XPON 10-Q
Expion Energy, Inc. (XPON)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly
period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ______.
Commission File
Number
(Exact name of registrant as specified in its charter)
(state or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
(Address of principal executive offices, including zip code)
Registrant’s
telephone number, including area code: (
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| The
|
Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject
to filing requirements for the past 90 days.
Indicate by check
mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company |
If an emerging growth
company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
As of November 13, 2025, there were shares of the registrant’s common stock, par value $0.001 per share, outstanding.
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q (this “Quarterly Report”) includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements in this Quarterly Report, other than statements of historical fact, are forward-looking statements, including, without limitation, projections regarding the markets in which we operate, plans and objectives for future operations, estimates of future financial condition, results of operations or liquidity, proposed new products or services, expected capital expenditures, proposed financings, future economic conditions or performance, and any estimates or assumptions underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “will,” “expects,” “plans,” “should,” “anticipates,” “intends,” “seeks,” “believes,” “estimates,” “potential,” “forecasts,” “continue,” or the negative thereof, or other comparable terminology. All forward-looking statements included in this Quarterly Report are made as of the date hereof and are based on information available to us as of such date. Although we believe the expectations reflected in our forward-looking statements are reasonable, there can be no assurance that such expectations or any of our forward-looking statements will prove to be accurate. Actual results may differ, and could differ materially, from those results expressed in or implied by the forward-looking statements. Investors are cautioned not to unduly rely on any such forward-looking statements.
Forward-looking statements are neither statements of historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations, and assumptions regarding our business, industry, plans and strategies, anticipated events and trends, and other future conditions. Because forward-looking statements relate to the future, they are subject to considerable risks, uncertainties and changes in circumstances that are difficult to predict and may be outside our control. Our actual financial condition, results of operations, liquidity and business outcomes may differ materially from those expressed in or implied by these forward-looking statements.
Important factors that could cause our actual results to differ materially from those indicated in the forward-looking statements include, among others, the following:
| · | We operate in an extremely competitive industry and are subject to pricing pressures. |
| · | We have a history of losses. As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. |
| · | 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. |
| · | Our results of operations could be adversely affected by changes in the cost and availability of raw materials and we are dependent on third-party manufacturers and suppliers. |
| · | Increases in costs, disruption of supply or shortage of any of our battery components, such as electronic and mechanical parts, or raw materials used in the production of such parts, could harm our business. |
| · | We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business. |
| · | Our business and future growth depends on the needs and success of our customers. |
| · | We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our sales. |
| · | If we fail to expand our sales and distribution channels, our business could suffer. |
| · | The uncertainty in global economic conditions could negatively affect our results of operations. |
| · | We are currently, and will likely continue to be, dependent on our two warehouse facilities. If our facilities become inoperable for any reason, our ability to produce our products could be negatively impacted. |
| · | We could face potential product liability or warranty claims relating to our products, including the components thereof, which could reduce market adoption, result in reputation damage, and result in significant costs and liabilities, which would reduce our profitability. |
| · | Our operations expose us to litigation, tax, environmental, and other legal compliance risks. |
| · | Our failure to introduce new products and product enhancements that respond to customer and end consumer demand, and any broad market acceptance of new technologies introduced by our competitors, could adversely affect our business. |
| · | We may not be able to adequately protect our proprietary intellectual property and technology and we may need to defend ourselves against intellectual property infringement claims. |
| · | Any acquisitions that we complete may dilute stockholder ownership interests in the Company, may have adverse effects on our financial condition and results of operations and may cause unanticipated liabilities. |
| · | If our electronic data is compromised, or we experience a failure in our information technology or storage systems, our business could be significantly harmed. |
| · | Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements and our stockholders may be diluted by future securities offerings. |
| · | Our stock price may fluctuate significantly, and you may lose all or a part of your investment. |
| · | Sales of substantial amounts of our securities in the public markets, or the perception that such sales might occur, could reduce the price of our securities and may dilute your voting power and your ownership interest in us. |
| · | Our long-term lease and debt obligations could adversely affect our ability to raise additional capital to fund operations and limit our ability to enter into certain transactions. |
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Moreover, new risks and uncertainties emerge occasionally, and it is not possible for us to predict all risks and uncertainties, nor can we assess the impact of all factors on our business, or the extent to which any factor, or combination of factors, may cause our actual future results to be materially different from any results expressed in or implied by any forward-looking statements. Except as required by applicable law or the listing rules of the Nasdaq Stock Market, we expressly disclaim any intent or obligation to update any forward-looking statements. If we do update or correct any forward-looking statements, investors should not conclude we will make additional updates or corrections. We qualify all of our forward-looking statements by reference to these cautionary statements.
INDUSTRY AND MARKET DATA
This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties, as well as our own projections and estimates. All of the market data used in this report involve a number of assumptions and limitations, and investors are cautioned not to unduly rely on such data. Industry publications and research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
Our estimates of the potential market opportunities for our products include several key assumptions based on our industry knowledge, industry publications and research, and other surveys. While we believe our internal assumptions are reasonable, no independent source has verified such assumptions.
TRADEMARKS
This Quarterly Report includes trademarks, tradenames, and service marks that are our property or the property of others. Solely for convenience, such trademarks and tradenames sometimes appear without any “™” or “®” symbol. However, failure to include such symbols is not intended to suggest, in any way, that we will not assert our rights or the rights of any applicable licensor, to these trademarks and tradenames.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXPION360 INC.
BALANCE SHEETS
| As of September 30, 2025 (Unaudited) | As of December 31, 2024 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid/in-transit inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment | ||||||||
| Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | ||||||||
| Other Assets | ||||||||
| Operating leases – right-of-use assets | ||||||||
| Deposits | ||||||||
| Total other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Current portion of operating lease liability | ||||||||
| Current portion of long-term debt | ||||||||
| Suspended liability | ||||||||
| Total current liabilities | ||||||||
| Long-term debt, net of current portion and discount | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Total liabilities | ||||||||
| Stockholders’ equity | ||||||||
| Preferred stock, par value $ per share; shares authorized; shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Common stock, par value $ per share; shares authorized; and shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
1
EXPION360 INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) / expense | ||||||||||||||||
| Interest income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ||||||||||||||||
| Loss on sale of property and equipment | ||||||||||||||||
| Settlement expense | ||||||||||||||||
| Other (income) / expense | ( | ) | ( | ) | ||||||||||||
| Total other (income) / expense | ( | ) | ( | ) | ||||||||||||
| Income / (Loss) before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Franchise taxes | ||||||||||||||||
| Net income / (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income / (loss) per share: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
The accompanying notes are an integral part of these financial statements.
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EXPION360 INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Equity | ||||||||||||||
| Shares | Amount | ||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | ( |
) | $ | |||||||||||
| Stock issued under equity line of credit | |||||||||||||||||
| Proceeds received from cashless exercise of warrants | ( |
) | ( |
) | |||||||||||||
| Stock issued for interest payment | |||||||||||||||||
| Stock-based compensation | — | ||||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Issuance of RSUs | — | ||||||||||||||||
| Settlement of vested RSUs | |||||||||||||||||
| Settlement of commitment shares | ( |
) | |||||||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||
| Balance at March 31, 2024 | ( |
) | |||||||||||||||
| Stock issued for ELOC | |||||||||||||||||
| Stock issued for interest payment | |||||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Issuance of RSUs | — | ||||||||||||||||
| Settlement of vested RSUs | |||||||||||||||||
| Stock issued as a result of settlement | |||||||||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||
| Balance at June 30, 2024 | ( |
) | |||||||||||||||
| Stock issued for interest payment | |||||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Issuance and settlement of RSUs | |||||||||||||||||
| Issuance of shares and pre-funded warrants, follow-on offering, net of issuance costs | |||||||||||||||||
| Proceeds from exercise of Series B warrants | |||||||||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( |
) | $ | |||||||||||
| Balance at December 31, 2024 | $ | $ | $ | ( |
) | $ | |||||||||||
| Issuance of shares, net of issuance costs | |||||||||||||||||
| Issuance of pre-funded warrants | |||||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||
| Balance at March 31, 2025 | ( |
) | |||||||||||||||
| Issuance and settlement of RSUs | |||||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Issuance of shares in exchange for services | |||||||||||||||||
| Net loss | — | ( |
) | ( |
) | ||||||||||||
| Balance at June 30, 2025 | ( |
) | |||||||||||||||
| Issuance of stock options | — | ||||||||||||||||
| Issuance of shares in exchange for services | |||||||||||||||||
| Proceeds from exercise of warrants, net of costs | |||||||||||||||||
| Net income | — | ||||||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | ( |
) | $ | |||||||||||
The accompanying notes are an integral part of these financial statements.
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EXPION360 INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
| For the Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Amortization of convertible note costs | ||||||||
| Loss on sale of property and equipment | ||||||||
| Stock-based settlement | ||||||||
| Stock-based compensation | ||||||||
| Issuance of common stock in exchange for services | ||||||||
| Non-cash expense in exchange for asset disposal | ||||||||
| Decrease in right-of-use assets and lease liabilities | ( | ) | ||||||
| Increase in derivative liability | ||||||||
| Decrease in suspended liability | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| (Increase) / decrease in accounts receivable | ( | ) | ||||||
| Decrease in inventory | ||||||||
| (Increase) / decrease in prepaid/in-transit inventory | ( | ) | ||||||
| Increase in prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| (Increase) / decrease in deposits | ( | ) | ||||||
| Increase in accounts payable | ||||||||
| Increase / (decrease) in customer deposits | ( | ) | ||||||
| Increase / (decrease) in accrued expenses and other current liabilities | ( | ) | ||||||
| Increase in right-of-use assets and lease liabilities | ||||||||
| Decrease in suspended liability | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net proceeds from sale of property and equipment | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities | ||||||||
| Principal payments on convertible note | ( | ) | ||||||
| Principal payments on long-term debt | ( | ) | ( | ) | ||||
| Principal payments on stockholder promissory notes | ( | ) | ||||||
| Net proceeds from exercise of warrants | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning | ||||||||
| Cash and cash equivalents, ending | $ | $ | ||||||
(continued on next page)
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EXPION360 INC.
