Twin Vee PowerCats, Co. 10-Q

ITEM 1. FINANCIAL STATEMENTS TWIN VEE POWERCATS CO, INC. (F/K/A TWIN VEE CATAMARANS, INC.) CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 2022 2021 ASSETS Current Assets Cash and cash equivalents $ 5,061,380 $ 6,975,302 Accounts receivable 5,019 5,137 Marketable securities-current 2,997,999 2,996,960 Inventories 3,213,182 1,799,769 Deferred offering costs 221,894 105,500 Due from affiliated companies 286,922 286,922 Prepaid expenses and other current assets 819,868 903,756 Total Current Assets 12,606,264 13,073,346 Marketable securities - non current 2,980,044 3,067,137 Property and equipment, net 3,433,042 2,883,171 Operating lease right of use asset 1,457,424 1,550,530 Security deposit 25,000 25,000 Total Assets $ 20,501,774 $ 20,599,184 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 1,969,493 $ 1,200,861 Accrued liabilities 660,038 456,814 Contract liability 200 14,100 Due to affiliated companies 115,043 115,043 Operating lease right of use liability 377,856 368,602 Total Current Liabilities 3,122,630 2,155,420 Economic Injury Disaster Loan 499,900 499,900 Operating lease liability - noncurrent 1,146,029 1,244,164 Total Liabilities 4,768,559 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; 7,000,000 and 7,000,000 shares issued and outstanding, respectively 7,000 7,000 Additional paid-in capital 18,935,088 18,710,256 Accumulated deficit ( 3,208,873 ) ( 2,017,556 ) Total stockholders’ equity 15,733,215 16,699,700 Total Liabilities and Stockholders’ Equity $ 20,501,774 $ 20,599,184 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 Table of Contents TWIN VEE POWERCATS CO, INC. (F/K/A TWIN VEE CATAMARANS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three months ended March 31, 2022 2021 Net sales $ 5,886,000 $ 3,207,643 Cost of products sold 3,451,646 1,719,737 Gross profit 2,434,354 1,487,906 Operating expenses: Selling, general and administrative 682,321 299,425 Salaries and wages 2,253,810 928,170 Professional fees 244,739 59,026 Depreciation 80,092 46,523 Research and design 221,545 — Total operating expenses 3,482,507 1,333,144 (Loss) income from operations ( 1,048,153 ) 154,762 Other (expense) income: Other income 598 — Interest expense ( 39,840 ) ( 17,712 ) Interest income 24 — Loss on disposal of assets ( 18,408 ) ( 5,101 ) Net change in fair value of marketable securities ( 85,538 ) — Total other expenses ( 143,164 ) ( 22,813 ) Net (loss) income $ ( 1,191,317 ) $ 131,949 Basic and dilutive (loss) income per share of common stock $ ( 0.17 ) $ 0.03 Weighted average number of shares of common stock outstanding 7,000,000 4,000,000 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 5 Table of Contents TWIN VEE POWERCATS CO, INC. (F/K/A TWIN VEE CATAMARANS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited) For the Three ended March 31, 2021 Additional Total Common Stock Paid-in Accumulated Stockholder’s Shares Amount Capital Deficit Equity Balance at December 31, 2020 — — 4,000,000 $ 4,000 $ 2,551,387 $ ( 1,006,547 ) $ 1,548,840 Net income for the period — — — — 131,949 131,949 Balance at March 31, 2021 — — 4,000,000 $ 4,000 $ 2,551,387 $ ( 874,598 ) $ 1,680,789 For the Three ended March 31, 2022 Additional Total Preferred Stock Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit 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 for the period — — — — — ( 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 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 6 Table of Contents TWIN VEE POWERCATS CO, INC. (F/K/A TWIN VEE CATAMARANS, INC.) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three months ended March 31, 2022 2021 Cash Flows From Operating Activities Net (loss) income $ ( 1,191,317 ) $ 131,949 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Stock based compensation 224,832 — Depreciation and amortization 80,092 46,523 Loss on disposal of asset 18,408 5,101 Change of right-of-use asset and lease liabilities 93,106 96,520 Net change in fair value of marketable securities 85,538 — Changes in operating assets and liabilities: Accounts receivable 118 ( 85,558 ) Inventories ( 1,413,413 ) ( 315,131 ) Prepaid expenses and other current assets 83,888 ( 1,450 ) Accounts payable 768,632 129,920 Accrued liabilities 203,224 71,324 Operating lease liabilities ( 88,881 ) ( 88,847 ) Contract liabilities ( 13,900 ) 199,547 Net cash (used in) provided by operating activities ( 1,149,673 ) 189,898 Cash Flows From Investing Activities Net purchases of investment in trading marketable securities 516 — Proceeds from sale of property and equipment 80,000 — Purchase of property and equipment ( 728,371 ) ( 443,250 ) Net cash used in investing activities ( 647,855 ) ( 443,250 ) Cash Flows From Financing Activities Deferred offering cost ( 116,394 ) ( 131,000 ) Proceeds from Paycheck Protection Program loan — 608,224 Advances from related parties — 24,300 Repayment to related parties — ( 43,658 ) Net cash (used in) provided by financing activities ( 116,394 ) 457,866 Net change in cash and cash equivalents ( 1,913,922 ) 204,514 Cash at beginning of period 6,975,302 891,816 Cash and cash equivalents at end of period $ 5,061,380 $ 1,096,330 Supplemental Cash Flow Information Cash paid for income taxes $ — $ — Cash paid for interest $ 38,647 $ 79,129 Non Cash Investing and Financing Activities Increase in the right-of-use asset and lease liability $ — $ 655,726 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 7 Table of Contents TWIN VEE POWERCATS CO. (F/K/A TWIN VEE CATAMARANS, INC.) NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 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. 