PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Unaudited H1 2022 financial statements reveal significant revenue growth, increased costs, and a net loss, alongside rising inventories and liabilities [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to $21.0 million by June 30, 2022, driven by inventories and property, while liabilities rose and equity declined due to net loss Condensed Consolidated Balance Sheet Highlights (as of June 30, 2022 vs. Dec 31, 2021) | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | **$21,019,907** | **$20,599,184** | | Cash and cash equivalents | $5,910,533 | $6,975,302 | | Inventories | $4,369,549 | $1,799,769 | | Property and equipment, net | $4,362,758 | $2,883,171 | | **Total Liabilities** | **$5,523,583** | **$3,899,484** | | Accounts payable | $2,262,434 | $1,200,861 | | **Total stockholders' equity** | **$15,496,324** | **$16,699,700** | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 and H1 2022 saw significant revenue growth but substantial cost increases, resulting in net losses of $0.54 million and $1.73 million respectively Key Operating Results (Unaudited) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $8,519,613 | $3,297,571 | $14,405,613 | $6,505,214 | | Gross profit | $3,447,212 | $1,316,144 | $5,881,566 | $2,804,050 | | (Loss) Income from operations | ($471,979) | ($116,933) | ($1,520,132) | $37,829 | | Net (loss) income | ($538,782) | $50,851 | ($1,730,099) | $182,800 | | Basic and dilutive (loss) income per share | ($0.08) | $0.01 | ($0.25) | $0.05 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2022 saw $1.2 million net cash used in operations, primarily due to inventory increase and net loss, leading to a $1.06 million overall cash decrease Cash Flow Summary for the Six Months Ended June 30 | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($1,196,245) | $5,045 | | Net cash provided by (used in) investing activities | $273,105 | ($604,990) | | Net cash (used in) provided by financing activities | ($141,629) | $114,771 | | **Net change in cash and cash equivalents** | **($1,064,769)** | **($485,174)** | [Notes to the Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail company structure, significant inventory and equipment investments, segment performance, and post-quarter events including Forza X1's grant and IPO - The company operates through three segments: **Gas-powered Boats**, **Franchise (Fix My Boat, Inc.)**, and **Electric Boats (Forza X1, Inc.)**[26](index=26&type=chunk)[27](index=27&type=chunk)[78](index=78&type=chunk) Segment Operating Loss for Six Months Ended June 30, 2022 | Segment | Operating Loss | | :--- | :--- | | Gas-Powered Boats | ($402,282) | | Franchise | ($36,037) | | Electric Boat and Development | ($1,081,813) | | **Total** | **($1,520,132)** | - The company is dependent on a single vendor for all boat engines, with purchases totaling **$2.7 million** in the first six months of 2022[42](index=42&type=chunk) - Subsequent to the quarter, subsidiary Forza X1 received approval for a Job Development Investment Grant (JDIG) of up to **$1.37 million** and priced its IPO to raise gross proceeds of **$15 million**[89](index=89&type=chunk)[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2022 revenue growth driven by demand and production, offset by rising operating expenses and R&D for the electric boat segment, while liquidity remains sufficient - The company operates through three segments: **gas-powered boats**, **electric-powered boats (Forza X1)**, and a **franchise model for marine mechanics (Fix My Boat)**[93](index=93&type=chunk) - Production of gas-powered boats has increased from **one boat per week** at the time of the July 2021 IPO to **4.75 boats per week**, with a goal of reaching **five per week**[98](index=98&type=chunk) - The electric boat division (Forza X1) is expected to continue incurring losses due to ongoing research and development efforts, with production anticipated to begin by **Q2 2023**[96](index=96&type=chunk)[99](index=99&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Q2 2022 net sales surged 158% to $8.5 million, but operating expenses rose 173%, leading to a net loss of $0.54 million, with similar trends for the six-month period Comparison of Three Months Ended June 30, 2022 and 2021 | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $8,519,613 | $3,297,571 | 158% | | Gross Profit | $3,447,212 | $1,316,144 | 162% | | Operating Expenses | $3,919,191 | $1,433,077 | 173% | | Net (Loss) Income | ($538,782) | $50,851 | (1,160%) | Comparison of Six Months Ended June 30, 2022 and 2021 | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $14,405,613 | $6,505,214 | 121% | | Gross Profit | $5,881,566 | $2,804,050 | 110% | | Operating Expenses | $7,401,698 | $2,766,221 | 168% | | Net (Loss) Income | ($1,730,099) | $182,800 | (1,046%) | - The net loss for the first six months of 2022 included a **$1,114,222** loss from the electric segment, which currently generates no revenue[126](index=126&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2022, cash and marketable securities totaled $9.8 million, but working capital decreased to $8.3 million due to increased liabilities and inventory, though liquidity is deemed sufficient for 12 months Liquidity Position | Metric | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,910,533 | $6,975,302 | | Marketable securities | $3,948,930 | $6,064,097 | | Working capital | $8,344,385 | $10,917,926 | - Cash used in operations for the first six months of 2022 was **$1.2 million**, mainly due to a **$2.6 million** increase in inventory to mitigate supply chain risks[135](index=135&type=chunk) - The company believes its cash and cash equivalents are sufficient to fund operations for the **next 12 months**[133](index=133&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the company is exempt from providing quantitative and qualitative market risk disclosures - As a smaller reporting company, Twin Vee is **not required to provide** quantitative and qualitative disclosures about market risk[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were ineffective as of June 30, 2022, due to material weaknesses in internal control over financial reporting, with remediation efforts ongoing - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2022[156](index=156&type=chunk) - The ineffectiveness is due to **material weaknesses** related to **insufficient staff** with appropriate GAAP experience[156](index=156&type=chunk) - A remediation plan is in progress, including the hiring of a full-time controller, but the material weakness was **not remediated** as of the reporting date[157](index=157&type=chunk)[158](index=158&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its operations - The company is **not presently involved** in any **material legal proceedings**[162](index=162&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Key risks include geopolitical impacts, dependence on dealer network, potential inventory repurchase obligations, and un-remediated internal control weaknesses - Global economic and geopolitical conditions, such as the Russia-Ukraine conflict, could **adversely impact** business and operating results[164](index=164&type=chunk) - The company **depends on its network of independent dealers**, and its success is tied to their financial health and access to financing. The top five dealers accounted for **64%** of boats sold as of June 30, 2022[167](index=167&type=chunk)[168](index=168&type=chunk) - The company has a maximum obligation to repurchase approximately **$6.9 million** of dealer inventory under floor plan financing agreements if dealers default[170](index=170&type=chunk) - **Material weaknesses** in internal controls have been identified due to insufficient staffing with GAAP experience, and these weaknesses have **not yet been remediated**[171](index=171&type=chunk)[175](index=175&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred; IPO proceeds of $15.8 million were reallocated from retrofittable electric propulsion to working capital due to market shift - The company received net proceeds of approximately **$15.8 million** from its July 2021 IPO[184](index=184&type=chunk) - The company has **changed its use of proceeds**, reallocating funds intended for a retrofittable electric motor to general working capital due to a **shift in market preference** towards fully integrated electric boats[187](index=187&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q1 2022 increased by 83% to approximately $5.886 million from $3.208 million in Q1 2021 [11] - Gross profit rose by 64% to approximately $2.434 million from $1.488 million in the previous year [12] - The net loss for the quarter was approximately $1.191 million, compared to a net income of $132,000 in 2021, with a significant portion attributed to the new subsidiaries [13] Business Line Data and Key Metrics Changes - The company continues to manufacture and sell its GFX model line, with a backlog of around 200 boats and low dealer inventory under 20 boats [5] - The introduction of new models, including the 400 GFX and 260 GFX, is expected to enhance product offerings [5][7] - The core business of gas-powered boats reported a net loss of approximately $626,000, while the adjusted net loss was approximately $152,000 [13][14] Market Data and Key Metrics Changes - The company is experiencing ongoing supply chain issues, with rising material and component prices, but has managed to ship all completed boats except for a few requiring specific motors [6] - The demand for catamaran boats is increasing, with a notable backlog and low dealer inventory indicating strong market interest [5][17] Company Strategy and Development Direction - The company is focused on expanding its dealer network and increasing production capacity, aiming for one boat per day to reach over 200 boats annually [14][17] - The electric vehicle manufacturing subsidiary, Forza X1, is progressing towards producing affordable electric boats, with plans for a dedicated factory to manufacture up to 1,000 units annually [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver value to shareholders, citing strong order backlogs and low dealer inventory as positive indicators for future performance [17] - The company is actively addressing supply chain challenges and is optimistic about the growth potential in the catamaran market [6][21] Other Important Information - The company had cash, cash equivalents, and marketable securities of approximately $11.039 million as of March 31, 2022, which is expected to support ongoing operations [15] - The company is preparing for an IPO for its subsidiary Forza X1, with a no-comment letter received from the SEC, indicating readiness to proceed once market conditions stabilize [25] Q&A Session Summary Question: How does the company see itself positioned relative to competitors and the evolution of the space? - Management noted the growing momentum in the catamaran industry, with only a few companies producing over 100 units annually, positioning Twin Vee favorably for growth [20][21] Question: Can you provide an update on the Forza IPO? - Management confirmed that the SEC has provided a no-comment letter and that they are working with ThinkEquity to refine their presentation, with plans to begin the roadshow once market conditions improve [24][25]

