XPON 10-K & 10-Q changes, risk factors and insider trading

Investing in our common stock involves significant risk and uncertainty. Before you make a decision to buy our common stock, in addition to the risks and uncertainties discussed below under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth below, as well as the other information in this Annual Report, including our consolidatedfinancial financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any of these risks actually occur, it may materially and adversely affect our business, financial condition, liquidity, results of operations, and prospects. As a result, the market price of our common stock could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this Annual Report are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business. If any of the following risks or other risks not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our shares of common stock could decline.

We compete with a number of major international and domestic manufacturers, assemblers and distributors, as well as a large number of smaller, regional competitors. In addition, our customers have many choices for energy storage solutions in the markets that we serve, including both traditional lead-acid products as well as lithium-ion products. We believe our main competitive advantage in displacing incumbent lead-acid batteries is that we produce a lighter, safer, higher performing, cost-effective battery with a longer lifespan. We believe our product offerings, proven reliability, and relationships with dealers, private-labelprivate label direct to consumer and OEMs enable us to compete effectively against other battery manufacturers and position us favorably to expand into new addressable markets. However, OEM sales typically result in lower average selling prices and related margins, which could result in overall margin erosion, affect our growth, or require us to raise our prices. As a result, we may be unable to maintain our competitive advantage.

Our audited financial statements as of and for the years ended December 31, 20242025 and 20232024 were prepared on the assumption that we would continue as a going concern. For the years ended December 31, 20242025 and 2023,2024, we sustained recurring losses and negative cash flows from operations. These factors raise substantial doubt about our ability to continue as a going concern over the next 12 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, 20242025 and 2023.2024. IfWe our results of operations failexpect to improvecontinue to incur operating losses for the foreseeable future, and/or ifmay we failneed to raise additional debt or equity financing,financing to fund working capital, expand our presence in the marketplace, develop new products, achieve operating efficiencies, and accomplish our long-term business plan. There can be no assurance that additional financing will be available on acceptable terms or at all. If we are unable to secure additional funding before we achieve profitability or positive cash flow from operations, then our financial condition could render us unable to continue as a going concern.

Our results of operations could be adversely affected by changes in the cost and availability of raw materials and weour are dependentreliance on third-party manufacturers and suppliers.

We currently rely on multiple third-party manufacturers located in Asia to manufacture our batteries and battery cells, and we intend to continue to rely on these suppliers going forward. Lithium-ion batteries are our most significant raw material and are used along with significant amounts of plastics, steel, copper and other materials in our assembly and manufacturing processes. Our third-party manufacturers source the raw materials and battery components required for the production of our batteries directly from third-party suppliers and thus we may have limited control over the agreed pricing for these raw materials and battery components. We estimate that raw material costs account for over half of our cost of goods sold. The costs of these raw materials, particularly lithium-ion batteries, are volatile and beyond our control. Additionally, availability of the raw materials used to manufacture our products may be limited at times resulting in higher prices and/or the need to find alternative suppliers. Furthermore, the cost of raw materials may also be influenced by transportation and freight costs. Volatile raw material costs can significantly affect our results of operations and make period-to-period comparisons extremely difficult. We cannot assure you that we will be able to either hedge the costs or that we or our third-party manufacturers will be able to secure the availability of our raw material requirements at a reasonable level or that we will be able to pass on to our customers the increased costs of our raw materials without affecting demand, or that limited availability of materials will not impact our production capabilities. Our inability to raise the price of our products in response to increases in prices of raw materials or to maintain a proper supply of raw materials could have an adverse effect on our revenue, operating profit, and net income.

In addition, during the years ended December 31, 2024 2025 and 2023,2024, approximately 82%55% and 70%,82%, 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 do not have long-term purchase arrangements with our third-party manufacturers and ourgenerally transact purchases are completed on a purchase order basis. Thus, although we carefully manage our inventory and lead times, we may experienceface challenges obtaining favorable apricing, delayconsistent orquality disruption in our supply chainspecifications, and/or oursufficient currentquantities suppliers may not continue to provide us withof lithium-ion batteries in our required quantities or to our required specifications and qualityother levelsmaterials orfrom atthese attractive prices. suppliers. 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. However, if we are unable to enter into or maintain commercial arrangements with these suppliers on favorable terms, or if any of these suppliers experience unanticipated delays, disruptions or shutdowns or other difficulties ramping up their supply of products or materials to meet our requirements, our assembly operations and customer deliveries would be seriously impacted, potentially resulting in liquidatedcontractual damagespenalties or other liabilities and harm to our customer relationships. 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.

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. For example, trade tensions between the United States and China have been escalating in recent years. Notably, the lithium-ion battery industry has been subjected to tariffs implemented by the United States government on goods imported from China. There is an ongoing risk of new or additional tariffs being put in placeimposed on lithium-ion batteries or related parts which would significantly increase our cost of goods sold, which could require us to increase prices to our customers or, if we are unable to do so, result in lower gross margins on the products sold by us. In addition, these tariffs could make our products less competitive than those of our competitors whose inputs are not subject to these tariffs. These U.S. tariff impositions against Chinese exports have been followed by a round of retaliatory Chinese tariffs on U.S. exports to China. The imposition of additional tariffs by the United States could trigger the adoption of tariffs by other countries as well. Any resulting escalation of trade tensions, including a “trade war,” could have a significant adverse effect on world trade and the world economy, as well as on our results of operations. At this time, we cannot predict howwhether such enactedadditional tariffs or trade restrictions will be imposed or the extent willto which they may impact our business. We may otherwise experience supply disruptions or delays, and although we carefully manage our inventory and lead-times, our suppliers may not continue to provide us with battery components in our required quantities, to our required specifications and quality levels or at attractive prices.

Further, we may be unable to control price fluctuations for these components or negotiate supply arrangements on favorable terms to us. We may also be exposed to fluctuations in the value of the U.S. dollar relative to the Renminbi with any appreciation in the value of the Renminbi increasing our costs for lithium-ion batteries and other raw materials sourced from China. Substantial increases in the prices for our lithium-ion batteries and other raw materials would increase our operating costs and negatively impact our results of operations. In addition, foreign currency fluctuations relative to the value of the U.S. dollar could affect the price of components and materials used in our batteries and sourced from countries other than the United States. Demand for lithium-ion batteries and other raw materials used in our products may also increase as a result of growing global demand from EV and energy storage industries, which could further increase the cost or reduce the availability of these materials.

Increases in costs, disruption of supplysupply, or shortage of any of our battery components,components such as electronic and mechanical parts,parts or raw materials used in the production of such parts, could harm our business.

