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, 2022

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 7, 2022, 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, 2022 (Unaudited) and December 31, 2021	4
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months ended September 30, 2022 and 2021	5
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months ended September 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months ended September 30, 2022 and 2021	7
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

	PART II—OTHER INFORMATION	29

Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
SIGNATURES		35

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, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	September 30,			December 31,
	2022			2021

Assets
Current Assets
Cash and cash equivalents	$	19,975,562		$	6,975,302
Accounts receivable		1,610			5,137
Marketable securities		—			2,996,960
Inventories		4,393,238			1,799,769
Deferred offering costs		10,000			105,500
Due from affiliated companies		368,093			286,922
Prepaid expenses and other current assets		1,500,153			903,756
Total current assets		26,248,656			13,073,346

Marketable securities - non current		2,910,936			3,067,137
Property and equipment, net		4,774,839			2,883,171
Operating lease right of use asset		1,264,259			1,550,530
Security deposit		25,000			25,000
Total Assets	$	35,223,690		$	20,599,184

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable	$	1,927,656		$	1,200,861
Accrued liabilities		538,312			456,814
Contract liability – customer deposits		1,026,580			14,100
Due to affiliated companies		115,043			115,043
Operating lease right of use liability		387,993			368,602
Total current liabilities		3,995,584			2,155,420

Paycheck Protection Program Loan		—			—
Economic Injury Disaster Loan		499,900			499,900
Operating lease liability - noncurrent		949,495			1,244,164
Total Liabilities		5,444,979			3,899,484

Commitments and contingencies (Note 9)

Stockholders’ equity:
Preferred stock: 10,000,000 authorized; $0.001 par value; no shares issued and outstanding		—			—
Common stock: 50,000,000 authorized; $0.001 par value; 7,020,000 and 7,000,000 shares issued and outstanding, respectively		7,020			7,000
Additional paid-in capital		29,165,138			18,710,256
Accumulated deficit		(4,447,684	)		(2,017,556	)
Noncontrolling interest		5,054,237			—
Total stockholders’ equity		29,778,711			16,699,700

Total liabilities and stockholders’ equity	$	35,223,690		$	20,599,184

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

TWIN VEE POWERCATS CO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021

Net sales	$	8,812,021		$	4,118,246		$	23,217,634		$	10,623,460
Cost of products sold		5,477,947			2,508,170			14,001,994			6,209,334
Gross profit		3,334,074			1,610,076			9,215,640			4,414,126

Operating expenses:
Selling, general and administrative		707,322			512,982			2,027,387			1,090,583
Salaries and wages		2,891,863			1,222,062			7,938,954			3,197,476
Professional fees		135,311			105,384			573,592			217,592
Depreciation and amortization		172,602			31,091			372,511			132,089
Research and design		283,936			61,091			680,288			61,091
Total operating expenses		4,191,034			1,932,610			11,592,732			4,698,831

Loss from operations		(856,960	)		(322,534	)		(2,377,092	)		(284,705	)

Other income (expense):
Other income		29,764			148			32,994			148
Interest expense		(52,878	)		(50,315	)		(136,434	)		(85,468	)
Interest income		30,958			—			63,883			—
Loss on disposal of assets		—			—			(49,990	)		(254,600	)
Gain from insurance recovery		—			—			—			434,724
Net change in fair value of marketable securities		(37,993	)		(10,576	)		(150,569	)		(10,576	)
Total other (expenses) income		(30,149	)		(60,743	)		(240,116	)		84,228

Net loss before income tax		(887,109	)		(383,277	)		(2,617,208	)		(200,477	)
Income taxes provision		—			—			—			—
Net loss		(887,109	)		(383,277	)		(2,617,208	)		(200,477	)
Less: Net loss attributable to noncontrolling interests		(187,080	)		—			(187,080	)
Net loss attributed to stockholders of Twin Vee PowerCats Co, Inc.	$	(700,029	)	$	(383,277	)	$	(2,430,128	)	$	(200,477	)

Basic and dilutive loss per share of common stock	$	(0.10	)	$	(0.06	)	$	(0.35	)	$	(0.04	)
Weighted average number of shares of common stock outstanding		7,013,478			6,282,700			7,004,542			4,769,200

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

TWIN VEE POWERCATS CO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

For the Three and Nine months ended September 30, 2021


									Additional							Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Noncontrolling		Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Interests		Equity

Balance at December 31, 2020		—	$	—		4,000,000	$	4,000	$	2,551,387	$	(1,006,547	)	$	—	$	1,548,840
Net income		—		—		—		—		—		131,949			—		131,949
Balance at March 31, 2021		—	$	—		4,000,000	$	4,000	$	2,551,387	$	(874,598	)	$	—	$	1,680,789
Net income		—		—		—		—		—		50,851			—		50,851
Balance at June 30, 2021		—	$	—		4,000,000	$	4,000	$	2,551,387	$	(823,747	)	$	—	$	1,731,640
Common stock issued for cash						3,000,000		3,000		15,849,037		—					15,852,037
Stock-based compensation		—		—		—		—		86,571		—			—		86,571
Net loss		—		—		—		—		—		(383,277	)		—		(383,277	)
Balance at September 30, 2021		—	$	—		7,000,000	$	7,000	$	18,486,995	$	(1,207,024	)	$	—	$	17,286,971

For the Three and Nine months ended September 30, 2022

									Additional								Total
	Preferred Stock				Common Stock				Paid-in		Accumulated			Noncontrolling			Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Interests			Equity

Balance at December 31, 2021		—	$	—		7,000,000	$	7,000	$	18,710,256	$	(2,017,556	)	$	—		$	16,699,700

