Item 1. Business
ITEM 1. BUSINESS
Our Company
Expion360 focuses on the design, assembly, manufacturing,
and sale of lithium iron phosphate (“LiFePO4”) batteries and supporting accessories for recreational vehicles (“RVs”),
marine applications and home energy storage products with plans to expand into industrial applications. Our high-powered, lithium battery
solutions incorporate innovative concepts and have been designed to include some of the most dense and minimal-footprint batteries in
the RV and marine industries. In 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 multiple intellectual property strategies with research and
products to sustain and scale our business. This includes design, development and collaboration, using our IP to bring safety, quality
and service to our customers. Our customers consist of dealers, wholesalers, private-label customers, and original equipment manufacturers
(“OEMs”) who then sell our products to end consumers and drive brand awareness nationally.
Our primary target markets are currently the RV, marine,
and home energy storage industries. We believe we are well-positioned to capitalize on the rapid market conversion from lead-acid to lithium
batteries as the primary method of power sourcing in these industries. We are also focused on expanding into the home energy storage market
with the introduction of our e360 Home Energy Storage Solutions, and we hope to establish a new standard in the industry for barrier price,
flexibility, and integration with this offering. Along with the RV, marine and home energy storage markets, we aim to provide additional
capacities to the expanding electric forklift and industrial material handling markets.
We launched our e360 product line, which is manufactured
for the RV and marine industries, in December 2020. The e360 product line, through its sales growth, has shown to be a preferred conversion
solution for lead-acid batteries. In December 2023, we announced our entrance into the home energy storage market with our introduction
of two LiFePO4 battery storage solutions that enable residential and small business customers to create their own stable micro-energy
grid and lessen the impact of increasing power fluctuations and outages. As of January 2025, we have begun shipping orders of our e360
Home Energy Storage Solutions.
We currently operate Expion360 as one reportable business
segment, Energy Storage (ES).
Our products provide numerous advantages for various
industries that are looking to migrate to lithium-based energy storage. They incorporate detailed-oriented design and engineering, strong
case materials, and internal and structural layouts, and are backed by responsive customer service.
Our Market Opportunity
The trend of vehicle electrification is expected to
be a significant growth catalyst for lithium compounds over the next decade and beyond. According to ReportLinker, the global light electric
vehicle market is growing at a 9.4% compound annual growth rate (“CAGR”) and is expected to reach $122.7 billion by 2027.
Similarly, the global golf cart battery market is growing at a 5.9% CAGR and is anticipated to reach $216.5 million by 2031 according
to Allied Market Research.
Furthermore, the global RV market was $57.3 billion
in 2021, and is anticipated to have a CAGR of 7.6% from 2022 to 2031, with an anticipated market of $117.0 billion by 2031, per Allied
Market Research.
In addition, the global residential solar energy storage
market is expected to increase from $20.5 billion in 2023, to an anticipated $518.8 billion in 2032, a CAGR of 43.16%, according to Market
Data Forecast.
At the intersection of both these trends lies the
rapidly expanding lithium battery market. According to IMARC, the market for lithium-ion batteries is projected to grow at 13.2% CAGR
to reach $93.3 billion by 2028.
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The vast expansion of the lithium battery market can
be attributed to global trends promoting clean energy, as well as the compact and flexible nature of lithium battery packs, which make
them easy to install in RVs and boats. Our technology, which we believe offers industry-leading battery pack flexibility for the most
efficient energy storage, is poised to be able to offer power to these large vehicles such as RVs and recreational boats.
Expion360 is focused on expanding its position in
the deep cycle, off-grid, and stationary energy storage markets. According to the Federal Consortium for Advanced Batteries, the United
States has five goals in mind to secure battery materials and the U.S. technology supply chain. They include (i) securing access to raw
materials; (ii) support of the U.S. materials-processing base; (iii) stimulation of U.S. electrode, cell, and pack manufacturing; (iv)
enabling recycling and reuse of critical materials; and (v) support of scientific R&D, STEM education and workforce development. Expion360
is well-positioned to benefit from this national focus.
Lithium-based batteries power our daily lives, from
consumer electronics to national defense. They enable electrification of the transportation sector and provide stationary grid storage,
critical to developing the clean-energy economy. The U.S. has a strong research community, a robust innovation infrastructure for technological
advancement of batteries, and an emerging lithium-based battery manufacturing industry, according to the U.S. Department of Energy.
