Expion360 Inc.

Greetings and welcome to the Expeon 360 First Quarter 2025 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded and will be available in the Investor Relations section of the company's website at .expeon360.com. Before we begin the formal presentation, I would like to remind everyone that certain statements made on this call and throughout the webcast are forward-looking statements within the meaning of the federal securities laws and are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding the company's beliefs, plans, and expectations about its operations, growth prospects, product development and pipeline, anticipated timing of commercial availability of its products, market size and opportunity, the anticipated incremental revenue to be generated from new OEM partnerships and distributors, the public sector's financial potential partnership with Neo Volta, and the anticipated use of proceeds from the company's recently completed public offering. While these forward-looking statements represent management's current beliefs and expectations, they are subject to risks and uncertainties that could cause actual results to differ materially. The company has explained some of these risks and uncertainties in its SEC filings, including in the risk factor section of its annual report on Form 10k. You are cautioned not to place undue reliance on these forward-looking statements which reflect our expectations as of the date of this presentation. Except as required by law or the NASDAQ listing standards, the company expressly disclaims any intent or obligation to publicly update or revise any forward-looking statements. Your host today, Brian Schaffner, Chief Executive Officer and Interim Chief Financial Officer, will present results of operations for the first quarter ended March 31st, 2025. A press release detailing these results crossed the wire this afternoon at 4 or 5 pm Eastern time and is available in the investor relations section of the company's website at .xpon360.com. At this time, I will turn the call over to Xpion360's CEO and Interim CFO, Brian Schaffner.

