UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _______________

Commission File Number: 001-40623

TWIN VEE POWERCATS CO.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	27-1417610 (I.R.S. Employer Identification No.)

3101 S. US-1 Ft. Pierce, Florida (Address of principal executive offices)	34982 (Zip Code)

(772) 429-2525

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	VEEE	The Nasdaq Stock Market, LLC (The Nasdaq Capital Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November xx, 2024 there were 9,520,000 shares of Common Stock, $0.001 par value per share, outstanding.

TWIN VEE POWERCATS CO.

TABLE OF CONTENTS

		Page No.

	PART I—FINANCIAL INFORMATION	4

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
	Condensed Consolidated Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	4
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months ended September 30, 2024 and 2023	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months ended September 30, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months ended September 30, 2024 and 2023	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	39

	PART II—OTHER INFORMATION	40

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48
Item 3.	Defaults Upon Senior Securities	48
Item 4.	Mine Safety Disclosures	48
Item 5.	Other Information	48
Item 6.	Exhibits	49
SIGNATURES		50

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments, and other factors we believe are appropriate under the circumstances. As you read and consider this Quarterly Report on Form 10-Q, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond our control), and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ materially from the performance anticipated in the forward-looking statements. We believe these factors include, but are not limited to, those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect, our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.

As a result of these and other factors, we may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

NOTE REGARDING COMPANY REFERENCES

Throughout this Quarterly Report on Form 10-Q, “Twin Vee,” “the Company,” “we” and “our” refer to Twin Vee PowerCats Co.

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TWIN VEE POWERCATS CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30, 2024			December 31, 2023
	Unaudited
Assets
Current Assets
Cash and cash equivalents	$	11,144,929		$	16,497,703
Restricted cash		212,963			257,530
Accounts receivable		129,544			80,160
Marketable securities - available for sale		—			4,462,942
Inventories, net		3,343,468			4,884,761
Prepaid expenses and other current assets		548,077			463,222
Total current assets		15,378,981			26,646,318

Property and equipment, net		14,217,041			12,293,988
Operating lease right of use asset		495,744			854,990
Security deposit		48,710			51,417
Total Assets	$	30,140,476		$	39,846,713

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable	$	1,957,902		$	2,399,026
Accrued liabilities		1,195,982			1,075,512
Contract liabilities - customer deposits		38,175			44,195
Finance lease liability - current portion		220,103			214,715
Operating lease right of use liability - current portion		431,132			482,897
Total current liabilities		3,843,294			4,216,345

Economic Injury Disaster Loan		499,900			499,900
Finance lease liability - noncurrent		2,479,742			2,644,123
Operating lease liability - noncurrent		109,329			436,730
Total Liabilities		6,932,265			7,797,098

Commitments and contingencies (Note 12)					—

Stockholders' equity:
Common stock: 50,000,000 authorized; $0.001 par value; 9,520,000 shares issued and outstanding		9,520			9,520
Additional paid-in capital		38,871,551			37,848,657
Accumulated deficit		(21,491,078	)		(14,346,984	)
Equity attributed to stockholders of Twin Vee PowerCats Co, Inc.		17,389,993			23,511,193
Equity attributable to noncontrolling interests		5,818,218			8,538,422
Total stockholders’ equity		23,208,211			32,049,615

Total Liabilities and Stockholders' Equity	$	30,140,476		$	39,846,713

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

TWIN VEE POWERCATS CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023

Net sales	$	2,901,318		$	8,076,545		$	12,504,482		$	24,980,902
Cost of products sold		3,046,975			7,471,034			12,170,486			21,928,093
Gross (loss) profit		(145,657	)		605,511			333,996			3,052,809

Operating expenses:
Selling, general and administrative		764,757			984,881			2,214,670			2,921,516
Salaries and wages		1,145,568			1,731,934			3,641,185			5,571,856
Professional fees		403,387			262,426			1,111,079			977,448
Impairment of property & equipment		—			—			1,674,000			—
Depreciation and amortization		440,458			341,826			1,300,697			844,665
Research and development		89,403			63,867			583,878			930,497
Total operating expenses		2,843,573			3,384,934			10,525,509			11,245,982

Loss from operations		(2,989,230	)		(2,779,423	)		(10,191,513	)		(8,193,173	)