We currently derive a significant portion of our revenue from a limited number of customers. Sales to onefour customercustomers totaled approximately 14%60% of our gross sales during the year ended December 31, 2025, and these customers had accounts receivable balances representing 69% of our total accounts receivable as of December 31, 2025. During the year ended December 31, 2024, sales to one customer represented approximately 14% of our gross sales, and four other customers had accounts receivable balances representing 60% of our total accounts receivable as of December 31, 2024. During the year ended December 31, 2023, sales to two customers totaled approximately 21% of our gross sales, and four other customers had accounts receivable balances representing 92% of total accounts receivable as of December 31, 2023. There are inherent risks whenever a large percentage of gross sales are concentrated with a limited number of customers. In addition, most of 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 any of our customers experience declining or delayed sales due to market, economic or competitive conditions, we could be pressured to reduce the prices we charge for our products which could have an adverse effect on our margins and financial position and could negatively affect our revenue and results of operations and/or trading price of our common stock. 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 have been continuously expanding our operations since our founding in 2016. As we continue to grow, we must continue to improve our managerial, technical and operational knowledge and allocation of resources, and to implement an effective management information system. To effectively manage our expanded operations, we need to continue to recruit and train managerial, accounting, internal audit, engineering, assembly and manufacturing, technical, sales sales, and other staff to satisfy our development requirements and there are currently significant labor shortages in the market. In order to fund our ongoing operations and our future growth, we need to have sufficient internal sources of liquidity or access to additional financing from external sources. Furthermore, we will be required to manage relationships with a greater number of customers, suppliers, contractors, service providers, lenders and other third parties. We will need to further strengthen our internal control and compliance functions to ensure that we are able to comply with our legal and contractual obligations and to reduce our operational and compliance risks. We cannot assure you that we will not experience issues such as capital constraints, construction delays, operational difficulties at new locations, or difficulties in expanding our existing business and operations and in recruiting and training an increasing number of personnel to manage and operate the expanded business. 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.

We are exposed to risks associated with public health crises andcrises, epidemics or pandemics.pandemics, Aand other widespread healthdisruptions crisisthat could adversely affect the global economy, resultingsupply in an economic downturn that could impact our operationschain, and demand for our products and therefore have a material adverse effect on our business and results of operations.products. 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, whichand aresimilar locateddisruptions could occur in the Unitedfuture States,due Asiato andother Europe.public health events or comparable global disruptions. 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. Any performance failure on the part of any of our significant suppliers or third-party manufacturers could interrupt production of our products, which would have a material adverse effect on our business, financial condition and results of operations. 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. components. The highly competitive labor market made it difficult to recruit and maintain a workforce properly sized and suited for our operational operational and strategic needs, which further adversely impacted our business, and any future incidence of disease could similarly impact our business. 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.

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 we are unable to expand our sales and distribution channels, we may not be able to increase revenue or achieve market acceptance of our products. WeThe arecompany expandingmay ourexpand its direct sales force andby planrecruiting to recruit additional sales personnel. NewNewly-hired sales personnel will require training and may take time to achieve full productivity,productivity. andThe thereCompany isoperates strong competitionin a competitive market for qualifiedexperienced sales personnelprofessionals, inwhich ourmay business.impact recruiting efforts. In addition, we believe our future success is dependent upon establishing successful relationships with a variety of distribution partners. To date, we have entered into agreements with only a small number of these distribution partners. We cannot be certain that we will be able to reach agreement with additional distribution partners on a timely basis or at all, or that these distribution partners will devote adequate resources to selling our products. Furthermore, if our distribution partners fail to adequately market or support our products, the reputation of our products in the market may suffer. In addition, we will need to manage potential conflicts between our direct sales force and any third-party reselling efforts. There can be no assurances that any of our efforts to expand our sales and distribution channels will be successful.

Our results of operations are directly affected by the general global economic conditions of the industries in which our major customer groups operate. Our business is also highly dependent on the economic and market conditions in each of the geographic areas in which we operate. Our products are heavily dependent on the end markets that we serve and our results of operations will vary by location, depending on the economic environment in these markets. 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. We are actively expanding our product offerings and customer base into industrial, commercial, construction, surveillance, remote monitoring, and other adjacent markets in an effort to diversify revenue sources and reduce reliance on the RV and marine end markets; however, these efforts may not offset fluctuations in our core markets. 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. These conditions, including levels of consumer spending, economic recessions, slow economic growth, economic and pricing instability, inflation levels, increase of interest rates, credit market volatility and adverse developments affecting financial institutions, could affect our business by reducing prices that our customers may be able or willing to pay for our products or by reducing the demand for our products. 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 have impacted global shipping routes. 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. We have also historically 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, and such costs could adversely impact our results of operations in future periods. 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,flows, results of operationsoperations, and financial position.

As we operate in various locations around the world, our operations in certain countries are subject to significant governmental scrutiny and may be adversely impacted by the results of such scrutiny, including regulations relating to environmental compliance, hazardous materials, product safety, scrutiny.and international trade. The regulatory environment with regard to our business is evolving, and officials often exercise broad discretion in deciding how to interpret and apply applicable regulations. From time to time, we receive formal and informal inquiries from various government regulatory authorities, as well as self-regulatory organizations, about our business and compliance with local laws, regulations or standards. Any determination that our operations or activities, or the activities of our employees, are not in compliance with existing laws, regulations or standards could result in the imposition of substantial fines, interruptions of business, loss of supplier, vendor, customer or other third-party relationships, termination of necessary licenses and permits, or similar results, all of which could potentially harm our business and/or reputation. Even if an inquiry does not result in these types of determinations, regulatory authorities could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business, and it potentially could create negative publicity which could harm our business and/or reputation.

We are currently, and will likely continue to be, dependent on oura twolimited number of warehouse facilities. If our facilities become inoperable for any reason, our ability to produce our products could be negatively impacted.

We have atwo adjacent warehouse locationfacilities in Redmond, Oregon and another a third warehouse facility in Elkhart, Indiana.Indiana, which support the storage, assembly, and distribution of our products.

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. This faulty result could subject us to lawsuits, product product recalls, or redesign efforts, all of which would be time-consuming and expensive. 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.

To facilitate an uninterrupted supply of lithium-ion batteries, we store a significant number of lithium-ion batteries at our facilities. Any mishandling, other safety issueissue, 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. Such damage or injury could lead to adverse publicity and potentially a product recall, which could have a material adverse effect on our brand, business, financial condition and results of operations.

Our product offerings and energy storage solutions, which are complex, could contain design- or manufacturing-related defects, or may not operate at expected performance levels. We face an inherent business risk of exposure to product liability claims in the event that the use of any of our products results in personal injury or property damage. In the event that any of our products prove to be defective, we may be required to recall or redesign such products, which would result in significant unexpected costs. Any insurance we maintain may not be available on terms acceptable to us or such coverage may not be adequate for liabilities actually incurred. Further, any claim or product recall could result in adverse publicity against us, which could adversely affect our sales or increase our costs.

We are also exposed to potential liability and product performance warranty risks that are inherent in the design, assemble,assembly, manufacturemanufacture, and sale of our products. We sell the majority of our products to customers with conditional repair or replacement warranties. ForExpion360-branded example, our branded DC mobile chargers products are warrantied for two up to twelve years from the date of sale, and our branded VPR 4EVER Classic and Platinum batteries are warrantied at gradually lesser levels over a 12-year period from date of sale. As a result, we bear the risk of warranty claims long after we have sold the product and recognized revenue. In addition, under real worldreal-world operating conditions, which may vary by location and design, as well as environmental conditions, our products may perform in a different way than under standard test conditions or other failure data sets. We depend significantly on our reputation for safety and reliability and high-quality products and services, exceptional customer service, and our brand name to attract new customers and maintain our current customers, and grow our business. If our products do not perform as anticipated or we experience unexpected reliability problems or widespread product failures, our brand and market reputation could be significantly impaired and we may lose, or be unable to gain or retain, customers which could impact our business and results of operations.

