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 F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to the Consolidated Financial Statements F-7 F- 1 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, 2022 and 2021, 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, 2022 and 2021 and the results of its operations and its cash flows for the years then ended, 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 29, 2023 606 F- 2 TWIN VEE POWERCATS CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2022 2021 ASSETS Current Assets Cash and cash equivalents $ 23,501,007 $ 6,975,302 Accounts receivable 14,167 5,137 Marketable securities 1,481,606 2,996,960 Inventories 4,008,332 1,799,769 Deferred offering costs — 105,500 Due from affiliated companies — 286,922 Prepaid expenses and other current assets 882,417 903,756 Total current assets 29,887,529 13,073,346 Marketable securities - non current 1,445,912 3,067,137 Property and equipment, net 5,535,902 2,883,171 Operating lease right of use asset 1,329,620 1,550,530 Security deposit 32,517 25,000 Total Assets $ 38,231,480 $ 20,599,184 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 2,065,680 $ 1,200,861 Accrued liabilities 1,240,769 456,814 Contract liabilities 5,300 14,100 Due to affiliated companies — 115,043 Operating lease right of use liability 479,314 368,602 Total current liabilities 3,791,063 2,155,420 Economic Injury Disaster Loan 499,900 499,900 Operating lease liability - noncurrent 919,628 1,244,164 Total Liabilities 5,210,591 3,899,484 Commitments and contingencies (Note 11) 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; 9,520,000 and 7,000,000 shares issued and outstanding, respectively 9,520 7,000 Additional paid-in capital 35,581,022 18,710,256 Accumulated deficit ( 7,154,808 ) ( 2,017,556 ) Equity attributed to stockholders of Twin Vee PowerCats Co, Inc. 28,435,734 16,699,700 Equity attributable to noncontrolling interests 4,585,155 — Total stockholders’ equity 33,020,889 16,699,700 Total liabilities and stockholders’ equity $ 38,231,480 $ 20,599,184 The accompanying notes are an integral part of these consolidated financial statements F- 3 TWIN VEE POWERCATS CO. AND SUSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended December 31, 2022 2021 Net sales $ 31,987,724 $ 15,774,170 Cost of products sold 21,330,918 9,498,384 Gross profit 10,656,806 6,275,786 Operating expenses: Selling, general and administrative 2,759,625 1,726,345 Salaries and wages 11,457,569 5,389,599 Professional fees 966,037 380,929 Depreciation and amortization 553,750 198,523 Research and design 941,533 211,111 Total operating expenses 16,678,514 7,906,507 Loss from operations ( 6,021,708 ) ( 1,630,721 ) Other income (expense): Other income 155,137 538 Interest expense ( 164,155 ) ( 136,709 ) Interest income 75,401 — Loss on disposal of assets ( 60,088 ) ( 254,600 ) Gain from insurance recovery — 434,724 Net change in fair value of marketable securities ( 133,988 ) ( 32,465 ) Government grant income 355,987 608,224 Total other income 228,294 619,712 Loss before income tax ( 5,793,414 ) ( 1,011,009 ) Provision for income taxes — — Net loss ( 5,793,414 ) ( 1,011,009 ) Less: Net loss attributable to noncontrolling interests ( 656,162 ) — Net loss attributed to stockholders of Twin Vee PowerCats Co, Inc. $ ( 5,137,252 ) $ ( 1,011,009 ) Basic and dilutive loss per share of common stock $ ( 0.76 ) $ ( 0.19 ) Weighted average number of shares of common stock outstanding 7,624,938 5,331,400 The accompanying notes are an integral part of these consolidated financial statements F- 4 TWIN VEE POWERCATS CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Additional Common Stock Paid-in Accumulated Noncontrolling Shares Amount Capital Deficit Interests Total Balance, December 31, 2020 4,000,000 $ 4,000 $ 2,551,387 $ ( 1,006,547 ) $ — $ 1,548,840 Common stock issued for cash 3,000,000 3,000 15,849,037 — — 15,852,037 Stock-based compensation — — 309,832 — — 309,832 Net loss — — — ( 1,011,009 ) — ( 1,011,009 ) Balance, December 31, 2021 7,000,000 $ 7,000 $ 18,710,256 $ ( 2,017,556 ) $ — $ 16,699,700 Common stock issued for payment on behalf of Twin Vee PowerCats, Inc. 20,000 20 52,380 — — 52,400 Common stock issued for cash 2,500,000 2,500 5,999,337 — — 6,001,837 Subsidiary share issuance — — 9,588,172 — 5,241,317 14,829,489 Stock-based compensation — — 1,448,751 — — 1,448,751 Merger of Twin Vee PowerCats, Inc. ( 217,874 ) — — ( 217,874 ) Net loss — — — ( 5,137,252 ) ( 656,162 ) ( 5,793,414 ) Balance, December 31, 2022 9,520,000 $ 9,520 $ 35,581,022 $ ( 7,154,808 ) $ 4,585,155 $ 33,020,889 The accompanying notes are an integral part of these consolidated financial statements F- 5 TWIN VEE