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What changed in Expion360 Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Expion360 Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+299 added−286 removedSource: 10-K (2024-03-28) vs 10-K (2023-03-30)

Top changes in Expion360 Inc.'s 2023 10-K

299 paragraphs added · 286 removed · 215 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeTo enable us to provide a full range of components to complement our battery offerings, we offer a suite of accessories and components for new installations or conversions which includes but is not limited to chargers, monitors, inverters, and solar components from brands such as Victron Energy and RedArc. 7 The Company has the following products: · Group 24 batteries: o e360 60Ah lithium battery o e360 80Ah lithium battery o e360 Extreme Density 95Ah lithium battery · Group 27 batteries: o e360 100Ah lithium battery o e360 Extreme Density 120Ah lithium battery · Custom battery: o E360 Extreme Density 360Ah battery · Expion360 e360 Lithium Power Bundle™ · Battery monitors · DC battery chargers · Industrial tie-downs – 7 models · Terminal blocks · Bus bars The Company has the following products in its pipeline: · In January 2023, Expion360 introduced AURA POWERCAP™ 600 and AURA POWERCAP™ 800.
Biggest changeAs of December 31, 2023, we offer the following products for sale: ● 12v batteries: o Group 24 batteries: ● e360 60Ah lithium battery ● e360 80Ah lithium battery ● e360 Extreme Density 95Ah lithium battery o Group 27 batteries: ● e360 100Ah lithium battery ● e360 Extreme Density 120Ah lithium battery o Custom form factor battery: ● e360 Extreme Density 360Ah battery ● e360 Extreme Density 450 Ah lithium battery ● 48v batteries: o Group GC2 batteries: ● e360 36Ah lithium battery ● Expion360 e360 Lithium Power Bundle™ ● Battery monitors ● DC battery chargers ● Industrial tie-downs – 7 models ● Terminal blocks ● Bus bars ● AURA POWERCAP TM 600 ● e360 SmartTalk TM mobile app As of December 31, 2023, we have the following products in our pipeline: ● In September 2023, we introduced a new 4.5 Ah 26650 lithium-ion phosphate battery cell and 12 Volt 450 Ah e360 SmartTalk™ lithium-ion battery.
Strong National Retail Customers and Distribution Channels Expion360 has sales relationships with many major RV retailers and with marine retailers and plans to use what we believe is a strong reputation in the lithium battery space to create an even stronger distribution channel.
Strong National Retail Customers and Distribution Channels Expion360 has sales relationships with many major RV and marine retailers, and plans to use what we believe is a strong reputation in the lithium battery space to create an even stronger distribution channel.
Our batteries utilize lithium iron phosphate, and therefore, are expected to have a lifespan of approximately 12 years — three to four times that of certain lead-acid batteries and with ten times the number of charging cycles.
Our batteries utilize lithium iron phosphate, and therefore, are expected to have a lifespan of approximately 12 years - three to four times that of certain lead-acid batteries and with ten times the number of charging cycles.
These provisions include: · the requirement that we provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; · reduced disclosure about our executive compensation arrangements; · an exemption from the requirement that we hold a non-binding advisory vote on executive compensation or golden parachute arrangements; and · an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
These provisions include: ● the requirement that we provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure; ● reduced disclosure about our executive compensation arrangements; ● exemption from the requirement that we hold a non-binding advisory vote on executive compensation or golden parachute arrangements; and ● an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
To maximize the power and efficiency of our batteries, we welded our cells via thick copper/tin machined collector plates, welded all interior pack points, added a press broke flange at each end to create a mechanical backbone for the battery monitoring system (the “BMS”), used high-grade wiring and ring terminals throughout, and treated connections with industrial epoxy for long-lasting protection.
To maximize the power and efficiency of our batteries, we welded our cells via thick copper/tin-machined collector plates, welded all interior pack points, added a press break flange at each end to create a mechanical backbone for the battery monitoring system (the “BMS”), used high-grade wiring and ring terminals throughout, and treated connections with industrial epoxy for long-lasting protection.
The vast expansion of the lithium battery market can be attributed to global trends promoting clean energy, as well as the compact and flexible nature of lithium battery packs which make them easy to install in RV’s and boats.
The vast expansion of the lithium battery market can be attributed to global trends promoting clean energy, as well as the compact and flexible nature of lithium battery packs which make them easy to install in RVs and boats.
Our technology, which we believe offers industry leading battery pack flexibility for the most efficient energy storage, is poised to be able to offer power to these large vehicles such as RV’s and recreational boats. 5 Expion360 is focused on expanding its position in the deep cycle, off-grid and stationary energy storage markets.
Our technology, which we believe offers industry leading battery pack flexibility for the most efficient energy storage, is poised to be able to offer power to these large vehicles such as RVs and recreational boats. Expion360 is focused on expanding its position in the deep cycle, off-grid and stationary energy storage markets.
We currently have customers consisting of dealers, wholesalers, private label customers and original equipment manufacturers who are driving revenue and brand awareness nationally. Our corporate headquarters are based in Redmond, Oregon, with assembly in the United States and suppliers based in Asia. We are currently in the process of building out manufacturing capacity at our corporate headquarters.
We currently have customers consisting of dealers, wholesalers, private label customers and original equipment manufacturers who are driving revenue and brand awareness nationally. Our corporate headquarters are based in Redmond, Oregon, and our suppliers are based in the United States, Asia, and Europe. We are currently in the process of building out manufacturing capacity at our corporate headquarters.
We are developing the e360 Home Energy Storage: a system that we expect to significantly change the industry in barrier price, flexibility, and integration. We are deploying multiple IP strategies with cutting-edge research and unique products to sustain and scale the business.
We are developing the e360 Home Energy Storage System, a system that we expect to significantly change the industry in barrier price, flexibility, and integration. We are deploying multiple intellectual property strategies with cutting-edge research and unique products to sustain and scale the business.
The AURA POWERCAP™ 600 and AURA POWERCAP™ 800 contain beneficial features and functions for a compact portable power unit, including the ability to recharge the battery from the input charge port using the included 7 Amp household charger and the ability to recharge remotely with Expion360’s lightweight portable solar panel options, which are sold separately.
The Aura 600 contains beneficial features and functions for a compact portable power unit, including the ability to recharge the battery from the input charge port using the included 7 Amp household charger and the ability to recharge remotely with Expion360’s lightweight portable solar panel options, which are sold separately.
Customers We currently have over 213 customers across the United States consisting of dealers, wholesalers, private-label customers and original equipment manufacturers who then sell our products to end consumers. Our sales are completed on a purchase order basis and most are without firm, long-term revenue commitments or sales arrangements. In addition, we also sell products directly to consumers.
Customers We currently have more than 300 customers across the United States consisting of dealers, wholesalers, private-label customers and original equipment manufacturers who then sell our products to end consumers. Our sales are completed on a purchase order basis and most are without firm, long-term revenue commitments or sales arrangements. In addition, we also sell products directly to consumers.
We design, assemble, and distribute high-powered, lithium battery solutions using ground-breaking concepts with a creative sales and marketing approach. We believe that our product offerings include some of the most dense and minimal-footprint batteries in the RV & Marine industry.
We design, assemble, and distribute high-powered, lithium battery solutions using ground-breaking concepts and rugged, high-quality designs with a creative sales and marketing approach. We believe that our product offerings include some of the most dense and minimal-footprint batteries in the RV and marine industries.
Our long-term target is to onshore the manufacturing of most of our components and assemblies, including cell manufacturing, to the United States. Our main target markets are currently the RV & Marine industry.
Our long-term target is to onshore the manufacturing of most of our components and assemblies, including cell manufacturing, to the United States. Our primary target markets are currently the RV and marine industries.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our common stock, par value $0.001 per share (“Common Stock”) held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year, and our Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
The SEC also maintains a website found at http://www.sec.gov/ that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. 12
We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer as defined in the Exchange Act.
This process will recapture the raw lithium from the cell for reuse in future cells. The price of lithium remains subject to volatility and thus we aim to monitor any developments that might adversely affect our supply chain.
Another development of the past few years is lithium cell recycling. This process will recapture the raw lithium from the cell for reuse in future cells. The price of lithium remains subject to volatility and thus we aim to monitor any developments that might adversely affect our supply chain.
We have implemented policies and procedures, trained our employees, and conducted internal audits to verify compliance with environmental health and safety regulations. 9 In August of 2022, our Group 24 and Group 27 batteries passed UL 1973 certification. In February 2023, our custom 360Ah battery also passed UL 1973 certification.
We have implemented policies and procedures, trained our employees, and conducted internal audits to verify compliance with environmental health and safety regulations. In August 2022, our Group 24 and Group 27 batteries passed UL 1973 certification. In February 2023, our custom 360Ah battery also passed UL 1973 certification. Employees As of December 31, 2023, we had 23 full-time employees.
Competitors Our competitors include lithium-ion battery manufacturers, such as Relion (which was acquired by Brunswick Corporation in September 2021), Battle Born Batteries, Renogy, and Dakota Lithium. Lead-acid battery manufactures also continue to have a presence in the marketplace.
Competitors Our competitors include lithium-ion battery manufacturers, such as Relion (which was acquired by Brunswick Corporation in September 2021); Dragonfly Energy Holdings Corp (Nasdaq: DFLI), the manufacturer of Battle Born Batteries; Renogy; and Dakota Lithium. Lead-acid battery manufactures also continue to have a presence in the marketplace.
Employees As of December 31, 2022, we had 25 employees, all full time. None of our employees are covered by collective bargaining agreements and we have never experienced an organized work stoppage, strike, or labor dispute. We believe working conditions and compensation packages are competitive with those offered by competitors and consider our relations with our employees to be good.
None of our employees are covered by collective bargaining agreements, and we have never experienced an organized work stoppage, strike, or labor dispute. We believe our working conditions and compensation packages are competitive with those offered by competitors and consider our relations with our employees to be good.
ITEM 1. BUSINESS Our Company Expion360 Inc. (the “Company,” “Expion360”, “we,” “us” or “our”) focuses on the design, assembly, manufacturing, and sales of lithium iron phosphate (LiFePO4) batteries and supporting accessories for recreational vehicles (“RVs”) and marine applications with plans to expand into home energy storage products and industrial applications.
ITEM 1. BUSINESS Our Company Expion360 focuses on the design, assembly, manufacturing, and sales 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.
MH64383). We believe that our materials and engineering enhance the reliability, stability, and safety of our products. We reimagined the standard battery case and included built-in rubber feet, radiused corners, 96.7% larger terminal connection pads, interior molded ribs for structural security, and the highest-grade ABS plastics with additives for fire retardancy.
We reimagined the standard battery case and included built-in rubber feet, radiused corners, 96.7% larger terminal connection pads, interior molded ribs for structural security, and the highest-grade ABS plastics with additives for fire retardancy.
Information contained on our website is not part of this Annual Report or our other filings with the SEC. We assume no obligation to update or revise any forward-looking statements in this Annual Report whether as a result of new information, future events or otherwise, unless we are required to do so by law.
We assume no obligation to update or revise any forward-looking statements in this Annual Report whether as a result of new information, future events or otherwise, unless we are required to do so by law.
Furthermore, we believe that our typical battery provides three times the power of the typical, lead-acid battery despite being half the weight (comparing, for example, a typical lead-acid battery like Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery and assuming slow discharge at a .1C rate).
Furthermore, we believe that our typical battery provides three times the power of the typical, lead-acid battery despite being half the weight (comparing, for example, a typical lead-acid battery like Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery and assuming slow discharge at a .1C rate). 9 Manufacturing and Supply Chain Our batteries are manufactured by multiple third-party manufacturers located in Asia, which also produce our battery cells.
Our website is https://expion360.com/ and on the Investor Relations section of our website, we post or will post, as applicable, the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (“SEC”): our Annual Report on Form 10-K (the “Annual Report”), our Proxy Statement on Schedule 14A, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. 10 All of the information on our Investor Relations web page is available to be viewed free of charge.
Our website is found at expion360.com and on the Investor Relations section of our website, we post or will post, as applicable, the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our Annual Reports on Form 10-K, our Proxy Statements on Schedule 14A, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
Due to the progress and success with our existing sales and distribution activities and to avoid any channel conflicts, our previously announced value-added reseller program has been deferred, pending additional review.
Due to the progress and success with our existing sales and distribution activities and to avoid any channel conflicts, our previously announced value-added reseller program has been deferred, pending additional review. We will continue to focus on our sales and distribution channels in order to develop existing customer relationships and grow our customer base.