Financial Performance - Net sales for the three months ended March 31, 2022, were $5,886,000, representing a 83.3% increase from $3,207,643 in the same period of 2021[21] - Gross profit for the three months ended March 31, 2022, was $2,434,354, compared to $1,487,906 for the same period in 2021, indicating a 63.5% increase[21] - The net loss for the three months ended March 31, 2022, was $1,191,317, compared to a net income of $131,949 in the same period of 2021[21] - For the three months ended March 31, 2022, net sales reached $5,886,000, an increase of 83% compared to $3,207,643 for the same period in 2021[71] - The company recorded a net loss of $1,191,317 for the three months ended March 31, 2022, compared to a net income of $131,949 for the same period in 2021[71] - Net loss for the three months ended March 31, 2022, was $1,191,317, compared to net income of $131,949 for the same period in 2021, resulting in a basic and dilutive loss per share of $0.17[93] Operating Expenses - Total operating expenses increased to $3,482,507 for the three months ended March 31, 2022, from $1,333,144 in the same period of 2021, reflecting a 61.9% rise[21] - Total operating expenses increased by $2,149,363, or 161%, to $3,482,507, with operating expenses as a percentage of sales rising to 59% from 42%[86] - The company incurred stock-based compensation of $224,832 during the three months ended March 31, 2022[25] - The company has recorded $320,505 in stock-based compensation expense for the three months ended March 31, 2022, compared to $0 for the same period in 2021[63] - Professional fees increased by 315%, or $185,713, to $244,739, primarily due to costs associated with being a public company[89] Cash and Liquidity - Cash and cash equivalents decreased to $5,061,380 as of March 31, 2022, down from $6,975,302 at the end of 2021[32] - Cash used in operating activities was $1,149,673, a significant decrease from cash provided by operating activities of $189,898 in the prior year[101] Assets and Liabilities - Total current liabilities increased to $3,122,630 as of March 31, 2022, compared to $2,155,420 at the end of 2021, marking a 45% increase[19] - The accumulated deficit as of March 31, 2022, was $(3,208,873), up from $(2,017,556) at the end of 2021[19] - As of March 31, 2022, total marketable securities amounted to $9,827,969, a decrease from $13,039,399 as of December 31, 2021[42] - Accrued liabilities totaled $660,038 as of March 31, 2022, up from $456,814 at December 31, 2021, representing a 44.4% increase[52] - The company recognized operating lease liabilities totaling $1,523,885 as of March 31, 2022, down from $1,612,766 at December 31, 2021[50] Inventory and Production - Total inventory rose to $3,213,182 as of March 31, 2022, compared to $1,799,769 at December 31, 2021, reflecting a 78.8% increase[45] - The company increased its manufacturing throughput to an average of 4 boats per week during the first quarter of 2022[80] - The company plans to increase production to 5 boats per week, which has led to higher operating expenses due to increased headcount and salaries[81] - The number of boats sold increased by 48% year-over-year, contributing to the rise in net sales[84] Strategic Initiatives - The company formed a wholly-owned subsidiary, Fix My Boat, Inc., to utilize a franchise model for marine mechanics across the country[27] - The company is developing a line of electric-powered catamaran boats through its subsidiary Forza X1, with production expected to begin in the second quarter of 2023[79] - The company decided to discontinue the design of electric motors for retrofitting gas-powered boats due to consumer preference shifting towards fully integrated electric boats, reallocating those funds for working capital needs[144] Internal Controls and Compliance - The company has identified weaknesses in its internal controls and cannot assure that these weaknesses will be effectively remediated[134] - The company expects that compliance with the Sarbanes-Oxley Act will increase legal, accounting, and financial compliance costs[121] - The company is actively recruiting to retain a full-time controller to address material weaknesses in internal controls[124] - The company faces challenges in maintaining effective internal controls over financial reporting, which could adversely affect operating results and investor confidence[139] - The independent registered public accounting firm will not audit the effectiveness of internal controls until the company