We have been required to make assumptions and apply judgments, including the durability and reliability of our products, regarding their performance over the estimated warranty period and our the anticipated ratenumber and value of warranty claims. We have a relatively limited operating history and must project how our offerings will perform over the estimated warranty period and the estimated reserve may have material changes. Historically, there have been very few claims and the costs forassociated with repairs or replacement parts associated with those claims have been nominal nominal.so However,we expense warranty reservesclaims includeas ouroccurred management’sand bestdo estimates ofnot theaccrue projectedan costs to repair or replace items under warranty, which is based on estimated failure rates.allowance. Our assumptions could prove to be materially different from the actual performance of our products, causing us to incur substantial expense to repair or replace defective products in the future. An increase in our estimates of future warranty obligations could cause us to increase the amount of warranty obligations. If our warranty reserves are inadequate to cover future warranty claims on our energy storage products, our financial condition and results of operations could be adversely affected.

We are subject to a variety of litigation, tax, environmental, health and safety and other legal compliance risks. These risks include, among other things, possible liability relating to product liability matters, personal injuries, intellectual property rights, contract-related claims, government contracts, taxes, health and safety liabilities, environmental mattersmatters, and compliance with competition laws and laws governing improper business practices. We could be charged with wrongdoing as a result of such matters. If convicted or found liable, we could be subject to significant fines, penalties, repaymentsrepayments, or other damages (in certain cases, treble damages). In the area of taxes, changes in tax laws and regulations, as well as changes in related interpretations and other tax guidance could materially impact our tax receivables and liabilities and our deferred tax assets and tax liabilities.

We plan to manufacture lithium-ion batteries in the future which involves processing, storing, disposing ofof, and otherwise moving large amounts of hazardous materials, and federal, state, and local regulations impose significant environmental requirements on the manufacturing, storage, transportation, and disposal of various components of advanced energy storage systems. As a result, we will be subject to extensive and changing environmental, health and safety laws, and regulations governing, among other things, the generation, handling, storage, use, transportation and disposal of hazardous materials; remediation of polluted ground or water; emissions or discharges of hazardous materials into the ground, air or water; and the health and safety of our employees. Although we believe our operations are in material compliance with applicable environmental regulations, regulations, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. Our ongoing compliance with environmental, health and safety laws, regulationsregulations, and permits could require us to incur significant expenses, limit our ability to modify or expand our facilities or continue productionproduction, and require us to install additional pollution control equipment and make other capital improvements. In addition, private parties, including employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us or contained in our products.

Certain environmental laws assess liability on owners or operators of real property for the cost of investigation, removalremoval, or remediation of hazardous substances at their current or former properties or at properties at which they have disposed of hazardous substances. These laws may also assess costs to repair damage to natural resources. 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. For example, federal and state regulators, including the United States Environmental Protection AgencyAgency, hashave promulgated and may continue to promulgate regulations applicablerelating to projects involving greenhouse gas emissions aboveemissions, ahazardous certainair threshold,pollutants, energy use, and climate-related reporting and compliance obligations. In addition, the United States and certain states within the United States have enacted, or are considering, limitations on greenhouse gas emissions.emissions, carbon pricing mechanisms, and other climate-related regulatory measures that could affect manufacturing, supply chains, energy costs, or capital expenditures.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in the jurisdictions in which we conduct or in the future may conduct activities, including, the U.S. Foreign Corrupt Practices Act (the “FCPA”). The FCPA generally prohibits companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. The FCPA applies to companies, individual directors, officers, employeesemployees, and agents. Under the FCPA, U.S. companies may be held liable for actions taken by strategic or local partners or representatives. The FCPA also imposes accounting standards and requirements on publicly traded U.S. corporations and their foreign affiliates, which are intended to prevent the diversion of corporate funds to the payment of bribes and other improper payments. Our policies mandate compliance with these antibribery laws. 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. As a result, we could be subject to criminal and civil penalties, disgorgement, further changes or enhancements to our procedures, policies and controls, personnel changes or other remedial actions. Violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction and result in a material adverse effect on our competitive position, results of operations, cash flows or financial condition.

Our success will depend on our ability to develop new products and capabilities that respond to consumer demand, industry trends, or developments by our competitors. There is no assurance that we will be able to successfully develop new products and capabilities that adequately respond to these forces. In addition, many new energy storage technologies have been introduced over the past several years. For certain important and growing markets, such as aerospace and defense, lithium-based battery technologies have a large and growing market share. Our ability to achieve significant and sustained penetration of key developing markets, including the RVRV, marine, and home energyindustrial markets, will depend upon our success in developing or acquiring these and other technologies, either independently, through joint ventures, or through acquisitions, which in each case may require significant capital. In addition, new product introductions and technologies are risky, and may suffer from a lack of market acceptance, delays in related product development and failure of new products to operate properly. Any failure by us to successfully launch new products, or a failure by us to meet our customerscustomers’ criteria in order to accept such products, could adversely affect our results. If we fail to develop or acquire, assemble and manufacture and sell, products that satisfy our customers’ demands, or we fail to respond effectively to new product announcements by our competitors by quickly introducing competitive products, then we may fail to maintain our competitive position in our markets, and our business and financial condition could be adversely affected. We cannot assure you that our portfolio of primarily lithium-ion products will remain competitive with products based on new technologies.

We rely on a combination of copyright, trademark, patent and trade secret laws, non-disclosure agreementsagreements, and other confidentiality procedures and contractual provisions to establish, protect protect, and maintain our proprietary intellectual property and technology and other confidential information. Certain of these technologies, especially battery case construction, are important to our business and are not protected by patents.patents, and certain assets of our technology may not be protected by issued patents and instead rely on trade secret protection and other contractual safeguards. Despite our efforts to protect our proprietary intellectual property and technology and other confidential information, unauthorized parties may attempt to copy or otherwise obtain and use our intellectual property and proprietary technologies. If we are unable to protect our intellectual property and technology, we may lose our competitive position or any technological advantage we currently enjoy and may behave required to take an impairment charge with respect to the carryingdeveloped, value of such intellectual property or goodwill established in connection with the acquisition thereof. In either case,and our results of operations and net income may be adversely affected. In addition, entities holding intellectual property rights relating to our technology may bring suits alleging infringement of such rights or otherwise asserting their rights and seeking licenses. Any such litigation or claims, whether or not valid or successful, could result in substantial costs and diversion of resources and our management’s attention. attention. If we are determined to have infringed upon a third-party’s intellectual property rights, we may have to pay substantial damages, damages, obtain a licenselicense, or cease making certain products, which in turn could have a material adverse effect on our business, results of operations operations, and financial condition.

Any acquisitions that we complete may dilute stockholder ownership interests in the Company, may have adverse effects on our financial condition and results of operationsoperations, and may cause unanticipated liabilities.