Along with RV/Marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial material handling markets. Expion360’s e360 product line, which is manufactured for the RV/Marine industry, was launched in December 2020. The e360 product line, through its rapid sales growth, has shown to be a preferred conversion solution for lead-acid batteries.
Along with RV, marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial material handling markets. Expion360’s e360 product line, which is manufactured for the RV and marine industries, was launched in December 2020.
We pursue the registration of our domain names and trademarks and service marks in the United States and in an effort to protect our brand, as of December 31, 2022, we own 5 trademark registrations to cover our house marks in the United States and we have 3 pending trademark applications relating to our design logos and slogans in the United States.
We pursue the registration of our domain names, trademarks, and service marks in the United States. In an effort to protect our brand, as of December 31, 2023, we own 15 trademark registrations to cover our house marks in the United States. We also own nine trademark registrations relating to our house marks in Canada.
We hold our lithium batteries to high safety standards, which has enabled us to achieve a UL 1973 compliance. We stand by our batteries with an industry leading 12-year warranty.
We hold our lithium batteries to high safety standards, which has enabled us to achieve a UL 1973 compliance.
In addition, the Company has secured a secondary source for lithium iron phosphate cells used in its batteries from a supplier in Denmark, enabling the Company to source materials outside of China in the event it becomes necessary to do so. We aim to maintain an appropriate level of inventory to satisfy our expected supply requirements.
In addition, we secured 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.
Product Section We focus on the design, assembly, and sales of lithium iron phosphate (LiFePO4) batteries and supporting accessories for RV and marine applications. Our batteries are designed and engineered in house using premium lithium iron phosphate cells with quality controls at every step We use high-grade LiFePO4 encased in steel and meeting the UL 1642 standard (UL file no.
Expion360 Products We focus on the design, assembly, and sales of LiFePO4 batteries and supporting accessories for RV and marine applications, as well as our recent expansion into home energy storage solutions. Our batteries are designed and engineered in-house using premium lithium iron phosphate cells with quality controls at every step.
Implications of Being an Emerging Growth Company and a Smaller Reporting Company We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, we have elected to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.
As an emerging growth company, we have elected to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.
Additional focus markets include home energy storage, where we aim to provide a cost-effective, low barrier of entry, and a do-it-yourself (“DIY”) flexible system for those looking to power their homes via solar energy, wind, or grid back-up.
We are also focused on expanding into the home energy storage market with the introduction of our two LiFePO4 battery storage systems, where we aim to provide a cost-effective, low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up.
While we do not have long-term purchase agreements with our third-party manufacturers and our purchases are completed on a purchase order basis, we have had strong relationships with our third-party manufacturers spanning many years.
While we do not have long-term purchase agreements with our third-party 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).
Expion360 has sales relationships with many major RV retailers, including Camping World, a leading national RV retailer, as well as NTP-STAG, a leading distributor of aftermarket RV parts as well as with marine retailers.
Expion360 has sales relationships with many major RV retailers, including Camping World, a leading national RV retailer and Meyer Distributing, Inc., a leading national marketer and distributor of automotive and RV specialty products.
The AURA POWERCAP™ 600 is designed to fit and convert any one of Expion360’s group 24 lithium batteries into a 600W mobile power station while the AURA POWERCAP™ 800 is designed to fit and convert any one of Expion360’s group 27 lithium batteries into an 800W mobile power station.
The Aura 600 is designed to fit and convert any one of Expion360’s Group 24 lithium batteries into a 600W mobile power station. The Aura 600’s proprietary patent pending design allows it to join seamlessly to 60Ah, 80Ah, and 95Ah Expion360 batteries. The Aura 600 is an exclusive fit to Expion360 batteries and is not compatible with other brands.
We will continue to focus on our sales and distribution channels in order to develop existing customer relationships and grow our customer base.We also offer a high level of technical support to our customers before and after product sales. We currently derive a significant portion of our revenues from a limited number of customers.
We also offer a high level of technical support to our customers before and after product sales. 10 We currently derive a significant portion of our revenues from a limited number of customers. During the year ended December 31, 2023, sales to two customers totaled approximately 21% of our total sales.
Our battery cell manufacturers also have joint venture factories outside of China and have secured sourcing contracts from lithium suppliers in South America and Australia.
For example, a global shortage and component supply disruptions of electronic battery components were reported during 2021 and 2022, but it is not currently affecting our supply chain. Our battery cell manufacturers also have joint venture factories outside of Asia and have secured sourcing contracts from lithium suppliers in South America and Australia.
Battery Pack Flexibility Our battery packs are also highly flexible, designed to be moved and used in various applications seamlessly. We plan to onshore our semi-automated pack assembly in Redmond, Oregon. The initial equipment has arrived and subject to market conditions, we are working on setup and development of additional equipment to automate the line.
The 12 volt 450 Ah battery was introduced in September 2023 as our first e360 battery incorporating our 4.5 Ah cell technology. 7 Battery Pack Flexibility Our battery packs are also highly flexible, designed to be moved and used in various applications seamlessly. We plan to onshore our semi-automated pack assembly in Redmond, Oregon.
The lithium prices in 2020 ended below the 2016 prices. In addition to increased mining and newly located reserves, there is also an industry push to provide more efficient ways to extract lithium from the mined ore. Another development of the past few years is lithium cell recycling.
Lithium 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 In addition to increased mining and newly located reserves, there is also an industry push to provide more efficient ways to extract lithium from the mined ore.
John Yozamp has used his decades of experience in the energy and RV industries to cultivate relationships with numerous retailers in the space. Expion360 has already established a sales relationship with several large retail customers, including Camping World, a leading national RV retailer, as well as NTP-STAG, a leading distributor of aftermarket RV parts.
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; and Meyer Distributing, Inc., a leading national marketer and distributor of automotive and RV specialty products.
Expion360 began taking pre-orders of the new AURA POWERCAP™ 600 and 800 in Q1 2023 with anticipated deliveries Q2 2023. See “— Competitive Strengths—Expansion into New Markets ” for additional information about the AURA POWERCAP™ 600 and AURA POWERCAP™ 800. · Expion360 is also currently developing the e360 off-grid home energy system with release expected in 2024.
Expion360 expects to begin taking orders for the new home energy storage solutions in second quarter of 2024 with anticipated deliveries beginning in second half of 2024. See the section above titled “— Expansion into New Markets ” for additional information about the new home energy storage solutions.
This should allow us to use a more flexible approach to forming and creating new battery packs. By onshoring, we expect to be able to react to market demands at a much quicker pace and increase profit levels over our competition.
By onshoring, we expect to be able to react to market demands at a much quicker pace and increase profit levels over our competition. Expansion into New Markets In furtherance of our vision of stored energy, in the second quarter of 2023, we commenced deliveries of a portable power generator product, the AURA POWERCAP™ 600 (the “Aura 600”).
We have filed patent applications in the United States to provide protection for our technology. Two design patents in the United States related to the new AURA POWERCAP™ are pending as of December 2022.
Intellectual Property The success of our business and our technology leadership is supported by our proprietary battery technology. We have filed 11 patent applications in the United States to provide protection for our technology, including seven design patent applications and four utility patent applications.
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According to industry sources and management estimates, the global electric vehicle market was valued at $163.01 billion in 2020, and is projected to reach $823.75 billion by 2030, a CAGR of 18.2%. In addition, the North American electric vehicle market is projected to reach $147.6 billion by 2028, a CAGR of 37.2%.
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The e360 product line, through its sales growth, has shown to be a preferred conversion solution for lead-acid batteries.
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Furthermore, the North American RV market was estimated at roughly $33.95 billion in 2021, and is expected to grow at a 9.7% CAGR, approaching $59.16 billion by 2027. There are almost 230 national chain RV dealers in the United States, further exemplifying the robust market for these vehicles.
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In December 2023, we announced our entrance into the home energy storge 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.
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In addition, the global recreational boating market was valued at $27.32 billion in 2021, and is projected to reach $36.78 billion by 2027, growing at a CAGR of 5.1% from 2021 to 2027. At the intersection of both these trends lies the rapidly expanding lithium battery market.
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According to ResearchAndMarkets.com, the global EV market demand is expected to reach $1.66 trillion by 2030, expanding at a compound annual growth rate (“CAGR”) of 14.5% over the forecast period. On a global level, the market is driven by initiatives taken by governments of various countries to promote manufacturing of EVs.
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The market for lithium-ion batteries is expected to grow at 13.1% CAGR between 2022 and 2031, from roughly $44.5 billion to $135.1 billion.
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For example, the Electric Vehicles Initiative (“EVI”), a multi-government forum with 13 participating countries, works to increase the adoption of EVs globally. Several campaigns and programs have been launched through the EVI forum, including the EV30@30 in 2017 initiative, which aims to have at least 11 countries with EVs reflecting 30% of new vehicle sales by 2030.
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Long-time RV and Marine Industry Experience and Relationships and Strong Insider Ownership Expion360 is managed by a team with a strong track record in the RV and clean energy spaces. John Yozamp, Founder of Expion360, pioneered multiple new recreational concepts in the RV industry.
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Further, according to ResearchAndMarkets.com, the United States EV market size was valued at $49.1 billion in 2022 and is anticipated to expand at a CAGR of over 15.5% between 2023 and 2032 due to the growing demand for efficient and eco-friendly vehicles. 6 Furthermore, the North American RV market was estimated at roughly $33.95 billion in 2021, and is projected to grow at a 5.0% CAGR from 2024 to 2032 according to Expert Market Research.
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As the founder and previous owner of Zamp Solar, he has extensive relationships in the RV OEM industry.
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There are over 200 national chain RV dealers in the United States, further underscoring the robust market for these vehicles. At the intersection of both these trends lies the rapidly expanding lithium battery market. According to IMARC, the market for lithium-ion batteries is projected to grow at 13.2% CAGR to reach $93.3 billion by 2028.
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In addition, our co-founders own significant equity in the company, signaling a strong commitment and personal investment. 6 Expansion into New Markets While RV and marine applications currently drive revenue, Expion360 has plans to expand into the home energy market in the coming years.
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In addition, in September 2023, Expion360 introduced a new 4.5 Ah 26650 lithium-ion phosphate battery cell. This will allow us to increase energy density by over 32% compared to traditional 3.4 Ah 26650 cells.
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Our e360 Home Energy Storage system is planned to target entry level customers with its modular design that will allow for DIY expansion. We see the vision of stored energy as a portable, moving concept, where stored energy can be transported from the home to other devices outside of it.
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The initial equipment has arrived and subject to market conditions, we are working on setup and development of additional equipment to automate the line. This should allow us to use a more flexible approach to forming and creating new battery packs.
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Furthermore, Expion360 plans to file for IP protection for Expion360’s “Smart Talk” upon completion of development. “Smart Talk” is designed to allow multiple batteries in a bank to communicate as one and be linked to a network.
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In January 2023, we also announced our plans to introduce the AURA POWERCAP™ 800 (the “Aura 800”), which is designed to fit and convert any one of our Group 27 lithium batteries into an 800W mobile power station. The Aura 800’s design allows it to join to 100Ah and 120Ah Expion360 batteries.
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In furtherance of our vision of stored energy, in January 2023, Expion360 introduced two portable power generator products: the AURA POWERCAP™ 600 and AURA POWERCAP™ 800 (together, the “Aura”).
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While we have completed development of the Aura 800 and accepted pre-orders of the product, demand for the Aura 800 has been softer than anticipated and we have no current plans to commence commercial sales of the product. We remain focused on growing our commercial sales of the Aura 600.
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The Aura’s proprietary patent pending design allows the AURA POWERCAP™ 600 to join seamlessly to 60Ah, 80Ah, and 95Ah Expion360 batteries and the AURA POWERCAP™ 800 to join to 100Ah and 120Ah Expion360 batteries. The AURA POWERCAP™ 600 and AURA POWERCAP™ 800 are an exclusive fit to Expion360 batteries and will not fit other brands.
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Additionally, in June 2023, we unveiled e360 SmartTalk, an innovative mobile app that allows the seamless integration and management of e360 Bluetooth-enabled LiFePO4 batteries. The technology enables users to wirelessly monitor and manage e360 batteries, providing a view of individual battery conditions and performance as well as a comprehensive view of an entire power bank consisting of multiple e360 batteries.
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Manufacturing and Supply Chain Our batteries are manufactured by multiple third-party manufacturers located in China who also produce our battery cells. We then assemble and package the batteries in the United States for sale to our customers.
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The 48 Volt GC2 LiFePO4 battery was also introduced in June 2023 as our first e360 SmartTalk Battery for powering electric golf carts and other light electric vehicles (LEVs).