It is our objective to work closely with federal,
state and local governments, as well as private industry to help America be the leader in lithium battery technology.
Competitive Strengths
We believe the following strengths
differentiate Expion360 and create long-term, sustainable competitive advantages:
Superior Capacity to Lead-Acid Competitors
Lead-acid batteries have historically been the standard
in RV and marine transportation vehicles, but these industries are experiencing a rapid conversion from lead-acid to lithium batteries
as the primary method of power sourcing. Our lithium-ion batteries offer superior capacity to our lead-acid competitors with an expected
lifespan of approximately 12 years—three to four times the lifespan of certain lead-acid batteries—and ten times the number
of charging cycles. Furthermore, our typical battery may provide three times the power of the typical, lead-acid battery despite being
half the weight (comparing, for example, a typical lead-acid battery like the Renogy Deep Cycle AGM, which is rated at 100Ah, to our
own LFP 100Ah battery and assuming slow discharge at a 0.1C rate).
In addition, we offer a 4.5 Ah 26650 lithium-ion phosphate
battery cell, which allows us to increase energy density by over 32% compared to traditional 3.4 Ah 26650 cells.
Expansion into New Markets
Our proprietary e360 SmartTalk mobile app is included
in many of our battery models and allows the seamless integration and management of e360 Bluetooth-enabled LiFePO4 batteries. The technology
enables users to wirelessly monitor and manage e360 batteries, providing a comprehensive view of both individual battery conditions and
performance, and a power bank consisting of multiple e360 batteries. The 48 Volt GC2 LiFePO4 battery was our first e360 SmartTalk Battery
for powering electric golf carts and other light electric vehicles.
In December 2023, we entered the home energy storage
market with our introduction of two LiFePO4 battery storage solutions comprising our e360 Home Energy Storage Solution: a wall mounted
all-in-one inverter and 10kWh battery and an expandable server rack style battery cabinet system. We believe our new home energy storage
product line will benefit from a fast-growing battery energy storage market, which is forecasted by Markets and Markets to grow at a 26.4%
CAGR to reach $17.5 billion by 2028. Further, according to Clean Energy Group, approximately 3.2 million homes in the United States have
solar panels installed, but only about 6% of residential solar systems have battery storage. Our home energy storage products are currently
completing UL testing and certification, as well as other requirements for various Authorities Having Jurisdiction.
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In January 2024, we introduced our next generation
12V GC2 and Group 27 series LiFePO4 batteries. These new versions include higher amp-hour options (4.0Ah and 4.5Ah cell technology) and
the latest advancements in power technology features, including Expion360’s proprietary Vertical Heat Conduction™ internal
heating, Bluetooth®, and controller area network (“CANBus”) communication. We began delivering the new 12V GC2 and Group
27 batteries to customers in the second quarter of 2024.
In July 2024, we launched our new Edge battery, which
offers a slim design and adds greater flexibility during installation. The Edge is offered in both 12V and 48V versions. We are seeing
high customer interest and started shipping the new Edge in July 2024.
Strong National Retail Customers and Distribution
Channels
We have sales relationships with many major RV and
marine retailers and plan to use our strong reputation in the lithium battery space to create an even stronger distribution channel. Current
and former members of management have used their decades of experience in the energy and RV industries to cultivate relationships with
numerous retailers in the space, including Camping World, a leading national RV retailer; and Meyer Distributing, Inc., a leading national
marketer and distributor of automotive and RV specialty products.
Home Energy Integration
We are currently having discussions with integration
partners. This is key for the development of our home energy storage products and subsequent sales growth.