is no longer classified as an "emerging growth company" under the JOBS Act[140] - Any failure to maintain effective internal controls could result in a restatement of financial statements and negatively impact the market price of the company's common stock[140] Shareholder Information - The company reported a weighted average number of shares of common stock outstanding of 7,000,000 for the three months ended March 31, 2022, compared to 4,000,000 in the same period of 2021[21] - As of March 31, 2022, the company has outstanding warrants to purchase 3,000,000 shares of common stock at a weighted-average exercise price of $7.50 per share[61] - The company closed its initial public offering on July 22, 2021, selling 3,000,000 shares at an offering price of $6.00 per share, resulting in gross proceeds of $18,000,000[142] - After deducting underwriting discounts and commissions of approximately $1,260,000 and other offering expenses of approximately $1,567,150, the net proceeds received were approximately $15,849,037[142] - The primary use of net proceeds includes approximately $1,500,000 for production and marketing of larger fully equipped boats, $2,500,000 for the design and development of a new line of electric boats, and $6,000,000 for the electric propulsion system[143]

PART I [Business](index=6&type=section&id=Item%201.%20Business) The company designs, manufactures, and markets power catamaran boats through gas-powered, electric, and franchise segments - The company is organized into three operating segments: gas-powered boats, electric-powered boats (through Forza X1, Inc), and a franchise segment (through Fix My Boat, Inc)[23](index=23&type=chunk) - **Gas-powered boats** accounted for **99% of net revenue** in fiscal year 2021 and 100% in 2020[27](index=27&type=chunk) - The company is developing a line of electric-powered catamarans through its subsidiary Forza X1, with the first two models expected to begin production by the **second quarter of 2023**[25](index=25&type=chunk)[37](index=37&type=chunk) - Sales are primarily conducted through a network of **19 independent boat dealers** in 23 locations across North America and the Caribbean[24](index=24&type=chunk)[42](index=42&type=chunk) [Business of Our Segments](index=6&type=section&id=Business%20of%20Our%20Segments) The company's core business is gas-powered boats, while developing electric models and a marine mechanic franchise - The gas-powered boat segment offers 14 models, including the new 280 GFX, 340 GFX, and the upcoming 400 GFX, which is the largest Twin Vee to date[27](index=27&type=chunk)[28](index=28&type=chunk)[39](index=39&type=chunk) - Forza X1 has completed the design of two electric boat models and the prototype of its electric outboard motor, with commercial production expected to start by **Q2 2023**[37](index=37&type=chunk) - The franchise segment is being developed to establish a franchise model for marine mechanics across the United States[34](index=34&type=chunk) [Our Strategy](index=8&type=section&id=Our%20Strategy) The company's strategy centers on product innovation and dealer expansion, with a distinct direct-to-consumer model for its EV subsidiary - Key strategies include launching new products, increasing market share in the catamaran category, strengthening the dealer network, and expanding internationally[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) - Forza X1 plans a **direct-to-consumer sales model** using a dedicated web and app platform for an end-to-end customer experience, differing from the traditional dealer model[45](index=45&type=chunk) - Forza's specific goals include successfully launching the FX1 model, investing in a dedicated factory, using a common platform for new models, and focusing on technological advancements[46](index=46&type=chunk) [Our Markets](index=10&type=section&id=Our%20Markets) The company operates in a robust U.S powerboat market and is positioned to enter the growing electric boat segment - In 2021, U.S sales of boats and marine products totaled an estimated **$49 billion**, with new powerboat sales increasing by 7% compared to 2020[51](index=51&type=chunk) - The global recreational boating market is projected to surpass **$63 billion by 2026**[52](index=52&type=chunk) - The market for hybrid and pure electric boats is estimated to be greater than **$20 billion worldwide by 2027**, with recreational boats being the largest and fastest-growing segment[60](index=60&type=chunk) [Our Dealer Network](index=12&type=section&id=Our%20Dealer%20Network) The company relies on a concentrated network of independent dealers without formal written agreements for its gas-powered boat sales - The company's **top five dealers** accounted for approximately **67% of total units sold** for the year ended December 31, 2021[65](index=65&type=chunk) - The company does not have written agreements with its dealers and relies on non-binding indications of interest for production planning[67](index=67&type=chunk) - Twin Vee has repurchase agreements with third-party floor plan financing providers but has not been required to repurchase any boats to date[68](index=68&type=chunk)[69](index=69&type=chunk) [Risk Factors](index=18&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from dealer concentration, supply chain