM competitors, but there are several companies that provide monitoring capabilities similar to OmniMetrix such as Mobiltex Solutions, Abriox, Elecsys, and American Innovations. We believe that OmniMetrix systems provide greater functionality than these competitors, though those competitors are much larger and have greater resources, potentially enabling better channel penetration in the future than OmniMetrix has accomplished to date.
Intellectual Property
OmniMetrix has always focused on being the technology leader in its markets, and as a result has created many “industry firsts” and “trade secrets”. Initially, the Company only pursued patents on the most valuable processes and systems and otherwise made public disclosure of many processes to prevent others from making later patent claims on those items. Nonetheless, OmniMetrix has four valid patents issued. OmniMetrix continually evaluates whether and how to best protect its intellectual property, but there can be no assurance that its efforts will be successful in all cases.
Facilities
OmniMetrix’s activities are currently conducted in 21,000 square feet of office and production space in the Hamilton Mill Business Park located in Buford, Georgia, under a lease that expires September 30, 2025. On July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc., to sublease from the Company 1,900 square feet of unused office space. The sublease commenced on October 1, 2021 and also continues through September 30, 2025. We are currently considering new office space while also discussing potential renewal terms with our landlord.
Backlog
As of December 31, 2024, OmniMetrix had a backlog of $4.2 million, primarily comprised of deferred revenue, of which $3.5 million is expected to be recognized as revenue in 2025. This compares to a backlog of $5.6 million at December 31, 2023. Since September 1, 2023, OmniMetrix recognizes revenue, COGS and commissions from the sale of the new version of its hardware products sold when the product is shipped rather than over the estimated time that the unit is in service for the customer which is the reason for the decrease in the backlog. See discussion under Results of Operations under Item 7 below.
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R&D Expense, Net
R&D expense recorded for the years ended December 31, 2024 and 2023 for our OmniMetrix subsidiary is as follows (amounts in thousands of U.S. dollars):
| Years ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| OmniMetrix | $ | 1,012 | $ | 875 | ||||
Employees
At December 31, 2024, we had a total of 26 employees (all of whom were employed in the United States by OmniMetrix), of whom 25 were full-time and one was part-time. Our CEO, who also serves as acting CEO of OmniMetrix, and our CFO, who also serves as COO of OmniMetrix, are hired as consultants to Acorn. OmniMetrix also has consultants that supplement our employed staff and provide monthly recurring services in engineering and information technology.
Thirteen of OmniMetrix’s 26 employees are engaged in production, engineering and technical support, eight in marketing and sales and five in finance and IT. We consider our relationship with our employees to be positive. We have no collective bargaining agreements with any of our employees.
Additional Financial Information
For additional financial information regarding our operating segments, foreign and domestic operations and sales, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 12 and 13 to our Consolidated Financial Statements included in this Annual Report.
Available Information
We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). These filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.
Our website can be found at http://www.acornenergy.com. We make available free of charge on or through our website, access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such material is electronically filed, or furnished, to the SEC. Our website also includes our Code of Business Conduct and Ethics, and our Board of Directors’ Committee Charter for the Audit Committee.
ITEM 1A. RISK FACTORS
We may from time to time make written or oral statements that contain forward-looking information. However, our actual results may differ materially from our expectations, statements or projections. The following risks and uncertainties, together with other factors not presently determinable, could cause actual results to differ from our expectations, statements or projections.
General Factors
We depend on key management for the success of our business.
Our success is largely dependent on the skills, experience and efforts of our senior management team, including Jan Loeb, CEO of Acorn and Acting CEO of OmniMetrix, who beneficially owns approximately 21.07% of the Company’s stock, and Tracy Clifford, CFO of Acorn and COO of OmniMetrix. The loss of the services of either of these key managers could materially harm our business, financial condition, future results and cash flow. We do not maintain “key person” life insurance policies on any members of senior management. We may also not be able to locate or employ on acceptable terms qualified replacements for our senior management if their services were no longer available.
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Loss of the services of a few key employees could harm our operations.
We depend on key technical employees and sales personnel. The loss of certain personnel could diminish our ability to develop and maintain relationships with customers and potential customers. The loss of certain technical personnel could harm our ability to meet development and implementation schedules. The loss of key sales personnel could have a negative effect on sales to certain current customers. Our future success also depends on our continuing ability to identify, hire, train and retain other highly qualified technical and managerial personnel. If we fail to attract or retain highly qualified technical and managerial personnel in the future, our business could be disrupted.
There is a limited trading market for our common stock and the price of our common stock may be volatile.
Our common stock is traded on the OTCQB marketplace under the symbol “ACFN.” The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter equity securities and provides significantly less liquidity than a listing on the NASDAQ Stock Market or other national securities exchanges. The OTCQB securities are traded by a community of market makers that enter quotes and trade reports. This market is limited in comparison to the national stock exchanges, and any prices quoted may not be a reliable indication of the value of our common stock.
Trading on the OTCQB marketplace as opposed to a national securities exchange has resulted, and may continue to result, in a reduction in some or all of the following, each of which could have a material adverse effect on the price of our common stock and our company:
| ● | the liquidity of our common stock; | |
| ● | the market price of shares of our common stock; | |
| ● | our ability to obtain financing for the continuation of our operations; | |
| ● | the number of institutional and other investors that will consider investing in shares of our common stock; | |
| ● | the number of market markers in shares of our common stock; and | |
| ● | the number of broker-dealers willing to execute trades in shares of our common stock. |
In addition, the market price of our common stock could be subject to wide fluctuations in response to:
| ● | quarterly variations in our revenues and operating expenses; | |
| ● | announcements of new products or services by us; | |
| ● | fluctuations in interest rates; | |
| ● | significant sales of our common stock; | |
| ● | the operating and stock price performance of other companies that investors may deem comparable to us; and | |
| ● | news reports relating to trends in our markets or general economic conditions. |
See “Risks Related to Our Securities” below.
Compliance with changing regulations of corporate governance, public disclosure and financial accounting standards may result in additional expenses and affect our reported results of operations.
Keeping informed of, and in compliance with, changing laws, regulations and standards relating to corporate governance, public disclosure and accounting standards, including the Sarbanes-Oxley Act, Dodd-Frank Act, as well as new and proposed SEC regulations and accounting standards, has required an increased amount of management attention and external resources. Compliance with such requirements may result in increased general and administrative expenses and an increased allocation of management time and attention to compliance activities.
We may not be able to successfully integrate companies which we may invest in or acquire in the future, which could materially and adversely affect our business, financial condition, future results and cash flow.
Part of our business plan includes the acquisition of new companies either as new platform companies or complimentary companies. Any failure to effectively integrate any future acquisitions into our controls, systems and procedures could materially adversely affect our business, results of operations, financial condition and cash flow.
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Any significant acquisition could require substantial use of our capital and may require significant debt or equity financing. We anticipate the need to closely manage our cash for the foreseeable future and cannot provide any assurance as to the availability or terms of any such financing or its effect on our liquidity and capital resources.
Integrating acquisitions is often costly, and we may not be able to successfully integrate acquired companies with existing operations without substantial costs, delays or other adverse operational or financial consequences. Integrating acquired companies involves a number of risks that could materially and adversely affect our business, including:
| ● | failure of the acquired companies to achieve the results we expect; | |
| ● | inability to retain key personnel of the acquired companies; | |
| ● | dilution of existing stockholders; | |
| ● | potential disruption of our ongoing business activities and distraction of our management; | |
| ● | difficulties in retaining business relationships with suppliers and customers of the acquired companies; | |
| ● | difficulties in coordinating and integrating overall business strategies, sales and marketing, and research and development efforts; and | |
| ● | difficulties in establishing and maintaining uniform standards, controls, procedures and policies, including accounting controls and procedures. |
We have reported material weaknesses in internal controls over financial reporting as of December 31, 2024 and we cannot assure you that additional material weaknesses will not be identified in the future or that we can effectively remediate our reported weaknesses. If our internal control over financial reporting or disclosure controls and procedures are not effective, there may be errors in our consolidated financial statements that could require a restatement of our consolidated financial statements, or our filings may not be timely, and investors may lose confidence in our reported financial information.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate the effectiveness of our internal control over financial reporting as of the end of each year, and to include a management report assessing the effectiveness of our internal control over financial reporting in each Annual Report on Form 10-K.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Controls can be circumvented by the individual acts of some people, by the collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because changes in conditions or deterioration in the degree of compliance with policies or procedures may occur. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Any failure to maintain or implement required new or improved controls, or any difficulties we encounter in their implementation, could result in significant deficiencies or material weaknesses, cause us to fail to timely meet our periodic reporting obligations, or result in material misstatements in our financial statements. Any such failure could also adversely affect the results of periodic management evaluations regarding disclosure controls and the effectiveness of our internal control over financial reporting required under Section 404 of the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder. The existence of a material weakness could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements, cause us to fail to timely meet our reporting obligations and cause investors to lose confidence in our reported financial information.
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If we are unable to protect our intellectual property, or our intellectual property protection efforts are unsuccessful, others may duplicate our technology.
We rely on a combination of patents, trademarks, copyrights, trade secret laws and restrictions on disclosure to protect our intellectual property rights. Our ability to compete effectively will depend, in part, on our ability to protect our proprietary technology, systems’ designs and manufacturing processes. The ability of others to use our intellectual property could allow them to duplicate the benefits of our products and reduce our competitive advantage. We could incur substantial costs in prosecuting patent and other intellectual property infringement suits and defending the validity of our patents and other intellectual property. While we have attempted to safeguard and maintain our property rights, we do not know whether we have been or will be completely successful in doing so. These actions could place our patents, trademarks and other intellectual property rights at risk and could result in the loss of patent, trademark or other intellectual property rights protection for the products, systems and services on which our business strategy partly depends. Furthermore, it is not practical from a cost/benefit perspective to file for patent or trademark protection in every jurisdiction where we now or in the future may conduct business. In those territories where we do not have the benefit of patent or trademark protections, our competitors may be able to prevent us from selling our products or otherwise limit our ability to advertise under our established product names.
We rely, to a significant degree, on contractual provisions to protect our trade secrets and proprietary knowledge. These trade secrets either cannot be protected by patent protection, or we have determined that seeking a patent is not in our interest. These agreements may be breached, and we may not have adequate remedies for any breach. Our trade secrets may also be known without breach of such agreements or may be independently developed by competitors.
It can be difficult or expensive to obtain the insurance we need for our business operations.
As part of our business operations, we maintain insurance as a corporate risk management strategy. Insurance products are impacted by market fluctuations and can become expensive and sometimes very difficult to obtain. There can be no assurance that we can secure all necessary or appropriate insurance at affordable prices for the required limits. Our failure to obtain such insurance could lead to uninsured losses that could have a material adverse effect on our results of operations or financial condition or cause us to be out of compliance with our contractual obligations.
We may in the future be involved in product liability and product warranty claims relating to the products we manufacture and distribute that, if adversely determined, could adversely affect our financial condition, results of operations, and cash flows. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant periods, regardless of the ultimate outcome. Claims of this nature could also have a negative impact on customer confidence in our products and our company.
Our financial instruments could subject us to concentrations of credit risk.
Our financial instruments, which potentially subject us to concentrations of credit risk, consist principally of cash and trade accounts receivable. Our cash was deposited with a U.S. bank and amounted to $2,326,000 at December 31, 2024. We had one customer, the party to the Material Contract, as defined below under Other Matters in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which represented 61% of the accounts receivable at December 31, 2024 of which 53% was collected as of March 4, 2025. Typically, credit risk with respect to the balance of trade receivables is generally diversified due to the number of entities comprising our customer base. However, at December 31, 2024, the balance of accounts receivable under the Material Contract was the majority of the outstanding balance of accounts receivable. Although we do not believe there is a significant risk of non-performance by this customer, any failures or defaults on their part could negatively impact the value of our financial instruments and could have a material adverse effect on our business, operations or financial condition.
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We are dependent on information technology and our systems and infrastructure face certain risks, including cybersecurity breaches and data leakage.
We rely extensively on information technology systems, networks and services, including internet sites, data hosting and processing facilities and tools, physical security systems and other hardware, software and technical applications and platforms, some of which are managed, hosted, provided and/or used for third-parties or their vendors, to assist in conducting our business. A significant breakdown, invasion, corruption, destruction or interruption of critical information technology systems or infrastructure, by our workforce, others with authorized access to our systems or unauthorized persons could negatively impact our operations. The ever-increasing use and evolution of technology, including cloud-based computing, creates opportunities for the unintentional dissemination or intentional destruction or modification of confidential information stored in our, or our third-party providers’ systems, portable media or storage devices. We could also experience a business interruption, theft of confidential information or reputational damage from industrial espionage attacks, malware or other cyber-attacks, which may compromise our system infrastructure or lead to data leakage, either internally or at our third-party providers. We have invested in appropriate industry protections and monitoring practices of our data and IT and have established a Cybersecurity Steering Committee to reduce these risks and continue to monitor our systems on an ongoing basis for any current or potential threats. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any losses incurred. Moreover, as cyber-attacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as appropriate for our operations. There can be no assurance that our continuing efforts will prevent breakdowns or breaches of our and/or our third-party providers’ databases or systems that could adversely affect our business.
Risks Related to Omnimetrix
An increase in customer terminations would negatively affect our business by reducing OmniMetrix’s revenue or requiring us to spend more money to grow our customer base.
Although our historical renewal rate is greater than 90%, non-renewals or other monitoring service terminations could increase in the future due to customer dissatisfaction with our products and services, increased competition from other providers or alternative technologies.
If we have an increase in our non-renewal rate, we will have to acquire new customers on an ongoing basis just to maintain our existing level of customers and revenues. As a result, marketing expenditures are an ongoing requirement of our business. We incur costs to acquire new customers, and those costs are a factor in determining our net profitability. Therefore, if we are unsuccessful in retaining customers or are required to spend significant amounts to acquire new customers, our revenue could decrease and/or our operating results could be affected.
OmniMetrix is a relatively small company with limited resources compared to some of its current and potential competitors, which may hinder its ability to compete effectively.
Some of OmniMetrix’s current and potential competitors have significantly greater resources and broader name recognition than it does. As a result, these competitors may have greater credibility with OmniMetrix’s existing and potential customers. They also may be able to adopt more aggressive pricing policies and devote greater resources to the development, promotion and sale of their products, which would allow them to respond more quickly to new or emerging technologies or changes in customer requirements. In particular, at the present time we are facing significant competition from certain generator manufacturers who offer their own monitoring solutions.
OmniMetrix may not be able to access sufficient capital to support growth.
While we believe we have sufficient cash to finance our operations for at least twelve months from the issuance of the audited consolidated financial statements contained in this Annual Report, we may need to seek additional sources of funding for long-term corporate costs or if OmniMetrix were not to grow at the rate anticipated and needed additional funds for their operations. Additional financing for OmniMetrix may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof. The availability and amount of any additional loans from us to OmniMetrix may be limited by the working capital needs of our corporate activities. Whether Acorn will have the resources necessary to provide funding, or whether alternative funds, such as third-party loans or investments, will be available at the time and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
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OmniMetrix sells equipment and services which monitor third-party products; thus its revenues are dependent on the continued sales of such third-party products.
OmniMetrix’s end-user customer base is comprised exclusively of parties who have chosen to purchase either generators or construct gas pipelines. OmniMetrix has no ability to control the rate at which new generators or cathodic protection systems are acquired. If purchases of such products decline, the associated need for OmniMetrix’s products and services would be expected to decline as well.
If OmniMetrix is unable to keep pace with changing markets or customer-mandated product and service improvements, OmniMetrix’s results of operations and financial condition may suffer.
Many of OmniMetrix’s existing products may require ongoing engineering and upgrades in conjunction with market developments as well as specific customer needs. There can be no assurance that OmniMetrix will continue to be successful in its engineering efforts regarding the development of its products, and future technological difficulties could adversely affect its business, results of operations and financial condition.
The cellular networks used by OmniMetrix are also subject to periodic technical updates that may require corresponding updates to, or replacement of, OmniMetrix’s monitoring equipment.
Cellular networks have evolved over time to offer more robust technical capabilities in both voice and data transmission. As new capabilities come online, it will be necessary to have equipment that can readily interface with the newer cellular networks to avoid negative impacts on customer service. Not all of the costs associated with OmniMetrix’s corresponding equipment upgrades can be passed on to customers, and any increased expenses are expected to have a negative impact on OmniMetrix’s operating results.
A substantial portion of OmniMetrix’s revenues is expected to be generated not from product sales, but from periodic monitoring fees and thus it is continually exposed to risks associated with its customers’ financial stability.
OmniMetrix sells on-going monitoring services to both PG and CP customers. It is therefore dependent on these customers continuing to timely pay service fees on an on-going basis. If a significant portion of these fees are not paid on a timely basis and/or are not renewed from year-to-year, OmniMetrix could expect to experience deterioration in its financial condition.
OmniMetrix’s ability to provide, and to collect revenues from, monitoring services is dependent on the reliability of cellular networks not controlled by OmniMetrix.
OmniMetrix provides monitoring services through the use of cellular and satellite technology utilizing the networks of third-party providers. These providers generally do not warrantee their services to either OmniMetrix or the end users, and any dropped transmissions could result in the loss of customer renewals and potential claims against OmniMetrix. There is no assurance that customers will not cancel monitoring services due to network issues.
OmniMetrix’s business is dependent on its ability to reliably store and manage data, but there can be no guarantee that it has sufficient capabilities to mitigate potential data loss in all cases.
The efficient operation of OmniMetrix’s business is dependent on its information technology systems. In addition, OmniMetrix’s ability to assist customers in analyzing data related to the performance of such customers’ power and cathodic protection monitoring systems is an important component of its customer value proposition. OmniMetrix utilizes Microsoft Azure cloud-hosted data servers utilizing accepted data and power monitoring and protection processes, but whether a data loss can be avoided cannot be assured in every case. OmniMetrix’s information technology systems are vulnerable to damage or interruption from natural disasters, sabotage (including theft and attacks by computer viruses or hackers), power outages, and computer systems, Internet, telecommunications or data network failure. Any interruption of OmniMetrix’s information technology systems could result in decreased revenue, increased expenses, increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect on its results of operations and financial condition.
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Risks Related to Our Securities
Our stock price is highly volatile, and we do not expect to pay dividends on shares of our common stock for the foreseeable future. Investors may never obtain a return on their investment.
The market price of our common stock has fluctuated substantially in the past and is likely to continue to be highly volatile and subject to wide fluctuations. During 2024, our common stock traded at prices as low as $5.76 and as high as $19.35 per share. Fluctuations in our stock price may continue to occur in response to various factors, many of which we cannot control, including:
| ● | general economic and political conditions and specific conditions in the markets we address; | |
| ● | quarter-to-quarter variations in our operating results; | |
| ● | strategic investments or divestments; | |
| ● | announcements of changes in our senior management; | |
| ● | the gain or loss of one or more significant customers or suppliers; | |
| ● | announcements of technological innovations or new products by our competitors, customers or us; | |
| ● | the gain or loss of market share in any of our markets; | |
| ● | changes in accounting rules; | |
| ● | changes in investor perceptions; or | |
| ● | changes in expectations relating to our products, plans and strategic position or those of our competitors or customers. |
We do not intend to pay dividends to our stockholders in the foreseeable future. We intend to reinvest earnings, if any, in the development and expansion of our business. Accordingly, investors will need to rely on sales of their common stock after price appreciation, which may never occur, in order to realize a return on their investment.
Our share price may decline due to the large number of shares of our common stock eligible for future sale in the public market including shares underlying options.
Almost all of our outstanding shares of common stock are, or could upon exercise of options become, eligible for sale in the public market as described below. Sales of a substantial number of shares of our common stock in the public market, or the possibility of these sales, may adversely affect our stock price.
As of March 4, 2025, 2,491,130 shares of our common stock were issued and outstanding. As of that date, we had 68,089 options outstanding and exercisable with a weighted average exercise price of $6.80 per share, which if exercised would result in the issuance of additional shares of our common stock. In addition to the options noted above, at March 4, 2025, there were 8,960 options outstanding that have not yet vested and are not yet exercisable.
Substantially all of our currently outstanding shares and shares issuable under our outstanding options are or would be freely tradable.
We may have to offer additional securities for sale in the near future.