Expion360 Products
We have historically focused on the design, assembly,
and sales of LiFePO4 batteries and supporting accessories for RV and marine applications, and have recently expanded into home energy
storage solutions. Our batteries are designed and engineered in-house using premium lithium iron phosphate cells with quality controls
at every step. We use high-grade LiFePO4 batteries meeting the UL 1642 standard (UL File No. MH64383). We believe our materials and engineering
enhance the reliability, stability, and safety of our products relative to those of our competitors. We reimagined the standard battery
case and included built-in rubber feet, radiused corners, 96.7% larger terminal connection pads, interior molded ribs for structural security,
and the highest-grade ABS plastics with additives for fire retardancy. To maximize the power and efficiency of our batteries, we welded
our cells via thick copper/tin-machined collector plates, welded all interior pack points, added a press break flange at each end to create
a mechanical backbone for the battery monitoring system (“BMS”), used high-grade wiring and ring terminals throughout, and
treated connections with industrial epoxy for long-lasting protection. Our internal “smart” BMS design includes multiple safety
and performance features, such as low temperature discharge, auto shutoff, short circuit protection, low- and high-voltage shutoffs, and
overcurrent disconnect. Our structurally sound BMS board features a bolted design, eliminating all unnecessary solder, resulting in one
cohesive pack with a long lifespan. We hold our lithium batteries to high safety standards, which has enabled us to achieve a UL 1973
compliance. We stand by our batteries with a robust 12-year warranty.
To enable us to provide a full range of components
to complement our battery offerings, we offer a suite of accessories and components for new installations or conversions which includes
but is not limited to chargers, monitors, inverters, and solar components from brands such as Victron Energy and RedArc.
As of December 31, 2024, we offered the following products for sale:
12V Batteries:
· Group 24:
o e360 60Ah LiFePO4 battery
o e360 80Ah LiFePO4 battery
o e360 95Ah LiFePO4 battery
· Group 27:
o e360 100Ah LiFePO4 battery
o e360 120Ah LiFePO4 battery
o e360 100Ah LiFePO4 battery with SmartTalk, CANBus, and VHS Internal Heating
o e360 100Ah LiFePO4 battery with SmartTalk, CANBus, and VHS Internal Heating
· GC2:
o e360 162Ah LiFePO4 battery with SmartTalk, CANBus, and VHC Internal Heating
· EX1 Custom:
o e360 368Ah LiFePO4 battery
o e360 368Ah LiFePO4 battery with SmartTalk
o e360 450Ah LiFePO4 battery with SmartTalk
· EX2 Edge Custom:
o e360 240Ah LiFePO4 battery with SmartTalk, CANBus, and VHC Internal Heating
48V Batteries:
· GC2:
o e360 36Ah LiFePO4 battery with SmartTalk and CANBus
· EX2 Edge Custom:
o e360 60Ah LiFePO4 battery with SmartTalk, CANBus, and VHC Internal Heating
· 3U Server Rack Home Energy Battery:
o e360 100Ah Home Energy LiFePO4 battery with CANBus
Accessories:
· Battery Monitors
· DC-DC Battery Chargers
· AC-DC Battery Chargers
· Solar Charge Controller Battery Chargers
· CANBus Communication Cables
· 120W Portable Solar Panel
· Industrial Battery Mounting Kits – 10 models
· Terminal Blocks
· Bus Bars
· AURA Powercap 600W Inverter
· e360 SmartTalk mobile app
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As of December
31, 2024, we had the following products in our pipeline:
· In September 2023, we introduced a new 4.5 Ah
26650 lithium-ion phosphate battery cell and 12 Volt 450 Ah e360 SmartTalk™ lithium-ion battery. We have been regularly shipping
the battery to our customers, including OEMs, since March 2024.
· In December 2023, we introduced a wall mounted
all-in-one inverter and 10kW battery and an expandable server rack style battery cabinet system and begun taking orders for the new e360
Home Energy Storage Solutions, which began shipping to customers in January 2025. See the section above titled “ Competitive Strengths — Expansion
into New Markets ” for additional information about the new home energy storage solutions.
Competitors
Our competitors include lithium-ion battery manufacturers,
such as Relion (which was acquired by Brunswick Corporation in September 2021); Dragonfly Energy Holdings Corp (Nasdaq: DFLI), the manufacturer
of Battle Born Batteries; Renogy; and Dakota Lithium. Lead-acid battery manufactures also continue to have a presence in the marketplace.
