Twin Vee PowerCats, Co. 10-K

Item 8. Financial Statements and Supplementary Data. 61 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 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, 2023 and 2022, 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, 2023 and 2022 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. 606 GRASSI & CO., CPAs, P.C. We have served as the Company’s auditor since 2020. Jericho, New York March 27, 2024 F- 2 TWIN VEE POWERCATS CO. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2023 2022 Assets Current Assets Cash and cash equivalents $ 16,497,703 $ 23,501,007 Restricted cash 257,530 — Accounts receivable 80,160 14,167 Marketable securities 4,462,942 1,481,606 Inventories, net 4,884,761 4,008,332 Prepaid expenses and other current assets 463,222 882,417 Total current assets 26,646,318 29,887,529 Marketable securities - non current — 1,445,912 Property and equipment, net 12,293,988 5,535,902 Operating lease right of use asset 854,990 1,329,620 Security deposit 51,417 32,517 Total Assets $ 39,846,713 $ 38,231,480 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable $ 2,399,026 $ 2,065,680 Accrued liabilities 1,075,512 1,240,769 Contract liabilities 44,195 5,300 Finance lease liability 214,715 — Operating lease right of use liability 482,897 479,314 Total current liabilities 4,216,345 3,791,063 Economic Injury Disaster Loan 499,900 499,900 Finance lease liability - noncurrent 2,644,123 — Operating lease liability - noncurrent 436,730 919,628 Total Liabilities 7,797,098 5,210,591 Commitments and contingencies (Note 13) — — 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 shares issued and outstanding 9,520 9,520 Additional paid-in capital 37,848,657 35,581,022 Accumulated deficit ( 14,346,984 ) ( 7,154,808 ) Equity attributed to stockholders of Twin Vee PowerCats Co, Inc. 23,511,193 28,435,734 Equity attributable to noncontrolling interests 8,538,422 4,585,155 Total stockholders’ equity 32,049,615 33,020,889 Total Liabilities and Stockholders' Equity $ 39,846,713 $ 38,231,480 The accompanying notes are an integral part of these consolidated financial statements F- 3 TWIN VEE POWERCATS CO. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2023 2022 Net sales $ 33,425,912 $ 31,987,724 Cost of products sold 23,702,885 21,330,918 Gross profit 9,723,027 10,656,806 Operating expenses: Selling, general and administrative 3,734,406 2,759,625 Salaries and wages 13,929,580 11,457,569 Professional fees 1,249,388 966,037 Depreciation and amortization 1,353,383 553,750 Research and development 1,443,569 941,533 Total operating expenses 21,710,326 16,678,514 Loss from operations ( 11,987,299 ) ( 6,021,708 ) Other income (expense): Dividend income 909,215 — Other income 9,898 155,137 Interest expense ( 221,157 ) ( 164,155 ) Interest income 48,370 75,401 Loss on disposal of assets — ( 60,088 ) Unrealized gain on marketable securities 87,781 ( 133,988 ) Realized gain on marketable securities 103,941 — Employee Retention Credit income 1,267,055 355,987 Total other income 2,205,103 228,294 Income before income tax ( 9,782,196 ) ( 5,793,414 ) Income taxes provision — — Net loss ( 9,782,196 ) ( 5,793,414 ) Less: Net loss attributable to noncontrolling interests ( 2,590,020 ) ( 656,162 ) Net loss attributed to stockholders of Twin Vee PowerCats Co, Inc. $ ( 7,192,176 ) $ ( 5,137,252 ) Basic and dilutive loss per share of common stock $ ( 0.76 ) $ ( 0.67 ) Weighted average number of shares of common stock outstanding 9,520,000 7,624,938 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 Preferred Stock Common Stock Paid-in Accumulated Noncontrolling Shares Amount Shares Amount Capital Deficit Interests Total 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 parent — — 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 Subsidiary share issuance — — — — 364,886 — 6,564,666 6,929,552 Stock-based compensation — — — — 1,902,749 — — 1,902,749 Subsidiary stock repurchase — — — — — — ( 21,379 ) ( 21,379 ) Net loss — — — — — ( 7,192,176 ) ( 2,590,020 ) ( 9,782,196 ) Balance, December 31, 2023 — $ — 9,520,000 $ 9,520 $ 37,848,657 $ ( 14,346,984 ) $ 8,538,422 $ 32,049,615 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 Years Ended December 31, 2023 2022 Cash Flows From Operating Activities Net loss $ ( 9,782,196 ) $ ( 5,793,414 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock based compensation 1,902,749 1,448,751 Depreciation and amortization 1,353,383 553,750 Loss on disposal of asset — 60,088 Change of right-of-use asset 474,630 397,136 Net change in fair value of marketable securities ( 87,781 ) 133,988 Change in inventory reserve 419,616 — Changes in operating assets and liabilities: Accounts receivable ( 65,993 ) ( 9,030 ) Inventories ( 1,296,045 ) ( 2,208,563 ) Prepaid expenses and other current assets 419,195 21,339 Accounts payable 333,346 864,819 Accrued liabilities ( 165,257 ) 783,955 Operating lease liabilities ( 479,315 ) ( 390,050 ) Contract liabilities 38,895 ( 8,800 ) Net cash used in operating activities ( 6,934,773 ) ( 4,146,031 ) Cash Flows From Investing