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 Forza X1, Inc. (“Forza X1” “Forza), collectively referred to as the “Company”. 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 March 31, 2022 and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 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 March 31, 2022 and December 31, 2021, the Company had cash and cash equivalents of $ 5,061,380 and $ 6,975,302 , respectively. 8 Table of Contents 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 March 31, 2022 and December 31, 2021, the Company had $ 4,121,000 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 March 31, 2022 and December 31, 2021, the Company had customer deposits of $ 200 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. 9 Table of Contents 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 three months ended March 31, 2022, the Company purchased all engines for its boats under a supply agreement with a single vendor. For the three months ended March 31, 2022 and 2021, total purchases to this vendor were $ 1,250,003 and $ 642,771 , 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 March 31, 2022 and December 31, 2021 are as follows: Schedule of Fair value Marketable Securities Fair Value Measurements Using Balance as of March 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Marketable securities: Corporate bonds $ 5,472,730 $ — $ 5,472,730 Certificated of Deposits 505,313 — 505,313 Money market funds (1) 3,849,926 3,849,926 — Total marketable securities $ 9,827,969 $ 3,849,926 $ 5,978,043 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 6,975,302 — Total marketable securities $ 13,039,399 $ 6,975,302 $ 6,064,097 (1) Included within cash and cash equivalents on the Company’s consolidated balance sheets. 10 Table of Contents 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 March 31, 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 March 31, 2022 and December 31, 2021 inventories consisted of the following: Schedule of Inventories March 31, December 31, 2022 2021 Raw Materials $ 2,853,541 $ 1,518,947 Work in Process 359,641 240,256 Finished Product — 40,566 Total Inventory $ 3,213,182 $ 1,799,769 4. Property and Equipment At March 31, 2022 and December 31, 2021, property and equipment consisted of the following: Schedule of property and equipment March 31, December 31, 2022 2021 Machinery and equipment $ 1,474,273 $ 1,343,797 Furniture and fixtures 9,636 1,850 Leasehold improvements 927,998 786,199 Software and website development 113,120 113,120 Computer hardware and software 84,518 76,598 Boat molds 1,217,618 778,229 Vehicles 1,000 101,984 Electric prototypes and tooling 142,526 142,526 3,970,689 3,344,303 Less accumulated depreciation and amortization ( 537,647 ) ( 461,132 ) Total Property and Equipment $ 3,433,042 $ 2,883,171 Depreciation and amortization expense of property and equipment for the three months ended March 31, 2022 and 2021 is $ 80,092 and $ 46,523 , 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 March 31, 2022 and December 31, 2021, respectively. 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. 11 Table of Contents 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. At March 31, 2022 and December 31, 2021, supplemental balance sheet information related to leases were as follows: Schedule of leases supplemental balance sheet information March 31, December 31, 2022 2021 Operating lease ROU asset $ 1,457,424 $ 1,550,530 March 31, December 31, 2021 2021 Operating lease liabilities: Current portion $ 377,856 $ 368,602 Non-current portion 1,146,029 1,244,164 Total $ 1,523,885 $ 1,612,766 At March 31, 2022, future minimum lease payments under the non-cancelable operating leases are as follows: Schedule of maturities of lease liabilities Year Ending December 31, 2022 (excluding the three months ended March 31, 2022) $ 283,500 2023 396,900 2024 416,745 2025 437,582 Total lease payment 1,534,727 Less imputed interest ( 10,842 ) Total $ 1,523,885 The following summarizes other supplemental information about the Company’s operating lease: Schedule of operating lease cost March 31, 2022 Weighted average discount rate 0.36 % Weighted average remaining lease term (years) 3.67 Three Months Ended March 31, 2022 2021 Operating lease cost $ 97,674 $ 97,674 Total lease cost $ 97,674 $ 97,674 12 Table of Contents 6. Accrued Liabilities At March 31, 2022 and December 31, 2021, accrued liabilities consisted of the following: Accrued Liabilities March 31, December 31, 2022 2021 Accrued wages and benefits $ 136,929 $ 185,402 Accrued bonus 30,000 30,000 Accrued warranty 76,927 75,000 Accrued rebates 150,000 60,000 Accrued interest 38,871 33,852 Accrued professional fees 169,701 10,225 Accrued operating expense 57,610 62,335 Total $ 660,038 $ 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 three months ended March 31, 2022, and 2021, the Company received cash of $ 0 and $ 24,300 from its affiliate companies and paid $ 0 and $ 15,808 to its affiliate companies, respectively. During three months ended March 31, 2022, and 2021, the Company recorded management fees of $ 13,500 and $ 10,500 , respectively, paid to its shareholder parent company. 