Stock-based compensation		—		—		—		—		224,832		—			—			224,832
Net loss		—		—		—		—		—		(1,191,317	)		—			(1,191,317	)
Balance at March 31, 2022		—	$	—		7,000,000	$	7,000	$	18,935,088	$	(3,208,873	)	$	—		$	15,733,215

Stock-based compensation		—		—		—		—		301,891		—			—			301,891
Net loss		—		—		—		—		—		(538,782	)		—			(538,782	)
Balance at June 30, 2022		—	$	—		7,000,000	$	7,000	$	19,236,979	$	(3,747,655	)	$	—		$	15,496,324

Common stock issued for payment on behalf of parent		—		—		20,000		20		52,380		—			—			52,400
Subsidiary share issuance		—		—		—		—		9,588,172		—			5,241,317			14,829,489
Stock-based compensation		—		—		—		—		287,607		—			—			287,607
Net loss		—		—		—		—		—		(700,029	)		(187,080	)		(887,109	)
Balance at September 30, 2022		—	$	—		7,020,000	$	7,020	$	29,165,138	$	(4,447,684	)	$	5,054,237		$	29,778,711

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

TWIN VEE POWERCATS CO, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months Ended
	September 30,
	2022			2021
Cash Flows From Operating Activities
Net loss	$	(2,617,208	)	$	(200,477	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation		814,330			86,571
Depreciation and amortization		372,511			132,089
Loss on disposal of asset		49,990			224,037
Change of right-of-use asset and lease liabilities		286,271			288,621
Net change in fair value of marketable securities		150,569			10,576
Changes in operating assets and liabilities:
Accounts receivable		3,527			(212,908	)
Inventories		(2,593,469	)		(1,515,118	)
Prepaid expenses and other current assets		(596,397	)		(684,813	)
Accounts payable		726,795			888,465
Accrued liabilities		81,498			349,269
Operating lease liabilities		(275,278	)		(265,600	)
Contract liabilities – customer deposits		1,012,480			155,853
Net cash used in operating activities		(2,584,381	)		(743,435	)

Cash Flows From Investing Activities
Net purchases of investment in trading marketable securities		—			(6,101,461	)
Net sale of investment in trading marketable securities		3,002,592			—
Proceeds from sale of property and equipment		80,000			—
Purchase of property and equipment		(2,394,169	)		(1,221,826	)
Net cash provided by (used in) investing activities		688,423			(7,323,287	)

Cash Flows From Financing Activities
Net proceeds from issuance of common stock		15,231,350			15,852,037
Deferred offering cost		(306,361	)		—
Proceeds from Paycheck Protection Program loan		—			608,224
Advances to parent		(28,771	)		—
Advances from related parties		—			33,129
Repayment to related parties		—			(339,576	)
Net cash provided by financing activities		14,896,218			16,153,814

Net change in cash and cash equivalents		13,000,260			8,087,092
Cash at beginning of period		6,975,302			891,816
Cash and cash equivalents at end of period	$	19,975,562		$	8,978,908

Supplemental Cash Flow Information
Cash paid for income taxes	$	—		$	—
Cash paid for interest	$	121,284		$	118,906

Non Cash Investing and Financing Activities
Increase in the right-of-use asset and lease liability	$	—		$	655,726
Common stock issued for payment on behalf of parent	$	52,400		$

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

TWIN VEE POWERCATS CO.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

1. Organization and Summary of Significant Accounting Policies

Organization

Twin Vee PowerCats Co. (“Twin Vee”) 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.

On October 15, 2021, the Company formed Electra Power Sports, Inc., a wholly-owned subsidiary. Electra Power Sports, Inc. subsequently changed its name to Forza X1, Inc. (“Forza X1” or “Forza”) on October 29, 2021.

Principles of Consolidation

The consolidated financial statements include the accounts of Twin Vee and its wholly owned subsidiaries Fix My Boat, Inc., (“Fix My Boat”) and majority owned subsidiary, Forza X1, Inc. (“Forza X1” “Forza”), 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, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended September 30, 2022 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, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2022.

Use of Estimates

The preparation of 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.

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with original maturities of three months or less at the time of purchase. On September 30, 2022 and December 31, 2021, the Company had cash and cash equivalents of $19,975,562 and $6,975,302, respectively. Our cash and cash equivalents as of September 30, 2022, does include $13,940,706, related to Forza which was generated from their IPO.

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, 2022 and December 31, 2021, the Company had $19,023,055 and $6,725,302, respectively, in excess of FDIC insured limits.

Marketable Securities

Our 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.

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 expenses and other current liabilities in the accompanying consolidated balance sheets.

Payment received for the future sale of a boat to a customer is recognized as a customer deposit, which is included in contract liabilities on the consolidated balance sheet. Customer deposits are recognized as revenue when control over promised goods is transferred to the customer. At September 30, 2022 and December 31, 2021, the Company had customer deposits of $1,026,580 and $14,100, respectively, which is recorded as contract liabilities. 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.

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.

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, 2022, the Company purchased all engines for its boats under a supply agreement with a single vendor. For the nine months ended September 30, 2022 and 2021, total purchases to this vendor were $4,025,956 and $2,805,739, respectively.