As part of our growth strategy, we may make future investments in businesses, new technologies, servicesservices, and other assets that complement our business. Future acquisitions may involve the issuance of our equity securities as payment, in part or in full, for the businesses or assets acquired. Any future issuances of equity securities would dilute stockholder ownership interests. In addition, future acquisitions might not increase, and may even decrease, our earnings or earnings per share and the benefits derived by us from an acquisition might not outweigh or might not exceed the dilutive effect of the acquisition. We also may incur additional debt or suffer adverse tax and accounting consequences in connection with any future acquisitions.

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, partnerpartner, and employee data. Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology systems, which support our operations. We maintain systems and processes designed to protect this data, but notwithstanding such protective measures, there is a risk of intrusion, cyberattacks, tampering, theft, misplaced or lost data, programming and/or human errors that could compromise the integrity and privacy of this data, improper use of our systems, software solutions or networks, unauthorized access, use, disclosure, modification or destruction of information, defective products, production downtimesdowntimes, and operational disruptions, which in turn could adversely affect our reputation, competitiveness, and results of operations. High-profile security breaches at other companies and in government agencies have increased in recent years, and cyber-attacks are becoming more sophisticated and frequent, and in some cases have caused significant harm. Computer hackers and others routinely attempt to breach the security of technology products, services and systems, and to fraudulently induce employees, customers, or others to disclose information or unwittingly provide access to systems or data. While we devote significant resources to security measures to protect our systems and data, these measures cannot provide absolute security.

In addition, we provide confidential and proprietary information to our third-party business partners in certain cases where doing so is necessary to conduct our business. While we obtain assurances from those parties that they have systems and processes in place to protect such data, and where applicable, that they will take steps to assure the protections of such data by third parties, nonetheless those partners may also be subject to data intrusion or otherwise compromise the protection of such data. Any compromise of the confidential data of our customers, suppliers, partners, employees employees, or ourselves, or failure to prevent or mitigate the loss of or damage to this data through breach of our information technology systems or other means could substantially disrupt our operations, harm our customers, employees and other business partners, damage our reputation, violate applicable laws and regulations, subject us to potentially significant costs and liabilities and result in a loss of business that could be material. We operate a number of critical computer systems throughout our business that can fail for a variety of reasons. If such a failure were to occur, we may not be able to sufficiently recover from the failure in time to avoid the loss of data or any adverse impact on certain of our operations that are dependent on such systems. This could result in lost sales and the inefficient operation of our facilities for the duration of such a failure.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debtdebt, or a combination of both or by entering into credit facilities or securing other types of financing. Additional financing may not be available on favorable terms or at all. 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.

In addition, actual events involving limited liquidity, defaults, non-performancenon-performance, or other adverse developments that affect financial institutions, transactional counterparties counterparties, or other companies in the financial services industry as well as concerns or rumors regarding such events, could adversely affect the financial services industry generally,generally orand concernsour orliquidity rumorsand aboutfinancial any events of these kinds or other similar risks.condition. If banks or financial institutions enter receivership or become insolvent 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.

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. 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. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timingtiming, or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

Our success depends in part on our ability to attract, retain retain, and motivate senior management and other key employees. Achieving this objective may be difficult due to many factors, including fluctuations in global economic and industry conditions, competitors’ hiring practices, cost reduction activities, and the effectiveness of our compensation programs. Competition for qualified personnel can be very intense. We must continue to recruit, retainretain, and motivate senior management and other key employees sufficient to maintain our current business and support our future projects. We are vulnerable to attrition among our current senior management team and other key employees. 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. For example,In John2025, Yozamp,certain members of our co-founder,senior formerleadership Chiefteam Business Development Officer,departed, and formerwe Chiefappointed Executive Officer, pioneered multiple new recreationalexecutive officers, conceptsincluding ininternal the RV industry and leveraged extensive relationships in the RV OEM businesspromotions to establish our company. Mr. Yozamp retired as Chief Business Development Officer as of December 31, 2023. In addition, Greg Aydelott, ourthe Chief Financial Officer,Officer and Chief Operating Officer roles. Although these executives have resignedprior fromexperience hiswith rolethe asCompany of December 31, 2024. Whileand we believe we have successfullymaintained transitionedoperational fromcontinuity, theseleadership departurestransitions andmay haveresult sufficientin temporary experiencedisruption, changes in strategic direction, or uncertainty among ouremployees, managementcustomers, team,or anyother stakeholders. Any additional attrition among senior management or key employeesemployees, couldor adverselyany impactfailure us. The board has commenced a search for a new Chief Financial Officer. If we are unsuccessful inof our succession planning efforts, thecould continuityadversely ofaffect our businessbusiness, financial condition, and results of operations could be adversely affected.operations.

The income and non-income tax regimes we are subject to or operate under are unsettled and may be subject to significant change. Changes in tax laws or tax rulings, or changes in interpretations of existing laws, could materially affect our financial position, results of operations, and cash flows. The overall tax environment remains uncertain and increasingly complex. Future changes in tax laws, treaties or regulations, and their interpretation or enforcement, may be unpredictable, particularly as taxing jurisdictions face an increasing number of political, budgetary, and other fiscal challenges. In the U.S., various proposals to change corporate income taxes are periodically considered. Tax rates in the jurisdictions in which we operate may change as a result of macroeconomic and other factors outside of our control, making it increasingly difficult to operate with certainty about taxation. For example, changes to U.S. tax laws enacted in December 2017 had a significant impact on our tax obligations and effective tax rate beginning 2018, and the full consequences of the significant changes to U.S. tax laws as a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”) have not yet been fully determined. These enactments and future possible guidance guidance from the applicable taxing authorities may have a material impact on our results of operations. In addition, regulatory or legislative developments may arise from various U.S. tax reform proposals, some of which include proposed changes to the U.S. tax laws, which, if adopted, could result in increased taxation of our business operations. We closely monitor these proposals as they arise in the countries where it operates. Changes to the statutory tax rate may occur at any time, and any related expense or benefit recorded may be material to the fiscal quarter and year in which the law change is enacted. We regularly assess the likely outcomes of our tax audits and disputes to determine the appropriateness of our tax reserves. However, any tax authority could take a position on tax treatment that is contrary to our expectations, which could result in tax liabilities in excess of reserves. In addition, the foregoing items, as well as any future changes in tax laws, could have a material adverse effect on our business, cash flow, financial condition, or results of operations.

Our business continues to demand the use of sophisticated systems and technology. These systems and technologies must be refined, updatedupdated, and replaced with more advanced systems on a regular basis in order for us to meet our customers’ demands and expectations. If we are unable to do so on a timely basis or within reasonable cost parameters, or if we are unable to appropriately and timely train our employees to operate any of these new systems, our business could suffer. 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 results of operations.

You may be diluted by the future issuance of additional common stock in connection with our incentive plans, acquisitionsacquisitions, or otherwise.

