Expion360 Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and related notes for the three months ended March 31, 2025 and 2024 included elsewhere in this Quarterly Report, as well as our audited financial statements and related notes for the fiscal years ended December 31, 2024 and 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025 (the “Annual Report”). Our future financial condition and results of operations, as well as any forward-looking statements, 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 Part II, Item 1A “Risk Factors” of this Quarterly Report and “Cautionary Note Regarding Forward-Looking Statements and Industry Data,” as well as in Part I, Item 1A, “Risk Factors” of the Annual 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 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 the unaudited interim financial statements and related notes for the three and six months ended June 30, 2025 and 2024 included elsewhere in this Quarterly Report, as well as our audited financial statements and related notes for the fiscal years ended December 31, 2024 and 2023, included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025 (the “Annual Report”). Our future financial condition and results of operations, as well as any forward-looking statements, 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 Part II, Item 1A “Risk Factors” of this Quarterly Report and “Cautionary Note Regarding Forward-Looking Statements and Industry Data,” as well as in Part I, Item 1A, “Risk Factors” of the Annual 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 financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this section may not sum due to rounding.

Previous wording

Our primary target markets are currently the RV, marine, and home energy storage industries. We believe we are well-positioned to capitalize on the rapid market conversion from lead-acid to lithium batteries as the primary method of power sourcing in these industries. We are primarily focused on expanding within the home energy storage market with the introduction of our e360 Home Energy Storage Solutions, and we believe we have established a new standard in the industry for barrier price, flexibility, and integration with this offering. Along with the RV, marine and home energy storage markets, we aim to provide additional capacities to the expanding electric forklift and industrial material handling markets.

Current wording

Our primary target markets are currently the RV, marine, and home energy storage industries. We believe we are well-positioned to capitalize on the rapid market conversion from lead-acid to lithium batteries as the primary method of power sourcing in these industries. We are primarily focused on expanding within the home energy storage market with the introduction of our e360 Home Energy Storage Solutions, and we believe we have established a new standard in the industry for price, flexibility, and integration with this offering. Along with the RV, marine and home energy storage markets, we aim to provide additional capacities to the expanding electric forklift and industrial material handling markets.

Previous wording

We launched our e360 product line, which is manufactured for the RV and marine industries, in December 2020. The e360 product line, through its sales growth, has shown to be a preferred conversion solution for lead-acid batteries. In December 2023, we announced our entrance into the home energy storage market with our introduction of two LiFePO4 battery storage solutions that enable residential and small business customers to create their own stable micro-energy grid and lessen the impact of increasing power fluctuations and outages. As of January 2025, we have begun shipping orders of our e360 Home Energy Storage Solutions.

Current wording

We launched our e360 product line, which is manufactured for the RV and marine industries, in December 2020. The e360 product line, through its sales growth, has shown to be a preferred conversion solution for lead-acid batteries. In December 2023, we announced our entrance into the home energy storage market with our introduction of two LiFePO4 battery storage solutions that enable residential and small business customers to create their own stable micro-energy grid and lessen the impact of increasing power fluctuations and outages. We began shipping orders of our e360 Home Energy Storage Solutions in early 2025.

Previous wording

In December 2024, we announced a letter of intent to collaborate with another leading innovator in energy storage solutions to pursue funding for and to establish a state-of-the-art manufacturing facility in the United States and to collaborate on battery cell and product designs to make a lasting impact on the energy storage industry.

Current wording

In December 2024, we announced our intent to collaborate with another leading innovator in energy storage solutions to pursue funding for and to establish a state-of-the-art manufacturing facility in the United States and to collaborate on battery cell and product designs to make a lasting impact on the energy storage industry, and we are continuing to work toward this goal.