As of March 4, 2025, we had consolidated cash of $2,800,000 which we believe is sufficient for at least the next twelve months. Despite this, we may ultimately not have sufficient cash to allow us to execute our plans, and the occurrence of one or more unanticipated events may require us to make significant expenditures. Accordingly, we may need to raise additional amounts to finance our operations. If we were to do so by selling shares of our common stock and/or other securities convertible into shares of our common stock, current investors may incur dilution in the value of their shares.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 1C. CYBERSECURITY
Securing
our business information, intellectual property, customer and employee data, and technology systems is essential for the continuity of
our business, meeting applicable regulatory requirements and maintaining the trust of our stockholders.
Governance
Although we did not experience a material cybersecurity incident during the year ended December 31, 2024, the scope and impact of any future incident cannot be predicted. See “Item 1A. Risk Factors” for more information on our cybersecurity-related risks.
ITEM 2. PROPERTIES
OmniMetrix’s activities are currently conducted in approximately 21,000 square feet of office and production space in the Hamilton Mill Business Park located in Buford, Georgia, under a lease that expires on September 30, 2025. We are currently considering new office space while also discussing potential renewal terms with our landlord. The annual total rent payment was $129,000 in 2024 and $128,000 in 2023. For 2025, the annual total rent payment will be $98,000 for the period through September 30, 2025. OmniMetrix is currently utilizing only a portion of these leased facilities. If we renew this lease, we expect to grow into a portion of the currently unused space.
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On July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc. to sublease from the Company 1,900 square feet of the unused office space for a monthly sublease payment of $2,375 plus annual escalators (the average monthly sublease payment in 2024 was $2,465), which includes the base rent plus a pro-rata share of utilities, property taxes and insurance. Fifty percent of any excess rent received above the per square foot amount that the Company pays will be remitted to the Company’s landlord less the allocation of any shared expenses and leasehold improvements specific to the sublease. As of December 31, 2024, after the offset of the investment in leasehold improvements and other expenses related to the sublease, the Company has paid its landlord $16,000 for its share of the sublease profit since the lease commencement. The estimated amount the Company expects to remit to the landlord each year of the sublease subsequent to December 31, 2024 is $7,000 per year. The sublease commenced on October 1, 2021 and will run through September 30, 2025 which is the end of the Company’s lease term with its landlord. Below are the future payments expected under the sublease net of the estimated annual service cost of $2,750 (gross of the estimated amount we expect to remit to our landlord):
| Year ended December 31, 2025 | ||||
| 2025 | $ | 22,000 | ||
| Total undiscounted cash flows | $ | 22,000 | ||
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded under the symbol “ACFN” on the OTCQB marketplace. You should be aware that over-the-counter market quotations may reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not necessarily represent actual transactions.
Holders
As of March 4, 2025, the last reported sales price of our common stock on the OTCQB marketplace was $16.34, there were 61 record holders of our common stock, and we estimate that there were approximately 2,500 beneficial owners of our common stock.
ITEM 6. [RESERVED.]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview and Trend Information
The following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate depends upon a variety of factors that may affect our business and operations. Certain of these factors are discussed in “Item 1A. Risk Factors.”
All dollar amounts in the discussion below are rounded to the nearest thousand and, thus, are approximate.
We currently operate in two reportable operating segments, both of which are performed through our OmniMetrix subsidiary:
| ● | Power Generation (“PG”). OmniMetrix’s PG services provide wireless remote monitoring and control systems and IoT applications for 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. |
| 15 |
| ● | 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 following analysis should be read together with the segment information provided in Notes 12 and 13 to our consolidated financial statements included in this report.
OmniMetrix
Following the emergence of machine-to-machine (“M2M”) and IoT applications whereby companies aggregate multiple sensors and monitors into a simplified dashboard for customers, OmniMetrix believes it plays a key role in this economic ecosystem. In addition, OmniMetrix continues to see a growing need for backup power infrastructure to secure critical military, government, and private sector assets against emergency events including terrorist attacks, natural disasters, and cybersecurity threats. Residential, commercial and industrial standby generators, turbines, compressors, pumps, pumpjacks, light towers and other industrial equipment are part of the critical infrastructure increasingly becoming monitored in IoT applications. OmniMetrix solutions monitor critical equipment used by cell towers, manufacturing plants, medical facilities, data centers, retail stores, public transportation systems, energy distribution and federal, state and municipal government facilities, in addition to residential back-up generators. Given that OmniMetrix monitors all major brands of critical equipment and continues to invest in research and development in response to customer and potential customer feedback, OmniMetrix remains well positioned as a competitive participant in this market to continue to grow its customer base and expand its product offerings.
Other Matters
On June 1, 2024, we entered into a contract (the “Material Contract”) with one of the nation’s largest cell phone providers to provide monitoring hardware and services. Under the contract, OmniMetrix 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 will be deployed over a 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 have recognized $1,637,000 in hardware revenue and $24,000 in monitoring revenue from this contract as of year-end 2024. Our current expectation of total revenue over the life of the contract is approximately $5.4 million, which encompasses the revenue from the sales of the hardware and the first year of monitoring. We have not included in this estimate monitoring after the first year.
On January 12, 2024, we entered into a new service contract with our current primary data provider for Internet of Things (IoT) wireless services over a 36-month term with automatic one-year extensions, subject to termination notice. The pricing structure involves account setup, SIM charges, monthly revenue obligations, and various rate plans based on data usage and regions along with other optional services. The monthly revenue obligation was $10,000 for the first 6 months and is $15,000 thereafter. We are also eligible for volume discounts based on total monthly service revenue. Additionally, the agreement includes an IoT Enhanced Support and a Priority Care Services Rate Plan with various support service types and pricing tiers based on the number of devices and terms for SIM migrations, including tiered pricing and conditions for waiver of certain charges during migration. This agreement will allow us to migrate our customers to higher tier data plans for nominal additional cost.
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.
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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.
In light of the Company’s generation of three-year cumulative positive income through December 31, 2024, the Company believes that it is more-likely-than-not that a portion of the deferred tax assets will be utilized. Therefore, the Company has released valuation allowance on its deferred tax assets (other than as stated above) in the amount of $4,686,000 for the year ended December 31, 2024. As of December 31, 2024, we believe, based on our projections, that a partial valuation allowance of $11,400,000 is 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 of $1,476,000 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. As of December 31, 2024, the Company has completed a 382 analysis and concluded that none of the unreserved net operating losses were subject to 382 limitations.
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.
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Results of Operations
The selected consolidated statement of operations data for the years ended December 31, 2024 and 2023 and consolidated balance sheet data as of December 31, 2024 and 2023 has been derived from our audited consolidated financial statements included in this Annual Report.
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, therefore, 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. Monitoring revenue continues to be deferred and amortized over the period that the monitoring services are rendered. The remaining balance of deferred revenue from the prior version of these products will continue to be amortized each period until it is fully amortized. Modifications were made to the circuit boards and embedded firmware of hardware enclosures in stock as of August 31, 2023, such that only the new versions of these products were sold subsequent to that date.
This data should be read in conjunction with our consolidated financial statements and related notes included herein.
Selected Consolidated Statement of Operations Data:
| For the Years Ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands, except per share data) | ||||||||
| Revenue | $ | 10,986 | $ | 8,059 | ||||
| COGS | 2,987 | 2,055 | ||||||
| Gross profit | 7,999 | 6,004 | ||||||
| R&D expense | 1,012 | 875 | ||||||
| SG&A expense | 5,050 | 5,055 | ||||||
| Operating income | 1,937 | 74 | ||||||
| Interest income, net | 73 | 64 | ||||||
| Income before income taxes | 2,010 | 138 | ||||||
| Current state tax expense | (123 | ) | (9 | ) | ||||
| Deferred income tax benefit | 4,435 | — | ||||||
| Net income after income taxes | 6,322 | 129 | ||||||
| Non-controlling interest share of income | (28 | ) | (10 | ) | ||||
| Net income attributable to Acorn Energy, Inc. stockholders | $ | 6,294 | $ | 119 | ||||
| Basic and diluted net income per share attributable to Acorn Energy, Inc. stockholders: | ||||||||
| Net income per share attributable to Acorn Energy, Inc. stockholders – basic | $ | 2.53 | $ | 0.05 | ||||
| Net income per share attributable to Acorn Energy, Inc. stockholders – diluted | $ | 2.51 | $ | 0.05 | ||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – basic | 2,487 | 2,484 | ||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – diluted | 2,512 | 2,503 | ||||||
| 18 |
The following table sets forth certain information with respect to revenues and profits of our reportable business segments for the years ended December 31, 2024 and 2023 (dollars in thousands), including the percentages of revenues attributable to such segments. (See Note 12 to our consolidated financial statements for the definitions of our reporting segments).
| PG | CP | Total | ||||||||||
| Year ended December 31, 2024: | ||||||||||||
| Revenues from customers | $ | 9,882 | $ | 1,104 | $ | 10,986 | ||||||
| Percentage of total revenues by segment | 90 | % | 10 | % | 100 | % | ||||||
| Segment gross profit | $ | 7,334 | $ | 665 | $ | 7,999 | ||||||
| Year ended December 31, 2023: | ||||||||||||
| Revenues from customers | $ | 7,000 | $ | 1,059 | $ | 8,059 | ||||||
| Percentage of total revenues by segment | 87 | % | 13 | % | 100 | % | ||||||
| Segment gross profit | $ | 5,373 | $ | 631 | $ | 6,004 | ||||||
2024 Compared to 2023
Revenue. In 2024, OmniMetrix recorded total revenue of $10,986,000, as compared to total revenue of $8,059,000 in 2023, for an increase of $2,927,000 (36%). As previously stated, OmniMetrix has two divisions: PG and CP. The PG segment includes our monitoring device for generators, industrial air compressors and our annunciator products. The CP segment includes our monitoring device for cathodic protection systems on gas pipelines serving the gas utilities market and pipeline operators. In 2024, revenue of $9,882,000 was attributed to the PG segment and revenue of $1,104,000 was attributed to the CP segment, as compared to the 2023 revenue of $7,000,000 that was attributed to the PG segment and $1,059,000 that was attributed to the CP segment. Hardware revenue increased $2,636,000 (69%) from $3,797,000 during the year ended December 31, 2023 to $6,433,000 during the year ended December 31, 2024. The hardware revenue during the years ended December 31, 2024 and 2023 is further detailed in the table below:
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
| Amortization of deferred revenue | $ | 1,841 | $ | 2,381 | ||||
| Sales of custom designed units and related accessories | 26 | 259 | ||||||
| Hardware sales under the Material Contract | 1,637 | — | ||||||
| Hardware sales (new product versions) | 2,378 | 475 | ||||||
| Other accessories, services, shipping and miscellaneous charges | 551 | 682 | ||||||
| Total hardware revenue | $ | 6,433 | $ | 3,797 | ||||
PG hardware revenue increased $2,585,000 (86%) during the year ended December 31, 2024 to $5,579,000 compared to $2,994,000 during the year ended December 31, 2023. Hardware sales under the Material Contract represented 63% of the 86% increase. We also had an increase in CP hardware revenue of $51,000 (6%) to $854,000 during the year ended December 31, 2024 from $803,000 during the year ended December 31, 2023. The increase in total hardware revenue was due to recognition of sales revenue from the Material Contract as well as increased sales of other PG products, offset by a decrease in service revenue and custom designed units. Monitoring revenue increased $291,000 (7%) from $4,262,000 in the year ended December 31, 2023 to $4,553,000 in the year ended December 31, 2024. The increase in monitoring revenue was due to an increase in the number of connections being monitored and growth in our customer base.
Gross profit. Gross profit was $7,999,000, reflecting a 73% gross margin on revenue, in 2024 compared with a gross profit of $6,004,000, reflecting a 74% gross margin on revenue, in 2023. The gross margin was a percentage point lower in 2024 due to a greater volume of hardware sales which have a lower gross margin than monitoring. Gross margin on hardware revenue for the year ended December 31, 2024 was 57% compared to 54% for the year ended December 31, 2023. Gross margin on monitoring revenue was 94% for the year ended December 31, 2024 compared to 93% for the year ended December 31, 2023.
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R&D expense. During 2024, OmniMetrix recorded $1,012,000 of R&D expense as compared to $875,000 in 2023, an increase of $137,000 (16%). The increase in R&D expense in 2024 is related to increases in wages and bonuses paid to our engineering personnel in 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 for 2025 due to the hiring of another senior level engineer, as well as engineering salary increases granted effective October 1, 2024, and for continued investment in work on certain initiatives to redesign products and expand product lines to increase our level of innovation ahead of our competitors.
SG&A expense. Consolidated SG&A expense was essentially flat from 2023 to 2024, decreasing only $5,000. Corporate overhead decreased by $37,000 (3%), from $1,057,000 in 2023 to $1,020,000 in 2024, primarily due to the non-recurring expenses of $102,000 related to the execution of the reverse stock split in 2023 and a net decrease in other expense categories of $2,000 in the aggregate offset by an increases in (i) legal fees of $24,000, (ii) tax professional fees of $28,000, and (iii) audit fees of $15,000.
OmniMetrix’s SG&A expense increased $32,000 (0.8%), from $3,998,000 in 2023 to $4,030,000 in 2024. This increase was primarily due to increases of $251,000 in commission expenses and $100,000 in IT consulting and staff augmentation fees offset by decreases in (i) personnel expenses of $153,000, which was due to the elimination of the vice president of sales position offset by increases related to staff additions, promotions, bonuses and cost of living wage increases, (ii) $69,000 in travel and trade show expenses, (iii) $46,000 in other consulting and contract labor expenses, (iv) $39,000 in depreciation and amortization primarily related to IT assets and (v) $12,000 in net aggregate decreases in other expense categories. We anticipate that our annual SG&A costs in 2025 will increase by approximately 6% due to increasing wage and benefit expenses as a result of merit increases, promotions and hiring a higher-level skill set in certain roles in 2024.
Interest income, net. Interest income in the year ended December 31, 2024 was $74,000 due to high interest rates on cash balances offset by interest expense of $1,000, compared to interest income in the year ended December 31, 2023 of $67,000 offset by interest expense of $3,000.
Income taxes. For the year ended December 31, 2024, the Company recorded an income tax benefit of $4,435,000, offset by current state income tax expense of $123,000 compared to state income tax expense for the year ended December 31, 2023 of $9,000. The change in the tax expense was primarily due to the partial release of the Company’s valuation allowance in 2024. The recorded income tax benefit contributed $1.78 to our basic earnings per share of $2.53 and $1.77 of our diluted earnings per share of $2.51 at December 31, 2024.
Net income attributable to Acorn Energy. We had net income attributable to Acorn of $6,294,000 in 2024 compared to $119,000 in 2023. Our net income in 2024 is comprised of net income at OmniMetrix of $3,027,000, corporate expense of $1,017,000, current state income tax expense of $123,000, the non-controlling interest share of our net income in OmniMetrix of $28,000 offset by deferred income tax benefit as a result of the release of our valuation allowance of $4,435,000. Our income in 2023 is comprised of net income at OmniMetrix of $1,185,000, corporate expense of $1,056,000, offset by $10,000 representing the non-controlling interest share of our income in OmniMetrix. The positive change in net income was due to the increase in gross profit as a result of the Material Contract while managing SG&A expenses as described above.
Liquidity and Capital Resources
At December 31, 2024, we had working capital of $1,115,000. Our working capital includes $2,326,000 of cash and deferred revenue of $3,521,000. Such deferred revenue does not require a significant cash outlay for the revenue to be recognized. Total deferred revenue decreased by $1,351,000, from $5,584,000 at December 31, 2023 to $4,233,000 at December 31, 2024, as a result of the sales mix of products sold. Based on the current products being sold, the Company expects continued decreases in the deferred revenue balance in the foreseeable future. Net cash increased during the year ended December 31, 2024 by $877,000, of which $905,000 was provided by operating activities, $56,000 was used in investing activities, and $28,000 was provided by financing activities.
During the year ended December 31, 2024, our operating activities provided $905,000 of net cash. Our OmniMetrix subsidiary provided $1,991,000 from its operations while our corporate headquarters used $1,086,000 in its operating activities during the period. OmniMetrix’s inventory balance decreased by $514,000 at December 31, 2024 as compared to December 31, 2023 due to inventory shipped under the Material Contract and selling through safety stock to return to pre-COVID par inventory levels. During the year ended December 31, 2023, our operating activities provided $72,000 of net cash. Our OmniMetrix subsidiary provided $1,147,000 from its operations while our corporate headquarters spent $1,075,000 in its operating activities during the period.
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During the year ended December 31, 2024, net cash of $56,000 was used in investing activities, primarily related to the continued investment in our technology infrastructure. During the year ended December 31, 2023, net cash of $78,000 was used in investing activities.
Net cash of $28,000 and $5,000 was provided by financing activities during the years ended December 31, 2024 and 2023, respectively, which represents proceeds from the exercise of stock options and warrants.
Other Liquidity Matters
We had $2,326,000 of cash on December 31, 2024, and $2,800,000 on March 4, 2025. We believe that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance the corporate activities of Acorn and the operating activities of OmniMetrix at their current level of operations for at least the twelve-month period from the issuance of the audited consolidated financial statements contained in this Annual Report. We may, at some point, elect to obtain a new line of credit or other source of financing to fund additional investments in the business. If we decide to pursue additional financing in the future, it may be in the form of a bank line, a new loan or investment by others, an equity raise by Acorn, which could then facilitate a loan by Acorn to OmniMetrix, or any combination thereof. Whether alternative funds, such as third-party loans or investments, will be available at the time required and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
Contractual Obligations and Commitments
The table below provides information concerning obligations under certain categories of our contractual obligations as of December 31, 2024.
Cash Payments Due to Contractual Obligations
| Years Ending December 31, (in thousands) | ||||||||||||||||
| Total | 2025 | 2026-2027 | 2028-2029 | |||||||||||||
| Software agreements | $ | 20 | $ | 20 | $ | — | $ | — | ||||||||
| Operating leases* | 99 | 99 | — | — | ||||||||||||
| Contractual services | 443 | 233 | 210 | — | ||||||||||||
| Purchase obligations** | 603 | 603 | — | — | ||||||||||||
| Total contractual cash obligations | $ | 1,165 | $ | 955 | $ | 210 | $ | — | ||||||||
*Reflects the gross amount of the operating lease liabilities. Imputed interest is $1,000 resulting in $98,000 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide information required by this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Furnished at the end of this report commencing on page F-1.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. 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 annual report on Form 10-K. Based on this evaluation, our CEO and CFO concluded that, due to the material weaknesses in our internal control over financial reporting as described below, our disclosure controls and procedures were not effective as of December 31, 2024.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024, based upon the document “Internal Control - Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based upon this assessment and those criteria, management concluded that due to the material weaknesses described below, our internal control over financial reporting was not effective as of December 31, 2024.
The Company employs 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. |
A material weakness is defined as a deficiency, or a combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses identified, and the related risks are not uncommon in a company of our size because of the limitations in the location, size and number of our staff. The material weaknesses identified, however, did not result in any material misstatements of the Company’s consolidated financial statements and disclosures for any interim periods during, or for, the annual period ended December 31, 2024.
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Remediation Actions
Management intends to continue to focus on strengthening the Company’s internal controls. Management expects to make progress towards reducing the risk that the material weakness could result in a material misstatement of the Company’s annual or interim consolidated financial statements. As business conditions allow and resources permit, management will continue to systematically build the necessary capabilities and infrastructure to implement corrective actions.
Changes in Internal Control Over Financial Reporting
During the year ended December 31, 2024, we have implemented the following (i) a process pursuant to which System and Organization Controls (SOC) reports are obtained from third-party vendors on a recurring schedule and such reports are evaluated for any issues, (ii) provisioning/termination controls with signed and authenticated authorizations, and (iii) change controls for development processes that require authorizations, peer review, quality assurance documentation, ticket matching of changes to work authorizations and overall change controls. It is our belief that these added controls and related actions will effectively remediate the existing material weaknesses. 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.
