Expion360 Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
XPON$2.45-8.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001903596-24-000505
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001903596-24-000674
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 146 previous paragraphs and 154 current paragraphs.
82 unchanged; 41 reworded; 31 added; 20 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (31)
Current report
In July 2024, we launched our new Edge battery. The slim design adds greater flexibility during installation and comes in either 12V or 48V versions. We are seeing high customer interest and started shipping the new Edge in July 2024.
Current report
Chief Operating Officer Medical Leave of Absence
Current report
Effective November 16, 2024, Paul Shoun, the Company’s Co-Founder, President, Chief Operating Officer, and Chairman of the Board, will be taking a temporary medical leave of absence from his duties as Chief Operating Officer. Mr. Shoun will continue to perform his duties as President and Chairman of the Board.
Current report
The Company currently anticipates that Mr. Shoun will resume his responsibilities as Chief Operating Officer in February 2025. During his absence, as of November 16, 2024, Carson Heagen, the Company’s current Vice President of Operations, will be temporarily assuming the duties of Chief Operating Officer.
Current report
Mr. Heagen, age 34, brings 10+ years of experience in business management, operations, finance, supply chain management, product development, and ERP systems. Since joining the Company in April 2021 as the Director of Finance, Mr. Heagen quickly advanced to Vice President of Operations by November 2021. Mr. Heagen oversees the Company’s international supply chain and manufacturing, warehouse, and logistics operations, serves as the Company’s NetSuite ERP administrator, and manages the Company’s marketing initiatives. Prior to joining the Company, Mr. Heagen served as Purchasing and Supply Chain Manager at Stout Tanks & Kettles from January 2020 to April 2021 and Purchasing, Logistics, and Customer Service Manager at Tensility International Corporation from January 2017 to December 2019. Mr. Heagen’s previous experience highlights his experience in optimizing global supply chains and managing operations for tech-focused companies. Mr. Heagen holds a double BBA in Business Administration and Management and Entrepreneurial Management from Boise State University’s College of Business and Economics.
Current report
There are no arrangements or understandings between Mr. Heagen and any other person pursuant to which he was selected to temporarily assume the responsibilities of Chief Operating Officer. There are no family relationships between Mr. Heagen and any director or executive officer, nor any relationships required to be reported pursuant to Item 404(a) of Regulations S-K.
Current report
Reverse Stock Split and Reverse Stock Split True-Up Payment
Current report
Effective as of 5:00 p.m. Pacific Time on October 8, 2024 (the “Effective Date”), the Company effected a 1-for-100 reverse stock split (the “Reverse Stock Split”), which was approved by the Board of Directors on September 27, 2024, following stockholder approval at the 2024 Annual Meeting. No fractional shares of common stock were issued as a result of the Reverse Stock Split and instead each holder of common stock who was otherwise entitled to receive a fractional share as a result of the Reverse Stock Split received one whole share of common stock in lieu of such fractional share. As a result of this, 210,668 shares were issued on or before October 17, 2024. In addition, the Reverse Stock Split effected a reduction in the number of shares issuable pursuant to the Company’s equity awards, warrants and non-plan options outstanding as of the Effective Date of the Reverse Stock Split, and a corresponding increase in the respective exercise prices, conversion prices, reset prices and the like thereunder. In conjunction with the Reverse Stock Split, the derivative liability has been relieved, and the expense of $5.9 million in Other Expense was reversed to result in no annual expense.
Current report
As a result of the VWAP of the common stock during the five trading days before and after the Reverse Stock Split, the Reverse Stock Split cash true-up payment provision in the Series A Warrants, which is capped at $5 million in the aggregate under all Series A Warrants, was triggered, but the payment of the Reverse Stock Split cash true-up payment is currently suspended in accordance with the terms of the Series A Warrants.
Current report
All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split.
Current report
The Common Units were sold at a price of $0.20 per unit and the Pre-Funded Warrants were sold at a price of $0.199 per unit (Pre-Reverse Stock Split).
Current report
The Pre-Funded Warrants were immediately exercisable at an exercise price of $0.001 per share (pre-Reverse Stock Split) and could be exercised at any time until all Pre-Funded Warrants are exercised in full. As of September 30, 2024, all Pre-Funded Warrants have been exercised.
Current report
Each Series A Warrant is exercisable at any time or times beginning on September 30, 2024, which was the first trading day following the Company’s notice to the Series A Warrant holders of stockholder approval received at the Company’s annual meeting of stockholders held on September 27, 2024 (the “2024 Annual Meeting”), and will expire five years from such date. Each Series A Warrant was initially exercisable at an exercise price of $24.00 per share of common stock (post-Reverse Stock Split). The exercise price of the Series A Warrants was subject to reduction on the 11 th trading day after the stockholder approval to the greater of the lowest daily volume weighted average price (“VWAP”) during the ten trading day period following the stockholder approval and the floor price of $5.206 (representing 20% of the lower of our common stock’s closing price on The Nasdaq Capital Market on the date that we priced the August 2024 Public Offering,, post-Reverse Stock Split) or our common stock’s average closing price on The Nasdaq Capital Market for the five trading days ending on such date (such lower price, without giving effect to such 20% reduction, the “Nasdaq Minimum Price”), and the number of shares issuable upon exercise would be proportionately adjusted such that the aggregate exercise price would remain unchanged. As of September 30, 2024, there would have been 5,301,592 shares of common stock (post-Reverse Stock Split and assuming the Adjustment had occurred on September 30, 2024) issuable upon exercise of the Series A Warrants as of that date. Subsequent to September 30, 2024, the exercise price under the Series A Warrants was reduced to the floor price of $5.206 (representing 20% of the Nasdaq Minimum Price, post-Reverse Stock Split), beginning on October 14, 2024, the 11 th trading day following stockholder approval. As of November 12, 2024, 14,900 shares of Common stock have been issued upon exercise of Series A Warrants and 5,286,692 shares of Common stock remain issuable upon exercise of Series A Warrants.
Current report
Each Series B Warrant was exercisable immediately upon issuance at an exercise price of $0.10 per share (post-Reverse Stock Split). The number of shares of common stock issuable under the Series B Warrants were subject to adjustment using a reset price based on the weighted average price of common stock over a rolling five-trading-day period between the issuance date of the Class B Warrants and the close of trading on the tenth trading day following stockholder approval, subject to certain floor prices. As of September 30, 2024, 342,588 shares of Common stock (post-Reverse Stock Split) had been issued upon exercise of Series B Warrants and there were 1,032,198 shares of Common stock (post-Reverse Stock Split) issuable upon exercise of Series B Warrants based on the reset price of $5.45 (representing the lowest arithmetic average of the daily VWAP during the 5 trading day period from September 12, 2024 through September 18, 2024. Effective October 8, 2024, after market close, a reverse stock split occurred and as of November 12, 2024, 87,384 shares of common stock remain issuable upon exercise of Series B Warrants using the reset price, which was reduced to the floor price of $5.206 (representing 20% of the Nasdaq Minimum Price (post-Reverse Stock Split and post-Adjustment).