STATEMENTS OF CASH FLOWS (UNAUDITED) - CONTINUED
| For the Nine Months Ended September 30, | ||||||||
| Supplemental disclosure of cash flow information: | 2025 | 2024 | ||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for franchise taxes | $ | $ | ||||||
| Non-cash financing activities: | ||||||||
| Acquisition / modification of operating lease right-of-use asset and lease liability | $ | $ | ||||||
| Issuance of common stock for payment on accrued interest | $ | $ | ||||||
| Issuance of common stock for payment on accrued compensation | $ | $ | ||||||
The accompanying notes are an integral part of these financial statements.
5
EXPION360, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Organization and Nature of Operations
Expion360 Inc. (formerly Yozamp Products Company, LLC) (the “Company”) was incorporated in the State of Nevada in November 2021. Effective November 1, 2021, the Company converted to a C corporation. Upon conversion, all of the members were issued shares of the Company’s common stock, par value $0.001 per share, and became stockholders of the Company.
The Company designs, assembles, and distributes premium lithium batteries for recreational vehicles (“RVs”), marine, golf, industrial, residential, and off-the-grid needs. The Company uses lithium iron phosphate (“LiFePO4”) batteries. LiFePO4 batteries are considered a top choice for high energy density, dependability, longevity, and safety, providing the ability to power anything, anywhere. The Company is located in Redmond, Oregon.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. However, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included.
Results of operations for the three- and nine-month periods ended September 30, 2025 and 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 or for any other reporting period. The unaudited interim financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025, and amended April 30, 2025 (the “Annual Report”).
Reclassification of Prior Year Presentation
Certain prior year amounts have been reclassified for consistency with current year presentation. These reclassifications had no effect on the reported results of operations.
Going Concern
The Company’s activities are subject to significant risks and uncertainties, including the potential that the Company may continue to incur significant losses and fail to secure additional funding before achieving or sustaining profitability or positive cash flow from operations. Historically, the Company’s growth has been funded through a combination of equity financing, third-party debt, and working capital loans. The Company may need to raise additional debt or equity financing to expand its presence in the marketplace, acquire inventory, develop and commercialize new products, achieve operating efficiencies, and accomplish its long-term business plan. There can be no assurance as to the availability of financing or the terms upon which it might be available.
As presented in the financial statements, the Company has sustained recurring losses and negative cash flows from operations. The Company incurred net income of $ million and net loss of $ million for the three and nine months ended September 30, 2025, respectively, and has accumulated deficit of $ million through September 30, 2025. The Company expects to continue to incur additional losses for the foreseeable future. These factors raise substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date the financial statements in this Quarterly Report were issued. However, management is working to address these challenges, including increasing revenue from the sale of products, managing inventory levels, identifying alternative supply chain resources, managing operational expenses, and raising additional capital.
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Historically, the Company’s growth has been funded through a combination of equity financing, third-party debt, and working capital loans. However, there can be no assurance that the Company’s financial performance will continue to improve or that it will be able to raise additional equity or debt financing to finance its operations. If the Company is unable to increase sales of its products to levels sufficient to achieve profitability and positive cash flows from operations, it may be required to pursue alternative business strategies, sell assets, seek additional equity or debt financing, or cease operations.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business; however, the above conditions raise substantial doubt about the Company’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.
For additional information regarding the significant risks and uncertainties that may impact our business and financial results, see Part II, Item 1A, “Risk Factors” in this Quarterly Report.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The Company’s significant accounting estimates include the depreciable lives of fixed assets, right-of-use asset and liability for operating leases, valuation of warrants, stock-based compensation, and deferred assets and liability for income tax purposes. Management makes its estimates and assumptions on an ongoing basis using historical experience, existing and known circumstances, authoritative accounting pronouncements, and other factors management believes to be reasonable. In addition, the Company has considered the potential impact of macroeconomic factors, including tariffs, inflation, interest rates, commodity pricing, and recessionary concerns on its business and operations. Although the full impact of these factors is unknown and cannot be reasonably estimated, the Company believes it has made appropriate accounting estimates and assumptions based on the facts and circumstances available as of the reporting date. However, actual results could vary materially from the estimates and assumptions that were used, which may result in material effects on the Company’s financial condition, results of operations, and liquidity.
Cash and Cash Equivalents
The Company considers
all cash amounts which are not subject to withdrawal restrictions or penalties, and all highly liquid investments purchased with an original
maturity of three months or less from the date of purchase, to be cash equivalents. The Company maintains its cash balances with high-quality
financial institutions located in the United States. Cash accounts are secured by the Federal Deposit Insurance Corporation (the “FDIC”)
up to $
Accounts Receivable
Accounts receivable
are recorded at the invoiced amount, are due within a year or less, and generally do not bear any interest. The Company performs ongoing
credit evaluations of its customers and generally requires no collateral. An allowance for uncollectible accounts may be recorded to
reduce accounts receivable to the estimated amount that management expects will be collected. The allowance is based upon management’s
review of the accounts receivable aging, specific identification of potentially uncollectible balances and other factors deemed relevant.
Recoveries of accounts previously
written off and adjustments to the allowance for uncollectible accounts are recorded as adjustments to bad debt expense. For the three
and nine months ended September 30, 2025 and 2024, the Company wrote off $
7
Customer Deposits
As of September 30,
2025 and December 31, 2024, the Company had customer deposits totaling $
Inventory
Inventory generally consists of batteries and accessories, resale items, components, and related landing costs. Inventory is stated at the lower of cost (first in, first out) or net realizable value.
As of September 30,
2025 and December 31, 2024, the Company had inventory that consisted of finished assemblies totaling $
The Company periodically
reviews its inventory for evidence of slow-moving or obsolete inventory and provides for an allowance when considered necessary. Due
to changing customer demands and available technology, in the three and nine months ended September 30, 2025, the Company recognized
an allowance for obsolete inventory of $
The Company prepays
for inventory purchases from foreign suppliers. Prepaid inventory totaled $
Vendor and Foreign Concentrations of Inventory Suppliers
During the three
months ended September 30, 2025 and 2024, approximately
Property and Equipment
Property and equipment are stated at cost less depreciation calculated on the straight-line basis over the estimated useful lives of the related assets as follows:
| Vehicles and transportation equipment | ||
| Manufacturing equipment | ||
| Office furniture and equipment | ||
| Warehouse equipment | ||
| Quality Assurance (“QA”) equipment | ||
| Tooling and molds |
Leasehold improvements are amortized over the shorter of the lease term or their estimated useful lives.
Betterments, renewals, and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to retired assets are removed from the accounts, and the gain or loss on disposition is recognized on the statements of operations.
8
Leases
The Company determines if an arrangement is a lease at inception. Leases may be categorized as operating leases or finance leases. The Company does not have any finance leases.
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 balance sheets.
Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate (“IBR”) applicable to the lease asset, unless the implicit rate is readily determinable. The Company’s IBR represents the interest rate that the Company would expect to incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis with similar terms and payments, in an economic environment where the leased asset is located. ROU assets include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the balance sheets. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
The Company accounts for lease and non-lease components as a single lease component for all its leases.
Impairment of Long-Lived Assets
Long-lived assets
consist primarily of property and equipment. When events or circumstances indicate the carrying value of a long-lived asset may be impaired,
the Company estimates the future undiscounted cash flows to be derived from the use and eventual disposition of the asset to assess whether
or not a potential impairment exists. If the carrying value exceeds the estimate of future undiscounted cash flows, the impairment is
calculated as the excess of the carrying value of the asset over the estimate of its fair value. Fair value is determined primarily using
the estimated cash flows discounted at a rate commensurate with the risk involved.
Product Warranties
The Company sells the majority of its products with conditional repair or replacement warranties. Expion360’s branded LiFePO₄ recreational batteries are covered by limited warranties that extend up to twelve years from the date of sale, with coverage levels that gradually decrease over time. The Company’s branded accessories, such as DC chargers and battery mounting kits, generally carry a two-year limited warranty from the date of sale. The Company estimates its potential liability for warranty claims based on historical experience and the actual volume of claims received. As of September 30, 2025 and December 31, 2024, the Company has not recorded a liability for product warranties, as warranty claims have historically been infrequent and any related repair or replacement costs have been immaterial.
Liability for Refunds
The Company does not have a formal product return policy but does accept returns under its warranty policies. Returns have historically been minimal. The Company has not accrued a refund liability as of September 30, 2025 or December 31, 2024. If a refund liability was recognized, revenue would be recorded net of this amount. Any returns of discontinued product are not added back to inventory and therefore related costs are nominal and not recorded as an asset.
9
Revenue Recognition
The Company’s revenue is generated from the sale of products consisting primarily of batteries and accessories. The Company recognizes revenue when control of goods or services is transferred to its customers in an amount that reflects the consideration it is expected to be entitled to in exchange for those goods or services. The Company recognizes revenue based on the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue when (or as) the performance obligation(s) is satisfied. Revenue is recognized when the customer obtains control of the promised goods and the Company’s performance obligation is considered satisfied. As such, accounts receivable is recorded at the time of shipment or will call, when the Company’s right to payment from the customer becomes unconditional and the Company determines there are no uncertainties regarding payment terms or transfer of control.