ITEM 9B. OTHER INFORMATION
During
the fourth quarter of fiscal year 2024, none of our directors or officers
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
Set forth below is certain information concerning the directors and certain officers of the Company:
| Name | Age | Position | ||
| Jan H. Loeb | 66 | Director, President and Chief Executive Officer of Acorn Energy, Inc. and Acting CEO of OmniMetrix | ||
| Gary Mohr | 66 | Director and member of our Audit, Nominating and Compensation Committees | ||
| Michael F. Osterer | 79 | Director and member of our Audit, Nominating and Compensation Committees | ||
| Peter Rabover | 44 | Director | ||
| Samuel M. Zentman | 79 | Director, Chairman of our Audit Committee and member of our Nominating and Compensation Committees | ||
| Tracy S. Clifford | 56 | Chief Financial Officer of Acorn Energy, Inc. and COO of OmniMetrix |
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Jan H. Loeb has served as our President and CEO since January 28, 2016 and as Acting CEO of OmniMetrix since December 1, 2019. He was appointed to our Board in August 2015 pursuant to the terms of our loan and security agreement with Leap Tide Capital Partners III, LLC (the “Leap Tide Loan Agreement”). He was also appointed to the Board of our then subsidiary DSIT in August 2015 pursuant to the terms of the Leap Tide Loan Agreement and held that position until the sale of our remaining interest in DSIT in February 2018. Mr. Loeb has more than 40 years of money management and investment banking experience. He has been the Managing Member of Leap Tide Capital Management LLC since 2007. From 2005 to 2007, he served as the President of Leap Tide’s predecessor, Leap Tide Capital Management Inc., which was formerly known as AmTrust Capital Management Inc. He served as a Portfolio Manager of Chesapeake Partners from February 2004 to January 2005. From January 2002 to December 2004, he served as Managing Director at Jefferies & Company, Inc. From 1994 to 2001, he served as Managing Director at Dresdner Kleinwort Wasserstein, Inc. (formerly Wasserstein Perella & Co., Inc.). He served as a Lead Director of American Pacific Corporation from July 8, 2013 to February 27, 2014, and also served as its Director from January 1997 to February 27, 2014. He served as an Independent Director of Pernix Therapeutics Holdings Inc. (formerly, Golf Trust of America, Inc.) from 2006 to August 31, 2011. He served as a Director of TAT Technologies, Ltd. from August 2009 to December 21, 2016. He served as a Director of Keweenaw Land Association, Ltd. from December 2016 until May 2019. He has served as President, Executive Chairman and board member of NovelStem International Corp since July 2018, and as a board member of Gyrodyne, LLC since July 2023.
Key Attributes, Experience and Skills. Mr. Loeb brings to the Acorn Board significant financial expertise, cultivated over more than 40 years of money management and investment banking experience, together with a background in public company management and audit committee experience.
Gary Mohr was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees. Mr. Mohr is President of UE Systems, Incorporated, an international technology company specializing in the field of plant asset reliability through ultrasound. Mr. Mohr started with UE Systems in 1988 as a salesman and rapidly progressed through the ranks as regional sales manager, National Sales Manager, Vice President and eventually President of the company. It is through Mr. Mohr’s stewardship that UE Systems has grown from a national brand to an international company with offices in Toronto, Mexico City, Hong Kong, India and the Netherlands, and developed a list of loyal customers, including those in the Fortune 500.
Key Attributes, Experience and Skills. Mr. Mohr brings to the Board a broad range of operational and managerial experience, including a successful track record in product development and marketing leadership.
Michael F. Osterer was elected to the Board in August 2018 and is a member of our Audit, Compensation and Nominating Committees. He served as an advisor to our Board from October 2017 until his election as director. Since 1973, Mr. Osterer has served as Chairman of the Board of UE Systems, Incorporated, a leader in the field of plant asset reliability through ultrasound, which he founded in 1973. He also served as President of UE Systems from 1973 to 1985. Since 1987, Mr. Osterer has served as President of Libom Oil, an oil exploration, drilling and purchasing company, which he founded in 1987. He is the Acting Chairman of the Board of Radon Testing Corporation of America, Inc., which he founded in 1985 and where he served as President from 1985 through 1989. Mr. Osterer also founded Westchester Consultants, a general business consultancy nationally recognized for branding expertise of food products. He served in the United States Air Force/Air National Guard, 105th Airborne Division, from 1964 through 1970. Mr. Osterer graduated from Fordham University with a BA in Social Sciences, Magna Cum Laude.
Key Attributes, Experience and Skills. Mr. Osterer brings to Acorn a wealth of operational and managerial experience gained over his long history of successful entrepreneurial pursuits, corporate leadership and oversight.
Peter Rabover was appointed to the Board in March 2023. Mr. Rabover is currently the chief financial officer for Grodivo, a corporate culture measurement software company. He has been an active buyside investor for over 20 years, and is currently the Managing Director of Artko Capital LP, a partnership focused on microcap investments, which is a role he has held since he founded the partnership in 2015. In such capacity, Mr. Rabover has advised on a wide range of corporate finance activities for dozens of companies. Prior to founding Artko Capital, he worked for Scharf Investments from 2012 to 2014, and Hahn Capital Management from 2005 to 2011 in an analyst capacity. He served in the United States Peace Corps in Kazakhstan from 2003 to 2005 as an Economic Development Volunteer. Mr. Rabover started his career as an auditor for United States Steel Corporation from 2001 to 2003. He holds an undergraduate degree from Duquesne University, a Masters of Business Administration from the University of Virginia’s Darden School of Business and is a CFA Charterholder.
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Key Attributes, Experience and Skills. Mr. Rabover has a wide range of corporate finance, audit and capital allocation acumen and experience as well as a unique shareholder perspective gained through a long career of managing outside capital and finding successful investments.
Samuel M. Zentman has been one of our directors since November 2004 and currently serves as Chairman of our Audit Committee and as a member of our Compensation and Nominating Committees. From 1980 until 2006, Dr. Zentman was the president and chief executive officer of a privately held textile firm, where he also served as vice president of finance and administration from 1978 to 1980. From 1973 to 1978, Dr. Zentman served in various capacities in the Information Systems department at American Motors Corporation including Director of the Corporate Data Center and the Engineering Computer Centers. He holds a Ph.D. in Complex Analysis. Dr. Zentman serves on the board of Hinson & Hale Medical Technologies, Inc., as well as several national charitable organizations devoted to advancing the quality of education.
Key Attributes, Experience and Skills. Dr. Zentman’s long-time experience as a businessman together with his experience with computer systems and software enables him to bring valuable insights to the Board. Dr. Zentman has a broad, fundamental understanding of the business drivers affecting our Company and also brings leadership and oversight experience to the Board.
Tracy S. Clifford has served as the Company’s Chief Financial Officer since June 1, 2018 and as the COO of OmniMetrix since December 1, 2019. She serves in such positions pursuant to a Consulting Agreement between the Company and Tracy Clifford Consulting, LLC. Ms. Clifford is President and Owner of Tracy Clifford Consulting, LLC, through which she has been providing contract CFO/COO services and other advisory services and project engagements since June 2015. Between October 1999 and May 2015, she served as CFO, Principal Accounting Officer, Corporate Controller and Secretary for a publicly traded pharmaceutical company and a publicly traded REIT. Her prior experience includes accounting leadership positions at United Healthcare (Atlanta) and the North Broward Hospital District (Fort Lauderdale) and work on the audit team of Deloitte & Touche (Miami). Ms. Clifford has served as a board member of Novelstem International Corp since July 2018. Ms. Clifford obtained a bachelor of science degree in accounting from the College of Charleston and a master’s degree in business administration with a concentration in finance from Georgia State University. Ms. Clifford is a licensed CPA in the state of South Carolina and holds a certification in the fundamentals of forensic accounting from the AICPA.
Key Attributes, Experience and Skills. Ms. Clifford brings to the Company over 20+ years as a public company chief financial/accounting officer together with Big 4 public accounting experience and a broad scope of operational experience.
Audit Committee; Audit Committee Financial Expert
The Company has a separate designated standing Audit Committee established and administered in accordance with SEC rules. The three members of the Audit Committee are Samuel M. Zentman (who serves as Chairman of the Audit Committee), Gary Mohr and Michael F. Osterer. The Board of Directors has determined that each member of the Audit Committee meets the independence criteria prescribed by NASDAQ governing the qualifications for audit committee members and each Audit Committee member meets NASDAQ’s financial knowledge requirements. Our Board has determined that Dr. Zentman qualifies as an “audit committee financial expert,” as defined in the rules and regulations of the SEC.
Compensation Committee
Our executive compensation is administered by the Compensation Committee of the Board of Directors. The members of the Compensation Committee are Gary Mohr, Michael F. Osterer and Samuel M. Zentman, all of whom have been determined by the Board to be independent in accordance with NASDAQ’s requirement for independent director oversight of executive officer compensation.
Nominating Committee
The Nominating Committee of our Board of Directors has overall responsibility for identifying, evaluating, recruiting and selecting qualified candidates for election, re-election or appointment to the Board. The Members of the Nominating Committee are Gary Mohr, Samuel M. Zentman and Michael Osterer, all of whom have been determined by the Board to meet the independence criteria prescribed by NASDAQ governing the qualifications of nominating committee members.
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Our stockholders may recommend potential director candidates by contacting the Secretary of the Company to receive a copy of the procedure to recommend a potential director candidate for consideration by the Nominating Committee, who will evaluate recommendations from stockholders in the same manner that they evaluate recommendations from other sources.
Section 16(a) Beneficial Ownership Reporting Compliance; Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. These persons are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Further, we have implemented measures to ensure timely filing of Section 16(a) reports by our executive officers and directors. Based solely on our review of such forms or written representations from certain reporting persons, we believe that during 2024 our executive officers and directors complied with the filing requirements of Section 16(a).
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers and employees. This code of ethics is designed to comply with the NASDAQ marketplace rules related to codes of conduct. Our code of ethics may be accessed under “Investor Relations” on our website at www.acornenergy.com. We also intend to satisfy any disclosure requirement under Item 5.05 on Form 8-K regarding an amendment to, or waiver from, a provision of our code of ethics by posting such information on our website, www.acornenergy.com.
Insider Trading Policy
We have adopted an Insider Trading Policy governing the purchase, sale and/or other dispositions of our securities by directors, officers and employees, and by the Company itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to us. A copy of the policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Executive and Director Compensation
Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
| Jan H. Loeb | 2024 | 321,360 | (3) | — | 13,009 | (5) | — | 334,369 | |||||||||||||||
| President and CEO of the Company and Acting CEO of OmniMetrix (1) | 2023 | 312,000 | (3) | — | 9,142 | (6) | — | 321,142 | |||||||||||||||
| Tracy S. Clifford | 2024 | 216,300 | (4) | — | 13,009 | (7) | — | 229,309 | |||||||||||||||
| CFO of the Company and COO of OmniMetrix (2) | 2023 | 210,000 | (4) | — | 18,000 | (8) | — | 228,000 | |||||||||||||||
| (1) | Mr. Loeb began serving as President and CEO of the Company on January 28, 2016 and as Acting CEO of OmniMetrix on December 1, 2019. | |
| (2) | Ms. Clifford began serving as CFO of the Company on June 1, 2018 and as COO of OmniMetrix on December 1, 2019. | |
| (3) | Represents the consulting fee paid for the provision of Mr. Loeb’s services to the Company as President and CEO of the Company and Acting CEO of OmniMetrix. | |
| (4) | Represents the consulting fee paid for the provision of Ms. Clifford’s services as CFO of the Company and COO of OmniMetrix. |
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| (5) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to 2,200 options granted on January 2, 2024 with an exercise price of $6.09. The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 4.0% (ii) an expected term of 4.88 years (iii) an assumed volatility of 194.1% and (iv) no dividends. | |
| (6) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to 2,187 options granted on January 1, 2023 with an exercise price of $5.60 (as adjusted in connection with the September 2023 1-for-16 reverse stock split). The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 4.0% (ii) an expected term of 5.19 years (iii) an assumed volatility of 94.3% and (iv) no dividends. | |
| (7) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to 2,200 options granted on January 2, 2024 with an exercise price of $6.09. The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 4.0% (ii) an expected term of 4.88 years (iii) an assumed volatility of 194.1% and (iv) no dividends. | |
| (8) | Represents the grant date fair value calculated in accordance with applicable accounting principles with respect to 6,250 options granted on June 1, 2023 with an exercise price of $4.96 (as adjusted in connection with the September 2023 1-for-16 reverse stock split). The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 3.9% (ii) an expected term of 3.7 years (iii) an assumed volatility of 93.8% and (iv) no dividends. |
Executive Compensation for 2024 and 2023
Jan H. Loeb. On January 2, 2024, the Company entered into a consulting agreement (the “2024 Loeb Consulting Agreement”) extending its arrangements for compensation of Mr. Loeb. Pursuant to the 2024 Loeb Consulting Agreement, Mr. Loeb received cash compensation of $16,780 per month for service as President and CEO of Acorn, and an additional $10,000 per month for serving as Acting CEO of OmniMetrix. Mr. Loeb also received a grant of options on January 2, 2024 to purchase 2,200 shares of the Company’s common stock, which are exercisable at an exercise price equal to the December 29, 2023, closing price of the common stock of $6.09 per share. Twenty-five percent (25%) of the options were vested immediately; the remaining options vested in three equal increments on April 1, 2024, July 1, 2024 and October 1, 2024. The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside directors. The 2024 Consulting Agreement expired on December 31, 2024; the Company and Mr. Loeb have entered into a new consulting agreement for 2025 as described below under Employment Arrangements.
On January 1, 2023, the Company entered into a new consulting agreement (the “2023 Consulting Agreement”) with Jan H. Loeb, extending its arrangements for compensation of Mr. Loeb for his services as President and CEO of the Company and as principle executive officer of the Company’s OmniMetrix subsidiary in the capacity of Acting CEO.
Pursuant to the 2023 Consulting Agreement, Mr. Loeb received cash compensation of $16,000 per month for service as President and CEO of the Company, and an additional $10,000 per month for service as Acting CEO of OmniMetrix. Mr. Loeb also received a grant of options on January 1, 2023, to purchase 2,187 shares of the Company’s common stock, which are exercisable at an exercise price equal to the December 30, 2022, closing price of the common stock of $5.60 per share (as adjusted in connection with the September 2023 1-for-16 reverse stock split). Twenty-five percent (25%) of the options were vested immediately; the remaining options vested in three equal increments on April 1, 2023, July 1, 2023 and October 1, 2023. The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside directors.
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Tracy S. Clifford. On January 2, 2024, the Company entered into an Amended and Restated Consulting Agreement with Ms. Clifford (the “2024 Clifford Consulting Agreement”) for the provision of Ms. Clifford’s services as both CFO of Acorn and COO of OmniMetrix. The 2024 Clifford Consulting Agreement amends, restates and replaces in its entirety the 2023 Clifford Consulting Agreement. The 2024 Clifford Consulting Agreement has an effective date of January 1, 2024, had an initial one-year term, and automatically renews for an additional year upon the expiration of each one-year term unless earlier terminated as provided therein. Pursuant to the 2024 Clifford Consulting Agreement, Ms. Clifford receives cash compensation of $18,025 per month. In the event of termination, other than for cause, Ms. Clifford shall be entitled to continuation, for a period of six months following the date of such termination, of the monthly cash compensation in effect at the time of such termination. Pursuant to the terms of the 2024 Clifford Consulting Agreement, Ms. Clifford also received a grant of options on January 2, 2024, to purchase 2,200 shares of the Company’s common stock, which are exercisable at an exercise price equal to the December 29, 2023, closing price of the common stock of $6.09 per share. Twenty-five percent (25%) of the options were vested immediately; the remaining options vested in three equal increments on April 1, 2024, July 1, 2024 and October 1, 2024. On each subsequent anniversary of January 1, 2024, so long as the 2024 Clifford Consulting Agreement has not been terminated, the Company will grant Ms. Clifford 2,200 stock options exercisable at an exercise price equal to the then-current stock price. Twenty-five percent (25%) of the options will be vested immediately as of the date of grant; the remaining options will vest in three equal increments on April 1, July 1 and October 1 during the first nine months following the date of grant. The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside directors. This agreement auto renewed on January 1, 2025.
On June 1, 2023, the Company entered into an Amended and Restated Consulting Agreement with Ms. Clifford (the “2023 Clifford Consulting Agreement”). The 2023 Clifford Consulting Agreement began on June 1, 2023, had a one-year term, and was to automatically renew for an additional year upon the expiration of each one-year term unless earlier terminated as provided therein. Pursuant to the 2023 Clifford Consulting Agreement, Ms. Clifford received cash compensation of $17,500 per month, as well as a grant of options on June 1, 2023, to purchase 6,250 shares of our common stock, which are exercisable at an exercise price per share equal to the May 31, 2023, closing price of the common stock of $4.96 per share (as adjusted in connection with the September 2023 1-for-16 reverse stock split). Twenty-five percent (25%) of the options were vested immediately; the remaining options vested in three equal increments on September 1, 2023, December 1, 2023 and March 1, 2024. On January 2, 2024, the Company entered into a new consulting agreement with Tracy Clifford Consulting, LLC, that amends, restates and replaces in its entirety the 2023 Clifford Consulting Agreement, as described above. From January to May 2023, Ms. Clifford received cash compensation of $17,500 per month pursuant to the terms of the Amended and Restated Consulting Agreement entered into by the Company and Tracy Clifford Consulting, LLC on June 1, 2022.
Stockholder input on executive compensation. Stockholders can provide the Company with their views on executive compensation matters at each year’s annual meeting through the stockholder advisory vote on executive compensation and during the interval between stockholder advisory votes. The Company welcomes stockholder input on our executive compensation matters, and stockholders are able to reach out directly to our independent directors by emailing samzentman@yahoo.com to express their views on executive compensation matters.
Employment Arrangements
The employment arrangements of each named executive officer are described below.
Jan H. Loeb
On January 6, 2025, the Company entered into a new consulting agreement (the “2025 Loeb Consulting Agreement”) extending its arrangements for compensation of Mr. Loeb. Pursuant to the 2025 Loeb Consulting Agreement, Mr. Loeb will receive cash compensation of $16,780 per month for service as President and CEO of Acorn, and an additional $10,000 per month for so long as he serves as Acting CEO of OmniMetrix. Mr. Loeb also received a grant of options on January 6, 2025 to purchase 2,200 shares of the Company’s common stock, which are exercisable at an exercise price equal to the January 3, 2025, closing price of the common stock of $17.50 per share. Twenty-five percent (25%) of the options were vested immediately; the remaining options shall vest in three equal increments on April 1, 2025, July 1, 2025 and October 1, 2025. The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside directors. The 2025 Loeb Consulting Agreement expires on December 31, 2025, unless terminated early as provided therein.
Tracy S. Clifford
On January 1, 2025, the 2024 Clifford Consulting Agreement discussed above for the provision of Ms. Clifford’s services as both CFO of Acorn and COO of OmniMetrix automatically renewed for another one-year term. Pursuant to the 2024 Clifford Consulting Agreement, Ms. Clifford receives cash compensation of $18,025 per month. Ms. Clifford also received a grant of options on January 1, 2025 to purchase 2,200 shares of the Company’s common stock, which are exercisable at an exercise price equal to the December 31, 2024, closing price of the common stock of $17.89 per share. Twenty-five percent (25%) of the options were vested immediately; the remaining options shall vest in three equal increments on April 1, 2025, July 1, 2025 and October 1, 2025. The exercise period and other terms are otherwise substantially the same as the terms of the options granted by the Company to its outside directors.
| 28 |
Outstanding Equity Awards at 2024 Fiscal Year End
The following table sets forth all outstanding equity awards made to each of the Named Executive Officers that were outstanding at December 31, 2024.
| OPTIONS TO PURCHASE ACORN ENERGY, INC. STOCK | ||||||||||||||
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| Jan H. Loeb | 2,187 | — | 5.92 | January 1, 2027 | ||||||||||
| 2,187 | — | 7.68 | January 1, 2028 | |||||||||||
| 2,187 | — | 10.08 | January 1, 2029 | |||||||||||
| 2,187 | — | 5.60 | January 1, 2030 | |||||||||||
| 2,200 | — | 6.09 | January 2, 2031 | |||||||||||
| Tracy S. Clifford | 1,875 | — | 6.56 | June 1, 2025 | ||||||||||
| 1,875 | — | 4.48 | June 25, 2026 | |||||||||||
| 3,125 | — | 3.68 | June 8, 2027 | |||||||||||
| 6,250 | — | 9.92 | May 10, 2028 | |||||||||||
| 3,125 | — | 7.04 | June 1, 2029 | |||||||||||
| 6,250 | 4.96 | June 1, 2030 | ||||||||||||
| 2,200 | — | 6.09 | January 2, 2031 | |||||||||||
Option and Warrant Exercises
Options were exercised by Jan Loeb on December 9, 2024, for 2,187 shares at an exercise price of $5.60 per share and on February 21, 2024, for 2,187 shares at an exercise price of $5.76 per share.
