10-Q: Expion360 Reports Strong Sales Growth Amid Nasdaq Delisting Threat

Expion360 Inc. announced significant revenue growth and reduced net losses for Q2 2025, but faces a Nasdaq delisting notice due to its low bid price and a 'going concern' warning.

Summary

• Net sales for the three months ended June 30, 2025, increased by 133.9% to $2,989,947, compared to $1,278,109 in the same period of 2024.
• Year-to-date net sales for the six months ended June 30, 2025, rose by 124.0% to $5,039,278, up from $2,249,967 in the prior year.
• Gross profit for Q2 2025 increased by 91.3% to $622,610, while the gross profit percentage decreased from 25.5% to 20.8% due to product mix.
• Net loss improved by 38% for Q2 2025, reaching $(1,368,860) compared to $(2,220,231) in Q2 2024.
• Year-to-date net loss improved by 43% to $(2,520,858) for the six months ended June 30, 2025, down from $(4,413,172) in the same period of 2024.
• Selling, general, and administrative expenses decreased by 1.6% in Q2 2025 and 13.6% year-to-date, significantly reducing as a percentage of sales.
• Cash and cash equivalents increased to $684,920 as of June 30, 2025, from $547,565 at December 31, 2024.
• Net cash used in operating activities for the six months ended June 30, 2025, decreased to $(1,629,896) from $(3,406,266) in the prior year.
• The company received a Nasdaq Staff Determination on July 1, 2025, for non-compliance with the $1.00 Minimum Bid Price Requirement and has requested a hearing to appeal.
• A 'going concern' warning remains due to recurring losses and negative cash flows from operations, with an accumulated deficit of $37.1 million as of June 30, 2025.
• The company used $500,000 from its January 2025 public offering to partially satisfy a $4,485,948 'Cash True-up Payment' liability related to Series A Warrants.

Sentiment

Score: 6

Explanation: While the company shows strong revenue growth and significant improvement in net loss and cash burn from operations, the 'going concern' warning and Nasdaq delisting notice due to low bid price are major concerns. The positive operational trends are encouraging, but the financial stability remains precarious.

Positives

• Net sales increased by 133.9% for the three months and 124.0% for the six months ended June 30, 2025, driven by RV market recovery, enhanced sales efforts, and new customer onboarding.
• Net loss significantly improved by 38% for the three months and 43% for the six months ended June 30, 2025, compared to the prior year periods.
• Selling, general, and administrative expenses decreased by 1.6% for the three months and 13.6% for the six months ended June 30, 2025, contributing to reduced losses.
• Net cash used in operating activities decreased substantially from $3.4 million in the six months ended June 30, 2024, to $1.6 million in the same period of 2025, indicating improved operational efficiency.
• Successfully completed a public offering in January 2025, raising net proceeds of $1,779,557.
• All of the company's batteries now have UL Safety Certification, emphasizing commitment to quality and safety.
• Introduced new products including e360 Home Energy Storage Solutions (shipping early 2025), next-generation 12V GC2 and Group 27 LiFePO4 batteries (shipping Q2 2024), and the slim Edge battery (shipping July 2024).
• Engaged in strategic discussions with integration partners for home energy storage products, crucial for future sales growth.
• Added several new distributors and OEM customers in RV and marine markets, expected to generate significant new revenue streams in 2025.

Negatives

• The company continues to incur net losses, with $(1,368,860) in Q2 2025 and $(2,520,858) year-to-date.
• Negative cash flows from operations persist, with $1,629,896 used in operating activities for the six months ended June 30, 2025.
• The company's financial statements include a statement of 'substantial doubt about our ability to continue as a going concern' due to recurring losses and negative cash flows.
• Gross profit percentage decreased from 25.5% to 20.8% in Q2 2025 and from 24.4% to 22.3% year-to-date, primarily due to product mix.
• Received a Nasdaq Staff Determination on July 1, 2025, for non-compliance with the $1.00 Minimum Bid Price Requirement, risking delisting.
• A significant 'Cash True-up Payment' liability of $4,485,948 remains outstanding as of June 30, 2025.
• The company has substantial customer concentration, with two customers accounting for approximately 53% of Q2 2025 sales and three customers for 56% of year-to-date sales.
• Dependence on foreign suppliers located in Asia exposes the company to potential tariffs and supply chain disruptions.
• The price of lithium, a key raw material, is volatile and unpredictable, impacting cost of goods sold.