We have designed custom form factors in both the industry standard Group 24 and Group 27 battery sizes allowing us to visually and structurally
differentiate Expion360 within the market space. We believe our custom 360Ah battery also provides a unique capacity to footprint ratio
compared to lead-acid and lithium battery competitors. Our batteries utilize lithium iron phosphate and therefore are expected to have
a lifespan of approximately 12 years—three to four times that of certain lead-acid batteries—and ten times the number of charging
cycles. Furthermore, our typical battery may provide three times the power of the typical lead-acid battery despite being half the weight
(comparing, for example, a typical lead-acid battery like Renogy Deep Cycle AGM, which is rated at 100Ah, to our own LFP 100Ah battery
and assuming slow discharge at a 0.1C rate).
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Manufacturing and Supply Chain
Our batteries are manufactured by multiple third-party
manufacturers located in Asia, which also produce our battery cells. While we do not have long-term purchase agreements with these manufacturers
and our purchases are completed on a purchase-order basis, we maintain strong relationships with our manufacturers and cell suppliers,
reflected in our ability to increase our purchase order volumes (qualifying us for related volume-based discounts). The strength of these
relationships has helped us moderate increased supply-related costs associated with inflation, currency fluctuations, and U.S. government
tariffs imposed on our imports, and avoid potential shipment delays. We aim to maintain an appropriate level of inventory to satisfy our
expected supply requirements. We believe we could locate suitable alternative third-party manufacturers to fulfill our requirements if
needed.
Our third-party manufacturers source the raw materials
and battery components required for the production of our batteries directly from third-party suppliers that meet our approval and quality
standards and, as a result, we may have limited control over the agreed pricing for these raw materials and battery components. We estimate
that raw material costs account for over half of our cost of goods sold. Lithium, which is extracted from mined ore, is a key raw material
used to produce our battery cells and, as a result, the cost of our battery cells is dependent on the price and availability of lithium,
which may be volatile and unpredictable and beyond our control. Additionally, availability of the raw materials used to manufacture our
products may be limited at times, resulting in higher prices and/or the need to find alternative suppliers. Our battery cell manufacturers
have joint venture factories outside of Asia and have secured sourcing contracts from lithium suppliers in South America and Australia.
In addition, we have a secondary source for lithium iron phosphate cells used in our batteries from a supplier in Europe, enabling us
to source materials outside of Asia in the event it becomes necessary to do so.
In addition to increased mining and newly located
reserves, there is an industry push to provide more efficient ways to extract lithium from mined ore. Another development of the past
few years is lithium cell recycling. This process will recapture the raw lithium from the cell for reuse in future cells. However, notwithstanding
any efforts to improve the sustainability and efficiency of lithium mining, the price of lithium is volatile. We continue to monitor developments
that may adversely affect our supply chain.
Management expects that products from our Asian third-party
manufacturers will be subject to additional tariffs in 2025. We believe that we can protect our margins through a combination of supplier
concessions, customer price increases and efficiencies gained as sales continue to grow.
Customers
We currently have more than 300 customers across the
United States consisting of dealers, wholesalers, private-label customers and OEMs who then sell our products to end consumers. Our sales
are completed on a purchase order basis and most are without firm, long-term revenue commitments or sales arrangements. Expion360 has
sales relationships with many major RV retailers, including Camping World, a leading national RV retailer and Meyer Distributing, Inc.,
a leading national marketer and distributor of automotive and RV specialty products. In addition, we also sell products directly to end
consumers. We intend to continue to focus on our sales and distribution channels to develop existing customer relationships and grow our
customer base. We also offer a high level of technical support to our customers before and after product sales.
We currently derive a significant portion of our revenue
from a limited number of customers. During the year ended December 31, 2024, sales to one customer accounted for approximately 14% of
our gross sales. This customer accounted for 6% of our accounts receivable as of December 31, 2024. Sales to each of our other customers
did not exceed 10% during this period. Four other customers accounted for 60% of our accounts receivable as of December 31, 2024.
Intellectual Property
The success of our business and our technology leadership
is supported by our proprietary battery technology. We have filed 11 patent applications in the United States to provide protection for
our technology, including seven design patent applications and four utility patent applications. In addition, we rely upon a combination
of trademark and trade secret laws in the United States, as well as license
agreements and other contractual protections, to establish, maintain and enforce rights in our proprietary technologies. We also seek
to protect our intellectual property rights through non-disclosure and invention assignment agreements with our employees and consultants
and through non-disclosure agreements with business partners and other third parties.