You will experience additional dilution upon the exercise of options and warrants to purchase our common stock, including those options currently outstanding and possibly those granted in the future, and the issuance of restricted stock or other equity awards under our stock incentive plans. As of December 31, 2024,2025, we had 200,000,000 shares of common stock authorized, of which 2,096,0829,781,739 were issued. SubsequentIn toJanuary December 31, 2024,2025, we issued to certain institutionalcompleted investors in connection with a registered direct offering (i) 474,193 shares of common stock; and (ii)concurrent 574,193private pre-fundedplacement warrants (the “January 2025 Pre-Funded Warrants”)pursuant to purchasewhich upwe to 574,193issued shares of common stock (theand “Januarywarrants to purchase shares of common stock, and in October 2025 Pre-Funded Warrant Shares”). The January 2025 Pre-Funded Warrants were all exercised immediately upon issuance. In a concurrent private placement that closed January 3, 2025, the Company alsowe issued to the institutional investors unregistered warrants (the “January 2025 Warrants”) to purchase up to an aggregate of 1,048,386 shares of common stock.stock and pre-funded warrants in a private placement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—January 2025 Registered Direct Offering and Warrant Private Placement” for additional information regarding the offering.offerings.

Our Articles of Incorporation authorizes us to issue shares of common stock and options, rights, warrantswarrants, and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our Board in its sole discretion, whether in connection with our incentive plans, acquisitionsacquisitions, or otherwise. We have reserved 10,000 shares of common stock for issuance upon the exercise of outstanding stock options under the 2021 Incentive Incentive Award Plan and 25,000 shares of common stock for issuance pursuant to our 2021 Employee Stock Purchase Plan. In addition, as of December 31, 2024, there were outstanding warrants to purchase up to 5,380,965 shares of common stock. In addition, there are 11,430 shares of common stock issuable upon the exercise of equity incentive awards outstanding under our 2021 Incentive Award Plan as of December 31, 2024. Any common stock that we issue, including stock issued under our 2021 Incentive Award Plan or other equity incentive plans that we may adopt in the future, as well as under outstanding options or warrantswarrants, would dilute the percentage ownership held by our common stockholders. In addition, we have sold, and may continue to sell, shares of common stock under our commonat-the-market program, stockholders.which may result in additional dilution. To the extent we raise additional capital by issuing equity securities, our stockholders may also experience substantial additional dilution.

If our existing stockholders sell substantial amounts of our securities in the public market, including the shares of common stock issued or issuable upon the exercise of theoutstanding Augustwarrants 2024or Pre-Funded Warrants,warrants Seriesthat Amay Warrants and Series B Warrantsbe issued in the August 2024 Public Offering, as well as shares of common stock issued in the January 2025 Registered Direct Offering (including the January 2025 Pre-Funded Warrant Shares) and upon the issuance of shares of common stock upon the exercise, if any, of the January 2025 Warrants,future, and shares issued as consideration in any future acquisitions, or the market perceives that such sales may occur, the market price of our securities could fall and we may be unable to sell our securities in the future. See the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—August 2024 Public Offering and Subsequent Warrant Exercises and Adjustments to Warrant Exercise and Reset Prices” and “—January 2025 Registered Direct Offering and Warrant Private Placement” for additional information regarding the August 2024 Public Offering Offering and January 2025 Registered Direct Offering, respectively. The perception in the public market that our stockholders might sell securities securities could also depress our market price. As of March 25,11, 2025,2026, we had 3,144,46810,846,135 shares of common stock outstanding. Pursuant to the terms of the warrants issued to the underwriters (or their designees) in connection with our initial public offering (the “Underwriter Warrants”), the holders of the Underwriter Warrants have the right, subject to certain conditions, to require us to register the sale of the shares of our common stock underlying their Underwriter Warrants under the Securities Act.

If the holders of the Underwriter Warrants exercise their registration rights, the market price of shares of our securities may drop significantly. 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. 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.

Our common stock is currently is listed on Nasdaq.the Nasdaq Capital Market. We are required to meet specified financial requirements in order to maintain such listing, including a requirement that the bid price for our common stock remain above $1.00. On SeptemberJanuary 6,29, 2024, as expected,2026, we received a staff determination from The Nasdaq Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) to delist our common stock from Nasdaq.Nasdaq On September 12, 2024, we requested an appeal hearing, stayingif the delistingclosing bid price does not exceed $1.00 for a minimum of ten consecutive business days within the compliance common stock pending a decision from a hearings panel. Upon successful completionperiod of the Reverse180 Stockcalendar Split, we received a letter from Nasdaq staff on October 23, 2024, advising us that we had regained compliance with the continued listing requirements in Listing Rule 5550(a)(2) and that we are therefore in compliance with Nasdaq’s listing requirements. Consequently, the scheduled hearing before the hearings panel on October 24, 2024, was cancelled.days. See the section titled “Legal Proceedings” for further information on the delisting notice.

As of December 31, 2025, 2024, 114,676,79719,564,585 Series A Warrants, Warrants exercisable for 5,286,692901,943 shares of common stock,stock at $5.206$1.31 per share (post-Adjustment),share, and 3,075,00046,246 Series B Warrants exercisable for for 87,3842,132 shares of common stock, at $0.10 per shareshare, (post-Adjustment)and were outstanding. In addition, subsequent to December 31, 2024, we issued to certain institutional investors the449,193 January 2025 Warrants toexercisable purchasefor up to an aggregate of 1,048,386449,193 shares of common stock at an exercise price of $2.36$1.31 per share,share subjectwere to adjustment for reverse stock splits, recapitalizations, and reorganizations.outstanding. The exercise of thethese Series A Warrants and, to a lesser extent, the Series B Warrants and January 2025 Warrantswarrants could result and have resulted in a substantial increase in the number of shares of common stock outstanding and therefore materially dilute the ownership percentage of currently outstanding shares of common stock. See the“Note section7, titled “Management’s DiscussionEquity and AnalysisDebt of Financial Condition and Results of Operations—January 2025 Registered Direct Offering and Warrant Private Placement” and “—August 2024 Public Offering and Subsequent Warrant Exercises and Adjustments to Warrant Exercise and Reset PricesFinancings” for additional information regarding the January 2025 Registered Direct Offering and August 2024 Public Offering, respectively.offerings.

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, regulationsregulations, 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 operationsoperations, and financial condition. 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.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. These obligations and constituents require significant attention from our senior management and can divert their attention away from the day-to-day management of our business, which can harm our business, results of operationsoperations, and financial condition.

As of December 31, 2024, 2025, we had total liabilities of $6.6$1.5 million, of which $5.0 million is the suspended liability for the true-up payment related to the August 8, 2024 capital raise, $799,000$710,000 was related to operating lease liabilities,liabilities and $230,000$197,000 was related to debt obligations.

If we cannot generate sufficient cash flow from operations to service our lease and debtany obligationscurrent or thefuture Reversedebt Stock Split cash true-up payment,obligations, we may need to further refinance oursuch debt,obligations, dispose of assetsassets, or issue equity to obtain necessary funds. We do not know whether we will be able to do any of this on a timely basis or on terms satisfactory to us, or at all. Our substantial lease and debt obligations could have important consequences, including:

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, 20242025 and 2023,2024, included in this Annual Report. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties that may adversely impact our operations and financial results. These risks and uncertainties are discussed in this Annual Report, including in Item 1A. “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. 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 may not sum due to rounding.