disruptions, new product development, and material weaknesses in internal controls - Business risks include reliance on a network of independent dealers, with the **top five dealers accounting for 67%** of total boats sold in fiscal 2021[115](index=115&type=chunk) - The company relies on a single manufacturer, **Suzuki Motor of America, Inc**, for outboard engines and has experienced shortages of 150-horsepower motors[122](index=122&type=chunk) - The planned fully electric sport boat (FX1) has not yet been fully developed, and its success depends on consumer adoption and a new **direct-to-consumer distribution model**[159](index=159&type=chunk)[162](index=162&type=chunk)[168](index=168&type=chunk) - The company has identified **material weaknesses in its internal controls** over financial reporting, specifically related to segregation of duties[208](index=208&type=chunk)[210](index=210&type=chunk)[212](index=212&type=chunk) - The parent company, Twin Vee PowerCats, Inc, owns approximately **57.14% of the outstanding common stock**, giving it and its CEO significant influence over corporate decisions[152](index=152&type=chunk) [Unresolved Staff Comments](index=40&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company has no unresolved staff comments from the Securities and Exchange Commission - None[236](index=236&type=chunk) [Properties](index=40&type=section&id=Item%202.%20Properties) The company leases its current facility from its CEO and plans to acquire land for a new manufacturing plant - The company leases its primary facility from an LLC solely owned by its CEO, Joseph C Visconti, under a five-year lease agreement with monthly rent of **$31,500**[237](index=237&type=chunk) - The current facility's capacity is not expected to be sufficient for future growth; subsidiary Forza X1 has an option to acquire **14.5 acres** to build a new manufacturing plant[238](index=238&type=chunk) [Legal Proceedings](index=40&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The company is not presently a party to any material legal proceedings[239](index=239&type=chunk) [Mine Safety Disclosures](index=40&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[240](index=240&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=41&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq, and proceeds from its 2021 IPO have been partially reallocated - The company's common stock has traded on the Nasdaq under the symbol **"VEEE"** since July 21, 2021[241](index=241&type=chunk) - The company has not paid cash dividends in 2021 or 2020 and does not intend to in the foreseeable future[244](index=244&type=chunk) - The IPO on July 23, 2021, generated approximately **$15.8 million in net proceeds**[248](index=248&type=chunk) - The company has revised its use of IPO proceeds, reallocating funds from developing electric motors for retrofitting to general working capital[250](index=250&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sales grew 43% in 2021, but higher costs led to a decline in gross margin and a net loss | | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $15,774,170 | $11,063,619 | $4,710,551 | 43% | | **Gross profit** | $6,275,786 | $4,774,303 | $1,501,483 | 31% | | **(Loss) income from operations** | $(1,630,721) | $720,834 | $(2,351,555) | (326%) | | **Net (loss) income** | $(1,011,009) | $1,171,077 | $(2,182,086) | (186%) | | **Basic and dilutive (loss) income per share** | $(0.19) | $0.29 | $(0.48) | (166%) | - **Net sales increased 43% YoY** due to a strengthening economy, a 27% increase in the number of boats sold, and a 12% increase in average revenue per unit[267](index=267&type=chunk) - **Gross profit margin decreased from 43% to 40%** in 2021, attributed to increased costs of raw materials and purchased components[268](index=268&type=chunk) - **Operating expenses increased 95% to $7.9 million**, driven by higher salaries, public company costs, and R&D for the electric boat division[270](index=270&type=chunk)[271](index=271&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk) - **Working capital increased by approximately $10.5 million** in 2021, primarily due to the net proceeds from the IPO[264](index=264&type=chunk) [Financial Statements and Supplementary Data](index=49&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The company's total assets and stockholders' equity significantly increased in 2021, driven by IPO proceeds | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $13,073,346 | $1,834,942 | | **Total Assets** | $20,599,184 | $4,504,566 | | **Total Current Liabilities** | $2,155,420 | $1,440,067 | | **Total Liabilities** | $3,899,484 | $2,955,726 | | **Total Stockholders' Equity** | $16,699,700 | $1,548,840 | | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | **Net sales** | $15,774,170 | $11,063,619 | | **Gross profit** | $6,275,786 | $4,774,303 | | **Net (loss) income** | $(1,011,009) | $1,171,077 | | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | **Net cash (used in) provided by operating activities** | $(1,947,539) | $364,648 | | **Net cash used in investing activities** | $(8,037,264) | $(200,452) | | **Net cash provided by financing activities** | $16,068,289 | $512,046 | [Controls and Procedures](index=71&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of