Current report
Pursuant to an underwriting agreement by and between the Company and the Underwriter, the Company paid the Underwriter a total cash underwriting discount of $700,000, equal to 7% of gross proceeds received in the August 2024 Public Offering, reimbursement for Underwriter expenses of $100,000, equal to 1% of gross proceeds received, and reimbursement for road show, diligence, legal fees and disbursements of $100,000, equal to 1% of gross proceeds received, as well as $5,000 for investor counsel fee, totaling $905,000 in cash fees deducted from cash proceeds.
Current report
Payoff of 3i Note
Current report
Expion360 has recently added several new distributors and OEM customers in RV and marine markets. Management believes that orders resulting from these new relationships will result in significant new revenue for 2025.
Current report
Net sales for the three months ended September 30, 2024 decreased by $501,000, or 26.5%, compared to the three months ended September 30, 2023. Net sales were $1.4 million for the three months ended September 30, 2024 and $1.9 million for the three months ended September 30, 2023.
Current report
Net sales for the nine months ended September 30, 2024 decreased by $1.5 million, or 29.0%, compared to the nine months ended September 30, 2023. Net sales were $3.6 million for the nine months ended September 30, 2024 and $5.1 million for the nine months ended September 30, 2023.
Current report
During the three months ended September 30, 2024, we liquidated some non-core product, which was a factor in reducing leased warehouse space. If we had not done the liquidation, cost of sales would have decreased by $303,000, or 21.3%, compared to the three months ended September 30, 2023. Cost of sales would have been $1.1 million for the three months ended September 30, 2024 and $1.4 million for the three months ended September 30, 2023. Cost of sales as a percentage of sales would have increased by 7.9% in the three months ended September 30, 2024 compared to the prior year period.
Current report
During the nine months ended September 30, 2024, we liquidated some non-core product, which was a factor in reducing leased warehouse space. If we had not done the liquidation, cost of sales would have decreased by $935,000, or 24.9%, compared to the nine months ended September 30, 2023. Cost of sales would have been $2.8 million for the nine months ended September 30, 2024 and $3.8 million for the nine months ended September 30, 2023. Cost of sales as a percentage of sales would have increased by 5.1% in the nine months ended September 30, 2024 compared to the prior year period.
Current report
During the three months ended September 30, 2024, we liquidated some non-core product, which was a factor in reducing leased warehouse space. If we had not done the liquidation, gross profit would have decreased by $242,000, or 51.3%, compared to the three months ended September 30, 2023. Gross profit would have been $230,000 for the three months ended September 30, 2024 and $473,000 for the three months ended September 30, 2023. Gross profit as a percentage of sales would have decreased by 7.9% in the three months ended September 30, 2024 compared to the prior year period.
Current report
During the nine months ended September 30, 2024, we liquidated some non-core product, which was a factor in reducing leased warehouse space. If we had not done the liquidation, gross profit would have decreased by $592,000, or 43.2%, compared to the nine months ended September 30, 2023. Gross profit would have been $778,000 for the nine months ended September 30, 2024 and $1.4 million for the nine months ended September 30, 2023. Gross profit as a percentage of sales would have decreased by 5.1% in the nine months ended September 30, 2024 compared to the prior year period.
Current report
Selling, general and administrative expenses for the three months ended September 30, 2024 decreased by $194,000, or 8.5%, compared to the three months ended September 30, 2023. Selling, general and administrative expenses were $2.1 million for the three months ended September 30, 2024 and $2.3 million for the three months ended September 30, 2023. For the three months ended September 30, 2024, fees related to repayment of the 3i Note and termination of the lease, categorized as “other,” made up the majority of the increase, while decreases in legal and professional fees accounted for the largest reduction in expenses, along with a reduction in salaries and benefits.
Current report
Selling, general and administrative expenses for the nine months ended September 30, 2024 decreased by $73,000, or 1.2%, compared to the nine months ended September 30, 2023. Selling, general and administrative expenses were $6.3 million for the nine months ended September 30, 2024 and $6.4 million for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, fees related to repayment of the convertible note and termination of the lease, categorized as “other,” made up the majority of the increase, while decreases in legal and professional fees accounted for the largest reduction in expenses.
Current report
Other Expense / (Income
Current report
Our other expense / (income) for the three months ended September 30, 2024 and 2023 was $6.9 million and $(6,000), respectively. Other expense for the three months ended September 30, 2024 was primarily made up of the change in fair value of the warrants issued as part of the Aegis financing, along with interest expense and settlement expense. Other income in the three months ended September 30, 2023 was almost entirely interest income, and other expense was entirely made up of interest expense.
Current report
Our other expense for the nine months ended September 30, 2024 and 2023 was $7.7 million and $276,000, respectively. Other expense for the nine months ended September 30, 2024 was primarily made up of the change in fair value of the warrants issued as part of the Aegis financing, along with interest expense and settlement expense.
Current report
Other expenses for the nine months ended September 30, 2023 was primarily settlement expense, along with interest expense, partially offset by interest income.
Current report
On August 8, 2024, the Company sold in the August 2024 Public Offering, (i) 33,402,000 Common Units, each consisting of one share of common stock, two Series A Warrants and one Series B Warrant, and (ii) 16,598,000 Pre-Funded Units, each consisting of one Pre-Funded Warrant, two Series A Warrants, and one Series B Warrant, through the Underwriter. The Common Units were sold at a price of $0.20 per unit and the Pre-Funded Warrants were sold at a price of $0.199 per unit (pre-Reverse Stock Split). Additionally, the Underwriter partially exercised its over-allotment option with respect to an additional 15,000,000 Series A Warrants and 7,500,000 Series B Warrants (pre-Reverse Stock Split and pre-Adjustment). The August 2024 Public Offering resulted in net proceeds of approximately $8.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. As of September 30, 2024, all 16,598,000 Pre-Funded Warrants have been exercised, 0 Series A Warrants have been exercised, and 18,837,530 Series B Warrants have been exercised. See section above entitled “Recent Developments” in this Quarterly Report for further information on the August 2024 Public Offering.
Current report
Other Indebtedness
Removed paragraphs (20)
Previous report
Battery Pack Flexibility
Previous report
Our battery packs are also highly flexible, designed to be moved and used in various applications seamlessly. We plan to onshore our semi-automated pack assembly in Redmond, Oregon. The initial equipment has arrived and, subject to market conditions, we intend to complete the setup and development of additional equipment to automate the line. This should allow us to use a more flexible approach to forming and creating new battery packs. By onshoring, we expect to be able to react to market demands at a much quicker pace and increase profit levels over our competition.
Previous report
In furtherance of our vision of stored energy, in the second quarter of 2023, we commenced deliveries of a portable power generator product, the AURA POWERCAP™ 600 (the “Aura 600”). The Aura 600 is designed to fit and convert any one of our Group 24 lithium batteries into a 600W mobile power station. The Aura 600’s proprietary patent pending design allows it to join seamlessly to 60Ah, 80Ah, and 95Ah Expion360 batteries. The Aura 600 is an exclusive fit to Expion360 batteries and is not compatible with other brands. The Aura 600 contains beneficial features and functions for a compact portable power unit, including the ability to recharge the battery from the input charge port using the included 7 Amp household charger and the ability to recharge remotely with our lightweight portable solar panel options, which are sold separately.