Unless otherwise noted, all references to sharesshare and per share amountsdata, as well as stockholders’ equity balances for the years ended December 31, 20242025 and 20232024 presented in this sectionsection, have been adjusted retroactively to reflect a 1-for-100 reverse stock split, which was effective at 5:00 p.m. Pacific Time on October 8, 2024 (the “Reverse Stock Split”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Reverse Stock Split and Reverse Stock Split True-Up Payment” below for additional information about the Reverse Stock Split.

Expion360 focuses on the design, assembly, manufacturing, and sale of lithium iron phosphate (“LiFePO4”) batteries and supporting accessories for recreational vehicles (“RVs”), marine applicationsapplications, and homeindustrial energy storage products with plans to expand into industrial applications.products. Our high-powered, lithium battery battery solutions incorporate innovative concepts and have been designed to include some of the most dense and minimal-footprint batteries in in the RV and marine industries. In addition, in January 2025 we began selling our e360 Home Energy Storage Solutions, which consist of two LiFePO4 battery storage solutions and seek to provide consumers with a cost-effective, low barrier of entry, flexible system to power their homes utilizing solar energy, wind, or grid back-up. We are deploying multipledeploy intellectual property strategies with research and products to sustainsupport product development, enhance safety and scaleperformance, and strengthen relationships across our business.target markets. This includes design, developmentdevelopment, and collaboration, using our IP to bring safety, quality, quality and service to our customers. Our customers consist of dealers, wholesalers, private-label customers, and original equipment manufacturers manufacturers (“OEMs”) who then sell our products to end consumers and drive brand awareness nationally.

Our products provide numerous advantages for various industries that are looking to migrate to lithium-based energy storage. They incorporate detailed-orienteddetailed design and engineering, strong case materials, andoptimized internal and structural layouts, and are backedsupported by responsive customer service.

Our batteries are manufactured by multiple third-party manufacturers located in Asia, which also produce our battery cells. While we do not have long-term purchase agreements with these manufacturers and ourgenerally purchases are completedtransact on a purchase-orderpurchase order basis, we maintain strong relationships with our manufacturers and cell suppliers, reflected inwhich ourhave abilityhistorically enabled us to increase our purchase order volumes (qualifyingand usqualify for related volume-based discounts). discounts. The strength of these relationships, together with ongoing supplier negotiations and purchasing strategies, have supported relationshipsour hasefforts helpedto us moderate increasedmanage supply-related costs associated with inflation, currency fluctuations, and U.S. government tariffs imposed on our imports, andas avoidwell as to mitigate potential shipment delays. We aim to maintain an appropriate level of inventory to satisfy our expected expected supply requirements. WeWhile we believe we could locate suitable alternative third-party manufacturers to fulfill our requirements if needed, needed.transitioning suppliers could require time and result in additional costs.

Our third-party manufacturers source the raw materials and battery components required for the production of our batteries directly from third-party suppliers that meet our approval and quality standards and,standards. as a result, we may have limited control over the agreedAccordingly, pricing for thesecertain raw materials and batterycomponents components.is influenced by market conditions and supplier negotiations. We estimate that raw material costs account for over half of our cost of goods sold. Lithium, which is extracted from mined ore, is a key raw material used to produce our battery cells and,and asfluctuations ain result,lithium thepricing costcan ofaffect our battery cellscell costs. isFrom dependenttime onto thetime, pricechanges andin raw material availability of lithium, which may beinfluence volatilepricing anddynamics unpredictableor andsourcing beyondstrategies. our control. Additionally, availabilityCertain of the raw materials used to manufacture our products may be limited at times, resulting in higher prices and/or the need to find alternative suppliers. Our battery cell manufacturers have joint venture factories outside of Asia and have secured sourcing contracts from lithium suppliers in South America and Australia. In addition, we have a secondary source for lithium iron phosphate cells used in our batteries from a supplier in Europe, enablingproviding usadditional togeographic sourcediversification materialsand outsidesourcing of Asia in the event it becomes necessary to do so.flexibility.

InIndustry addition initiatives to increasedexpand mininglithium production capacity and newlylithium located reserves,cell recycling may affect long-term supply dynamics. For example, there is an industry push to provide more efficient ways to extract lithium from mined ore. Another development of the past few years is lithium cell recycling.recycling, which This process will recapture therecaptures raw lithium from the cell for reuse in future cells. However, notwithstanding efforts to improve the sustainability and efficiency of lithium mining, the price of lithium isremains volatile.subject to market volatility. We continue to monitor developments that that may adversely affect our supply chain.

Management expects that products sourced from our Asian third-party manufacturers willmay be subject to additional tariffs in 2025.2026. We believeintend thatto wemitigate canthe protectpotential ourimpact on margins through a combination of supplier concessions, negotiations, selective customer price increasesadjustments, ongoing cost optimization initiatives, and the development of lower-cost product configurations designed to improve manufacturing efficiency and efficienciesoverall gainedunit economics as sales volumes continueincrease. toThe grow.effectiveness of these measures will depend on market conditions, sales volume, product mix, and future tariff developments.

For additional information regarding,regarding supply chain risks, see the section titled “Risk Factors—Our results of operations could be adversely affected by changes in the cost and availability of raw materials andour we are dependentreliance on third-party manufacturers and suppliers” and “Risk Factors—Increases in costs, disruption of supplysupply, or shortage of any of our battery components,components such as electronic and mechanical parts, or raw materials used in the production of such parts could harm our business.”

As of December 31, 2024, 2025, we sell 1514 models of LiFEPO4 batteries, the Aura 600, and various individual or bundled accessories for battery systems. Our products are sold to different customers (i.e., dealers, wholesalers, private-label customers, OEMs,and etc.)OEMs at differing prices and havewith varying costs.cost structures. The average selling price and costs of goods sold for a particular product will vary with changes in the sales channel mix, volume of products sold, and the prices of such products sold relative to other products. While we work with our suppliers to limit price and supply cost increases, our products may see price increases resulting from a rise in supply costs due to currency fluctuations, inflation, and tariffs.tariffs, which may affect pricing and gross margins. Accessory and OEM sales typically have lower average selling prices and resulting margins,margins whichrelative to other distribution channels. As a result, shifts in customer mix could decrease our margins and negatively affect our growth or require us to increase the prices of our products. However, the benefits of increased sales volumes and broader customer penetration typically has, and may continue to, offset thesethe reductions. impact of lower-margin product and customer mix. The relative margins of products sold also impact our results of operations. As we introduce new products, we may see a change in product and sales channel mix, which could result in period-to-period fluctuations in our overall gross margin.

Our revenue is generated from the sale of products consisting primarily of batteries and accessories. We recognize revenue when control of goods or services is transferred to our customers in an amount that reflects the consideration it is expected to be entitled to in exchange for those goods or services. All of ourOur sales are primarily within the United States.

Selling, general, and administrative expenses consist primarily of salaries and benefits, legal and professional fees, and sales and marketing costs. Other significant costs include facility and related costs, research and development, software and information technology, insurance, and insurance.facility and related costs.