Previous wording

Total cost of sales for the three months ended March 31, 2025 increased by $798,000, or 107%, compared to the three months ended March 31, 2024. However, cost of sales as a percent of sales decreased by 1.6% compared to the prior year period, from 77.1% to 75.5%. Cost of sales was $1.5 million for the three months ended March 31, 2025 and $749,000 for the three months ended March 31, 2024. The percentage decrease in cost of sales was primarily related to the increase in net sales resulting in lower fixed overhead costs per unit.

Current wording

The percentage increase in cost of sales was primarily related to the product mix sold in different periods.

Previous wording

Our gross profit for the three months ended March 31, 2025 increased by $279,000, or 125%, compared to the three months ended March 31, 2024. Gross profit was $502,000 for the three months ended March 31, 2025 and $223,000 for the three months ended March 31, 2024. Gross profit as a percentage of sales increased by 1.6% compared to the prior year period. The increase in gross profit for the three months ended March 31, 2025 was primarily attributable to the increase in net sales and lower cost of goods sold as a percentage of sales.

Current wording

Our gross profit for the three months ended June 30, 2025 increased by $297,000, or 91.3%, compared to the three months ended June 30, 2024. Gross profit was $623,000 for the three months ended June 30, 2025 and $325,000 for the three months ended June 30, 2024. Gross profit as a percentage of sales decreased by 4.6% for that period, from 25.5% for the three months ended June 30, 2024 to 20.8% for the three months ended June 30, 2025.

Previous wording

Net cash used in operating activities was $1.2 million for the three months ended March 31, 2025, compared to $1.7 million for the prior year period. The decrease in cash used was primarily driven by improved operating performance and favorable changes in working capital, including:

Current wording

Net cash used in operating activities was $1.6 million for the six months ended June 30, 2025, compared to $3.4 million for the prior year period. The decrease in cash used was primarily driven by improved operating performance and favorable changes in working capital, including:

Previous wording

Cash provided by investing activities was $3,000 and $77,000 for the three months ended March 31, 2025 and 2024, respectively. We sold one vehicle in the three months ended March 31, 2025, and sold three vehicles during the three months ended March 31, 2024, for net proceeds of $3,000 and $88,000, respectively.

Current wording

Cash provided by investing activities was $4,000 and $77,000 for the six months ended June 30, 2025 and 2024, respectively. We sold three vehicles in the six months ended June 30, 2025, and sold three vehicles during the six months ended June 30, 2024, for cash proceeds of $4,000 and $88,000, respectively. One vehicle sold in the six months ended June 30, 2025 was traded for services rendered and no cash was exchanged.

Previous wording

Cash provided by financing activities in the three months ended March 31, 2025 was $1.3 million , while cash used in financing activities was $75,000 for the three months ended March 31, 2024. For the three months ended March 31, 2025, we received net proceeds of $1.8 million from issuance of common stock, offset by payments of $8,000 toward principal on long-term debt. 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.

Current wording

Cash provided by financing activities in the six months ended June 30, 2025 and 2024 was $1.7 million and $299,000, respectively. For the six months ended June 30, 2025, we received net proceeds of $1.8 million from issuance of common stock, offset by payments of $17,000 toward principal on long-term debt. For the six months ended June 30, 2024, net proceeds from issuance of common stock of $828,000 was partially offset by payment of long-term debt principal of $102,000, payment of principal on a stockholder note in the amount of $62,500, and principal payments toward the short-term convertible note of $366,000.

Previous wording

Our operations have been financed primarily through net proceeds from the sale of securities and from borrowings. As of March 31, 2025, our working capital improved to $2.7 million compared to $2.0 million as of December 31, 2024, and we had cash and cash equivalents of $1.1 million and $548,000, as of March 31, 2025 and December 31, 2024, respectively.

Current wording

Our operations have been financed primarily through net proceeds from the sale of securities and from borrowings. As of June 30, 2025, our working capital was $1.6 million compared to $2.0 million as of December 31, 2024, and we had cash and cash equivalents of $685,000 and $548,000 as of June 30, 2025 and December 31, 2024, respectively.