Previous report
Purchasers of Units whose purchase would otherwise have resulted in the purchaser’s beneficial ownership exceeding 4.99% of the Company’s outstanding Common Stock immediately following the closing of the 2024 Public Offering were able to purchase Units consisting of one pre-funded warrant to purchase one share of Common Stock (in lieu of one Share, each a “Pre-Funded Warrant”), two Series A Warrants and one Series B Warrant. For each Unit including a Pre-Funded Warrant (without regard to any limitation on exercise set forth therein), the number of Units including a Share were offered decreased on a one-for-one basis.
Previous report
The 2024 Public Offering closed on August 8, 2024. Of the 50,000,000 Units sold in the 2024 Public Offering, 33,402,000 were issued with Shares and 16,598,000 were issued with Pre-Funded Warrants. Subsequent to the closing of the 2024 Public Offering, 14,598,000 of the Pre-Funded Warrants have been exercised for Shares.
Previous report
The Units were offered at a public offering price of $0.20 per Unit, resulting in total gross proceeds of $10.0 million. The Company estimates that the net proceeds from the 2024 Public Offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, are approximately $8.7 million. The Company has used a portion of the net proceeds from the 2024 Public Offering to repay approximately $2.7 million due under the3i Note, and intends to use a portion of the net proceeds to repay an aggregate of approximately $0.7 million due to stockholders under certain unsecured promissory note agreements, as well as for working capital and general corporate purposes.
Previous report
The Shares, the Pre-Funded Warrants, the Series A Warrants and the Series B Warrants and the shares of Common Stock issuable upon exercise of the Pre-Funded Warrants, the Series A Warrants and the Series B Warrants described above, were offered by the Company pursuant to a Registration Statement on Form S-1 (File No. 333-280996), initially filed on July 25, 2024 with the SEC under the Securities Act of 1933, as amended (the “Securities Act”), as amended on August 2, 2024, and declared effective by the SEC on August 6, 2024.
Previous report
On May 2, 2024, the Company entered into a Settlement and Mutual Release with Alexander Capital L.P. (“Alexander”), pursuant to which the parties resolved certain disputes while not admitting any liability or wrongdoing (the “Settlement Agreement”). We agreed to (i) make a single cash payment of $100,000, (ii) issue 100,000 shares of Common Stock, and (iii) amend certain outstanding warrants to reduce the per share exercise price from $9.10 to $4.50. The shares of Common Stock were issued pursuant to an effective Registration Statement on Form S-3 (File No. 333-272956). The Settlement Agreement also contains other customary provisions, including a mutual release of claims and mutual non-disparagement provision.
Previous report
Net sales
Previous report
Net sales for the three months ended June 30, 2024 decreased by $447,000, or 25.9%, compared to the three months ended June 30, 2023. Sales were $1.7 million for the three months ended June 30, 2023 and $1.3 million for the three months ended June 30, 2024.
Previous report
Net sales for the six months ended June 30, 2024 decreased by $982,000, or 30.4%, compared to the six months ended June 30, 2023. Sales were $3.2 million for the six months ended June 30, 2023 and $2.2 million for the six months ended June 30, 2024.
Previous report
Selling, general and administrative expenses for the three months ended June 30, 2024 increased by $53,000, or 2.7%, compared to the three months ended June 30, 2023. Selling, general and administrative expenses were $2.0 million for the three months ended June 30, 2024 and 2023. For the three months ended June 30, 2024, increases in legal fees and insurance costs were largely offset by decreases in sales and marketing expenses and salaries and benefits.
Previous report
Selling, general and administrative expenses for the six months ended June 30, 2024 increased by $121,000, or 3.0%, compared to the six months ended June 30, 2023. Selling, general and administrative expenses were $4.1 million for the six months ended June 30, 2023 and $4.2 million for the six months ended June 30, 2024. For the six months ended June 30, 2024, increases in salaries and benefits and insurance costs were largely offset by a decrease in legal fees and travel expenses.
Previous report
Other (Income)/Expense
Previous report
Our other (income)/expense for the three months ended June 30, 2024 and 2023 was $541,000 and ($18,000), respectively. Other expense for the three months ended June 30, 2024 was made up of settlement expense and interest expense, including non-cash interest for the convertible note and stock-based settlement expense. Other income for the three months ended June 30, 2023 was made up of interest income from investments, partially offset by interest expense on long-term debt.
Previous report
Our other expense for the six months ended June 30, 2024 and 2023 was $767,000 and $281,000, respectively. Other expense for the six months ended June 30, 2024 was made up of settlement expense and interest expense, including non-cash interest for the convertible note and settlement of shares. Other expense for the six months ended June 30, 2023 almost entirely consisted of settlement expense; the net of interest income and interest expense was immaterial.
Previous report
On August 7, 2024, the Company entered into the Underwriting Agreement with Aegis for the 2024 Public Offering of 50,000,000 Units based on a public offering price of $0.20 per Unit, resulting in net proceeds of approximately $8.7 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. Each Unit consists of one Share of Common Stock (or one Pre-Funded warrant to purchase one share of Common Stock in lieu of one Share, two Series A warrants and one Series B Warrant. The 2024 Public Offering closed on August 8, 2024. Of the 50,000,000 Units sold in the 2024 Public Offering, 33,402,000 were issued with Shares and 16,598,000 were issued with Pre-Funded Warrants.
Previous report
The principal repayment amount of the 3i Note is $2,750,000. The associated costs and expenses incurred in connection with the Convertible Note Financing of approximately $80,000 will be amortized over the 12-month period ending December 31, 2024. The 3i Note required monthly interest-only payments at 9.0% per annum, payable in cash or, subject to certain conditions set forth in the Note, Common Stock, and had a maturity date of December 27, 2024, unless earlier converted or redeemed. An interest payment of $2,750 was made in December 2023 for the pro-rated interest due for December.
Previous report
For the quarter ended June 30, 2024, redemption amounts of $353,000 were used to repay a portion of the balance under the 3i Note, consisting of payments of $308,000 to the loan principal, $28,000 to interest, and $17,000 as a redemption premium. As of June 30, 2024, the outstanding principal balance of the note was $2.4 million and the remaining interest was $136,000.
Previous report
Other Long-Term Indebtedness
Reworded paragraphs (41)
Previous wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes for the three and six months ended June 30, 2024 and 2023 included in Part 1, Item 1, “Financial Statements,” within this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our audited consolidated financial statements and related notes for the fiscal years ended December 31, 2023 and 2022, included in Part II, Item 8, “Financial Statements and Supplementary Data,” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “Annual Report”). Certain statements included in this discussion and analysis constitute “forward-looking statements” that are subject to inherent risks and uncertainties that may adversely impact our operations and financial results. These risks and uncertainties are described in Item 1A,“Risk Factors” in our Annual Report, as well as in our other public filings with the SEC. Please also see the information under the heading “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this Quarterly Report. Percentage amounts included in this section have not in all cases been calculated on the basis of rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this section may not sum due to rounding.