2. Marketable securities

Assets and liabilities measured at fair value on a recurring basis based on Level 1 and Level 2 fair value measurement criteria as of September 30, 2022 and December 31, 2021 are as follows:


			Fair Value Measurements Using
	Balance as of September 30, 2022		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Marketable securities:
Corporate bonds	$	2,418,689	$	—	$	2,418,689
Certificates of Deposits		492,247		—		492,247
Total marketable securities	$	2,910,936	$	—	$	2,910,936

			Fair Value Measurements Using
	Balance as of December 31, 2021		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)
Marketable securities:
Corporate bonds	$	5,549,670	$	—	$	5,549,670
Certificates of Deposits		514,427		—		514,427
Total marketable securities	$	6,064,097	$	—	$	6,064,097

The Company’s investments in US government bonds are measured based on publicly available quoted market prices for identical securities as of September 30, 2022 and December 31, 2021. The Company’s investments in corporate bonds, commercial paper and certificated of deposits are measured based on quotes from market makers for similar items in active markets.

3. Inventories

At September 30, 2022 and December 31, 2021 inventories consisted of the following:

Schedule of inventories
	September 30,		December 31,
	2022		2021
Raw Materials	$	4,138,044	$	1,518,947
Work in Process		255,194		240,256
Finished Product		—		40,566
Total Inventory	$	4,393,238	$	1,799,769

4. Property and Equipment

At September 30, 2022 and December 31, 2021, property and equipment consisted of the following:

Schedule of property and equipment
	September 30,			December 31,
	2022			2021
Machinery and equipment	$	1,934,869		$	1,343,797
Furniture and fixtures		9,636			1,850
Leasehold improvements		959,541			786,199
Software and website development		147,334			113,120
Computer hardware and software		100,113			76,598
Boat molds		2,215,350			778,229
Vehicles		95,536			101,984
Electric prototypes and tooling		142,526			142,526
		5,604,905			3,344,303
Less accumulated depreciation and amortization		(830,066	)		(461,132	)
	$	4,774,839		$	2,883,171

Depreciation and amortization expense of property and equipment for the nine months ended September 30, 2022 and 2021 is $372,511 and $132,089, 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 our 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. We used the U.S. Treasury rate of 0.36% at September 30, 2022 and December 31, 2021.

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 and the CEO and majority shareholder of the Company’s parent company. The Company entered into the lease on January 1, 2020, and as amended January 1, 2021, the lease has a term of five 5 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, 2022 and December 31, 2021, supplemental balance sheet information related to leases were as follows:


	September 30,		December 31,
	2022		2021
Operating lease ROU asset	$	1,264,259	$	1,550,530


	September 30,		December 31,
	2022		2021
Operating lease liabilities:
Current portion	$	387,993	$	368,602
Non-current portion		949,495		1,244,164
Total	$	1,337,488	$	1,612,766

At September 30, 2022, future minimum lease payments under the non-cancelable operating leases are as follows:


Year Ending December 31,
2022 (excluding the nine months ended September 30, 2022)	$	94,500
2023		396,900
2024		416,745
2025		437,582
Total lease payment		1,345,727
Less imputed interest		(8,239	)
Total	$	1,337,488

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

Schedule of operating lease cost
	September 30,
	2022
Weighted average discount rate		0.36	%
Weighted average remaining lease term (years)		3.17

6. Accrued Liabilities

At September 30, 2022 and December 31, 2021, accrued liabilities consisted of the following:

Accrued liabilities
	September 30,		December 31,
	2022		2021
Accrued wages and benefits	$	172,485	$	185,402
Accrued Interest		49,052		33,852
Accrued bonus		77,000		30,000
Accrued rebates		—		60,000
Accrued professional fees		73,300		10,225
Accrued operating expense		82,621		62,335
Warranty reserve		83,854		75,000
Total	$	538,312	$	456,814

7. Notes Payable – SBA EIDL Loan

On April 22, 2020, the Company received an SBA Economic Injury Disaster Loan (“EIDL”) in the amount of $499,900. The loan is in response to the COVID-19 pandemic. The loan is a 30-year loan with an interest rate of 3.75%, monthly payments of $2,437 to begin October 22, 2022, under the EIDL program, which is administered through the SBA. Under the guidelines of the EIDL, the maximum term is 30 years; however, terms are determined on a case-by-case basis based on each borrower’s ability to repay and carry an interest rate of 3.75%. The EIDL loan has an initial deferment period wherein no payments are due for thirty months from the date of disbursement. The EIDL loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. The proceeds from this loan must be used solely as working capital to alleviate economic injury caused by the COVID-19 pandemic.

As part of the EIDL loan, the Company granted the SBA a continuing security interest in and to any and all collateral to secure payment and performance of all debts, liabilities and obligations of the Company to the SBA under the EIDL loan. The collateral includes substantially all tangible and intangible personal property of the Company.

A summary of the minimum maturities of term debt follows for the years set forth below.

Schedule of minimum maturities
Year
2022	$	2,171
2023		8,892
2024		9,231
2025		9,583
2026 and thereafter		470,023
Total	$	499,900

8. Related Party Transactions

As discussed in note 5, the Company has leased its facilities from a company owned by its CEO.

During the nine months ended September 30, 2022, and 2021, the Company received cash of $0 and $33,128 from its affiliate companies, paid operating expenses of $28,771 and $0 on behalf of to its affiliate companies, and paid $0 and $339,576 to its affiliate companies, respectively.

During the nine months ended September 30, 2022, and 2021, the Company recorded management fees of $42,225 and $31,500, respectively, paid to its shareholder parent company.

At September 30, 2022 and December 31, 2021, advances from affiliated companies included in due to affiliated companies was $115,043. Approximately $93,000 of the balance is related to an equipment purchase, the remaining balance was related to startup costs for our franchise business.

During the nine months ended September 30, 2022, Twin Vee received a monthly fee of $5,850 to provide management services and facility utilization to Forza. This income for Twin Vee, and expense for Forza, has been eliminated in the condensed consolidated financial statements.