Risks

• Operating in an extremely competitive industry with significant pricing pressures.
• History of losses and the potential inability to generate sufficient revenue to achieve and sustain profitability.
• Substantial doubt about the ability to continue as a going concern due to recurring losses and negative cash flows.
• Adverse effects from changes in the cost and availability of raw materials, and dependence on third-party manufacturers and suppliers.
• Increases in costs, disruption of supply, or shortage of battery components or raw materials.
• Business and future growth are highly dependent on the needs and success of existing and new customers.
• Substantial customer concentration, with a limited number of customers accounting for a significant portion of sales.
• Failure to expand sales and distribution channels could adversely affect business growth.
• Uncertainty in global economic conditions, including inflation, interest rates, and geopolitical pressures, could negatively affect results of operations.
• Dependence on two warehouse facilities; if inoperable, production could be negatively impacted.
• Potential product liability or warranty claims relating to products could reduce market adoption, damage reputation, and result in significant costs.
• Exposure to litigation, tax, environmental, and other legal compliance risks.
• Failure to introduce new products and enhancements that respond to customer demand, or broad market acceptance of competitor technologies, could adversely affect business.
• Inability to adequately protect proprietary intellectual property and technology, or needing to defend against infringement claims.
• Any future acquisitions may dilute stockholder ownership, have adverse effects on financial condition, and cause unanticipated liabilities.
• Compromised electronic data or failure in information technology/storage systems could significantly harm the business.
• Limited ability to raise capital in the future, which could hinder funding of capital requirements and dilute stockholders through future securities offerings.
• Dependence on the senior management team and other key employees; significant attrition or unsuccessful succession planning could adversely affect the business.
• Stock price may fluctuate significantly, leading to potential loss of investment.
• Sales of substantial amounts of securities in public markets, or the perception of such sales, could reduce stock price and dilute voting power/ownership interest.
• Exercise of outstanding warrants may result in a substantial increase in the number of common stock shares outstanding.
• Series A Warrants and Series B Warrants may adversely affect the market price of common stock and make business combinations more difficult.
• The cash true-up payment provision in the Series A Warrants may materially adversely impact financial condition, impede capital raising, and discourage third-party acquisition.
• Long-term lease and debt obligations could adversely affect the ability to raise additional capital and limit certain transactions.
• Risk of delisting from The Nasdaq Capital Market due to non-compliance with the Minimum Bid Price Requirement.

Future Outlook

The company expects to continue incurring additional losses for the foreseeable future and may need to raise additional debt or equity financing to expand its market presence, develop new products, achieve operating efficiencies, and accomplish its long-term business plan. Management anticipates that products from its Asian third-party manufacturers will be subject to additional tariffs in 2025 but believes it can protect margins through supplier concessions, customer price increases, and efficiencies from sales growth. The company aims to expand into the electric forklift and industrial material handling markets and is working towards establishing a state-of-the-art manufacturing facility in the United States while collaborating on battery cell and product designs. The company is committed to maintaining its Nasdaq listing and will present a comprehensive plan to regain compliance with the Minimum Bid Price Requirement at a hearing on August 19, 2025.

Management Comments

• Net sales increases were driven not only by the RV market recovering from its previous slowdown but also by enhanced sales efforts, including expanded outreach to OEM partners, strategic marketing initiatives, and the successful onboarding of new customers during this period.
• Management expects products shipped from the company's third-party manufacturers in Asia will be subject to tariffs. The company intends to maintain its gross margins through a combination of supplier concessions and customer price increases.
• Expion360 has recently added several new distributors and OEM customers in RV and marine markets. Management believes that orders resulting from these new relationships will result in significant new revenue streams in the year ending December 31, 2025.
• We are currently having discussions with integration partners. This is key for the development of our home energy storage products and subsequent sales growth.
• We believe that we can protect our margins through a combination of supplier concessions, customer price increases and efficiencies gained as sales continue to grow.
• We are committed to maintaining our Nasdaq listing and executing such plan to ensure full compliance with Nasdaq's continued listing standards.