Concentration of Major Customers
A customer is considered a major customer when net revenue attributable to the customer exceeds 10% of total revenue for the period, or the accounts receivable balance attributable to the customer exceeds 10% of total accounts receivables.
During the three
months ended September 30, 2025, sales to three customers totaled $
During the three
months ended September 30, 2024, sales to four customers totaled $
Shipping and Handling Costs
Shipping and handling
fees billed to customers totaled $
Advertising and Marketing Costs
The Company expenses
advertising and marketing costs as incurred. Advertising and marketing expenses totaled $
Research and Development
Research and development
costs are expensed as incurred. Research and development costs charged to expense amounted to $
10
Income Taxes
The Company’s deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of exiting assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Fair Value of Financial Instruments
The Company accounts for its financial assets and liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs.
Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.
The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, and long-term debt. The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximates their respective carrying values because of the short-term nature of those instruments. The fair value of the long-term debt approximates its respective carrying values because the interest rates applicable to these instruments approximate market rates available to the Company for similar obligations with the same maturities.
The basic net earnings or loss per share is calculated by dividing the net earnings or loss by the weighted average number of shares outstanding during the period. Diluted earnings or loss per share adjusts the basic earnings or loss per share for the potentially dilutive impact of securities (e.g., options and warrants).
We calculate basic and diluted net earnings or loss per share using the weighted average number of common shares outstanding during the periods presented. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include stock options, warrants, unvested restricted stock units (“RSUs”), and shares associated with the conversion of any convertible notes or convertible preferred stock, in each case as applicable. We use the if-converted method for calculating any potential dilutive effect of convertible notes and convertible preferred stock on diluted net earnings or loss per share. For periods in which we have a net loss position, we exclude these potentially dilutive securities from the weighted average number of shares because their inclusion would be anti-dilutive. Accordingly, for periods in which we have a net loss position, basic and diluted net loss per share are the same.
The following shows the amounts used in computing net income / (loss) per share:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net income / (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Net income / (loss) per share: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
11
As of September 30, 2025, the Company had outstanding warrants, options, and RSUs exercisable for or convertible into an aggregate of shares of common stock.
The following table sets forth the number of shares excluded from the computation of diluted loss per share since their inclusion would have been anti-dilutive.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| 2021-2023 Warrants | ||||||||||||||||
| August 2024 Warrants – Series A | ||||||||||||||||
| August 2024 Warrants – Series B | ||||||||||||||||
| January 2025 Warrants | ||||||||||||||||
| Stock Options | ||||||||||||||||
| RSUs | ||||||||||||||||
| Total | ||||||||||||||||
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation, which requires compensation costs to be recognized at grant date fair value over the requisite service period of each of the awards. The Company recognizes forfeitures of awards as they occur.
The fair value of stock options is determined using the Black-Scholes-Merton (“Black-Scholes”) option-pricing model. Certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield, and expected life of the stock option. Changes to these assumptions could cause significant adjustments to the valuations.
Accounting Guidance Issued but Not Yet Adopted
In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40).” This ASU was issued to improve the disclosures about an entity’s expenses and require certain types of expenses to be disclosed individually. The Company is currently evaluating the impact of this standard on its financial statements.
3. Property and Equipment, Net
Property and equipment consist of the following:
| As of | ||||||||
| September 30, 2025 | December 31, 2024 | |||||||
| Vehicles and transportation equipment | $ | $ | ||||||
| Manufacturing equipment | ||||||||
| Office furniture and equipment | ||||||||
| Warehouse equipment | ||||||||
| Leasehold improvements | ||||||||
| QA equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense
was $
12
4. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
| As of September 30, 2025 | As of December 31, 2024 | |||||||
| Accrued salaries and payroll liabilities | $ | $ | ||||||
| Accrued commissions | ||||||||
| Accrued interest | ||||||||
| Accrued income taxes | ||||||||
| Deferred income and deposit (sublease) | ||||||||
| Other | ||||||||
| Accrued expenses and other current liabilities | $ | $ | ||||||
5. Long-Term Debt
Long-term debt consisted of the following as of September 30, 2025 and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Note payable – Bank: The notes are payable in monthly installments of $ | $ | $ | ||||||
| Note payable – SBA: The Economic Injury Disaster Loan is payable in monthly installments of $ | ||||||||
| Notes payable – GM Financial: The Company acquired six notes payable to GM Financial for vehicles in April 2022. As of September 30, 2025, the notes are payable in aggregate monthly installments of $2,560, including interest at rates ranging from | ||||||||
| Total | $ | $ | ||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term debt, net of unamortized debt discount and current portion | $ | $ | ||||||
13
Future maturities of long-term debt are as follows:
| 12 Months Ending September 30, | |||
| 2026 | $ | ||
| 2027 | |||
| 2028 | |||
| 2029 | |||
| 2030 | |||
| Thereafter | |||
| Total | $ | ||
The Company previously
issued unsecured promissory notes to certain stockholders (the “Notes”). As of September 30, 2025 and December 31, 2024,
the Company had
Interest paid to
stockholders under the Notes totaled $
7. Equity and Debt Financings
January 2025 Public Offering
In January 2025,
the Company sold in a public offering (i)
The fair value of the January 2025 Warrants was determined at the date of issuance using the Black-Scholes option-pricing model and following assumptions: a per share price of common stock on date of grant of $, expected dividend yield of %, expected volatility of %, risk-free interest rate of % and expected life of years. The warrants were valued at $2.064 per share, with a total value of $2,163,869.
The offering of the shares of common stock and pre-funded warrants in the January 2025 Public Offering was made pursuant to an effective shelf registration statement on Form S-3 (File No. 333-272956), which the Company filed with the SEC on June 27, 2023 and was declared effective on July 10, 2023 (the “Shelf Registration Statement”). The offering of the January 2025 Warrants was made pursuant to a registration statement on Form S-1 (File No. 333-284354), which the Company filed with the SEC on January 17, 2025 and was declared effective on February 11, 2025.
On August 14, 2025,
the Company entered into inducement offer letter agreements with certain holders of the January 2025 Warrants,
which reduced the exercise price of the January 2025 Warrants from $ per share to $1.31 per share in exchange for the prompt exercise
by such holders of the warrants for cash (the “Warrant Inducement”). As a result, an aggregate of
14
Reverse Stock Split Cash True-Up Payment
On October 8, 2024, the Company effected a 1-for-100 reverse stock split (the “Reverse Stock Split”) of its issued and outstanding common stock, which was approved by the Company’s board of directors on September 27, 2024, following stockholder approval at the Company’s annual meeting of stockholders held on September 27, 2024 (the “2024 Annual Meeting”).
As a result of the lowest daily volume weighted average price (“VWAP”) of the common stock during the five trading days before and after the Reverse Stock Split, a Reverse Stock Split cash true-up payment provision in the Series A Warrants, which is capped at $5.0 million in the aggregate under all Series A Warrants (as described under the section entitled “—August 2024 Public Offering” below), was triggered, but the payment of the Reverse Stock Split cash true-up payment was suspended in accordance with the terms of the Series A Warrants (the “Cash True-up Payment”).
During
the year ended December 31, 2024, $14,052 of the Cash True-up Payment was relieved in connection with the exercise of certain Series
A Warrants, leaving a remaining liability of $
On
August 14, 2025, in connection with the Warrant Inducement, the Company also entered into inducement offer letter agreements with certain
holders of the Series A Warrants, which reduced the exercise price of the Series A Warrants from $ per share to $1.31 per share,
removing the Cash True-up Payment requirement. As a result of the Warrant Adjustments, the remaining Cash True-up Payment liability of
$
August 2024 Public Offering
On August 8, 2024,
the Company sold in a public offering (i)
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 Series A Warrants (pre-Reverse Stock Split) and Series B Warrants (pre-Reverse Stock Split).
The Common Units were sold at a price of $ per unit and the Pre-Funded Warrants were sold at a price of $ per unit (pre-Reverse Stock Split).
The Pre-Funded Warrants
were immediately exercisable at an exercise price of $
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 2024 Annual Meeting, and will expire five years from such date.
Each Series A Warrant was initially exercisable at an exercise price of $
15
On
August 14, 2025, in connection with the Warrant Inducement, the exercise price of the Series A Warrants was reduced to $1.31 per share
in exchange for the prompt exercise by such holders of the warrants for cash. As a result, an aggregate of
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. Effective October 8, 2024, the Reverse Stock Split
occurred. As of November 12, 2024,
Pursuant to an underwriting
agreement, the Company paid the underwriter a cash underwriting discount of 7% of gross proceeds received in the August 2024 Public Offering,
reimbursement for underwriter expenses of $
In July 2025, shares of common stock were issued upon exercise of Series B warrants, resulting in net proceeds to the Company of $8,525. As of September 30, 2025, there were shares issuable upon exercise of the remaining Series B warrants.
The offering of securities in the August 2024 Public Offering was made pursuant to the Shelf Registration Statement.
Convertible Note Financing
On December 27, 2023,
The offering of securities in the Convertible Note Financing was made pursuant to the Shelf Registration Statement.
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.
Equity Line of Credit
16
In connection with the Equity Line of Credit, the Company filed a Registration Statement on Form S-1 (File No. 333-276663) with the SEC on January 23, 2024, which was declared effective on February 9, 2024, registering the securities to be sold thereunder, if any.
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
shares of common stock (post-Reverse Stock Split) under the Equity Line of Credit for an aggregate amount of $
8. Commitments and Contingencies
Operating Leases
The Company leases its warehouses and office space under long-term lease arrangements. None of its leases include characteristics specified in ASC 842, Leases, that require classification as financing leases, and accordingly, these leases are accounted for as operating leases. The Company does not recognize an ROU asset and lease liability for short-term leases, which have terms of 12 months or less. For longer-term lease arrangements that are recognized on the Company’s balance sheets, the ROU asset and lease liability are initially measured at the commencement date based upon the present values of the lease payments due under the leases.