9. Commitments and Contingencies

Repurchase Obligations

Under certain conditions, the Company is obligated to repurchase new inventory repossessed from dealerships by financial institutions that provide credit to the Company’s dealers. The maximum obligation of the Company under such floor plan agreements totaled approximately $11,825,000 or 68 units, and $4,273,000 or 24 units, as of September 30, 2022, and December 31, 2021, respectively. The Company incurred no impact from repurchase events during the nine months ended September 30, 2022 and year ended December 31, 2021.

Short-term lease

In August of 2022, Forza signed a six-month lease for a duplex, to be used by its employees to minimize travel expense as it started construction on its new manufacturing facility, for $2,200 per month, on a property in Black Mountain, North Carolina. During the nine months ended September 30, 2022, the lease expense was $2,200.

Litigation

The Company is currently involved in various civil litigation in the normal course of business none of which is considered material.

10. Stockholders’ Equity

Twin Vee

Common Stock Warrants

As of September 30, 2022, the Company had outstanding warrants to purchase 150,000 shares of common stock issuable at a weighted-average exercise price of $7.50 per share that were issued to the representative of the underwriters on July 23, 2021 in connection with the Company’s initial public offering that closed on July 23, 2021 (the “IPO”). The representative’s warrants are exercisable at any time and from time to time, in whole or in part, and expire on July 20, 2026. There was no warrant activity during the nine months ended September 30, 2022.

Equity Compensation Plan

The Company maintains an equity compensation plan (the “Plan”) under which it may award employees, directors and consultants’ incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the Plan. The number of awards under the Plan automatically increased on January 1, 2022. As of September 30, 2022, there were 377,090 shares remaining available for grant under this Plan.

Accounting for Stock -Based Compensation

Stock Compensation Expense

For the nine months ended September 30, 2022 and 2021, the Company recorded $814,330 and $86,571, respectively, of stock-based compensation expense, which is included in salaries and wages on the accompanying condensed consolidated statement of operations. Included in the $814,330 of stock options expense for the nine months ending September 30, 2022, is Forza’s stock-based compensation expense of $158,705.

Stock Options

Under the Company’s 2021 Stock Incentive Plan the Company has issued stock options. A stock option grant gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time. The Company typically issues options that vest pro rata on a monthly basis over various periods. Under the terms of the Plan, the contractual life of the option grants may not exceed ten years.

The Company utilizes the Black-Scholes model to determine fair value of stock option awards on the date of grant. The Company utilized the following assumptions for option grants during the nine months ended September 30, 2022:


		Nine months ended
		September 30,
		2022
Expected term		5 years
Expected average volatility		49 - 50%
Expected dividend yield		—
Risk-free interest rate		1.50 – 2.96%

The expected volatility of the option is determined using historical volatilities based on historical stock price of comparable boat manufacturing companies. The Company estimated the expected life of the options granted based upon historical weighted average of comparable boat manufacturing companies. The risk-free interest rate is determined using the U.S. Department of the Treasury yield curve rates with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%


	Options Outstanding						Weighted Average
	Number of			Weighted Average			Remaining life
	Options			Exercise Price			(years)

Outstanding, December 31, 2021		713,612		$	5.13			9.54
Granted		277,500			3.84			10.00
Exercised		—			—			—
Forfeited/canceled		(7,624	)		(4.10	)		(9.10	)
Outstanding, September 30, 2022		983,488		$	4.81			8.94

Exercisable options, September 30, 2022		463,707		$	4.81			8.93

At September 30, 2022, 519,781 Twin Vee options are unvested and expected to vest over the next five years.

Forza

Common Stock Warrants

As of September 30, 2022, the Company had outstanding warrants to purchase 172,500 shares of common stock issuable at a weighted-average exercise price of $6.25 per share that were issued to the representative of the underwriters on August 16, 2022 in connection with the Company’s IPO. The representative’s warrants are exercisable at any time and from time to time, in whole or in part, and expire on August 16, 2027. There was no warrant activity during the nine months ended September 30, 2022.

Equity Compensation Plan

The Company maintains an equity compensation plan (the “Plan”) under which it may award employees, directors and consultants’ incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the plan. The number of awards under the Plan will automatically increase on January 1, 2023. As of September 30, 2022, there were 683,500 shares remaining available for grant under this Plan. Stock based compensation expense is included in the Statements of Operations, under salaries and wages.

Accounting for Stock -Based Compensation

For the nine months ended September 30, 2022 and 2021, Forza recorded $1,587,058 and $0, respectively, of stock-based compensation expense, which is included in salaries and wages on the accompanying condensed consolidated statement of operations.

Stock Options

Under Forza’s 2022 Stock Incentive Plan (the “Forza Plan”), Forza has issued stock options. A stock option grant gives the holder the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time. Forza typically issues options that vest pro rata on a monthly basis over various periods. Under the terms of the Forza Plan, the contractual life of the option grants may not exceed ten years.

Fprza utilizes the Black-Scholes model to determine fair value of stock option awards on the date of grant. Forza utilized the following assumptions for option grants during the nine months ended September 30, 2022:


	Nine months ended
	September 30,
	2022
Expected term		5 years
Expected average volatility		115	%
Expected dividend yield		—
Risk-free interest rate		2.98	%

The expected volatility of the option is determined using historical volatilities based on historical stock price of comparable boat manufacturing companies. Forza estimated the expected life of the options granted based upon historical weighted average of comparable boat manufacturing companies. The risk-free interest rate is determined using the U.S. Department of the Treasury yield curve rates with a remaining term equal to the expected life of the option. Forza has never paid a dividend, and as such the dividend yield is 0.0%


	Options Outstanding				Weighted Average
	Number of		Weighted Average		Remaining life
	Options		Exercise Price		(years)

Outstanding, December 31, 2021		—	$	0.00		0.00
Granted		816,500		5.00		10.00
Exercised		—		—		—
Outstanding, September 30, 2022		816,500	$	5.00		9.87

Exercisable options, September 30, 2022		47,194	$	5.00		9.87

At September 30, 2022, 769,306 Forza options are unvested and expected to vest over the next five years.