POWERCATS CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended December 31, 2022 2021 Cash Flows From Operating Activities Net loss $ ( 5,793,414 ) $ ( 1,011,009 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 1,448,751 309,832 Impairment loss — 50,417 Depreciation and amortization 553,750 198,523 Loss on disposal of asset 60,088 224,037 Gain on government grant — ( 608,224 ) Change of right-of-use asset 397,136 384,791 Net change in fair value of marketable securities 133,988 32,465 Changes in operating assets and liabilities: Accounts receivable ( 9,030 ) ( 5,137 ) Inventories ( 2,208,563 ) ( 913,510 ) Prepaid expenses and other current assets 21,339 ( 903,406 ) Accounts payable 864,819 401,581 Accrued liabilities 783,955 238,878 Operating lease liabilities ( 390,050 ) ( 354,093 ) Contract liabilities ( 8,800 ) 7,316 Net cash used in operating activities ( 4,146,030 ) ( 1,947,539 ) Cash Flows From Investing Activities Security deposit ( 7,517 ) — Net sales (purchases) of investment in trading marketable securities 3,002,591 ( 6,096,562 ) Proceeds from sale of property and equipment 175,000 — Purchase of property and equipment ( 3,365,679 ) ( 1,940,702 ) Net cash used in investing activities ( 195,605 ) ( 8,037,264 ) Cash Flows From Financing Activities Net proceeds from Twin Vee issuance of common stock 6,001,836 15,746,537 Net proceeds from Forza issuance of common stock 14,934,989 — Proceeds from Paycheck Protection Program loan — 608,224 Advances from related parties ( 11,826 ) 44,628 Repayment to related parties ( 57,659 ) ( 331,100 ) Net cash provided by financing activities 20,867,340 16,068,289 Net change in cash and cash equivalents 16,525,705 6,083,486 Cash at beginning of year 6,975,302 891,816 Cash and cash equivalents at end of year $ 23,501,007 $ 6,975,302 Supplemental Cash Flow Information Cash paid for income taxes $ — $ — Cash paid for interest $ 150,399 $ 165,195 Non Cash Investing and Financing Activities Increase in the right-of-use asset $ 176,226 $ 655,726 Common stock issued for payment on behalf of Twin Vee Inc. $ 52,400 $ — The accompanying notes are an integral part of these consolidated financial statements F- 6 TWIN VEE POWERCATS CO. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2022 and 2021 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. Fix My Boat has been inactive for the majority of 2022, we anticipate focusing resources on this entity in 2023. 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. Merger On December 5, 2022, pursuant to the terms of the Agreement and Plan of Merger, dated as of September 8, 2022 (the “Merger Agreement”), by and between Twin Vee PowerCats Co. and Twin Vee Powercats, Inc., a Florida corporation (“TVPC”), was merged with and into the Company (the “Merger”). As TVPC did not meet the definition of a business under ASC 805, the merger was not accounted for as a business combination. The merger was accounted for as a recapitalization of Twin Vee PowerCats, Co., effected through the exchange of TVPC shares for Twin Vee PowerCats, Co. shares, and the cancellation of Twin Vee PowerCats, Co. shares held by Twin Vee Inc. Upon the effective date of the Merger, December 5, 2022, Twin Vee Co. accounted for the merger by assuming TVPC’s net liabilities. Twin Vee PowerCats, Co.’s financial statements reflect the operations of TVPC. prospectively and will not be restated retroactively to reflect the historical financial position or results of operations of TVPC. Principles of Consolidation The consolidated financial statements include the accounts of Twin Vee and its wholly owned subsidiary, Fix My Boat, and majority owned subsidiary, Forza X1, collectively referred to as the “Company”. The Company’s net loss excludes losses attributable to noncontrolling interests. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All inter-company balances and transactions are eliminated in consolidation. 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. Basis of Presentation The accompanying consolidated financial statements, and the related notes, have been prepared in accordance with accounting principles generally accepted in the United State of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (“SEC”). F- 7 Revenue Recognition The Company’s revenue is derived primarily from the sale of boats, motors and trailers to its independent dealers. The Company recognizes revenue when obligations under the terms of a contract are satisfied and control over promised goods is transferred to the dealer. For the majority of sales, this occurs when the product is released to the carrier responsible for transporting it to a dealer. The Company typically receives payment within five business