Activities Security deposit ( 18,900 ) ( 7,517 ) Realized gain on sale of marketable securities, available for sale ( 103,941 ) — Net (purchases) sales of investment in trading marketable securities ( 1,343,702 ) 3,002,591 Proceeds from sale of property and equipment — 175,000 Purchase of property and equipment ( 5,162,478 ) ( 3,365,679 ) Net cash used in investing activities ( 6,629,021 ) ( 195,605 ) Cash Flows From Financing Activities Proceeds from issuance of common stock — 6,001,836 Proceeds from Forza Issuance of common stock 6,996,015 14,934,989 Deferred offering costs ( 66,463 ) — Forza stock repurchase ( 21,379 ) — Advances from related parties — ( 11,826 ) Repayment to related parties — ( 57,659 ) Finance lease payments ( 90,153 ) — Net cash provided by financing activities 6,818,020 20,867,340 Net change in cash, cash equivalents and restricted cash ( 6,745,774 ) 16,525,705 Cash and cash equivalents at beginning of the year 23,501,007 6,975,302 Cash, cash equivalents and restricted cash at end of the year $ 16,755,233 $ 23,501,007 Supplemental Cash Flow Information Cash paid for income taxes $ — $ — Cash paid for interest $ 235,519 $ 150,399 Non Cash Investing and Financing Activities Increase in the right-of-use asset and lease liability $ — $ 176,226 Common stock issued for payment on behalf of parent — 52,400 Right of use asset - finance leases $ 2,948,991 $ — Reconciliation to the Consolidated Balance Sheets Cash and cash equivalents $ 16,497,703 $ 23,501,007 Restricted cash 257,530 — Total cash, cash equivalents and restricted cash $ 16,755,233 $ 23,501,007 F- 6 TWIN VEE POWERCATS CO. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2023 and 2022 1. Organization and Summary of Significant Accounting Policies Organization Twin Vee PowerCats Co. (“Twin Vee” or the “Company”) was incorporated as Twin Vee Catamarans, Inc., in the state of Florida, on December 1, 2009. On April 7, 2021, the Company filed a Certificate of Conversion to register and incorporate in the state of Delaware and changed the company name to Twin Vee PowerCats Co. The Certificate of Incorporation for Twin Vee PowerCats Co. was also filed on April 7, 2021. On September 1, 2021, the Company formed Fix My Boat, Inc., (“Fix My Boat”), a wholly-owned subsidiary. Fix My Boat will utilize a franchise model for marine mechanics across the country. Fix My Boat has been inactive for 2023 and 2022, we anticipate focusing resources on this entity in the future. Forza X1, Inc. was initially incorporated as Electra Power Sports, Inc. on October 15, 2021, and subsequently changed its name to Forza X1, Inc. (“Forza X1” or “Forza”) on October 29, 2021. Prior to Forza’s incorporation on October 15, 2021, the electric boat business was operated as the Company’s Electra Power Sports™ Division. Following the Company’s initial public offering that closed on July 23, 2021 (the “IPO”), it determined in October 2021 that for several reasons, that it would market the Company’s new independent line of electric boats under a new brand name (and new subsidiary) . On April 20, 2023, the Company formed AquaSport Co.(“AquaSport”), a wholly owned subsidiary in the state of Florida in connection with the Company’s plan to lease the assets of former AQUASPORT™ boat brand and manufacturing facility in White Bluff Tennessee. 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 (“Twin Vee Inc.” or “TVPC”), TVPC was merged with and into the Company (the “Merger”). As Twin Vee Inc. 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, AquaSport, Fix My Boat, and controlling interest subsidiary, Forza X1, collectively referred to as the “Company”. The Company’s net loss excludes losses attributable to noncontrolling interests. The Company reports noncontrolling interests in consolidated entities as a component of equity separate from the Company’s equity. All inter-company balances and transactions are eliminated in consolidation. Basis of Presentation The accompanying 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 consolidated 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. Schedule of accounts receivable Total accounts receivable January 1, 2022 $ 5,137 January 1, 2023 $ 14,167 December 31, 2023 $ 80,160 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, 2023 and 2022, the Company had customer deposits of $ 44,195 and $ 5,300 , respectively, which is recorded as contract liabilities on the consolidated balance sheets. These deposits are refundable, we are uncertain when we will be able to recognize as revenues. 