11. Major Customers

During the nine months ended September 30, 2022, three individual customers had sales of over 10% of our total sales, and combined these three customers represented 37% of total sales. During the nine months end September 30, 2021, five individual customers had sales of over 10% of our total sales and combined these five customers represented 67% of total sales.

12. Segment

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.

The Company reported its financial performance based on the following segments: Gas-powered Boats, Franchise and Electric Boats.

The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for business segments are generally based on the sale of boats and the sale of franchises. Income (loss) from operations for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Operating income for each segment excludes other income and expense. The Company does not include intercompany transfers between segments for management reporting purposes.

The following table shows information by reportable segments for the three and nine months ended September 30, 2022 and 2021:


For the Nine Months Ended September 30, 2022	Gas-Powered Boats			Franchise			Electric Boat and Development			Total
Net sales	$	23,218,666		$	(1,032	)	$	—		$	23,217,634
Cost of products sold		13,910,332			1,027			90,635			14,001,994
Operating expense		9,468,564			34,507			2,089,661			11,592,732
Loss from operations		(160,230	)		(36,566	)		(2,180,296	)		(2,377,092	)
Other expense		(181,113	)		(30,059	)		(28,944	)		(240,116	)
Net loss	$	(341,343	)	$	(66,625	)	$	(2,209,240	)	$	(2,617,208	)


For the Nine Months Ended September 30, 2021	Gas-Powered Boats			Franchise		Electric Boat and Development			Total
Net sales	$	10,623,460		$	—	$	—		$	10,623,460
Cost of products sold		6,209,334			—		—			6,209,334
Operating expense		4,581,634			—		117,197			4,698,831
Loss from operations		(167,508	)		—		(117,197	)		(284,705	)
Other income (expense)		153,101			—		(68,873	)		84,228
Net loss	$	(14,407	)	$	—	$	(186,070	)	$	(200,477	)


For the Three Months Ended September 30, 2022	Gas-Powered Boats			Franchise			Electric Boat and Development			Total
Net sales	$	8,812,021		$	—		$	—		$	8,812,021
Cost of products sold		5,411,404			—			66,543			5,477,947
Operating expense		3,210,920			529			979,585			4,191,034
Income (loss) from operations		189,697			(529	)		(1,046,128	)		(856,960	)
Other (expense) income		(29,671	)		(3,943	)		3,465			(30,149	)
Net income (loss)	$	160,025		$	(4,471	)	$	(1,042,663	)	$	(887,109	)


For the Three Months Ended September 30, 2021	Gas-Powered Boats			Franchise		Electric Boat and Development			Total
Net sales	$	4,118,246		$	—	$	—		$	4,118,246
Cost of products sold		2,508,170			—		—			2,508,170
Operating expense		1,850,380			—		82,230			1,932,610
Loss from operations		(240,304	)		—		(82,230	)		(322,534	)
Other loss		(57,452	)		—		(3,291	)		(60,743	)
Net loss	$	(297,756	)	$	—	$	(85,521	)	$	(383,277	)

Property and equipment, net classified by business were as follows:


	September 30,		December 31,
	2022		2021
Gas-Powered Boats	$	4,143,587	$	2,547,410
Franchise	$	—	$	100,196
Electric-Boats	$	631,252	$	235,565

13. Subsequent Events

The Company has evaluated all event or transactions that occurred after September 30, 2022 through November 7, 2022, which is the date that the condensed consolidated financial statements were available to be issued. During this period, there were no material subsequent events requiring recognition or disclosure, other than the ones described below.

On October 3, 2022, the Company issued and sold to ThinkEquity LLC, as the underwriter in a firm commitment underwritten public offering (the “Offering”) pursuant to the term of an underwriting agreement that the Company entered into with ThinkEquity LLC on September 28, 2022 (the “Underwriting Agreement”) ,an aggregate of 2,500,000 shares of the Company’s common stock, par value $0.001 per share, at a public offering price of $2.75 per share, for gross proceeds of $6,875,000, before deducting underwriting discounts, commissions and offering expenses. Pursuant to the Underwriting Agreement, the Company has also issued to the underwriter warrants to purchase up to 143,750 shares of Common Stock.

On October 7, 2022, Forza signed a two-year lease agreement, on a warehouse facility to begin building out its prototype boats. The monthly rent will be $6,600 the first year and $6,798 the second year.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto. You should also review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and under Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

OVERVIEW

We are a designer, manufacturer and marketer of recreational and commercial power catamaran boats. We believe our company has been an innovator in the recreational and commercial power catamaran industry. We currently have 8 gas-powered models in production ranging in size from our 24-foot, dual engine, center console to our newly designed 40-foot offshore 400 GFX. Our twin-hull catamaran running surface, known as a symmetrical catamaran hull design, adds to the Twin Vee ride quality by reducing drag, increasing fuel efficiency, and offering users a stable riding boat. Twin Vee’s home base operations in Fort Pierce Florida is a 7.5-acre facility with several buildings totaling over 75,000 square feet. We employed approximately 160 people on September 30, 2022, some of whom have been with our company for over twenty years.