days of shipment. Revenue is measured as the amount of consideration it expects to receive in exchange for a product. The Company offers dealer incentives that include wholesale rebates, retail rebates and promotions, floor plan reimbursement or cash discounts, and other allowances that are recorded as reductions of revenues in net sales in the statements of operations. The consideration recognized represents the amount specified in a contract with a customer, net of estimated incentives the Company reasonably expects to pay. The estimated liability and reduction in revenue for dealer incentives is recorded at the time of sale. Subsequent adjustments to incentive estimates are possible because actual results may differ from these estimates if conditions dictate the need to enhance or reduce sales promotion and incentive programs or if dealer achievement or other items vary from historical trends. Accrued dealer incentives are included in accrued liabilities in the accompanying consolidated balance sheets. Payment received for the future sale of a boat to a customer is recognized as a customer deposit. Customer deposits are recognized as revenue when control over promised goods is transferred to the customer. At December 31, 2022 and 2021, the Company had customer deposits of $ 5,300 and $ 14,100 , respectively, which is recorded as contract liabilities on the consolidated balance sheets. These deposits are expected to be recognized as revenue within a one-year period. Rebates and Discounts Dealers earn wholesale rebates based on purchase volume commitments and achievement of certain performance metrics. The Company estimates the amount of wholesale rebates based on historical achievement, forecasted volume, and assumptions regarding dealer behavior. Rebates that apply to boats already in dealer inventory are referred to as retail rebates. The Company estimates the amount of retail rebates based on historical data for specific boat models adjusted for forecasted sales volume, product mix, dealer and consumer behavior, and assumptions concerning market conditions. The Company also utilizes various programs whereby it offers cash discounts or agrees to reimburse its dealers for certain floor plan interest costs incurred by dealers for limited periods of time, generally ranging up to nine months. 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, 2022 and 2021, the Company had $ 22,666,301 and $ 6,725,302 , respectively, in excess of FDIC insured limits. F- 8 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, 2022 and 2021, the Company had cash and cash equivalents of $ 23,501,007 and $ 6,975,302 , respectively. 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. 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 is stated at cost, net of accumulated depreciation and amortization, using the straight-line method over the assets’ useful life. Leasehold improvements are amortized over the shorter of the assets’ useful life or the lease term. The estimated useful lives of property and equipment range from three to five years. Upon sale or retirement, the cost and related accumulated depreciation is eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred. F- 9 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. 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, 2022 and 2021, respectively: Schedule of product warranty liability 2022 2021 Balance as of beginning of year $ 75,000 $ 75,000 Less: Payments made ( 227,229 ) ( 75,012 ) Add: Provision for current years warranty 244,602 75,012 Balance as of end of year $ 92,373 $ 75,000 Advertising Advertising and marketing costs are expensed as incurred. During the years ended December 31, 2022 and 2021, advertising costs incurred by the Company totaled $ 112,320 and $ 43,467 , 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, 2022 and 2021, research and development costs amounted to $ 941,533 and $ 211,111 , 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. F- 10 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 year ended December 31, 2022, the Company purchased all engines for its boats under a supply agreement with a single vendor. For the year ended December 31, 2022 and 2021, total purchases to this vendor were $ 5,020,973 and $ 3,149,300 , 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. During the year ended December 31, 2021, the Company elected to recognize government grant income separately within other income to present a clearer distinction in its consolidated financial statements. Employee Retention Credit On Mach 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. Pursuant to the employee retention credit, eligible employers could receive a 50% or 70% credit