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During the years ended December 31, 2022 and 2021, approximately 85% and 90%, respectively, of inventory purchases were made from foreign suppliers in China and Hong Kong.
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In December 2023, we entered the home energy storage market with our introduction of two LiFePO4 battery storage solutions: a wall mounted all-in-one inverter and 10kW battery and an expandable server rack style battery cabinet system.
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We believe that we could locate alternative third-party manufacturers to fulfill our needs. 8 Lithium 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. From 2010 until 2015, the price of lithium stayed fairly flat.
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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.
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In 2016 the price started to rise, fueled by the fear of material shortages. As a result of the higher prices, new mining operations that had been in development came online and companies invested in more efficient extraction processes. The increases in production led to an oversupply of lithium in 2019 and a sharp drop in prices.
Added
Further, according to Clean Energy Group, approximately 3.2 million homes in the United States have solar panels installed, but only about 6% of residential solar systems have battery storage.
Removed
During the year ended December 31, 2022, sales to our top three customers totaled $2,905,326, comprising approximately 41% of our total sales, including sales to one customer, which totaled $1,346,344 or approximately 19% of our total sales. Intellectual Property The success of our business and our technology leadership is supported by our proprietary battery technology.
Added
We use high-grade LiFePO4 encased in steel and meeting the UL 1642 standard (UL File No. MH64383). We believe that our materials and engineering enhance the reliability, stability, and safety of our products.
Added
We stand by our batteries with an industry leading 12-year warranty. 8 To enable us to provide a full range of components to complement our battery offerings, we offer a suite of accessories and components for new installations or conversions which includes but is not limited to chargers, monitors, inverters, and solar components from brands such as Victron Energy and RedArc.
Added
Expion360 began taking pre-orders for the new 450 Ah e360 SmartTalk™ battery starting in the fourth quarter of 2023, with initial shipments expected to begin in the first quarter of 2024. ● In December 2023, we introduced our two LiFePO4 battery storage solutions, a wall mounted all-in-one inverter and 10kW battery and an expandable server rack style battery cabinet system.
Added
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 to avoid potential shipment delays. We aim to maintain an appropriate level of inventory to satisfy our expected supply requirements.
Added
We believe that we could locate suitable alternative third-party manufacturers to fulfill our needs if needed.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur Articles of Incorporation provides that, subject to limited exceptions, the Nevada Eighth Judicial District Court of Clark County Nevada shall be, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of Nevada Revised statutes Chapters 78 or 92A, our Articles of incorporation or our Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our Articles of Incorporation or Bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine.
Biggest changeOur Articles of Incorporation provides that, subject to limited exceptions, the Nevada Eighth Judicial District Court of Clark County, Nevada shall be, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought in the name or right of the Corporation or on its behalf, (ii) any action asserting a claim for breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of Nevada Revised Statutes Chapters 78 or 92A, our Articles of incorporation or our Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our Articles of Incorporation or Bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine. 28 Although these choice of forum provisions would not apply to suits brought to enforce any duty or liability created by the Exchange Act or rules and regulations thereunder, and suits brought to enforce the Securities Act or rules and regulations thereunder are granted concurrent jurisdiction in federal and state courts pursuant to preemptive federal law, these choice of forum provisions may otherwise limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents.
These risks include, but are not limited to: · supply shortages caused by the inability or unwillingness of suppliers and their competitors to build or operate component production facilities to supply the numbers of battery components required to support the rapid growth of the electric RV and marine component vehicle industry and other industries in which we operate as demand for such components increases; 17 · disruption in the supply of electronic circuits due to quality issues or insufficient raw materials; · a decrease in the number of manufacturers of battery components; and · an increase in the cost of raw materials.
These risks include, but are not limited to: ● supply shortages caused by the inability or unwillingness of suppliers and their competitors to build or operate component production facilities to supply the numbers of battery components required to support the rapid growth of the electric RV and marine component vehicle industry and other industries in which we operate as demand for such components increases; ● disruption in the supply of electronic circuits due to quality issues or insufficient raw materials; ● a decrease in the number of manufacturers of battery components; and ● an increase in the cost of raw materials.
Furthermore, there is inherent risk associated with accounts receivable concentration as a deterioration in the financial condition of a limited number of account debtors, or any other factor which affects their ability or willingness to pay could in turn have a material adverse effect on our financial condition. We may not be able to successfully manage our growth.
Furthermore, there is inherent risk associated with accounts receivable concentration as a deterioration in the financial condition of a limited number of account debtors, or any other factor which affects their ability or willingness to pay could in turn have a material adverse effect on our financial condition. 14 We may not be able to successfully manage our growth.
The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges.
The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles (“EVs”) and energy storage products. Furthermore, fluctuations or shortages in petroleum and other economic conditions may cause us to experience significant increases in freight charges.
Any shortages in trucking capacity, any increase in the cost thereof or any other disruption to the highway systems could limit our ability to deliver our products in a timely manner or at all. 18 Lithium-ion battery cells have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business.
Any shortages in trucking capacity, any increase in the cost thereof or any other disruption to the highway systems could limit our ability to deliver our products in a timely manner or at all. Lithium-ion battery cells have been observed to catch fire or release smoke and flame, which may have a negative impact on our reputation and business.
Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their expectations, our stock prices could decline and such decline could be material. 23 You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitions or otherwise.
Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their expectations, our stock prices could decline and such decline could be material. You may be diluted by the future issuance of additional Common Stock in connection with our incentive plans, acquisitions or otherwise.
Such a lawsuit could also divert the time and attention of our management from our business. We do not anticipate paying dividends on our common stock in the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
Such a lawsuit could also divert the time and attention of our management from our business. 24 We do not anticipate paying dividends on our Common Stock in the foreseeable future, you may not receive any return on investment unless you sell your Common Stock for a price greater than that which you paid for it.
Sales of our RV and marine power products, for example, depend significantly on demand for new electric products for RV’s and marine applications, which, in turn, depends on end-user demand for RVs and boats. The uncertainty in global economic conditions varies by geographic location and can result in substantial volatility in global credit markets, particularly in the United States.
Sales of our RV and marine power products, for example, depend significantly on demand for new electric products for RVs and marine applications, which, in turn, depends on end-user demand for RVs and boats. The uncertainty in global economic conditions varies by geographic location and can result in substantial volatility in global credit markets, particularly in the United States.
Although we believe we could locate alternative suppliers to fulfill our needs, we may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable terms. 16 Further, our dependence on these third-party suppliers entails additional risks, including: · inability, failure or unwillingness of third-party suppliers to comply with regulatory requirements; · breach of supply agreements by the third-party suppliers; · misappropriation or disclosure of our proprietary information, including our trade secrets and know-how; · relationships that third-party suppliers may have with others, which may include our competitors, and failure of third-party suppliers to adequately fulfill contractual duties, resulting in the need to enter into alternative arrangements, which may not be available, desirable or cost-effective; and · termination or nonrenewal of agreements by third-party suppliers at times that are costly or inconvenient for us.
Although we believe we could locate alternative suppliers to fulfill our needs, we may be unable to find a sufficient alternative supply in a reasonable time or on commercially reasonable terms. 17 Further, our dependence on these third-party suppliers entails additional risks, including: ● inability, failure or unwillingness of third-party suppliers to comply with regulatory requirements; ● breach of supply agreements by the third-party suppliers; ● misappropriation or disclosure of our proprietary information, including our trade secrets and know-how; ● relationships that third-party suppliers may have with others, which may include our competitors, and failure of third-party suppliers to adequately fulfill contractual duties, resulting in the need to enter into alternative arrangements, which may not be available, desirable or cost-effective; and ● termination or nonrenewal of agreements by third-party suppliers at times that are costly or inconvenient for us.
However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves. A failure to keep pace with developments in technology could impair our operations or competitive position. Our business continues to demand the use of sophisticated systems and technology.
However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves. 23 A failure to keep pace with developments in technology could impair our operations or competitive position. Our business continues to demand the use of sophisticated systems and technology.
Our Articles of Incorporation authorizes us to issue shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board of Directors in its sole discretion, whether in connection with our incentive plans, acquisitions or otherwise.
Our Articles of Incorporation authorizes us to issue shares of Common Stock and options, rights, warrants and appreciation rights relating to Common Stock for the consideration and on the terms and conditions established by our Board of Directors (“Board”) in its sole discretion, whether in connection with our incentive plans, acquisitions or otherwise.
In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our financial results on a timely and accurate basis could be impaired. 24 Our management team has limited experience managing a public company.
In addition, if we fail to implement the requirements with respect to our internal accounting and audit functions, our ability to report our financial results on a timely and accurate basis could be impaired. Our management team has limited experience managing a public company.
Labor unrest or other disruptions could result in product shortages and delays in distributing our products to retailers, which could materially and adversely affect our business, financial condition, results of operations and prospects. The uncertainty in global economic conditions could negatively affect the Company’s operating results.
Labor unrest or other disruptions could result in product shortages and delays in distributing our products to retailers, which could materially and adversely affect our business, financial condition, results of operations and prospects. The uncertainty in global economic conditions could negatively affect our operating results.
We may be responsible for remediating damage to our properties caused by former owners by our existing operations or by our future operations. 19 Changes in environmental and climate laws or regulations could lead to new or additional investment in production designs and could increase environmental compliance expenditures.
We may be responsible for remediating damage to our properties caused by former owners by our existing operations or by our future operations. Changes in environmental and climate laws or regulations could lead to new or additional investment in production designs and could increase environmental compliance expenditures.
We cannot assure you that we will be able to continue to control our operating, assembly and manufacturing expenses, to raise or maintain our prices or increase our unit volume or unit mix, in order to maintain or improve our operating results. We have a history of losses.
We cannot assure you that we will be able to continue to control our operating, assembly and manufacturing expenses, to raise or maintain our prices or increase our unit volume or unit mix, in order to maintain or improve our operating results. 13 We have a history of losses.
As an “emerging growth company,” we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
As an “emerging growth company,” we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Our close working relationships with our China-based suppliers to-date, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and to order and receive delivery of components in advance of required demand, has helped us moderate or offset increased supply-related costs associated with inflation, currency fluctuations and tariffs imposed on our battery imports by the U.S. government and avoid potential shipment delays.
Our close working relationships with our foreign suppliers to date, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and to order and receive delivery of components in advance of required demand, has helped us moderate or offset increased supply-related costs associated with inflation, currency fluctuations and tariffs imposed on our battery imports by the U.S. government and avoid potential shipment delays.
There can be no assurances that any of our efforts to expand our sales and distribution channels will be successful. 14 Our ability to expand into international markets is uncertain. Our strategy is to expand our operations into international markets.
There can be no assurances that any of our efforts to expand our sales and distribution channels will be successful. Our ability to expand into international markets is uncertain. Our strategy is to expand our operations into international markets.
The trading price of our securities may be volatile and subject to wide price fluctuations in response to various factors, including: · market conditions in the broader stock market; · actual or anticipated fluctuations in our quarterly financial condition and results of operations, or those of other companies in our industry; · actual or anticipated strategic, technological, or regulatory threats, whether or not warranted by actual events; · whether any securities analysts cover our stock; · issuance of new or changed securities analysts’ reports or recommendations, if any; · investor perceptions of our Company, the lithium battery and accessory industry; · the volume of trading in our stock; · changes in accounting standards, policies, guidance, interpretations, or principles; · sales, or anticipated sales, of large blocks of our stock; · additions or departures of key management personnel, creative, or other talent; · regulatory or political developments, including changes in laws or regulations that are applicable to our business; · litigation and governmental investigations; · sales or distributions of our common stock by significant shareholders, the entity through which our controlling shareholder holds its investment, or other insiders; · natural disasters and other calamities; and · macroeconomic conditions.
The trading price of our securities may be volatile and subject to wide price fluctuations in response to various factors, including: · market conditions in the broader stock market; · actual or anticipated fluctuations in our quarterly financial condition and results of operations, or those of other companies in our industry; · actual or anticipated strategic, technological, or regulatory threats, whether or not warranted by actual events; · whether any securities analysts cover our stock; · issuance of new or changed securities analysts’ reports or recommendations, if any; · investor perceptions of our Company, the lithium battery and accessory industry; · the volume of trading in our stock; · changes in accounting standards, policies, guidance, interpretations, or principles; · sales, or anticipated sales, of large blocks of our stock; · additions or departures of key management personnel, creative, or other talent; · regulatory or political developments, including changes in laws or regulations that are applicable to our business; · litigation and governmental investigations; · sales or distributions of our common stock by significant stockholders, the entity through which our controlling stockholder holds its investment, or other insiders; · natural disasters and other calamities; and · macroeconomic conditions.