Other income (expense):
Dividend income		50,898			242,718			447,571			730,117
Other income (expense)		480			(6,206	)		33,442			897
Interest expense		(57,034	)		—			(178,922	)		(113,523	)
Interest income		99,418			32,648			107,297			63,078
Unrealized gain on marketable securities		8,148			42,507			5,204			45,585
Realized gain on marketable securities		—			23,747			35,210			23,747
Loss on disposal of property & equipment		(172,684	)		—			(172,684	)		—
Gain on sale of R&D assets		50,097			—			50,097			—
Employee Retention Credit income		—			—			—			1,267,055
Total other (expense) income		(20,677	)		335,414			327,215			2,016,956

Loss before income tax		(3,009,907	)		(2,444,009	)		(9,864,298	)		(6,176,217	)
Income taxes provision		—			—			—			—
Net loss		(3,009,907	)		(2,444,009	)		(9,864,298	)		(6,176,217	)
Less: Net loss attributable to noncontrolling interests		(497,742	)		(582,274	)		(2,720,204	)		(1,813,067	)
Net loss attributed to stockholders of Twin Vee PowerCats Co, Inc.	$	(2,512,165	)	$	(1,861,735	)	$	(7,144,094	)	$	(4,363,150	)

Basic and dilutive loss per share of common stock	$	(0.26	)	$	(0.20	)	$	(0.75	)	$	(0.46	)
Weighted average number of shares of common stock outstanding		9,520,000			9,520,000			9,520,000			9,520,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

TWIN VEE POWERCATS CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


	Common Stock				Paid-in		Accumulated			Noncontrolling
	Shares		Amount		Capital		Deficit			Interests			Total

For the three and nine months ended September 30, 2023

Balance, December 31, 2022		9,520,000	$	9,520	$	35,581,022	$	(7,154,808	)	$	4,585,155		$	33,020,889

Stock-based compensation		—		—		482,964		—			—			482,964
Net loss		—		—		—		(1,166,772	)		(661,693	)		(1,828,465	)
Balance, March 31, 2023		9,520,000	$	9,520	$	36,063,986	$	(8,321,580	)	$	3,923,462		$	31,675,388

Forza share issuance						364,886					6,564,666			6,929,552
Stock-based compensation		—		—		489,361		—			—			489,361
Net loss		—		—		—		(1,334,643	)		(569,100	)		(1,903,743	)
Balance, June 30, 2023		9,520,000	$	9,520	$	36,918,233	$	(9,656,223	)	$	9,919,028		$	37,190,558

Stock-based compensation		—		—		464,560		—			—			464,560
Subsidiary stock repurchase		—		—		—		—						—
Net loss		—		—		—		(1,861,735	)		(582,274	)		(2,444,009	)
Balance, September 30, 2023		9,520,000	$	9,520	$	37,382,793	$	(11,517,958	)	$	9,336,754		$	35,211,109

For the three and nine months ended September 30, 2024

Balance, December 31, 2023		9,520,000	$	9,520	$	37,848,657	$	(14,346,984	)	$	8,538,422		$	32,049,615

Stock-based compensation		—		—		426,283		—			—			426,283
Net loss		—		—		—		(1,686,227	)		(648,967	)		(2,335,194	)
Balance, March 31, 2024		9,520,000	$	9,520	$	38,274,940	$	(16,033,211	)	$	7,889,455		$	30,140,704

Stock-based compensation		—		—		317,744		—			—			317,744
Net loss		—		—		—		(2,945,701	)		(1,573,495	)		(4,519,196	)
Balance, June 30, 2024		9,520,000	$	9,520	$	38,592,684	$	(18,978,912	)	$	6,315,960		$	25,939,252

Stock-based compensation		—		—		278,867		—			—			278,867
Net loss		—		—		—		(2,512,165	)		(497,742	)		(3,009,907	)
Balance, September 30, 2024		9,520,000	$	9,520	$	38,871,551	$	(21,491,078	)	$	5,818,218		$	23,208,211

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

TWIN VEE POWERCATS CO. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine Months Ended September 30,
	2024			2023
Cash Flows From Operating Activities
Net loss	$	(9,864,298	)	$	(6,176,217	)

Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		1,022,894			1,436,885
Depreciation and amortization		1,300,697			844,665
Impairment of property & equipment		1,674,000			—
Change of right-of-use asset		359,246			355,519
Gain on sale of R&D assets		(50,097	)		—
Loss on disposal of property & equipment		172,564			—
Net change in fair value of marketable securities		(5,204	)		(45,585	)
Change in inventory reserve		(293,059	)		—
Changes in operating assets and liabilities:
Accounts receivable		(49,384	)		(494,339	)
Inventories		1,884,449			(4,126,506	)
Prepaid expenses and other current assets		(84,855	)		332,142
Accounts payable		(441,124	)		1,568,127
Accrued liabilities		120,470			(275,255	)
Operating lease liabilities		(379,166	)		(358,525	)
Contract liabilities		(6,020	)		8,959
Net cash used in operating activities		(4,638,887	)		(6,930,130	)

Cash Flows From Investing Activities
Security deposit		2,707			(16,650	)
Realized gain on sale of marketable securities, available for sale		(35,210	)		(23,747	)
Net sales (purchases) of investment in marketable securities		4,503,356			(8,608,148	)
Proceeds from disposition of equipment		6,000			—
Purchase of property and equipment		(5,044,742	)		(2,413,119	)
Net cash used in investing activities		(567,889	)		(11,061,664	)

Cash Flows From Financing Activities
Proceeds from Forza Issuance of common stock		—			6,996,015
Deferred offering costs		—			(66,463	)
Finance lease liabilities		(190,565	)		(37,214	)
Net cash (used in) provided by financing activities		(190,565	)		6,892,338

Net change in cash, cash equivalents and restricted cash		(5,397,341	)		(11,099,456	)
Cash, cash equivalents and restricted cash at beginning of the period		16,755,233			23,501,007
Cash, cash equivalents and restricted cash at end of the period	$	11,357,892		$	12,401,551

Supplemental Cash Flow Information
Cash paid for interest	$	327,879		$	113,523

Non Cash Investing and Financing Activities
Increase in the right-of-use asset and lease liability	$	31,572		$	2,948,991

Reconciliation to the Consolidated Balance Sheet
Cash and cash equivalents	$	11,144,929		$	12,146,619
Restricted cash		212,963			254,932
Total cash, cash equivalents and restricted cash	$	11,357,892		$	12,401,551

TWIN VEE POWERCATS CO.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2024

1. Organization and Summary of Significant Accounting Policies

Organization

Twin Vee PowerCats Co. (“Twin Vee” or the “Company”) was incorporated as Twin Vee Catamarans, Inc., in the state of Florida, on December 1, 2009. On April 7, 2021, the Company filed a Certificate of Conversion to register and incorporate in the state of Delaware and changed the company name to Twin Vee PowerCats Co. The Certificate of Incorporation for Twin Vee PowerCats Co. was also filed on April 7, 2021.

On September 1, 2021, the Company formed Fix My Boat, Inc., (“Fix My Boat”), a wholly owned subsidiary. Fix My Boat will utilize a franchise model for marine mechanics across the country. Fix My Boat has been inactive for the majority of 2023 and the nine months ended September 30, 2024. On July 23, 2024, Fix My Boat, Inc. was merged into Twin Vee PowerCats Co.

Forza X1, Inc. was initially incorporated as Electra Power Sports, Inc. on October 15, 2021, and subsequently changed the name to Forza X1, Inc. (“Forza X1” or “Forza”) on October 29, 2021. Prior to Forza’s incorporation on October 15, 2021, the electric boat business was operated as the Company’s Electra Power Sports™ Division. Following the Company’s initial public offering that closed on July 23, 2021 (the “IPO”), it determined in October 2021 that for several reasons, it would market the Company’s new independent line of electric boats under a new brand name (and new subsidiary).

In an effort to retain cash and reduce expenditures and as a result of current market conditions, on July 11, 2024, Forza’s Board of Directors determined to discontinue and wind down the business related to the development and sale of electric boats utilizing its proprietary outboard electric motor. Forza explored strategic alternatives, including a potential merger with Twin Vee PowerCats Co. As part of this decision, Forza obtained an appraisal of its partially constructed facility in Monroe, NC and evaluated the carrying costs of its assets, primarily its inventory and fixed assets. Based on this analysis, Forza recorded an impairment charge of $1,674,000 against the carrying cost of its partially constructed building at June 30, 2024. Forza has evaluated any material liabilities resulting from this action and has determined that there are no additional material liabilities to be recorded as of September 30, 2024.