on qualified wages against their employment taxes each quarter during the eligible period in 2020 and 2021, respectively, with any excess credits eligible for refunds. During the year ended December 31, 2022, the Company recognized income related to the employee retention credit of $ 355,987 upon completion of an analysis providing reasonable assurance that the Company met the conditions set forth in the CARES Act. The employee retention credit is recorded in government grant income on the consolidated statement of operations during the year ended December 31, 2022. Stock-Based Compensation The Company recognizes stock-based compensation costs for its restricted stock measured at the fair value of each award at the time of grant, as an expense over the period during which an employee is required to provide service. Compensation cost is recognized over the service period for the fair value of awards that vest. F- 11 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 In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments Credit Losses —Measurement of Credit Losses on Financial Instruments. ” ASU 2016-13 requires a financial asset (or group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected, which includes the Company’s accounts receivable. This ASU is effective for the Company for reporting periods beginning after December 15, 2022. The Company is currently assessing the potential impact that the adoption of this ASU will have on its consolidated financial statements. The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements. 2. Marketable securities 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, 2022 and 2021 are as follows: Schedule of fair value marketable securities Fair Value Measurements Using Balance as of December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Nonobservable Inputs (Level 3) Marketable securities: Corporate Bonds $ 2,436,333 $ — $ 2,436,333 $ — Certificates of Deposits 491,185 — 491,185 — Total marketable securities $ 2,927,518 $ — $ 2,927,518 $ — 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) Significant Nonobservable Inputs (Level 3) 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 corporate bonds, commercial paper and certificated of deposits are measured based on quotes from market makers for similar items in active markets. F- 12 3. Inventories At December 31, 2022 and 2021 inventories consisted of the following: Schedule of inventories December 31, December 31, 2022 2021 Raw Materials $ 3,406,371 $ 1,518,947 Inventory in transit 222,607 — Work in Process 246,734 240,256 Finished Product 132,620 40,566 Total Inventory $ 4,008,332 $ 1,799,769 4. Property and Equipment At December 31, 2022 and 2021, property and equipment consisted of the following: Schedule of property and equipment December 31, December 31, 2022 2021 Machinery and equipment $ 2,018,203 $ 1,343,797 Furniture and fixtures 23,211 1,850 Leasehold improvements 979,549 786,199 Software and website development 204,279 113,120 Computer hardware and software 123,088 76,598 Boat molds 3,007,903 778,229 Vehicles 95,534 101,984 Electric prototypes and tooling 142,526 142,526 6,594,293 3,344,303 Less accumulated depreciation and amortization ( 1,058,391 ) ( 461,132 ) $ 5,535,902 $ 2,883,171 Depreciation and amortization expense of property and equipment for the year ended December 31, 2022 and 2021 is $ 553,750 and $ 198,523 , 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, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. 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. F- 13 At December 31, 2022 and 2021, supplemental balance sheet information related to leases were as follows: Schedule of leases supplemental balance sheet information December 31, December 31, 2022 2021 Operating lease ROU asset $ 1,167,551 $ 1,550,530 December 31, December 31, 2022 2021 Operating lease liabilities: Current portion $ 393,069 $ 368,602 Non-current portion 851,096 1,244,164 Total $ 1,244,165 $ 1,612,766 At December 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, 2023 $ 396,675 2024 424,488 2025 437,582 2025 — Total lease payment 1,258,745 Less imputed interest ( 7,064 ) Total $ 1,251,681 The following summarizes other supplemental information about the Company’s operating lease: Schedule of operating lease cost December31, 2022 Weighted average discount rate 0.36 % Weighted average remaining lease term (years) 2.92 6. Leases Operating right of use (“ROU”) assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value of lease payments not yet paid. Operating right of use assets represent the Company’s right to use an underlying asset and is based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. We used the