We disclose financial measures calculated and presented in accordance with the generally accepted accounting principles in the United States (US “GAAP”); however, we provide certain financial information on a non-GAAP basis (“non-GAAP financial measures”). We provide non-GAAP financial measures to provide information that may assist investors in understanding our results of operations and assessing our prospects for future performance, which consist of adjusted cost of sales. We believe evaluating certain financial and operating measures on an adjusted basis is important as it excludes liquidation costs that are not indicative of our core results of operations and are largely outside of our control. However, our non-GAAP financial measures are not intended to represent and should not be considered more meaningful measures than, or alternatives to, measures of financial or operating performance as determined in accordance with US GAAP.

We calculate our adjusted cost of sales non-GAAP financial measures for current period financial information by excluding the effect of an liquidationadjustment of non-corerelated productto inobsolete the consolidated financial statements.inventory. The information presented on an adjusted cost of sales basis, as we present such information, may not necessarily be comparable to similarly titledsimilarly-titled information presented by other companies, and may not be appropriate measures for comparing our performance relative to other companies.

During the year ended December 31,Cost 2024, we liquidated some non-core product, which was a factor in reducing leased warehouse space. If we had not done the liquidation, cost of sales for the year ended December 31, 20242025 would have decreasedincreased by $42,000,$3.8 million, or 0.9%,86.0%, compared to the year ended December 31, 2023.2024. Cost Cost of sales wouldwere have been $4.4$8.3 million for the year ended December 31, 20242025 and $4.4$4.5 million for the year ended December 31, 2023. 2024. Cost of sales as a percentage of sales would have increased by 4.5%6.7 percentage points in the2025, yearto ended December 31, 202486.1% compared to the79.5% priorin year.2024.

We are not aware of any material changes to the risks and uncertainties described in Part I, Item 1A, “Risk Factors” of the Annual Report,Report and Part II, Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the three months ended March 31, 2026 (the “Q1 2026 Quarterly Report”), which are incorporated herein by reference, except as set forth below.reference. The risks described in the Annual Report and the Q1 2026 Quarterly Report are not the only ones we face. Additional risks we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, results of operations, liquidity, and prospects.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited interim financial statements and related notes for the three and six months ended MarchJune 31,30, 2026 and 2025 included elsewhere in this Quarterly Report, as well as our audited financial statements and related notes for the fiscal years ended December 31, 2025 and 2024, included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 17, 2026 (the “Annual Report”). Our future financial condition and results of operations, as well as any forward-looking statements, are subject to inherent risks and uncertainties that may adversely impact our operations and financial results. These risks and uncertainties are discussed in this Quarterly Report, including in Part II, Item 1A, “Risk Factors” of this Quarterly Report and “Cautionary Note Regarding Forward-Looking Statements and Industry Data,” as well as in Part I, Item 1A, “Risk Factors” of the Annual Report. Percentage amounts included in this section have not in all cases been calculated on the basis of rounded figures, but on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary from those obtained by performing the same calculations using the figures in our financial statements included elsewhere in this Quarterly Report. Certain other amounts that appear in this section may not sum due to rounding.

Management expects expects that products sourced from our Asian third-party manufacturers may be subject to additional tariffs in 2026. U.S. trade policy has been subject to significant legal and regulatory developments, and tariffs or other trade measures may continue to be imposed, modified, suspended, or challenged under various statutory authorities. During the three months ended June 30, 2026, we received tariff refunds of approximately $11,000, which were recorded in other income. We received another $298,000 in July, 2026, which will be reflected on our Quarterly Report for the period ending September 30, 2026. We intend to mitigate the potential impact on margins through a combination of supplier negotiations, selective customer price adjustments, ongoing cost optimization initiatives, and the development of lower-cost product configurations designed to improve manufacturing efficiency and overall unit economics as sales volumes increase. The effectiveness of these measures will depend on market conditions, sales volume, product mix, and future tariff developments.

As of MarchJune 31,30, 2026, we sell 1413 models of LiFEPO4 batteries, the Aura 600, and various individual or bundled accessories for battery systems. Our products are sold to dealers, wholesalers, private-label customers, and OEMs at differing prices and with varying cost structures. The average selling price and costs of goods sold for a particular product will vary with changes in the sales channel mix, volume of products sold, and the prices of such products sold relative to other products. While we work with our suppliers to limit price and supply cost increases, our products may see price increases resulting from a rise in supply costs due to currency fluctuations, inflation, and tariffs, which may affect pricing and gross margins. Accessory and OEM sales typically have lower average selling prices and resulting margins relative to other distribution channels. As a result, shifts in customer mix could decrease our margins and negatively affect our growth or require us to increase the prices of our products. However, the benefits of increased sales volumes and broader customer penetration typically have offset, and may continue to offset, the impact of lower-margin product and customer mix. The relative margins of products sold also impact our results of operations. As we introduce new products, we may see a change in product and sales channel mix, which could result in period-to-period fluctuations in our overall gross margin.

Selling, general, general, and administrative expenses consist primarily of salaries and benefits, legal and professional fees, and sales and marketing costs. Other significant costs include research and development, software and information technology, insurance, andfacility facility and related costs.costs, and research and development.

We have adopted the provisions in ASC 740, Income Taxes, related to accounting for uncertain tax positions. It requires that the Company recognize the impact of a tax position in the financial statements if the position is more likely than not to be sustained upon examination and on the technical merits of the position. Management has concluded that there were no material unrecognized tax benefits as of MarchJune 31,30, 2026 or December 31, 2025.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. We had no accrual for interest or penalties on our balance sheets at MarchJune 31,30, 2026 or December 31, 2025 and did not recognize interest and/or penalties in the statement of operations for the three months ended MarchJune 31,30, 2026 and 2025, since there are no material unrecognized tax benefits. Management believes no material change to the amount of unrecognized tax benefits will occur within the next 12 months.

Net sales for the three months ended March 31, 2026 decreased by $0.5 million, or 24%, compared to the three months ended March 31, 2025. Net sales were $1.6 million for the three months ended March 31, 2026 and $2.0 million for the three months ended March 31, 2025. The decrease was primarily due to discontinuing resale of certain low-margin accessories in order to increase our profit margins. Additionally, certain OEM customers entered the period carrying elevated battery inventory levels built up through year-end, which tempered order volume early in the quarter. We anticipate demand from these customers to normalize in the second quarter of 2026 and beyond as their inventory levels return to standard operating levels.year.

Total cost of sales for the three months ended MarchJune 31,30, 2026 decreased by $0.4$1.0 million, or 24%,42.1%, compared to the three months ended March 31,June 30, 2025. Cost of sales as a percent of sales decreased by 0.8 percentage points compared to the prior year period, from 75.5% to 74.7%. Cost of sales was $1.2$1.4 million for the three months ended MarchJune 31,30, 2026 and $1.5$2.4 million for the three months ended MarchJune 31,30, 2025. The decrease in costCost of sales was primarily related to the decrease in net sales, while the decrease in cost of sales as a percentage of net sales wasdecreased primarilyby related11.6% toin changingthat our product mix to exclude low-margin items and maintaining healthy pricing models across our core battery product lines.period.