On April 20, 2023, the Company formed AquaSport Co., a wholly owned subsidiary in the state of Florida in connection with the Company’s plan to lease the assets of former AQUASPORT™ boat brand and manufacturing facility in White Bluff, Tennessee. On July 30, 2024, AquaSport Co. was merged into Twin Vee PowerCats Co.

Merger

On December 5, 2022, pursuant to the terms of the Agreement and Plan of Merger, dated as of September 8, 2022 (the “Merger Agreement”), by and between Twin Vee PowerCats Co. and Twin Vee PowerCats, Inc., a Florida corporation (“TVPC”), TVPC was merged with and into the Company (the “Merger”).

As TVPC did not meet the definition of a business under ASC 805, the merger was not accounted for as a business combination. The Merger was accounted for as a recapitalization of Twin Vee PowerCats, Co., effected through the exchange of TVPC shares for Twin Vee PowerCats, Co. shares, and the cancellation of Twin Vee PowerCats, Co. shares held by TVPC. Upon the effective date of the Merger, December 5, 2022, the Company accounted for the Merger by assuming TVPC’s net liabilities. Twin Vee PowerCats, Co.’s financial statements reflect the operations of TVPC. prospectively and were not restated retroactively to reflect the historical financial position or results of operations of TVPC.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Twin Vee, its wholly owned subsidiaries as of September 30, 2024, AquaSport Co., and Fix My Boat, Inc., and its publicly traded subsidiary, Forza X1, collectively referred to as the “Company”. The Company’s net loss excludes losses attributable to noncontrolling interests. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All inter-company balances and transactions are eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of September 30, 2024 and the results of operations and cash flows for the periods presented. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 27, 2024.

During the first quarter of 2024, the Company changed the classification of production labor and related benefit costs to be included as a component of cost of sales rather than operating expenses. The Company has adjusted the statement of operations for the three and nine months ended September 30, 2023 to be consistent with the accounting treatment in 2024. This resulted in an increase in cost of products sold of $1,929,720 and $4,866,739 and a corresponding decrease in operating expenses for the nine and three months ended September 30, 2023, respectively.

Revenue Recognition

The Company’s revenue is derived primarily from the sale of boats, motors and trailers to its independent dealers. The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to the dealer. For the majority of sales, this occurs when the product is released to the carrier responsible for transporting it to a dealer. The Company typically receives payment within five business days of shipment. Revenue is measured as the amount of consideration it expects to receive in exchange for a product. The Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash discounts, and other allowances that are recorded as reductions of revenues in net sales in the statements of operations. The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale. Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Accrued dealer incentives are included in accrued liabilities in the accompanying condensed consolidated balance sheets.

Payment received for the future sale of a boat to a customer is recognized as a customer deposit. Customer deposits are recognized as revenue when control over promised goods is transferred to the customer. At September 30, 2024 and December 31, 2023, the Company had customer deposits of $38,175 and $44,195, respectively, which is recorded as contract liabilities on the condensed consolidated balance sheets. These deposits are expected to be recognized as revenue within a one-year period.

Rebates and Discounts

Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months. These floor plan interest costs are treated as a reduction in the revenue recognized on the sale at an amount estimated at the time of sale.

Other Revenue Recognition Matters

Dealers generally have no right to return unsold boats. Occasionally, the Company may accept returns in limited circumstances and at the Company’s discretion under its warranty policy. The Company may be obligated, in the event of default by a dealer, to accept returns of unsold boats under its repurchase commitment to floor financing providers, who are able to obtain such boats through foreclosure. The repurchase commitment is on an individual unit basis with a term from the date it is financed by the lending institution through the payment date by the dealer, generally not exceeding 30 months.

The Company has excluded sales and other taxes assessed by a governmental authority in connection with revenue-producing activities from the determination of the transaction price for all contracts. The Company has not adjusted net sales for the effects of a significant financing component because the period between the transfer of the promised goods and the customer’s payment is expected to be one year or less.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of these judgments can be subjective and complex, and, consequently, actual results may differ from these estimates.