The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an IBR, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under the arrangement. Under ASC 842, the IBR for leases must be (1) a rate of interest over a similar term, and (2) for an amount that is equal to the lease payments. The Company uses both the Federal Reserve Economic Data U.S. corporate debt effective yield and the U.S. Treasury rates adjusted for credit spread as the primary data points for purposes of determining the IBR.
In the first quarter
of 2022, the Company entered into two new long-term, non-cancelable operating lease agreements for office and warehouse space resulting
in the Company recognizing an additional lease liability totaling $
In the first quarter
of 2021, the Company entered into a long-term, non-cancelable operating lease agreement for office and warehouse space resulting in the
Company recognizing an additional lease liability totaling $
The Company signed a lease for warehouse space in close proximity to its existing headquarters and main warehouse with a term commencing May 1, 2025.
The following is a summary of total lease costs during the three and nine months ended September 30, 2025 and 2024:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Short-term lease costs | ||||||||||||||||
| Variable lease costs | ||||||||||||||||
| Sublease income | ( | ) | ( | ) | ( | ) | ||||||||||
| Total lease costs | $ | $ | $ | $ | ||||||||||||
17
The weighted-average
remaining lease term was
The total lease liability
as of September 30, 2025 and December 31, 2024 was $
The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2025, for years ending September 30:
| Total | |||
| 2026 | $ | ||
| 2027 | |||
| 2028 | |||
| Thereafter | |||
| Total future minimum lease payments | $ | ||
| Less imputed interest | ( |
) | |
| Total | $ | ||
| Current lease liability | $ | ||
| Noncurrent lease liability | |||
| Total | $ | ||
Subleases
The Company has subleased office and warehouse space under one of its existing operating leases on similar terms as the Company’s lease agreements. The sublease terminated in February 2025 and there was no remaining income due or liabilities associated with subleases as of September 30, 2025.
Legal Proceedings
From time to time, the Company is subject to legal claims, regulatory matters and contingencies in the ordinary course of business. Accruals for these matters are reflected in the financial statements based on management’s assessment of the expected outcome of these matters. Liabilities for estimated losses are accrued if the potential losses from any legal proceedings, regulatory matters or contingencies are considered probable and the amounts can be reasonably estimated. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount can be reasonably estimated. Accruals are based only on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, management reassesses potential liabilities related to legal claims, regulatory matters and contingencies, and may revise its previous estimates, which could materially affect the Company’s results of operations.
Except as set forth under Part II, Item 1, “Legal Proceedings” in this Quarterly Report, as of September 30, 2025 and December 31, 2024, the Company was not a party to any legal proceedings, regulatory matters, or other disputes or claims which, if determined adversely, would, individually or taken together, have a material adverse effect on the Company’s business, financial condition, operating results, liquidity, or future prospects.
9. Stockholders’ Equity
The Company is authorized
to issue an aggregate of
A holder of common stock is entitled to one vote for each share of common stock. The holders of common stock have no conversion, redemption or preemptive rights and shall be entitled to receive dividends when, as, and if declared by the board of directors. Upon dissolution, liquidation, or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, subject to the rights, if any, of the holders of any class or series stock having a preference over the right to participate with common stock with respect to the distribution of assets of the Company upon such dissolution, liquidation, or winding up of the Company, the holders of common stock shall be entitled to receive the remaining assets of the Company available for distribution to its stockholders ratably in proportion to the number of shares of common stock held.
18
Since no shares of preferred stock have been issued, no rights and privileges of preferred stockholders have been defined.
In September 2025, the Company issued unregistered shares of common stock to a vendor in exchange for services rendered, and recorded $ expense in Legal and Professional Fees.
In August 2025,
In July 2025, shares of common stock were issued upon exercise of Series B Warrants.
In
April 2025, the Company issued RSUs that were immediately vested and settled into shares of common stock as part of the
2021 Incentive Award Plan (the “2021 Plan”), and shares were granted to a vendor as payment for services rendered.
Expenses of $ in stock-based compensation and $
As of September 30, 2025 and December 31, 2024, and shares, respectively, of common stock were issued and outstanding. No shares of preferred stock have been issued.
Warrants / Options
In the January 2025
Public Offering, the Company issued pre-funded warrants, which were immediately exercised for
In 2024,
In 2023, the Company
issued
In 2022, the Company
issued
Below is a summary of warrants issued and outstanding as of September 30, 2025:
| Number of Warrants | Issuable Shares | Exercise Price per Share | Weighted Average Remaining Life (Years) | |||||||||||
| (1) | $ | N/A | (2) | |||||||||||
| $ | (3) | |||||||||||||
| (4) | $ | (5) | ||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| 1,359,907 | ||||||||||||||
19
| (1) | ||
| (2) | Series B Warrants do not have an expiration date. | |
| (3) | ||
| (4) | ||
| (5) |
Warrant Inducement and Repricing
On
August 14, 2025, the Company entered into an inducement offer letter agreements with certain holders of the Series A Warrants and the
January 2025 Warrants, which reduced the exercise price of the Series A Warrants from $ to $1.31 per share, and the January 2025
Warrants from $ to $1.31 per share. The difference between the fair value of the warrants immediately prior to modification and immediately
after modification was treated as a transaction cost, which is netted against proceeds received. The difference in fair value for the
Series A Warrants was $
| Warrant | Stock Price | Remaining Life (Years) | Volatility | Risk-Free Rate | Dividend |
| Series A | $ | % | % | ||
| January 2025 | $ | % | % |
During
August 2025,
Equity Plans
As of September 30, 2025, the Company had adopted two stock-based compensation plans, the 2021 Plan and the 2021 Employee Stock Purchase Plan (the “2021 ESPP”).
2021 Incentive Award Plan
The purpose of the 2021 Plan is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities. Various stock-based awards may be granted under the 2021 Plan to eligible employees, consultants, and non-employee directors.
During the three months ended September 30, 2025 and 2024 respectively, and shares were issued pursuant to the 2021 Plan.
At the Company’s 2025 annual meeting of stockholders, stockholders approved the addition of 750,000 shares to the 2021 Plan. As of September 30, 2025, the aggregate number of shares that can be issued under the 2021 Plan is , of which options and RSUs have been granted.
The stock-based compensation expense that has been charged against operations for awards issued under the 2021 Plan was $ and $ for the three months ended September 30, 2025 and 2024, respectively, and $ and $ for the nine months ended September 30, 2025 and 2024, respectively.
20
2021 Employee Stock Purchase Plan
The purpose of the 2021 ESPP is to assist eligible employees of the Company in acquiring a stock ownership in the Company and to help such employees provide for their future security and to encourage them to remain in the employment of the Company. The 2021 ESPP consists of a Section 423 component and non-Section 423 component. The Section 423 component is intended to qualify as an employee stock purchase plan and authorizes the grant of options. Options granted under the non-Section 423 Component are granted pursuant to separate offerings containing sub-plans. Option awards are generally granted with an exercise price equal to 85% of the lesser of the fair market value of a share on (a) the applicable grant date and (b) the applicable exercise date, or such other price as designated by the administrator, provided that in no event shall the option price be less that the per share par value price.
No shares have been issued to date under the 2021 ESPP.
See “Note 9—Stockholders’ Equity” in the Company’s financial statements in Part IV of the Annual Report for further information regarding the 2021 Plan and 2021 ESPP.
Stock Options
The fair value of each option granted pursuant to the 2021 Plan is estimated on the date of grant using the Black-Scholes option pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon similar traded companies’ historical share price movements as adequate historical Company trading experience is not available to provide a reasonable estimate. Expected term is calculated based on the simplified method as adequate historical experience is not available to provide a reasonable estimate. The simplified method will continue to apply until enough historical experience is available to provide a reasonable estimate of the expected term. The risk-free interest rate is calculated based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends.
The Company has computed the fair value of the options granted during the year ended December 31, 2024 using the following assumptions:
| Expected volatility | % | |||
| Expected dividends | None | |||
| Expected term (in years) | ||||
| Risk-free rate | % | |||
The Company has computed the fair value of the options granted during the nine months ended September 30, 2025 using the following assumptions:
| Expected volatility | % | |||
| Expected dividends | None | |||
| Expected term (in years) | ||||
| Risk-free rate | % | |||
The following table summarizes the Company’s stock option activity during the three months ended September 30, 2025 under the 2021 Plan:
| Number of options | Weighted average exercise price | Weighted average remaining contractual term (in years) | Aggregate intrinsic value | ||||||||
| Outstanding at July 1, 2025 | $ | — | $ | (1) | |||||||
| Granted | .04 | ||||||||||
| Exercised | — | — | — | ||||||||
| Canceled | — | ||||||||||
| Outstanding at end of period | $ | $ | .04 | ||||||||
| Exercisable at September 30, 2025 | $ | $ | .04 | ||||||||
21
| (1) | The aggregate intrinsic value of options outstanding and exercisable as of July 1, 2025 was $0, as all options are out of the money. |
During the nine months ended September 30, 2025 and 2024, the weighted-average grant-date fair value of the options granted to employees and non-employees was $and $, respectively. The options granted in March 2024 vested 50% at time of grant with the remaining shares vesting in 12 equal consecutive quarterly installments commencing September 30, 2024 and becoming fully vested on March 31, 2027. The options granted in July 2025 were 100% vested at the time of grant.
The Company granted 649 RSUs in 2024, 105,000 RSUs in April 2025, and 15,000 RSUs in July 2025, all of which were vested immediately. The 15,000 July 2025 RSUs had not settled as of September 30, 2025.