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. F- 8 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, 2023 and 2022, the Company had $ 15,868,574 and $ 22,666,301 , respectively, in excess of FDIC insured limits. Cash, Cash Equivalents and Restricted Cash 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, 2023 and 2022, the Company had cash and cash equivalents of $ 16,755,233 and $ 23,501,007 , respectively. Restricted cash includes amounts that are collected and are held in connection with assets securing certain of the Company’s financing transactions. Restricted cash is restricted for payment of interest expense and principal on the outstanding borrowings. On December 31,2023 and 2022, included within restricted cash on the Company’s consolidated balance sheets is an irrevocable letter of credit for $ 257,530 and $0, respectively. Marketable Securities The Company’s investments in debt securities are carried at either amortized cost or fair value. Investments in debt securities that the Company has the positive intent and ability to hold to maturity are carried at amortized cost and classified as held-to-maturity. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading debt securities as well as realized gains and losses on available-for-sale debt securities are included in other 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. F- 9 Accounts Receivable The Company carries its accounts receivables net of an allowance for credit losses. The measurement and recognition of credit losses involves the use of judgment. Management’s assessment of expected credit losses includes consideration of current and expected economic conditions, market and industry factors affecting the Company’s customers (including their financial condition), the aging of account balances, historical credit loss experience, customer concentrations, and customer creditworthiness. Management evaluates its experience with historical losses and then applies this historical loss ratio to financial assets with similar characteristics. The Company’s historical loss ratio or its determination of risk pools may be adjusted for changes in customer, economy, market or other circumstances. The Company may also establish an allowance for credit losses for specific receivables when it is probable that the receivable will not be collected, and the loss can be reasonably estimated. Amounts are written off against the allowance when they are considered to be uncollectible, and reversals of previously reserved amounts are recognized if a specifically reserved item is settled for an amount exceeding the previous estimate. Inventories Inventories are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method on a first-in first-out basis. Net realizable value is defined as sales price less cost of completion, disposable and transportation and a normal profit margin. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value. At December 31, 2023 and 2022, the provision for excess or obsolete inventories is $ 419,616 and $ 0 , respectively. Property and Equipment Property and equipment is stated at cost, net of accumulated depreciation and amortization, using the straight-line method over the assets’ useful life. Leasehold improvements are amortized over the shorter of the assets’ useful life or the lease term. The estimated useful lives of property and equipment range from three to five years. Upon sale or retirement, the cost and related accumulated depreciation is eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which do not increase the useful lives of the assets, are charged to operations as incurred. Impairment of Long-Lived Assets Management assesses the recoverability of its long-lived assets when indicators of impairment are present. If such indicators are present, recoverability of these assets is determined by comparing the undiscounted net cash flows estimated to result from those assets over the remaining life to the assets’ net carrying amounts. If the estimated undiscounted net cash flows are less than the net carrying amount, the assets would be adjusted to their fair value, based on appraisal or the present value of the undiscounted net cash flows. 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, 2023 and 2022, respectively: F- 10 Schedule of product warranty liability 2023 2022 Balance as of the beginning of year $ 92,373 $ 75,000 Less: Payments made ( 358,129 ) ( 227,229 ) Add: Provision for current years warranty 458,650 244,602 Balance as of end of year $ 192,894 $ 92,373 Advertising Advertising and marketing costs are expensed as incurred. During the years ended December 31, 2023 and 2022, advertising costs incurred by the Company totaled $ 444,231 and $ 112,320 , 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 years ended December 31, 2023 and 2022, research and development costs amounted to $ 1,157,585 and $ 941,533 , 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 products sold in the consolidated statements of operations. All manufactured boats are free on board (FOB), from the Fort Pierce manufacturing plant. Dealers are required to either pick up the boats themselves or contract with a transporter. For the years ended December 31, 2023, and 2022, shipping and handling costs amounted to $ 718,635 and $ 179,998 , respectively. Leases The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. The operating lease ROU asset also includes any lease payments made and is reduced by lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expenses for lease payments is recognized on a straight-line basis over the lease term. Supplier