We have organized our business into three operating segments: (i) our gas-powered boat segment which manufactures and distributes gas-powered boats under the Twin Vee name; (ii) our electric-powered boat segment which is developing fully electric boats, through our wholly owned subsidiary, Forza X1, Inc., a Delaware corporation (“Forza”) and (iii) our franchise segment which is developing a standard product offering and will be selling franchises across the United States through our wholly owned subsidiary, Fix My Boat, Inc., a Delaware corporation.

Our gas-powered boats allow consumers to use them for a wide range of recreational activities including fishing, diving and water skiing and commercial activities including transportation, eco tours, fishing and diving expeditions. We believe that the performance, quality and value of our boats position us to achieve our goal of increasing our market share and expanding the power catamaran boating market. We currently primarily sell our boats through a current network of 21 independent boat dealers in 26 locations across North America and the Caribbean who resell our boats to the end user Twin Vee customers. We continue recruiting efforts for high quality boat dealers and seek to establish new dealers and distributors domestically and internationally to distribute our boats as we grow our production and introduce new models. Our gas-powered boats are currently outfitted with gas-powered outboard combustion engines.

Due to the growing demand for sustainable, environmentally friendly electric and alternative fuel commercial and recreational vehicles, our majority owned subsidiary, Forza X1, Inc., is designing and developing a line of electric-powered catamaran boats ranging in size from 18-feet to 28-feet. Forza’s initial two models, the FX1 Dual Console and FX1 Center Console, are being designed to be 24-foot in length, have an 8’ beam or width and utilize a catamaran hull surface to reduce drag and increase run times. The initial launch of FX1 will include our proprietary single electric outboard motor. Our electric boats are being designed as fully integrated electric boats including the hull, outboard motor and control system. To date, we have completed the design of the 25-foot FX1 dual console model, including hull, deck and small parts. This design has gone from an intellectual concept in CAD to fiberglass and foam plugs, fiberglass molds and, finally, working boat parts in just over one year. On October the 28^th, the running surface of the boat and all major components were tested successfully for several hours on the Indian River Lagoon in Fort Pierce, Florida. While the motor and control systems have been successfully trialed previously, this was the first voyage that included all major components, production batteries, fully functioning “alpha” engine design, control system - including 22” Garmin screen, and Osmosis telematics unit. The performance of the boat exceeded all expectations and will provide a great baseline for improvements, iterations, and design enhancements. We anticipate revenues from the sale of these fully integrated electric boats and motors to commence in late 2023. Forza X1 will continue to build prototype engines and boats for the next six to nine months.

Through the first nine months of 2022, we continued to experience strong sales for our products. Our company’s objectives have been to add new, larger boat models to our GFX lineup, expand our dealers and distribution network, and increase unit production to fulfill our customer and dealer orders. We have made significant progress on all fronts in the first nine months ended September 30, 2022, we started production on our new 260GFX and we unveiled our 400GFX at our dealer meeting in July of 2022, we have added to our dealer network, we now have 21 dealers and 26 locations. We have increased our production by 69%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, which has increased our net revenue up 119% for the nine months ended September 30, 2022. For the three months ended September 30, 2022, our net revenue increased 114% compared to the three months ended September 30, 2021. While net sales growth has been significant, the investments we are making also increases our labor, operating, sales and general administration costs. Our manufacturing process is labor intensive, and with the addition of new models to our production line we have added staff and expanded our training program.

As we move forward, we anticipate our operating income to be moderate toward breakeven for our core gas-powered boat segment, however, our electric boat division will continue to incur losses as we continue to develop our fully integrated electric boats, which includes research and development efforts.

Recent Developments

On August 16, 2022, Forza issued and sold to ThinkEquity LLC, as the underwriter in a firm commitment underwritten initial public offering (the “Forza IPO”) pursuant to the term of an underwriting agreement that it entered into with ThinkEquity LLC on August 11, 2022 (the “Forza Underwriting Agreement”) ,an aggregate of 3,450,000 shares of Forza’s common stock, par value $0.001 per share, at an initial public offering price of $5.00 per share, for gross proceeds of $17,250,000, before deducting underwriting discounts, commissions and offering expenses. Pursuant to the Forza Underwriting Agreement, Forza also issued to the underwriter warrants to purchase up to 172,500 shares of Common Stock. After the Forza IPO, Forza was no longer a wholly owned subsidiary of the Company.

On October 3, 2022, we issued and sold to ThinkEquity LLC, as the underwriter in a firm commitment underwritten public offering (the “Offering”) pursuant to the term of an underwriting agreement that we entered into with ThinkEquity LLC on September 28, 2022 (the “Underwriting Agreement”),an aggregate of 2,500,000 shares of our Common Stock at a public offering price of $2.75 per share, for gross proceeds of $6,875,000, before deducting underwriting discounts, commissions and offering expenses. Pursuant to the Underwriting Agreement, we also issued to the underwriter warrants to purchase up to 143,750 shares of Common Stock.

We continue adding new models to our lineup. We are now adding 3 new STX Sport Tournament models and 4 new, completely unique, special models that we have been designing and will be launching under a new boat brand named LFG Marine Group. LFG Marine will be a 100% owned division within Twin Vee. These initial models are geared more toward the freshwater market but can also be used and enjoyed in the saltwater environment.

The LFG Marine Group will have its own website, its own marketing but the boats will be designed, manufactured, and shipped from our Twin Vee, factory in Fort Pierce, Florida to existing and new dealers. Our initial LFG models will include a 25-foot muti hull center console, 25-foot dual console, 25-foot deck boat and a new 22-foot single engine mono hull. All of these models are past the design stage and the tooling is being completed. The 25-foot dual console is currently being completed in the factory and should be in the water within 2-3 weeks. We anticipate that revenue from LGF boat sales will begin in Q1 of 2023.

Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table provides certain selected financial information for the periods presented:

	Three Months Ended
	September 30,
	2022			2021			Change			% Change
Net sales	$	8,812,021		$	4,118,246			4,693,775			114	%
Cost of products sold	$	5,477,947		$	2,508,170			2,969,777			118	%
Gross profit	$	3,334,074		$	1,610,076			1,723,998			107	%
Operating expenses	$	4,191,034		$	1,932,610			2,258,424			117	%
Operating loss	$	(856,960	)	$	(322,534	)		(534,426	)		166	%
Net loss	$	(877,109	)	$	(383,277	)		(503,832	)		131	%
Net loss per common share: Basic and Diluted	$	(0.10	)	$	(0.06	)		(0.04	)		64	%
Weighted average number of common shares outstanding: Basic and diluted		7,013,478			6,282,700

Net Sales and Cost Sales

Our net sales increased $4,693,775, or 114% to $8,812,021 for the three months ended September 30, 2022 from $4,118,246 for the three months ended September 30, 2021. This increase was due to an increase in the number of boats sold during the three months ended September 30, 2022. The number of our boats sold during the three months ended September 30, 2022 increased 65% over the three months ended September 30, 2021, due to our increased production plan, enabling us to produce more boats during the quarter. Additionally, we have increased our sale prices and reduced discounts and rebates, to help offset the increases in operating expenses described below, in addition to increased costs of product parts and components and our increased inventory that we are maintaining to protect against supply chain shortages.

Gross Profit

Gross profits increased by $1,723,998, or 107% to $3,334,074 for the three months ended September 30, 2022 from $1,610,076 for the three months ended September 30, 2021. Gross profit as a percentage of sales, for the three months ended September 30, 2022 and 2021 was 38% and 39% respectively.

Total Operating Expenses

Our total operating expenses for the three months ended September 30, 2022 and 2021 were $4,191,034 and $1,932,610 respectively. Operating expenses as a percentage of sales were 48% compared to 47% in the prior year. Our total operating expenses, for our gas-powered boat segment, for the three months ended September 30, 2022 and 2021 were $3,210,921 and $1,850,513 respectively. Our gas-powered segment, operating expenses as a percentage of sales were 36% compared to 45% in the prior year, showing a 9% improvement quarter over quarter. Our total operating expenses, for Forza, our electric powered boat and development segment, for the three months ended September 30, 2022 and 2021 were $979,584 and $0 respectively.

Selling, general and administrative expenses increased by approximately 38%, or $194,339 to $707,321 for the three months ended September 30, 2022, compared to $512,982 for the three months ended September 30, 2021. A significant portion of this increase, $101,724 was due increased costs in liability and workman’s compensation insurance. These insurance charges increase based on your employment level and sales revenue, both of which, have increased significantly quarter over quarter. Another $42,551 was due to Forza now carrying cost of being publicly traded. Our sales and marketing expenses for the quarter increased $40,188, the majority of this increase was due to hosting a dealer meeting in 2023, which we did not due in 2022. Our travel expense increased approximately $26,662, this is due to Forza’s remote workforce being required to travel for development and testing.

Salaries and wages related expenses increased by approximately 137%, or $1,669,801 to $2,891,863 for the three months ended September 30, 2022, compared to $1,222,062 for the three months ended September 30, 2021. Of the increase in salaries and wages of $1,216,037 was the result of aggressively ramping up of production, which required increasing our production staff and adding mid-level staff, as well as the staffing of our Forza segment, which account for $698,967 of the increase. Included in salaries and wage related expenses for the three months ended September 30, 2022 was stock based compensation expense of $287,607 due to the issuance of options to employees. We have added a full package of benefits for our employees, in order to retain our quality employees, which resulted in an increase in salaries and wages of $90,113. The remaining increase in salaries and wages during the three months ended September 30, 2022 is associated with taxes.

Research and design expenses increased by $222,845 to $283,936 for the three months ended September 30, 2022, from $61,091 for the three months ended September 30, 2021. Part of the use of proceeds from our IPO, was the development of an electric boat and an electric motor.

Professional fees increased by 28%, or $29,927 to $135,311 for the three months ended September 30, 2022, compared to $105,384 for the three months ended 2021. This increase was also due to the additional costs we incurred associated with Forza being public. We engaged the services of an outside financial consultant, as well as an audit firm for quarterly reporting and SEC legal counsel to fulfill our public company reporting obligations.

Depreciation and amortization expense increased by 455%, or $141,511 to $172,602 for the three months ended September 30, 2022, compared to $31,091 for the three months ended 2021. This increase is due to the addition of fixed assets, primarily molds, to increase our production levels and throughput.

Our other (expenses) decreased by 50%, or $30,594 to an expense of $30,149 for the three months ended September 30, 2022, compared to $60,743 for the three months ended, 2021. Our interest income increased for the quarter by 30,958, compared to 2021, accounting for the change.

Net Loss

Net loss for the three months ended September 30, 2022 was $887,109, compared to $383,277 for the three months ended September 30, 2021. Our electric segment, which does not generate any revenue, at this time, incurred a loss of $1,042,663, for the three months ended September 30, 2022, related to research and design. Our gas-powered segment had income of $160,025 for the three months ended September 30, 2022. Basic and dilutive loss per share of common stock for the three months ended September 30, 2022, was ($0.10) compared to ($0.06) for the three months ended September 30, 2021.