Concentrations of Credit and Business Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of trade receivables. Credit risk on trade receivables is mitigated as a result of the Company’s use of trade letters of credit, dealer floor plan financing arrangements, and the geographically diversified nature of the Company’s customer base. The Company minimizes the concentration of credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However, cash balances in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000 are at risk. As of September 30, 2024 and December 31, 2023, the Company had $10,414,162 and $15,868,574, respectively, in excess of FDIC insured limits.

Cash, Cash Equivalents and Restricted Cash

Cash, cash equivalents and restricted cash include all highly liquid investments with original maturities of six months or less at the time of purchase. On September 30, 2024 and December 31, 2023, the Company had cash, cash equivalents and restricted cash of $11,357,892 and $16,755,233, respectively. Included within restricted cash on the Company’s condensed consolidated balance sheets at September 30, 2024 and December 31, 2023 was cash deposited as collateral for irrevocable letters of credit of $212,963 and $257,530, respectively.

Marketable Securities

The Company’s investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income.

Fair Value of Financial Instruments

The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

	●	Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.

	●	Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.

	●	Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation.

Financial instruments measured as fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires it to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

The carrying amounts of cash equivalents approximate their fair value due to their liquid or short-term nature, such as accounts receivable and payable, and other financial instruments in current assets or current liabilities.

Accounts Receivable

The Company’s Accounts Receivable is derived from third party financing arrangements that its dealers utilize to finance the purchase of its boats. This “floorplan financing” is collateralized by the finished boat, and cash payment is received within 3-5 days of the finance company’s approval of the dealer’s purchase. At the end of a reporting period, some payment(s) may not yet have been received from the financing company, which creates a temporary account receivable that will be satisfied in just a few days. As such, the Company’s Accounts Receivable at any point in time are 100% collectable, and no valuation adjustment is necessary. Therefore, there is no allowance for credit losses on the Company’s balance sheet.

Inventories

Inventories are valued at the lower of cost and net realizable value, with cost determined using the average cost method on a first-in first -out basis. Net realizable value is defined as sales price, less cost of completion, disposable and transportation and a normal profit margin. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value. Provisions for excess and obsolete inventories at September 30, 2024 and December 31, 2023 were $126,557 and $419,616, respectively.

Property and Equipment

Property and equipment is stated at cost, net of accumulated depreciation and amortization, using the straight-line method over the assets’ useful life. Leasehold improvements are amortized over the shorter of the assets’ useful life or the lease term. The estimated useful lives of property and equipment range from three to five years. Upon sale or retirement, the cost and related accumulated depreciation is eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred.

Impairment of Long-Lived Assets

Management assesses the recoverability of its long-lived assets when indicators of impairment are present. If such indicators are present, recoverability of these assets is determined by comparing the undiscounted net cash flows estimated to result from those assets over the remaining life to the assets’ net carrying amounts. If the estimated undiscounted net cash flows are less than the net carrying amount, the assets would be adjusted to their fair value, based on appraisal or the present value of the undiscounted net cash flows. An impairment charge of $1,674,000 was recorded against the Forza building under construction in the second quarter of 2024 based on a third-party appraisal.

Advertising

Advertising and marketing costs are expensed as incurred, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. During the three months ended September 30, 2024 and 2023, advertising costs incurred by the Company totaled $24,196 and $129,592, respectively. During the nine months ended September 30, 2024 and 2023, advertising costs incurred by the Company totaled $151,776 and $374,059, respectively.

Research and Development

The Company expenses research and development costs relating to new product development as incurred. For the three months ended September 30, 2024 and 2023, research and development costs amounted to $89,403 and $63,867, respectively. For the nine months ended September 30, 2024 and 2023, research and development costs amounted to $583,878 and $930,497, respectively.

Shipping and Handling Costs

Shipping and handling costs include those costs incurred to transport product to customers and internal handling costs, which relate to activities to prepare goods for shipment. The Company has elected to account for shipping and handling costs associated with outbound freight after control over a product has been transferred to a customer as a fulfillment cost. The Company includes shipping and handling costs, including cost billed to customers, in cost of sales in the statements of operations. All manufactured boats are free on board (FOB) from the Fort Pierce manufacturing plant. Dealers are required to either pick up the boats themselves or contract with a transporter. For the three months ended September 30, 2024 and 2023, shipping and handling costs amounted to $57,149 and $144,388, respectively. For the nine months ended September 30, 2024 and 2023, shipping and handling costs amounted to $261,927 and $540,155, respectively.