Current wording
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes for the three and nine months ended September 30, 2024 and 2023 included in Part 1, Item 1, “Financial Statements,” within this Quarterly Report on Form 10-Q (this “Quarterly Report”) and our audited consolidated financial statements and related notes for the fiscal years ended December 31, 2023 and 2022, included in Part II, Item 8, “Financial Statements and Supplementary Data,” in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 28, 2024 (the “Annual Report”). Certain statements included in this discussion and analysis constitute “forward-looking statements” that are subject to inherent risks and uncertainties that may adversely impact our operations and financial results. These risks and uncertainties are discussed in this Quarterly Report, including in Item 1A “Risk Factors” of Part II of this Quarterly Report. Please also see the information under the heading “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this Quarterly Report. Percentage amounts included in this section have not in all cases been calculated on the basis of rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this section may not sum due to rounding.
Previous wording
Lead-acid batteries have always been the standard in RV and marine transportation vehicles. Our lithium-ion batteries offer superior capacity to our lead-acid competitors. Our batteries utilize lithium iron phosphate, and therefore, are expected to have a lifespan of approximately 12 years - three to four times the lifespan of certain lead-acid batteries and with ten times the number of charging cycles. Furthermore, we believe that our typical battery provides three times the power of the typical, lead-acid battery despite being half the weight (comparing, for example, a typical lead-acid battery like the Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery and assuming slow discharge at a 1C rate).
Current wording
Lead-acid batteries have historically been the standard in RV and marine transportation vehicles. Our lithium-ion batteries offer superior capacity to our lead-acid competitors with an expected lifespan of approximately 12 years— three to four times the lifespan of certain lead-acid batteries and with ten times the number of charging cycles. Furthermore, we believe that our typical battery provides three times the power of the typical, lead-acid battery despite being half the weight (comparing, for example, a typical lead-acid battery like the Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery and assuming slow discharge at a 1C rate).
Previous wording
In addition, in September 2023, we introduced a new 4.5 Ah 26650 lithium-ion phosphate battery cell, which will allow us to increase energy density by over 32% compared to traditional 3.4 Ah 26650 cells. The 12 volt 450 Ah battery, our first e360 battery incorporating our 4.5 Ah cell technology, was also introduced in September 2023.
Current wording
In addition, we offer a 4.5 Ah 26650 lithium-ion phosphate battery cell, which allows us to increase energy density by over 32% compared to traditional 3.4 Ah 26650 cells.
Previous wording
Additionally, in June 2023, we unveiled e360 SmartTalk, an innovative mobile app that allows the seamless integration and management of e360 Bluetooth-enabled LiFePO4 batteries. The technology enables users to wirelessly monitor and manage e360 batteries, providing a view of individual battery conditions and performance as well as a comprehensive view of an entire power bank consisting of multiple e360 batteries. The 48 Volt GC2 LiFePO4 battery was also introduced in June 2023 as our first e360 SmartTalk Battery for powering electric golf carts and other light electric vehicles (“LEVs”).
Current wording
We include our e360 SmartTalk, an innovative mobile app, in many of our battery models that allows the seamless integration and management of e360 Bluetooth-enabled LiFePO4 batteries. The technology enables users to wirelessly monitor and manage e360 batteries, providing a view of individual battery conditions and performance as well as a comprehensive view of an entire power bank consisting of multiple e360 batteries. The 48 Volt GC2 LiFePO4 battery was our first e360 SmartTalk Battery for powering electric golf carts and other light electric vehicles (“LEVs”).
Previous wording
In December 2023, we entered the home energy storage market with our introduction of two LiFePO4 battery storage solutions: a wall mounted all-in-one inverter and 10kW battery and an expandable server rack style battery cabinet system. We believe our new home energy storage product line will benefit from a fast-growing battery energy storage market, which is forecasted by Markets and Markets to grow at a 26.4% CAGR to reach $17.5 billion by 2028. Further, according to Clean Energy Group, approximately 3.2 million homes in the United States have solar panels installed, but only about 6.0% of residential solar systems have battery storage. Our home energy storage products are currently under development including UL testing and certification, in addition to other requirements for various Authorities Having Jurisdiction (“AHJ”).
Current wording
In December 2023, we entered the home energy storage market with our introduction of two LiFePO4 battery storage solutions: a wall mounted all-in-one inverter and 10kW battery and an expandable server rack style battery cabinet system. We believe our new home energy storage product line will benefit from a fast-growing battery energy storage market, which is forecasted by Markets and Markets to grow at a 26.4% CAGR to reach $17.5 billion by 2028. Further, according to Clean Energy Group, approximately 3.2 million homes in the United States have solar panels installed, but only about 6% of residential solar systems have battery storage. Our home energy storage products are currently under development including UL testing and certification, in addition to other requirements for various Authorities Having Jurisdiction (“AHJ”).
Previous wording
In January 2024, we introduced our next generation GC2 and Group 27 series LiFePO4 batteries. The new versions now include higher amp-hour options (4.0Ah and 4.5Ah cell technology) and the latest advancements in power technology features, including Expion360’s proprietary Vertical Heat Conduction™ internal heating, Bluetooth® and controller area network communication. We began taking pre-orders for the new GC2 and Group 27 batteries in the first quarter of 2024 with deliveries beginning in the second quarter of 2024.
Current wording
In January 2024, we introduced our next generation 12V GC2 and Group 27 series LiFePO4 batteries. The new versions now include higher amp-hour options (4.0Ah and 4.5Ah cell technology) and the latest advancements in power technology features, including Expion360’s proprietary Vertical Heat Conduction™ internal heating, Bluetooth® and controller area network (“CAN Bus”) communication. We began taking pre-orders of the new 12V GC2 and Group 27 batteries in the first quarter of 2024.We began delivering to customers in the second quarter of 2024.
Previous wording
On August 7, 2024, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp., the underwriter (“Aegis”), in connection with a firm commitment underwritten public offering (such transaction, the “2024 Public Offering”) of 50,000,000 units (“Units”), each Unit consisting of one share (each, a “Share”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), two Series A warrants each to purchase one share of Common Stock (each, a “Series A Warrant”) and one Series B Warrant to purchase such number of shares of Common Stock as determined in the Series B Warrant (each, a “Series B Warrant”).
Current wording
On August 8, 2024, the Company sold in a public offering (the “August 2024 Public Offering”), (i) 33,402,000 common units (the “Common Units,” Pre-Reverse Stock Split), each consisting of one share of common stock, two Series A warrants each to purchase one share of common stock (pre-Reverse Stock Split and pre-Adjustment, and each, a “Series A Warrant”) and one Series B warrant to purchase such number of shares of common stock as determined in the Series B warrant (each, a “Series B Warrant”), and (ii) 16,598,000 pre-funded units (the “Pre-Funded Units,” and together with the Common Units, the “Units,” Pre-Reverse Stock Split), each consisting of one pre-funded warrant to purchase one share of common stock (each, a “Pre-Funded Warrant”), two Series A Warrants, and one Series B Warrant, through the Underwriter.