Concentrations The Company is dependent on the ability of its suppliers to provide products on a timely basis and on favorable pricing terms. The loss of certain principal suppliers or a significant reduction in product availability from principal suppliers could have a material adverse effect on the Company. Business risk insurance is in place to mitigate the business risk associated with sole suppliers for sudden disruptions such as those caused by natural disasters. The Company is dependent on third-party equipment manufacturers, distributors, and dealers for certain parts and materials utilized in the manufacturing process. During the year ended December 31, 2023, the Company purchased all engines for its boats under supplier agreements with three vendors. During the year ended December 31, 2022, the Company purchased all engines for its boats under supplier agreements with one vendor. For the years ended December 31, 2023 and 2022, total purchases from these vendors were $ 9,252,915 and $ 5,020,973 , respectively. F- 11 Employee Retention Credit On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC. Accounting Standards Codification 105, “Generally Accepted Accounting Principles,” describes the decision-making framework when no guidance exists in US GAAP for a particular transaction. Specifically, ASC 105-10-05-2 instructs companies to look for guidance for a similar transaction within US GAAP and apply that guidance by analogy. As such, forms of government assistance, such as the ERC, provided to business entities would not be within the scope of ASC 958, but it may be applied by analogy under ASC 105-10-05-2. We accounted for the Employee Retention Credit as a government grant in accordance with Accounting Standards Update 2013-06, Not-for-Profit Entities (Topic 958) (“ASU 2013-06”) by analogy under ASC 105-10-05-2. Under this standard, government grants are recognized when the conditions on which they depend are substantially met. For the years ended December 31, 2023 and 2022, respectively, the Company received $ 1,267,055 and $ 355,987 , from the Employee Retention Credit (ERC). Stock-Based Compensation The Company recognizes stock-based compensation costs for its restricted stock and restricted stock units, measured at the fair value of each award at the time of grant, as an expense over the period during which an employee is required to provide service. Compensation cost is recognized over the service period for the fair value of awards that vest. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating losses. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be 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 Accounting Standards Update (“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 adopted this standard effective January 1, 2023, and the adoption of this ASU did not have a significant impact on the 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 consolidated financial statements. 2. Marketable Securities Schedule of marketable Securities As of December 31, 2023 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Marketable Securities Corporate Bonds $ 4,473,033 $ 50,878 $ ( 60,969 ) $ 4,462,942 Certificates of Deposits — — — — Total marketable securities $ 4,473,033 $ 50,878 $ ( 60,969 ) $ 4,462,942 As of December 31, 2022 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Marketable Securities Corporate Bonds $ 2,575,817 $ — $ ( 139,484 ) $ 2,436,333 Certificates of Deposits 517,815 ( 26,630 ) 491,185 Total marketable securities $ 3,093,632 $ — $ ( 166,114 ) $ 2,927,518 3. Fair Value Measurements 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, 2023 and 2022 are as follows: F- 12 Schedule of assets and liabilities measured fair value recurring basis Fair Value Measurements Using Balance as of December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Nonobservable Inputs (Level 3) Marketable securities: Corporate Bonds $ 4,462,942 $ — $ 4,462,942 $ — Total marketable securities $ 4,462,942 $ — $ 4,462,942 $ — 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 $ — $ 2,436,333 $ — The Company’s investments in corporate bonds are measured based on quotes from market makers for similar items in active markets. 4. Inventories At December 31, 2023 and 2022 inventories consisted of the following: Schedule of inventories December 31, December 31, 2023 2022 Raw Materials $ 5,001,512 $ 3,628,978 Work in Process 96,721 246,734 Finished Product 206,144 132,620 Total Inventory $ 5,304,377 $ 4,008,332 Reserve for Excess and Obsolete ( 419,616 ) — Net inventory $ 4,884,761 $ 4,008,332 5. Property and Equipment At December 31, 2023 and 2022, property and equipment consisted of the following: Schedule of property and equipment December 31, December 31, 2023 2022 Machinery and equipment $ 2,692,473 $ 1,977,482 Furniture and fixtures 40,299 20,335 Land 1,119,758 — Leasehold improvements 1,228,860 950,132 Software and website development 300,935 148,693 Computer hardware and software 159,342 123,088 Boat molds 5,871,373 2,277,664 Vehicles 143,360 94,534 Electric prototypes and tooling 142,526 142,526 Assets under construction 2,977,894 859,839 14,676,820 6,594,293 Less accumulated depreciation and amortization ( 2,382,832 ) ( 1,058,391 ) $ 12,293,988 $ 5,535,902 F- 13 Depreciation and amortization expense of property and equipment for the year ended December 31, 2023 and 2022 is $ 1,353,383 and $ 553,750 , respectively. 