Previous wording

As of March 31, 2025, we expect our short-term liquidity requirements to include (a) scheduled principal debt payments of approximately $31,000, (b) lease obligation payments of approximately $256,000, including imputed interest, and (c) a suspended liability payment of $4.5 million, which represents an obligation under our Series s Warrants subject to payment deferral mechanisms that are being actively managed.

Current wording

As of June 30, 2025, we expect our short-term liquidity requirements to include (a) scheduled principal debt payments of approximately $31,000, (b) lease obligation payments of approximately $383,000, including imputed interest, and (c) a suspended liability payment of $4.5 million, which represents an obligation under our Series A Warrants subject to payment deferral mechanisms that are being actively managed.

Previous wording

We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next 12 months. We continue to experience recurring operating losses and negative cash flows from operations, with $1.2 million used in operating activities during the three months ended March 31, 2025. While management has implemented cost containment measures and is working to address its cash flow challenges, including by raising additional capital, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses, material uncertainty remains. Without additional funding or a material increase in revenue generation, we may not be able to meet our obligations as they become due. These factors raise substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements for the year ended March 31, 2025 are issued. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves 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 its long-term business plan 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. See also 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 Part I, Item 1A, “Risk Factors” of the Annual Report.

Current wording

We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next 12 months. We continue to experience recurring operating losses and negative cash flows from operations, with $1.6 million used in operating activities during the six months ended June 30, 2025. While management has implemented cost containment measures and is working to address its cash flow challenges, including by raising additional capital, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses, material uncertainty remains. Without additional funding or a material increase in revenue generation, we may not be able to meet our obligations as they become due. These factors raise substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements for the year ended December 31, 2024 are issued. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves 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 its long-term business plan 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. See also 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 Part I, Item 1A, “Risk Factors” of the Annual Report.

Previous wording

As of March 31, 2025, our long-term debt was approximately $222,000, of which $31,000 is due within the next 12 months. This balance includes $142,000 outstanding under a COVID-19 Economic Injury Disaster Loan, $78,000 outstanding under vehicle financing arrangements, and an equipment loan for $2,000.

Current wording

As of June 30, 2025, our long-term debt was approximately $214,000, of which $31,000 is due within the next 12 months. This balance includes $141,000 outstanding under a COVID-19 Economic Injury Disaster Loan, $72,000 outstanding under vehicle financing arrangements, and an equipment loan with an outstanding balance of $700.

Previous wording

As of March 31, 2025, we had three notes payable to GM Financial for vehicles. In addition, a commercial line secured in April 2022 for $300,000 was renewed in April 2023 and increased to $350,000, and renewed again in April 2024 and April 2025 for the same $350,000 amount. This commercial line may be used to finance vehicle purchases and expires in April 2026. The notes are payable in aggregate monthly installments of $2,560, including interest at rates ranging from 6.14% to 7.29% per annum, mature at various dates from October 2027 to May 2028, and are secured by the related vehicles.

Current wording

As of June 30, 2025, we had three notes payable to GM Financial for vehicles. In addition, a commercial line secured in April 2022 for $300,000 was renewed in April 2023 and increased to $350,000, and renewed again in April 2024 and April 2025 for $350,000 each time. This commercial line may be used to finance vehicle purchases and expires in April 2026. The notes are payable in aggregate monthly installments of $2,560, including interest at rates ranging from 6.14% to 7.29% per annum, mature at various dates from October 2027 to May 2028, and are secured by the related vehicles.

Previous wording

Our estimated future obligations consist of long-term operating lease liabilities. As of March 31, 2025, the Company had $732,000 in long-term operating lease liabilities.

Current wording

Our estimated future obligations consist of long-term operating lease liabilities. As of June 30, 2025, the Company had $864,000 in long-term operating lease liabilities.

Previous wording

We discount unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily determined, our incremental borrowing rate (IBR).

Current wording

We discount unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily determined, our incremental borrowing rate.