Previous wording
In addition, the Company granted Aegis a 45-day option to purchase additional Shares and/or Pre-Funded Warrants and/or Series A Warrants and/or Series B Warrants, representing up to 15% of the number of the respective securities sold in the 2024 Public Offering, solely to cover over-allotments, if any. Aegis partially exercised its over-allotment option with respect to an additional 15,000,000 Series A Warrants and 7,500,000 Series B Warrants.
Current wording
In addition, the Company granted the Underwriter a 45-day option to purchase additional shares of common stock and/or Pre-Funded Warrants and/or Series A Warrants and/or Series B Warrants, representing up to 15% of the number of the respective securities sold in the August 2024 Public Offering, solely to cover over-allotments, if any. The Underwriter partially exercised its over-allotment option with respect to 15,000,000 Series A Warrants and 7,500,000 Series B Warrants (Pre-Reverse Stock Split).
Previous wording
On August 8, 2024, in connection with the 2024 Public Offering, the Company repaid the 3i Note, and the Company’s obligations under the 3i Note were fully satisfied and discharged.
Current wording
On August 8, 2024, in connection with the closing of the August 2024 Public Offering, the Company repaid that certain senior unsecured convertible note (the “3i Note”) issued to 3i, LP, and the Company’s obligations under the 3i Note were fully satisfied and discharged.
Previous wording
On July 1, 2024, the Company entered into a Mutual Termination Agreement with Alexander (the “Termination Agreement”), pursuant to which the parties agreed to terminate a certain provision in that certain underwriting agreement, dated March 31, 2022, between the Company and Alexander, as representative of the underwriters, which granted Alexander a right of first refusal to act as the Company’s financial advisor, book-runner, book-running manager, manager, placement agent, or underwriter in connection with any transaction contemplated or consummated by us (the “ROFR Provision”). In exchange for the termination of the ROFR Provision, and in connection with the closing of the 2024 Public Offering, the Company made a cash payment to Alexander in the amount of $400,900.
Current wording
On July 1, 2024, the Company entered into a Mutual Termination Agreement (the “Termination Agreement”) with Alexander Capital L.P. (“Alexander”), pursuant to which the parties agreed to terminate a certain provision in that certain underwriting agreement, dated March 31, 2022, between the Company and Alexander, as representative of the underwriters, which granted Alexander a right of first refusal to act as the Company’s financial advisor, book-runner, book-running manager, manager, placement agent, or underwriter in connection with any transaction contemplated or consummated by us (the “ROFR Provision”). In exchange for the termination of the ROFR Provision, and in connection with the closing of the August 2024 Public Offering, the Company made a cash payment to Alexander in the amount of $400,900.
Previous wording
In May 2024, we announced the launch of our Edge™ battery, which is designed for off-grid enthusiasts, bringing a new Expion360 option designed with performance, reliability, and versatility in mind. We began taking pre-orders for our Edge battery in the second quarter of 2024, with deliveries beginning in the third quarter of 2024.
Current wording
In May 2024, we announced the launch of our Edge™ battery, which is designed for off-grid enthusiasts, bringing a new Expion360 option designed with performance, reliability, and versatility in mind. The slim design adds greater flexibility during installation and comes in either 12V or 48V versions. We began taking pre-orders of our Edge battery in the second quarter of 2024. We began shipping the Edge in July 2024.
Previous wording
Key Factors Affecting Our BUSINESS AND Results OF OPERATIONS
Current wording
Key Factors AND TRENDS Affecting Our BUSINESS AND Results OF OPERATIONS
Previous wording
Demand from end users is affected by a number of factors, including, but not limited to, fuel costs, overall macroeconomic conditions, inflation, interest rates, and geopolitical pressures. During the COVID-19 pandemic, the increased adoption of the RV lifestyle benefited battery suppliers. However, more recently, we have seen a rise in fuel costs, higher interest rates, and other changes in macroeconomic conditions, which have resulted in decreased end user spending decisions which is affecting our industry. These conditions may continue to have a negative effect on our business, financial condition, and results of operations.
Current wording
Although our sales are primarily generated from dealers, wholesalers, and OEMs focused on the RV and marine markets, the demand for our products from these customers depends on consumer demand. Our sales are completed on a purchase order basis, and most are without firm, long-term revenue commitments or sales arrangements, which we expect to continue going forward. Accordingly, our growth prospects and future sales are subject to risks and uncertainties related in part to consumer demand for our products, which is affected by a number of factors, including fuel costs, discretionary spending, macroeconomic conditions, including inflation, changes in tariffs and interest rates, geopolitical pressures, and volatility in the RV [and marine] markets. For instance, during the COVID-19 pandemic, the increased adoption of the RV lifestyle benefited battery suppliers. However, in recent years we have seen a rise in fuel costs, higher interest rates, and other changes in macroeconomic conditions, which have resulted in decreased consumer spending decisions which is affecting our industry. These conditions may continue to have a negative effect on our business, financial condition, and results of operations.
Previous wording
While RV and marine applications drive current revenues, in December 2023, we announced our plans to enter the home energy storage market with our introduction of two LiFePO4 battery storage solutions. Our e360 Home Energy Storage System aims to provide a cost-effective, low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up. We see the vision of stored energy as a portable, moving concept, where stored energy can be transported from the home to other devices outside of the home. The success of our strategy depends on (i) our continued growth of these addressable markets in line with our expectations, and (ii) our ability to successfully enter these markets with commercially viable markets. We expect to incur significant marketing costs understanding these new markets, and researching and targeting customers in these end markets, which may not result in sales. We may lack the resources to execute our plans in home energy storage. If we fail to execute on this growth strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets.
Current wording
While RV and marine applications drive current revenues, in December 2023, we announced our plans to enter the home energy storage market with our introduction of two LiFePO4 battery storage solutions. Our e360 Home Energy Storage System aims to provide a cost-effective, low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up. The success of our strategy depends on (i) continued growth of these addressable markets in line with our expectations, and (ii) our ability to successfully enter these markets with commercially viable products. We expect to incur significant marketing costs understanding these new markets, and researching and targeting customers in these end markets, which may not result in sales. We may lack the resources to execute our plans in home energy storage. If we fail to execute on this growth strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets.
Previous wording
As of June 30, 2024, we sell 14 models of LiFEPO4 batteries, the Aura 600, and individual or bundled accessories for battery systems, seven of which we have released over the last 12 months. Our products are sold to different customers (i.e., dealers, wholesalers, OEMs, etc.) at differing prices and have varying costs. The average selling price and costs of goods sold for a particular product will vary with changes in the sales channel mix, volume of products sold, and the prices of such products sold relative to other products. While we work with our suppliers to limit price and supply cost increases, our products may see price increases resulting from a rise in supply costs due to currency fluctuations, inflation, and tariffs. Accessory and OEM sales typically have lower average selling prices and resulting margins, which could decrease our margins and negatively affect our growth or require us to increase the prices of our products. However, the benefits of increased sales volumes typically offset these reductions. The relative margins of products sold also impact our results of operation. As we introduce new products, we may see a change in product and sales channel mix which could result in period-to-period fluctuations in our overall gross margin.
