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ACCOUNTING POLICIES (Policies)
 9 Months Ended
Sep. 30, 2025
Accounting Policies [Abstract]  
Use of Estimates in Preparation of Financial Statements

Use of Estimates in Preparation of Financial Statements

 

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods.

 

As applicable to these unaudited consolidated financial statements, the most significant estimates and assumptions relate to uncertainties with respect to valuation allowance.

 
Concentrations of Credit Risk

Concentrations of Credit Risk

 

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade accounts receivable. The Company’s cash was deposited with a U.S. bank and amounted to $4,167,000 at September 30, 2025. The Company does not believe there is a significant risk of non-performance by its counterparties. For the nine- and three-month periods ended September 30, 2025, there was one customer that represented 32% and 7%, respectively, of the Company’s total invoiced revenue. At September 30, 2025, the Company had one customer that represented 34% of our total accounts receivable due at various dates but all no later than December 31, 2025 based on the customer’s payment terms. The customer with this concentration of both invoiced revenue and accounts receivable is the customer under a material contract that was executed in June 2024. Approximately 61% of the accounts receivable at December 31, 2024 was due from this customer which was subsequently collected in full. Credit risk with respect to the balance of trade receivables is typically diversified due to the number of entities comprising the Company’s customer base. Although we do not believe there is significant risk of non-performance by this counterparty, 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.

 
Inventory

Inventory

 

Inventories are comprised of components (raw materials) and finished goods, which are measured at the lower of 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.

 

All inventories are periodically reviewed to identify slow-moving and obsolete inventory. Management conducts an assessment at the end of each reporting period of the Company’s inventory reserve and writes off any inventory items that are deemed obsolete.

 

Management conducted an assessment and wrote off inventory deemed obsolete valued at $15,000 and $11,000 in the nine- and three-month periods ended September 30, 2025, respectively. Management wrote off inventory valued at $21,000 and $3,000, respectively, during the nine- and three-month periods ended September 30, 2024.

 
Revenue Recognition

Revenue Recognition

 

The Company’s revenue recognition policy is consistent with applicable revenue recognition guidance and interpretations. The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied. The Company assesses whether payment terms are customary or extended in accordance with normal practice relative to the market in which the sale is occurring. The Company’s sales arrangements generally include standard payment terms. These terms effectively relate to all customers, products, and arrangements regardless of customer type, product mix or arrangement size. See Note 11, Revenue, for further discussion.

 

Revenue from sales of the hardware products that are distinct products are recorded when shipped (with the exception of the hardware products under a material contract with one customer for which revenue is recognized when the unit is accepted) while the revenue from sales of the hardware products (product versions sold prior to September 1, 2023) that were not separable from the Company’s monitoring services was deferred and amortized over the estimated unit life. Product revenues are recognized at the point in time when control of the product is transferred to the customer, which typically occurs upon shipment or delivery except to the one customer under a material contract for which this occurs upon acceptance. To determine when control has transferred, the Company considers if there is a present right to payment and if legal title, physical possession, and the significant risks and rewards of ownership of the asset has transferred to the customer. Revenue from the prepayment of monitoring fees (generally paid twelve months in advance) are recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring service period. This method provides a faithful depiction of the transfer of services as it aligns the recognition of revenue with the period in which the monitoring services are provided. By deferring the revenue and recognizing it over the service period, the financial statements accurately reflect the Company’s performance and obligations to its customers. See Notes 10 and 11 for the disaggregation of the Company’s revenue for the periods presented.

 

Any sales tax, value added tax, and other tax the Company collects concurrent with revenue producing activities are excluded from revenue.

 
Income Taxes

Income Taxes

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and the tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred assets and liabilities is recognized in income in the period that includes the enactment date.