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. The operating lease ROU asset also includes any lease payments made and is reduced by lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expenses for lease payments is recognized on a straight-line basis over the lease term.

Supplier Concentrations

The Company is dependent on the ability of its suppliers to provide products on a timely basis and on favorable pricing terms. The loss of certain principal suppliers or a significant reduction in product availability from principal suppliers could have a material adverse effect on the Company. Business risk insurance is in place to mitigate the business risk associated with sole suppliers for sudden disruptions such as those caused by natural disasters.

The Company is dependent on third-party equipment manufacturers, distributors, and dealers for certain parts and materials utilized in the manufacturing process. During the nine months ended September 30, 2024, the Company purchased all engines and certain composite materials for its boats under supplier agreements with five vendors. Total purchases from these vendors were $4,414,169. During the nine months ended September 30, 2023, the Company purchased all engines from three vendors for its boats under supplier agreements. Total purchases from these vendors were $5,654,582.

Employee Retention Credit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

Accounting Standards Codification 105, “Generally Accepted Accounting Principles,” describes the decision-making framework when no guidance exists in US GAAP for a particular transaction. Specifically, ASC 105-10-05-2 instructs companies to look for guidance for a similar transaction within US GAAP and apply that guidance by analogy. As such, forms of government assistance, such as the ERC, provided to business entities would not be within the scope of ASC 958, but it may be applied by analogy under ASC 105-10-05-2. The Company accounted for the Employee Retention Credit as a government grant in accordance with Accounting Standards Update 2013-06, Not-for-Profit Entities (Topic 958) (“ASU 2013-06”) by analogy under ASC 105-10-05-2. Under this standard, government grants are recognized when the conditions on which they depend are substantially met. For the nine months ended September 30, 2024 and 2023, the Company recognized income related to the employee retention credit of $0 and $1,267,055, respectively.

Stock-Based Compensation

The Company recognizes stock-based compensation costs for its restricted stock measured at the fair value of each award at the time of grant, as an expense over the period during which an employee is required to provide service. Compensation cost is recognized over the service period for the fair value of awards that vest.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is entirely dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

The Company files income tax returns in the U.S. federal jurisdiction and various states.

Recently Issued Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 aims to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 requires disclosures of significant expenses that are regularly provided to the chief operating decision maker and included within each reported segment measure of segment profit or loss. The update also required disclosure regarding the chief operating decision maker and expands interim segment disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact ASU-2023-07 on its consolidated financial statements.

The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

2. Marketable securities

As of September 30, 2024, the Company had no marketable securities. The Company’s investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in net income.

Schedule of marketable securities
	As of 12/31/2023
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value

Marketable Securities
Corporate Bonds	$	4,473,033	$	50,878	$	(60,969	)	$	4,462,942
Total Marketable Securities	$	4,473,033	$	50,878	$	(60,969	)	$	4,462,942


	Fair Value Measurements Using
	Balance as of December 31, 2023		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Non-observable Inputs (Level 3)
Marketable securities:
Corporate Bonds	$	4,462,942	$	—	$	4,462,942	$	—

Total marketable securities	$	4,462,942	$	—	$	4,462,942	$	—

The Company’s investments in corporate bonds, commercial paper and certificates of deposits are measured based on quotes from market makers for similar items in active markets.