Current wording
As of September 30, 2024, we sell 14 models of LiFEPO4 batteries, the Aura 600, and individual or bundled accessories for battery systems. Our products are sold to different customers (i.e., dealers, wholesalers, OEMs, etc.) at differing prices and have varying costs. The average selling price and costs of goods sold for a particular product will vary with changes in the sales channel mix, volume of products sold, and the prices of such products sold relative to other products. While we work with our suppliers to limit price and supply cost increases, our products may see price increases resulting from a rise in supply costs due to currency fluctuations, inflation, and tariffs. Accessory and OEM sales typically have lower average selling prices and resulting margins, which could decrease our margins and negatively affect our growth or require us to increase the prices of our products. However, the benefits of increased sales volumes typically offset these reductions. The relative margins of products sold also impact our results of operation. As we introduce new products, we may see a change in product and sales channel mix which could result in period-to-period fluctuations in our overall gross margin.
Previous wording
New technologies are rapidly emerging in the markets where we conduct business and many new energy storage technologies have been introduced over the past several years. Our ability to achieve significant and sustained penetration of key developing markets, including the RV and marine markets, will depend upon our success in developing these and other technologies, either independently, through joint ventures, or through acquisitions, which in each case may require significant capital and commitment of resources to research and development. Accordingly, we may need to seek additional debt and equity financing to fund our research and development efforts and planned growth.
Current wording
New technologies are rapidly emerging in the markets where we conduct business and many new energy storage technologies have been introduced over the past several years. Our ability to achieve significant and sustained penetration of key developing markets, including the RV, marine, residential energy storage, and small commercial energy storage markets, will depend upon our success in developing these and other technologies, either independently, through joint ventures, or through acquisitions, which in each case may require significant capital and commitment of resources to research and development. Accordingly, we may need to seek additional debt and equity financing to fund our research and development efforts and planned growth.
Previous wording
We are completing the final requirements to obtain UL Safety Certifications on our new 12V Group 27 100Ah and 132Ah batteries, and on our 48V GC2 battery. We anticipate receiving the UL Safety Certifications, and once this milestone has been achieved, all of the batteries produced by us will have a UL Safety Certification, emphasizing our commitment to quality, safety and service for our customers.
Current wording
We have completed the final requirements to obtain UL Safety Certifications on our new 12V Group 27 100Ah and 132Ah batteries, and on our 12V GC2 battery. Now that these certifications have been completed, all of the batteries produced by us will have a UL Safety Certification, emphasizing our commitment to quality, safety and service for our customers.
Previous wording
Interest expense consists of interest costs on loans with interest rates ranging from 3.75% to 10.0% and amortization of convertible note costs. The amortized convertible note costs were $167,000 and $334,000 for the three and six months ended June 30, 2024, and $0 for each of the same periods in the prior year.
Current wording
Interest expense consists of interest costs on loans with interest rates ranging from 3.75% to 10.0% and amortization of convertible note costs. The amortized convertible note costs were $334,000 and $667,000 for the three and nine months ended September 30, 2024, respectively, and include all associated expenses due to the convertible note being paid off in August, 2024. The costs were $0 for each of the same periods in 2023.
Previous wording
Our practice is to recognize interest and/or penalties related to income tax matters as income tax expense. We had no accrual for interest or penalties on our balance sheet at June 30, 2024 or December 31, 2023 and did not recognize any interest and/or penalties in our statement of operations for the three and six months ended June 30, 2024 and 2023, since there are no material unrecognized tax benefits. We do not expect any material change to the amount of unrecognized tax benefits to occur within the next twelve months.
Current wording
Our practice is to recognize interest and/or penalties related to income tax matters as income tax expense. We had no accrual for interest or penalties on our balance sheet at September 30, 2024 or December 31, 2023 and did not recognize any interest and/or penalties in our statement of operations for the three and nine months ended September 30, 2024 and 2023, since there are no material unrecognized tax benefits. We do not expect any material change to the amount of unrecognized tax benefits to occur within the next twelve months.
Previous wording
Total cost of sales for the three months ended June 30, 2024 decreased by $318,000, or 25.0%, compared to the three months ended June 30, 2023. Cost of sales were $1.3 million for the three months ended June 30, 2023 and $953,000 for the three months ended June 30, 2024. Cost of sales as a percentage of sales increased by 0.9% in that period.
Current wording
Cost of sales for the three months ended September 30, 2024 decreased by $197,000, or 13.9%, compared to the three months ended September 30, 2023. Cost of sales was $1.2 million for the three months ended September 30, 2024 and $1.4 million for the three months ended September 30, 2023. Cost of sales as a percentage of sales increased by 12.9% in the three months ended September 30, 2024 compared to the prior year period.
Previous wording
Total cost of sales for the six months ended June 30, 2024 decreased by $632,000, or 27.1%, compared to the six months ended June 30, 2023. Cost of sales were $2.3 million for the six months ended June 30, 2023 and $1.7 million for the six months ended June 30, 2024. Cost of sales as a percentage of sales increased by 3.4% in that period.
Current wording
Total cost of sales for the nine months ended September 30, 2024 decreased by $829,000, or 22.1%, compared to the nine months ended September 30, 2023. Cost of sales were $2.9 million for the nine months ended September 30, 2024 and $3.8 million for the nine months ended September 30, 2023. Cost of sales as a percentage of sales increased by 7.1% in the three months ended September 30, 2024 compared to the prior year period.
Previous wording
The percentage increase in cost of sales was primarily related to the decrease in net sales resulting in higher fixed overhead costs per unit.
Current wording
The percentage increase in cost of sales for both periods was primarily related to the decrease in net sales resulting in higher fixed overhead costs per unit, as well as the liquidation of non-core product increasing our cost of sales above what they would have been without the liquidation.
Previous wording
Our gross profit for the three months ended June 30, 2024 decreased by $129,000, or 28.4%, compared to the three months ended June 30, 2023. Gross profit was $454,000 for the three months ended June 30, 2023 and $325,000 for the three months ended June 30, 2024. Gross profit as a percentage of sales decreased by 0.9% for that period, from 26.3% for the three months ended June 30, 2023 to 25.5% for the three months ended June 30, 2024.
Current wording
Our gross profit for the three months ended September 30, 2024 decreased by $304,000, or 64.3%, compared to the three months ended September 30, 2023. Gross profit was $169,000 for the three months ended September 30, 2024 and $473,000 for the three months ended September 30, 2023. Gross profit as a percentage of sales decreased by 12.9% for that period, representing 12.1% for the three months ended September 30, 2024 and 25.0% for the three months ended September 30, 2023.