Warrants were exercised by Leap Tide Capital Management, LLC (of which Mr. Loeb is the Managing Member), on March 2, 2023, for 2,187 shares at an exercise price of $2.08 per share.
Non-qualified Deferred Compensation
There was no executive non-qualified deferred compensation activity for either of our named executive officers for the year ended December 31, 2024.
Payments and Benefits Upon Termination or Change in Control
Jan H. Loeb
Under the terms of the consulting agreement with Mr. Loeb, there are no amounts due under any termination scenario.
Tracy S. Clifford
Under the terms of the consulting agreement with Ms. Clifford, in the event of termination by the Company other than for cause, Ms. Clifford shall be entitled to a continuation, for a period of six months following the date of such termination, of the monthly cash compensation in effect at the time of such termination. There are no other amounts due under any other termination scenario under the terms of her consulting agreement.
| 29 |
Compensation of Directors
The Board reviews non-employee director compensation on an annual basis. Our compensation policy for non-employee Directors for 2024 was as follows:
Each non-employee Director (other than the Executive Chairman) receives an annual retainer of $15,000, plus an annual grant on January 1 of an option to purchase 625 shares of Company Common Stock.
Upon a non-employee Director’s first election or appointment to the Board, such newly elected/appointed Director will be granted an option to purchase 1,562 shares of Company Common Stock. Each option granted to a newly elected/appointed Director shall vest for the purchase of one-third of the shares purchasable under such option on each of the three anniversaries following the date of the first election or appointment.
All options granted to non-employee Directors shall have an exercise price equal to the closing price of the Company’s Common Stock on its then-current trading platform or exchange on the last trading day immediately preceding the date of grant, and shall, except as described in the preceding paragraph, vest in four quarterly installments beginning on the grant date. Once vested, such options shall be exercisable in whole or in part at all times until the earliest of (i) seven years from the date of grant or (ii) 18 months from the date such Director ceases to be a Director, officer, employee of, or consultant to, the Company.
The chair of the Audit Committee receives an additional annual retainer of $10,000; each Audit Committee member other than the chair receives an additional annual retainer of $2,000.
Each Director may, in his discretion, elect by written notice delivered on or before the first day of each calendar year whether to receive, in lieu of some or all of his retainer and board fees, that number of shares of Company Common Stock as shall have a value equal to the applicable retainer and board fees, based on the closing price of the Company’s Common Stock on its then-current trading platform or exchange on the last trading day immediately preceding the first day of the applicable year. Once made, the election shall be irrevocable for such election year and the shares subject to the election shall vest and be issued one-fourth upon the first day of the election year and one-fourth as of the first day of each of the second through fourth calendar quarters thereafter during the remainder of the election year. A newly-elected or appointed Director may, in his or her discretion, make such an election for the balance of the year in which he or she was elected/appointed by written notice delivered on or before the tenth day after his or her election/appointment to the Board, with the number of shares of Company Common Stock subject to such newly elected/appointed Director’s election to be based on closing price of the Company’s Common Stock on its then-current trading platform or exchange on the last trading day immediately preceding the day of such newly elected/appointed Director’s election/appointment.
The following table sets forth information concerning the compensation earned for service on our Board of Directors during the fiscal year ended December 31, 2024 by each individual who served as a director at any time during the fiscal year (other than Mr. Loeb who was not separately compensated for his Board service).
| 30 |
DIRECTOR COMPENSATION IN 2024
| Name | Fees Earned or Paid in Cash ($) | Option Awards ($)(1) | All Other Compensation ($) | Total ($) | ||||||||||||
| Samuel M. Zentman | 25,000 | (2) | 3,695 | (1) | — | 28,695 | ||||||||||
| Gary Mohr | 17,000 | (3) | 3,695 | (1) | — | 20,695 | ||||||||||
| Peter Rabover | 15,000 | (4) | 3,695 | (1) | 18,695 | |||||||||||
| Michael F. Osterer | 17,000 | (3) | 3,695 | (1) | — | 20,695 | ||||||||||
| (1) | On January 1, 2024, Samuel M. Zentman, Gary Mohr, Peter Rabover, and Michael F. Osterer were each granted 625 options to acquire stock in the Company. The options had an exercise price of $6.09 and were to expire on January 1, 2031. The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a risk-free interest rate of 3.86% (ii) an expected term of 4.9 years (iii) an assumed volatility of 194.1% and (iv) no dividends. | |
| (2) | Represents the annual retainer of $15,000 as a non-employee director and $10,000 received for services rendered as Chairman of the Audit Committee. | |
| (3) | Represents the annual retainer of $15,000 as a non-employee director plus $2,000 received for services rendered as a member of the Audit Committee. | |
| (4) | Represents the annual retainer of $15,000 as a non-employee director. |
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
OWNERSHIP OF THE COMPANY’S COMMON STOCK
The following table and the notes thereto set forth information, as of March 4, 2025, concerning beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of common stock by (i) each director of the Company, (ii) each executive officer (iii) all executive officers and directors as a group, and (iv) each holder of 5% or more of the Company’s outstanding shares of common stock.
| Name and Address of Beneficial Owner (1) (2) | Number of Shares of Common Stock Beneficially Owned (2) | Percentage of Common Stock Outstanding (2) | ||||||
| Jan H. Loeb | 527,497 | (3) | 21.07 | % | ||||
| Gary Mohr | 73,862 | (4) | 2.96 | % | ||||
| Michael F. Osterer | 182,058 | (5) | 7.29 | % | ||||
| Peter Rabover | 125,196 | (6) | 5.02 | % | ||||
| Samuel M. Zentman | 10,679 | (7) | * | |||||
| Tracy S. Clifford | 26,925 | (8) | 1.07 | % | ||||
| All executive officers and directors of the Company as a group (6 people) | 894,134 | (9) | 35.11 | % | ||||
| Joel Charles Sklar | 162,111 | (10) | 6.51 | % | ||||
* Less than 1%
| (1) | Unless otherwise indicated, the address for each of the beneficial owners listed in the table is in care of the Company, 1000 N West Street, Suite 1200, Wilmington, Delaware 19801. |
| (2) | Unless otherwise indicated, each person has sole investment and voting power with respect to the shares indicated. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares, as of a given date which such person has the right to acquire within 60 days after such date. Percentage information is based on the 2,491,130 shares outstanding as of March 4, 2025. |
| (3) | Consists of 242,198 shares held by Mr. Loeb directly, 273,251 shares held by Leap Tide Capital Acorn LLC, and 12,048 shares underlying currently exercisable options held by Mr. Loeb. Mr. Loeb is the sole manager of Leap Tide Capital Acorn LLC, with sole voting and dispositive power over the securities held by such entity. Mr. Loeb disclaims beneficial ownership of the securities held by Leap Tide Capital Acorn LLC except to the extent of his pecuniary interest therein. |
| (4) | Consists of 68,238 shares beneficially held by Mr. Mohr (including 52,083 shares held by UE Systems Inc.), and 5,624 shares underlying currently exercisable options. |
| 31 |
| (5) | Consists of 176,107 shares beneficially held by Mr. Osterer (including 52,083 shares held by UE Systems Inc.), and 5,951 shares underlying currently exercisable options. |
| (6) | Consists of 123,218 shares held by Artko Capital LP and 1,978 shares underlying currently exercisable options held by Mr. Rabover. Mr. Rabover is Managing Director of Artko Capital LP, with sole voting and dispositive power over the securities held by such entity. Mr. Rabover disclaims beneficial ownership of the securities held by Artko Capital LP except to the extent of his pecuniary interest therein. |
| (7) | Consists of 6,617 shares and 4,062 shares underlying currently exercisable options. |
| (8) | Consists of 1,125 shares and 25,800 shares underlying currently exercisable options. |
(9)
|
Consists of 838,671 shares and 55,463 shares underlying currently exercisable options.
|
| (10) | The information is based on a Schedule 13G filed by Mr. Sklar with the SEC on October 18, 2024, reporting beneficial ownership as of that date. Mr. Sklar reported that he has sole voting power and sole dispositive power with respect to all 162,111 shares of Common Stock. |
EQUITY COMPENSATION PLAN INFORMATION
The table below provides certain information concerning our equity compensation plans as of December 31, 2024.
| Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |||||||||
| Equity Compensation Plans Approved by Security Holders | 3,451 | $ | 5.28 | — | ||||||||
| Equity Compensation Plans Not Approved by Security Holders | 66,698 | $ | 6.58 | 70,806 | ||||||||
| Total | 70,149 | $ | 6.52 | 70,806 | ||||||||
The grants made under our equity compensation plans not approved by security holders represent 66,698 options which were granted under our 2006 Stock Incentive Plan following the original expiration of the Plan on February 8, 2017. These grants were made to directors and officers at exercise prices equal to the fair market value on the date of the grant. The options generally vest over a one-year period and expire seven years from the date of the grant. In February 2019, the Company’s Board ratified all option grants made under our 2006 Stock Incentive Plan following the original expiration of the Plan on February 8, 2017 and extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December 31, 2024. In March 2025, the Company’s Board ratified all option grants made under our Amended and Restated 2006 Stock Incentive Plan following expiration of the Plan on December 31, 2024 and extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December 31, 2034.
Equity awards are granted to our named executive officers pursuant to the terms of their consulting agreements. The 2024 Loeb Consulting Agreement and the 2025 Loeb Consulting Agreement each provided for, on the date the respective agreement was executed, a grant of 2,200 stock options exercisable at an exercise price equal to the then-current stock price. The 2024 Clifford Consulting Agreement calls for, on each anniversary of January 1, 2024, so long as the 2024 Clifford Consulting Agreement has not been terminated, a grant of 2,200 stock options exercisable at an exercise price equal to the then-current stock price. Our director compensation policy currently calls for an annual grant of stock options to our directors on the first day of the applicable fiscal year. In addition, equity awards may be granted at other times during the year to new hires, employees receiving promotions, and in other special circumstances.
| 32 |
We do not grant equity awards in anticipation of the release of material, nonpublic information or time the release of material, nonpublic information based on equity award grant dates, vesting events, or sale events. For all stock option awards, the exercise price is the closing price of our common stock on the OTCQB marketplace on the last trading day preceding the date of grant.
ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Director Independence
Applying the definition of independence provided under the NASDAQ rules, the Board has determined that with the exception of Jan H. Loeb, all of the members of the Board of Directors are independent. The Board has also determined that all of the members of the Audit Committee, the Compensation Committee and the Nominating Committee are independent under the NASDAQ independence standards for such committees.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Accounting Fees
Marcum, LLP
The following table summarizes the fees billed to Acorn for professional services rendered by Marcum, LLP for the years ended December 31, 2024 and 2023.
| 2024 | 2023 | |||||||
| Audit fees | $ | 144,835 | $ | 122,990 | ||||
| Tax fees | 23,107 | 13,511 | ||||||
| All other fees | — | — | ||||||
| Total | $ | 168,772 | $ | 136,501 | ||||
Audit Fees were for professional services rendered for the audits of the consolidated financial statements of the Company, assistance with review of documents filed with the SEC, consents, and other assistance required to be performed by our independent accountants.
Tax Fees generally consist of tax compliance and return preparation fees.
Pre-Approval Policies and Procedures
The Audit Committee’s current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged by our independent auditor to assure that the provision of these services does not impair the independence of the auditor. The Audit Committee pre-approved all audit and non-audit services rendered by our principal accountant in 2024 and 2023.
| 33 |
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) List of Financial Statements of the Registrant
The consolidated financial statements of the Registrant and the reports thereon of the Registrant’s Independent Registered Public Accounting Firms are included in this Annual Report beginning on page F-1.
ITEM 16. FORM 10-K SUMMARY
Not applicable.
(a)(3) List of Exhibits
| 34 |
| 35 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Wilmington, State of Delaware, on March 6, 2025.
| ACORN ENERGY, INC. | ||
| By: | /s/ Jan H. Loeb | |
| Jan H. Loeb | ||
| President and Chief Executive Officer | ||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant, in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Jan H. Loeb | President, Chief Executive Officer and | March 6, 2025 | ||
| Jan H. Loeb | Director (Principal Executive Officer) | |||
| /s/ Tracy S. Clifford | Chief Financial Officer (Principal Financial | March 6, 2025 | ||
| Tracy S. Clifford | Officer and Principal Accounting Officer) | |||
| /s/ Gary Mohr | Director | March 6, 2025 | ||
| Gary Mohr | ||||
| /s/ Michael F. Osterer | Director | March 6, 2025 | ||
| Michael F. Osterer | ||||
| /s/ Peter Rabover | Director | March 6, 2025 | ||
| Peter Rabover | ||||
| /s/ Samuel M. Zentman | Director | March 6, 2025 | ||
| Samuel M. Zentman |
| 36 |
ACORN ENERGY, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Acorn Energy, Inc.
Opinion on the Financial Statements
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Realizability of Deferred Tax Assets
Critical Audit Matter Description
As described in Note 10 of the financial statements, at December 31, 2024, the Company had deferred tax assets of $4.4 million (net of a $11.4 million valuation allowance). Deferred tax assets are reduced by a valuation allowance if, based upon the weight of all available evidence, it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
Auditing the Company’s analysis of the realizability of its deferred tax assets required complex auditor judgment because the amounts are material to the financial statements and the assessment process involves significant judgment related to the projections of future taxable income that may be affected by future market or economic conditions.
How the Critical Audit Matter Was Addressed in the Audit
We obtained an understanding and evaluated the design of controls that address the risks of material misstatement relating to the realizability of deferred tax assets. This included controls over management’s projected financial information that have been identified as a source of future taxable income.
To test the Company’s assessment of the realizability of deferred tax assets and the resulting valuation allowance, our audit procedures included, among others, testing the Company’s calculation of future taxable income from the reversal of existing temporary taxable differences. In addition, we evaluated projected future taxable income exclusive of reversing temporary differences and carryforwards. We involved our tax professionals to assist in evaluating the application of tax law in the Company’s consideration of the sources of future taxable income.
/s/ Marcum llp
We have served as the Company’s auditor since 2010.
March 6, 2025
| F-2 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| 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 (DEFICIT) | ||||||||
| 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 | ||||||||
| Noncurrent operating lease liabilities | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 8) | ||||||||
| Equity (deficit): Acorn Energy, Inc. stockholders | ||||||||
| Common stock – $ par value per share; Authorized – shares; issued – and shares at December 31, 2024 and 2023, respectively; outstanding – and at December 31, 2024 and 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated stockholders’ deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost – shares at December 31, 2024 and December 31, 2023 | ( | ) | ( | ) | ||||
| Total Acorn Energy, Inc. stockholders’ equity (deficit) | ( | ) | ||||||
| Non-controlling interests | ||||||||
| Total equity (deficit) | ( | ) | ||||||
| Total liabilities and equity (deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | $ | ||||||
| COGS | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Research and development expense (R&D) | ||||||||
| Selling, general and administrative (SG&A) expense | ||||||||
| Total operating expenses | ||||||||
| Operating income | ||||||||
| Interest income, net | ||||||||
| Income before income taxes | ||||||||
| Current state tax expense | ( | ) | ( | ) | ||||
| Deferred income tax benefit | ||||||||
| 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 | $ | $ | ||||||
| Net income per share attributable to Acorn Energy, Inc. stockholders –diluted | $ | $ | ||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – basic | ||||||||
| Weighted average number of shares outstanding attributable to Acorn Energy, Inc. stockholders – diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
(IN THOUSANDS)
| Acorn Energy, Inc. Stockholders | Total Acorn | |||||||||||||||||||||||||||||||||||
| Number of Shares Outstanding | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Number of Treasury Shares | Treasury Stock | Energy, Inc. Stockholders’ Equity (Deficit) | Non- controlling interests | Total Equity (Deficit) | ||||||||||||||||||||||||||||
| Balances as of December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Proceeds from stock option exercise | * | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2023 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Balances | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||||||||||
| Proceeds from stock option exercises | * | — | ||||||||||||||||||||||||||||||||||
| Accrued dividend in OmniMetrix preferred shares | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
| Balances | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
ACORN ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows provided by operating activities: | ||||||||
| Net income | $ | $ | ||||||
| Depreciation and amortization | ||||||||
| Decrease in the provision for credit losses | ( | ) | ||||||
| Impairment of inventory | ||||||||
| Non-cash lease expense | ||||||||
| Deferred income tax benefit | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| (Increase) decrease in accounts receivable | ( | ) | ||||||
| Decrease (increase) in inventory | ( | ) | ||||||
| Decrease in deferred COGS | ||||||||
| Decrease in other current assets and other assets | ||||||||
| Increase 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 operating activities | ||||||||
| Cash flows used in investing activities: | ||||||||
| Investments in technology | ( | ) | ( | ) | ||||
| Equipment purchases | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows provided by financing activities: | ||||||||
| Warrant exercise proceeds | ||||||||
| Stock option exercise proceeds | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at the beginning of the year | ||||||||
| Cash at the end of the year | $ | $ | ||||||
| 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 (see Note 3) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
ACORN ENERGY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1—NATURE OF OPERATIONS
(a) Description of Business
Acorn Energy, Inc. and its subsidiaries, OMX Holdings, Inc. and OmniMetrix, LLC (collectively, “Acorn” or “the Company”) is a Delaware corporation which is a holding company focused on technology-driven solutions for energy infrastructure asset management. The Company provides the following products and Internet of Things (“IoT”) applications and services through its OmniMetrix, 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.
See Notes 12 and 13 for segment information and major customers.
Acorn’s shares are traded on the OTCQB marketplace under the symbol ACFN.
(b) Liquidity
As
of December 31, 2024, the Company had $
At
December 31, 2024, the Company had working capital of $
As of March 4, 2025, the Company had cash of $2,800,000. The Company believes that such cash, plus the cash expected to be generated from operations, will provide sufficient liquidity to finance the corporate activities of Acorn and operating activities of OmniMetrix at their current level of operations for at least the twelve-month period from the issuance of these audited consolidated financial statements. The Company 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 the Company decides 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 and on terms acceptable to Acorn and OmniMetrix cannot be determined at this time.
| F-7 |
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All dollar amounts are rounded to the nearest thousand and, thus, are approximate.
Principles of Consolidation and Presentation
The consolidated financial statements include the accounts of Acorn Energy, Inc. (“Acorn”) and its subsidiaries, OmniMetrix, LLC (“OmniMetrix”) and OMX Holdings, Inc. (collectively, with Acorn and OmniMetrix, “the Company”). Intercompany transactions and balances are eliminated in consolidation; profits from intercompany sales are also eliminated; and non-controlling interests are included in equity.
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 consolidated financial statements, the most significant estimates and assumptions relate to uncertainties with respect to valuation allowance.
Accounts Receivable and Credit Losses
Accounts receivable consists of trade receivables. Trade receivables are recorded at the invoiced amount, net of any allowance for credit losses.
The Company’s trade receivables primarily arise from the sale of our products to a national telecommunications company, 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 60 days. Certain very large commercial customers have 90 day terms. 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.
For the Company, the contract assets of accounts receivable, deferred COGS and deferred sales commissions are subject to review under ASC 326 however, no credit losses on contract assets were incurred.
Inventory
Inventories are comprised of components (raw materials) and finished goods, which are measured at the lower cost or net realizable value.
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.
| F-8 |
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.
All
inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conducted an assessment and wrote-off
inventory valued at $
Impairment of Long-Lived Assets
The Company reviews long-lived assets, such as property and equipment, intangible assets subject to amortization, and right-of-use assets on operating leases for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. These events or changes in circumstances include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, and significant negative industry or economic trends. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset group to the estimated undiscounted cash flows over the estimated remaining useful life of the primary asset included in the asset group. If the asset group is not recoverable, the impairment loss is calculated as the excess of the carrying value over the fair value.
Non-Controlling Interests
The Financial Accounting Standards Board (“FASB”) requires that non-controlling interests be reported as a component of equity, changes in a parent’s ownership interest while the parent retains its controlling interest be accounted for as equity transactions, and upon a loss of control, retained ownership interest be re-measured at fair value, with any gain or loss recognized in earnings. The Company attributes the applicable percentage of income and losses to the non-controlling interests associated with OmniMetrix (see Note 3).
Property and Equipment
Property and equipment are presented at cost at the date of acquisition. Depreciation and amortization are calculated based on the straight-line method over the estimated useful lives of the depreciable assets, or in the case of leasehold improvements, the shorter of the lease term or the estimated useful life of the asset, a portion of which is allocated to cost of sales. Improvements are capitalized while repairs and maintenance are charged to operations as incurred.