If we are determined to have infringed upon a third party’s intellectual property rights, we may have to pay substantial damages, obtain a license or cease making certain products, which in turn could have a material adverse effect on our business, operating results and financial condition. 20 Quality problems with our products could harm our reputation and erode our competitive position.
If we are determined to have infringed upon a third-party’s intellectual property rights, we may have to pay substantial damages, obtain a license or cease making certain products, which in turn could have a material adverse effect on our business, operating results and financial condition. 21 Quality problems with our products could harm our reputation and erode our competitive position.
These factors raise substantial doubt about our ability to continue as a going concern over the next twelve months and our independent auditors have included a “going concern” explanatory paragraph in their report on our financial statements as of and for the years ended December 31, 2022 and 2021.
These factors raise substantial doubt about our ability to continue as a going concern over the next twelve months and our independent auditors have included a “going concern” explanatory paragraph in their report on our financial statements as of and for the years ended December 31, 2023 and 2022.
Our operating results could be adversely affected by changes in the cost and availability of raw materials and we are dependent on third-party manufacturers and suppliers. We currently rely on multiple third-party manufacturers located in China who also produce our battery cells and we intend to continue to rely on these suppliers going forward.
Our operating results could be adversely affected by changes in the cost and availability of raw materials and we are dependent on third-party manufacturers and suppliers. We currently rely on multiple third-party manufacturers located in Asia who also produce our battery cells and we intend to continue to rely on these suppliers going forward.
There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which in turn could damage our brand, business, prospects, financial condition and operating results. We are currently, and will likely continue to be, dependent on our two warehouse facilities.
There can be no assurance that we will be able to recoup increasing costs of our components by increasing prices, which in turn could damage our brand, business, prospects, financial condition and operating results. We are currently, and will likely continue to be, dependent on our three warehouse facilities.
Because our key manufacturers and suppliers are located in China, we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, laws, rules and regulations of the United States or Chinese governments, as well as political unrest or unstable economic conditions in China.
Several of our key manufacturers and suppliers are located in China, and we are exposed to the possibility of product supply disruption and increased costs in the event of changes in the policies, laws, rules and regulations of the United States or Chinese governments, as well as political unrest or unstable economic conditions in China.
Our audited financial statements as of and for the years ended December 31, 2022 and 2021 were prepared on the assumption that we would continue as a going concern. For the years ended December 31, 2022 and 2021, the company has sustained recurring losses and negative cash flows from operations.
Our audited financial statements as of and for the years ended December 31, 2023 and 2022 were prepared on the assumption that we would continue as a going concern. For the years ended December 31, 2023 and 2022, the company has sustained recurring losses and negative cash flows from operations.
Our lithium-ion batteries use lithium iron phosphate (LiFePO4) as the cathode material for lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by releasing smoke and flames in a manner that can ignite nearby materials and other lithium-ion cells.
Our lithium-ion batteries use LiFePO4 as the cathode material for lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by releasing smoke and flames in a manner that can ignite nearby materials and other lithium-ion cells.
Yozamp and his affiliates, including his brothers, are able to substantially influence matters requiring stockholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets, and any other significant transaction. The interests of Mr.
Yozamp and his affiliates, including his brother, are able to substantially influence matters requiring stockholder approval, including the election of directors, a merger, consolidation or sale of all or substantially all of our assets, and any other significant transaction. The interests of Mr.
We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our sales in 2022 and 2021. We currently derive a significant portion of our revenues from a limited number of customers.
We have substantial customer concentration, with a limited number of customers accounting for a substantial portion of our sales in 2023 and 2022. We currently derive a significant portion of our revenues from a limited number of customers.
This rise in price may cause a decrease in RV travel, which could ultimately negatively impact sales of our batteries for RVs. In 2022, we also experienced increased shipping costs as a result of increased fuel costs and shutdowns at the ports through which our lithium-ion batteries and other raw materials are shipped due to COVID-19 restrictions.
Any rise in the cost of fuel may cause a decrease in RV travel, which could ultimately negatively impact sales of our batteries for RVs. In 2022, we also experienced increased shipping costs as a result of increased fuel costs and shutdowns at the ports through which our lithium-ion batteries and other raw materials are shipped due to COVID-19 restrictions.
You should carefully consider the risks described below, as well as the other information in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly before deciding whether to invest in our securities.
You should carefully consider the risks described below, as well as the other information in this Annual Report, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” particularly before deciding whether to invest in our securities.
In addition, all of the shares of common stock issuable upon exercise of outstanding stock options under the 2021 Incentive Award Plan and all of the shares of common stock issuable pursuant to the 2021 ESPP have been registered for public resale under the Securities Act.
In addition, all of the shares of Common Stock issuable upon exercise of outstanding stock options under the 2021 Incentive Award Plan and all of the shares of Common Stock issuable pursuant to the 2021 Employee Stock Purchase Plan have been registered for public resale under the Securities Act.
Despite meaningful measures that we undertake to facilitate lawful conduct, which include training and internal control policies, these measures may not always prevent reckless or criminal acts by our employees or agents as we expand our operations from the U.S. domestically to abroad.
Despite meaningful measures that we undertake to facilitate lawful conduct, which include training and internal control policies, these measures may not always prevent reckless or criminal acts by our employees or agents as we expand our operations from the United States domestically to abroad.
Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, utility and transportation infrastructure disruptions, acts of war or terrorism, or by public health crises, such as the ongoing COVID-19 pandemic, which may render it difficult or impossible for us to assemble our products for an extended period of time.
Our facilities may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, flooding, fire and power outages, utility and transportation infrastructure disruptions, acts of war or terrorism, or by public health crises, which may render it difficult or impossible for us to assemble our products for an extended period of time.
In addition, during the years ended December 31, 2022 and 2021, approximately 85% and 90%, respectively, of inventory purchases were made from foreign suppliers in China and Hong Kong. Our dependence on a limited number of key third-party manufacturers and suppliers exposes us to challenges and risks in ensuring that we maintain adequate supplies required to produce our batteries.
In addition, during the years ended December 31, 2023 and 2022, approximately 70% and 85%, respectively, of inventory purchases were made from foreign suppliers in Asia. Our dependence on a limited number of key third-party manufacturers and suppliers exposes us to challenges and risks in ensuring that we maintain adequate supplies required to produce our batteries.
We have reserved 1,000,000 shares of common stock for issuance upon the exercise of outstanding stock options under the 2021 Incentive Award Plan, (the “2021 Incentive Award Plan”) and 2,500,000 shares of common stock for issuance pursuant to our 2021 Equity Stock Purchase Plan (the “2021 ESPP”).
We have reserved 1,000,000 shares of Common Stock for issuance upon the exercise of outstanding stock options under the 2021 Incentive Award Plan and 2,500,000 shares of Common Stock for issuance pursuant to our 2021 Employee Stock Purchase Plan.
Any such action could have a material adverse effect on our business, prospects, results of operations, and financial condition. 25 Our management continues to have broad discretion as to the use of the net proceeds from our initial public offering.
Any such action could have a material adverse effect on our business, prospects, results of operations, and financial condition. Our management has broad discretion as to the use of the net proceeds from our initial public offering and equity and debt financings.
Alternatively, if a court were to find the choice of forum provision contained in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. 27
Alternatively, if a court were to find the choice of forum provision contained in our Articles of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition. I TEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), as well as rules promulgated by the Securities and Exchange Commission (“SEC”) and NASDAQ, require us to adopt corporate governance practices applicable to U.S. public companies. Compliance with these rules and regulations will continue to increase our legal and financial compliance costs.
In addition, the Sarbanes-Oxley, as well as rules promulgated by the Securities and Exchange Commission (“SEC”) and The Nasdaq Capital Market (“Nasdaq”), require us to adopt corporate governance practices applicable to U.S. public companies. Compliance with these rules and regulations will continue to increase our legal and financial compliance costs.
As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. We have experienced net losses in each period since inception. We generated net losses of $7,536,540 and $4,720,858 for the years ended December 31, 2022 and 2021, respectively. Part of our business strategy is to focus on our long-term growth.
As our costs increase, we may not be able to generate sufficient revenue to achieve and sustain profitability. We have experienced net losses in each period since inception. We generated net losses of $7.5 million for each of the years ended December 31, 2023 and 2022. Part of our business strategy is to focus on our long-term growth.
As a public company, and particularly after we cease to be an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), we will continue to incur significant legal, accounting and other expenses.
As a public company, and particularly after we cease to be an “emerging growth company,” as defined in the JOBS Act, we will continue to incur significant legal, accounting and other expenses.
We are required to comply with certain SEC rules that implement Sections 302 and 404 of Sarbanes-Oxley, which require management to certify financial and other information in our quarterly and annual reports and beginning with the Form 10-K filed for the year ending December 31, 2023, provide an annual management report on the effectiveness of our internal control over financial reporting.
We are required to comply with certain SEC rules that implement Sections 302 and 404 of Sarbanes-Oxley, which require management to certify financial and other information in our quarterly and annual reports and beginning with this Annual Report, provide an annual management report on the effectiveness of our internal control over financial reporting.
In addition, we experienced shortages and workforce slowdowns due to stay-at-home mandates, illness among our workforce from COVID-19, delays in shipping finished products to customers and some delays in our receiving batteries and certain components.
In addition, during the pandemic we experienced shortages and workforce slowdowns due to stay-at-home mandates, illness among our workforce, delays in shipping finished products to customers, and delays in our receiving batteries and certain components.
Any of the above factors could, in turn, negatively impact our sales and earnings generation and result in a material adverse effect on our business, cash flow, results of operations and financial position. 15 Government reviews, inquiries, investigations, and actions could harm our business or reputation.
We did not experience any major residual impacts in 2023. Any of the above factors could, in turn, negatively impact our sales and earnings generation and result in a material adverse effect on our business, cash flow, results of operations and financial position. 16 Government reviews, inquiries, investigations, and actions could harm our business or reputation.
As described in Section 101 of the JOBS Act, the “emerging growth company” classification can be retained for up to five years following our IPO or until the earlier occurrence of the following: · the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeded $700 million as of the prior June 30th; or · the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
As described in Section 101 of the JOBS Act, the “emerging growth company” classification can be retained for up to five years following our initial public offering or until the earlier occurrence of the following: the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of the prior June 30; or the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. 26 If some investors find our securities less attractive as a result of any choices to reduce future disclosure, there may be a less active market for our securities and our stock price may be more volatile.
In addition, the Russia-Ukraine conflict has and may continue to further exacerbate disruptions in the global supply chain. As a result of sanctions imposed in relation to the Russia-Ukraine conflict, gas prices in the United States have risen to historic levels.
In addition, the Russia-Ukraine war and the Israel-Palestine conflict has and may continue to further exacerbate disruptions in the global supply chain. As a result of sanctions imposed in relation to the Russia-Ukraine conflict, gas prices in the United States have risen to historic levels, and geopolitical tensions in the Middle East has impacted global shipping routes.
If we fail to expand our sales and distribution channels, our business could suffer. Our success, and our ability to increase sales and operate profitably, depends on our ability to identify target customers and convert these customers into meaningful orders, as well as our continued development of existing customer relationships.
Our success, and our ability to increase sales and operate profitably, depends on our ability to identify target customers and convert these customers into meaningful orders, as well as our continued development of existing customer relationships.
If our existing stockholders sell substantial amounts of our securities in the public market, the market price of our securities could decrease significantly. The perception in the public market that our stockholders might sell securities could also depress our market price. As of March 27, 2023, we had 6,848,566 shares of common stock outstanding.
If our existing stockholders sell substantial amounts of our securities in the public market, the market price of our securities could decrease significantly. The perception in the public market that our stockholders might sell securities could also depress our market price. As of March 23, 2024, we had 7,036,937 shares of Common Stock outstanding.
In addition, any accident, whether occurring at our facilities or from the use of our batteries, may result in significant production interruption, delays or claims for substantial damages caused by personal injuries or property damage.
Any mishandling, other safety issue or fire related to the cells or batteries could disrupt our operations. In addition, any accident, whether occurring at our facilities or from the use of our batteries, may result in significant production interruption, delays or claims for substantial damages caused by personal injuries or property damage.
Further, negative public perceptions regarding the suitability or safety of lithium-ion cells or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our products, could seriously harm our business and reputation.
Further, negative public perceptions regarding the suitability or safety of lithium-ion cells or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our products, could seriously harm our business and reputation. 19 To facilitate an uninterrupted supply of lithium-ion batteries, we store a significant number of lithium-ion batteries at our facilities.
In addition, while the COVID-19 pandemic has positively impacted our battery sales due to more consumers adopting the RV lifestyle, there is no guarantee that any such increase would be sustained, which could cause our results of operations to fluctuate.
