Expion360 Inc

The following table sets forth certain operational data as a percentage of sales:

Net sales

Net sales for the three months ended March 31, 2024 decreased by $535,000, or 35.5%, compared to the three months ended March 31, 2023. Sales were $1.5 million for the three months ended March 31, 2023 and $972,000 for the three months ended March 31, 2024. The decrease in net sales was significantly impacted by the lingering effects of the downturn in the RV market, combined with customers limiting orders in anticipation of the availability of our new products with enhanced features.

Cost of Sales

Total cost of sales for the three months ended March 31, 2024 decreased by $314,000, or 29.6%, compared to the three months ended March 31, 2023. Cost of sales were $1.1 million for the three months ended March 31, 2023 and $749,000 for the three months ended March 31, 2024. Cost of sales as a percentage of sales increased by 6.5% in that period. The percentage increase in cost of sales was primarily related to the decrease in net sales resulting in higher fixed overhead costs per unit.

Gross Profit

Our gross profit for the three months ended March 31, 2024 decreased by $221,000, or 49.8%, compared to the three months ended March 31, 2023. Gross profit was $443,000 for the three months ended March 31, 2023 and $223,000 for the three months ended March 31, 2024. Gross profit as a percentage of sales decreased by 6.5% for that period, from 29.4% for the three months ended March 31, 2023 to 22.9% for the three months ended March 31, 2024. The decrease in gross profit for the three months ended March 31, 2024 was primarily attributable to decreases in sales which drove higher fixed overhead costs per unit.

*** Selling, General and Administrative Expenses***

Selling, general and administrative expenses increased by $69,000, or 3.2%, to $2.2 million for the three months ended March 31, 2024 compared to $2.1 million for the three months ended March 31, 2023, primarily due to salaries and benefits which included non-cash stock-based compensation of $315,853 for the three-months ending March 31, 2024, compared to $0 in the same prior year period. In addition, increases in sales and marketing expenses were offset by significant reductions in legal and professional fees.

Presented in the table below is the composition of selling, general and administrative expenses:

Other Expense

Our other expense for the three months ended March 31, 2024 and 2023 was $226,000 and $300,000, respectively. Other expense for the three months ended March 31, 2024 was made up almost entirely of interest expense. Other expense for the three months ended March 31, 2023 was made up almost entirely of settlement expense.

During the three months ended March 31, 2024 and 2023, interest expense totaled $253,000 and $38,000, respectively. Interest expense during the three months ended March 31, 2024 was made up of non-cash interest expense of $225,000 and interest expense paid in cash of $28,000. Interest expense during the three months ended March 31, 2023 was entirely paid in cash. During the three months ended March 31, 2024 and 2023, settlement expense totaled $0 and $282,000, respectively. During the three months ended March 31, 2024 and 2023, interest income totaled $27,000 and $20,000, respectively.

Net Loss

Our net loss for the three months ended March 31, 2024 and 2023 was $2.2 million and $2.0 million, respectively. The increase in net loss was primarily the result of lower net sales for the period ended March 31, 2024. Additionally, for the period ended March 31, 2024, the Company recognized $316,000 in non-cash stock-based compensation expense, compared to $0 for the period ended March 31, 2023, offset by reductions of $257,000 in legal and professional fees, $28,000 in travel expense, $16,000 in supplies, and $90,000 in compensation expenses other than stock-based compensation.

Cash Flows

The following table shows a summary of our cash flows for the periods presented:

Net cash used in operating activities

Our largest source of operating cash is cash collection from sales of our products. Our primary use of cash in operating activities are for inventory purchases, salaries and benefits, legal and professional services, and sales and marketing. In the last several years, we have generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from the sales of common stock.

We generated negative cash flows from operating activities of $1.7 million for the three months ended March 31, 2024, compared to negative cash flows of $1.4 million for the same period in 2023. Factors affecting operating cash flows during both periods included:

Net cash provided by / (used in) investing activities

Cash provided by investing activities was $77,000 for the three months ended March 31, 2024, and cash used in investing activities was $9,000 for the three months ended March 31, 2023. Purchases of $11,000 in 2024 were for quality assurance equipment and purchases of $9,000 in 2023 were for improvements of existing vehicles. We sold three vehicles during the three months ended March 31, 2024, for net proceeds of $88,000, compared to $0 for the three months ended March 31, 2023.

• Net cash provided by / (used in) financing activities*

Cash used in financing activities was $75,000 for the three months ended March 31, 2024 and $43,000 for the three months ended March 31, 2023. For the three months ended March 31, 2024, we paid down long-term debt principal of $94,000, paid off a stockholder note in the principal amount of $62,500, and made principal payments toward the short-term convertible note of $44,000, which were offset by net cash proceeds of $125,000 from issuance of common stock. For the three months ended March 31, 2023, we paid down debt principal of $93,000, which was offset by net cash proceeds of $50,000 from the exercise of warrants.