Capitalization of Software
The
Company capitalizes certain implementation costs incurred in a hosting arrangement that is a service contract to develop or obtain internal-use
software. During the years ended December 31, 2024 and 2023, the Company capitalized internal-use software costs totaling $
Deferred Sales Commissions
The Company pays its employees sales commissions for sales of hardware and for first sales of monitoring services (not for renewals). In accordance with Topic 606, Revenue from Contracts with Customers, of the FASB Accounting Standards Codification (ASC 606”), the Company capitalizes as a contract asset the sales commissions on these sales. Commissions earned from the sales of the new hardware products will be recognized when the product is shipped. Commissions earned from the sales of monitoring services continue to be deferred and amortized over the period of service. Contract assets associated with monitoring services are amortized over the expected monitoring life, including renewals.
The contract assets of accounts receivable, deferred COGS and deferred sales commissions are subject to review under ASC 326 however, no credit losses on contract assets were incurred.
| F-9 |
Leases
The Company determines if a contractual arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current operating lease liabilities, and noncurrent operating lease liabilities on the Company’s consolidated balance sheets. The Company evaluates and classifies leases as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonably certain and failure to exercise such option would result in an economic penalty. All of the Company’s real estate leases are classified as operating leases.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease based on the present value of the lease payments over the lease term. The lease payments included in the present value are fixed lease payments. As most of the Company’s leases do not provide an implicit rate, the Company estimates its collateralized incremental borrowing rate, based on information available at the commencement date, in determining the present value of lease payments. The Company applies the portfolio approach in applying discount rates to its classes of leases. The operating lease ROU assets include any payments made before the commencement date. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company does not currently have residual value guarantees or restrictive covenants in its leases.
The Company also made accounting policy elections by class of underlying asset to not apply the recognition requirements of the standard to leases with terms of 12 months or less and to not separate non-lease components from lease components. Consequently, each separate lease component and the non-lease components associated with that lease component will be accounted for as a single lease component for lease classification, recognition, and measurement purposes.
The
lease obligation liability was $
Treasury Stock
Shares of common stock repurchased are recorded at cost as treasury stock. When shares are reissued, the cost method is used for determining cost. In accordance with GAAP, the excess of the acquisition cost over the reissuance price of the treasury stock, if any, is charged to additional paid-in capital, limited to the amount previously credited to additional paid-in capital, if any. Any excess is charged to accumulated stockholders’ deficit.
Segment Reporting
Operating
segments are defined as components of an enterprise for which separate financial information is available and that is evaluated on a
regular basis by the chief operating decision-maker (“CODM”) in deciding how to allocate resources to an individual segment
and in assessing performance. The Company’s operations are organized into
| F-10 |
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 13, 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 12 and 13 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.
Warranty Provision
OmniMetrix generally grants their customers a one-year warranty on their products; however, large volume contracts may receive a longer-term warranty. Estimated warranty obligations are provided for as a cost of sales in the period in which the related revenues are recognized, based on management’s estimate of future potential warranty obligations and historical experience. Adjustments are made to accruals as warranty claim data and historical experience warrant. The Company’s warranty obligations may be materially affected by product or service failure rates and other costs incurred in correcting a product or service failure. Should actual product or service failure rates or other related costs differ from the Company’s estimates, revisions to the accrued warranty liability would be required.
Concentration of Credit Risk
The
Company’s 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 $
Financial Instruments
Fair values of financial instruments included in current assets and current liabilities are estimated to approximate their book values, due to the short maturity of such instruments.
| F-11 |
Research and Development Expenses
Research and development expenses consist primarily of labor and related expenses and are charged to operations as incurred.
Advertising Expenses
Advertising
expenses are charged to operations as incurred. Advertising expense was $
Stock-Based Compensation
The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to share-based transactions, including employee stock options, to be measured and recognized in the consolidated financial statements based on a determination of the fair value of the stock options. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model. For all employee stock options, the Company recognizes expense over the requisite service period on an accelerated basis over the employee’s requisite service period (generally the vesting period of the equity grant). Stock-based compensation expense is included in selling, general and administrative expenses. The Company’s option pricing model requires the input of highly subjective assumptions, including the expected stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based compensation expense.
Options awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance with applicable accounting principles. Such options are valued using the Black-Scholes option pricing model when the services are performed.
See Note 9(b) for the assumptions used to calculate the fair value of stock-based employee compensation. Upon the exercise of options, it is the Company’s policy to issue new shares rather than utilizing treasury shares.
Sales Taxes
The
Company accrues sales taxes based on determination of which of its products/services are subject to sales tax, and in which states and
jurisdictions the tax applies. Further, the Company must determine which of its customers are exempt from the Company charging sales
tax because the customer is a reseller or self-assesses and direct pays to states and other jurisdictions on purchases the customer makes
from the Company. These determinations contain estimates and are subject to judgment and interpretation by taxing authorities in various
states and other jurisdictions, which could result in recognizing materially different amounts in future periods. At December 31, 2024
and December 31, 2023, the amount of such accrual was $
Deferred Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are classified as non-current. Valuation allowances are established against deferred tax assets if it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates or laws is recognized in operations in the period that includes the date of the enactment. See Note 10(d) for the impact of the Tax Cuts and Jobs Act of 2017.
| F-12 |
As
of December 31, 2023, the Company had a full valuation allowance of $
Income Tax Uncertainties
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations. The Company recognizes liabilities for uncertain tax positions based on the two-step process prescribed by applicable accounting principles. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step requires the Company to estimate and measure the tax benefit as the largest amount that is more likely than not being realized upon ultimate settlement. It is inherently difficult and subjective to estimate such amounts, as this requires the Company to determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision in the period. The Company recognizes interest and penalties as incurred in interest income, net in the consolidated statements of operations.
As
of December 31, 2024 and 2023,
During
the years ending December 31, 2024 and 2023, the Company had
The Company is subject to U.S. Federal and state income tax. As of January 1, 2024, the Company is no longer subject to examination by U.S. Federal taxing authorities for years before 2021, or for years before 2020 for state income taxes.
Basic net income per share is computed by dividing the net loss attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the year, excluding treasury stock. Diluted net loss per share is computed by dividing the net loss by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise of stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net loss per share if doing so would be antidilutive.
The combined weighted average number of options and warrants that were excluded from the computation of diluted net loss per share, as they had an antidilutive effect, was (which have a weighted average exercise price of $) and (which had a weighted average exercise price of $) for the years ending December 31, 2024 and 2023, respectively.
| F-13 |
SCHEDULE OF EFFECT ON NET INCOME LOSS AND WEIGHTED AVERAGE NUMBER OF SHARES
| Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Net income attributable to common stockholders | $ | $ | ||||||
| Weighted average shares outstanding: | ||||||||
| Basic | ||||||||
| Add: Stock options | ||||||||
| Diluted | ||||||||
| Basic net income per share | $ | $ | ||||||
| Diluted net income per share | $ | $ | ||||||
Fair Value Measurement
The Company follows the provisions of the accounting standard which defines fair value, establishes a framework for measuring fair value and enhances fair value measurement disclosure. Under these provisions, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use on unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
The carrying amounts for cash, accounts receivable, and accounts payable approximate their fair value because of their short-term maturity. The Company determined that the carrying amount of the lease liabilities approximate fair value since the applicable interest rate approximated fair value at the time the leases were entered into. While the Company believes the carrying value of the assets and liabilities are reasonable, considerable judgment is used to develop estimates of fair value; thus, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange.
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.
| F-14 |
Recently Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance. This update is effective and was adopted for this annual reporting period, fiscal year-ended December 31, 2024.
NOTE 3—INVESTMENT IN OMNIMETRIX
The
Company owns
NOTE 4—ACCOUNTS RECEIVABLE AND ALLOWANCE FOR CREDIT LOSSES
The
Company has historically experienced immaterial write-offs given the nature of the customers that receive credit. As of December 31,
2024, the Company had gross receivables of $
SCHEDULE OF ACCOUNTS RECEIVABLE
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| (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:
SCHEDULE OF ALLOWANCES FOR CREDIT LOSSES
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Balance at beginning of period | $ | $ | ||||||
| (Decrease) increase in provision for credit losses | ( | ) | ||||||
| Net credits (charge-offs) | ( | ) | ||||||
| Balance at end of period | $ | $ | ||||||
NOTE 5—INVENTORY
SCHEDULE OF INVENTORY
| 2024 | 2023 | |||||||
| As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| (in thousands) | ||||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Inventory net | $ | $ | ||||||
At
December 31, 2024 and 2023, the Company’s inventory reserve for obsolescence was $
| F-15 |
NOTE 6—PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
Estimated Useful Life (in years) | As of December 31, | |||||||||
| 2024 | 2023 | |||||||||
| (in thousands) | ||||||||||
| Cost: | ||||||||||
| Computer hardware and software | $ | $ | ||||||||
| Equipment | ||||||||||
| Leasehold improvements | ||||||||||
| Intangible asset | ||||||||||
| Accumulated depreciation and amortization | ||||||||||
| Computer hardware and software | ||||||||||
| Equipment | ||||||||||
| Leasehold improvements | ||||||||||
| Intangible asset | ||||||||||
| Property and equipment, net | $ | $ | ||||||||
| * |
During
the year ended December 31, 2024, the Company wrote off fully depreciated equipment and software with an original cost of $
Depreciation
and amortization in respect of property and equipment amounted to $
NOTE 7—LEASES
OmniMetrix
leases office space and office equipment under operating lease agreements. The office lease has an expiration date of September 30, 2025.
The office equipment lease was entered into in April 2019 and had a sixty-month term. This lease is currently month-to-month until the
Company negotiates a new term. Operating lease payments for 2024 and 2023 were $
SCHEDULE OF SUPPLEMENTAL CASH FLOW INFORMATION RELATED TO LEASES
For the year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for operating lease liabilities | ||||||||
Supplemental balance sheet information related to leases consisted of the following:
SCHEDULE OF SUPPLEMENTAL BALANCE SHEET INFORMATION RELATED TO LEASES
As of December 31, 2024 | ||||
| Weighted average remaining lease terms for operating leases | ||||
| F-16 |
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 December 31, 2024 (in thousands):
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Year Ended December 31, 2024 | ||||
| 2025 | $ | |||
| Less: Imputed interest | ( | ) | ||
| Present value of operating lease liabilities (a) | $ | |||
| (a) |
On
July 6, 2021, the Company entered into an agreement with King Industrial Realty, Inc., to sublease from the Company
SCHEDULE OF SUBLEASES
| Total undiscounted cash flows | Year ended December 31, 2024 | |||
| 2025 | $ | |||
NOTE 8—COMMITMENTS AND CONTINGENCIES
The
Company has $
NOTE 9— STOCKHOLDERS’ EQUITY (DEFICIT)
(a) 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.
| F-17 |
At December 31, 2024, options were available for grant under the Amended and Restated 2006 Stock Incentive Plan and no options were available for grant under the 2006 Stock Option Plan for Non-Employee Directors. In 2024 and 2023, ( to directors and executive officers and to other employees) and ( to directors and executive officers and to other employees) options, respectively, were granted. In 2024 and 2023, there were no grants to non-employees (other than the non-employee directors and executive officers). The fair value of the options issued was $ and $ in 2024 and 2023, respectively.
options were exercised in the year ended December 31, 2024. warrants and no options were exercised in the year ended December 31, 2023. The intrinsic value of options outstanding and of options exercisable at December 31, 2024 was $ and $, respectively. The intrinsic value of options outstanding and of options exercisable at December 31, 2023 was $ and $, respectively.
SCHEDULE OF STOCK OPTIONS FAIR VALUE ASSUMPTIONS ESTIMATED USING BLACK-SCHOLES PRICING MODEL
| 2024 | 2023 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term of options, in years | ||||||||
| Expected annual volatility | % | % | ||||||
| Expected dividend yield | % | % | ||||||
| Determined weighted average grant date fair value per option | $ | $ | ||||||
The expected term of the options is the length of time until the expected date of exercising the options. The Company estimated volatility by considering historical stock volatility over the expected term of the option. The risk-free interest rates are based on the U.S. Treasury yields for a period consistent with the expected term. The Company expects no dividends to be paid. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in determining the estimated fair value of the Company’s stock options granted in the years ended December 31, 2024 and 2023. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by persons who receive equity awards.
(b) Summary Option Information
SUMMARY OF STOCK OPTION ACTIVITY
| 2024 | 2023 | |||||||||||||||
Number of Options (in shares) | Weighted Average Exercise Price Per Share | Number of Options (in shares) | Weighted Average Exercise Price | |||||||||||||
| Outstanding at beginning of year | $ | $ | ||||||||||||||
| Granted at market price | $ | $ | ||||||||||||||
| Exercised | $ | $ | ||||||||||||||
| Forfeited or expired | $ | $ | ||||||||||||||
| Outstanding at end of year | $ | $ | ||||||||||||||
| Exercisable at end of year | $ | $ | ||||||||||||||
| F-18 |
SUMMARY OF INFORMATION REGARDING TO OPTIONS OUTSTANDING AND EXERCISABLE
| Outstanding | Exercisable | |||||||||||||||||||||
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| (in shares) | (in years) | (in shares) | ||||||||||||||||||||
| $ | – $ | $ | $ | |||||||||||||||||||
| $ | – $ | $ | $ | |||||||||||||||||||
Stock-based compensation expense included in selling, general and administrative expense in the Company’s consolidated statements of operations was $ and $ for the years ending December 31, 2024 and 2023, respectively.
The total compensation cost related to non-vested awards not yet recognized was $ and $ as of December 31, 2024 and 2023, respectively.
(c) Warrants
The Company has issued warrants at exercise prices equal to or greater than the market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows:
SUMMARY OF WARRANT ACTIVITY
| 2024 | 2023 | |||||||||||||||
Number of Shares Underlying Warrants | Weighted Average Exercise Price | Number of Shares Underlying Warrants | Weighted Average Exercise Price | |||||||||||||
| Outstanding at beginning of year | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Exercised | $ | ( | ) | $ | ( | ) | ||||||||||
| Forfeited or expired | $ | $ | ||||||||||||||
| Outstanding and exercisable at end of year | $ | $ | ||||||||||||||
NOTE 10—INCOME TAXES
Prior
to 2024, based on negative evidence (primarily a cumulative history of operating losses), the Company had a full valuation allowance
against its net deferred tax assets. As of December 31, 2024, the Company considered all the positive and negative evidence related
to the likelihood of realization of the deferred tax assets and determined, based on the weight of available evidence, it is more
likely than not that some of the deferred tax assets will be realized. As of December 31, 2024 and 2023 the Company had recorded
$
(a) Composition of income (loss) before income taxes is as follows (in thousands):
SCHEDULE OF COMPOSITION OF INCOME (LOSS) BEFORE INCOME TAXES
Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Domestic | $ | $ | ||||||
| F-19 |
Income tax (benefit) expense consists of the following (in thousands):
SCHEDULE OF INCOME TAX (BENEFIT) EXPENSE
| 2024 | 2023 | |||||||
Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Current: | ||||||||
| Federal | $ | $ | ||||||
| State and local | ||||||||
| Current income tax (benefit) expense | ||||||||
| Deferred: | ||||||||
| Federal | ( | ) | ||||||
| State and local | ( | ) | ||||||
| Deferred income tax benefit | ( | ) | ||||||
| Total income tax (benefit) expense | $ | ( | ) | $ | ||||
(b) Effective Income Tax Rates
Set forth below is a reconciliation between the federal tax rate and the Company’s effective income tax rates with respect to continuing operations:
SCHEDULE OF RECONCILIATION BETWEEN FEDERAL TAX RATE AND EFFECTIVE INCOME TAX RATES
| 2024 | 2023 | |||||||
Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Statutory Federal rates | % | % | ||||||
| Increase (decrease) in income tax rate resulting from: | ||||||||
| Nondeductible/nontaxable items | % | % | ||||||
| State taxes | % | % | ||||||
| Rate change | ( | )% | % | |||||
| Prior year rate change adjustment | % | % | ||||||
| Deferred true ups | ( | )% | % | |||||
| Valuation allowance | ( | )% | ( | )% | ||||
| Effective income tax rates | ( | )% | % | |||||
(c) Analysis of Deferred Tax Assets and (Liabilities) (in thousands):
SCHEDULE OF DEFERRED TAX ASSETS AND (LIABILITIES)
| 2024 | 2023 | |||||||
As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Deferred tax assets (liabilities) consist of the following: | ||||||||
| Employee benefits and deferred compensation | $ | $ | ||||||
| Deferred revenue | ||||||||
| Lease liability | ||||||||
| Intangible assets | ||||||||
| Other temporary differences | ||||||||
| Section 174 expenditures | ||||||||
| NOL and capital loss carryforwards | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | ||||||||
| Right-of-use asset | ( | ) | ( | ) | ||||
| Fixed assets | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Net deferred tax assets | $ | $ | ||||||
| F-20 |
Valuation
allowances relate primarily to NOL carryforwards related to the Company’s consolidated tax losses as well as state tax losses related
to the Company’s OmniMetrix subsidiary and book-tax differences related to asset impairments and stock compensation expense of
the Company. During the year ended December 31, 2024 and 2023, the valuation allowance decreased by $
(d) Summary of Tax Loss Carryforwards
As of December 31, 2024, the Company had various NOL carryforwards expiring as follows (in thousands):
SCHEDULE OF NET OPERATING LOSS CARRYFORWARDS
| Expiration | Federal | State | ||||||
| 2025 – 2031* | ||||||||
| 2032 – 2037* | ||||||||
| Unlimited | ||||||||
| Total | $ | $ | ||||||
| * |
Under Section 382 of the Internal Revenue Code, the yearly utilization of a corporation’s NOL carryforwards may be limited following a change in ownership of greater than 50% (by value) over a three-year period. The yearly limitation is based on the value of the corporation immediately before the ownership change multiplied by the federal long-term tax-exempt rate. We are currently subject to the annual limitation under Sections 382 and 383 of the Internal Revenue Code for NOLs generated prior to 2014. As of December 31, 2024, the Company has not completed a recent 382 study and the remaining NOL carryforwards may be limited in the amount. The Company has maintained a full valuation allowance against the deferred tax assets for all NOLs which may be subject to the annual limitations under Section 382. The Company has determined that no limitation on the unreserved NOL carryforwards exists. The Company will complete a full analysis of the tax attribute carryforwards prior to any utilization of NOLs which are currently reserved.
Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and experimentation (R&E) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017 Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E activities in the US must be amortized over a 5-year period if incurred. R&E activities are broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the year ended December 31, 2024, the Company performed an analysis based on available guidance and capitalized the required R&E costs. The Company will continue to monitor this issue for future developments.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.
The Company is also subject to certain non-income taxes such as value added taxes, sales taxes, and property taxes. The Company has taken certain positions that management feels, although not free from doubt, should not result in a successful challenge by certain tax authorities.
| F-21 |
NOTE 11—RELATED PARTY BALANCES AND TRANSACTIONS
The
Company recorded fees to officers of $
The
Company recorded fees to directors of $
The Company issued ( to directors and executive officers and to other employees) and ( to directors and executive officers and to other employees) options, in 2024 and 2023, respectively. options were exercised in the year ended December 31, 2024. warrants and no options were exercised in the year ended December 31, 2023. See Note 9 for further discussion.
Each Director of the Company may elect by written notice delivered on or before the first day of each calendar year whether to receive, in lieu of some or all of his or her retainer and board fees, that number of shares of Company common stock as shall have a value equal to the applicable retainer and board fees, based on the closing price of the Company’s common stock on its then-current trading platform or exchange on the last trading day immediately preceding the first day of the applicable year. Once made, the election shall be irrevocable for such election year and the shares subject to the election shall vest and be issued one-fourth upon the first day of the election year and one-fourth as of the first day of each of the second through fourth calendar quarters thereafter during the remainder of the election year.
NOTE 12—SEGMENT REPORTING AND GEOGRAPHIC INFORMATION
(a) General Information
As
of December 31, 2024, the Company continues to operate in
The Company’s reportable segments are strategic business units, offering different products and services and are managed separately by the CODM 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 expense that is routinely provided to the CODM is COGS and R&D expense. R&D expense is allocated to each segment based on estimated time on 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.
| F-22 |
The following tables represent segmented data for the years ended December 31, 2024 and 2023 (in thousands).
