Expion360 (XPON) - 2025 Q1 - Quarterly Report

Cautionary Note Regarding Forward-Looking Statements and Industry Data Forward-Looking Statements This report contains forward-looking statements concerning future operations and financial performance that are subject to significant risks and uncertainties - The company identifies several key risks that could impact future performance, including:[10] - History of Losses & Going Concern: The company has a history of losses and its financial statements include a substantial doubt about its ability to continue as a going concern[10] - Competitive & Supply Chain Pressures: The company operates in a highly competitive industry, is subject to pricing pressures, and depends on third-party manufacturers and suppliers, facing risks related to raw material costs and availability[10] - Customer Concentration: A limited number of customers account for a substantial portion of sales, posing a concentration risk[10] - Capital & Financing Risks: The company's ability to raise future capital may be limited, and outstanding warrants could dilute stockholder ownership and affect the stock price[10][11] PART I - FINANCIAL INFORMATION Financial Statements Unaudited statements show increased net sales and a reduced net loss, but operating losses and negative cash flows persist, prompting a going concern warning Balance Sheets Total assets slightly increased to $9.24 million while total liabilities decreased, resulting in an increase in stockholders' equity to $3.20 million Balance Sheet Summary (in thousands) | Account | March 31, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,092.6 | $547.6 | | Inventory | $6,036.0 | $4,831.5 | | Total current assets | $8,079.2 | $7,841.2 | | Total assets | $9,242.4 | $9,107.4 | | Liabilities & Equity | | | | Suspended Liability | $4,485.9 | $4,986.0 | | Total current liabilities | $5,379.2 | $5,847.9 | | Total liabilities | $6,045.8 | $6,589.1 | | Total stockholders' equity | $3,196.6 | $2,518.3 | Statements of Operations (Unaudited) For Q1 2025, revenue grew 111% to $2.05 million and the net loss improved by 48% to $1.15 million year-over-year Quarterly Operating Results (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net sales | $2,049.3 | $971.9 | | Gross profit | $501.6 | $222.5 | | Selling, general and administrative | $1,649.4 | $2,189.5 | | Loss from operations | $(1,147.9) | $(1,967.0) | | Net loss | $(1,152.0) | $(2,192.9) | | Net loss per share (basic and diluted) | $(0.37) | $(31.30) | Statements of Cash Flows (Unaudited) Net cash used in operations improved, while financing activities provided $1.77 million, resulting in a net cash increase of $545,042 for Q1 2025 Summary of Cash Flows (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,228.9) | $(1,671.9) | | Net cash provided by investing activities | $2.8 | $77.1 | | Net cash provided by / (used in) financing activities | $1,771.2 | $(74.8) | | Net change in cash | $545.0 | $(1,669.6) | | Cash and cash equivalents, ending | $1,092.6 | $2,263.1 | Notes to Financial Statements (Unaudited) Notes highlight a going concern doubt due to recurring losses, a January 2025 public offering, and significant customer concentration - Going Concern: The company has sustained recurring losses, with a net loss of $1.2 million for Q1 2025 and an accumulated deficit of $35.7 million, raising substantial doubt about its ability to continue as a going concern[37] - January 2025 Public Offering: The company raised gross proceeds of approximately $2.6 million through the sale of common stock and warrants, with $500,000 of the net proceeds used to partially satisfy a cash true-up payment liability[38][89][94] - Customer Concentration: During Q1 2025, sales to four customers accounted for approximately 49.6% of total sales and represented 53% of total accounts receivable as of March 31, 2025[62] - Subsequent Events: In April 2025, the board approved grants of 105,000 RSUs and a conditional grant of 188,278 options to employees, and 125,000 shares of restricted common stock were issued to a consultant[146][148] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes a 111% sales increase to market rebound and new products, but liquidity remains a critical issue with a going concern doubt Results of Operations Q1 2025 saw 111% sales growth to $2.0 million and a 125% gross profit increase, significantly reducing the net loss compared to the prior-year period Comparison of Operations for the Three Months Ended March 31 | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $2.0M | $0.97M | +111% | | Gross Profit | $0.50M | $0.22M | +125% | | Gross Margin | 24.5% | 22.9% | +1.6 pts | | SG&A Expenses | $1.6M | $2.2M | -24.7% | | Net Loss | $(1.2M) | $(2.2M) | -48% | - The decrease in SG&A was primarily due to lower salaries and benefits (including stock-based compensation), reduced headcount, and lower legal and professional fees[194][195] - Other expense decreased significantly to $4,000 from $226,000 in Q1 2024, mainly due to lower interest expense after the convertible note was paid off in August 2024[196][197] Liquidity and Capital Resources Recurring operating losses and negative cash flows raise substantial doubt about the company's ability to continue as a going concern - The company's financial condition, marked by recurring losses and negative cash flows, raises substantial doubt about its ability to continue as a going concern within the next 12 months[207] - As of March 31, 2025, cash and cash equivalents stood at $1.1 million, with working capital at $2.7 million[204] - Short-term liquidity needs include approximately $31,000 in debt payments, $256,000 in lease obligations, and a $4.5 million suspended liability payment[206] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this information is not required - The company is a smaller reporting company and is not required to provide the information called for by Item 305 of Regulation S-K[227] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal controls - Based on an evaluation as of March 31, 2025, the principal executive and financial officer concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[230] - No changes in internal control over financial reporting occurred during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal controls[231][232] PART II - OTHER INFORMATION Legal Proceedings The company is not currently a party to any material legal proceedings - As of the report date, the company is not party to any pending legal claims or contingencies that would materially impact its business or financial condition[233] Risk Factors This section incorporates by reference the risk factors detailed in the company's Annual Report on Form 10-K - The report refers investors to the detailed risk factors described in Part I, Item 1A of the company's Annual Report[234] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the quarter, but 125,000 restricted shares were issued to a consultant subsequent to the period - No unregistered equity securities were sold during the quarter ended March 31, 2025[235] - Subsequent to the quarter, on April 21, 2025, the company issued 125,000 shares of restricted common stock pursuant to a consulting agreement[235] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[237] Other Information No director or officer adopted, modified, or terminated any Rule 10b5-1 trading arrangement during the quarter - No director or officer adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter[240] Exhibits This section lists the exhibits filed with the Quarterly Report, including corporate governance documents and officer certifications - The report includes a list of filed exhibits, such as corporate governance documents, forms of securities, and certifications required by the Sarbanes-Oxley Act[241]