Industry Context

The company operates in a highly competitive industry, but is positioned to capitalize on the rapid market conversion from lead-acid to lithium batteries in the RV and marine sectors. It is expanding into the fast-growing home energy storage market, which is forecasted to reach $17.5 billion by 2028 with a 26.4% CAGR, and where only about 6% of U.S. residential solar systems currently have battery storage. The industry is also seeing an push for more efficient lithium extraction and recycling. However, escalating U.S.-China tensions and potential tariffs on Asian-sourced components pose ongoing risks to the supply chain and costs.

Comparison to Industry Standards

• The company's lithium-ion batteries offer superior capacity compared to traditional lead-acid competitors, with an expected lifespan of approximately 12 years (three to four times longer) and ten times the number of charging cycles.
• Its typical battery may provide three times the power of a typical lead-acid battery (e.g., Renogy Deep Cycle AGM 100Ah) despite being half the weight, assuming slow discharge at a 1C rate.
• The 4.5 Ah 26650 lithium-ion phosphate battery cell allows for an increase in energy density by over 32% compared to traditional 3.4 Ah 26650 cells.
• The company's entry into the home energy storage market aligns with industry forecasts predicting a 26.4% CAGR to reach $17.5 billion by 2028, indicating a significant growth opportunity given that only about 6% of U.S. residential solar systems currently have battery storage (Clean Energy Group).
• All of the company's batteries have obtained UL Safety Certification, demonstrating adherence to recognized safety and quality standards in the industry.

Corporate Governance

Legal Proceedings

• On July 1, 2025, the company received a staff determination from the Nasdaq Listing Qualifications department stating that its common stock bid price had closed below the $1.00 minimum required by Nasdaq Listing Rule 5550(a)(2) for 30 consecutive business days.
• The company requested a hearing before a Nasdaq Hearings Panel to appeal the Staff Determination, which is scheduled for August 19, 2025, to present a comprehensive plan to regain compliance.

Related Party Transactions

• Repayment of unsecured promissory notes to certain stockholders (Notes) in August 2024, resulting in no outstanding principal balance as of June 30, 2025.

Stakeholder Impact

• Shareholders face potential dilution from future securities offerings and the risk of stock price fluctuation, including the risk of losing all or part of their investment due to the 'going concern' warning and Nasdaq delisting threat.
• Employees benefit from equity ownership opportunities through the 2021 Incentive Award Plan and 2021 Employee Stock Purchase Plan, which had their available shares increased.
• Customers benefit from new product introductions, such as the e360 Home Energy Storage Solutions and next-generation batteries, and the assurance of UL Safety Certifications on all products.
• Suppliers, particularly those in Asia, are critical to the company's operations, but face potential impacts from tariffs and volatile raw material costs like lithium.
• Creditors may face increased risk due to the 'going concern' warning, which raises questions about the company's ability to meet its long-term debt and lease obligations.

Next Steps

• Present a comprehensive plan to regain compliance with Nasdaq's Minimum Bid Price Requirement at the hearing scheduled for August 19, 2025.
• Continue efforts to increase revenue from product sales, particularly from new distributor and OEM relationships.
• Manage inventory levels and identify alternative supply chain resources to mitigate risks.
• Manage operational expenses to further reduce losses and improve cash flow.
• Raise additional capital as needed to fund operations and growth initiatives.
• Continue discussions with integration partners for the development and sales growth of home energy storage products.
• Work towards establishing a state-of-the-art manufacturing facility in the United States and collaborating on battery cell and product designs.

Key Dates

Recommendation

While the company demonstrated impressive revenue growth and a significant reduction in net losses and cash burn, the 'going concern' warning and the Nasdaq delisting notice due to bid price non-compliance introduce substantial uncertainty and risk. The operational improvements are positive indicators, but the immediate financial stability and listing status are critical concerns. A seasoned investor would likely hold to see if the company can successfully address the Nasdaq listing issue and demonstrate sustained profitability and positive cash flow, as these factors currently overshadow the operational gains. The high customer concentration and tariff risks also warrant caution.

Keywords

Lithium batteries, LiFePO4, RV, marine, home energy storage, energy storage solutions, SEC filing, 10-Q, financial results, quarterly report, Expion360, XPON, Nasdaq listing, going concern, capital raise, supply chain, tariffs, e360