6. 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 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 December 31, 2023 and 2022, supplemental balance sheet information related to leases were as follows: Schedule of supplemental balance sheet information related to leases December 31, December 31, 2023 2022 Operating lease ROU asset $ 779,843 $ 1,167,551 December 31, December 31, 2023 2022 Operating lease liabilities: Current portion $ 414,364 $ 393,069 Non-current portion 436,731 851,096 Total $ 851,095 $ 1,244,165 At December 31, 2023, future minimum lease payments under the non-cancelable operating leases are as follows: Schedule of future minimum lease payments Year Ending December 31, 2024 $ 416,745 2025 437,582 Total lease payment 854,327 Less imputed interest ( 3,232 ) Total $ 851,095 The following summarizes other supplemental information about the Company’s operating lease: Schedule of other supplemental information December 31, 2023 Weighted average discount rate 0.36 % Weighted average remaining lease term (years) 1.92 F- 14 7. 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. 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, 2023 and 2022, supplemental balance sheet information related to leases were as follows: Schedule of leases supplemental balance sheet information December 31, December 31, 2023 2022 Operating lease ROU asset $ 75,147 $ 162,069 December 31, December 31, 2023 2022 Operating lease liabilities: Current portion $ 68,532 $ 86,245 Non-current portion — 68,532 Total $ 68,532 $ 154,777 At December 31, 2023, future minimum lease payments under the non-cancelable operating leases are as follows: Schedule of future minimum lease payments under the non-cancelable Year Ending December 31, 2024 $ 69,680 Less imputed interest ( 1,148 ) Total $ 68,532 The following summarizes other supplemental information about the Company’s operating lease: Schedule of operating lease cost December 31, 2023 Weighted average discount rate 4 % Weighted average remaining lease term (years) 0.79 8. Finance Leases Vehicle and Equipment Lease The Company has finance leases for a vehicle, two forklifts, and a copy machine. The Company entered into the vehicle lease in February of 2023, with an asset value of $ 48,826 , which is recorded in net property and equipment on the consolidated balance sheet, it is a 60 -month lease at a 3 % interest rate. At December 31, 2023 and 2022, the net book value was $40,688 and $0, respectively. The Company entered into the first forklift lease in January of 2023, with an asset value of $ 43,579 , which is recorded in net property and equipment on the consolidated balance sheet. It is a 60 -month lease at a 7.5 % interest rate. At December 31, 2023 and 2022, the net book value was $ 37,042 and $ 0 , respectively The Company entered into the second forklift lease in July of 2023, with an asset value of $ 35,508 , which is recorded in net property and equipment on the consolidated balance sheet. It is a 60 -month lease at a 5.0 % interest rate. At December 31, 2023 and 2022, the net book value was $ 34,239 and $ 0 , respectively. The Company entered into the copier lease in July of 2023, with an asset value of $ 14,245 , which is recorded in net property and equipment on the consolidated balance sheet. It is a 60 -month lease at a 7.0 % interest rate. At December 31, 2023 and 2022, the net book value was $ 13,566 and $ 0 . F- 15 AquaSport lease On April 20, 2023 Twin Vee incorporated AquaSport Co., a wholly owned subsidiary, in the state of Florida in connection with its plan to lease the AQUASPORT™ boat brand and manufacturing facility in White Bluff Tennessee. On May 5, 2023, Twin Vee and AquaSport Co. entered into an agreement with Ebbtide Corporation (“Ebbtide”) providing AquaSport Co. with the right to acquire assets, AQUASPORT™ boat brand, trademarks, 150,000-square-foot manufacturing facility situated on 18.5 acres in White Bluff Tennessee, related tooling, molds, and equipment to build five Aquasport models ranging in size from 21 to 25-foot boats (the “AquaSport Assets”). Under the Agreement, the Company has the right to purchase the AquaSport Assets from Ebbtide for $ 3,100,000 during the five-year term of the Agreement (or extension period), less credit for a $ 300,000 security deposit paid by the Company and $16,000 a month for any rent paid under the Agreement by AquaSport Co. to Ebbtide. AquaSport Co. will lease the AquaSport Assets from Ebbtide under the Agreement at a monthly rent of $ 22,000 with the option to acquire the AquaSport Assets. The lease is for a term of five years, commencing June 1, 2023 at a 2.93 % interest rate, with one option to renew the lease for an additional five years. In the event