year-end 2021 due to material weaknesses in internal control - Management concluded that as of December 31, 2021, the company's disclosure controls and procedures were **not effective**[419](index=419&type=chunk) - The ineffectiveness is due to **material weaknesses** related to a lack of segregation of duties across financially relevant functions[421](index=421&type=chunk) - A remediation plan is underway, which includes recruiting a full-time controller and utilizing outside advisors to improve internal controls[422](index=422&type=chunk)[423](index=423&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=73&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) The company's five-member board has a majority of independent directors and has established key governance committees - The board of directors consists of five members: Joseph C Visconti (CEO), Preston Yarborough (VP), Bard Rockenbach, James Melvin, Neil Ross, and Steven A Shallcross[432](index=432&type=chunk) - The board is divided into three classes with staggered three-year terms, which may delay or prevent changes in control[445](index=445&type=chunk)[446](index=446&type=chunk) - The board has determined that Messrs Rockenbach, Ross, Melvin, and Shallcross are **independent directors** under Nasdaq rules[451](index=451&type=chunk) - The company has established Audit, Compensation, and Corporate Governance and Nominating committees, each composed of independent directors[454](index=454&type=chunk)[455](index=455&type=chunk) [Executive Compensation and Director Compensation](index=79&type=section&id=Item%2011.%20Executive%20Compensation%20and%20Director%20Compensation) Executive compensation is comprised of salary, bonus, and option awards, with long-term employment agreements in place | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Joseph C. Visconti** (President and CEO) | 2021 | 235,276 | 200,965 | 671,276 | 1,135,788 | | | 2020 | 171,000 | 85,000 | - | 265,500 | | **Preston Yarborough** (Vice President) | 2021 | 145,577 | 58,359 | 335,638 | 548,835 | | | 2020 | 135,000 | 13,500 | - | 161,200 | | **Carrie Gunnerson** (CFO) | 2021 | 39,088 | 16,406 | 227,617 | 283,111 | - The company has five-year employment agreements with its CEO, Vice President, and CFO, which include provisions for salary, performance bonuses, and severance[477](index=477&type=chunk)[486](index=486&type=chunk)[494](index=494&type=chunk) - Non-employee directors receive annual cash retainers ranging from **$3,000 to $12,000** depending on committee roles, plus an initial grant of options to purchase 5,500 shares[527](index=527&type=chunk)[528](index=528&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=88&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Ownership is highly concentrated, with the parent company and CEO holding a controlling interest | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned | | :--- | :--- | :--- | | **Twin Vee PowerCats, Inc.** | 4,000,000 | 58.82% | | **Joseph Visconti** | 2,321,160 | 33.16% | | **Marathon Micro Fund, L.P.** | 652,832 | 9.32% | | **All current executive officers and directors as a group (7 persons)** | 2,394,016 | 33.52% | - CEO Joseph Visconti is deemed to have control over the **4,000,000 shares** owned by the parent company, Twin Vee PowerCats, Inc, due to his controlling stake in the parent[540](index=540&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=90&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) The company engages in multiple related party transactions, primarily with entities controlled by its CEO - The company leases its facility from Visconti Holdings, LLC, an entity controlled by CEO Joseph Visconti, with monthly rent payments of **$26,500**[545](index=545&type=chunk) - A loan from CEO Joseph Visconti with an original principal of **$525,500** was fully repaid during 2021[546](index=546&type=chunk)[383](index=383&type=chunk) - The company paid its parent, Twin Vee PowerCats, Inc, **$90,417** to purchase a used boat and also pays a monthly management fee of **$3,500** to the parent company[547](index=547&type=chunk)[549](index=549&type=chunk) [Principal Accountant Fees and Services](index=91&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The company's audit fees increased in 2021, with all services pre-approved by the Audit Committee | | Year ended Dec 31, 2021 | Year ended Dec 31, 2020 | | :--- | :--- | :--- | | **Audit fees and expenses** | $115,000 | $75,000 | | **Audit related fees** | $9,500 | $0 | | **Other fees** | $8,500 | $0 | | **Total** | **$133,000** | **$75,000** | PART IV [Exhibits and Financial Statement Schedules](index=93&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all exhibits filed with the Form 10-K, including key corporate and employment agreements - The financial statements required for this report are located in Part II, Item 8[559](index=559&type=chunk) - Key exhibits filed include the Underwriting Agreement, Certificate of Incorporation, Bylaws, employment agreements for executives, and the 2021 Stock Incentive Plan[561](index=561&type=chunk)[562](index=562&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 OR FORM 10-Q ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 Commission file number: 001-40623 TWIN VEE POWERCATS CO. (Exact Name of Registrant as Specified in Its Charter) Delawar ...