Comparison of the Nine Months Ended September 30, 2022 and 2021

	Nine months Ended
	September 30,
	2022			2021			Change			% Change
Net sales	$	23,217,634		$	10,623,460			12,594,174			119	%
Cost of products sold	$	14,001,994		$	6,209,334			7,792,660			125	%
Gross profit	$	9,215,640		$	4,414,126			4,801,514			109	%
Operating expenses	$	11,592,732		$	4,698,831			6,893,901			147	%
Loss from operations	$	(2,377,092	)	$	(284,705	)		(2,092,387	)		735	%
Other income (expense)	$	240,116		$	(84,228	)		324,344			(385	%)
Net loss	$	(2,617,208	)	$	(200,477	)		(2,416,731	)		1,205	%
Basic and dilutive loss per share of common stock	$	(0.37	)	$	(0.04	)		(0.33	)		789	%
Weighted average number of shares of common stock outstanding		7,004,542			4,769,200

Net Sales and Cost Sales

Our net sales increased by $12,594,174, or 119% to $23,217,634 for the nine months ended September 30, 2022 from $10,623,460 for the nine months ended September 30, 2021. We attribute the large increase due to strong demand for our product, coupled with our increase in production. The number of our boats sold during the nine months ended September 30, 2021 increased 69% over the number of our boats sold during the nine months ended September 30, 2021, due to our increased production plan that we focused on since the third quarter of 2021. Additionally, we have increased our sale prices and reduced discounts and rebates and introduced new larger models to help offset the increases in operating expenses described below, in addition to increased costs of product parts and components and our increased inventory that we are maintaining to protect against supply chain shortages. Our average revenue per unit for the nine months ended September 30, 2022 increased approximately 35% over revenue per unit for the nine months ended September 30, 2021.

Gross Profit

Gross profit increased by $4,801,514 or 109% to 9,215,640 for the nine months ended September 30, 2022 from $4,414,126 for the nine months ended September 30, 2021. Gross profit as a percentage of net sales for the nine months ended September 30, 2022, was 40% as compared to 42% for the same period in fiscal 2021.

Total Operating Expenses

Our total operating expenses for the nine months ended September 30, 2022 and 2021 were $11,592,732 and $4,698,831 respectively. Operating expenses as a percentage of sales were 50% compared to 44% in the prior year. Our total operating expenses, for our gas-powered boat segment, for the nine months ended September 30, 2022 and 2021 were $9,520,918 and $4,581,634 respectively. Our gas-powered segments, operating expenses as a percentage of sales were 41% compared to 43% in the prior year, showing a 2% improvement quarter over quarter. Our total operating expenses, for Forza, our electric powered boat and development segment, for the nine months ended September 30, 2022 and 2021 were $2,037,307 and $1,046,129 respectively. Forza operating expenses as a percentage of consolidated sales were 9%.

Selling, general and administrative expenses increased by 86% or $936,804 to $2,027,387 for the nine months ended September 30, 2022, from $1,090,583. A significant portion of the increase, $405,191, resulted from expenses incurred in connection with being a publicly traded company, which we did not incur for the majority of the prior period. Our insurance increased by $223,977 over the prior period, due to our increased wages and sales level. Our state taxes increased by $122,769. Our advertising and marketing increased $46,527, primarily due to hosting a dealer sales meeting in 2022, which we did not host in 2021, over concerns regarding Covid. We also have experienced moderate increases several accounts totaling $49,880 of the increase. Selling, general and administrative expenses associated specifically to Forza, our electric boat and development segment, totaled $267,657.

Salaries and wage related expenses increased by 148% or $4,741,478 to $7,938,954 for the nine months ended September 30, 2022 from $3,197,476 for the nine months ended September 30, 2021. We have been aggressively working on increasing production, and this included increasing our production staff as well as adding mid-level staff, resulting in an increase of $3,365,308 of additional salaries and wage expense for the nine months ended September 30, 2022 as compared to for the nine months ended September 30, 2021, $698,967 can be directly associated with Forza, for our electric boat and development segment. Included in salaries and wage related expenses for the nine months ended September 30, 2022 was stock based compensation expense of $814,330 due to the issuance of options to employees, $158,705 was directly associated with Forza, for our electric boat and development segment. We have added a full package of benefits for our employees, to retain our quality employees, which resulted in an increase of $315,566. The remaining increase of salaries and wages related expenses during the nine months ended September 30, 2022 is associated with taxes and benefits.

Research and design expenses, for Forza, our electric boat and development segment, for the nine months ended September 30, 2022, and 2021 were $680,288 and $61,091, respectively. Part of the use of proceeds from our IPO, was the development of an electric boat and an electric motor.

Professional fees for the nine months ended September 30, 2022 and 2021 were $573,592 compared to $217,591, respectively. This increase is also due to the expenses incurred from being a public company. We engaged the services of an outside financial consultant, as well as an audit firm for quarterly reporting and SEC legal counsel in order to fulfill our public company reporting obligations.

Depreciation and amortization expenses for the nine months ended September 30, 2022 and 2021 were $372,511 and $132,089, respectively. This increase is due to the addition of fixed assets, primarily molds, to increase our production levels and throughput.

Our other expenses increased by 385%, or $324,344 to $240,116 for the nine months ended September 30, 2022, compared to other income of $84,228 for the nine months ended September 30, 2021. The majority of the increase was due to a net gain from insurance recoveries of $180,124, in 2021, which we did not receive in 2022, an increase in interest expense of $50,966 and our net loss in fair value of marketable securities was $150,569 compared to $10,576 during the nine months ended September 30, 2021. The increase in expenses was also offset by an increase of interest income of $63,883, and other income of $32,994.

Net Loss

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