Twin Vee PowerCats, Co. 10-K

Item 8. Financial Statements and Supplementary Data. Twin Vee Powercats Co. and subsidiaries CONSOLIDTAED FINANCIAL STATEMENTS Contents Page Report of Independent Registered Public Accounting Firm 48 Consolidated Balance Sheets 49 Consolidated Statements of Operations 50 Consolidated Statements of Stockholders’ Equity 51 Consolidated Statements of Cash Flows 52 Notes to the Consolidated Financial Statements 53 47 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To The Board of Directors and the Stockholders of Twin Vee Powercats Co. and Subsidiaries Fort Pierce, Florida Opinion on the Financial Statement We have audited the accompanying consolidated financial statements of Twin Vee Powercats Co. and Subsidiaries (the “Company”), which comprise the consolidated balance sheets at December 31, 2021 and 2020, and the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020 and the results of its operations and its cash flows for the years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ GRASSI & CO., CPAs, P.C. We have served as the Company’s auditor since 2020. Jericho, New York March 30, 2022 606 48 Table of Contents TWIN VEE POWERCATS CO. AND SUBSIDIARIES (F/K/A TWIN VEE CATAMARANS, INC.) CONSOLIDATED BALANCE SHEETS December 31, December 31, 2021 2020 ASSETS Current Assets Cash and cash equivalents $ 6,975,302 $ 891,816 Accounts receivable 5,137 — Marketable securities 2,996,960 — Inventories 1,799,769 936,676 Deferred offering costs 105,500 — Due from affiliated companies 286,922 6,100 Prepaid expenses and other current assets 903,756 350 Total Current Assets 13,073,346 1,834,942 Marketable securities – non current 3,067,137 — Property and equipment, net 2,883,171 1,365,029 Operating lease right of use asset 1,550,530 1,279,595 Security deposit 25,000 25,000 Total Assets $ 20,599,184 $ 4,504,566 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 1,200,861 $ 799,280 Accrued liabilities 456,814 217,936 Contract liabilities 14,100 6,784 Due to affiliated companies 115,043 120,693 Operating lease right of use liability 368,602 295,374 Total Current Liabilities 2,155,420 1,440,067 Economic Injury Disaster Loan 499,900 499,900 Operating lease liability – noncurrent 1,244,164 1,015,759 Total Liabilities 3,899,484 2,955,726 Commitments and contingencies (Note 10) 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; 7,000,000 and 4,000,000 shares issued and outstanding, respectively 7,000 4,000 Additional paid-in capital 18,710,256 2,551,387 Accumulated deficit ( 2,017,556 ) ( 1,006,547 ) Total Stockholders’ Equity 16,699,700 1,548,840 Total Liabilities and Stockholders’ Equity $ 20,599,184 $ 4,504,566 The accompanying notes are an integral part of these consolidated financial statements 49 Table of Contents TWIN VEE POWERCATS CO. AND SUSIDIARIES (F/K/A TWIN VEE CATAMARANS, INC.) CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2021 2020 Net sales $ 15,774,170 $ 11,063,619 Cost of products sold 9,498,384 6,289,316 Gross profit 6,275,786 4,774,303 Operating expenses: Selling, general and administrative 1,726,345 872,669 Salaries and wages 5,389,599 2,857,773 Research and development 211,111 — Professional fees 380,929 167,299 Depreciation 198,523 155,728 Total operating expenses 7,906,507 4,053,469 ( Loss) from operations ( 1,630,721 ) 720,834 Other income: Other income 538 — Interest expense ( 136,709 ) ( 178,584 ) Loss on disposal of assets ( 254,600 ) 19,327 Gain from insurance recovery 434,724 — Net change in fair value of marketable securities ( 32,465 ) — Government grant income 608,224 — Forgiveness of PPP loan — 609,500 Total other income 619,712 450,243 Net (loss) income $ ( 1,011,009 ) $ 1,171,077 Basic and dilutive (loss) income per share of common stock $ ( 0.19 ) $ 0.29 Weighted average number of shares of common stock outstanding 5,331,400 4,000,000 The accompanying notes are an integral part of these consolidated financial statements 50 Table of Contents TWIN VEE POWERCATS CO. AND SUBSIDIARIES (F/K/A TWIN VEE CATAMARANS, INC.) CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Years ended December 31, 2021 and 2020 Additional Total Common Stock Paid-in Accumulated Stockholders’ Shares Amount Capital Deficit Equity Balance at December 31, 2019 4,000,000 $ 4,000 $ 2,289,231 $ ( 2,177,624 ) $ 115,607 Capital contribution of advances from parent 262,156 262,156 Net income for the year — — — 1,171,077 1,171,077 Balance at December 31, 2020 4,000,000 $ 4,000 $ 2,551,387 $ ( 1,006,547 ) $ 1,548,840 Common stock issued for cash, net 3,000,000 3,000 15,849,037 — 15,852,037 Stock-based compensation — — 309,832 — 309,832 Net loss for the year ( 1,011,009 ) ( 1,011,009 ) Balance, December 31, 2021 7,000,000 $ 7,000 $ 18,710,256 $ ( 2,017,556 ) $ 16,699,700 The accompanying notes are an integral part of these consolidated financial statements 51 Table of Contents TWIN VEE POWERCATS CO. AND SUSIDIARIES (F/K/A TWIN VEE CATAMARANS, INC.) CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2021 2020 Cash Flows From Operating Activities Net (loss) income $ ( 1,011,009 ) $ 1,171,077 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Stock based compensation 309,832 — Impairment loss 50,417 — Depreciation and amortization 198,523 155,728 Gain (loss) on disposal of asset 224,037 ( 19,327 ) Gain on government grant ( 608,224 ) — Gain on forgiveness of Paycheck Protection Program loan — ( 609,500 ) Change of ROU and lease liabilities 384,791 307,143 Net change in fair value of marketable securities 32,465 — Changes in operating assets and liabilities: Accounts receivable ( 5,137 ) — Inventories ( 913,510 ) ( 232,520 ) Prepaid expenses and other current assets ( 903,406 ) 11,846 Accounts payable 401,581 ( 64,362 ) Accrued liabilities 238,878 ( 15,114 ) Operating lease liabilities ( 354,093 ) ( 275,605 ) Contract liabilities 7,316 ( 64,718 ) Net cash (used in) provided operating activities ( 1,947,539 ) 364,648 Cash Flows From Investing Activities Security deposit — ( 25,000 ) Proceeds from sale of equipment — 349,744 Net purchases of investment in trading marketable securities ( 6,096,562 ) — Purchase of property and equipment ( 1,940,702 ) ( 525,196 ) Net cash used in investing activities ( 8,037,264 ) ( 200,452 ) Cash Flows From Financing Activities Net proceeds from issuance of common stock 15,852,037 — Deferred offering cost ( 105,500 ) — Capital contribution from Parent, net — 262,156 Proceeds from government grant 608,224 — Proceeds from Paycheck Protection Program loan — 609,500 Proceeds from EIDL loan — 499,900 Repayment of note payable related party — ( 497,650 ) Advances from related parties 44,628 90,000 Repayment to related parties ( 331,100 ) ( 6,100 ) Payment of capital lease obligation — ( 445,760 ) Net cash provided by financing activities 16,068,289 512,046 Net change in cash and cash equivalents 6,083,486 676,242 Cash at beginning of year 891,816 215,574 Cash and cash equivalents at end of year $ 6,975,302 $ 891,816 Supplemental Cash Flow Information Cash paid for income taxes $ — $ — Cash paid for interest $ 165,195 $ 120,604 Non Cash Investing and Financing Activities Increase in the right-of-use asset and lease liability $ 655,726 $ 1,586,738 The accompanying notes are an integral part of these consolidated financial statements 52 Table of Contents TWIN VEE POWERCATS CO. AND SUBSIDIARIES (F/K/A TWIN VEE CATAMARANS, INC.) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2021 and 2020 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 incorporated Electra Power Sports, Inc., and subsequently changed the name to Forza X1, Inc. (“Forza X1” “Forza) October 29, 2021. Forza X1, Inc. aims to be among the first to develop and manufacture electric boats targeting the recreational market. We are focused on the creation and implementation of marine electric vehicle (“EV”) technology to control and power our electric boats utilizing our proprietary outboard electric motor. Our electric boats are being designed as fully integrated electric boats including the hull, outboard motor and control system. Principles of Consolidation The consolidated financial statements include the accounts of Twin Vee and its wholly owned subsidiaries Fix My Boat and Forza X1, collectively referred to as the “Company”. All inter-company balances and transactions are eliminated in consolidation. Common Stock Split On May 13, 2021, the Company effected a forty thousand (40,000)-for-one stock split to the shareholder of record as of May 13, 2021. The stock split was in the form of a common stock dividend of 3,999,900 new shares and all share and per share information has been retroactively adjusted to reflect the stock split. 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 December 31, 2021 and 2020, the Company had customer deposits of $ 14,100 and $ 6,784 , respectively, and is expected to be recognized as revenue within a one-year period. 53 Table of Contents 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. Use of Estimates The preparation of 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 consolidated 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 December 31, 2021 and December 31, 2020, the Company had $ 6,725,302 and $ 641,816 , respectively, in excess of FDIC insured limits. 54 Table of Contents 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 December 31, 2021 and December 31, 2020, the Company had cash and cash equivalents of $ 6,975,302 and $ 891,816 , respectively. 