SUMMARY OF SEGMENTED DATA
| PG | CP | Total | ||||||||||
| Year ended December 31, 2024: | ||||||||||||
| 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 | $ | $ | $ | |||||||||
| Year ended December 31, 2023: | ||||||||||||
| 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 | $ | $ | ( | ) | $ | |||||||
(c) The following tables represent a reconciliation of the segment data to the consolidated statement of operations and balance sheet data for the years ended and as of December 31, 2024 and 2023 (in thousands):
SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT OF OPERATIONS
| 2024 | 2023 | |||||||
Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Total net income before income taxes for reportable segments | $ | $ | ||||||
| Unallocated cost of corporate headquarters | ( | ) | ( | ) | ||||
| Consolidated net income before income taxes | $ | $ | ||||||
SCHEDULE OF RECONCILIATION OF SEGMENT DATA TO CONSOLIDATED STATEMENT BALANCE SHEET
| 2024 | 2023 | |||||||
As of December 31, | ||||||||
| 2024 | 2023 | |||||||
| Assets: | ||||||||
| Total assets for OmniMetrix subsidiary | $ | $ | ||||||
| Assets of corporate headquarters | ||||||||
| Deferred tax assets | ||||||||
| Total consolidated assets | $ | $ | ||||||
SCHEDULE OF REVENUE FROM CUSTOMERS BY GEOGRAPHICAL AREAS
| 2024 | 2023 | |||||||
Year ended December 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues based on location of customer: | ||||||||
| United States | $ | $ | ||||||
| Other | ||||||||
| Revenues | $ | $ | ||||||
All of the Company’s long-lived assets are located in the United States.
(d) Revenues and Accounts Receivable Balances from Major Customers (in thousands):
SCHEDULE OF REVENUES AND ACCOUNTS RECEIVABLE BALANCES FROM MAJOR CUSTOMERS
| Invoiced Sales | Accounts Receivable | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| Customer | Total | % | Total | % | Balance | % | Balance | % | ||||||||||||||||||||||||
| A | $ | |
% | $ | * | * | % | $ | % | $ | * | * | % | |||||||||||||||||||
| B | $ | * | * | % | $ | * | * | % | $ | * | * | % | $ | % | ||||||||||||||||||
| * | * | |
| The revenue and accounts receivable of both customer A and B are within the PG segment. |
| F-23 |
NOTE 13—REVENUE
OmniMetrix sells monitoring equipment (“HW”) and monitoring services (“Monitoring”). 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 this date.
The following table disaggregates the Company’s revenue for the years ended December 31, 2024 and 2023 (in thousands):
SCHEDULE OF DISAGGREGATES OF REVENUE
| HW | Monitoring | Total | ||||||||||
| Year ended December 31, 2024: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
| HW | Monitoring | Total | ||||||||||
| Year ended December 31, 2023: | ||||||||||||
| PG Segment | $ | $ | $ | |||||||||
| CP Segment | ||||||||||||
| Total Revenue | $ | $ | $ | |||||||||
Deferred revenue activity for the year ended December 31, 2024 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED REVENUE ACTIVITY
| HW | Monitoring | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Recognized as revenue | ( | ) | ( | ) | ( | ) | ||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| Amounts to be recognized as revenue in the year ending: | ||||||||||||
| December 31, 2025 | $ | $ | $ | |||||||||
| December 31, 2026 | ||||||||||||
| December 31, 2027 and thereafter | ||||||||||||
| Total | $ | $ | $ | |||||||||
| F-24 |
The
amount of hardware revenue recognized during the year ended December 31, 2024 that was included in deferred revenue at the beginning
of the fiscal year was $
Deferred revenue activity for the year ended December 31, 2023 can be seen in the table below (in thousands):
| HW | Monitoring | Total | ||||||||||
| Balance at December 31, 2022 | $ | $ | $ | |||||||||
| Balance | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Recognized as revenue | ( | ) | ( | ) | ( | ) | ||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Balance | $ | $ | $ | |||||||||
| Reconciliation of Hardware Revenue | 2024 | 2023 | ||||||
| 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 charges relate only to the sale of HW. Deferred charges activity for the year ended December 31, 2024 can be seen in the table below (in thousands):
SCHEDULE OF DEFERRED CHARGES ACTIVITY
| Balance at December 31, 2023 | $ | |||
| Additions during the period | ||||
| Recognized as cost of sales | ( | ) | ||
| Balance at December 31, 2024 | $ | |||
| Amounts to be recognized as cost of sales in the year ending: | ||||
| December 31, 2025 | $ | |||
| December 31, 2026 and thereafter | ||||
| $ |
Deferred charges relate only to the sale of HW. Deferred charges activity for the year ended December 31, 2023 can be seen in the table below (in thousands):
| Balance at December 31, 2022 | $ | |||
| Additions during the period | ||||
| Recognized as cost of sales | ( | ) | ||
| Balance at December 31, 2023 | $ |
The following table provides a reconciliation of the Company’s sales commissions contract assets for the year ended December 31, 2024 (in thousands):
SCHEDULE OF SALES COMMISSIONS CONTRACT ASSETS
| HW | Monitoring | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Amortization of sales commissions | ( | ) | ( | ) | ( | ) | ||||||
| Balance at December 31, 2024 | $ | $ | $ | |||||||||
| F-25 |
The
capitalized sales commissions are included in other current assets ($
SCHEDULE OF SALES COMMISSIONS EXPENSE
| Amounts to be recognized as sales commissions expense in the year ending: | ||||
| December 31, 2025 | $ | |||
| December 31, 2026 | ||||
| December 31, 2027 and thereafter | ||||
| Total | $ | |||
| HW | Monitoring | Total | ||||||||||
| Balance at December 31, 2022 | $ | $ | $ | |||||||||
| Balance | $ | $ | $ | |||||||||
| Additions during the period | ||||||||||||
| Amortization of sales commissions | ( | ) | ( | ) | ( | ) | ||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Balance | $ | $ | $ | |||||||||
The
capitalized sales commissions are included in other current assets ($
NOTE 14—SUBSEQUENT EVENTS
On
January 1, 2025, options were issued to the CFO with an exercise price of $
In March 2025, the Company’s Board ratified all option grants made under its Amended and Restated 2006 Stock Incentive Plan following expiration of the Plan on December 31, 2024 and extended the expiration date of the Amended and Restated 2006 Stock Incentive Plan until December 31, 2034.
| F-26 |
Exhibit 10.1
ACORN ENERGY, INC.
AMENDED AND RESTATED 2006 STOCK INCENTIVE PLAN
(as in effect as of January 1, 2025)
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT. Acorn Energy, Inc., a Delaware corporation (the “Company”), establishes an incentive compensation plan to be known as the Amended and Restated 2006 Stock Incentive Plan (the “Plan”), as set forth in this document.
The Plan permits the grant of Cash-Based Awards, Nonqualified Options, Incentive Options, Share Appreciation Rights (SARs), Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, and Other Share-Based Awards.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to provide a means whereby Employees, Directors, and Third Party Service Providers of the Company develop a sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of the Plan is to provide a means through which the Company may attract able individuals to become Employees or serve as Directors, or Third Party Service Providers of the Company and to provide a means whereby those individuals upon whom the responsibilities of the successful administration and management of the Company are of importance, can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company.
1. 3 DURATION OF THE PLAN. Unless sooner terminated as provided herein, the Plan shall terminate on December 31, 2034. After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan’s terms and conditions.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.
2.1 “AFFILIATE” shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
2.2 “ANNUAL AWARD LIMIT” OR “ANNUAL AWARD LIMITS” have the meaning set forth in Section 4.3.
2.3 “AWARD” means, individually or collectively, a grant under this Plan of Cash-Based Awards, Nonqualified Options, Incentive Options, SARs, Restricted Shares, Restricted Share Units, Performance Shares, Performance Units, or Other Share-Based Awards, in each case subject to the terms of this Plan.
2.4 “AWARD AGREEMENT” means either (i) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (ii) a written statement issued by the Company to a Participant describing the terms and provisions of such Award.
2.5 “BENEFICIAL OWNER” or “BENEFICIAL OWNERSHIP” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.6 “BOARD” or “BOARD OF DIRECTORS” means the Board of Directors of the Company.
2.7 “CASH-BASED AWARD” means an Award granted to a Participant as described in Article 10.
2.8 “CODE” means the U.S. Internal Revenue Code of 1986, as amended from time to time.
2.9 “COMMITTEE” means the committee designated by the Board to administer this Plan, if such committee has been designated. In the absence of a designated committee the Board shall serve the committee function, and all references to Committee shall refer to the Board acting in such capacity. If established, the committee shall consist of members appointed from time to time by, and serving at the discretion of, the Board and, unless otherwise determined by the Board, the committee shall consist of no fewer than two directors, each of whom is (i) a “Non-Employee Director” within the meaning of Rule 16b-3 (or any successor rule) of the Exchange Act, and (ii) an “outside director” within the meaning of Section 162(m) of the Code.
2.10 “COMPANY” means Acorn Energy, Inc., a Delaware corporation, and any successor thereto as provided in Article 20 herein.
2.11 “COVERED EMPLOYEE” means a Participant who is a “covered employee,” as defined in Code Section 162(m) and the Treasury Regulations promulgated under Code Section 162(m), or any successor statute.
2.12 “DIRECTOR” means any individual who is a member of the Board of Directors of the Company.
2.13 [removed and reserved]
2.14 “EMPLOYEE” means any officer or employee of the Company, its Affiliates, and/or its Subsidiaries.
2.15 “EXCHANGE ACT” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.
2.16 “FAIR MARKET VALUE” or “FMV” means a price that is equal to the opening, closing, actual, high, low, or average selling prices of a Share reported on the NASDAQ Stock Market or other established stock exchange (or exchanges) on the applicable date or the preceding trading day, as determined by the Committee in its discretion. Unless the Committee determines otherwise, if the Shares are traded over-the-counter at the time a determination of its Fair Market Value is required to be made hereunder, its Fair Market Value shall be deemed to be equal to the last reported sale price or the average between the reported high and low or closing bid and asked prices of a Share on the most recent date on which Shares were publicly traded on the NASD OTC Bulletin Board, as determined by the Committee in its discretion. In the event Shares are not publicly traded at the time a determination of their Fair Market Value is required to be made hereunder, the determination of their Fair Market Value shall be made by the Committee in such manner as it deems appropriate.
Such definition(s) of FMV shall be specified in each Award Agreement and may differ depending on whether FMV is in reference to the grant, exercise, vesting, settlement, or payout of an Award.
| 2 |
2.17 “FULL VALUE AWARD” means an Award other than in the form of an ISO, NQSO, or SAR, and which is settled by the issuance of Shares.
2.18 “FREESTANDING SAR” means an SAR that is granted independently of any Options, as described in Article 7.
2.19 “GRANT PRICE” means the price established at the time of grant of an SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.
2.20 “INCENTIVE OPTION” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee and that is designated as an Incentive Option and that is intended to meet the requirements of Code Section 422, or any successor provision.
2.21 “INSIDER” shall mean an individual who is, on the relevant date, an officer or Director of the Company, or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.
2.21.1 “NET EXERCISE” shall mean a method for settling Options whereby upon exercise of an Option (or portion thereof) the Participant makes no payment and receives Shares with an aggregate FMV equal to the difference between the aggregate FMV of the Shares issuable upon exercise of the Option (or portion thereof) if exercised for cash and the aggregate exercise price of the Option (or portion thereof).
2.22 “NONEMPLOYEE DIRECTOR” means a Director who is not an Employee.
2.23 “NONEMPLOYEE DIRECTOR AWARD” means any NQSO, SAR, or Full Value Award granted, whether singly, in combination, or in tandem, to a Participant who is a Nonemployee Director pursuant to such applicable terms, conditions, and limitations as the Board or Committee may establish in accordance with this Plan.
2.24 “NONQUALIFIED OPTION” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.
2.25 “OPTION” means an Incentive Option or a Nonqualified Option, as described in Article 6.
2.26 “OPTION PRICE” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.27 “OTHER SHARE-BASED AWARD” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.
2.28 “PARTICIPANT” means any eligible individual as set forth in Article 5 to whom an Award is granted.
2.29 “PERFORMANCE-BASED COMPENSATION” means compensation under an Award that satisfies the requirements of Section 162(m) of the Code and the applicable Treasury Regulations thereunder for certain performance-based compensation paid to Covered Employees.
2.30 “PERFORMANCE MEASURES” means (i) those measures described in Section 11.3 hereof on which the performance goals are based, or (ii) such other measures that have been approved by the Company’s shareholders as contemplated by Article 11 of this Plan in order to qualify Awards as Performance-Based Compensation.
| 3 |
2.31 “PERFORMANCE PERIOD” means the period of time during which the performance goals must be met in order to determine the degree of payout and/or vesting with respect to an Award.
2.32 “PERFORMANCE SHARE” means an Award granted under Article 9 herein and subject to the terms of this Plan, denominated in Shares, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
2.33 “PERFORMANCE UNIT” means an Award granted under Article 9 herein and subject to the terms of this Plan, denominated in units, the value of which at the time it is payable is determined as a function of the extent to which corresponding performance criteria have been achieved.
2.34 “PERIOD OF RESTRICTION” means the period when Restricted Shares or Restricted Share Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.
2.35 “PERSON” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
2.36 “PLAN” means this 2006 Stock Incentive Plan, as it may hereinafter be amended or restated.
2.37 “PLAN YEAR” means the Company’s fiscal year as may be in effect from time to time. The Company’s current fiscal year is the calendar year.
2.38 “RESTRICTED SHARES” means an Award granted to a Participant pursuant to Article 8.
2.39 “RESTRICTED SHARE UNIT” means an Award granted to a Participant pursuant to Article 8, except no Shares are actually awarded to the Participant on the date of grant.
2.40 “SHARE” or “SHARES” means the Company’s shares of common stock, par value $.01 per share.
2.41 “SHARE APPRECIATION RIGHT” or “SAR” means an Award, designated as a SAR, pursuant to the terms of Article 7 herein.
2.42 “SUBSIDIARY” means any corporation, partnership, limited liability company, or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, an at least 20% interest or over which the Company exercises significant influence.
2.43 “SHAREHOLDER APPROVAL DATE” means the date of the approval of the Plan by the shareholders of the Company, if so submitted for approval.
2.44 “TANDEM SAR” means an SAR that is granted in connection with a related Option pursuant to Article 7 herein, the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is purchased under the Option, the Tandem SAR shall similarly be canceled).
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2.45 “THIRD PARTY SERVICE PROVIDER” means any consultant, agent, advisor, or independent contractor who renders services to the Company, a Subsidiary, or an Affiliate that (a) are not in connection with the offer and sale of the Company’s securities in a capital raising transaction, and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.
2.46 “TREASURY REGULATIONS” means the regulations promulgated under the Code.
2.47 “WITHHOLDING TAXES” means any federal, state, local or foreign income taxes, withholding taxes, or employment taxes required to be withheld by law or regulations.
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions of the Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of the Plan and any Award Agreement or other agreement or document ancillary to or in connection with the Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, and, subject to Article 17, adopting modifications and amendments to the Plan or any Award Agreement, including without limitation, any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company, its Affiliates, and/or its Subsidiaries operate.
3.3 DELEGATION. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries and Affiliates or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individual to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individual may have under the Plan. The Committee may, by resolution, authorize one or more officers of the Company to do one or more of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards; (b) designate Third Party Service Providers to be recipients of Awards; and (c) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities to any such officer for Awards granted to an Employee that is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards such officer(s) may grant; and (iii) the officer(s) shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated. Notwithstanding the foregoing, the Committee may not delegate to any officer the ability to take any action or make any determination regarding issues arising out of Code Section 162(m).
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR AWARDS. Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares available for issuance to Participants under the Plan (the “Share Authorization”) shall be 166,562 Shares.
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4.2 SHARE USAGE. Shares covered by an Award shall only be counted as used to the extent they are actually issued. Any Shares related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares, are settled in cash in lieu of Shares, or are exchanged with the Committee’s permission, prior to the issuance of Shares, for Awards not involving Shares, shall be available again for grant under the Plan. Subject to the foregoing, the Committee shall have discretion to employ any method of share counting it deems reasonable. The Shares available for issuance under the Plan may be authorized and unissued Shares or treasury Shares.
4.3 ANNUAL AWARD LIMIT. Unless and until the Committee determines that an Award to a Covered Employee shall not be designed to qualify as Performance-Based Compensation, the following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”) shall apply to grants of such Awards under the Plan:
(a) OPTIONS: The maximum aggregate number of Shares subject to Options granted in any one Plan Year to any one Participant shall be 12,500 Shares.
(b) SARS: The maximum number of Shares subject to Share Appreciation Rights granted in any one Plan Year to any one Participant shall be 12,500 Shares.
(c) RESTRICTED SHARES OR RESTRICTED SHARE UNITS: The maximum aggregate grant with respect to Awards of Restricted Shares or Restricted Share Units in any one Plan Year to any one Participant shall be 12,500.
(d) PERFORMANCE UNITS OR PERFORMANCE SHARES: The maximum aggregate Award of Performance Units or Performance Shares that any one Participant may receive in any one Plan Year shall be 12,500 Shares (if such Award is payable in Shares), or equal to the value of 12,500 Shares. For this purpose, to the extent an Award is payable in cash or property other than Shares, then such Award shall be treated as payable in such number of Shares having a value equal to the value of the cash or property (other than Shares) payable under such Award, determined as of the earlier of the date of vesting or payout.
(e) CASH-BASED AWARDS: The maximum aggregate amount awarded or credited with respect to Cash-Based Awards to any one Participant in any one Plan Year may not exceed a value of $500,000.
(f) OTHER SHARE-BASED AWARDS. The maximum aggregate grant with respect to Other Share-Based Awards pursuant to Section 10.2 in any one Plan Year to any one Participant shall be 12,500 Shares.
The above Annual Award Limits are intended to comply with Code Section 162(m) and the Treasury Regulations thereunder, and shall be applied and/or construed in such a way to ensure compliance with Code Section 162(m) and the Treasury Regulations thereunder.
4.4 ADJUSTMENTS IN AUTHORIZED SHARES, ETC. In the event of any corporate event or transaction (including, but not limited to, a change in the Shares of the Company or the capitalization of the Company) such as a merger, consolidation, reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution of stock or property of the Company, combination of Shares, exchange of Shares (other than pursuant to a conversion of convertible securities), dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any similar corporate event or transaction, the Committee shall, proportionately and accordingly, in its sole discretion, substitute and adjust, as applicable, the number and kind of shares for which grants of Options and other Awards may be made under the Plan. In addition, the number and kind of shares subject to outstanding Awards, the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards shall be adjusted proportionately and accordingly by the Committee so as to prevent dilution or enlargement of Participants’ rights under the Plan.
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The Committee, in its sole discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such changes or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
Subject to the provisions of Article 17, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, spin-off, split-off, split-up, acquisition of property or stock, or reorganization (collectively, a “Reorganization”) upon such terms and conditions as it may deem appropriate, subject to compliance with the ISO rules under Section 422 of the Code and the provisions of Section 409A of the Code, where applicable. Without limiting the foregoing, in the event of any Reorganization, the Committee or the Board may cause any Award outstanding as of the effective date of the Reorganization to be cancelled in consideration of a cash payment or alternate Award made to the holder of such cancelled Award equal in value to the fair market value of such cancelled Award; PROVIDED, HOWEVER, that nothing in this Section 4.4 shall permit the repricing, replacing or regranting of Options or SARs in violation of the provisions of Section 409A of the Code.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Individuals eligible to participate in this Plan include all Employees, Directors, and Third Party Service Providers.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible individuals, those individuals to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award.
ARTICLE 6. OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion; provided that ISOs may be granted only to eligible Employees of the Company or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the Treasury Regulations thereunder). ISOs may be granted for the purchase of up to an aggregate of 100,000 Shares, subject to adjustment as provided in Section 4.4.
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the maximum duration of the Option, the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or a NQSO.
6.3 OPTION PRICE. The Option Price for each grant of an Option under this Plan shall be as determined by the Committee and shall be specified in the Award Agreement. The Option Price shall be: (i) equal to 100% of the FMV of the Shares on the date of grant or (ii) set at a premium to the FMV of the Shares on the date of grant.
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6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the tenth anniversary date of its grant. Notwithstanding the foregoing, for Options (other than ISOs) granted to Participants outside the United States, the Committee has the authority to grant Options that have a term greater than ten years.
6.5 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant.
6.6 PAYMENT. Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.
A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the Option Price (provided that except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six months prior to their tender to satisfy the Option Price or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved or accepted by the Committee in its sole discretion, including, without limitation, if the Committee so determines, a cashless (broker-assisted) exercise or Net Exercise.
Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of the purchased Shares, including upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.
Notwithstanding anything to the contrary set forth herein, in the event that a Participant has not fully exercised an Option at the end of the term of such Option and the exercise price of the Option is less than the Fair Market Value of the Shares, the entire outstanding Option shall automatically be deemed exercised and settled on the expiration date by Net Exercise with no further action by the Participant.
6.7 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such restrictions on any Shares acquired pursuant to the exercise of an Option granted under this Article 6 as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or State securities laws applicable to such Shares.
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6.8 TERMINATION OF EMPLOYMENT. Each Participant’s Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options issued pursuant to this Article 6, and may reflect distinctions based on the reasons for termination.
6.9 TRANSFERABILITY OF OPTIONS.
(a) INCENTIVE OPTIONS. No ISO granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all ISOs granted to a Participant under this Article 6 shall be exercisable during the lifetime of the Participant only by such Participant.
(b) NONQUALIFIED OPTIONS. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, no NQSO granted under this Article 6 may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution; provided that the Board or Committee may permit further transferability, on a general or a specific basis, and may impose conditions and limitations on any permitted transferability. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, or unless the Board or Committee decides to permit further transferability, all NQSOs granted to a Participant under this Article 6 shall be exercisable during the lifetime of the Participant only by such Participant. With respect to those NQSOs, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment of the Option Price by the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
(c) NOTIFICATION OF DISQUALIFYING DISPOSITION. If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten days thereof.
6.10 SPECIAL ISO RULES FOR 10% SHAREHOLDERS. If any Participant to whom an ISO is to be granted is, on the date of grant, the owner of Shares (determined using applicable attribution rules) possessing more than 10% of the total combined voting power of all classes of equity securities of his or her employer (or of its parent or subsidiary), then the following special provisions will apply to the ISO granted to that Participant:
(a) The Option Price per Share of the ISO will not be less than 110% of the Fair Market Value of the Shares underlying such ISO on the date of grant; and
(b) The ISO will not have a term in excess of five years from the date of grant.
ARTICLE 7. SHARE APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of these forms of SARs. Notwithstanding the foregoing, SARs may be granted only if Shares are traded on an established securities market at the date of grant. Subject to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such SARs.
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The Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award Agreement. The Grant Price shall be: (i) based on 100% of the FMV of the Shares on the date of grant or (ii) set at a premium to the FMV of the Shares on the date of grant.
7.2 SAR AGREEMENT. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, and such other provisions as the Committee shall determine.
7.3 TERM OF SAR. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the tenth anniversary date of its grant. Notwithstanding the foregoing, for SARs granted to Participants outside the United States, the Committee has the authority to grant SARs that have a term greater than ten years.
7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes.
7.5 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect to the Shares for which its related Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR will expire no later than the expiration of the underlying ISO; (b) the exercise of the Tandem SAR may not have economic and tax consequences more favorable than the exercise of the ISO followed by an immediate sale of the underlying Shares, and the value of the payout with respect to the Tandem SAR may be for no more than 100% of the excess of the Fair Market Value of the Shares subject to the underlying ISO at the time the Tandem SAR is exercised over the Option Price of the underlying ISO; (c) the Tandem SAR may be exercised only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO; (d) the Tandem SAR may be exercised only when the underlying ISO is eligible to be exercised; and (e) the Tandem SAR is transferable only when the underlying ISO is transferable, and under the same conditions.
7.6 PAYMENT OF SAR AMOUNT. SARs granted under this Plan shall be payable only in Shares. Upon the exercise of an SAR, a Participant shall be entitled to receive from the Company such number of Shares determined by multiplying:
(a) The excess of the Fair Market Value of a Share on the date of exercise over the Grant Price; by
(b) The number of Shares with respect to which the SAR is exercised.
Such product shall then be divided by the Fair Market Value of a Share on the date of exercise. The resulting number (rounded down to the next whole number) is the number of Shares to be issued to the Participant upon exercise of an SAR.
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7.7 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise the SAR following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with Participants, need not be uniform among all SARs issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
7.8 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, no SAR granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, all SARs granted to a Participant under the Plan shall be exercisable during his lifetime only by such Participant. With respect to those SARs, if any, that are permitted to be transferred to another individual, references in the Plan to exercise of the SAR by the Participant or payment of any amount to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
7.9 OTHER RESTRICTIONS. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise of a SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be limited to, a requirement that the Participant hold the Shares received upon exercise of a SAR for a specified period of time.
ARTICLE 8. RESTRICTED SHARES AND RESTRICTED SHARE UNITS
8.1 GRANT OF RESTRICTED SHARES OR RESTRICTED SHARE UNITS. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Restricted Shares and/or Restricted Share Units to Participants in such amounts as the Committee shall determine. Restricted Share Units shall be similar to Restricted Shares except that no Shares are actually awarded to the Participant on the date of grant.
8.2 RESTRICTED SHARES OR RESTRICTED SHARE UNIT AGREEMENT. Each Restricted Share and/or Restricted Share Unit grant shall be evidenced by an Award Agreement that shall specify the Period(s) of Restriction, the number of Restricted Shares or the number of Restricted Share Units granted, and such other provisions as the Committee shall determine. Notwithstanding anything in this Article 8 to the contrary, delivery of Shares pursuant to an Award of Restricted Share Units (or an Award of Restricted Shares) shall be made no later than 2-1/2 months after the close of the Company’s first taxable year in which such Shares are no longer subject to a risk of forfeiture (within the meaning of Section 409A of the Code).
8.3 TRANSFERABILITY. Except as provided in this Plan or an Award Agreement, the Restricted Shares and/or Restricted Share Units granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Award Agreement (and in the case of Restricted Share Units until the date of delivery or other payment), or upon earlier satisfaction of any other conditions, as specified by the Committee, in its sole discretion, and set forth in the Award Agreement or otherwise at any time by the Committee. All rights with respect to the Restricted Shares and/or Restricted Share Units granted to a Participant under the Plan shall be available during his lifetime only to such Participant, except as otherwise provided in an Award Agreement or at any time by the Committee.
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8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions and/or restrictions on any Restricted Shares or Restricted Share Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Restricted Share or each Restricted Share Unit, restrictions based upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company upon vesting of such Restricted Share or Restricted Share Units.
To the extent deemed appropriate by the Committee, the Company may retain the certificates representing Restricted Shares in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Restricted Shares covered by each Restricted Share Award shall become freely transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including satisfaction of any applicable tax withholding obligations), and Restricted Share Units shall be paid in cash, Shares, or a combination of cash and Shares as the Committee, in its sole discretion shall determine.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates pursuant to Section 8.4, each certificate representing Restricted Shares granted pursuant to the Plan may bear a legend such as the following or as otherwise determined by the Committee in its sole discretion:
“The sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the Acorn Energy, Inc. 2006 Stock Incentive Plan, and in the associated Award Agreement. A copy of the Plan and such Award Agreement may be obtained from Acorn Energy, Inc.”
8.6 VOTING RIGHTS. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the extent permitted or required by law, as determined by the Committee, Participants holding Restricted Shares granted hereunder may be granted the right to exercise full voting rights with respect to those Shares during the Period of Restriction. A Participant shall have no voting rights with respect to any Restricted Share Units granted hereunder.
8.7 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Restricted Shares and/or Restricted Share Units following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Restricted Shares or Restricted Share Units issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
8.8 SECTION 83(B) ELECTION. The Committee may provide in an Award Agreement that the Award of Restricted Shares is conditioned upon the Participant making or refraining from making an election with respect to the Award under Section 83(b) of the Code. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Share Award, the Participant shall be required to file promptly a copy of such election with the Company.
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ARTICLE 9. PERFORMANCE UNITS/PERFORMANCE SHARES
9.1 GRANT OF PERFORMANCE UNITS/PERFORMANCE SHARES. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Performance Units and/or Performance Shares to Participants in such amounts and upon such terms as the Committee shall determine.
9.2 VALUE OF PERFORMANCE UNITS/PERFORMANCE SHARES. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the value and/or number of Performance Units/Performance Shares that will be paid out to the Participant.
9.3 EARNING OF PERFORMANCE UNITS/PERFORMANCE SHARES. Subject to the terms of this Plan, after the applicable Performance Period has ended, the holder of Performance Units/Performance Shares shall be entitled to receive payout of the value and number of Performance Units/Performance Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE UNITS/PERFORMANCE SHARES. Payment of earned Performance Units/Performance Shares shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of the Plan, the Committee, in its sole discretion, may pay earned Performance Units/Performance Shares in the form of cash or in Shares (or in a combination thereof) equal to the value of the earned Performance Units/Performance Shares at the close of the applicable Performance Period, or as soon as practicable after the end of the Performance Period. Any Shares may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the Award Agreement pertaining to the grant of the Award. Notwithstanding anything in this Article 9 to the contrary, delivery of Shares, cash or other property pursuant to an Award of Performance Units/Performance Shares shall be made no later than 2-1/2 months after the close of the Company’s first taxable year in which delivery of such Shares, cash or other property is no longer subject to a risk of forfeiture (within the meaning of Section 409A of the Code).
9.5 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the extent to which the Participant shall have the right to retain Performance Units and/or Performance Shares following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards of Performance Units or Performance Shares issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
9.6 NONTRANSFERABILITY. Except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, Performance Units/Performance Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided in a Participant’s Award Agreement or otherwise determined at any time by the Committee, a Participant’s rights under the Plan shall be exercisable during his lifetime only by such Participant.
ARTICLE 10. CASH-BASED AWARDS AND OTHER SHARE-BASED AWARDS
10.1 GRANT OF CASH-BASED AWARDS. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms, including the achievement of specific performance goals, as the Committee may determine.
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10.2 OTHER SHARE-BASED AWARDS. The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
10.3 VALUE OF CASH-BASED AND OTHER SHARE-BASED AWARDS. Each Cash-Based Award shall specify a payment amount or payment range as determined by the Committee. Each Other Share-Based Award shall be expressed in terms of Shares or units based on Shares, as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its discretion to establish performance goals, the number and/or value of Cash-Based Awards or Other Share-Based Awards that will be paid out to the Participant will depend on the extent to which the performance goals are met.
10.4 PAYMENT OF CASH-BASED AWARDS AND OTHER SHARE-BASED AWARDS. Payment, if any, with respect to a Cash-Based Award or an Other Share-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines. Notwithstanding anything in this Article 10 to the contrary, delivery of Shares, cash or other property pursuant to a Cash-Based Award or Other Share-Based Award shall be made no later than 2-1/2 months after the close of the Company’s first taxable year in which delivery of such Shares, cash or other property is no longer subject to a risk of forfeiture (within the meaning of Section 409A of the Code).
10.5 TERMINATION OF EMPLOYMENT. The Committee shall determine the extent to which the Participant shall have the right to receive Cash-Based Awards or Other Share-Based Awards following termination of the Participant’s employment with or provision of services to the Company, its Affiliates, and/or its Subsidiaries, as the case may be. Such provisions shall be determined in the sole discretion of the Committee, such provisions may be included in an Award Agreement entered into with each Participant, but need not be uniform among all Awards of Cash-Based Awards or Other Share-Based Awards issued pursuant to the Plan, and may reflect distinctions based on the reasons for termination.
10.6 NONTRANSFERABILITY. Except as otherwise determined by the Committee, neither Cash-Based Awards nor Other Share-Based Awards may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, except as otherwise provided by the Committee, a Participant’s rights under the Plan, if exercisable, shall be exercisable during his lifetime only by such Participant. With respect to those Cash-Based Awards or Other Share-Based Awards, if any, that are permitted to be transferred to another individual, references in the Plan to exercise or payment of such Awards by or to the Participant shall be deemed to include, as determined by the Committee, the Participant’s permitted transferee.
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ARTICLE 11. PERFORMANCE MEASURES
11.1 GENERAL.
(a) If the Plan shall have been submitted to and approved by the shareholders of the Company, certain Awards granted under the Plan may be granted in a manner such that the Awards qualify as Performance-Based Compensation and thus are exempt from the deduction limitation imposed by Section 162(m) of the Code. Awards shall only qualify as Performance-Based Compensation if, among other things, at the time of grant the Committee is comprised solely of two or more “outside directors” (as such term is used in Section 162(m) of the Code and the Treasury Regulations thereunder).
(b) Awards intended to qualify as Performance-Based Compensation may be granted to Participants who are or may be Covered Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number, amount and timing of awards granted to each Covered Employee.
(c) The Committee shall set performance goals at its discretion which, depending on the extent to which they are met, will determine the number and/or value of Awards intended to qualify as Performance-Based Compensation that will be paid out to the Covered Employees, and may attach to such Performance-Based Compensation one or more restrictions.
11.2 OTHER AWARDS. Either the granting or vesting of Awards intended to qualify as Performance-Based Compensation (other than Options and SARs) granted under the Plan shall be subject to the achievement of a performance target or targets, as determined by the Committee in its sole discretion, based on one or more of the performance measures specified in Section 11.3 below. With respect to such Performance-Based Compensation:
(a) the Committee shall establish in writing (x) the objective performance-based goals applicable to a given period and (y) the individual Covered Employees or class of Covered Employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25 percent of such period has elapsed);
(b) no Performance-Based Compensation shall be payable to or vest with respect to, as the case may be, any Covered Employee for a given period until the Committee certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and
(c) after the establishment of a performance goal, the Committee shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal.
11.3 PERFORMANCE MEASURES. Unless and until the Committee proposes for shareholder vote and the shareholders approve a change in the general Performance Measures set forth in this Article 11, the performance goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:
(a) Net earnings or net income (before or after taxes);
(b) Earnings per share;
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(c) Net sales growth;
(d) Net operating profit;
(e) Return measures (including, but not limited to, return on assets, capital, invested capital, equity, or sales);
(f) Cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on capital);
(g) Earnings before or after taxes, interest, depreciation, and/or amortization;
(h) Gross or operating margins;
(i) Productivity ratios; and
(j) Share price (including, but not limited to, growth measures and total shareholder return).
Any Performance Measure(s) may be used to measure the performance of the Company, Subsidiary, and/or Affiliate as a whole or any business unit of the Company, Subsidiary, and/or Affiliate or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of peer companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Company may select Performance Measure (j) above as compared to various stock market indices.
11.4 EVALUATION OF PERFORMANCE. The Committee may provide in any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results, (d) any reorganization and restructuring programs, (e) extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders for the applicable year, (f) acquisitions or divestitures, and (g) foreign exchange gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
11.5 ADJUSTMENT OF PERFORMANCE-BASED COMPENSATION. Awards intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.
11.6 COMMITTEE DISCRETION. In the event that applicable tax and/or securities laws change to permit Committee discretion to alter the governing Performance Measures without obtaining shareholder approval of such changes, the Committee shall have sole discretion to make such changes without obtaining shareholder approval. In addition, in the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 11.1.
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ARTICLE 12. NONEMPLOYEE DIRECTOR AWARDS
In addition to the options to be awarded under the Company’s 2006 Stock Option Plan for Non-Employee Directors, the Committee may provide such additional Awards as it deems appropriate. The terms and conditions of any grant to any such Non-employee Director shall be set forth in an Award Agreement.
ARTICLE 13. DIVIDEND EQUIVALENTS
Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject to any Award, to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee (but subject to the provisions of Section 409A of the Code, if applicable).
ARTICLE 14. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant’s death shall be paid to the Participant’s estate.
ARTICLE 15. RIGHTS OF PARTICIPANTS
15.1 EMPLOYMENT. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company, its Affiliates, and/or its Subsidiaries, to terminate any Participant’s employment or service on the Board or to the Company at any time or for any reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director or Third Party Service Provider for any specified period of time.
Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company, its Affiliates, and/or its Subsidiaries and, accordingly, subject to Articles 3 and 17, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company, its Affiliates, and/or its Subsidiaries.
15.2 PARTICIPATION. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.
15.3 RIGHTS AS A SHAREHOLDER. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
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ARTICLE 16. CHANGE OF CONTROL
In addition to the terms and conditions of this Plan, one or more Awards may be subject to the terms and conditions set forth in a written agreement between the Company and a Participant providing for different terms or provisions with respect to such Awards upon a “Change of Control” of the Company (as that term may be defined in such written agreement), including but not limited to acceleration of benefits, lapsing of restrictions, vesting of benefits and such other terms, conditions or provisions as may be contained in such written agreement; PROVIDED HOWEVER, that such written agreement may not increase the maximum amount of such Awards.
ARTICLE 17. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION
17.1 AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION. Subject to Section 17.3, the Committee may, at any time and from time to time, alter, amend, modify, suspend, or terminate the Plan and any Award Agreement in whole or in part, except that no amendment of the Plan shall be made without shareholder approval if shareholder approval is required by law, regulation, or stock exchange rule.
17.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR NONRECURRING EVENTS. The Committee may make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under the Plan.
17.3 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the Plan to the contrary, and except to the extent necessary to avoid the imposition of additional tax and/or interest under Section 409A of the Code with respect to Awards that are treated as nonqualified deferred compensation, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. Notwithstanding any other provision of the Plan to the contrary, except in connection with a corporate transaction involving the Company (including without limitation, any stock dividend, distribution (whether in the form of cash, Shares, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities, or similar transaction(s)), the Company may not, without obtaining shareholder approval: (a) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (b) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (c) cancel outstanding Options or SARs with an exercise price above the current stock price in exchange for cash or other securities.
ARTICLE 18. WITHHOLDING
The Company shall have the right to withhold from a Participant (or a permitted assignee thereof), or otherwise require such Participant or assignee to pay, any Withholding Taxes arising as a result of the grant of any Award, exercise of an Option or SAR, lapse of restrictions with respect to Restricted Shares or Restricted Share Units, or any other taxable event occurring pursuant to this Plan or any Award Agreement. If the Participant (or a permitted assignee thereof) shall fail to make such tax payments as are required, the Company (or its Affiliates or Subsidiaries) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise due to such Participant or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes, the Participant (or permitted assignee) may make a written election which may be accepted or rejected in the discretion of the Committee, (i) to have withheld a portion of any Shares or other payments then issuable to the Participant (or permitted assignee) pursuant to any Award, or (ii) to tender other Shares to the Company (either by actual delivery or attestation, in the sole discretion of the Committee, PROVIDED THAT, except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant for at least six months prior to their tender to satisfy the Option Price or have been purchased on the open market), in either case having an aggregate Fair Market Value equal to the Withholding Taxes.
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ARTICLE 19. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
ARTICLE 20. GENERAL PROVISIONS
20.1 FORFEITURE EVENTS.
(a) The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, termination of employment for cause, termination of the Participant’s provision of services to the Company, Affiliate, and/or Subsidiary, violation of material Company, Affiliate, and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company, its Affiliates, and/or its Subsidiaries.
(b) If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the Participant knowingly or grossly negligently engaged in the misconduct, or knowingly or grossly negligently failed to prevent the misconduct, or if the Participant is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the Participant shall reimburse the Company the amount of any payment in settlement of an Award earned or accrued during the twelve-month period following, the earlier of, the first public issuance, or filing with the United States Securities and Exchange Commission, of the financial document embodying such financial reporting requirement.
20.2 LEGEND. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer of such Shares.
20.3 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.
20.4 SEVERABILITY. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
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20.5 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
20.6 DELIVERY OF TITLE. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the Plan prior to:
(a) Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.
20.7 INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
20.8 INVESTMENT REPRESENTATIONS. The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.
20.9 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company, its Affiliates, and/or its Subsidiaries operate or have Employees, Directors, or Third Party Service Providers, the Committee, in its sole discretion, shall have the power and authority to:
(a) Determine which Affiliates and Subsidiaries shall be covered by the Plan;
(b) Determine which Employees, Directors, or Third Party Service Providers outside the United States are eligible to participate in the Plan;
(c) Modify the terms and conditions of any Award granted to Employees, Directors, or Third Party Service Providers outside the United States to comply with applicable foreign laws;
(d) Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 20.9 by the Committee shall be attached to this Plan document as appendices; and
(e) Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.
20.10 UNCERTIFICATED SHARES. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.
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20.11 UNFUNDED PLAN. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, its Subsidiaries, and/or its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company, its Subsidiaries, and/or its Affiliates under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company, a Subsidiary, or an Affiliate, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company, a Subsidiary, or an Affiliate, as the case may be and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan.
20.12 NO FRACTIONAL SHARES. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
20.13 RETIREMENT AND WELFARE PLANS. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under the Company’s or any Subsidiary’s or Affiliate’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.