AquaSport Co. commits three payment Events of Default (as defined in the Agreement) within any consecutive two-year period or commits any other material Event of Default that is not cured timely and remains uncured, Ebbtide may terminate AquaSport’s rights under the Agreement to acquire the AquaSport Assets. In addition, Ebbtide has the right to terminate the Agreement if an Event of Default occurs. AquaSport’s obligations under the Agreement have been guaranteed by the Company. Finance leases on the AquaSport lease are recorded in property and equipment, net on the consolidated balance sheet. Schedule of finance lease in property and equipment December 31, December 31, 2023 2022 Land $ 1,000,000 $ — Building 100,000 — Molds 2,000,000 — At December 31, 2023 and 2022, supplemental balance sheet information related to finance leases were as follows: Schedule of supplemental balance sheet of finance lease December 31, December 31, 2023 2022 Finance lease liabilities: Current portion $ 214,715 $ — Non-current portion 2,644,123 — Total $ 2,858,838 $ — At December 31, 2023, future minimum lease payments under the non-cancelable finance leases are as follows: Schedule of future minimum lease payments of finance lease Year Ending December 31, 2024 $ 298,249 2025 298,248 2026 290,842 2027 292,927 Thereafter 1,987,354 Total lease payment 3,167,620 Less imputed interest ( 308,782 ) Total $ 2,858,838 F- 16 The following summarizes other supplemental information about the Company’s finance lease: Schedule of summarize other supplemental information of finance lease December 31, 2023 Weighted average discount rate 3.03 % Weighted average remaining lease term (years) 4.34 9. Accrued Liabilities At December 31, 2023 and 2022, accrued liabilities consisted of the following: Schedule of accrued liabilities December 31, December 31, 2023 2022 Accrued wages and benefits $ 343,511 $ 333,976 Accrued interest 33,245 47,607 Accrued bonus — 20,000 Accrued rebates — 15,000 Accrued professional fees — 89,500 Accrued operating expense 115,037 64,601 Accrued assets under construction 390,825 — Accrued inventory — 577,712 Warranty reserve 192,894 92,373 Total accrued liabilities $ 1,075,512 $ 1,240,769 10. Short-term Debt On December 31, 2023 and 2022, the Company had a line of credit with Wells Fargo and Yamaha Motor Finance for $ 1,250,000 and $ 1,250,000 , respectively. Interest on our Wells Fargo line is calculated in two ways, the average daily balance is prime +5%, with a minimum prime at 5.5%, there is also a monthly flat charge of 0.2%, which, is 2.4% annualized. After the 150-day due in full period, the average daily balance rate goes up to prime +8.5% with no monthly flat charge. On December 31, 2023 and 2022, our interest rate was 11.6% and 6.5%. Interest on our Yamaha line is calculated on the average daily balance +4%, with a minimum prime at 8.0%. On December 31, 2023 and 2022, our interest rate was 16.8% and 0%, respectively. On December 31, 2023 and 2022, the outstanding balance with Wells Fargo was $ 231,736 and $ 699,638 , respectively. On December 31, 2023 and 2022, the outstanding balance with Yamaha Motor Finance was $ 210,674 and $ 0 , respectively. The outstanding balances are included in account payable on the consolidated balance sheet. 11. 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, F- 17 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 Ending December 31, 2024 $ — 2025 — 2026 — 2027 6,611 2028 and thereafter 493,289 Total $ 499,900 12. Related Party Transactions As discussed in note 6, the Company has leased its facilities from a company owned by its CEO. During the years ended December 31, 2023 and 2022, respectively, we recorded $ 36,000 and $ 24,225 of professional fees, for consulting work for Twin Vee performed by Jim Leffew, the Chief Executive Officer of Forza. Additionally, during the years ended December 31, 2023 and 2022, respectively, Aqua Sport recorded expense of $50,000 and $0, for compensation for his work to start up the Tennessee facility. During the years ended December 31, 2023 and 2022, the Company received a monthly fee of $ 6,800 and $ 5,000 , respectively, to provide management services and facility utilization to Forza. This income for the Company, and expense for Forza, has been eliminated in the consolidated financial statements. In August of 2022, Forza signed a six-month lease for a duplex on a property in Black Mountain, NC, to be used by its traveling employees during the construction of its new manufacturing facility, for $ 2,500 per month. After the initial term of the lease, it was extended on a month-to-month basis. In August of 2023, the president of Forza, James Leffew, purchased the property, and Forza executed a new lease agreement with Mr. Leffew on the same month-to-month terms. For the years ended December 31, 2023 and 2022, the lease expense was $ 20,000 and $ 10,036 , respectively. 13. 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 $ 10,510,252 or 76 units, and $ 10,693,000 or 67 units, as of December 31, 2023, and December 31, 2022, respectively. The Company incurred no impact from repurchase events during the years ended December 31, 2023 and December 31, 2022. 