In addition, while the pandemic positively impacted our battery sales due to more consumers adopting the RV lifestyle, there is no guarantee that any such increase would be sustained, which could cause our results of operations to fluctuate. 15 If we fail to expand our sales and distribution channels, our business could suffer.
As part of this agenda, we have leased another facility in Redmond, Oregon and are in the process of constructing a new assembly line at this facility. Our plans for expansion may experience delays, incur additional costs or cause disruption to our existing production lines.
As part of this agenda, we leased a second facility in Redmond, Oregon for assembly line development and additional warehouse space. Our plans for expansion may experience delays, incur additional costs, or cause disruption to our existing production lines.
In addition, the spreading of the virus may make it more difficult for us and our third-party manufacturers to find sufficient components or raw materials and component parts on a timely basis, or at a cost-effective price.
A future public health epidemic or outbreak may make it more difficult for us and our third-party manufacturers to find sufficient components or raw materials and component parts on a timely basis or at a cost-effective price.
If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our capital requirements.
If adequate funds are not available on acceptable terms, or at all, we may be unable to fund our capital requirements. Further, we may be restricted in our ability to access existing sources of liquidity.
A loss of any such personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations. In addition, if we are unsuccessful in our succession planning efforts, the continuity of our business and results of operations could be adversely affected.
A loss of any such personnel, or the inability to recruit and retain qualified personnel in the future, could have an adverse effect on our business, financial condition and results of operations.
We also may not achieve the benefits that we anticipate from any new system or technology, such as fuel abatement technologies, and a failure to do so could result in higher than anticipated costs or could impair our operating results. 22 Risks Related to Ownership of our Common Stock Our stock price may fluctuate significantly, and you may lose all or a part of your investment.
We also may not achieve the benefits that we anticipate from any new system or technology, such as fuel abatement technologies, and a failure to do so could result in higher than anticipated costs or could impair our operating results.
We are exposed to risks associated with public health crises and epidemics/pandemics, such as COVID-19. A widespread health crisis could adversely affect the global economy, resulting in an economic downturn that could impact our operations and demand for our products and therefore have a material adverse effect on our business and results of operations.
A widespread health crisis could adversely affect the global economy, resulting in an economic downturn that could impact our operations and demand for our products and therefore have a material adverse effect on our business and results of operations.
Our expansion plans may also adversely affect our existing operations and thereby have a material adverse effect on our business, prospects, financial condition and results of operations. 13 Our results of operations may be negatively impacted by public health epidemics or outbreaks, including the novel coronavirus (“COVID-19”).
Our expansion plans may also adversely affect our existing operations and thereby have a material adverse effect on our business, prospects, financial condition and results of operations. Our results of operations may be negatively impacted by public health epidemics or outbreaks. We are exposed to risks associated with public health crises and epidemics or pandemics.
The summary should be read in conjunction with the more detailed risk factors set forth in this “Risk Factors” section and the other information contained in this Annual Report on Form 10-K. · We operate in an extremely competitive industry and are subject to pricing pressures. · We have a history of losses and our audited financial statements include a statement that there is a substantial doubt about our ability to continue as a going concern.
The summary should be read in conjunction with the more detailed risk factors set forth in this “Risk Factors” section and the other information contained in this Annual Report. · We operate in an extremely competitive industry and are subject to pricing pressures. · We have a history of losses.
Other examples of shortages and component supply disruptions could include the supply of electronic components and raw materials (such as resins and other raw metal materials) that go into the production of our battery components. Any such cost increase or supply interruption could materially and negatively impact our business, prospects, financial condition and operating results.
Other examples of shortages and component supply disruptions could include the supply of electronic components and raw materials (such as resins and other raw metal materials) that go into the production of our battery components.
Our principal stockholder continues to have substantial control over us. As of March 27, 2023, John Yozamp, our Founder and Chief Business Development Officer, beneficially owns approximately 24.6% of our outstanding common stock, and, together with his brothers, Joel R. Yozamp and James Yozamp, Jr., 5.9% and 8.1%, respectively. As a consequence, Mr.
Our principal stockholder continues to have substantial control over us. As of March 23, 2024, John Yozamp, our Co-Founder and former Chief Executive Officer and Chief Business Development Officer, beneficially owns approximately 21.5% of our outstanding Common Stock, and, his brother, James Yozamp, Jr., owns approximately 7.1%. As a consequence, Mr.
If we are ultimately unable to achieve profitability at the level anticipated by industry or financial analysts and our stockholders, our stock price may decline. 12 Our efforts to grow our business may be costlier than we expect, or our revenue growth rate may be slower than we expect, and we may not be able to increase our revenue enough to offset the increase in operating expenses resulting from these investments.
Our efforts to grow our business may be costlier than we expect, or our revenue growth rate may be slower than we expect, and we may not be able to increase our revenue enough to offset the increase in operating expenses resulting from these investments.
For example, the United States Environmental Protection Agency has promulgated regulations applicable to projects involving greenhouse gas emissions above a certain threshold, and the United States and certain states within the United States have enacted, or are considering, limitations on greenhouse gas emissions.
For example, the United States Environmental Protection Agency has promulgated regulations applicable to projects involving greenhouse gas emissions above a certain threshold, and the United States and certain states within the United States have enacted, or are considering, limitations on greenhouse gas emissions. 20 Changes in climate change concerns, or in the regulation of such concerns, including greenhouse gas emissions, could subject us to additional costs and restrictions, including increased energy and raw materials costs.
Although we do not have any cash or cash equivalent balances on deposit at Silicon Valley Bank as of the date of this Annual Report on Form 10-K, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to raise additional financing or to access our existing cash, cash equivalents and investments may be threatened. 21 If we incur new debt, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock.
Although we did not have any cash or cash equivalent balances on deposit at Silicon Valley Bank, if other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, our ability to raise additional financing or to access our existing cash, cash equivalents and investments may be threatened.
As of December 31, 2022, we had total liabilities of $5,091,966, of which $3,220,019 was related to operating lease liabilities and $510,475 was related to debt obligations. 26 If we cannot generate sufficient cash flow from operations to service our lease and debt obligations, we may need to further refinance our debt, dispose of assets or issue equity to obtain necessary funds.
If we cannot generate sufficient cash flow from operations to service our lease and debt obligations, we may need to further refinance our debt, dispose of assets or issue equity to obtain necessary funds.
It is not possible for us to predict the future level of demand for our products and services that will be generated by our customers or the future demand for the products and services of our other customers.
In addition, our sales are completed on a purchase order basis and most are without firm, long-term revenue commitments or sales arrangements. It is not possible for us to predict the future level of demand for our products and services that will be generated by our customers or the future demand for the products and services of our other customers.
If we issue additional equity securities, existing stockholders may experience dilution, and the new equity securities could have rights senior to those of our common stock.
For example, the senior convertible note issued to 3i, LP (the “3i Note”) contains restrictions on our ability to pay dividends or make distributions. If we issue additional equity securities, existing stockholders may experience dilution, and the new equity securities could have rights senior to those of our Common Stock.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, such as the closure of Silicon Valley Bank and the placement into receivership of Signature Bank in March 2023, have in the past and may in the future lead to market-wide liquidity problems.
Accordingly, it is not currently possible to predict the number of shares that will be sold to Tumim, the actual purchase price per share to be paid by Tumim for such Shares, or the actual gross proceeds to be raised in connection with those sales, which may be substantially less than the $20.0 million available to us under the Common Stock Purchase Agreement. 22 In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, such as the closure of Silicon Valley Bank and the placement into receivership of Signature Bank in March 2023, have in the past and may in the future lead to market-wide liquidity problems.
We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with public company regulations.
A decline in the price of shares of our securities might impede our ability to raise capital through the issuance of additional shares of our Common Stock or other equity securities. 25 We will continue to incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to comply with public company regulations.
As of March 27, 2023, we had 200,000,000 shares of common stock authorized of which 193,151,434 were unissued.
As of March 23, 2024, we had 200,000,000 shares of Common Stock authorized, of which 7,036,937 were issued.
The highly competitive labor market has made it difficult to recruit and maintain a workforce properly sized and suited for our operational and strategic needs, which has further adversely impacted our business. We have also experienced increased expenses, including as a result of preventive and precautionary measures that we, other businesses and governments are taking.
The highly competitive labor market made it difficult to recruit and maintain a workforce properly sized and suited for our operational and strategic needs, which further adversely impacted our business, and any future incidence of disease could similarly impact our business.
The prices for our battery components fluctuate depending on market conditions and global demand, and could adversely affect our business, prospects, financial condition and operating results. For instance, we are exposed to multiple risks relating to price fluctuations for battery cells.
Any such cost increase or supply interruption could materially and negatively impact our business, prospects, financial condition and operating results. 18 The prices for our battery components fluctuate depending on market conditions and global demand, and could adversely affect our business, prospects, financial condition and operating results.
We may not be successful in continuing to implement these requirements and implementing them could adversely affect our business, results of operations and financial condition.
Our efforts to continue to comply with evolving laws, regulations and standards are likely to result in increased expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. We may not be successful in continuing to implement these requirements and implementing them could adversely affect our business, results of operations and financial condition.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares. 27 Risks Related to Our Capital Structure 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.
The delisting of our common stock could significantly impair our ability to raise capital and the value of your investment. If our shares become subject to the penny stock rules, it would become more difficult to trade our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
Pending their use, we may also invest the net proceeds from our offerings in a manner that does not produce income or that loses value. If our shares become subject to the penny stock rules, it would become more difficult to trade our shares. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.
Sarbanes-Oxley, as well as rules and regulations subsequently implemented by the SEC and NASDAQ, have imposed increased disclosure and enhanced corporate governance practices for public companies. Our efforts to continue to comply with evolving laws, regulations and standards are likely to result in increased expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities.
The Sarbanes-Oxley of 2002 (“Sarbanes-Oxley”), as well as rules and regulations subsequently implemented by the SEC and Nasdaq, have imposed increased disclosure and enhanced corporate governance practices for public companies.
During the year ended December 31, 2022, sales to our top three customers totaled $2,905,326, comprising approximately 41% of our total sales, including sales to one customer, which totaled $1,346,344 or approximately 19% of our total sales. Amounts due from these customers totaled $127,795, representing approximately 43% of our total accounts receivable at December 31, 2022.
During the year ended December 31, 2022, sales to our top three customers totaled approximately 41% of our total sales. Amounts due from these customers totaled approximately 43% of our total accounts receivable at December 31, 2022. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers.
If our electronic data is compromised, our business could be significantly harmed. We and our business partners maintain significant amounts of data electronically in locations around the world. This data relates to all aspects of our business, including current and future products and services under development, and also contains certain customer, supplier, partner and employee data.
If our electronic data is compromised, or we experience a failure in our information technology or storage systems, our business could be significantly harmed. We and our business partners maintain significant amounts of data electronically in locations around the world.
The COVID-19 pandemic has had, and may continue to have, an adverse impact on our operations, supply chains and distribution systems. For example, we rely on our facilities in the United States, as well as third-party suppliers and manufacturers, in the United States, the People’s Republic of China (“PRC”), and other countries impacted by COVID-19.
For example, the COVID-19 global pandemic adversely impacted our operations, supply chains, and distribution systems as well as those of our third-party suppliers and manufacturers, which are located in the United States, Asia and Europe.
If our facilities become inoperable for any reason, our ability to produce our products could be negatively impacted All of our battery assembly currently takes place at our headquarters located in Redmond, Oregon. We currently operate one battery production line, which has been sufficient to meet customer demand.
If our facilities become inoperable for any reason, our ability to produce our products could be negatively impacted. We have two warehouse locations in Redmond, Oregon and a third warehouse in Elkhart, Indiana.
During the year ended December 31, 2021, sales to one customer totaled $488,860 and comprised approximately 11% of our total sales. There were no accounts receivable from this customer as of December 31, 2021; however, amounts due from three other customers totaling $658,317 represented approximately 85% of our total accounts receivable at December 31, 2021.
During the year ended December 31, 2023, sales to two customers totaled approximately 21% of our total sales and these customers did not have any outstanding accounts receivable at December 31, 2023.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeFor the period from January 31, 2022 up to January 31, 2023, the rental cost of our headquarters is $18,510.34 per month. In Q1 of 2022 we added a second distribution warehouse in Elkhart, Indiana to service and provide a stocking location for several large manufacturers in the area. Elkhart is a hub for RV manufacturing in the United States.