3. Inventories

At September 30, 2024 and December 31, 2023, inventories consisted of the following:

Schedule of inventories
	September 30,			December 31,
	2024			2023
Raw Materials	$	3,206,838		$	5,001,512
Work in Process		119,339			96,721
Finished Product		143,848			206,144
Total Inventory	$	3,470,025		$	5,304,377
Reserve for Excess and Obsolete		(126,557	)		(419,616	)
Net inventory	$	3,343,468		$	4,884,761

4. Property and Equipment

At September 30, 2024 and December 31, 2023, property and equipment consisted of the following:

Schedule of property and equipment
	September 30,			December 31,
	2024			2023
Machinery and equipment	$	2,609,701		$	2,692,473
Furniture and fixtures		36,816			40,299
Land		1,119,758			1,119,758
Leasehold improvements		1,228,860			1,228,860
Software and website development		300,934			300,935
Computer hardware and software		118,267			159,342
Boat molds		7,091,748			5,871,373
Vehicles		143,360			143,360
Electric prototypes and tooling		142,526			142,526
Assets under construction		5,049,667			2,977,894
		17,841,637			14,676,820
Less accumulated depreciation and amortization		(3,624,596	)		(2,382,832	)
	$	14,217,041		$	12,293,988

Depreciation and amortization expense of property and equipment for the three months ended September 30, 2024 and 2023 were $440,458 and $341,826, respectively. Depreciation and amortization expense of property and equipment for the nine months ended September 30, 2024 and 2023 were $1,300,697 and $844,665, respectively.

5. Leases – Related Party

Operating right of use (“ROU”) assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating right of use assets represent the Company’s right to use an underlying asset and is based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. The Company used the U.S. Treasury rate of 0.36% at September 30, 2024 and December 31, 2023.

The Company’s office lease contains rent escalations over the lease term. The Company recognizes expense for this office lease on a straight-line basis over the lease term. Additionally, tenant incentives used to fund leasehold improvements are recognized when earned and reduce the Company’s right-of-use asset related to the lease. These are amortized through the right-of-use asset as reductions of expense over the lease term.

The Company leases its office and warehouse facilities, and the land which are located at 3101 S US-1, Fort Pierce, Florida (the “Property”) from Visconti Holdings, LLC. Visconti Holdings, LLC is a single member LLC that holds the ownership of the property, and its sole member is Joseph C. Visconti, the CEO of the Company. The Company entered into the lease on January 1, 2020, and as amended January 1, 2021, the lease has a term of five years. The current base rent payment is $30,000 per month including property taxes and the lease required a $25,000 security deposit. The base rent will increase five percent (5%) on the anniversary of each annual term.

At September 30, 2024 and December 31, 2023, supplemental balance sheet information related to the lease was as follows:


	September 30,		December 31,
	2024		2023
Operating lease ROU asset	$	488,115	$	779,843

	September 30,		December 31,
	2024		2023
Operating lease liabilities:
Current portion	$	431,132	$	414,363
Non-current portion		109,329		436,730
Total	$	540,461	$	851,095

Schedule of operating lease cost
	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023

Operating lease cost	$	97,336	$	96,971


	Nine Months Ended September 30, 2024		Nine Months Ended September 30, 2023

Operating lease cost	$	291,728	$	290,648

At September 30, 2024, future minimum lease payments under the non-cancelable operating lease is as follows:


Year Ending December 31,
2024 (excluding the nine months ended September 30, 2024)		104,186
2025		437,583
Total lease payments		541,769
Less imputed interest		(1,308	)
Total	$	540,461


	September 30,
	2024
Weighted average discount rate		0.36	%
Weighted average remaining lease term (years)		1.25

6. Leases

Operating ROU assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating right of use assets represent the Company’s right to use an underlying asset and is based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. The Company used the U.S. Treasury rate of 4% at December 31, 2022.

The Company leases a warehouse facility, and land which are located at 150 Commerce Street, Old Fort, North Carolina (the “Property”) from NC Limited Liability Company. The Company entered into the lease on October 7, 2022, the lease has a term of two years. The current base rent payment is $7,517 per month including property taxes, insurance, and common area maintenance. The lease required a $7,517 security deposit. The base rent increased three percent (3%) on October 15, 2023.