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, 2023, the lease expense was $ 4,400 . F- 18 Litigation The Company is currently involved in various civil litigation in the normal course of business none of which is considered material. 14. 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, 2023, 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, 2023. 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, 2023, there were shares remaining available for grant under this Plan. Accounting for Stock-Based Compensation Stock Compensation Expense For the year ended December 31, 2023 and 2022, the Company recorded $ 1,902,749 and $ 1,448,751 , 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. F- 19 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, 2023 and 2022: Schedule of assumptions Year ended December 31, 2023 2022 Expected term 5 years 4.94 - 5 years Expected average volatility 35.91 - 51 % 49 - 55 % Expected dividend yield — — Risk-free interest rate 1.50 – 4.72 % 0.72 - 1.00 % 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 option activity Options Outstanding Weighted Number of Weighted Average Average Remaining life Fair value Options Exercise Price (years) of options Outstanding, December 31, 2021 713,612 $ 5.13 9.54 $ 1,546,642 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 $ 2,324,581 Granted 75,000 1.35 10.00 39,960 Exercised — — — Forfeited/canceled ( 87,555 ) ( 3.65 ) ( 151,394 ) Outstanding, December 31, 2023 1,271,016 $ 3.99 8.04 $ 2,213,147 Exercisable options, December 31, 2023 870,444 $ 4.40 7.83 At December 31, 2023, 400,572 share of Twin Vee options are unvested and expected to vest over the next four years. Restricted Stock Units Under the Company’s 2021 Stock Incentive Plan the Company has issued restricted stock units (“RSUs”). RSUs are granted with a fair value equal to the closing market price of our common stock on the business day of the grant date. An award may vest completely at a point in time (cliff-vest) or in increments over time (graded-vest). Generally, RSUs vest over three years. F- 20 Schedule of restricted stock options Restricted Stock Units Outstanding Weighted Number of Weighted Average Grant – Date Average Remaining life Aggregate Intrinsic Units Fair Value Price (years) Value Outstanding, December 31, 2022 — $ — — $ — Granted 91,875 2.25 3.0 130,463 Exercised — — — Forfeited/canceled ( 24,625 ) ( 2.25 ) ( 34,968 ) Outstanding, December 31, 2023 67,250 $ 2.25 2.07 $ 95,495 Forza Common Stock Warrants As of December 31, 2023, Forza had outstanding warrants to purchase 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, 2023. 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, 2023, there were shares remaining available for grant under this Plan. Stock based compensation expense is included in the consolidated statements of operations, under salaries and wages. Accounting for Stock -Based Compensation For the year ended December 31, 2023 and 2022, Forza recorded $ 1,345,270 and $ 458,346 , 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. 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, 2023: Schedule of assumptions Year ended December 31, 2023 2022 Expected term 5 years 5 years Expected average volatility 108 - 113 % 110 - 113 % Expected dividend yield — — Risk-free interest rate 2.98 – 4.72 % 2.98 – 3.62 % F- 21 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 options activity Options Outstanding Weighted Number of Weighted Average Average Remaining life Fair value of Options Exercise Price (years) option 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 0.05 $ 4,009,913 Granted 518,000 0.70 9.76 287,835 Exercised — — Forfeited/canceled ( 69,583 ) 1.24 9.62 ( 40,248 ) Outstanding, December 31, 2023 1,889,917 $ 2.75 9.36 $ 4,257,500 Exercisable options, December 31, 2023 611,250 $ 2.79 2.79 At December 31, 2023, Forza options are unvested and expected to vest over the next three years. 15. 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, 2023, one individual dealer had sales of over 10 % of our total sales, and one customer represented 10 % of total sales. During the year ended December 31, 2022, one individual customer had sales of over 10 % of our total sales and one customer represented 12 % of total sales. During the year ended December 31, 2023, we purchased a substantial portion of materials from one third-party vendors. As of December 31, 2023, the amount due to the vendors was $ 396,828 . During the year ended December 31, 2022, we purchased a substantial portion of materials from two third-party vendors. As of December 31, 2022, the amount due to the vendors was $ 845,042 . The Company believe there are other suppliers that could be substituted should the supplier become unavailable or non-competitive. 