Biggest changeWe are working on setup and development of additional equipment to automate the line, subject to market conditions. We also lease a property in Elkhart, Indiana. In 2023, it served to provide a stocking location for several large manufacturers in the area. Elkhart is a hub for RV manufacturing in the United States.
We are working on set-up and development of additional equipment to automate the line, subject to market conditions We believe that these facilities are sufficient to meet our current and anticipated needs in the near term and that additional space can be obtained on commercially reasonable terms as needed.
We believe that these facilities are sufficient to meet our current and anticipated needs in the near term and that additional space can be obtained on commercially reasonable terms as needed.
ITEM 2. PROPERTIES Our corporate headquarters are in Redmond Oregon. This location houses our engineering, sales, accounting, and operations staff. It is also our primary product warehouse. Our headquarters is approximately 14,976 square feet, leased at a base rent set to increase by 3% every 12 months after January 31 of each year.
ITEM 2. PROPERTIES Our corporate headquarters are in Redmond, Oregon, and house our engineering, sales, accounting, and operations staff. Our primary product warehouse is also located there. Our headquarters is approximately 15,000 square feet, leased at a base rent that increases 3.0% annually on January 31st of each year.
This new facility is currently expected to be used for our first battery pack assembly plant in the United States. The square footage of this facility is approximately 31,425 square feet leased at a cost of $31,425.00 per month. Equipment for the assembly line was received in October 2022 due to a delay by our equipment supplier.
The square footage of this facility is approximately 31,400 square feet, and from February 1, 2023 to January 31, 2024, the rental cost of this facility was approximately $32,400 per month. Some of the equipment for the assembly line was received in October 2022 due to a delay by our equipment supplier.
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Other east coast customers will be supported from this location to reduce shipping times and costs to the customers. The square footage of this facility is approximately 7,000 square feet, leased at a cost of $4,853.00 per month. As part of our onshoring agenda, we have also entered into an agreement to lease another facility in Redmond Oregon.
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From January 31, 2023 to January 30, 2024, the rental cost of our headquarters was approximately $19,000 per month. We also lease a facility in Redmond, Oregon primarily used for warehousing, but it is also expected to be used for our first battery pack assembly plant in the United States.
Added
Currently it is primarily used for office space, and a backup location for warehousing and distribution to local customers. The square footage of this facility is approximately 7,000 square feet, leased at a cost of $4,900 per month.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOther than as described below, we are not currently party to any pending legal proceedings that we believe would, individually or in the aggregate, have a material adverse effect on our financial condition, cash flows or results of operations.
Biggest changeWe are not currently party to any pending legal proceedings that we believe would, individually or in the aggregate, have a material adverse effect on our financial condition, cash flows or results of operations. 30 ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 31 PART II
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On November 22, 2022, Expion360 Inc. received notice of a complaint (the “Complaint”) filed against it in Oregon state court by Ravi Sinha. The Complaint alleges, inter alia , that Mr.
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Sinha is entitled to 282,284 shares of the Company’s common stock, or in the alternative, $300,000 plus interest, in connection with services he previously rendered the Company as its chief executive officer. On March 21, 2023, the Company entered into a settlement agreement with Mr. Sinha and the matter has been resolved.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDividend Policy We have never declared or paid any dividends on our common stock and do not anticipate that we will pay any dividends to holders of our common stock in the foreseeable future. Instead, we currently plan to retain any earnings to finance the growth of our business.
Biggest changeDividend Policy We have never declared or paid cash dividends on our Common Stock. We do not anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business.
Shares of our common stock began trading on The Nasdaq Capital Market on April 1, 2022 and, following the sale of all the shares upon the closing of the initial public offering on April 5, 2022, the offer terminated.
Shares of our common stock began trading on Nasdaq on April 1, 2022 and, following the sale of all the shares upon the closing of the initial public offering on April 5, 2022, the offer terminated.
Recent Sales of Unregistered Securities from Registered Securities There were no sales of unregistered equity securities during fiscal year ended December 31, 2022 that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
Recent Sales of Unregistered Securities from Registered Securities There were no sales of unregistered equity securities during the fiscal year ended December 31, 2023 that were not previously reported in a Quarterly Report on Form 10-Q or Current Report on Form 8-K.
There has been no material change in the planned use of proceeds from our initial public offering from that described in the final prospectus for our initial public offering dated March 31, 2022 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on April 4, 2022 and those disclosed in this Annual Report. 29 Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.
There has been no material change in the planned use of proceeds from our initial public offering from that described in the final prospectus for our initial public offering dated March 31, 2022, filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on April 4, 2022, and those disclosed in this Annual Report.
Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on our financial condition, results of operations, and capital requirements, as well as other factors deemed relevant by our board of directors.
Any future determination related to our dividend policy will be made at the discretion of our Board and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, and other factors our Board may deem relevant.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our common stock has been traded on The Nasdaq Capital Market under the symbol “XPON” since April 1, 2022. Prior to that, there was no public market for our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information Our Common Stock began trading on Nasdaq on April 1, 2022 under the symbol “XPON.” As of March 23, 2024, there were approximately 11 registered holders of our Common Stock .
Removed
Holders As of March 27, 2023, there were 15 holders of record of our Common Stock . This does not reflect persons or entities that hold our common stock in nominee or “street” name through various brokerage firms.
Added
Further, the outstanding 3i Note and any future debt facilities we may enter into may contain restrictions on our ability to pay dividends or make distributions, and any new credit facilities we may enter into may contain similar restrictions.
Removed
Securities Authorized for Issuance Under Equity Compensation Plans The information required by this item is incorporated herein by reference to Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters,” of this Annual Report on Form 10-K.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [RESERVED] 32

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changePresented in the table below is the composition of selling, general and administrative expenses: Fiscal Year Ended 12/31/2022 Fiscal Year Ended 12/31/2021 Salaries and benefits $ 4,864,239 $ 1,232,660 Legal and professional 887,741 754,510 Sales and marketing 677,679 316,431 Rents, maintenance, utilities 616,141 165,600 Research and development 278,382 58,544 Travel expenses 217,626 72,354 Software, fees, tech support 190,222 89,613 Depreciation 151,353 56,100 Supplies, office 135,187 88,448 Insurance 128,202 35,563 Other 95,087 39,262 Total $ 8,241,859 $ 2,909,085 35 Other Expense Our other expense for the year ended December 31, 2022 and 2021 was $1.6 million and $3.4 million, respectively.
Biggest changeIn addition, sales and marketing expenses, along with research and development expenses, increased significantly for the year ended December 31, 2023 compared to December 31, 2022. 38 Presented in the table below is the composition of selling, general and administrative expenses: Fiscal Years Ended December 31, 2023 2022 Salaries and benefits $ 3,681,410 $ 4,864,239 Legal and professional 2,034,374 887,741 Sales and marketing 929,220 677,679 Rents, maintenance, utilities 573,652 616,141 Research and development 397,662 278,382 Software, fees, tech support 234,285 190,222 Travel expenses 199,845 217,626 Depreciation 182,825 151,353 Insurance 179,989 128,202 Supplies, office 58,049 135,187 Other 273,824 95,087 Total $ 8,745,135 $ 8,241,859 Other Expense Other expense for the years ended December 31, 2023 and 2022 was $283,000 and $1.6 million, respectively.
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. 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.
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. 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.
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.
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.
As of December 31, 2022 and 2021, the Company has not recorded any income tax provision/(benefit) resulting from the CARES Act, mainly due to the Company’s history of net operating losses. On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”).
As of December 31, 2023 and 2022, the Company has not recorded any income tax provision/(benefit) resulting from the CARES Act, mainly due to the Company’s history of net operating losses. On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”).
If we fail to execute on this growth strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets. Manufacturing and Supply Chain Our batteries are manufactured by multiple third-party manufacturers located in China, who also produce our battery cells.
If we fail to execute on this growth strategy in accordance with our expectations, our sales growth would be limited to the growth of existing products and existing end markets. Manufacturing and Supply Chain Our batteries are manufactured by multiple third-party manufacturers located in Asia, who also produce our battery cells.
Leases with a term of 12 months or less are not recognized on the Company’s Balance Sheet. 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.
Leases with a term of 12 months or less are not recognized on the Company’s 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.
As a result, we may need to raise additional funds for these research and development efforts. Key Line Items Revenue The Company’s revenue is generated from the sale of products consisting primarily of batteries and accessories.
As a result, we may need to raise additional funds for these research and development efforts. Key Line Items Revenue Our revenue is generated from the sale of products consisting primarily of batteries and accessories.
The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders. The Company will continue to evaluate the impact of the CAA and its impact on its financial statements in 2022 and beyond.
The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders. The Company will continue to evaluate the impact of the CAA and its impact on its financial statements in 2023 and beyond.
The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations.
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.
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. 40 On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).
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. On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”).
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, benefits, and sales and marketing costs.
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. 36 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.
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. The Company has adopted the provisions in ASC 740, Income Taxes, related to accounting for uncertain tax positions.
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. We have adopted the provisions in ASC 740, Income Taxes, related to accounting for uncertain tax positions.
For this reason, percentage amounts in this section may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Certain other amounts that appear in this section may not sum due to rounding.
For this reason, percentage amounts in this section may vary from those obtained by performing the same calculations using the figures in our consolidated financial statements included elsewhere in this Annual Report. Certain other amounts that appear in this section may not sum due to rounding.
There can be no assurance as to the availability or terms upon which such financing and capital might be available. For the years ended December 31, 2022 and 2021, the Company sustained recurring losses and negative cash flows from operations.
There can be no assurance as to the availability or terms upon which such financing and capital might be available. For the years ended December 31, 2023 and 2022, we sustained recurring losses and negative cash flows from operations.
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 at December 31, 2022 and 2021.
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 December 31, 2023 or December 31, 2022.
The Company expects to continue to incur additional losses for the foreseeable future, and the Company may need to raise additional debt or equity financing to expand its presence in the marketplace, develop new products, achieve operating efficiencies, and accomplish its long-term business plan over the next several years.
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.
In April 2022, with the use of proceeds from the IPO, the Company paid off approximately $2.46 million in debt with interest rates ranging from 10 to 15%. Net Loss Our net loss for the years ended December 31, 2022 and 2021 was $7.5 million and $4.7 million, respectively.
In April 2022, with the use of proceeds from the IPO, the Company paid off approximately $2.5 million in debt with interest rates ranging from 10.0 to 15.0%. Net Loss Our net loss for the years ended December 31, 2023 and 2022 was $7.5 million and $7.5 million, respectively.
Our close working relationships with our China-based third-party manufacturers and cell suppliers, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and to order and receive delivery of cells in anticipation of required demand, has helped us moderate increased supply-related costs associated with inflation, currency fluctuations, and U.S. government tariffs imposed on our imports and to avoid potential shipment delays.
Our close working relationships with our foreign suppliers, reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts) and to order and receive delivery of components in anticipation of required demand, has helped us moderate increased supply-related costs associated with inflation, currency fluctuations, and U.S. government tariffs imposed on our imports and to avoid potential shipment delays.
ITEM 7. 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 our audited financial statements and related notes for the fiscal years ended December 31, 2022 and 2021, included in this Annual Report on Form 10-K.
ITEM 7. 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 our audited financial statements and related notes for the fiscal years ended December 31, 2023 and 2022, included in this Annual Report.
We generated negative cash flows from operating activities of $5.5 million for the year ended December 31, 2022, compared to negative cash flows of $3.9 million for the corresponding period in 2021.
We generated negative cash flows from operating activities of $5.5 million for the year ended December 31, 2023, compared to negative cash flows of $5.5 million for the corresponding period in 2022.
The notes are payable in aggregate monthly installments of $4,676, including interest at rates ranging from 5.89% to 7.29% per annum, mature at various dates from October 2027 to May of 2028, and are secured by the related vehicles. Two of the notes are personally guaranteed by a co-founder of the Company.
The notes are payable in aggregate monthly installments of approximately $4,100, including interest at rates ranging from 5.9% to 7.3% per annum, mature at various dates from October 2027 to May 2028, and are secured by the related vehicles. Two of the notes are personally guaranteed by a co-founder of the Company.
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. Materially, all of our sales are within the United States.
We recognize 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. All of our sales are primarily within the United States.
Overview We focus on the design, assembly, manufacturing, and sales of lithium iron phosphate (LiFePO4) batteries and supporting accessories for recreational vehicles (“RVs”) and marine applications with plans to expand into home energy storage products and industrial applications. We design, assemble, and distribute high-powered, lithium battery solutions using ground-breaking concepts with a creative sales and marketing approach.
