Expion360, Inc. (XPON) Risk Analysis

The trading market for our securities may be influenced by the research and reports that securities or industry analysts publish about us or our business (or the absence of such research or reports). If one or more of these analysts cease coverage of our Company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock prices or trading volume to decline. Moreover, if one or more of the analysts who cover us downgrade recommendations regarding our stock, or if our results of operations do not meet their expectations, our stock prices could decline and such decline could be material.

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, 2025, we had 200,000,000 shares of common stock authorized, of which 9,781,739 were issued. In January 2025, we completed a registered direct offering and concurrent private placement pursuant to which we issued shares of common stock and warrants to purchase shares of common stock, and in October 2025 we issued shares of common stock and pre-funded warrants in a private placement. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding the offerings. As of December 31, 2025, there were outstanding warrants to purchase up to 1,359,907 shares of common stock, as well as 144,498 pre-funded warrants, and 269,219 shares of common stock issuable upon the exercise or settlement of equity incentive awards outstanding under our 2021 Incentive Award Plan. Our Articles of Incorporation authorizes us to issue shares of common stock and options, rights, warrants, 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, acquisitions, or otherwise. We have reserved shares of common stock for issuance under the 2021 Incentive Award Plan and 2021 Employee Stock Purchase Plan. 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 warrants, 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 at-the-market program, 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 outstanding warrants or warrants that may be issued in the 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 and January 2025 Registered Direct Offering, respectively. The perception in the public market that our stockholders might sell securities could also depress our market price. As of March 11, 2026, we had 10,846,135 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 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 listed on 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 January 29, 2026, we received a determination from The Nasdaq Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market ("Nasdaq") to delist our common stock from Nasdaq if the closing bid price does not exceed $1.00 for a minimum of ten consecutive business days within the compliance period of 180 calendar days. See the section titled "Legal Proceedings" for further information on the delisting notice. While shares of our common stock continue to be listed and traded on Nasdaq, there can be no assurance that we will continue to meet Nasdaq listing standards. Any potential delisting of our common stock from Nasdaq may have materially adverse consequences to our stockholders, including: a reduced market price and liquidity with respect to our shares of common stock, which could make our ability to raise new investment capital more difficult; limited dissemination of the market price of our common stock; limited news coverage; limited interest by investors in our common stock; volatility of the prices of our common stock due to low trading volume; our common stock being considered a "penny stock," which would result in broker-dealers participating in sales of our common stock being subject to the regulations set forth in Rules 15g-2 through 15g-0 promulgated under the Exchange Act; increased difficulty in selling our common stock in certain states due to "blue sky" restrictions; and limited ability to issue additional securities or secure additional financing.

As of December 31, 2025, 19,564,585 Series A Warrants exercisable for 901,943 shares of common stock at $1.31 per share, and 46,246 Series B Warrants exercisable for 2,132 shares of common stock, at $0.10 per share, and 449,193 January 2025 Warrants exercisable for 449,193 shares of common stock at $1.31 per share were outstanding. The exercise of these warrants 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 "Note 7, Equity and Debt Financings" for additional information regarding the offerings.

The trading price of our securities may be volatile and subject to wide price fluctuations in response to various factors, including: - market conditions in the broader stock market;- actual or anticipated fluctuations in our quarterly financial condition and results of operations, or those of other companies in our industry;- actual or anticipated strategic, technological, or regulatory threats, whether or not warranted by actual events;- whether any securities analysts cover our stock;- issuance of new or changed securities analysts' reports or recommendations, if any;- investor perceptions of our Company, the lithium battery and accessory industry;- the volume of trading in our stock;- changes in accounting standards, policies, guidance, interpretations, or principles;- sales, or anticipated sales, of large blocks of our stock;- additions or departures of key management personnel, creative, or other talent;- regulatory or political developments, including changes in laws or regulations that are applicable to our business;- litigation and governmental investigations;- sales or distributions of our common stock by significant stockholders, the entity through which our controlling stockholder holds its investment, or other insiders;- natural disasters and other calamities; and - macroeconomic conditions. Furthermore, the stock market has experienced extreme volatility that in some cases has been unrelated or disproportionate to the operating performance of particular companies. These and other factors may cause the market price and demand for our securities to fluctuate substantially, which may limit or prevent investors from readily selling their securities and it may otherwise negatively affect the liquidity of our securities. In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business.

To the extent we issue shares of common stock to affect a future business combination, the potential for the issuance of a substantial number of additional shares of common stock upon exercise of the Series A Warrants and, to a lesser extent, the Series B Warrants could make us a less attractive acquisition vehicle in the eyes of a target business. Such Series A Warrants and Series B Warrants, when exercised, will increase the number of issued and outstanding shares of common stock and reduce the value of the shares issued to complete the business combination. Accordingly, the Series A and Series B Warrants may make it more difficult to effectuate a business combination or increase the cost of acquiring a target business. Additionally, the sale, or even the possibility of a sale, of the shares of common stock underlying the August 2024 Pre-Funded Warrants, Series A Warrants, and Series B Warrants could have an adverse effect on the market price for our securities or on our ability to obtain future financing. If and to the extent the Series A Warrants and Series B Warrants are exercised, our investors may experience dilution to their holdings.

As an "emerging growth company," we take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our securities less attractive because we chose to rely on these exemptions. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile. Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. We choose to avail ourselves of this extended transition period and defer adoption of certain changes in accounting standards. As described in Section 101 of the JOBS Act, the "emerging growth company" classification can be retained for up to five years following our initial public offering or until the earlier occurrence of the following: the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeded $700.0 million as of the prior June 30; or the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. If some investors find our securities less attractive as a result of any choices to reduce future disclosure, there may be a less active market for our securities and our stock price may be more volatile.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq or another national securities exchange and if the price of our common stock is less than $5.00, our common stock could be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive: (i) the purchaser's written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.