Common Stock Reserved for Future Issuance
The following is a summary of shares of common stock reserved for future issuance as of September 30, 2025:
| Exercise of warrants | ||
| Exercise of stock options – 2021 Plan | ||
| Exercise of Series A Warrants | ||
| Exercise of Series B Warrants | ||
| Exercise of January 2025 Warrants | ||
| Settlement of RSUs | ||
| Total shares of common stock reserved for future issuances |
10. Segment Reporting
The Company focuses on the design, assembly, manufacturing, and sale of LiFePO4 batteries and supporting accessories for RVs, marine applications and home energy storage products with plans to expand into industrial applications. The Company sells to wholesalers, distributors, and OEMs, as well as directly to consumers.
The Company has identified one reportable segment: Energy Storage. This segment generates revenue in North America, and the Company manages its product sales and associated expenses on a total basis. The accounting policies for this segment align with those outlined in the summary of significant accounting policies. The Chief Executive Officer is the Chief Operating Decision Maker (the “CODM”) and assesses the performance of this segment and allocates resources based on net income or loss, which is reflected on the statements of operations, and the measure of segment assets is represented as total assets on the balance sheets.
The CODM evaluates the net income or loss from our reportable segment. Net income or loss is also utilized to monitor the difference between budgeted and actual results, offering insights into financial performance and guiding any necessary corrective actions. Additionally, the CODM employs net income or loss for competitive analysis by comparing the Company’s financial performance with competitors in the Energy Storage space.
The Company does not engage in any intra-entity sales or transfers.
11. Income Taxes
The Company has incurred losses and consequently recorded no provision beyond the minimum or base tax rate for state or federal income taxes for the three and nine months ended September 30, 2025
12. Related-Party Transactions
As of September 30, 2025 and December 31, 2024, related-party transactions consisted of the repayment of the Notes. See “Note 6—Stockholder Promissory Notes” for additional information regarding the Notes.
22
13. Subsequent Events
Execution of Securities Purchase Agreement and Issuance of Pre-Funded Warrant
On October 16, 2025,
the Company entered into a securities purchase agreement (the “Purchase Agreement”) with two institutional investors pursuant
to which the Company agreed to sell in a private placement (the “Private Placement”) an aggregate of (i) shares of
common stock, and (ii) a pre-funded warrant to purchase up to shares of common stock. The offering price per share was $
Resignation and Appointment of Officers and Directors
On October 16, 2025, in connection with the closing of the Private Placement and pursuant to the Purchase Agreement, Brian Schaffner, the Company’s former Chief Executive Officer and a member of the board of directors, resigned from his position as Chief Executive Officer, effective immediately, but retains his position as a member of the board of directors. In addition, in connection with the closing of the Private Placement and pursuant to the Purchase Agreement, Paul Shoun, the former President of the Company and Chairman of the Board, resigned from each of these positions, effective immediately.
The Company’s
board of directors appointed Joseph Hammer as Chief Executive Officer and Chairman of the Board, effective immediately upon Messrs. Schaffner’s
and Shoun’s resignations from such roles. Mr. Hammer will serve as a member of the board of directors until the Company’s
annual meeting of stockholders to be held in 2026 or until his successor is duly elected and qualified, or his earlier death, resignation,
or removal. In connection with his appointment as Chief Executive Officer, Mr. Hammer entered into an employment agreement with the Company,
pursuant to which, among other things, he is entitled to an annual base salary of $
In addition, the board of directors appointed Scott Burell as a member of the board in connection with the closing of the Private Placement and pursuant to the Purchase Agreement. Mr. Burell will serve as a member of the Board until the Company’s annual meeting of stockholders to be held in 2026 or until his successor is duly elected and qualified or his earlier death, resignation, or removal. Mr. Burell was appointed to serve on the Compensation Committee effective immediately upon his appointment.
With these recent changes and as part of an enhanced focus, the Company expects to expand the business beyond its current battery products. Such expansion may include related energy storage areas or extend into markets beyond energy.
Increase in Number of Directors
On October 16, 2025, the Company’s board of directors took action, pursuant to Article III, Section 3.2 of the Company’s Amended and Restated Bylaws, to increase the number of authorized directors on the board from five to six.
Issuance of RSUs
On October 16, 2025, in connection with the closing of the Private Placement and pursuant to the Purchase Agreement, RSUs were granted to each of Brian Schaffner, Paul Shoun, Shawna Bowin, and Carson Heagen under the 2021 Plan, which vested and settled immediately upon issuance, resulting in the issuance of shares of common stock.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 nine months ended September 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.
Unless otherwise noted, all references to shares and per share amounts presented in this section have been adjusted retroactively to reflect a 1-for-100 reverse stock split, which was effective at 5:00 p.m. Pacific Time on October 8, 2024 (the “Reverse Stock Split”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reverse Stock Split and Reverse Stock Split True-Up Payment” in the Annual Report for additional information about the Reverse Stock Split.
OVERVIEW
Expion360 focuses on the design, assembly, manufacturing, and sale of lithium iron phosphate (“LiFePO4”) batteries and supporting accessories for recreational vehicles (“RVs”), marine applications and home energy storage products with plans to expand into industrial applications. Our high-powered, lithium battery solutions incorporate innovative concepts and have been designed to include some of the most dense and minimal-footprint batteries in the RV and marine industries.
In January 2025 we began selling our e360 Home Energy Storage Solutions, which consist of two LiFePO4 battery storage solutions and are designed to provide consumers with a cost-effective, flexible system with low barrier of entry to power their homes utilizing solar energy, wind, or grid back-up. We are deploying multiple intellectual property strategies with research and product development to sustain and scale our business. This includes design, development and collaboration, using our IP to bring safety, quality and service to our customers. Our customers consist of direct consumers, dealers, wholesalers, private-label customers, and original equipment manufacturers (“OEMs”) who sell our products to end consumers and drive brand awareness nationally.
Our primary target markets are currently the RV, marine, and home energy storage industries. We believe we are well-positioned to capitalize on the continued market transition from lead-acid to lithium batteries as the primary method of power sourcing in these industries. We remain focused on expanding within the home energy storage market through 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. In addition, we are evaluating opportunities to extend our technology into adjacent applications, including the expanding electric forklift and industrial material handling markets.
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.
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In recent months, we have undertaken a leadership transition designed to support our next phase of operational and strategic growth. In September 2025, the board of directors appointed Shawna Bowin, the Company’s previous Controller, as Chief Financial Officer, and in October 2025, the board of directors appointed Joseph Hammer, a veteran financial executive and director as Chief Executive Officer and Chairman of the Board of Directors, and appointed Scott Burell, a veteran financial executive and director, to the Board of Directors. These changes reflect management’s intent to strengthen our financial, operational, and strategic execution capabilities. Under the direction of this new leadership, we intend to build upon our existing foundation in lithium-ion battery technology to pursue selective growth initiatives. Management is focused on increasing OEM market penetration, advancing product development for home energy storage solutions, and exploring potential expansion into related energy storage or adjacent markets, or into areas beyond energy, where our design, manufacturing, and distribution capabilities may be leveraged.
Our products provide numerous advantages for various industries that are looking to migrate to lithium-based energy storage. They incorporate detailed-oriented design and engineering, strong case materials, and internal and structural layouts, and are backed by responsive customer service.
We currently operate Expion360 as one reportable business segment, Energy Storage.
COMPETITIVE STRENGTHS
We believe the following strengths differentiate Expion360 and create long-term, sustainable competitive advantages:
Superior Capacity to Lead-Acid Competitors
Lead-acid batteries have historically been the standard in RV and marine transportation vehicles, but these industries are experiencing a rapid conversion from lead-acid to lithium batteries as the primary method of power sourcing. 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 ten times the number of charging cycles. Furthermore, our typical battery may provide 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).
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.
Expansion into New Markets
Our proprietary e360 SmartTalk mobile app is included in many of our battery models and 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 comprehensive view of both individual battery conditions and performance, and a 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.
In December 2023, we entered the home energy storage market with our introduction of two LiFePO4 battery storage solutions comprising our e360 Home Energy Storage Solution: a wall mounted all-in-one inverter and 10kWh 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 completing UL testing and certification, as well as other requirements for various Authorities Having Jurisdiction. Shipments of our two LiFePO4 battery solutions comprising our home energy storage product line began in January 2025.
In January 2024, we introduced our next generation 12V GC2 and Group 27 series LiFePO4 batteries. These new versions 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 (CANBus) communication. We began delivering the new 12V GC2 and Group 27 batteries to customers in the second quarter of 2024.
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In July 2024, we launched our new Edge battery, which offers a slim design and adds greater flexibility during installation. The Edge is offered in both 12V and 48V versions. We are experiencing high customer interest and are actively shipping Edge batteries.
Strong National Retail Customers and Distribution Channels
We have sales relationships with many major RV and marine retailers and plan to use our strong reputation in the lithium battery space to create an even stronger distribution channel. Current and former members of management have used their decades of experience in the energy and RV industries to cultivate relationships with numerous retailers in the space, including Camping World, a leading national RV retailer.
KEY FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our results of operations and financial performance are significantly dependent on the following factors:
Consumer Demand
Although our sales are primarily generated from dealers, wholesalers, private-label customers and OEMs focused on the RV, marine, and home energy 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, marine, and home energy markets. 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 and affected our industry as a whole. In addition, we expect continuing tensions between the U.S. and China, where several of our key manufacturers and suppliers are located, as well as the ongoing risk of new or additional tariffs impacting lithium-ion batteries or related parts, to increase our cost of goods sold, which could require us to increase prices to our customers or result in lower gross margins on our products. These conditions have had, and may continue to have, a negative effect on our business, financial condition, and results of operations.