Thank you, Operator, and good afternoon, everyone. I am pleased to welcome you to today's first quarter 2025 Financial Results Conference Call. But before I begin, I apologize for any difficulties with the audio. I am calling in from our nation's capital, Washington, D.C., where I have been speaking with the elected officials and U.S. representatives about our onshore efforts and tariff concerns, which I will address in more detail shortly. For those of you who might be new to our story, I'd like to start by giving a brief overview of who we are and what we do. Xpion360 is focused on creating energy storage solutions for our customers, utilizing our core values of safety through third-party testing and UL certification, quality, offering an industry-leading 12-year warranty, and service. We provide customer support for the entire system purchased from us, not just the Xpion360-built components. Xpion360 designs, assembles, and sells lithium iron phosphate or LiFePO4 batteries and supporting accessories for RVs, marine light EV, and home energy storage applications. We believe our product offerings include some of the most energy-dense and minimal footprint batteries available. We are also deploying multiple intellectual property strategies, advanced research and development capabilities, and innovative products to sustain and scale our business. Our customers consist of dealers, wholesalers, private label customers, and original equipment manufacturers, or OEMs, who are driving revenue and brand awareness nationally, and we complement our wholesale channel with -to-consumer sales. Our management team and board of directors are experienced across engineering, technology, and finance. We believe the combination of these factors positions us to execute our long-term growth strategies. I'm extremely proud of the progress we made in the first quarter and remain excited about our future. Our E360 product line is a preferred conversion solution for lead acid batteries, as demonstrated by its sales growth. 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. In addition, we sell products directly to consumers through our e-commerce platform. We have sales relationships with major RV retailers, including Camping World, a leading RV retailer, KZ Recreational Vehicles, a subsidiary of Thor Industries, and Meyer Distributing Inc., a leading national marketer and distributor of automotive and RV specialty products. We believe we have a strong reputation in the lithium battery space, which we plan to continue leveraging to broaden our distribution channels. Let me take a moment to highlight some of our accomplishments and milestones in the first quarter. We have continued our progress in our home energy storage solutions or HESS vertical with shipments beginning in January 2025. We believe the HESS product line will benefit from a fast-growing battery energy storage market, and consumer uptake can rapidly scale with the introduction of products that improve price, flexibility, and integration. We also anticipate that HESS will benefit from incentives available through California's self-generation incentive program and federal tax credits available through the Inflation Reduction Act for home battery systems. Additionally, we are exploring a partnership with Neovolta to combine our strengths towards a potential collaboration that aims to engineer a US-based -the-art battery manufacturing facility and develop innovative lithium ion battery cell and module product designs. A formal engagement would enable us to contribute our expertise in design and engineering while Neovolta plans to provide the necessary capital and manpower. Together, we expect to bring high-performance sustainable energy storage solutions to the management in both residential and commercial applications. Our anticipated partnership with Neovolta and our goal to onshore American-made batteries has become increasingly timely with the recent implementation of tariffs. In addition to pursuing this partnership to mitigate risks associated with international manufacturing, we are actively working to complete a tariff exclusion request, working with our resources in Washington to ensure that tariffs have little, if any, impact on our business and our growth. In addition to strengthening our relationships with existing OEM partners, we continue to work towards additional OEM market penetration with new major partners. Newer relationships have included three announced new OEM customers, Scout Campers, Alaskan Campers, and KZ Recreational Vehicles. Welcome. And we have secured several new OEM customers. Recently, we welcomed Carson Hegan as Chief Operating Officer. Carson brings over 10 years of leadership experience in operations, finance, global supply chain management, and ERP systems. Carson joined XBeyond 360 in 2021 and has rapidly and deservedly risen from the Director of Finance to VP of Operations and now our COO. We closed a registered direct offering and concurrent private placement with institutional investors in January of 2025. Aggregate gross proceeds from both transactions were approximately $2.6 million. We are using the net proceeds from the offering as working capital and for general corporate purposes to advance the commercialization of our home energy storage system and pursue other key growth initiatives like our on-shoring. As I just mentioned, I am in Washington, D.C., where I have been speaking with elected officials and U.S. representatives about our on-shoring efforts and tariff relief. While Monday's news about a reduction in tariffs on imports from China is a step in the right direction, we have nonetheless undertaken both short- and long-term strategies to address current and future uncertainties. Our tariff mitigation efforts include several initiatives to increase margins and reduce costs within the current line of batteries. We have also prepared for continued growth and tariff mitigation by building up to six to 12 months of inventory early in the quarter before the new tariffs were introduced. One of our stated long-term goals has been on-shoring the manufacturing and production of our BMS, cells, communications, and cases. This would not only tariff proof our products, but allow us to pursue opportunities in the government and defense space, and I hope to be able to report some positive developments in the very near future. Our reputation for quality in recreational and .E.V. markets is the driving force behind our development of home energy solutions that will be a foundation for our future growth. As mentioned before, we pride ourselves on servicing the entire system sold to a customer, not just the battery, and we are also a master Victron distributor. We believe we have strategically positioned our battery portfolio across multiple markets, each of which I will now touch on. The R.V. market is recovering with healthy momentum driven by interest in outdoor activities and demand for vehicles that depend on batteries to power systems. Our lithium batteries support R.V. systems and appliances while replacing noisy generators for off-grid power and can be charged by engine or solar. The EDGE battery, which is now commercially available, features a custom factor that includes our patent pending innovations and other recently developed IP. The EDGE incorporates VHC heating technology, smart talk Bluetooth, and CAN bus communication. We began shipping the EDGE to customers in the third quarter of 2024. Our solutions are also employed in the marine market to support trolling motors and operating cabin electronics. The third established market we serve is the .E.V. market such as golf carts, which are undergoing a transition from lithium to lead acid. These .V.s require sufficient power generation and reliability, which our batteries deliver. The fourth and newest market we serve is the home energy storage market, including both home and commercial solar powered storage solutions. I'll expand on our opportunity in home energy shortly. Finally, we see the industrial applications market as a future growth vertical for us, driven by demand for additional capacities related to electric forklift and industrial material handling. We continue to build a robust IP portfolio across all five of these markets, and we currently have 11 patents pending. Now I will focus on our market expansion with the E360 home energy storage solutions or HESS. With the introduction of our two LiPo4 battery solutions to support home energy storage, we are targeting home and small commercial solar users and installers who are interested in a high performance modular system with straightforward installation. The company moved up its home energy development timeline due to the downturn in RV sales in 2023, and we've seen the benefit of that. Even though we actually gained a market share during the downturn, our team knew that home energy was our future. Development was accelerated, and we now have two systems that are in final stages of UL certification and testing. Proper UL certification is vital as states such as California require UL 9540 certification of the battery and its inverter system to qualify for tax credits. Battery storage systems offer a way to capture ROI for a consumer outside of a traditional solar system, utilizing a draw of power into the system during off-peak hours and a discharge during peak hours. Our solutions provide scalability and versatility across market channels, including solar installers, electrical contractors, residential and commercial builders, and energy service providers. Please visit a view of our home energy solutions at our website, xpon360.com, forward slash pages, forward slash residential.com. In January, we began distribution and fulfilling purchase orders of HESS. These order deliveries reflect a significant milestone in bringing E360 HESS to the market. We believe the HESS product line will benefit from a fast-growing market, battery market, an energy storage market, and consumer uptake can rapidly scale with the introduction of products. HESS improves price, flexibility, and integration. We anticipate HESS will benefit from incentives available through California's Self-generation Incentive Program and federal tax credits, available through the Inflation Reduction Act for home battery systems. We think the home energy market provides complementary economics for our business model, with an opportunity to generate recurring revenue streams while enabling margin expansion in a expected market to surpass $123 billion globally by 2029, according to market data forecast. We are using proceeds from our public offering to provide necessary funding to further develop our new E360 home energy storage solutions, including completion of UL testing and certification processes, in addition to other requirements for various authorities having jurisdiction. I will now discuss our first quarter 2025 financial results. Revenue in the first quarter of 2025 totaled $2.0 million, an increase of 111% from $1 million the prior year period. The increase in net sales was due in part to a rebound in the RV market overall, as well as completing our first sales in the home energy market. Gross profit in the first quarter of 2025 totaled $0.5 million or .5% of revenue, compared to $0.2 million or .9% of revenue in the prior year period, and .5% of revenue for the full fiscal year ended December 31, 2024. The increase was primarily attributable to the increase in sales and lower cost of goods sold as a percentage of our sales. Selling, general and administrative expenses in the first quarter of 2025 decreased .7% to $1.6 million, compared to $2.2 million in the prior year period. The decrease was primarily due to decreases in salaries and benefits, including lower non-cash stock-based compensation, as well as a reduction in headcount. Legal and professional fees have also seen a significant decrease, as did rent expense due to terminating the lease on our second warehouse. Net loss in the first quarter of 2025 totaled $1.2 million, a .5% improvement from a net loss of $2.2 million in the prior year period. The decrease in net loss was primarily the result of higher net sales for the period ending March 31, 2025, combined with a decrease in selling, general and administrative expenses. Cash and cash equivalents totaled $1.1 million as of March 31, 2025, compared to $0.5 million as of December 31, 2024. On January 3, 2025, our company closed a $2.6 million registered direct offering and private placement priced at the market under NASDAQ rules. Net cash used in operating activities totaled $1.2 million for the three months ending March 31, 2025, compared to $1.7 million in the prior year period. Receiving inventory that was prepaid during the prior period accounted for a large portion of the change for three months ending March 31, 2025, as well as making payments to decrease our suspended liability. In closing, we remain confident and enthusiastic about our growth trajectory for 2025 and beyond. With substantial purchase orders already in hand and additional new customers expressing interest across our product lines, we look forward to announcements of additional milestones in the future. New customers are expressing interest across product lines including our next generation GC2, Group 27 and Edge batteries. Most importantly, market tailwinds are further strengthening our expectations for continued sequential growth moving forward. Our focus on safety, quality and service is paying off with our customers and this has been translated to the top and bottom lines. Underscored by the confidence from over 300 resellers in our network nationwide, our customers know that we truly believe in our product quality and manufacturing capabilities. Results for the RV Industry Association's March 2025 survey of manufacturers found that total RV shipments increased 14% in the first quarter of 2025 and we believe the RV market will continue to gain ground through 2025 with shipments increasing traction throughout the year. We are focused on expanding our addressable market most recently with our E360 Home Energy Storage Solutions which began production and shipments in January of 2025. Operationally, we have undertaken several initiatives to increase margins and reduce costs within the current line of our batteries. We are also actively engaged with resources in Washington to ensure that tariffs have little if any impact on our business and growth and we are working to diversify our supply chain with potential sourcing from additional free trade countries such as South Korea to further avoid tariffs and increase volume and margin. We have also prepared for continued growth and tariff mitigation by adding 6 to 12 months of inventory early in the quarter before new tariffs were introduced. In fact, we believe there is a significant market disconnect in our current valuation as we now have more in inventory than our market cap. Our long-term goal is to onshore the US manufacturing of most of our components and assemblies including cell manufacturing. To that end, we continue to work with Neovolta to combine our strengths towards a potential collaboration that aims to engineer a US-based -the-art battery manufacturing facility and develop innovative lithium-iron battery cell and module product designs. We continue to work towards additional OEM market penetration by adding features, improving energy density, and developing unique OEM-centric form factors. Thank you all for attending and now I would like to hand the call back over to the operator for additional questions. Operator.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a phone, if at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily

to assemble our roster. Once again, you may press star and 1 to ask a question. We have no audio questions

at this moment, ladies and gentlemen. And we'll now proceed to any questions from the webcast.

Our first webcast question asks, how will the on-shoring of a cell plant help Expeon 360 financially?

Well, there are a couple of ways that will help us financially. One of them is, we will have access to cells for our batteries at a cost plus basis, which should help us increase our margins with no threat of tariffs for those high-density cells that are currently made in Asia. We also benefit from economies of scale through shared administrative tasks. Finally, we would be receiving royalties from the sale of the battery cells and that would directly affect our cash and our bottom line.

Our next question asks, what would your financial burden be should a domestic cell plant be constructed? Well, we provide

the technology and the business partner in Asia, and our job is to bring our trusted manufacturing partners and their IP to the table, to on-shore production in the US, and manage site construction, equipment installation, production ramp up, and then the management of production going forward. That is our job. Our partner bears the financial burden and responsibility of providing the necessary capital to get that done.

Our last webcast question asks, how did your meetings go in Washington and can you provide any additional details?

Well, I can say that they were really incredible. They went very, very well. I am greatly encouraged by the support we're receiving to make our on-shoring efforts a reality. There is a great desire to increase US manufacturing investment and jobs, and that's what we plan on being part of. I come away from my meetings in Washington more encouraged than ever that this can become a possibility for us. We do look forward to sharing more with our valued investors and friends in the future.

That concludes the webcast question and answer portion of this session.

This concludes our question and answer session. I would now like to turn the call back over to Mr. Schaffner for his closing remarks.

Thank you, and thank you for attending today's call. We are excited about where we are headed and look forward to continuing to engage with our investors throughout the remainder of 2025. If for some reason we are unable to answer any of your questions, please do reach out to our IR firm MZ group. We would be more than happy to assist.

This concludes our call.

Thank you for attending today's presentation.

You may now disconnect.