U.S. Treasury rate of 0.33 % at December 31, 2022. The Company leases a warehouse facility, and the land which are located at 150 Commerce Street, Old Fort, North Carolina (the “Property”) from NC Limited Liability Company. The Company entered into the lease on October 7, 2022, the lease has a term of two years. The current base rent payment is $ 7,517 per month including property taxes, insurance, and common area maintenance. The lease required a $ 7,517 security deposit. The base rent will increase three percent (3%) on October 15, 2023. At December 31, 2022 and 2021, supplemental balance sheet information related to leases were as follows: Schedule of leases supplemental balance sheet information December 31, December 31, 2022 2021 Operating lease ROU asset $ 162,069 $ — December 31, December 31, 2022 2021 Operating lease liabilities: Current portion $ 86,245 $ — Non-current portion 68,532 — Total $ 154,777 $ — F- 14 At December 31, 2022, future minimum lease payments under the non-cancelable operating leases are as follows: Year Ending December 31, 2023 $ 91,102 2024 61,937 Total lease payment $ 153,039 Less imputed interest ( 5,778 ) Total $ 147,261 The following summarizes other supplemental information about the Company’s operating lease: Schedule of operating lease cost December 31, 2022 Weighted average discount rate 4 % Weighted average remaining lease term (years) 1.71 7. Accrued Liabilities At December 31, 2022 and 2021, accrued liabilities consisted of the following: Schedule of accrued liabilities December 31, December 31, 2022 2021 Accrued wages and benefits $ 333,976 $ 185,402 Accrued interest 47,607 33,852 Accrued bonus 20,000 30,000 Accrued rebates 15,000 60,000 Accrued professional fees 89,500 10,225 Accrued operating expense 64,601 62,335 Accrued inventory 577,712 — Warranty reserve 92,373 75,000 Total accrued liabilities $ 1,240,769 $ 456,814 8. 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. F- 15 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 set forth below. Schedule of minimum maturities Year 2023 $ 0 2024 0 2025 0 2026 0 2027 and thereafter 499,900 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 year ended December 31, 2021, the Company repaid $27,850. At December 31, 2021, the outstanding amount of the note payable was $ 0 . As discussed in note 5, the Company has leased its facilities from a company owned by its CEO. During the year ended December 31, 2021, we received a cash payment in the amount of $ 24,300 from Boat Fuji, Inc., a company owned 33 % by Joseph Visconti, our chief executive officer, for future technical website support expenses to be incurred by us on behalf of Boat Fuji, Inc. During the year ended December 31, 2021, we paid $ 15,808 to certain affiliate companies or on their behalf, including (i) $ 2,000 that was repaid to Boat Fuji, Inc. due to a decrease in the estimated expenses to be paid by us on its behalf, (ii) $ 12,000 of franchise fee development expenses paid by us on behalf of My Boat MD, Inc., a wholly owned subsidiary of Twin Vee PowerCats, Inc and (iii) $ 1,808 of expenses paid to Twin Vee PowerCats, Inc. for reimbursement of telephone, internet and other similar expenses incurred by it on our behalf. During the year ended December 31, 2022, we recorded $ 15,000 of professional fees, for consulting work for Twin Vee performed by Jim Leffew, the Chief Executive Officer of Forza. F- 16 In connection with the closing of Forza’s initial public offering, we entered into a transition services agreement (the “Transition Services Agreement”) with Forza, pursuant to which we agreed to provide Forza, at our cost, with certain services, such as procurement, shipping, receiving, storage and use of our facility until Forza’ s new planned facility is completed. Forza’s ability to utilize our manufacturing capacity pending completion of its own facility will be subject to its availability as determined by us. The Transition Services Agreement operates on a month-to-month basis. In 2021, the Company had purchases of $ 90,417 , 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 the year ended December 31, 2022 and 2021, the Company received cash of $ 14,549 and $ 44,628 from its affiliate companies, and paid $ 57,659 and $ 3,111,100 to its affiliate companies, respectively. During the year ended December 31, 2022 and 2021, the Company recorded management fees of $ 54,000 and $ 42,000 , respectively, paid to its majority shareholder company, Twin Vee PowerCats, Inc. During the year ended December 31, 2022, the Company issued 20,000 shares valued at $ 52,400 for payment on behalf of our former Parent company. At December 31, 2022 and 2021, advances from affiliated companies included in due to affiliated companies was $ 0 and $ 115,043 , 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. During the year ended December 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 consolidated financial statements. 