While RV and marine applications have historically driven our revenue, in January 2025, we began shipping orders of our e360 Home Energy Storage Solution, comprised of two LiFePO4 battery storage solutions. Our e360 Home Energy Storage Solutions aim to provide consumers with a cost-effective, low barrier of entry, flexible system to power their homes utilizing solar energy, wind, or grid back-up. The success of our strategy depends on (i) the continued growth of these addressable markets in line with our expectations, and (ii) our ability to successfully enter and maintain a competitive position in the RV, marine, and home energy markets with commercially viable products. We expect to incur significant marketing costs understanding and growing our presence within these markets, and researching and targeting customers in these markets, and our efforts may not be successful in generating sales. If we fail to execute on this growth strategy in accordance with our expectations, our sales growth could be limited to the growth of existing products and existing end markets.
Over the past year, Expion360 has added several new distributors and OEM customers in RV and marine markets, which contributed to the sales growth during the first nine months of 2025. Management believes that orders resulting from these new relationships will continue to result in significant new revenue streams for the remainder of 2025.
Manufacturing and Supply Chain
Our batteries are manufactured by multiple third-party manufacturers located in Asia, which also produce our battery cells. While we do not have long-term purchase agreements with these manufacturers and our purchases are completed on a purchase-order basis, we maintain strong relationships with our manufacturers and cell suppliers, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts). The strength of these relationships has helped us moderate increased supply-related costs associated with inflation, currency fluctuations, and U.S. government tariffs imposed on our imports, and avoid potential shipment delays. We aim to maintain an appropriate level of inventory to satisfy our expected supply requirements. We believe we could locate suitable alternative third-party manufacturers to fulfill our requirements if needed.
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Our third-party manufacturers source the raw materials and battery components required for the production of our batteries directly from third-party suppliers that meet our approval and quality standards and, as a result, we may have limited control over the agreed pricing for these raw materials and battery components. We estimate that raw material costs account for over half of our cost of goods sold. Lithium, which is extracted from mined ore, is a key raw material used to produce our battery cells and, as a result, the cost of our battery cells is dependent on the price and availability of lithium, which may be volatile and unpredictable and beyond our control. Additionally, availability of the raw materials used to manufacture our products may be limited at times, resulting in higher prices and/or the need to find alternative suppliers. Our battery cell manufacturers have joint venture factories outside of Asia and have secured sourcing contracts from lithium suppliers in South America and Australia. In addition, we have a secondary source for lithium iron phosphate cells used in our batteries from a supplier in Europe, enabling us to source materials outside of Asia in the event it becomes necessary to do so.
In addition to increased mining and newly located reserves, there is an industry push to provide more efficient ways to extract lithium from mined ore. Another development of the past few years is lithium cell recycling. This process recaptures raw lithium from the cell for reuse in future cells. However, notwithstanding efforts to improve the sustainability and efficiency of lithium mining, the price of lithium is volatile. We continue to monitor developments that may adversely affect our supply chain.
Management anticipates that products sourced from the Company’s third-party manufacturers in Asia may be subject to additional tariff exposure during 2025. Although recent developments in November 2025 have been favorable, the Company has timed certain inventory purchases to coincide with the period of reduced tariff rates. Management believes that any potential impact on gross margins can be mitigated through a combination of supplier pricing concessions, product redesign initiatives, selective customer pricing adjustments, and ongoing operational efficiencies realized through increased sales volumes.
For additional information regarding supply chain risks, refer to Part I, Item 1A of the Annual Report, “Risk Factors—Our results of operations could be adversely affected by changes in the cost and availability of raw materials and we are dependent on third-party manufacturers and suppliers” and “—Increases in costs, disruption of supply or shortage of any of our battery components, such as electronic and mechanical parts, or raw materials used in the production of such parts could harm our business.”
Product and Customer Mix
As of September 30, 2025, we sell 15 models of LiFEPO4 batteries, the Aura 600, and various individual or bundled accessories for battery systems. Our products are sold to different customers (e.g., dealers, wholesalers, private-label customers, 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 operations. 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.
Competition
We compete with both traditional lead-acid and lithium-ion battery manufacturers that primarily either import their products and/or components or manufacture their products and/or components under a private label. As we develop new products and expand into new markets, we may experience competition with a broader range of companies. These companies may have more resources than us and be able to allocate more resources to their current and future products.
Our competitors may source products or components at lower costs than us, which may require us to evaluate our own costs, lower our product prices, or increase our sales volume to maintain our expected profitability levels.
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Research and Development
We anticipate that additional investments in our infrastructure and research and development spending will be required to scale our operations and increase productivity, address the needs of our customers, further develop and enhance our products and services, and expand into new geographic areas and market segments.
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.
Certifications
We 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 have a UL Safety Certification, emphasizing our commitment to quality, safety and service for our customers.
KEY LINE ITEMS
Net Sales
Our revenue is generated from the sale of products consisting primarily of batteries and accessories. We recognize revenue when control of goods or services is transferred to our customers in an amount that reflects the consideration it is expected to be entitled to in exchange for those goods or services. All of our sales are primarily within the United States.
Cost of Sales
Our primary cost of sales as a percentage of sales is related to our direct product and landing costs. Direct labor costs consist of payroll costs (including taxes and benefits) of employees directly engaged in assembly activities. Per full absorption cost accounting, overhead related to our cost of sales is added, consisting primarily of warehouse rent and utilities. The costs can increase or decrease based on costs of product and assembly parts (purchased at market pricing), customer supply requirements, and the amount of labor required to assemble a product, along with the allocation of fixed overhead.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries and benefits, legal and professional fees, and sales and marketing costs. Other costs include research and development, insurance, and software and tech support expenses.
Other (Income) Expense
Our other (income) and expense typically consist of interest expense, interest income, and gain or loss on sale of property and equipment. See “Results of Operations – Other (Income) / Expense” below for more information.
Provision for Income Taxes
We are subject to corporate federal and state income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
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We have adopted the provisions in ASC 740, Income Taxes, related to accounting for uncertain tax positions. It requires that the Company recognize the impact of a tax position in the financial statements if the position is more likely than not to be sustained upon examination and on the technical merits of the position. Management has concluded that there were no material unrecognized tax benefits as of September 30, 2025 or December 31, 2024.
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our balance sheets at September 30, 2025 or December 31, 2024 and did not recognize interest and/or penalties in the statement of operations for the three months ended September 30, 2025 and 2024, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within the next twelve months.
Off-Balance Sheet Arrangements
We have no material off-balance sheet arrangements.
RESULTS OF OPERATIONS
The following table sets forth certain operational data as a percentage of sales:
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Net sales | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
| Cost of sales | 77.3 | 87.9 | 77.6 | 80.3 | ||||||||||||
| Gross profit | 22.7 | 12.1 | 22.4 | 19.7 | ||||||||||||
| Selling, general, and administrative expenses | 148.1 | 150.9 | 96.4 | 172.8 | ||||||||||||
| Loss from operations | (125.5 | ) | (138.7 | ) | (74.0 | ) | (153.1 | ) | ||||||||
| Other (income) / expense — net | (155.7 | ) | 495.6 | (49.8 | ) | 210.3 | ||||||||||
| Income / (Loss) before income taxes | 30.2 | (634.4 | ) | (24.2 | ) | (363.4 | ) | |||||||||
| Net income / (loss) | 30.2 | (634.4 | ) | (24.2 | ) | (363.5 | ) | |||||||||
Net Sales
Net sales for the three months ended September 30, 2025 increased by $1.0 million, or 72.2%, compared to the three months ended September 30, 2024. Sales were $2.4 million for the three months ended September 30, 2025 and $1.4 million for the three months ended September 30, 2024.
Net sales for the nine months ended September 30, 2025 increased by $3.8 million, or 104.2%, compared to the nine months ended September 30, 2024. Sales were $7.4 million for the nine months ended September 30, 2025 and $3.6 million for the nine months ended September 30, 2024.
The increase in net sales was primarily attributable to the RV market recovering from its previous slowdown, but also to enhanced sales efforts, including expanded outreach to OEM partners, strategic marketing initiatives, and the successful onboarding of new customers during this period.
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Cost of Sales
Total cost of sales for the three months ended September 30, 2025 increased by $600,000, or 51.6%, compared to the three months ended September 30, 2024. Cost of sales were $1.8 million for the three months ended September 30, 2025 and $1.2 million for the three months ended September 30, 2024. Cost of sales as a percentage of net sales decreased by 10.5% in that period.
Total cost of sales for the nine months ended September 30, 2025 increased by $2.9 million, or 97.3%, compared to the nine months ended September 30, 2024. Cost of sales were $5.8 million for the nine months ended September 30, 2025 and $2.9 million for the nine months ended September 30, 2024. Cost of sales as a percentage of net sales decreased by 2.7% in that period.
The year-to-year changes in cost of sales are primarily related to the product mix sold in different periods.
Gross Profit
Our gross profit for the three months ended September 30, 2025 increased by $373,000, or 221.6%, compared to the three months ended September 30, 2024. Gross profit was $542,000 for the three months ended September 30, 2025 and $169,000 for the three months ended September 30, 2024. Gross profit as a percentage of net sales increased by 10.5% for that period, from 12.1% for the three months ended September 30, 2024 to 22.7% for the three months ended September 30, 2025.
Our gross profit for the nine months ended September 30, 2025 increased by $950,000, or 132.6%, compared to the nine months ended September 30, 2024. Gross profit was $1,667,000 for the nine months ended September 30, 2025 and $717,000 for the nine months ended September 30, 2024. Gross profit as a percentage of net sales increased by 2.7% for that period, from 19.7% for the nine months ended September 30, 2024 to 22.4% for the nine months ended September 30, 2024.