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. Inventories Inventories are valued at the lower of cost and net realizable value, with cost determined using the average cost method. 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. Property and Equipment Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets, except for assets held under capital leases, for which the Company records depreciation and amortization based on the shorter of the asset’s useful life or the term of the lease. 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. 55 Table of Contents Product Warranty Costs As required by the Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 460, Guarantees , the Company is including the following disclosure applicable to its product warranties. The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience. The Company’s warranty reserve is calculated as the gross sales multiplied by the historical warranty expense return rate. The following table shows the changes in the aggregate product warranty liability for the years ended December 31, 2021 and December 31, 2020, respectively: Schedule of product warranty liability 2021 2020 Balance as of beginning of year $ 75,000 $ 75,000 Less: Payments made ( 75,012 ) ( 63,606 ) Add: Provision for current years warranty 75,012 63,606 Balance as of end of year $ 75,000 $ 75,000 Advertising Advertising and marketing costs are expensed as incurred. During the years ended December 31, 2021 and 2020, advertising costs incurred by the Company totaled $ 57,042 and $ 28,736 , respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations. Research and Development The Company expenses research and development costs relating to new product development as incurred. For the twelve months ended December 31, 2021 and 2020, research and development costs amounted to $ 211,111 and $ 0 , respectively. Shipping and Handling Costs Shipping and handling costs includes 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 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. 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. 56 Table of Contents 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 twelve months ended December 31, 2021, the Company purchased all engines for its boats under a supply agreement with a single vendor. For the years ended December 31, 2021, and 2020, total purchases from this vendor were $ 3,149,300 and $ 1,898,327 , respectively. Paycheck Protection Program As U.S. GAAP does not contain authoritative accounting standards for forgivable loans provided by governmental entities to a for-profit entity. Absent authoritative accounting standards, interpretative guidance issued and commonly applied by financial statement preparers allows for the selection of accounting policies amongst acceptable alternatives. Based on the financial statement preparers allows for the selection of accounting policies amongst acceptable alternatives. Based on the facts and circumstances, the Company determined it most appropriate to account for the Paycheck Protection Program (“PPP”) loan proceeds as an in-substance government grant by analogy to International Accounting Standards 20 “(IAS 20)”, Accounting for Government Grants and Disclosure of Government Assistance . Under the provisions of IAS 20, “a forgivable loan from government is treated as a government grant when there is reasonable assurance that the entity will meet the terms for forgiveness of the loan.” IAS 20 does not define “reasonable assurance”, however, based on certain interpretations, it is analogous to “probable” as defined in FASB ASC Subtopic 450-20-20 under U.S. GAAP, which is the definition the Company has applied to its expectations of PPP loan forgiveness. Under IAS 20, government grants are recognized in earnings on a systematic basis over the periods in which the Company recognizes costs for which the grant is intended to compensate (i.e. qualified expenses). Further, IAS 20 permits for the recognition in earnings either (1) separately under a general heading such as other income, or (2) as a reduction of the related expenses. The Company has elected to recognize government grant income separately within other income to present a clearer distinction in its consolidated financial statements. 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 recover 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 Adopted Accounting Pronouncements The Company has reviewed the Accounting Standards Updates (“ASU”) recently issued by FASB and determined that they are not applicable to the Company. 