Our gross profit for the three months ended MarchJune 31,30, 2026 decreasedincreased by $0.1 million,$37,000, or 21%,5.7%, compared to the three months ended March 31,June 30, 2025. Gross profit was $0.4 million$658,000 for the three months ended MarchJune 31,30, 2026 and $0.5 million$623,000 for the three months ended March 31,June 30, 2025. Gross profit as a percentage of sales increased by 0.811.6% percentagefor pointsthat comparedperiod, tofrom the prior year period. The decrease in gross profit20.8% for the three months ended MarchJune 31,30, 2026 was primarily attributable2025 to the32.4% decrease in net sales, partially offset byfor the increasethree inmonths grossended June profit30, as a percentage of sales.2026.

Selling, general general, and administrative expenses for the three months ended MarchJune 31,30, 2026 increaseddecreased by $0.5 million,$13,000, or 31%,0.7%, compared to the three months ended June March 31,30, 2025. Selling, general,general and administrative expenses were $2.2 million for the three months ended March 31, 2026 and $1.6$1.96 million for the three months ended MarchJune 31,30, 2026 and $1.97 million for the three months ended June 30, 2025. TheAs increasea inpercent of sales, selling, general,general and administrative expenses were 96.5% for the three expensemonths wasended June 30, 2026 compared to 66.0% for the same period in the prior year, an increase of 30.5 percentage points, primarily due to the lower revenue base. For the three months ended June 30, 2026, decreases in research and development, salaries and benefits, and travel expenses were offset by increases in legal and professional fees and salariessales and benefits,marketing which increased by approximately $289,000 and $142,000, respectively.expenses.

Other income was income$21,000 for the three months ended MarchJune 31,30, 2026 was $9,000 and other expense was $19,000 for the three months ended MarchJune 31,30, 20252025, wasa $4,000.net improvement of $39,000. Other income forin the three months ended MarchJune 31,30, 2026 wasincluded primarily$13,000 attributable toin interest income,income partiallyand $11,000 in tariff refunds, slightly offset by $3,000 in interest expense. Other expense forin the three months ended MarchJune 31,30, 2025 wasincluded made$15,000 upin almost entirely of interest expense, partially offset by a gainloss on sale of property and equipment and equipment.$4,000 in interest expense.

Our net loss for the three months ended MarchJune 31,30, 2026 and 2025 was $1.8$1.3 million and $1.2$1.4 million, respectively. The increase in net lossimprovement was primarilymainly thedue resultto improvements to other income and expense, with decreased losses from sale of higher selling, general,property and administrative expensesequipment and lowerincreased netinterest salesincome forand thetariff period ended March 31, 2026.refunds.

Net cash used in operating activities was $1.1$2.6 million for the threesix months ended MarchJune 31,30, 2026, compared to $1.2$1.6 million for the prior year period. The decrease increase in cash used was primarily attributable to the timing of our inventory purchases, timing of prepaid expenses, and timing of accounts receivable and accounts receivablepayable, and included the following:

There was no cash provided by or used in investing activities for the threesix months ended MarchJune 31,30, 2026, compared to cash provided by investing activities of $3,000$4,000 for the threesix months ended MarchJune 31,30, 2025. We did not purchase or dispose of any fixed assets in the threesix months ended MarchJune 31, 30, 2026, and sold onethree vehiclevehicles in the threesix months ended MarchJune 31,30, 2025.

For the threesix months ended MarchJune 31,30, 2026, net proceeds from the issuance of common stock were $1.2 million, slightly offset by principal payments on long-term debt of $8,000.$41,000. For the threesix months ended MarchJune 31,30, 2025, we received net proceeds of $1.8 million from the issuance of common stock, offset by principal payments on long-term debt totaling $8,000.$17,000.

Our operations have been financed primarily through net proceeds from the sale of securities. On December 12, 2025, we entered into an at-the-market issuance sales agreement. We commenced sales under the agreement in January 2026 and have sold an aggregate of 1,656,559 138,047 shares (post-Reverse Stock Split) for net proceeds of approximately $1.2 million during the threesix months ended MarchJune 31,30, 2026. As of MarchJune 31, 30, 2026, our working capital was $5.6$4.4 million compared to $6.0 million as of December 31, 2025, and we had cash and cash equivalents of $3.1$1.5 million and $3.0 million as of MarchJune 31,30, 2026 and December 31, 2025, respectively. During the three months ended March 31, 2026, we received net proceeds of approximately $1.2 million from the issuance of common stock.

As of MarchJune 31,30, 2026, we expect our short-term liquidity requirements to include scheduled principal debt payments of approximately $32,000 $13,000 and lease obligation payments of approximately $332,000,$328,000, including imputed interest.

We generally consider our long-term liquidity requirements to consist of those items that are expected to be incurred beyond the next 12 months. We continue to experience recurring operating losses and negative cash flows from operations, with $1.1$2.6 million used in operating activities during the threesix months ended MarchJune 31,30, 2026. While management has implemented cost containment measures and is working to address its cash flow challenges, including by raising additional capital, expanding into new sales channels, managing inventory levels, identifying alternative supply chain resources, and managing operational expenses, material uncertainty remains. Without additional funding or a material increase in revenue generation, we may not be able to meet our obligations as they become due. These factors raise substantial doubt about our ability to continue as a going concern within 12 months after the date that the financial statements included in this Quarterly Report are issued. Our activities are subject to significant risks and uncertainties, including failing to secure additional funding before we achieve sustainable revenues and profit from operations. We expect to continue to incur additional losses for the foreseeable future, and we may need to raise additional debt or equity financing to expand our presence in the marketplace, develop new products, achieve operating efficiencies, and accomplish our long-term business plan over the next several years. There can be no assurance as to the availability or terms upon which such financing and capital might be available. See also the risk factor entitled “Our audited financial statements include include a statement that there is a substantial doubt about our ability to continue as a going concern and a continuation of negative financial trends could result in our inability to continue as a going concern” in Part I, Item 1A, “Risk Factors” of of the Annual Report.

As of MarchJune 31,30, 2026, our long-term debt was approximately $190,000,$156,000, of which $32,000$13,000 is due within the next 12 months. This balance includes $138,000$137,000 outstanding under a COVID-19 Economic Injury Disaster Loan and $52,000$19,000 outstanding under vehicle financing arrangements.

As of MarchJune 31,30, 2026, we had threeone notesnote payable to GM Financial for vehicles. In addition, a commercial line secured in April 2022 for $300,000 was renewed in April 2023 and increased to $350,000, and renewed again each April from 2024 through 2026 for the same amount of $350,000. This commercial line may be used to finance vehicle purchases and expires in April 2027. The notesnote are is payable in aggregate monthly installments of $2,560,$892, including interest at rates ranging from 6.14% to 7.29% per annum, mature at various dates from October 2027 toin May 2028, and areis secured by the related vehicles.vehicle.

Our estimated future obligations include long-term operating lease liabilities. As of MarchJune 31,30, 2026, we had $629,000$546,000 in operating lease liabilities.