The increase in gross profit percentage for both periods was primarily attributable to the product mix sold in different periods.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended September 30, 2025 increased by $1.4 million, or 69.1%, compared to the three months ended September 30, 2024. Selling, general and administrative expenses were $3.5 million for the three months ended September 30, 2025 and $2.1 million for the three months ended September 30, 2024. As a percentage of net sales, selling, general and administrative expenses were 148.1% for the three months ended September 30, 2025 compared to 150.9% for the same period in the prior year, a decrease of 2.8 percentage points. For the three months ended September 30, 2025, increases in salaries and benefits as well as legal and professional fees made up the majority of the increase.
Selling, general and administrative expenses for the nine months ended September 30, 2025 increased by $877,000, or 13.9%, compared to the nine months ended September 30, 2024. Selling, general and administrative expenses were $7.2 million for the nine months ended September 30, 2025 and $6.3 million for the nine months ended September 30, 2024. As a percentage of net sales, selling, general and administrative expenses were 96.4% for the nine months ended September 30, 2025 compared to 172.8% for the same period in the prior year, a decrease of 76.4 percentage points. For the nine months ended September 30, 2025, increases in salaries and benefits and legal and professional fees were slightly offset by an decrease in rent and associates expenses.
Presented in the table below is the composition of selling, general and administrative expenses:
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Salaries and benefits | $ | 1,779,806 | $ | 743,347 | $ | 3,263,598 | $ | 2,555,403 | ||||||||
| Legal and professional | 1,067,839 | 321,963 | 1,850,317 | 1,239,413 | ||||||||||||
| Sales and marketing | 256,852 | 242,515 | 746,051 | 710,898 | ||||||||||||
| Insurance | 80,254 | 63,441 | 205,210 | 201,514 | ||||||||||||
| Research and development | 74,209 | 68,617 | 296,387 | 228,782 | ||||||||||||
| Software, fees, tech support | 73,105 | 68,959 | 215,986 | 207,590 | ||||||||||||
| Rents, maintenance, utilities | 55,705 | 106,001 | 174,360 | 391,426 | ||||||||||||
| Travel expenses | 51,302 | 35,823 | 159,072 | 113,934 | ||||||||||||
| Depreciation | 24,168 | 40,346 | 82,245 | 125,883 | ||||||||||||
| Supplies | 3,916 | 7,683 | 15,446 | 21,076 | ||||||||||||
| Other | 77,510 | 397,773 | 158,235 | 494,283 | ||||||||||||
| Total | $ | 3,544,666 | $ | 2,096,468 | $ | 7,166,907 | $ | 6,290,202 | ||||||||
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Other (Income) / Expense
Other (income) / expense for the three months ended September 30, 2025 decreased $10.6 million, or 154.1%, compared to the three months ended September 30, 2024, primarily due to writing off the suspended liability from the Series A Warrants in 2025, and not incurring the expenses for change in fair value of warrants or legal settlements that were recognized in 2024, slightly offset by obsolete inventory expense in 2025. Other income was $3.7 million for the three months ended September 30, 2025 and other expense was $6.9 million for the three months ended September 30, 2024. Other income for the three months ended September 30, 2025 was made up of the write-off of the suspended liability, and other expense for the three months ended September 30, 2025 was primarily made up of the write-off of obsolete inventory. 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 August 2024 financing, along with interest expense and settlement expense.
Other (income) / expense for the nine months ended September 30, 2025 decreased $11.4 million, or 148.4%, compared to the nine months ended September 30, 2024, primarily due to writing off the suspended liability from the Series A Warrants in 2025, and not incurring the expenses for change in fair value of warrants or legal settlements that were recognized in 2024, as well as significantly lower interest expense in 2025, slightly offset by obsolete inventory expense in 2025. Other income was $3.7 million for the nine months ended September 30, 2025 and other expense was $7.7 million for the nine months ended September 30, 2024. Other income for the nine months ended September 30, 2025 was primarily made up of the write-off of the suspended liability. 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 August 2024 financing, along with interest expense and settlement expense.
During the three months ended September 30, 2025 and 2024, expense for the change in fair value of warrants was $0 and $5.9 million, income from the write-off of suspended liability totaled $4.5 million and $0, obsolete inventory expense totaled $757,000 and $0, interest expense totaled $4,000 and $468,000, settlement expense totaled $0 and $401,000, loss on sale of property and equipment totaled $0 and $146,000, interest income totaled $0 and $15,000, and workers comp dividends totaled $0 and $1,000, respectively. During the nine months ended September 30, 2025 and 2024, expense for the change in fair value of warrants was $0 and $5.9 million, income from the write-off of suspended liability totaled $4.5 million and $0, interest expense was $14,000 and $972,000, obsolete inventory expense totaled $757,000 and $0, settlement expense totaled $0 and $710,000, loss on sale of property and equipment totaled $13,000 and $147,000, interest income totaled $0 and $60,000, miscellaneous income from sale of a non-capitalized asset was $0 and $1,000, dividend from a workers compensation policy was $0 and $1,000, respectively, and penalties and late fees totaled less than $100 each period.
Net Income / (Loss)
Our net income / (loss) for the three months ended September 30, 2025 and 2024 was $723,000 and $(8.8 million), respectively. Our net loss for the nine months ended September 30, 2025 and 2024 was $(1.8 million) and $(13.2 million), respectively. The improvement for both periods was driven by increased sales and proportional decreases in cost of sales resulting in improved gross profit, as well as improvements in other income and expense.
For the nine months ended September 30, 2025, we recognized a net of $3.6 million in non-cash operating income, including $4.5 million for write-off of suspended liability, $452,000 for stock-based compensation, and $348,000 for common stock issued for services. For the nine months ended September 30, 2024, we recognized $7.5 million in non-cash operating costs, including $5.9 million for change in fair value of warrants, $667,000 in amortization of convertible note costs, and $546,000 for stock-based compensation.
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Cash Flows
The following table shows a summary of our cash flows for the periods presented:
| Nine Months Ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (3,725,143 | ) | $ | (6,649,331 | ) | ||
| Net cash provided by investing activities | $ | 4,250 | $ | 122,061 | ||||
| Net cash provided by financing activities | $ | 7,467,125 | $ | 5,919,749 | ||||
Net cash used in operating activities
We primarily use cash in operating activities for inventory purchases, salaries and benefits, legal and professional services, and sales and marketing. In the last several years, we have generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from the sales of common stock.
Net cash used in operating activities was $3.7 million for the nine months ended September 30, 2025, compared to $6.6 million for the prior year period. The decrease in cash used was primarily driven by reduced inventory and prepaid inventory levels:
| · | For the nine months ended September 30, 2025, our loss of $1.8 million was reduced by non-cash transactions including stock-based compensation of $452,000, issuance of common stock for services of $348,000, and depreciation of $92,000, as well as a non-cash gain from the reversal of the suspended liability. For the nine months ended September 30, 2024, our loss of $13.2 million was reduced by non-cash transactions including an increase in derivative liability of $5.9 million, amortization of convertible note costs of $667,000, and stock-based compensation of $546,000. |
| · | For the nine months ended September 30, 2025, cash provided by decreases in inventory and prepaid/in-transit inventory totaled $2.2 million. For the nine months ended September 30, 2024, cash used in by an increase in prepaid/in-transit inventory was $1.2 million and was somewhat offset by a decrease in inventory of $460,000. |
| · | Cash used and provided by changes in accounts receivable, accounts payable, inventory, and in-transit inventory are primarily due to timing of such activities as part of normal operations. |
Net cash provided by investing activities
Cash provided by investing activities was $4,000 and $122,000 for the nine months ended September 30, 2025 and 2024, respectively. We sold three vehicles in the nine months ended September 30, 2025, one of which was traded for services rendered and no cash was exchanged. For the nine months ended September 30, 2024, we purchased quality assurance equipment for $11,000, and we sold three vehicles as well as fixed assets associated with the property for which we terminated the lease.
Net cash provided by financing activities
Cash provided by financing activities in the nine months ended September 30, 2025 and 2024 was $7.5 million and $5.9 million, respectively. For the nine months ended September 30, 2025, we received net proceeds of $5.7 million from the exercise of warrants and $1.8 million for issuance of common stock, offset by payments of $25,000 toward principal on long-term debt. 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 convertible note of $2.8 million, principal payments on stockholder promissory notes of $763,000, and principal payments on long-term debt of $109,000.
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LIQUIDITY AND CAPITAL RESOURCES
Overview
Our operations have been financed primarily through net proceeds from the sale of securities and from borrowings. As of September 30, 2025, our working capital was $8.5 million compared to $2.0 million as of December 31, 2024, and we had cash and cash equivalents of $4.3 million and $548,000 as of September 30, 2025 and December 31, 2024, respectively.
We generally consider our short-term liquidity requirements to consist of those items that are expected to be incurred within the next 12 months and believe those requirements to consist primarily of funds necessary to pay operating expenses, interest, and principal payments on our debt.
As of September 30, 2025, we expect our short-term liquidity requirements to include (a) accounts payable of $523,000, (b) scheduled principal debt payments of approximately $31,000, and (c) lease obligation payments of approximately $328,000, including imputed interest.
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 $3.7 million used in operating activities during the nine months ended September 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.
Financing Obligations
As of September 30, 2025, our long-term debt was approximately $206,000, of which $31,000 is due within the next 12 months. This balance includes $140,000 outstanding under a COVID-19 Economic Injury Disaster Loan and $65,000 outstanding under vehicle financing arrangements.
Vehicle Financing Arrangements
As of September 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.
Convertible Note Financing
On December 27, 2023, we entered into a securities purchase agreement with 3i, LP (“3i”) pursuant to which we sold, and 3i purchased, the 3i Note in the aggregate original principal amount of $2,750,000, for gross proceeds of $2.5 million. On August 8, 2024, in connection with the closing of the August 2024 Public Offering, we repaid the 3i Note, and our obligations under the 3i Note were fully satisfied and discharged. Prior to the closing of the August 2024 Public Offering, we had issued 414 shares of common stock (post-Reverse Stock Split) for the payment of $90,839 in interest.