Previous wording
Our gross profit for the six months ended June 30, 2024 decreased by $350,000, or 39.0%, compared to the six months ended June 30, 2023. Gross profit was $898,000 for the six months ended June 30, 2023 and $548,000 for the six months ended June 30, 2024. Gross profit as a percentage of sales decreased by 3.4% for that period, from 27.8% for the six months ended June 30, 2023 to 24.4% for the six months ended June 30, 2024.
Current wording
Our gross profit for the nine months ended September 30, 2024 decreased by $654,000, or 47.7%, compared to the nine months ended September 30, 2023. Gross profit was $717,000 for the nine months ended September 30, 2024 and $1.4 million for the nine months ended September 30, 2023. Gross profit as a percentage of sales decreased by 7.1% for that period, representing 19.7% for the nine months ended September 30, 2024 and 26.8% for the nine months ended September 30, 2023.
Previous wording
The decrease in gross profit for both periods was primarily attributable to decreases in sales which drove higher fixed overhead costs per unit.
Current wording
The decrease in gross profit for both periods was primarily attributable to decreases in sales which drove higher fixed overhead costs per unit, as well as the liquidation of non-core product increasing our cost of sales above what they would have been without the liquidation.
Previous wording
During the three months ended June 30, 2024 and 2023, settlement expense totaled $309,000 and $0, respectively, while interest expense totaled $251,000 and $26,000, respectively. During the six months ended June 30, 2024 and 2023, settlement expense totaled $309,000 and $282,000, respectively, interest income totaled $45,000 and $68,000, respectively, and interest expense totaled $504,000 and $65,000, respectively.
Current wording
During the three months ended September 30, 2024 and 2023, change in fair value of warrants totaled $5.9 million and $0, respectively, settlement expense totaled $401,000 and $0, respectively, while interest expense totaled $468,000 and $27,000, respectively. During the nine months ended September 30, 2024 and 2023, change in fair value of warrants totaled $5.9 million and $0, respectively, settlement expense totaled $710,000 and $282,000, respectively, interest income totaled $60,000 and $101,000, respectively, and interest expense totaled $972,000 and $92,000, respectively.
Previous wording
Our net loss for the three months ended June 30, 2024 and 2023 was $2.2 million and $1.5 million, respectively. Our net loss for the six months ended June 30, 2024 and 2023 was $4.4 million and $3.5 million, respectively. The increase in net loss for both periods was primarily the result of lower net sales for the period ended June 30, 2024. Additionally, for the six months ended June 30, 2024, we recognized $1.1 million in non-cash operating costs, including $439,000 for stock-based compensation, $334,000 for amortization of convertible note costs, and $209,000 for stock-based settlement expense. For the six months ended June 30, 2023, we recognized $338,000 in non-cash operating costs, including $252,000 for stock-based settlement expense and $102,000 for depreciation.
Current wording
Our net loss for the three months ended September 30, 2024 and 2023 was $8.8 million and $1.8 million, respectively. Our net loss for the nine months ended September 30, 2024 and 2023 was $13.2 million and $5.3 million, respectively. The increase in net loss for both periods was primarily the result of lower net sales and higher other expenses due to change in fair value of warrants and settlement expense for the period ended September 30, 2024. Additionally, for the nine months ended September 30, 2024, we recognized $7.5 million in non-cash operating costs, including $5.9 million in increase in derivative liability and $667 in amortization of convertible note costs. For the nine months ended September 30, 2023, we recognized $580,000 in non-cash operating costs, including $252,000 for stock-based settlement expense, $190,000 in stock-based compensation, and $154,000 for depreciation.
Previous wording
We generated negative cash flows from operating activities of $3.4 million for the six months ended June 30, 2024, compared to negative cash flows of $3.5 million for the same period in 2023. Factors affecting operating cash flows during both periods included:
Current wording
We generated negative cash flows from operating activities of $6.6 million for the nine months ended September 30, 2024, compared to negative cash flows of $4.2 million for the same period in 2023. Factors affecting operating cash flows during both periods included:
Previous wording
Cash provided by investing activities was $77,000 and $4,000 for the six months ended June 30, 2024 and 2023, respectively. Purchases of $11,000 in 2024 were for quality assurance equipment and purchases of $34,000 in 2023 included $22,000 for tooling and molds and $10,000 for improvements on vehicles. We sold three vehicles during the six months ended June 30, 2024, for net proceeds of $88,000, compared to the sale of one vehicle for net proceeds of $38,000 for the six months ended June 30, 2023.
Current wording
Cash provided by investing activities was $122,000 and $17,000 for the nine months ended September 30, 2024 and 2023, respectively. Purchases of $11,000 in 2024 were for quality assurance equipment and purchases of $20,000 in 2023 included $11,000 for quality assurance testing equipment and $9,000 for improvements on vehicles. We sold three vehicles as well as fixed assets associated with the property for which we terminated the lease during the nine months ended September 30, 2024, and sold one vehicle during the nine months ended September 30, 2023.
Previous wording
Cash provided by financing activities was $299,000 for the six months ended June 30, 2024 and cash used in financing activities was $87,000 for the six months ended June 30, 2023. For the six months ended June 30, 2024, we received net proceeds from issuance of Common Stock of $828,000, offset by principal payments on a convertible note of $366,000, principal payments on long-term debt of $102,000, and principal payments on stockholder promissory notes of $63,000. For the six months ended June 30, 2023, we made principal payments on long-term debt of $137,000, which were offset by net cash proceeds of $50,000 from the exercise of warrants.
Current wording
Cash provided by financing activities was $5.9 million for the nine months ended September 30, 2024 and cash used in financing activities was $99,000 for the nine months ended September 30, 2023. For the nine months ended September 30, 2024, we received net proceeds from issuance of common stock of $9.5 million and from issuance of warrants of $31,000, offset by principal payments on the 3i Note of $2.8 million, principal payments on long-term debt of $109,000, and principal payments on stockholder promissory notes of $763,000. For the nine months ended September 30, 2023, we made principal payments on long-term debt of $149,000, which was offset by net cash proceeds of $50,000 from the exercise of warrants.
Previous wording
Our operations have been financed primarily through net proceeds from sales of our Common Stock and equity and debt financings. As of June 30, 2024 and December 31, 2023, our current assets exceeded current liabilities by $1.5 million and $4.3 million, respectively, and we had cash and cash equivalents of $902,000 and $3.9 million, respectively.
Current wording
Our operations have been financed primarily through net proceeds from sales of our Common stock and equity and debt financings. As of September 30, 2024 and December 31, 2023, our current assets exceeded current liabilities by $2.0 million and $4.3 million, respectively, and we had cash and cash equivalents of $3.3 million and $3.9 million, respectively.
Previous wording
As of June 30, 2024, we expect our short-term liquidity requirements to include (a) principal debt payments totaling approximately $3.1 million net of amortization and (b) lease obligation payments of approximately $732,000, including imputed interest.
Current wording
As of September 30, 2024, we expect our short-term liquidity requirements to include (a) principal debt payments totaling approximately $32,000 net of amortization and (b) lease obligation payments of approximately $317,000, including imputed interest.