13 Table of Contents During the year ended December 31 2021, the Company paid bills on behalf of our parent company. At March 31, 2022 and December 31, 2021, due from affiliated companies was $ 286,622 . During the year ended December 31, 2021, our parent company funded certain expenditures which resulted in advances from affiliated companies. At March 31, 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 three months ended March 31,2022, 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 $ 5,361,000 and $ 4,273,258 as of March 31, 2022, and December 31, 2021, respectively. The Company incurred no impact from repurchase events during the three months ended March 31, 2022 and year ended December 31, 2021. Litigation The Company is currently involved in various civil litigation in the normal course of business none of which is considered material. 10. Stockholder’s Equity Common Stock Warrants As of March 31, 2022, 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. The representative’s warrants are exercisable at any time and from time to time, in whole or in part, during the four- and one-half year period commencing 180 days from the effective date of the registration statement, which was July 23, 2021. There was no warrant activity during the quarter ended March 31, 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 March 31, 2022, there were 352,043 shares remaining available for grant under this plan. Accounting for Stock -Based Compensation Stock Compensation Expense - For the three ended March 31, 2022 and 2021, the Company recorded $ 320,505 and $ 0 , respectively, of 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 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 three months ended March 31, 2022: 14 Table of Contents Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions Three months Ended March 31, 2022 Expected term 5 years Expected average volatility 49 % Expected dividend yield — Risk-free interest rate 1.50 – 1.94 % 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% Schedule of Expected Volatility Of Option 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 252,000 3.86 10.00 Exercised — — Forfeited/canceled ( 2,655 ) ( 4.10 ) ( 9.39 ) Outstanding, March 31, 2022 962,957 $ 4.83 9.42 Exercisable options, March 31, 2022 194,163 $ 4.34 7.33 At March 31, 2022, 768,794 options are unvested and expected to vest over the next five years. 11. Major Customers During the three months ended March 31, 2022, three individual customers had sales of over 10% of our total sales, and combined these three customers represented 62 % of total sales. During the three months end March 31, 2021, three individual customers had sales of over 10% of our total sales, and combined these three customers represented 41 % 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. 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 three months ended March 31,2022 and 2021: 15 Table of Contents Reconciliation of Operating Profit (Loss) from Segments to Consolidated Gas-Powered Boats Franchise Electric Boat and Development Total Net sales $ 5,887,032 $ ( 1,032 ) $ — $ 5,886,000 Cost of products sold 3,439,541 1,027 11,078 3,451,646 Operating expense 2,953,616 26,255 502,636 3,482,507 (Loss) from operations ( 506,125 ) ( 28,314 ) ( 513,714 ) ( 1,048,153 ) Other loss ( 120,353 ) ( 22,234 ) ( 577 ) ( 143,164 ) Net loss $ ( 626,478 ) $ ( 50,548 ) $ ( 514,291 ) $ ( 1,191,317 ) For the Three Months Ended March 31, 2021 Gas-Powered Boats Franchise Electric Boat and Development Total Net sales $ 3,207,643 $ — $ — $ 3,207,643 Cost of products sold 1,719,737 — — 1,719,737 Operating expense 1,333,144 — — 1,333,144 Income from operations 154,762 — — 154,762 Other loss ( 22,813 ) — — ( 22,813 ) Net income $ 131,949 $ — $ — $ 131,949 Property and equipment, net classified by business were as follows: Schedule of Segment Reporting Information, by Segment March 31, December 31, 2022 2021 Gas-Powered Boats $ 3,165,344 $ 2,547,410 Franchise $ — $ 100,196 Electric-Boats $ 267,698 $ 235,565 13. Subsequent Events Management evaluated all additional events subsequent to the balance sheet date through to May 10, 2022, the date the condensed consolidated financial statements were available to be issued, and determined the following items: On April 28, 2022, Twin Vee and Forza requested a release and termination of our vacant land contract. This contract provided us with an option to acquire 14.5 acres of undeveloped land in Fort Pierce, Florida. On December 6, 2021, the Company paid a refundable deposit on the land purchase agreement. It has since been determined that the cost associated with building on that site is prohibitive and the Company is looking for a new site to build the Forza factory. 16 Table of Contents