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Equity Line of Credit
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 Stone Capital, LLC (“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, we mutually agreed with Tumim 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, we 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.
Contractual and Other Obligations
Our estimated future obligations consist of long-term operating lease liabilities. As of September 30, 2025, the Company had $788,000 in long-term operating lease liabilities.
CRITICAL ACCOUNTING ESTIMATES
The above discussion and analysis of our financial condition and results of operations is based upon our financial statements. The preparation of financial statements in conformity with the generally accepted accounting principles in the United States (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosures of contingent assets and liabilities. These estimates involve judgments that are inherently uncertain and subject to change as future events and conditions evolve. We base our estimates on historical experience, known trends and events, and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the financial statements prospectively from the date of the change in the estimate.
A critical accounting estimate is one that involves a significant degree of judgment or complexity and where a different assumption could reasonably have a material impact on our financial condition or results of operations. The critical accounting estimates below are those that we consider to be the most important in portraying our financial condition and results of operations and also require the greatest number of judgments by management. There were no material changes to our methodologies or underlying assumptions for these estimates compared to prior periods.
Property and Equipment
Property and equipment are stated at cost less depreciation calculated on the straight-line basis over the estimated useful lives of the related assets as follows:
| Vehicles and transportation equipment | 5 – 7 years | |
| Manufacturing equipment | 3 – 10 years | |
| Office furniture and equipment | 3 – 7 years | |
| Warehouse equipment | 3 – 10 years | |
| QA equipment | 3 – 10 years | |
| Tooling and molds | 5 – 10 years |
Leasehold improvements are amortized over the shorter of the lease term or their estimated useful lives.
Useful life is estimated for each item at the time of purchase based on the typical useful life in our experience and best judgment, and remaining useful life of existing assets is evaluated regularly. If an estimated useful life were to be inaccurate, there would not be a material effect on our financials, and the estimated depreciation would be trued up at the time of disposal or impairment. It is our experience that the estimated useful lives of our assets are generally materially accurate.
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Leases
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 recognize operating lease assets and lease liabilities on the balance sheets on the lease commencement date, based on the present value of the outstanding lease payments over the reasonably certain lease term. The lease term includes the non-cancelable period at the lease commencement date, plus any additional periods covered by an option to extend (or not to terminate) the lease that is reasonably certain to be exercised, or an option to extend (or not to terminate) a lease that is controlled by the lessor.
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.
See “Note 8—Commitments and Contingencies” of our financial statements within the Annual Report for further information.
Warrants
Warrants are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified. See “Note 7—Equity and Debt Financings” and “Note 9—Stockholders’ Equity” in our accompanying financial statements for information on the warrants. Changes in assumptions used to estimate fair value could occur from stock pricing volatility depending on our performance and our position in the industry and changes in market interest rates which can result in materially different results.
Stock-Based Compensation
We use the Black-Scholes option-pricing model to determine the fair value of option grants. In estimating fair value, management is required to make certain assumptions and estimates such as the expected life of stock options, volatility of our stock price, risk-free interest rates, future dividend yields and estimated forfeitures at the initial grant date. Restricted stock unit awards are valued based on the closing trading price of our common stock on the date of grant. Changes in assumptions used to estimate fair value could result in materially different results.
Income Taxes
Effective November 1, 2021, the Company converted from an LLC to a C corporation and, as a result, became subject to corporate federal and state income taxes. Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates that will be in effect for the years in which those tax assets and liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. We believe it is more likely than not that forecasted income, together with future reversals of existing taxable temporary differences, will be sufficient to recover our deferred tax assets. In the event that we determine all, or part of our net deferred tax assets are not realizable in the future, we will record an adjustment to the valuation allowance and a corresponding charge to earnings in the period such determination is made.
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of US GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with our expectations could have a material impact on our financial condition and results of operations. We recognize tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recorded in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
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See “Note 11—Income Taxes” of our financial statements within the Annual Report for further information on our income taxes.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by Item 305 of Regulation S-K.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and our principal financial and accounting officer, evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2025. The term "disclosure controls and procedures," means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms.
In designing and evaluating our disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours is designed to do. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on this evaluation, our principal executive officer and our principal financial and accounting officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2025.
Changes in Internal Control Over Financial Reporting
During the three months ended September 30, 2025, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may become subject to legal claims, regulatory matters and contingencies in the ordinary course of our business. Except as set forth below, we are not currently party to any pending legal claims, regulatory matters or contingencies that we believe would, individually or in the aggregate, have a material adverse effect on our financial condition, results of operations, liquidity or prospects.
On July 1, 2025, we received a staff determination (the “Staff Determination”) from the Nasdaq Listing Qualifications department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) stating that the bid price of its common stock had closed below the $1.00 minimum required by Nasdaq Listing Rule 5550(a)(2) for the prior 30 consecutive business days (the “Minimum Bid Price Requirement”) and the Staff had determined to delist its securities from The Nasdaq Capital Market (the “Staff Determination”). We timely requested and were granted an appeal hearing before a Nasdaq Hearings Panel (the “Panel”) to appeal the Staff Determination, staying the delisting of our common stock pending the Panel’s decision. As of August 12, 2025, the common stock had closed above $1.00 per share for more than ten consecutive trading days. As a result, on August 13, 2025, we received a letter from the Nasdaq Office of General Counsel advising that we had regained compliance with the Minimum Bid Price Requirement, and that we were therefore in compliance with Nasdaq’s listing requirements. Consequently, the appeal hearing was cancelled.
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On August 20, 2025, we received a notification letter (the “Notice”) from the Staff notifying us that the stockholders’ equity balance reported in the Quarterly Report for the three months ended June 30, 2025 was below the $2.5 million required minimum for continued listing on the Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(b)(1). The Notice also provided that we had 45 calendar days to submit a plan to regain compliance. Following the Warrant Adjustments and subsequent warrant exercises, our stockholders’ equity balance increased above the required threshold. On September 17, 2025, we received a letter from the Nasdaq Listing Qualifications department confirming our regained compliance with the listing rule and that we were therefore in compliance with Nasdaq’s listing requirements.
ITEM 1A. RISK FACTORS
Investing in our common stock involves a high degree of risk. Before making a decision to purchase or sell our common stock, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors” of the Annual Report, which are incorporated herein by reference. If any of the identified risks are realized, our business, results of operations, financial condition, liquidity, and prospects could be materially and adversely affected. In that case, the trading price of our common stock may decline, and you could lose all or part of your investment. The risks described in our Annual Report are not the only ones we face. Additional risks we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, results of operations, liquidity, and prospects.
Except as set forth below, during the three months ended September 30, 2025, there were no material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors” of our Annual Report.
We depend on our senior management team and other key employees, and significant attrition within our management team or unsuccessful succession planning could adversely affect our business.
Our success depends in part on our ability to attract, retain, and motivate senior management and other key employees. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be intense. We must continue to recruit, retain, and motivate senior management and other key employees sufficient to maintain our current business and support our future projects.
We have experienced recent transitions in our leadership team. In April 2025, we appointed Carson Heagen as our Chief Operating Officer, and in September 2025, we appointed Shawna Bowin as our Chief Financial Officer. In October 2025, Brian Schaffner, our Chief Executive Officer, and Paul Shoun, our President and Chairman of the Board, each resigned. Following these resignations, the Board appointed Joseph Hammer as our new Chief Executive Officer and Chairman of the Board. Leadership transitions of this nature can create uncertainty, disrupt operations, and challenge continuity in our strategic direction or impact our ability to maintain relationships with customers and business partners or retain key employees. Although we believe our leadership team brings valuable experience and skills, there can be no assurance our transition efforts will be successful or that our new leaders will achieve our strategic, operational, or financial objectives. If we are unsuccessful in our succession planning or integration efforts, or if we experience additional unanticipated departures among senior management or other key employees, investor confidence and our results of operations could be adversely affected.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Recent Sales of Unregistered Securities
On September 8, 2025, we entered into a Consulting Agreement for business and advisory services, which provided, among other things, for the issuance to the consultant of a total of 325,000 shares of restricted common stock consisting of (i) 200,000 shares issued on September 9, 2025, and (ii) the remaining 125,000 shares shall be issued within four business days of November 20, 2025.
Issuer Repurchases of Equity Securities
None.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Plans
Our directors and officers may enter into trading plans or other arrangements with financial institutions to purchase or sell shares of our common stock, which plans or arrangements are intended to comply with the affirmative defense provisions of Rule 10b5-1 of the Exchange Act, or which may represent a non-Rule 10b5-1 trading arrangement as defined under Item 408(a) of Regulation S-K.
During the quarter
ended September 30, 2025, no director or officer
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ITEM 6. EXHIBITS
† Indicates a management contract or compensatory plan or arrangement.
| # | The certification shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act, and shall not be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, whether made before or after the date of this Quarterly Report, irrespective of any general incorporation language contained in any such filing. |
| * | Certain
of the schedules (and similar attachments) to this exhibit have been omitted in accordance
with Item 601(a)(5) of Regulation S-K under the Securities Act because they do not contain
information material to an investment decision and that information is not otherwise disclosed
in the exhibit or the disclosure document. The registrant agrees to furnish a copy of all
omitted schedules (or similar attachments) to the Commission upon its request. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 13, 2025 | By: | /s/ Joseph Hammer |
| Joseph Hammer | ||
Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) | ||
| Date: November 13, 2025 | By: | /s/ Shawna Bowin |
| Shawna Bowin | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
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