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 $ 10,693,000 or 67 units, and $ 4,273,000 or 24 units, as of December 31, 2022, and December 31, 2021, respectively. The Company incurred no impact from repurchase events during the year ended December 31, 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 year ended December 31, 2022, the lease expense was $ 8,800 . Litigation The Company is currently involved in various civil litigation in the normal course of business none of which is considered material. F- 17 12. Stockholders’ Equity Twin Vee Common Stock Issuance 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. The warrants will be exercisable at a per share exercise price of $ 3.4375 . Common Stock Warrants As of December 31, 2022, the Company had outstanding 293,750 warrants. 150,000 warrants 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. 143,750 warrants at exercise price of $ 34,375 were issued in connection with the Offering. 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 commencement of sales of the shares of common stock in this offering. There was no warrant activity during the year ended December 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 December 31, 2022, there were 377,090 shares remaining available for grant under this Plan. Accounting for Stock-Based Compensation Stock Compensation Expense For the year ended December 31, 2022 and 2021, the Company recorded $ 990,406 and $ 309,832 , respectively, of stock-based compensation expense, which is included in salaries and wages on the accompanying consolidated statement of operations. 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 year ended December 31, 2022 and 2021: Schedule of assumptions Year ended December 31, 2022 2021 Expected term 5 years 4.94 - 5 years Expected average volatility 49 - 51 % 49 - 55 % Expected dividend yield — — Risk-free interest rate 1.50 – 4.45 % 0.72 - 1.00 % F- 18 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 Fair value Options Exercise Price (years) of options 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 Granted 583,083 2.88 10.00 791,177 Exercised — — — — Forfeited/canceled ( 13,124 ) ( 4.81 ) ( 8.93 ) ( 13,238 ) Outstanding, December 31, 2022 1,283,571 $ 4.14 8.95 $ 2,256,233 Exercisable options, December 31, 2022 648,029 $ 4.61 8.76 At December 31, 2022, 635,542 Twin Vee options are unvested and expected to vest over the next four years. Forza Common Stock Warrants As of December 31, 2022, Forza 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 year ended December 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 will automatically increase on January 1, 2023. As of December 31, 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 year ended December 31, 2022 and 2021, Forza recorded $ 458,345 and $ 0 , respectively, of stock-based compensation expense, which is included in salaries and wages on the accompanying 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. F- 19 Forza 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 year ended December 31, 2022: Schedule of assumptions Year ended December 31, 2022 Expected term 5 years Expected average volatility 112 - 115 % Expected dividend yield — Risk-free interest rate 2.98 - 3.62 % 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 % Schedule of expected volatility of option Options Outstanding Weighted Average Number of Weighted Average Remaining life Fair value Options Exercise Price (years) of options Outstanding, December 31, 2020 — $ — — $ — Granted — — — — Exercised — — — — Forfeited/canceled — — — — Outstanding, December 31, 2021 — $ — — $ — Granted 1,441,500 3.41 10.00 4,009,913 Exercised — — — Forfeited/canceled — — — — Outstanding, December 31, 2022 1,441,500 $ 3.41 9.77 4,009,913 Exercisable options, December 31, 2022 117,986 $ 3.41 9.77 At December 31, 2022, 1,323,514 Forza options are unvested and expected to vest over the next three years. 13. Customer and Supplier Concentration Significant dealers and suppliers are those that account for greater than 10% of the Company’s revenues and purchases. During the year ended December 31, 2022, one individual dealer had sales of over 10 % of our total sales, and one customer represented 12% of total sales. During the year ended December 31, 2021, five individual customers had sales of over 10 % of our total sales and combined these five customers represented 67% of total sales. During the year ended December 31, 2022, we purchased substantial portion of materials from two third-party vendors (27%). As of December 31, 2022, the amount due to the vendors was $ 845,042 . During the year ended December 31, 2021, we purchased substantial portion of materials from two third-party vendors (454%). As of December 31, 2021, the amount due to the vendors was $ 804,098 . The Company believe there are other suppliers that could be substituted should the supplier become unavailable or non- competitive. 