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We periodically review our development efforts to
assess the existence and patentability of new intellectual property. We pursue the registration of our domain names and trademarks and
service marks in the United States and in an effort to protect our brand, as of December 31, 2024, we have 18 trademarks registered or
pending registration to cover our house marks in the United States and have 9 trademarks registered or pending registration in Canada.
Government Regulation
We are subject to inspections by federal, state, and
local regulators overseeing environmental health and safety, which could result in possible citations and/or fines. Lithium-ion battery
shipments are categorized as “dangerous goods” and are subject to rules governing their transportation. We have implemented
policies and procedures, trained our employees, and conducted internal audits to verify compliance with environmental health and safety
regulations.
Our Group 24 and Group 27 batteries and our custom
360Ah battery have passed UL 1973 certification.
Employees
As of December 31, 2024, we had 20 employees, all
of whom worked for us full time. None of our employees are covered by collective bargaining agreements and we have never experienced an
organized work stoppage, strike, or labor dispute. We believe working conditions and compensation packages are competitive with those
offered by competitors and consider our relations with our employees to be good.
Environmental, Health, and Safety
We and our third-party manufacturers and suppliers
are, and could become, subject to a wide range of international, federal, state, provincial, and local governmental regulations directed
at preventing or mitigating environmental harm, as well as to the storage, discharge, handling, generation, disposal and labeling of toxic
or other hazardous substances. Although we outsource our manufacturing, the manufacturing of our products by our third-party manufacturers
and suppliers require the use of hazardous materials that similarly subject these third parties, and therefore our business, to such environmental
laws and regulations. Our failure or the failure of these third parties to comply with these laws or regulations can result in regulatory,
civil, or criminal penalties, fines, and legal liabilities, suspension of production, alteration of manufacturing processes, including
for our products, reputational damage, and negative impact on our operations or sales of our products and services. Increased compliance
costs by our third-party manufacturing partners may also result in increased costs to our business. Our business and operations are also
subject to health and safety laws and regulations adopted by government agencies such as the Occupational Safety and Health Administration.
Although we believe we are in material compliance with applicable laws concerning matters relating to health, safety, and the environment,
the risk of liability relating to these matters cannot be eliminated completely. To date, we have not incurred significant expenditures
relating to environmental compliance nor have we experienced any material issues relating to employee health and safety. See the section
titled “ Risk Factors ” for additional information.
Implications of Being an Emerging Growth Company
and a Smaller Reporting Company
We qualify as an “emerging growth company”
as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). As an emerging growth company, we have elected
to take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies.
These provisions include:
· the requirement that we provide only two years
of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” disclosure;
· reduced disclosure about our executive compensation
arrangements;
· an exemption from the requirement that we hold
a non-binding advisory vote on executive compensation or golden parachute arrangements; and
· an exemption from the auditor attestation in
the assessment of our internal control over financial reporting.
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We may take advantage of these exemptions for up to
five years or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company on the
date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenue of $1.235 billion or more;
(ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii)
the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which
we are deemed to be a “large accelerated filer” under SEC rules.
We are also a “smaller
reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer
an emerging growth company. We may take advantage of certain of the reduced reporting requirements available to smaller reporting companies
and will be able to take advantage of these reduced reporting requirements for so long as our voting and non-voting Common Stock held
by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is
less than $100.0 million during the most recently completed fiscal year and our voting and non-voting Common Stock held by non-affiliates
is less than $700.0 million measured on the last business day of our second fiscal quarter.
Company Information
Expion360 Inc. was initially organized as a limited
liability company under the name Yozamp Products Company, LLC in the State of Oregon on June 16, 2016 and converted to a Nevada corporation
on November 16, 2021.
Our website is found at expion360.com and on
the Investor Relations section of our website, we post or will post, as applicable, the following filings as soon as reasonably practicable
after they are electronically filed with or furnished to the SEC: our Annual Reports on Form 10-K, our Proxy Statement on Schedule 14A,
our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act.
All of the information on our Investor Relations web
page is available to be viewed free of charge. Information contained on our website is not part of this Annual Report or our other filings
with the SEC. We assume no obligation to update or revise any forward-looking statements in this Annual Report whether as a result of
new information, future events or otherwise, unless we are required to do so by law.
The SEC also maintains a website found at http://www.sec.gov/
that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.