Expion360 Inc. Commitments Disclosure

8.    Commitments and Contingencies

 

Operating Leases

 

The Company leases its warehouses and office space under long-term lease arrangements. All of the Company’s leases are accounted for as operating leases. For longer-term lease arrangements that are recognized on the Balance Sheets, the ROU asset and lease liability are initially measured at the commencement date based upon the present values of the lease payments. The Company does not recognize a ROU asset and lease liability for short term leases, which have terms of 12 months or less. See “Note 2, Summary of Significant Accounting Policies—Leases” for additional information.

 

In May 2025, the Company entered into a long-term, non-cancelable operating lease agreement for warehouse space next door to the existing office and warehouse space in Redmond, Oregon, resulting in the Company recognizing an additional ROU asset and corresponding lease liability of $198,216, representing the present value of the lease payments discounted using an IBR of 13.49%. The lease expires in April 2028 and provides for one three-year option to renew.

 

In January and February 2022, the Company entered into two long-term, non-cancelable operating lease agreements for office and warehouse space resulting in the Company recognizing an additional ROU asset and corresponding lease liability of $2,348,509, representing the present value of the lease payments discounted using an IBR of 8.07% and 8.86%, respectively. One lease was terminated in September 2024, and the remaining lease expires in December 2026.

 

 

In January 2021, the Company entered into a long-term, non-cancelable operating lease agreement for office and warehouse space resulting in the Company recognizing an additional ROU asset and lease liability of $1,268,089, representing the present value of the lease payments discounted using an IBR of 7.47%. The lease expires in January 2028 and contains one three-year option to renew.

 

The Company had three additional leases relating to office and warehouse space that were terminated in January 2023, September 2024, and February 2025, respectively. The related ROU assets and lease liabilities were removed from the Balance Sheets at the time of termination.

 

The Company’s operating leases generally provide for fixed annual increases and require the Company to pay real estate taxes, insurance, and repairs.

 

The following is a summary of total lease costs for the years ending December 31, 2025 and 2024:

 

		Years Ended December 31,
		2025				2024
Operating lease cost		$	359,337			$	610,549
Short-term lease costs			3,652				1,149
Sublease income			(7,169	)			(42,804	)
Total lease costs		$	355,820			$	568,894

 

The weighted-average remaining lease term was 2.06 and 2.91 years as of December 31, 2025 and 2024, respectively. The weighted-average IBR was 8.99% and 7.60% as of December 31, 2025 and 2024, respectively. Operating cash flows from the operating leases totaled $287,409 and $455,690 for the years ended December 31, 2025 and 2024, respectively.

 

The total lease liability as of December 31, 2025 and 2024 was $709,724 and $798,917, respectively.

 

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of December 31, 2025, for years ending December 31:

	Total
2026	$	387,742
2027		339,392
2028		49,233
2029		—
Thereafter		—
Total future minimum lease payments		776,367
Less imputed interest		(66,643	)
Total	$	709,724
Current lease liability	$	337,246
Noncurrent lease liability		372,478
Total	$	709,724

 

Subleases

 

As of December 31, 2024, the Company subleased office and warehouse space under one of its operating leases with similar terms as the Company’s lease agreements. The Company’s lease and corresponding sublease for that property expired in February 2025 and were not renewed. Two additional subleases ended in February 2023. Because the Company was not relieved of its primary obligations under the original lease, the Company accounted for the subleases as a lessor. Sublease rental income was recorded based on the contractual rental payments, which were not substantially different from recognition on a straight-line basis over the lease term. Sublease rental income totaled $7,169 and $42,804 during the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, deferred sublease income and a sublease deposit totaled $0 and $4,549, respectively, and is included in accrued expenses and other current liabilities on the Balance Sheets.

 

The Company has no subleases as of December 31, 2025.