Overview Expion360 focuses on the design, assembly, manufacturing, and sales of LiFePO4 batteries and supporting accessories for RVs, marine applications and home energy storage products with plans to expand into industrial applications. We design, assemble, and distribute high-powered, lithium battery solutions using ground-breaking concepts with a creative sales and marketing approach.
The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.
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 Item 1A.
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 Item 1A, “Risk Factors” of this Annual Report.
The Company does not have any finance leases. 39 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 applicable to the lease asset, unless the implicit rate is readily determinable.
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 applicable to the lease asset, unless the implicit rate is readily determinable.
Shipping and handling costs for shipping product to customers totaled $169,335 and $102,653 during the years ended December 31, 2022 and 2021, respectively, and are classified in selling, general and administrative expense in the accompanying Statements of Operations. Research and Development Research and development costs are expensed as incurred.
Shipping and handling costs for shipping product to customers totaled $199,288 and $169,300 during the years ended December 31, 2023 and 2022, respectively, and are classified in selling, general and administrative expense in the accompanying statements of operations. Research and Development Research and development costs are expensed as incurred.
The Company had no accrual for interest or penalties on the Company’s balance sheet at December 31, 2022 or 2021 and did not recognize interest and/or penalties in the statement of operations for the years ended December 31, 2022 and 2021, since there are no material unrecognized tax benefits.
We had no accrual for interest or penalties on our balance sheet at December 31, 2023 or December 31, 2022 and recognize interest and/or penalties in the statement of operations for the years ended December 31, 2023 and 2022, since there are no material unrecognized tax benefits.
Research and development costs charged to expense amounted to $270,054 and $58,044 for the years ended December 31, 2022 and 2021, respectively, and are included in selling, general and administrative expenses in the accompanying Statements of Operations.
Research and development costs charged to expense amounted to $391,148 and $270,100 for the years ended December 31, 2023 and 2022, respectively, and are included in selling, general and administrative expenses in the accompanying statements of operations.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the date that the financial statements for the year ended December 31, 2022 are issued. However, management is working to address its cash flow challenges, including raising additional capital, alternative supply chain resources, and in-house assembly lines.
These factors raise substantial doubt about our ability to continue as a going concern within twelve months after the date that the financial statements for the year ended December 31, 2023 are issued. However, management is working to address its cash flow challenges, including raising additional capital, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses.
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 Annual Report on Form 10-K, including in Item 1A. “Risk Factors” and “Cautionary Note Concerning Forward-Looking Statements”.
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 Annual Report, including in Item 1A.
Demand from end users is affected by a number of factors which may include fuel costs, overall macroeconomic conditions, and travel restrictions (resulting from COVID-19 or otherwise). During the COVID-19 pandemic, the increased adoption of the RV lifestyle benefited battery suppliers.
Demand from end users is affected by a number of factors which may include fuel costs, overall macroeconomic conditions, inflation, interest rates, and geopolitical pressures. During the COVID-19 pandemic, the increased adoption of the RV lifestyle benefited battery suppliers.
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.
Management believes no material change to the amount of unrecognized tax benefits will occur within the next twelve months.
Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s Balance Sheets.
Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s balance sheets. The Company does not have any finance leases.
“Risk Factors” of this Annual Report on Form 10-K. 36 Financing Obligations On April 1, 2022, we closed our initial public offering which resulted in approximately $14.8 million of net proceeds, of which approximately $2,464,000 was used to pay down principal and accrued interest on high interest-bearing debt.
Financing Obligations On April 1, 2022, we closed our initial public offering which resulted in approximately $14.8 million of net proceeds, of which approximately $2.5 million was used to pay down principal and accrued interest on high interest-bearing debt.
Key Factors Affecting Our Operating Results Our operating results and financial performance are significantly dependent on the following factors: Consumer Demand Although most of our current sales are generated through dealers, wholesalers and original equipment manufacturers (“OEM”) focused on the RV and marine markets, ultimate demand for our products is reliant on demand from consumers.
As of the date of this Annual Report, the Company had 765,295 outstanding warrants. 34 Key Factors Affecting Our Operating Results Our operating results and financial performance are significantly dependent on the following factors: Consumer Demand Although most of our current sales are generated through dealers, wholesalers and original equipment manufacturers (“OEMs”) focused on the RV and marine markets, ultimate demand for our products is reliant on demand from consumers.
Cash flows provided by financing activities Cash provided by financing activities was $12.4 million for the year ended December 31, 2022.
Cash flows provided by financing activities Cash provided by financing activities was $2.2 million for the year ended December 31, 2023.
During the year ended December 31, 2022 and 2021, non-cash amortization of debt discount totaled $1.2 million and $118,000, respectively. Interest expense attributable to debt obligations totaled $409,000 and $436,000 during the year ended December 31, 2022 and 2021, respectively.
During the years ended December 31, 2023 and 2022, non-cash amortization of debt discount totaled $0.00 and $1.2 million, respectively. Interest expense attributable to debt obligations totaled $125,000 and $409,000 during the years ended December 31, 2023 and 2022, respectively.
We believe that our product offerings include some of the most dense and minimal-footprint batteries in the RV & Marine industry. We are developing the e360 Home Energy Storage: a system that we expect to significantly change the industry in barrier price, flexibility, and integration.
We believe that our product offerings include some of the most dense and minimal-footprint batteries in the RV and marine industries. We are developing the e360 Home Energy Storage System that we expect to change the industry in barrier price, flexibility, and integration. We are deploying multiple intellectual property strategies with research and products to sustain and scale the business.
Factors affecting operating cash flows during the periods included: · For the year ended December 31, 2022, our loss of $7.5 million was reduced by non-cash transactions including stock-based compensation of $2.1 million, amortization of debt discount on convertible notes of $1.2 million, and depreciation of $165,000.
Factors affecting operating cash flows during the periods included: ● For the year ended December 31, 2023, our loss of $7.5 million was reduced by non-cash transactions including stock-based compensation of $560,000, stock-based settlement of $252,000, and depreciation of $206,000.
Our primary use of cash from operating activities are for increases in inventory purchases, increased marketing, and research and development. 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 membership interests/common stock and convertible notes and incurrence of indebtedness.
Our primary use of cash for operating activities are related to legal and professional fees, sales and marketing expenses, and research and development. In the last several years, we have generated negative cash flows from operating activities and have supplemented working capital requirements through net proceeds from sales of our common stock.
Along with RV/Marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial material handling markets. Expion360’s e360 product line, which is manufactured for the RV/Marine industry, was launched in December 2020. The e360 product line, through its rapid sales growth, has shown to be a preferred conversion solution for lead-acid batteries.
Along with RV, marine and home energy storage markets, we aim to provide additional capacities to the ever-expanding electric forklift and industrial material handling markets. Expion360’s e360 product line, which is manufactured for the RV and marine industries, was launched in December 2020.
Cash Flows The following table shows a summary of our cash flows for the periods presented: Year Ended December 31, 2022 2021 Net cash used in operating activities $ (5,468,572 ) $ (3,896,830 ) Net cash used in investing activities $ (515,692 ) $ (113,694 ) Net cash provided by financing activities $ 12,412,270 $ (4,493,087 37 Cash flows used in operating activities Our largest source of operating cash is cash collection from sales of our products.
Cash Flows The following table shows a summary of our cash flows for the periods presented: Years Ended December 31, 2023 2022 Net cash used in operating activities $ (5,531,232 ) $ (5,468,572 ) Net cash provided by / (used in) investing activities $ 16,578 $ (515,692 ) Net cash provided by financing activities $ 2,246,108 $ 12,412,270 Cash flows used in operating activities Our largest source of operating cash is cash collection from sales of our products.
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.
Our products are sold to different customers ( i.e. , dealers, wholesalers, OEMs, etc.) at differing prices and have varying costs. The average selling price and costs of goods sold for a particular product, will vary with changes in the sales channel mix, volume of products sold, and the prices of such products sold relative to other products.
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.
“Risk Factors” and “Cautionary Note Concerning Forward-Looking Statements and Industry Data.” 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.
As of December 31, 2022 and December 31, 2021, the Company had inventory that consisted of finished assemblies totaling $2,722,765 and $985,537, respectively, and raw materials (inventory components, parts, and packaging) totaling $1,807,371 and $1,066,343, respectively. The valuation of inventory includes fixed production overhead costs based on normal capacity of the assembly warehouse.
As of December 31, 2023 and December 31, 2022, the Company had inventory that consisted of finished assemblies totaling $2,967,021 and $3,243,485, respectively, and raw materials (inventory components, parts, and packaging) totaling $858,369 and $1,286,651, respectively. The valuation of inventory includes fixed production overhead costs based on normal capacity of the assembly warehouse.
As of December 31, 2022, the Company long-term debt totaled $510,475, comprised of $150,114 outstanding under a COVID-19 Economic Injury Disaster Loan, $350,537 outstanding under vehicle financing arrangements, and an equipment loan for $9,824. In January 2023, the Company repaid a vehicle loan with an interest rate of 11.21% in the amount of $89,360 which included principal, interest, and fees.
As of December 31, 2023, our long-term debt totaled $349,000, comprised of $147,000 outstanding under a COVID-19 Economic Injury Disaster Loan, $196,000 outstanding under vehicle financing arrangements, and an equipment loan for $6,000. In January 2023, we repaid a vehicle loan with an interest rate of 11.2% in the amount of approximately $89,400 which included principal, interest, and fees.
Cost of Sales Our primary cost 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.
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.
Gross profit was $1.6 million for the year ended December 31, 2021 and $2.3 million for the year ended December 31, 2022. Gross profit as a percentage of sales decreased by 4.5% for the year ended December 31, 2022, from 31.9% to 36.4% for the year ended December 31, 2021.
Gross profit as a percentage of sales decreased by 5.6% for the year ended December 31, 2023, to 26.3% compared to 31.9% for the year ended December 31, 2022.
For the year ended December 31, 2021, our loss of $4.7 million was reduced by non-cash transactions including extinguishment loss on debt settlement of $2.8 million related to the settlement of convertible notes issued in 2021, stock-based compensation of $188,000, amortization of debt discount on convertible notes of $118,000, and debt conversion expense on induced conversion of $112,000. · Cash provided/(used) by accounts receivable was $458,000 and ($566,000), for the year ended December 31, 2022 and 2021, respectively, representing a decrease in accounts receivable for the year ended December 31, 2022 and an increase in accounts receivable for the year ended December 31, 2021, respectively.
For the year ended December 31, 2022, our loss of $7.5 million was reduced by non-cash transactions including stock-based compensation of $2.1 million, amortization of debt discount on convertible notes of $1.2 million, and depreciation of $165,000. ● Cash provided by accounts receivable was $162,000 and $458,000 for the year ended December 31, 2023 and 2022, respectively, representing a decrease in accounts receivable for the years ended December 31, 2023 and 2022.
Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be the most critical in understanding the judgments that are involved in preparing the financial statements.
Critical accounting policies 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. Judgments or uncertainties regarding the application of these policies may result in materially different amounts being reported under different conditions or using different assumptions.
Inventory Inventory is stated at the lower of cost (first in, first out) or net realizable value and consists of batteries and accessories, resale items, components, and related landing costs.
We consider the following policies to be the most critical in understanding the judgments that are involved in preparing the financial statements. 42 Inventory Inventory is stated at the lower of cost (first in, first out) or net realizable value and consists of batteries and accessories, resale items, components, and related landing costs.
We anticipate that we will spend up to $379,000 in 2023 as we continue to automate our new assembly line and enhance our quality control measures. Net cash used in investing activities of $114,000 for the year ended December 31, 2021 consisted entirely of purchases of property and equipment.
This was offset by net proceeds of $37,000 received for the sale and disposal of property and equipment during the year ended December 31, 2023. We anticipate that we will spend up to $270,000 in 2024 as we continue to enhance our quality control measures. We used cash in investing activities of $516,000 for the year ended December 31, 2022.
In addition, in April 2022, the Company secured a commercial line of up to $300,000 to be used to finance vehicle purchases, which expires in April 2023.
Vehicle Financing Arrangements As of December 31, 2023, the Company has five notes payable to GM Financial for vehicles. In addition, in April 2022, the Company secured a commercial line of up to $300,000 to be used to finance vehicle purchases, which was increased to $350,000 in April 2023 and expires in April 2024.