57 Table of Contents 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 December 31, 2021 are as follows: Schedule of Fair value Marketable Securities 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 Certificated of Deposits 514,427 — 514,427 Money market funds (1) 6,975,302 6,384,541 — Total marketable securities $ 13,039,399 $ 6,384,541 $ 6,064,097 (1) Included within cash and cash equivalents on the Company’s consolidated balance sheets. The Company’s investments in US government bonds and money market funds are measured based on publicly available quoted market prices for identical securities as of 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. The Company did not have any marketable securities at December 31, 2020 3. Inventories At December 31, 2021 and December 31, 2020 inventories consisted of the following: Schedule of Inventories December 31, December 31, 2021 2020 Raw Materials $ 1,518,947 $ 763,633 Work in Process 240,256 173,043 Finished Product 40,566 — Total Inventory $ 1,799,769 $ 936,676 58 Table of Contents 4. Property and Equipment At December 31, 2021 and December 31, 2020, property and equipment, net consisted of the following: Schedule of property and equipment December 31, December 31, 2021 2020 Machinery and equipment $ 1,343,797 $ 985,862 Furniture and fixtures 1,850 1,850 Leasehold improvements 786,199 228,875 Software and website development 113,120 113,120 Computer hardware and software 76,598 49,967 Boat molds 778,229 126,000 Vehicles 101,984 0 Electric prototypes and tooling 142,526 146,232 3,344,303 1,651,906 Less accumulated depreciation and amortization ( 461,132 ) ( 286,877 ) $ 2,883,171 $ 1,365,029 Depreciation and amortization expense of property and equipment for the twelve months ended December 31, 2021 and 2020 is $ 198,523 and $ 155,728 , 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, we estimate incremental secured borrowing rates corresponding to the maturities of the leases. We used the U.S. Treasury rate of 0.36 % and 1.67 % at December 31, 2021 and December 31, 2020, respectively. Our office lease contains rent escalations over the lease term. We recognize 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 our 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 and majority shareholder 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 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. 59 Table of Contents At December 31, 2021 and December 31, 2020, supplemental balance sheet information related to leases were as follows: Schedule of leases supplemental balance sheet information December 31, December 31, 2021 2020 Operating lease ROU asset $ 1,550,530 $ 1,279,595 December 31, December 31, 2021 2020 Operating lease liabilities: Current portion $ 368,602 $ 295,374 Non-current portion 1,244,164 1,015,759 Total lease liabilities $ 1,612,766 $ 1,311,133 At December 31, 2021, future minimum lease payments under the non-cancelable operating leases are as follows: Schedule of maturities of lease liabilities Years Ending December 31, 2022 $ 373,800 2023 396,900 2024 416,745 2025 437,582 Total lease payment 1,625,027 Less imputed interest ( 12,261 ) Total $ 1,612,766 The following summarizes other supplemental information about the Company’s operating lease: Schedule of operating lease cost December 31, 2021 Weighted average discount rate 0.36 % Weighted average remaining lease term (years) 4.25 Twelve Months Ended December 31, 2021 2020 Operating lease cost $ 390,699 $ 303,910 Total lease cost $ 390,699 $ 303,910 60 Table of Contents 6. Accrued Liabilities At December 31, 2021 and December 31, 2020, accrued liabilities consisted of the following: Schedule of accrued liabilities December 31, December 31, 2021 2020 Accrued wages and benefits $ 185,402 $ 60,988 Accrued bonus 30,000 0 Accrued warranty 75,000 75,000 Accrued rebates 60,000 0 Accrued interest 33,852 62,317 Accrued operating expense 72,560 19,631 Total accrued liabilities $ 456,814 $ 217,936 7. Government Grant Income – Paycheck Protection Program In response to the coronavirus disease (“Covid-19”) COVID-19 pandemic, the second PPP was established under Consolidated Appropriations Act (“CAA”) and administered by the Small Business Administration (“SBA”). Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans. If the loan proceeds are fully utilized to pay qualified expenses, the full principal amount of the PPP loan, along with any accrued interest, may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization. On March 19, 2021, the Company received a loan of $ 608,224 under the PPP provided by SunTrust/Trust Bank. The loan bears interest at 1.0 % and has an initial deferment period wherein no payments are due until the application for forgiveness is submitted, not to exceed ten months from the covered period. After the deferment period, if the loan is not forgiven under the terms of the PPP, the loan and interest will be paid back over the remaining period through maturity in March 2026. Funds from the loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations. When it applied for the loan, the Company believed it would qualify to have the loan forgiven under the terms of the PPP and therefore consider the loan to be substantively a conditional government grant to be accounted for using an analogy to IAS 20. As the Company believes that it completed the required activities by utilizing the PPP proceeds for payroll and other qualified expenditures prior to December 31, 2021, it has recognized PPP government grant income for the full amount of the PPP loan, $608,224, and no liability for the PPP loan is reflected in the consolidated balance sheet as of December 31, 2021. 8. Forgiveness of Debt – Paycheck Protection Program In response to the COVID-19 pandemic, the PPP was established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and administrated by the SBA. Companies who met the eligibility requirements set forth by the PPP could qualify for PPP loans. If the loan proceeds are fully utilized to pay qualified expenses, the full principal amount of the PPP loan, along with any accrued interest, may qualify for loan forgiveness, subject to potential reduction based on the level of full-time employees maintained by the organization. In April 2020, the Company received a loan of $ 609,500 from a bank under the PPP loan program. The loan bears interest at 1 %, with principal and interest payments deferred until the application of the forgiveness is submitted, not to exceed ten months from the covered period. After that, the loan and interest would be paid back over a period of 5 years, if the loan is not forgiven under the terms of the PPP. Funds from the loan were only to be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other dept obligations incurred. On December 31, 2020, the Company was approved for full forgiveness of the loan principal and interest in the amount of $ 609,500 . The Company recognized $ 609,500 of forgiveness of PPP loan on the consolidated statement of operations during the year ended December 31, 2020. 61 Table of Contents 9. 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 ending December 31, 2021. 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 10. Related Party Transactions On December 31, 2018, the Company entered into a loan and promissory note with Joseph C. Visconti, the CEO and majority shareholder of the Company. The principal amount of the loan was $ 525,500 , together with a simple interest rate of 6 % on the balance of principal remaining unpaid. During the twelve months ended December 31, 2021, the Company repaid $27,850. At December 31, 2021 and December 31, 2020, the outstanding amount of the note payable was $ 0 and $ 27,850 , respectively. As discussed in note 5, the Company has leased its facilities from a company owned by its CEO. During the twelve months ended December 31, 2021, and 2020, the Company had purchases of $ 90,417 and $ 0 , respectively, from a related party. The Company paid $ 90,417 to our parent company, Twin Vee PowerCats, Inc., to purchase a 36-foot used catamaran boat. During twelve months ended December 31, 2021, and 2020, the Company recorded management fees of $ 42,000 and $ 0 , respectively, paid to its shareholder parent company. During the years ending December 31, 2021 and 2020, the Company paid bills on behalf of our parent company. At December 31, 2021 and 2020, due from affiliated companies was $ 286,622 , and $ 6,100 , respectively. During the years ending December 31, 2021 and 2020, our parent company funded certain expenditure which resulted in advances from affiliated companies. At December 31, 2021 and 2020, advance from affiliated companies was $ 115,043 and $ 120,693 , respectively. Approximately $ 93,000 of the balance is related to an equipment purchase, the remaining balance was related to startup costs for our franchise business. 62 Table of Contents 11. 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 $ 4,273,258 and $ 1,790,000 as of December 31, 2021, and December 31, 2020, respectively. The Company incurred no impact from repurchase events during the twelve months ended December 31, 2021 and December 31, 2020. COVID-19 The COVID-19 outbreak in the United States has caused business disruption through mandated and voluntary closings of multiple industries. While disruption is currently expected to be temporary, there is considerable uncertainty regarding the duration of the closings. The extent to which COVID-19 impacts future results, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the action to contain it or treat its impact, among others. At this time, the Company cannot estimate with meaningful precision the potential impact of COVID-19 to its financial and operational results. Litigation The Company is currently involved in various civil litigation in the normal course of business none of which is considered material. 