 

 

Litigation

 

The Company may be involved from time to time in litigation or claims arising in the ordinary course of its business. While the ultimate liability, if any, arising from these claims cannot be determined with certainty, the Company believes that the resolution of any such matters are not reasonably likely have a material adverse effect on the Company’s financial condition, operating results or cash flows.

 

On May 2, 2024, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with Alexander Capital L.P. (“Alexander”), pursuant to which the parties resolved certain disputes while not admitting any liability or wrongdoing (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the Company agreed to (i) make a single cash payment of $100,000, (ii) issue 100,000 shares of common stock, and (iii) amend certain outstanding warrants held by Alexander to reduce the per share exercise price from $9.10 to $4.50. The shares of common stock were issued pursuant to the Shelf Registration Statement. The Settlement Agreement also contained other customary provisions, including a mutual release of claims and mutual non-disparagement provision.

 

On July 1, 2024, the Company entered into a Mutual Termination Agreement (the “Termination Agreement”) with Alexander, pursuant to which the parties agreed to terminate a provision in the Underwriting Agreement, dated March 31, 2022, entered into by and between the Company and Alexander, which granted Alexander a right of first refusal to act as the Company’s financial advisor, placement agent or underwriter in connection with certain financing transactions (the “ROFR Provision”). In exchange for the termination of the ROFR Provision, and in connection with the closing of the August 2024 Public Offering, the Company made a cash payment to Alexander in the amount of $400,900.

 

Nasdaq Listing Requirement

 

On September 6, 2024, the Company received a determination from The Nasdaq Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market (“Nasdaq”) to delist the common stock from the Nasdaq Capital Market indicating that (i) the Company was not in compliance with Nasdaq Listing Rule 5550(a)(2) because the closing bid price for the common stock had closed below $1.00 for the previous 30 consecutive business days, and (ii) the Company was subject to Nasdaq Listing Rule 5810(c)(3)(A)(iii) because, as of September 5, 2024, the common stock had a closing bid price of $0.10 or less for at least ten consecutive trading days (the “September 2024 Staff Determination”).

 

On September 12, 2024, the Company requested an appeal hearing with respect to the September 2024 Staff Determination from the Nasdaq Hearings Panel (the “Panel”), which had the effect of staying the delisting of the common stock pending the Panel’s decision.

 

Upon completion of the Reverse Stock Split, the Company received a letter from the Staff on October 23, 2024, advising the Company that it had regained compliance with the minimum bid price requirements and that the Company was therefore in compliance with Nasdaq’s listing requirements. Consequently, the scheduled hearing before the Panel was cancelled.

 

On July 1, 2025, the Company received a determination from the Staff stating that the bid price of the common stock had closed below the $1.00 minimum required by Nasdaq Listing Rule 5550(a)(2) for the prior 30 consecutive business days (the “Minimum Bid Price Requirement”) and the Staff had determined to delist its securities from the Nasdaq Capital Market (the “July 2025 Staff Determination”). The Company timely requested and was granted an appeal hearing before the Panel to appeal the July 2025 Staff Determination, which had the effect of staying the delisting of the common stock pending the Panel’s decision. As of August 12, 2025, the common stock had closed above $1.00 for more than ten consecutive trading days. As a result, on August 13, 2025, the Company received a letter from the Staff advising that it had regained compliance with the Minimum Bid Price Requirement, and that it was therefore in compliance with Nasdaq’s listing requirements. Consequently, the appeal hearing before the Panel was cancelled.

 

 

On August 20, 2025, the Company received a notification letter (the “August 2025 Staff Notice”) from the Staff notifying it that the stockholders’ equity balance reported in the Quarterly Report for the three months ended June 30, 2025 was below the $2.5 million required minimum for continued listing on the Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(b)(1). Following the Warrant Adjustments and resulting warrant exercises, and the elimination of the Cash True-up Payment liability, the Company’s stockholders’ equity balance increased above the required threshold. On September 17, 2025, the Company received a letter from the Staff confirming it had regained compliance with Nasdaq’s listing requirements.

 

See “Note 14, Subsequent Events” for additional information.