 

 

The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for incomes taxes. During the year ended December 31, 2024, the Company recorded a reduction in the valuation allowance of $4,686,000 that was previously recorded against our deferred tax assets. During the nine and three months ended September 30, 2025, the Company recorded a reduction in the valuation allowance of $111,000 that was previously recorded against our deferred tax assets. As of December 31, 2024, and September 30, 2025, based on our projections, we believe that a partial valuation allowance of $11,400,000 and $10,963,000, respectively, is necessary against our deferred tax assets. Management will continue to assess the need for the valuation allowance and will make adjustments when appropriate. Management’s projections and beliefs are based upon a variety of estimates and numerous assumptions made by our management with respect to, among other things, interest rates, forecasted revenue of the hardware sales and monitoring revenue or revenue streams that could generate sufficient income so that the Company can utilize our net operating loss (NOL) carryforwards and other matters, many of which are difficult to predict, are subject to significant uncertainties and are beyond our control. As a result, there is inherently uncertainty that the estimates and assumptions upon which these projections and beliefs are based will prove to be accurate, that the anticipated results will be realized or that the actual results will not be substantially higher or lower than the Company projected. On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We have assessed its impact on our financial statements and do not expect the provisions to have a material impact on our financial statements.

 

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) the Company determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the company recognizes the largest amount of tax benefit that more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

 

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying unaudited condensed consolidated statements of operations. No accrued interest or penalties were required to be included in the related tax liability line in the unaudited condensed consolidated balance sheet as of September 30, 2025 and in the consolidated balance sheet as of December 31, 2024.

 
Basic and Diluted Net Income Per Share

Basic and Diluted Net Income Per Share

 

Basic net income per share is computed by dividing the net income attributable to Acorn Energy, Inc. by the weighted average number of shares outstanding during the period, excluding treasury stock. Diluted net income per share is computed by dividing the net income by the weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise of stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net income per share if doing so would be antidilutive.

 

The combined weighted average number of options that were excluded from the computation of diluted net income per share, as they had an antidilutive effect, was 7,000 (which have a weighted average exercise price of $17.51) for the nine-month period ended September 30, 2025. There were no antidilutive options excluded from the computation of diluted net income per share in the three-month period ended September 30, 2025. For the nine-month period ending September 30, 2024, the weighted average number of options that were excluded from the computation of diluted net income, as they had an antidilutive effect, was 17,000 (which had a weighted average exercise price of $9.09). For the three-month period ending September 30, 2024, the weighted average number of options that were excluded from the computation of diluted net income, as they had an antidilutive effect, was 15,000 (which had a weighted average exercise price of $9.17).

 

The following data represents the amounts used in computing earnings per share and the effect on net income and the weighted average number of shares of dilutive potential common stock (in thousands, except per share data):

 

   2025   2024   2025   2024 
  

Nine months ended

September 30,

  

Three months ended

September 30,

 
   2025   2024   2025   2024 
Net income attributable to common stockholders  $1,436   $1,061   $252   $725 
                     
Weighted average share outstanding:                    
-Basic   2,494    2,487    2,509    2,487 
Add: Stock options   44    17    45    24 
-Diluted   2,538    2,504    2,554    2,511 
                     
Basic net income per share  $0.58   $0.43   $0.10   $0.29 
Diluted net income per share  $0.57   $0.42   $0.10   $0.29 

 

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In July 2025, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2025-05, which introduces a practical expedient and an accounting policy election for estimating expected credit losses on current accounts receivable and contract assets arising from revenue transactions under ASC Topic 606. The practical expedient allows entities to assume that current conditions as of the reporting date remain unchanged over the remaining life of the asset, thereby eliminating the need to incorporate forecasts of future economic conditions. The accounting policy election, available to entities other than public business entities, permits consideration of post-balance sheet cash collections in estimating expected credit losses, provided the practical expedient is also elected.

 

Although the Company qualifies as a public business entity and is therefore not eligible for the accounting policy election, the Company has evaluated the practical expedient and determined that it does not expect a material impact on its consolidated financial statements upon adoption.

 

ASU 2025-05 is effective for interim and annual periods beginning after December 15, 2025, with early adoption permitted. The Company does not plan to early adopt and will implement the guidance beginning with its first quarter of fiscal 2026.

 

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.