16. Income Tax Due to operating losses and the recognition of valuation allowances, the Company has no provision for current and deferred federal or state income taxes in 2022. In 2021, 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: F- 22 Twin Vee Schedule of deferred tax assets and deferred tax liabilities December 31, December 31, 2023 2022 Non-operating loss carryforward $ 7,725,000 $ 4,976,000 Valuation allowance ( 7,725,000 ) ( 4,976,000 ) Net deferred tax asset $ — $ — Forza X1 Schedule of deferred tax assets and deferred tax liabilities December 31, December 31, 2023 2022 Non-operating loss carryforward $ 875,000 $ 532,000 Valuation allowance ( 875,000 ) ( 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 years ended December 31, 2023 and 2022, respectively the Twin Vee valuation allowance increased by approximately $ 2,749,000 and $ 1,176,000 and the Forza X1 valuation allowance increased by approximately S 343,000 and $ 532,000 . The Company has net operating and economic loss carry-forwards of approximately $ 8.6 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, 2023 and 2022 is as follows: Schedule of income tax rate December 31, December 31, 2023 2022 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 2020 to 2022 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 2020 to 2022, are subject to review by the tax authorities. 17. Net Loss 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, 2023 and 2022: F- 23 Schedule of earning per share December 31, December 31, 2023 2022 Numerator for basic and diluted net loss per share: Net loss $ ( 7,192,176 ) $ ( 5,137,252 ) Denominator: For basic net loss per share - weighted average common shares outstanding 9,520,000 7,624,938 Effect of dilutive stock options — — For diluted net loss per share - weighted average common shares outstanding 9,520,000 7,624,938 Net loss per share -Basic: Net loss per share $ ( 0.76 ) $ ( 0.67 ) Net loss per share - Diluted: Net loss per share $ ( 0.76 ) $ ( 0.67 ) For the years ended December 31, 2023 and 2022, all potentially dilutive securities were antidilutive. 18. Segment The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments. The Company reported its financial performance based on the following segments: Gas-powered Boats, Franchise and Electric Boats. The Company evaluates the performance of its reportable segments based on net sales and operating income. Net sales for business segments are generally based on the sale of boats and the sale of franchises. Income (loss) from operations for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Operating income for each segment excludes other income and expense. The Company does not include intercompany transfers between segments for management reporting purposes. The following table shows information by reportable segments for the three and year ended December 31, 2023 and 2022: Schedule of reportable segments For the Year Ended December 31, 2023 Electric Boat Gas-Powered Boats Franchise and Development Total Net sales $ 33,388,794 $ — $ 37,118 $ 33,425,912 Cost of products sold 23,545,248 — 157,637 23,702,885 Operating expense 15,234,159 3,253 6,472,914 21,710,326 Loss from operations ( 5,390,613 ) ( 3,253 ) ( 6,593,433 ) ( 11,987,299 ) Other income (expense) 1,559,742 ( 14,959 ) 660,320 2,205,103 Net loss $ ( 3,830,871 ) $ ( 18,212 ) $ ( 5,933,113 ) $ ( 9,782,196 ) F- 24 For the Year Ended December 31, 2022 Electric Boat Gas-Powered Boats Franchise 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 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 ) Property and equipment, net classified by business were as follows: Schedule of property and equipment, net classified by business December 31, December 31, 2023 2022 Gas-Powered Boats $ 8,825,027 $ 4,694,607 Franchise $ — $ — Electric-Boats $ 3,468,961 $ 765,406 19. Subsequent Events The Company has evaluated all event or transactions that occurred after December 31, 2023 through March 25, 2024, 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 January 1, 2024, our 2021 Stock Incentive Plan automatically increased, and will continue to increase on January 1 of each calendar year for a period of ten years commencing on January 1, 2022 and ending on (and including) January 1, 2031, in a number of shares of common stock equal to 4.5% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year. For 2024, the maximum number of common stock shares that can be issued will be 4,284,000 . On March 4, 2024, Mrs. Carrie Gunnerson, the Company’s then Chief Financial Officer, provided the Company notice of her resignation as an executive officer of the Company and of Forza, effective May 31, 2024. Mrs. Gunnerson informed the Company that she was resigning 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 March 6, 2024, Mr. James Leffew, Forza X1’s then Chief Executive Officer, provided the Company notice of his resignation as an executive officer of the Company, effective June 2, 2024. Mr. Leffew informed Forza X1 that he was resigning from the Company as an executive officer to pursue another opportunity and that his resignation was not the result of any disagreement relating to the Company’s operations, policies or practices. F- 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.