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. F- 20 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: Twin Vee Schedule of deferred tax assets and deferred tax liabilities December 31, December 31, 2022 2021 Non-operating loss carryforward $ 4,976,000 $ 3,800,000 Valuation allowance ( 4,976,000 ) ( 3,800,000 ) Net deferred tax asset $ — $ — Forza X1 Schedule of deferred tax assets and deferred tax liabilities December 31, December 31, 2022 2021 Non-operating loss carryforward $ 532,000 $ — Valuation allowance ( 532,000 ) — Net deferred tax asset $ — $ — 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 Twin Vee valuation allowance increased by approximately $ 1,176,000 and the Forza X1 valuation allowance increased by approximately $ 532,000 . The Company has net operating and economic loss carry-forwards of approximately $ 5.0 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, 2022 and 2021 is as follows: Schedule of income tax rate December 31, December 31, 2022 2021 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 2019 to 2021 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 2019 to 2021, are subject to review by the tax authorities. F- 21 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, 2022 and 2021: Schedule of earning per share December 31, December 31, 2022 2021 Numerator for basic and diluted net loss per share: Net loss $ ( 5,793,414 ) $ ( 1,011,009 ) Denominator: For basic net loss per share - weighted average common shares outstanding 7,624,938 5,331,400 Effect of dilutive stock options — — For diluted net losse per share - weighted average common shares outstanding 7,624,938 5,331,400 Net loss per share -Basic: Net loss per share $ ( 0.76 ) $ ( 0.19 ) Net loss per share - Diluted: Net loss per share $ ( 0.76 ) $ ( 0.19 ) For the years ended December 31, 2022 and 2021, all potentially dilutive securities were antidilutive. 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. 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. F- 22 The following table shows information by reportable segments for the three and year ended December 31, 2022 and 2021: Schedule of reportable segments For the Year Ended December 31, 2022 Gas-Powered Boats Franchise Electric Boat and Development Total Net sales $ 31,988,756 $ ( 1,032 ) $ — $ 31,987,724 Cost of products sold 21,097,148 1,027 232,743 21,330,918 Operating expense 13,274,952 35,399 3,368,163 16,678,514 Income (loss) from operations ( 2,383,344 ) ( 37,458 ) ( 3,600,906 ) ( 6,021,708 ) Other income (expense) 239,177 ( 34,060 ) 23,177 228,294 Net loss $ ( 2,144,167 ) $ ( 71,518 ) $ ( 3,577,729 ) $ ( 5,793,414 ) For the Year Ended December 31, 2021 Gas-Powered Boats Franchise Electric Boat and Development Total Net sales $ 15,757,435 $ 16,735 $ — $ 15,774,170 Cost of products sold 9,483,158 15,226 — 9,498,384 Operating expense 7,461,787 63,173 381,547 7,906,507 Loss from operations ( 1,187,510 ) ( 61,664 ) ( 381,547 ) ( 1,630,721 ) Other income (expense) 699,486 ( 3,769 ) ( 76,005 ) 619,712 Net loss $ ( 488,024 ) $ ( 65,433 ) $ ( 457,552 ) $ ( 1,011,009 ) Property and equipment, net classified by business were as follows: Schedule of segment reporting information by segment December 31, December 31, 2022 2021 Gas-Powered Boats $ 4,694,607 $ 2,547,410 Franchise $ — $ 100,196 Electric-Boats $ 765,406 $ 235,565 18. Subsequent Events The Company has evaluated all event or transactions that occurred after December 31, 2022 through March 28, 2023, which is the date that the 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 February 3, 2023, Ms. Nicole Camacho, the Chief Financial of Forza X1, Inc., provided the Company notice of her resignation as an executive officer of the Company, effective February 24, 2023. Ms. Camacho informed the Company that she was resigning from the Company as an executive officer to pursue another opportunity and that her resignation was not the result of any disagreement relating to the Company’s operations, policies or practices. On February 6, 2023, the Board of Directors (the “Board”) of Forza, appointed Carrie Gunnerson to the position of Interim Chief Financial Officer and Interim Principal Financial and Accounting Officer. F- 23 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.