12. Stockholder’s Equity On April 7, 2021, the Company filed a Certificate of Incorporation with the Secretary of State of the State of Delaware (see Note 1) which authorizes the Company to issue 50,000,000 shares of common stock and 10,000,000 shares of preferred stock, each with a par value of $ 0.001 . On May 13, 2021, the Company effected a forty-thousand (40,000)-for-one stock split to the shareholder of record as of May 13, 2021. The stock split was in the form of a common stock dividend of 3,999,900 new shares and all share and per share information has been retroactively adjusted to reflect the stock split. On July 23, 2021, the Company, consummated its initial public offering (the “IPO”) of 3,000,000 shares of its common stock (“Shares”) at a public offering price of $ 6.00 per Share, generating gross proceeds of $ 18,000,000 , which netted to the Company $15,849,037 after offering expenses. The Company had granted the underwriters a 45-day option to purchase up to 450,500 additional Shares to cover over-allotment., which option expired unexercised. 63 Table of Contents Common Stock Warrants As of December 31, 2021, the Company has outstanding warrants to purchase 3,000,000 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 in connection with the IPO. There was no warrant activity during the year ended December 31, 2021 other than the warrant issuance. Equity Compensation Plans The Company maintains an equity compensation 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 plans. As of December 31, 2021, there were 286,388 shares remaining available for grant under these plans. Accounting for Stock-Based Compensation Stock Compensation Expense - For the year ended December 31, 2021, the Company recorded $ 309,832 of stock-based compensation expense in the accompanying consolidated statement of operations. For the year ended December 31, 2020, the Company did not issue any stock-based compensation expense. 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 10 years. The Company utilizes the Black-Scholes model to determine fair value of stock option awards on the date pf grant. The Company utilized the following assumptions for option grants during the year ended December 31, 2021: Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions Year Ended December 31, 2021 Expected term 4.94 - 5 years Expected average volatility 49 - 55 % Expected dividend yieldy — Risk-free interest rate 0.72 – 1 % 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% 64 Table of Contents Schedule of Expected Volatility Of Option Options Outstanding Weighted Average Number of Weighted Average Remaining life Options Exercise Price (years) Fair value of option Outstanding, December 31, 2020 — $ — — $ — Granted 754,000 5.15 10.00 1,573,297 Exercised — — — — Forfeited/canceled ( 40,388 ) ( 5.53 ) ( 9.73 ) ( 95,003 ) Outstanding, December 31, 2021 713,612 $ 5.13 9.54 $ 1,478,294 Exercisable options, December 31, 2021 102,865 $ 5.70 9.46 At December 31, 2021, the Company had 713,612 options outstanding, 610,747 shares are unvested and expected to vest over the next five years. 13. Major Customers During the year ended December 31, 2021, Boat House Marine Center, Palm City Yachts, Paradis, Seven Sports Marine and Wefings had sales of over 10% of our total sales, combined the five customers represented 67 % of total sales. During the year ended December 31, 2020, Wefings had sales of over 11 % of our total sales. 14. Gain from Insurance recovery During May 2021, the Company experienced a thermal event on the electric boat prototype rendering it unusable for further testing. Additionally, the Company experienced a building fire in one of the outer storage buildings resulting in the need for demolition. This had no impact on production as this was an extra storage building not necessary for business operations. The Company recorded a loss on disposal of asset from fire of $ 249,499 and gain from insurance recovery of $ 434,724 , during the year ended December 31, 2021. 