At September 30, 2024 and December 31, 2023, supplemental balance sheet information related to leases were as follows:


	September 30,		December 31,
	2024		2023
Operating lease ROU asset	$	7,629	$	75,147

	September 30,		December 31,
	2024		2023
Operating lease liabilities:
Current portion	$	—	$	68,532
Non-current portion		—		—
Total	$	—	$	68,532

Schedule of lease cost
	Nine Months Ended September 30, 2024		Nine Months Ended September 30, 2023

Operating lease cost	$	68,665	$	68,665


	Three Months Ended September 30, 2024		Three Months Ended September 30, 2023

Operating lease cost	$	22,888	$	22,888

7. Finance Leases

Forza Vehicle and Equipment Lease

The Company has finance leases for a vehicle, two forklifts, and a copy machine. Forza entered into the vehicle lease in February of 2023, with an asset value of $48,826, which is recorded in net property and equipment on the balance sheet, it is a 60-month lease at a 3% interest rate. Forza entered into the first forklift lease in January of 2023, with an asset value of $43,579, which is recorded in net property and equipment on the balance sheet. It is a 60-month lease at a 7.5% interest rate. Forza entered into the second forklift lease in July of 2023, with an asset value of $35,508, which is recorded in net property and equipment on the balance sheet. It is a 60-month lease at a 5.0% interest rate. Forza entered into the copier lease in July of 2023, with an asset value of $14,245, which is recorded in net property and equipment on the balance sheet. It is a 60-month lease at a 7.0% interest rate.

AquaSport lease

On April 20, 2023 Twin Vee incorporated AquaSport Co., a wholly owned subsidiary, in the state of Florida in connection with its plan to lease the AQUASPORT™ boat brand and manufacturing facility in White Bluff, Tennessee. On May 5, 2023, Twin Vee and AquaSport Co. entered into an agreement (the “Agreement”) with Ebbtide Corporation (“Ebbtide”) providing AquaSport Co. with the right to acquire assets, AQUASPORT™ boat brand, trademarks, 150,000-square-foot manufacturing facility situated on 18.5 acres in White Bluff Tennessee, related tooling, molds, and equipment to build five Aquasport models ranging in size from 21 to 25-foot boats (the “AquaSport Assets”).

Under the Agreement, the Company has the right to purchase the AquaSport Assets from Ebbtide for $3,100,000 during the five-year term of the Agreement (or extension period), less credit for a $300,000 security deposit paid by the Company and $16,000 a month for any rent paid under the Agreement by AquaSport Co. to Ebbtide. AquaSport Co. will lease the AquaSport Assets from Ebbtide under the Agreement at a monthly rent of $22,000 with the option to acquire the AquaSport Assets. The lease is for a term of five years, commencing June 1, 2023 at a 2.93% interest rate, with one option to renew the lease for an additional five years. In the event AquaSport Co. commits three payment Events of Default (as defined in the Agreement) within any consecutive two-year period or commits any other material Event of Default that is not cured timely and remains uncured, Ebbtide may terminate AquaSport Co.’s rights under the Agreement to acquire the AquaSport Assets. In addition, Ebbtide has the right to terminate the Agreement if an Event of Default occurs. AquaSport Co.’s obligations under the Agreement have been guaranteed by the Company.

Finance leases for AquaSport Co. are recorded in property and equipment, net on the balance sheet.

Schedule of property and equipment, net
	September 30		December 31,
	2024		2023
Land	$	1,000,000	$	1,000,000
Building		100,000		100,000
Equipment		2,000,000		2,000,000

At September 30, 2024 and December 31, 2023, supplemental balance sheet information related to finance leases were as follows:


	September 30,		December 31,
	2024		2023
Finance lease liabilities:
Current portion	$	220,103	$	214,715
Non-current portion		2,479,742		2,644,123
Total	$	2,699,845	$	2,858,838

At September 30, 2024, future minimum lease payments under the non-cancelable finance leases are as follows:


Year Ending December 31,
2024 (excluding the nine months ended September 30, 2024)	$	75,670
2025		298,248
2026		296,030
2027		292,928
2028		2,023,534
Total lease payment		2,986,410
Less imputed interest		(286,565	)
Total	$	2,699,845

The following summarizes other supplemental information about the Company’s finance lease:


	September 30,
	2024
Weighted average discount rate		3.02	%
Weighted average remaining lease term (years)		3.63

8. Accrued Liabilities

At September 30, 2024 and December 31, 2023, accrued liabilities consisted of the following:

Schedule of accrued liabilities
	September 30,		December 31,
	2024		2023
Accrued wages and benefits	$	86,987	$	343,511
Accrued interest		93,923		33,245
Accrued bonus		329,468		—
Accrued professional fees		29,130		—
Accrued operating expense		470,320		115,037

SEC Form 10-Q filed by Twin Vee PowerCats Co.