Results of Operations Year Ended December 31, 2022, Compared to the Year Ended December 31, 2021 The following table sets forth certain operational data as a percentage of sales: Fiscal Year Ended 12/31/2022 Fiscal Year Ended 12/31/2021 $ % of Net sales $ % of Net sales Net sales $ 7,162,837 100.0 % $ 4,517,499 100.0 % Cost of sales 4,874,392 68.1 2,871,770 63.6 Gross profit 2,288,445 31.9 1,645,729 36.4 Selling, general, and administrative expenses 8,241,859 115.1 2,909,085 64.4 Loss from operations (5,953,414 ) -83.1 (1,263,356 ) -28.0 Other expense - net (1,591,976 ) -22.2 (3,448,202 ) 76.3 Loss before income taxes (7,545,390 ) -105.3 (4,711,558 ) -104.3 Net loss (7,536,540 ) -105.2 (4,720,858 ) -104.5 Sales, net Sales, net for the year ended December 31, 2022 increased by $2.6 million, or 58.6%, compared to the year ended December 31, 2021.
Off-Balance Sheet Arrangements We have no material off-balance sheet arrangements. 37 Results of Operations Year Ended December 31, 2023, Compared to the Year Ended December 31, 2022 The following table sets forth certain operational data as a percentage of sales: Fiscal Years Ended December 31, 2023 2022 $ % of Net sales $ % of Net sales Net sales $ 5,981,134 100.0 % $ 7,162,837 100.0 % Cost of sales 4,405,611 73.7 4,874,392 68.1 Gross profit 1,575,523 26.3 2,288,445 31.9 Selling, general, and administrative expenses 8,745,135 146.2 8,241,859 115.1 Loss from operations (7,169,612 ) (119.9 ) (5,953,414 ) (83.1 ) Other expense - net 283,369 4.7 1,591,976 22.2 Loss before income taxes (7,452,981 ) (124.6 ) (7,545,390 ) (105.3 ) Net loss (7,456,274 ) (124.7 ) (7,536,540 ) (105.2 ) Sales, net Sales, net for the year ended December 31, 2023 decreased by $1.2 million, or 16.5%, compared to the year ended December 31, 2022.
As such, accounts receivable is recorded at the time of shipment or will call, when the Company’s right to the consideration becomes unconditional and the Company determines there are no uncertainties regarding payment terms or transfer of control.
As such, accounts receivable is recorded at the time of shipment or will call, when the Company’s right to the consideration becomes unconditional and the Company determines there are no uncertainties regarding payment terms or transfer of control. 43 Shipping and Handling Costs Shipping and handling fees billed to customers are classified on the statements of operations as “Sales, net” and totaled $70,712 and $23,200 during the years ended December 31, 2023 and 2022, respectively.
Additional focus markets include home energy storage, where we aim to provide a cost-effective, low barrier of entry, and a do-it-yourself (“DIY”) flexible system for those looking to power their homes via solar energy, wind, or grid back-up.
We are also focused on expanding into the home energy storage market with the introduction of our two LiFePO4 battery storage solutions, where we aim to provide a cost-effective, low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up.
Critical Accounting Policies and 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 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.
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. Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies.
Our competitors may source products or components at a lower cost 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. 32 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, to address the needs of our customers, to further develop and enhance our service, and to expand into new geographic areas.
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, to address the needs of our customers, to further develop and enhance our service, and to expand into new geographic areas and market segments.
Other costs include facility and related costs, professional fees and other legal expenses, consulting, and tax and accounting services. Interest and Other Income, net Interest expense consists of interest costs on loans with interest rates ranging from 3.75% to 11.21% and amortization of debt issuance costs. As of December 31, 2022, all debt issuance costs have been fully amortized.
Other costs include facility and related costs, research and development, software and tech support, and travel expenses. Interest and Other Income, net Interest expense consists of interest costs on loans with interest rates ranging from 3.75% to 11.2% and amortization of debt issuance costs.
For the year ended December 31, 2022, we paid down debt principal of $2.4 million, which was offset by net cash proceeds of $14.8 million from the sale of common stock. 38 Net cash provided by financing activities of $4.5 million for the year ended December 31, 2021, consisted of $4.2 million net proceeds from issuance of convertible notes and long-term debt, proceeds of $838,000 from the issuance of membership units/common stock, and proceeds of $125,000 on sale of future revenues.
For the year ended December 31, 2023, we paid down debt principal of $224,000, which was offset by net cash proceeds of $2.4 million from incurrence of short-term debt and net cash proceeds of $50,000 from the exercise of warrants. Cash provided by financing activities was $12.4 million for the year ended December 31, 2022.
Therefore, of the $7.5 million net loss for the year ended December 31, 2022, a total of $3.3 million was non-cash expenses. Liquidity and Capital Resources Overview Our operations have been financed primarily through net proceeds from the sale of securities and from borrowings.
Liquidity and Capital Resources Overview Our operations have been financed primarily through net proceeds from the sale of securities and from borrowings. As of December 31, 2023 and 2022, our current assets exceeded current liabilities by $4.3 million and $10.8 million, respectively, and we had cash and cash equivalents of $3.9 million and $7.2 million, respectively.
However, more recently we have seen a rise in fuel costs and other changes in macroeconomic conditions which has created a decrease in end user spending decisions which is affecting our markets. 31 While RV and marine applications drive current revenues, Expion360 has plans to expand into the home energy market in the coming years.
However, more recently we have seen a rise in fuel costs, higher interest rates, and other changes in macroeconomic conditions which have created a decrease in end user spending decisions which is affecting our markets. These conditions may continue to have a negative effect on our business.
This was partially offset by payments on debt and liability of future revenues of $636,000. Contractual and Other Obligations Our estimated future obligations consist of long-term operating lease liabilities. As of December 31, 2022, we had $3.2 million in long-term operating lease liabilities.
For the year ended December 31, 2022, we paid down debt principal of $2.4 million, which was offset by net cash proceeds of $14.8 million from sales of our common stock. Contractual and Other Obligations Our estimated future obligations consist of long-term operating lease liabilities. As of December 31, 2023, we had $2.8 million in long-term operating lease liabilities.
During the same period, holders of 15,000 warrants previously issued by the Company with an exercise price of $3.32 exercised their warrants by paying the exercise price, which resulted in the issuance of an additional 15,000 shares of common stock and the receipt by the Company of $49,800.
Warrant Exercises In February 2024, a holder of 7,535 warrants previously issued by the Company with an exercise price of $3.32 exercised their warrants on a cashless basis, which resulted in the issuance of an additional 1,606 shares of Common Stock.
Our e360 Home Energy Storage system is planned to target entry level customers with its modular design that will allow for DIY expansion. We see the vision of stored energy as a portable, moving concept, where stored energy can be transported from the home to other devices outside of it.
Our e360 Home Energy Storage System aims to provide a cost-effective, low barrier of entry, flexible system for those looking to power their homes via solar energy, wind, or grid back-up. We see the vision of stored energy as a portable, moving concept, where stored energy can be transported from the home to other devices outside of it.
Cost of sales were $2.9 million for the year ended December 31, 2021 and $4.9 million for the year ended December 31, 2022. Cost of sales as a percentage of sales increased by 4.5% in that period.
Cost of Sales Total cost of sales for the year ended December 31, 2023 decreased by $469,000, or 9.6%, compared to the year ended December 31, 2022. Cost of sales were $4.9 million for the year ended December 31, 2022 and $4.4 million for the year ended December 31, 2023.
For example, a global shortage and component supply disruptions of electronic battery components are currently being reported, and the full impact to us is yet unknown. Our battery cell manufacturers also have joint venture factories outside of China and have secured sourcing contracts from lithium suppliers in South America and Australia.
Our battery cell manufacturers have joint venture factories outside of Asia and have secured sourcing contracts from lithium suppliers in South America and Australia.
As of December 31, 2022, we expect our short-term liquidity requirements to include (a) approximately $379,000 of capital additions; (b) principal debt payments totaling approximately $571,000; and (c) lease obligation payments of approximately $719,000, including imputed interest.
As of December 31, 2023, we expect our short-term liquidity requirements to include (a) approximately $270,000 of capital additions; (b) principal debt payments totaling approximately $3.6 million net of amortization; and (c) lease obligation payments of approximately $736,000, including imputed interest. 39 We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next 12 months and believe these requirements consist primarily of funds necessary for the next 18 months.
In addition, as of December 31, 2022, the Company had outstanding shareholder loans totaling $825,000. Shareholder Promissory Notes Unsecured promissory notes due to shareholders had an outstanding principal balance of $825,000 as of December 31, 2022. The unsecured promissory notes require monthly interest-only payments at 10% per annum and mature at various dates from August 2023 to December 2024.
The unsecured promissory notes require monthly interest-only payments at 10% per annum and mature at various dates from January 2024 to December 2024. In January 2024, the Company repaid a $62,500 note maturing on January 29, 2024. A $500,000 note matures in August 2024 and another note for $200,000 matures in December 2024.
In addition, the Company has secured a secondary source for lithium iron phosphate cells used in its batteries from a supplier in Denmark, enabling the Company to source materials outside of China in the event it becomes necessary to do so.
In addition, we secured a secondary source for lithium iron phosphate cells used in its batteries from a supplier in Europe, enabling us to source materials outside of Asia in the event it becomes necessary to do so. 35 Product and Customer Mix As of December 31, 2023, we sell eight models of LiFEPO4 batteries, the Aura, and individual or bundled accessories for battery systems, two of which we have released over the last 12 months.
We are deploying multiple IP strategies with cutting-edge research and unique products to sustain and scale the business. We currently have customers consisting of dealers, wholesalers, private label customers and original equipment manufacturers who are driving revenue and brand awareness nationally. Our corporate headquarters are based in Redmond, Oregon, with assembly in the United States and suppliers based in Asia.
We currently have customers consisting of dealers, wholesalers, private label customers and original equipment manufacturers who are driving revenue and brand awareness nationally. Our primary target markets are currently the RV and marine industries.
As of December 31, 2022 and 2021, our current assets exceeded current liabilities by $10.8 million and $3.2 million, respectively, and we had cash and cash equivalents of $7.2 million and $773,000, respectively. On April 1, 2022, we closed our initial public offering which resulted in approximately $14.8 million of net proceeds.
On April 1, 2022, we closed our initial public offering which resulted in approximately $14.8 million of net proceeds, which management continues to use for working capital and general corporate purposes.
Sales were $4.5 million for the year ended December 31, 2021 and $7.2 million for the year ended December 31, 2022.
Sales were $7.2 million for the year ended December 31, 2022 and $6.0 million for the year ended December 31, 2023. The year-over-year decrease was primarily attributable to decreases in the consumer market, driving decreases in OEM sales.
Other expense for the year ended December 31, 2022 was made up almost entirely of interest expense. Other expense for the year ended December 31, 2021 was primarily attributable to extinguishment loss on debt settlement. The extinguishment of debt was related to settlement on convertible notes issued in 2021.
Other expense for the year ended December 31, 2023 was made up almost entirely of settlement expense of $282,000, with interest income and interest expense offsetting each other at $126,000 and $125,000, respectively. Other expense for the year ended December 31, 2022 was made up almost entirely of interest expense.
These increases are primarily due to significant purchases and prepayments of inventory to Chinese suppliers that were made in 2022 in order to have sufficient inventory for projected sales in 2022 and 2023. Turnaround time for receiving inventory from foreign sources can take up to 120 days, with prepayments required.
Turnaround time for receiving inventory from foreign sources can take up to 120 days, with prepayments required. ● Other significant changes include an increase in customer deposits of $17,000 during the year ended December 31, 2023, and a decrease in customer deposits of $437,000 during the year ended December 31, 2022, due to large deposits customers made in 2021 that we applied to orders in 2022, whereas 2023 saw deposits and usage occurring in the same year.
No new deposits were made in 2022. · Cash used for inventory and prepaid inventories increased by $1.5 million and $2.4 million for the years ended December 31, 2022 and 2021, respectively.
Sales are generally collected within 30 to 45 days. These changes are mainly due to timing between sales being recognized and payment being received. 41 ● Cash used for inventory and prepaid inventories decreased by $682,000 and increased by $1.5 million for the years ended December 31, 2023 and 2022, respectively.
The increase in cost of sales was primarily related to increases in facilities costs and labor as we expanded our operations, and in supplier and shipping costs, which the Company is currently monitoring. Gross Profit Our gross profit for the year ended December 31, 2022 increased by $643,000, or 39.1%, compared to the year ended December 31, 2021.
Gross Profit Our gross profit for the year ended December 31, 2023 decreased by $713,000, or 31.2%, compared to the year ended December 31, 2022. Gross profit was $2.3 million for the year ended December 31, 2022 and $1.6 million for the year ended December 31, 2023.
Removed
We are currently in the process of building out manufacturing capacity at our corporate headquarters. Our long-term target is to onshore the manufacturing of most of our components and assemblies, including cell manufacturing, to the United States. Our main target markets are currently the RV & Marine industry.

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