Previous wording
Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations. We expect to continue to incur additional losses for the foreseeable future, and we may need to raise additional debt or equity financing to expand our presence in the marketplace, develop new products, achieve operating efficiencies, and accomplish our long-term business plans over the next several years. There can be no assurance as to the availability or terms upon which such financing and capital might be available to us. For the three and six months ended June 30, 2024 and 2023, we sustained recurring losses and negative cash flows from operations. These factors raise substantial doubt about our ability to continue as a going concern within twelve months from the date of issuance of the financial statements for the quarterly period ended June 30, 2024. However, we are working to address our cash flow challenges, including raising additional capital, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses. Refer to the risk factor entitled “Our audited financial statements include a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative financial trends could result in our inability to continue as a going concern” in Item 1A, “Risk Factors” in our Annual Report.
Current wording
Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations. We expect to continue to incur additional losses for the foreseeable future, and we may need to raise additional debt or equity financing to expand our presence in the marketplace, develop new products, achieve operating efficiencies, and accomplish our long-term business plans over the next several years. There can be no assurance as to the availability or terms upon which such financing and capital might be available to us. For the three and nine months ended September 30, 2024 and 2023, we sustained recurring losses and negative cash flows from operations. These factors raise substantial doubt about our ability to continue as a going concern within twelve months from the date of issuance of the financial statements for the quarterly period ended September 30, 2024. However, we are working to address our cash flow challenges, including raising additional capital, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses. Refer to the risk factor entitled “Our audited financial statements include a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative financial trends could result in our inability to continue as a going concern” in Item 1A, “Risk Factors” in our Annual Report.
Previous wording
On December 27, 2023, we entered into a securities purchase agreement with 3i, pursuant to which we sold, and 3i purchased, the 3i Note in the aggregate original principal amount of $2,750,000 (the “Convertible Note Financing”). The gross proceeds to us were $2.5 million, prior to the payment of legal fees and transaction expenses. As of June 30, 2024, 26,025 shares of Common Stock have been issued to 3i for the payment of $76,000 in interest under the 3i Note.
Current wording
On December 27, 2023, we entered into a securities purchase agreement with 3i, pursuant to which we sold, and 3i purchased, the 3i Note in the aggregate original principal amount of $2,750,000 (the “Convertible Note Financing”). The gross proceeds to us were $2.5 million, prior to the payment of legal fees and transaction expenses. On August 8, 2024, in connection with the closing of the August 2024 Public Offering, the Company repaid the 3i Note, and the Company’s obligations under the 3i Note were fully satisfied and discharged. Prior to the closing of the August 2024 Public Offering, the Company had issued 415 shares of common stock (post-Reverse Stock Split) for the payment of $90,839 in interest
Previous wording
On December 27, 2023, we entered into the Common Stock Purchase Agreement, pursuant to which we had the right, but not the obligation, to sell to Tumim, and Tumim was obligated to purchase, up to the lesser of (a) $20,000,000 in aggregate gross purchase price of newly issued Common Stock and (b) the Exchange Cap (as defined in the purchase agreement) (the “Equity Line of Credit”). For the three and six months ended June 30, 2024, we sold 38,224 and 433,591 shares of Common Stock for an aggregate amount of $125,153 and $828,491.
Current wording
On December 27, 2023, we entered into the Common Stock Purchase Agreement, pursuant to which we had the right, but not the obligation, to sell to Tumim, and Tumim was obligated to purchase, up to the lesser of (a) $20,000,000 in aggregate gross purchase price of newly issued Common stock and (b) the Exchange Cap (as defined in the purchase agreement) (the “Equity Line of Credit”). In connection with the August 2024 Public Offering, the Company and Tumim mutually agreed to terminate the Equity Line of Credit, effective immediately upon the closing of the August 2024 Public Offering. Prior to the closing of the August 2024 Public Offering, the Company had sold 4,336 shares of common stock (post-Reverse Stock Split) under the Equity Line of Credit for an aggregate amount of $828,491, of which $434,958 was used to repay a portion of the balance under the 3i Note, consisting of $380,042 to the loan principal, $34,204 to interest, and $20,712 as a redemption premium.
Previous wording
Stockholder promissory notes had an outstanding principal balance of $700,000 as of June 30, 2024. The stockholder promissory notes require monthly interest-only payments at 10% per annum and mature at various dates from September 2024 to December 2024. See Note 6 – “Stockholder Promissory Notes” in this Quarterly Report for further information on such stockholder promissory notes.
Current wording
Stockholder promissory notes had an outstanding principal balance of $0 as of September 30, 2024, as they were repaid in August 2024. See Note 6 – “Stockholder Promissory Notes” in this Quarterly Report for further information on stockholder promissory notes.
Previous wording
Our estimated future obligations consist of long-term operating lease liabilities. As of June 30, 2024, we had $2.5 million in long-term operating lease liabilities.
Current wording
Our estimated future obligations consist of total operating lease liabilities. As of September 30, 2024, we had $867,000 in total operating lease liabilities, including the current portion.
Previous wording
As of June 30, 2024, our long-term debt totaled $248,000, which consists of $145,000 outstanding under a COVID-19 Economic Injury Disaster Loan, $98,000 outstanding under vehicle financing arrangements, and an equipment loan for $5,000.
Current wording
As of September 30, 2024, our long-term debt totaled $240,000, including the current portion, which consists of $144,000 outstanding under a COVID-19 Economic Injury Disaster Loan, $92,000 outstanding under vehicle financing arrangements, and an equipment loan for $4,000.
Previous wording
We periodically review our inventory for evidence of slow-moving or obsolete inventory and provide for an allowance when considered necessary. We have determined that no such reserve was necessary as of June 30, 2024 or December 31, 2023. We prepay for inventory purchases from foreign suppliers and include inventory in transit where title had passed to us but had not yet been physically received.
Current wording
The Company periodically reviews its inventory for evidence of slow-moving or obsolete inventory and provides for an allowance when considered necessary. The Company determined that no such reserve was necessary as of September 30, 2024 or December 31, 2023. The Company prepays for inventory purchases from foreign suppliers and includes inventory in transit where title had passed to the Company but had not yet been physically received.
Previous wording
We determine if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets represent our right to use an underlying asset during the lease term, and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on our Balance Sheets. We do not have any finance leases. We account for lease and non-lease components as a single lease component for all its leases.
Current wording
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s Balance Sheets. The Company does not have any finance leases. The Company accounts for lease and non-lease components as a single lease component for all its leases.
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Previous report — wording carried elsewhere
Settlement with Alexander Capital L.P.
Previous report — wording carried elsewhere
Although most of our current sales are generated through dealers, wholesalers, and OEMs focused on the RV and marine markets, ultimate demand for our products is reliant on demand from consumers. Our sales are completed on a purchase order basis, and most are without firm, long-term revenue commitments or sales arrangements, which we expect to continue going forward. Therefore, our future sales will be subject to risks and uncertainties related to end user demand.
Previous report — wording carried elsewhere
Effective as of August 8, 2024, in connection with the 2024 Public Offering, the Company and Tumim mutually agreed to terminate the Common Stock Purchase Agreement.