20.14 NONEXCLUSIVITY OF THE PLAN. The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant.
20.15 NO CONSTRAINT ON CORPORATE ACTION. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the Company’s or a Subsidiary’s or an Affiliate’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or, (ii) limit the right or power of the Company or a Subsidiary or an Affiliate to take any action which such entity deems to be necessary or appropriate.
20.16 GOVERNING LAW. The Plan and each Award Agreement shall be governed by the laws of the State of New York, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under the Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of New York, to resolve any and all issues that may arise out of or relate to the Plan or any related Award Agreement.
20.17 INDEMNIFICATION. Each individual who is or shall have been a member of the Board, or a committee appointed by the Board, or an officer of the Company to whom authority was delegated in accordance with Article 3, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him in connection with or resulting from any claim, action, suit, or proceeding to which he may be a party or in which he may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him in settlement thereof, with the Company’s approval, or paid by him in satisfaction of any judgment in any such action, suit, or proceeding against him, provided he shall give the Company an opportunity, at its own expense, to handle and defend the same before he undertakes to handle and defend it on his own behalf, unless such loss, cost, liability, or expense is a result of his own willful misconduct or except as expressly provided by statute.
The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such individuals may be entitled under the Company’s Certificate of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
20.18 AMENDMENT TO COMPLY WITH APPLICABLE LAW. It is intended that no Award granted under this Plan shall be subject to any interest or additional tax under Section 409A of the Code. In the event Code Section 409A is amended after the date hereof, or regulations or other guidance is promulgated after the date hereof that would make an Award under the Plan subject to the provisions of Code Section 409A, then the terms and conditions of this Plan shall be interpreted and applied, to the extent possible, in a manner to avoid the imposition of the provisions of Code Section 409.
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Exhibit 19.1
ACORN ENERGY, INC.
INSIDER TRADING POLICY
Section 1. Individuals and Entities Subject to this Policy
This Insider Trading Policy (the “Policy”) applies to all of the following individuals and entities (“Covered Persons”):
● employees of Acorn Energy, Inc., and/or its subsidiaries (the “Company”),
● Company directors and officers,
● contractors and consultants of the Company,
● their family members, and
● other entities over which such individuals have or share voting or investment control.
This Policy also applies to any other person who receives material nonpublic information (“MNPI”) from any person subject to this Policy or is otherwise designated by the Compliance Officer. Some examples of MNPI include internal estimates of earnings which differ significantly from analysts estimates, merger or acquisition negotiations, securities offerings, significant developments relating to a major contract, significant new products, changes in key management personnel or positions, upcoming announcements of earnings or losses, the sale of significant assets or a significant subsidiary, and the gain or loss of a substantial customer or supplier. If a Covered Person is unsure whether information they have received is MNPI, they should contact the Compliance Officer for assistance. Please see Section 14 below for a more detailed definition of MNPI.
This Policy continues to apply following termination of employment or other relationship with the Company until 9 a.m. ET on the morning of the third full trading day after any MNPI in your possession has become public or is no longer material. Each employee, officer, consultant, contractor and director is personally responsible for the actions of their family members and other persons with whom they have a relationship who are subject to this Policy, including any pre-clearances required.
For purposes of this Policy, “family members” include people who live with you, or are financially dependent on you, and also include those whose transactions in securities are directed by you or are subject to your influence or control.
Section 2. Trading in Company Securities While in Possession of MNPI is Prohibited
The purchase or sale of securities by any person who possesses MNPI is a violation of U.S. federal and state securities laws. It is important to avoid the appearance, as well as the fact, of trading based on MNPI.
No Covered Person who is aware of MNPI relating to the Company may, directly or indirectly (through family members, other persons, entities or otherwise):
● buy, sell, or otherwise trade in the securities of the Company,
● advise anyone else to buy, sell, or otherwise trade in the securities of the Company; or
● otherwise engage in any action to take personal advantage of that information.
For purposes of this Policy, the term “trade” includes any transaction in Company securities, including purchases, sales, gifts and pledges.
You may be required to forego a proposed transaction even if you planned to make the transaction before learning the MNPI (even though you may suffer economic loss or forego anticipated profit by waiting).
Section 3. Trades May Not Occur During Blackout Periods
Employees at or above the Vice President level (“Officers”), Company directors (“Directors”) (Directors and Officers collectively referred to as “Company Insiders”) and the employees listed on Exhibit A (collectively with Company Insiders referred to as “Restricted Persons”) of the Company are prohibited from trading in the Company’s securities during quarterly blackout periods, as defined below, and event-specific blackout periods that may apply to any employee from time to time.
A. Quarterly Blackout Periods: Trading in the Company’s securities is prohibited by Restricted Persons during the period beginning on the twentieth (20th) day of the last month of each of the Company’s fiscal quarters and ending at 9 a.m. ET on the morning of the third full trading day following the day on which the Company files its financial results in a Form 10-Q or Form 10-K (as applicable) covering the relevant fiscal quarter.
B. Event-Specific Blackout Periods: From time to time, other types of MNPI regarding the Company (such as negotiation of mergers, acquisitions, or dispositions, investigation and assessment of cybersecurity incidents or new product developments) may be pending and not be publicly disclosed. While such MNPI is pending, the Company may designate certain other employees (in addition to Company Insiders and the employees listed on Exhibit A) as Restricted Persons and may impose special event-specific blackout periods during which Restricted Persons are prohibited from trading in the Company’s securities. If the Company imposes an event-specific blackout period, it will notify the Restricted Persons affected and such Restricted Persons may not trade in the Company’s securities so long as the event remains material and nonpublic. Restricted Persons will be notified when the event-specific blackout period has been lifted.
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Section 4. Restricted Persons
The Compliance Officer will review, at least annually, those categories of individuals identified in Exhibit A as Restricted Persons. Generally, Restricted Persons shall include any person who by function of their employment is consistently in possession of MNPI or performs an operational role, such as head of a division or business unit, that is material to the Company as a whole.
Section 5. Trading in Other Public Companies’ Securities While in Possession of MNPI is Prohibited
No Covered Person who possesses MNPI relating to other companies, including our vendors, customers and partners, as a result of employment with the Company or the performance of services on our behalf, may, directly or indirectly (through family members, other persons, entities or otherwise) buy or sell securities of (or obtain or dispose of any other interest in) such companies, or advise anyone else to do so, or otherwise engage in any action to take personal advantage of that information.
Section 6. Certain Types of Transactions Are Prohibited
A. All Covered Persons are prohibited from engaging in the following transactions in the Company’s securities unless advance approval is obtained from the Compliance Officer:
1. Short Sales. Short sales of Company securities are prohibited, as short sales evidence the seller’s expectation that Company securities will decline in value, signal to the market that the seller has no confidence in the Company or its short-term prospects, and may reduce the seller’s incentive to improve Company performance. In addition, Section 16(c) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prohibits directors and officers from engaging in short sales.
2. Publicly Traded Options. Transactions in puts, calls or other derivative securities involving Company stock are prohibited, as any such transaction is, in effect, a bet on the short-term movement of the Company’s stock, creates the appearance of trading based on inside information, and may focus attention on short-term performance at the expense of Company long-term objectives.
3. Hedging Transactions. Hedging or monetization transactions (including but not limited to zero-cost collars, prepaid variable forwards, equity swaps, puts, calls, collars, forwards and other derivative instruments) are prohibited, as such transactions allow you to continue to own Company securities without the full risks and rewards of ownership and as a result, you may not have the same objectives as other stockholders.
4. Margin Accounts and Pledges. All Covered Persons are prohibited from holding Company securities in a margin account or pledging Company securities as collateral for a loan, as such securities may be traded without your consent (for failing to meet a margin call or if you default on the loan) at a time when you possess MNPI or otherwise are not permitted to trade. However, in the case of a pledge to collateralize a loan unrelated to securities trading, such as a home loan, the Compliance Officer may pre-clear the proposed pledge in limited circumstances upon concluding the transaction does not misuse MNPI.
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B. In addition, Company Insiders are also subject to the following restrictions:
1. Short-Term Trading. Company Insiders who purchase Company securities in the open market may not sell any Company securities of the same class during the six months following the purchase (or vice versa), as short-term trading of the Company’s securities may be distracting and may unduly focus the person on short-term stock market performance, instead of the Company’s long-term business objectives, and may result in the disgorgement of any short swing profits.
2. Certain Retirement Plan Trading. Company Insiders are prohibited from trading in the Company’s equity securities during a blackout period imposed under an “individual account” retirement or pension plan of the Company during which at least 50% of the plan participants are unable to purchase, sell, or otherwise acquire or transfer an interest in equity securities of the Company, due to a temporary suspension of trading by the Company or the plan fiduciary.
Section 7. Sharing MNPI is Prohibited
No Covered Person who possesses MNPI relating to the Company or any other companies may directly or indirectly (through family members, other persons, entities or otherwise) pass that information on to others outside the Company, including friends, family, or other acquaintances (referred to as “tipping”) until such information has been disseminated to the public. You must treat MNPI about our business partners with the same care required with respect to such information related directly to the Company.
Tipping includes passing information under circumstances that could suggest that you were trying to help another profit or avoid a loss. Exercise care when speaking with others who do not “need to know”, even if they are subject to this Policy, as well as when communicating with family, friends and others not associated with the Company. To avoid the appearance of impropriety, refrain from discussing our business or prospects or making recommendations about buying or selling our securities or the securities of other companies with which we have a relationship. Inquiries about the Company should be directed to our Compliance Officer.
Section 8. Recommendations Regarding Trading in Company Securities are Prohibited
No Covered Person may make recommendations or express opinions on trading in Company securities while in possession of MNPI, except to advise others not to trade in Company securities if doing so might violate the law or this Policy.
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Section 9. Only Designated Company Spokespersons are Authorized to Disclose MNPI (Reg FD)
U.S. federal securities laws, including Regulation Fair Disclosure, prohibit the Company from selectively disclosing MNPI. The Company has established procedures for designated spokespersons to release MNPI in a manner that is designed to achieve broad dissemination of the information immediately upon its release. Employees must follow the Company’s established disclosure procedures, which among other things prohibit employees from in any manner disclosing MNPI to anyone outside the Company, including family members and friends, and including social media or electronic communications.
Section 10. Other Transactions in Company Securities
A. General Rule. This Policy applies to all transactions in Company securities, including any securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by Company, such as exchange-traded options.
B. Exceptions.
1. Employee Benefit Plans.
a. Equity Incentive Plans. The trading restrictions set forth in this Policy do not apply to the exercise of stock options or other equity awards, but do apply to all sales of securities to pay the exercise price or associated tax withholding, including a “same-day sale” of shares received on exercise of options to pay the exercise price (sometimes called a “cashless exercise”) or applicable tax withholding. These restrictions also apply to the same-day sale of shares received on the settlement of restricted stock units or similar awards to cover applicable tax withholding.
b. Employee Stock Purchase Plans. The trading restrictions set forth in this Policy do not apply to purchases of Company securities pursuant to the employee’s advance instructions under employee stock purchase plans or employee benefit plans (e.g., a pension or 401(k) plan). However, no alteration to instructions regarding the level of withholding or the purchase of Company securities in such plans is permitted while in the possession of MNPI. Any sale of securities acquired under such plans remains subject to the prohibitions and restrictions of this Policy.
c. Rule 10b5-1 Trading Plans (“10b5-1 Plans”). The trading restrictions set forth in this Policy do not apply to sales of Company securities pursuant to a compliant 10b5-1 Plan.
Section 11. Company Insiders Are Subject to Additional Restrictions
A. Section 16 Insiders. Company Insiders are subject to the reporting provisions and trading restrictions of Section 16 of the Exchange Act and the underlying rules and regulations promulgated by the SEC. The Company’s legal counsel must be advised of a Company Insider’s intent to enter into any transaction involving Company securities at least 48 hours prior to effecting the planned transaction so that counsel can pre-clear the transaction. Almost all transactions by Company Insiders involving Company securities must be reported to the SEC by the end of the second business day following the transaction. As a result, it is essential that all transactions be pre-cleared.
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B. 10b5-1 Plans for Company Insiders. Rule 10b5-1 provides an affirmative defense against insider trading liability under Rule 10b-5. To be eligible for this defense, a Company Insider may enter into a 10b5-1 Plan for trading in Company securities. If the plan meets the requirements of Rule 10b5-1, Company securities may be purchased or sold without regard to certain insider trading restrictions. To comply with this Policy, a 10b5-1 Plan must be pre-approved by the Company’s legal counsel and meet the requirements of Rule 10b5-1. The Company expects that 10b5-1 Plans will be used only in limited circumstances where there is a demonstrated need for such a plan. In general, a 10b5-1 Plan must be entered into at a time when the Company Insider is not aware of any MNPI. Once the 10b5-1 Plan is adopted, the Company Insider must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The 10b5-1 Plan must either specify the amount, pricing and timing of transactions in advance or delegate discretion on these matters to an independent third party.
Section 12. Policy Violations Must Be Reported
Any person who violates this Policy or any federal or state laws governing insider trading, or knows of any such violation by any other person, must report the violation immediately to the Compliance Officer. Upon learning of any such violation, the Compliance Officer will determine whether the Company should release any MNPI or whether the Company should report the violation to the SEC or other appropriate governmental authority.
Section 13. Insider Trading Compliance Officers
The Company’s Chief Financial Officer shall act as the Company’s Insider Trading Compliance Officer (the “Compliance Officer”); provided, however, that if the Chief Financial Officer is a party to a proposed trade, transaction or inquiry relating to this Policy, the Company’s Chief Executive Officer shall act as the Compliance Officer with respect to such proposed trade, transaction or inquiry. The Compliance Officer may delegate his or her authority to act as the Compliance Officer as he or she deems necessary or appropriate in his or her sole discretion. The duties and powers of the Compliance Officer and his or her delegees may include the following:
● Administering, monitoring and enforcing compliance with this Policy.
● Pre-clearing trading in securities and 10b5-1 Plans of Company Insiders.
● Responding to all inquiries relating to this Policy.
● Designating and announcing special (e.g., event specific) trading blackout periods during which specified persons may not trade in Company securities.
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● Providing copies of this Policy and other appropriate materials to all current and new directors, officers and employees, and such other persons as the Compliance Officer determines have access to MNPI concerning the Company.
● Administering, monitoring and enforcing compliance with federal and state insider trading laws and regulations.
● Assisting in the preparation and filing of all required SEC reports filed by Company Insiders relating to their trading in Company securities, including Forms 3, 4, 5 and 144 and Schedules 13D and 13G.
● Maintaining as Company records originals or copies of all documents required by the provisions of this Policy, and copies of all required SEC reports relating to insider trading, including Forms 3, 4, 5 and 144 and Schedules 13D and 13G.
● Revising this Policy as necessary to reflect changes in applicable insider trading laws and regulations.
● Maintaining the accuracy of the list of roles/titles as set forth on Exhibit A, and updating such list periodically as necessary to reflect additions or deletions.
● Designing and requiring training about the obligations of this Policy as the Compliance Officer considers appropriate.
The Compliance Officer may designate one or more individuals who may perform the Compliance Officer’s duties under this Policy in the event that a Compliance Officer is unable or unavailable to perform such duties.
If you have any questions regarding provisions of this Policy, please contact the Compliance Officer using: tclifford@acornenergy.com
Section 14. Definition of “Material Nonpublic Information” (MNPI)
A. “Material”. Information about the Company is “material” if it would be expected to affect the investment or voting decisions of a reasonable investor, or if the disclosure of the information would be expected to significantly alter the total mix of the information in the marketplace about the Company. Any type of information that could reasonably be expected to affect the market price of Company securities or an investor’s decision to buy or sell Company securities is material. Both positive and negative information may be material. While it is not possible to identify all information that would be deemed material, the following information ordinarily would be considered material:
● Financial performance, including operating results and changes in performance or liquidity.
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● Projections of future earnings or losses, or other earnings guidance, and any changes to previously announced earnings guidance.
● Company projections and strategic plans.
● New major contracts, suppliers, or finance sources or the loss thereof.
● Development or release of a significant new product or service.
● Significant pricing or cost changes.
● Potential mergers or acquisitions, the sale of Company assets or subsidiaries or major partnering agreements.
● Changes in senior management or the Board of Directors.
● Stock splits, public or private securities/debt offerings, or changes in Company dividend policies or amounts.
● A significant cybersecurity incident, such as a data breach or a significant disruption or unauthorized access to information technology infrastructure.
● Actual or threatened major litigation, or the resolution of such litigation.
B. “Nonpublic”. Material information is “nonpublic” if it has not been widely disseminated to the general public through a report filed with the SEC or through major newswire services, national news services or financial news services. For purposes of this Policy, information will be considered public after the close of trading on the second full trading day following the Company’s widespread public release of the information.
C. Consult Compliance Officer When in Doubt. Any employees who are unsure whether the information that they possess is material or nonpublic must consult the Compliance Officer for guidance before trading in any Company securities.
Section 15. Violations of Insider Trading Laws or This Policy Can Result in Severe Consequences
A. Civil and Criminal Penalties. The consequences of prohibited insider trading or tipping can be severe. Persons violating insider trading or tipping rules may be required to disgorge profit made or loss avoided, pay civil penalties up to three times the profit made or loss avoided, face private action for damages, as well as be subject to criminal penalties, including imprisonment and significant fines. The Company and/or the supervisors of the person violating the rules may also be required to pay major civil or criminal penalties.
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B. Company Discipline. Violation of this Policy or federal or state insider trading laws by any director, officer or employee may subject the director to removal proceedings and the officer or employee to disciplinary action by the Company, including termination for cause.
Section 16. This Policy Is Subject to Revision
The Company may change the terms of this Policy from time to time to respond to developments in law and practice, and will take steps to inform all affected persons of any material changes.
Section 17. All Persons Must Acknowledge Their Agreement to Comply with This Policy
This Policy will be available on the Company’s website and delivered to all persons subject to this Policy upon adoption or the commencement of their employment or other service relationship with the Company. Upon first receiving a copy of this Policy, each such person must sign an acknowledgment that he or she has received a copy of and agrees to comply with this Policy. The Compliance Officer may periodically require written certifications by those subject to this Policy, including as to their compliance with this Policy or to refresh their acknowledgement of and agreement to comply with this Policy. Any acknowledgment and agreement hereunder will constitute consent for the Company to impose sanctions for violation of this Policy and to issue any necessary stop-transfer orders to the Company’s transfer agent to enforce compliance with this Policy.
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EXHIBIT A
[Company employees to be included as Restricted Persons]
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Exhibit 21.1
SUBSIDIARIES OF THE REGISTRANT
| Subsidiary | Jurisdiction | |
| OMX Holdings, Inc. | Georgia | |
| OmniMetrix, LLC | Georgia |
EXHIBIT 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in the Registration Statement of Acorn Energy, Inc. on Form S-8 (Nos. 333-140539, 333-158287 and 333-169438 ) of our report dated March 6, 2025, with respect to our audits of the consolidated financial statements of Acorn Energy, Inc. as of December 31, 2024 and 2023 and for the years ended December 31, 2024 and 2023, which report is included in this Annual Report on Form 10-K of Acorn Energy, Inc. for the year ended December 31, 2024.
/s/ Marcum llp
Marcum llp
Marlton New Jersey
March 6, 2025
Exhibit 31.1
I, Jan H. Loeb, the Chief Executive Officer of Acorn Energy, Inc., certify that:
| 1. | I have reviewed this report on Form 10-K of Acorn Energy, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: March 6, 2025 | ||
| By: | /s/ JAN H. LOEB | |
| Jan H. Loeb | ||
| Chief Executive Officer | ||
Exhibit 31.2
I, Tracy S. Clifford, the Chief Financial Officer of Acorn Energy, Inc., certify that:
| 1. | I have reviewed this report on Form 10-K of Acorn Energy, Inc.; | |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: March 6, 2025 | ||
| By: | /s/ Tracy S. Clifford | |
| Tracy S. Clifford | ||
| Chief Financial Officer | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Acorn Energy, Inc. (the “Company”) for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jan H. Loeb, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ Jan H. Loeb | |
| Jan H. Loeb | |
| Chief Executive Officer | |
| March 6, 2025 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-K of Acorn Energy, Inc. (the “Company”) for the fiscal year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tracy S. Clifford, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. |
| /s/ Tracy S. Clifford | |
| Tracy S. Clifford | |
| Chief Financial Officer | |
| March 6, 2025 |