15. Income Tax Due to operating losses and the recognition of valuation allowances, the Company has no provision for a current and deferred federal or state income taxes in 2021. In 2020, the Company reversed valuation allowances against previously reserved deferred tax assets, accordingly, there was no provision for current and deferred federal or state income taxes. Deferred income taxes reflect the net tax effects of temporary and permanent differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows as of: Schedule of deferred tax assets and deferred tax liabilities December 31, December 31, 2021 2020 Non-operating loss carryforward $ 3,800,000 $ 2,175,000 Valuation allowance ( 3,800,000 ) ( 2,175,000 ) Net deferred tax asset $ — $ — 65 Table of Contents The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. During year ended December 31, 2021, the valuation allowance increased by approximately $ 375,000 . The Company has net operating and economic loss carry-forwards of approximately $ 3.8 million available to offset future federal and state taxable income. A reconciliation between expected income taxes, computed at the federal income tax rate of 21% applied to the pretax accounting loss, and our blended state income tax rate of 2%, and the income tax net expense included in the consolidated statements of operations for the years ended December 31, 2021 and 2020 is as follows: Schedule of income tax rate December 31, December 31, 2021 2020 Tax at federal statutory rate 21.0 % 21.0 % Tax at state rate net of federal benefit 2.0 % 2.0 % Change in valuation allowance ( 23.0 )% ( 23.0 )% Provision for taxes 0.0 % 0.0 % The Company’s tax positions for 2018 to 2020 have been analyzed and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years. Tax returns for the years 2018 to 2020, are subject to review by the tax authorities. 16. Net (Loss) Income Per Share Basic net loss per share has been computed on the basis of the weighted average number of shares of common stock outstanding. Diluted net loss per share of common stock has been computed on the basis of the weighted average number of shares outstanding plus equivalent shares of common stock assuming exercise of stock options. Potential shares of common stock that have an anti-dilutive effect (i.e., those that share or decrease loss per share) are excluded from the calculation of diluted net loss per share of common stock. Basic and diluted loss per common share have been computed based on the following as of years ending December 31, 2021 and 2020: Schedule of earning per share December 31, December 31, 2021 2020 Numerator for basic and diluted net (loss) income per share: Net (loss) income $ ( 1,011,009 ) $ 1,171,077 Denominator: For basic net (loss) income per share - weighted average common shares outstanding 5,331,400 4,000,000 Effect of dilutive stock options — — For diluted net (loss) income per share - weighted average common shares outstanding 5,331,400 4,000,000 Net (loss) income per share -Basic: Net (loss) income per share $ ( 0.19 ) $ 0.29 Net (loss) income per share - Diluted: Net (loss) income per share $ ( 0.19 ) $ 0.29 For the years ended December 31, 2021 and 2020, all potentially dilutive securities were antidilutive. 66 Table of Contents 17. 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. We reported our 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. Operating income (loss) 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 years ended December 31,2021 and 2020: Schedule of segment information Boat 2021 2020 Net sales $ 15,757,435 $ 11,063,619 Cost of products sold 9,483,158 6,289,316 Operating expense 7,461,787 4,053,469 Income (loss) from operations ( 1,187,510 ) $ 720,834 Other income 699,486 — Net loss $ ( 488,024 ) $ — Franchise Net sales $ 16,735 $ — Cost of products sold 15,226 — Operating expense 63,173 — Income (loss) from operations ( 61,664 ) — Other loss ( 3,769 ) — Net loss $ ( 65,433 ) $ — Electric Boat and Development Net sales $ — $ — Cost of products sold — — Operating expense 381,547 — Loss from operations ( 381,547 ) — Other loss ( 76,005 ) — Net loss $ ( 457,552 ) $ — 67 Table of Contents Property and equipment, net classified by business were as follows: December 31, December 31, 2021 2020 Gas-Powered Boats $ 2,547,410 $ 1,365,029 Franchise $ 100,196 $ — Electric-Boats $ 235,565 $ — 18. Subsequent Events Management evaluated all additional events subsequent to the balance sheet date through to March 30, 2022, the date the consolidated financial statements were available to be issued and determined the following items are relevant to disclosure: The Company granted under its 2021 Stock Incentive Plan, stock options to purchase 240,000 and 12,000 share of the Company’s common stock, to two consultants. The grants occurred on January 7, 2022 and February 15, 2022, with and exercise price of $ 3.99 and $ 3.77 , respectively. The January 7, 2022 options vest according to set production accomplishments, while the February 15, 2022 options vest in five monthly installments commencing on the first day of the month following the issuance date, and are subject to consultants continued service to Twin Vee through each of the vesting dates. 68 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.