Part I [Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the period ended June 30, 2021, show significant revenue growth, improved net income, and positive cash flow from operations [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) As of June 30, 2021, total assets increased to $6.31 million, driven by inventories and property, while liabilities grew due to a PPP loan and accounts payable Condensed Balance Sheet Data (in USD) | Account | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Total Current Assets** | $2,899,841 | $1,834,942 | | Inventories | $1,539,514 | $936,676 | | Cash | $406,642 | $891,816 | | **Total Assets** | **$6,312,615** | **$4,504,566** | | **Total Current Liabilities** | $2,044,221 | $1,440,067 | | Accounts Payable | $1,190,147 | $799,280 | | Paycheck Protection Program Loan | $608,224 | $0 | | **Total Liabilities** | **$4,580,975** | **$2,955,726** | | **Total Stockholders' Equity** | **$1,731,640** | **$1,548,840** | [Condensed Statements of Operations](index=7&type=section&id=Condensed%20Statements%20of%20Operations) Net sales grew significantly for both three and six-month periods ended June 30, 2021, leading to a positive net income for the three-month period and substantial growth for the six-month period Operating Results (in USD) | Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $3,297,571 | $1,720,604 | $6,505,214 | $4,387,461 | | **Gross Profit** | $1,316,144 | $695,448 | $2,804,050 | $1,864,682 | | **(Loss) Income from Operations** | ($116,933) | ($824) | $37,829 | $138,212 | | **Net Income (Loss)** | $50,851 | ($23,524) | $182,800 | $55,132 | | **Basic and Dilutive EPS** | $0.01 | ($0.01) | $0.05 | $0.01 | [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2021, operating cash flow turned positive, while investing activities increased, and financing activities were primarily from a PPP loan Cash Flow Summary (in USD) | Activity | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $5,045 | ($314,367) | | Net cash used in investing activities | ($604,990) | ($119,692) | | Net cash provided by financing activities | $114,771 | $586,044 | | **Net change in cash** | **($485,174)** | **$151,985** | | **Cash at end of period** | **$406,642** | **$367,559** | [Notes to Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Financial%20Statements) Key notes highlight single vendor reliance, related-party leases, significant customer concentration, and the completion of an $18 million IPO in July 2021 - The company is dependent on a single vendor for all engines, with purchases totaling **$1.31 million** in the first six months of 2021[45](index=45&type=chunk) - The company leases its office and warehouse facilities from an LLC whose sole member is the company's CEO, Joseph C. Visconti[51](index=51&type=chunk) - In July 2021, the company completed its Initial Public Offering (IPO), selling 3,000,000 shares at **$6.00 per share** for gross proceeds of **$18,000,000**[69](index=69&type=chunk) - Customer concentration is significant, with five customers representing **64% of total sales** during the first six months of 2021[67](index=67&type=chunk) [Management's Discussion and Analysis (MD&A)](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes sales growth to economic recovery despite component shortages, with stable gross margins, increased operating expenses, and improved liquidity post-IPO [Business Overview](index=17&type=section&id=Overview) Twin Vee designs and manufactures power catamaran boats, increasing production and developing new emission-free electric propulsion models - The company is developing emission-free 240 and 280 electric propulsion models, intended for launch in the first half of 2022[77](index=77&type=chunk) - Production has increased from one boat per week during the COVID-19 slowdown in early 2020 to **two and a half boats per week** as of Q2 2021[77](index=77&type=chunk) - The company sells its boats through a network of **10 independent dealers** in 14 locations across North America and the Caribbean[76](index=76&type=chunk) [Results of Operations](index=18&type=section&id=Results%20of%20Operations) For the first six months of 2021, net sales and gross profit increased significantly, with net income rising 232% despite higher operating expenses Comparison of Six Months Ended June 30, 2021 and 2020 (in USD) | Metric | 2021 | 2020 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $6,505,214 | $4,387,461 | $2,117,753 | 48% | | **Gross Profit** | $2,804,050 | $1,864,682 | $939,368 | 50% | | **Operating Expenses** | $2,766,221 | $1,726,470 | $1,039,751 | 60% | | **Net Income** | $182,800 | $55,132 | $127,668 | 232% | - The increase in operating expenses is attributed to a higher headcount in 2021 compared to 2020 (when headcount was reduced due to COVID-19) and a doubling of professional services fees in preparation for the IPO[83](index=83&type=chunk) [Liquidity and Capital Resources](index=20&type=section&id=Liquidity%20and%20Capital%20Resources) Cash decreased as of June 30, 2021, but working capital significantly improved, with the July 2021 IPO providing substantial additional capital Liquidity Data (in USD) | Metric | June 30, 2021 | December 31, 2020 | % Change | | :--- | :--- | :--- | :--- | | Cash | $406,642 | $891,816 | (54.4%) | | Current Assets | $2,899,841 | $1,834,942 | 58.0% | | Current Liabilities | $2,044,221 | $1,440,067 | 42.0% | | **Working Capital** | **$855,620** | **$394,875** | **116.7%** | - Cash flow from operations turned positive to approximately **$5,000** for the first six months of 2021, compared to a use of **($314,000)** in the prior year period, driven by net income offset by increased inventory[92](index=92&type=chunk) [Critical Accounting Policies](index=22&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20SIGNIFICANT%20JUDGMENTS%20AND%20ESTIMATES) Critical accounting policies include revenue recognition, inventory valuation, and the treatment of the PPP loan as an in-substance government grant - Revenue is recognized when the product is released to the carrier for transport to a dealer, with dealer incentives recorded as a reduction of revenue[36](index=36&type=chunk)[99](index=99&type=chunk) - The company accounts for its Paycheck Protection Program (PPP) loan as an in-substance government grant, recognizing it in other income as the related costs are incurred[108](index=108&type=chunk) - Inventories are stated at the lower of cost (using FIFO) or net realizable value, requiring estimates for inventory obsolescence[102](index=102&type=chunk) [Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of June 30, 2021, due to material weaknesses in internal control over financial reporting, with remediation efforts underway - Management concluded that disclosure controls and procedures were **not effective** as of June 30, 2021[113](index=113&type=chunk) - Material weaknesses were identified relating to (i) lack of segregation of duties and (ii) insufficient level of review of internally prepared financial statements[115](index=115&type=chunk) - These control deficiencies resulted in an inventory error of approximately **$227,000** and other errors in balances for inventory, property and equipment, and accounts payable[115](index=115&type=chunk) - A remediation plan is being executed, including the retention of a full-time controller, but the weaknesses are not yet considered remediated[116](index=116&type=chunk)[117](index=117&type=chunk) Part II [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependence on dealers and a single engine supplier, supply chain disruptions, internal control weaknesses, and concentrated ownership influence [Business and Operational Risks](index=25&type=section&id=Business%20and%20Operational%20Risks) Operational risks include reliance on independent dealers and a single engine supplier, potential supply chain disruptions, and a large fixed cost base - The company depends on its network of independent dealers, with the top five dealers accounting for **33% of boats sold** in fiscal 2020[132](index=132&type=chunk) - The company relies on a single manufacturer, Suzuki Motor of America, Inc., for its engines and has experienced shortages of 150-horsepower motors due to the COVID-19 pandemic[139](index=139&type=chunk) - The company may be required to repurchase inventory from dealers who default on their floor plan financing arrangements[136](index=136&type=chunk) [Product and Market Risks](index=31&type=section&id=Product%20and%20Market%20Risks) The company faces risks from intense competition, volatile demand, and the need for successful new product introductions, particularly electric models - The powerboat industry is highly competitive and cyclical, with demand highly sensitive to general economic conditions and consumer discretionary spending[149](index=149&type=chunk)[175](index=175&type=chunk) - Future success depends on the successful introduction of new products, including the development of the Twin 240E, a fully electric boat with a proprietary powertrain system[153](index=153&type=chunk)[154](index=154&type=chunk) [Public Company and Ownership Risks](index=34&type=section&id=Public%20Company%20and%20Ownership%20Risks) Risks include material weaknesses in internal controls, significant influence by the CEO and parent company, and reduced reporting requirements as an emerging growth company - The company has identified material weaknesses in its internal control over financial reporting, including lack of segregation of duties and insufficient review, which could result in a material misstatement of financial statements[182](index=182&type=chunk)[185](index=185&type=chunk) - The parent company owns approximately **57.14%** of the outstanding common stock, and the CEO has significant influence over management and corporate matters[165](index=165&type=chunk) - As an "emerging growth company," the company is exempt from certain reporting requirements, including the auditor attestation of internal controls required by Section 404(b) of the Sarbanes-Oxley Act[194](index=194&type=chunk) [Use of Proceeds from Initial Public Offering](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company closed its IPO in July 2021, raising $16.4 million net, with proceeds allocated for electric boat development, larger boat production, and a new testing center - The company closed its IPO on July 22, 2021, raising approximately **$16.4 million** in net proceeds[211](index=211&type=chunk) Planned Use of IPO Net Proceeds (in USD) | Use of Proceeds | Allocated Amount | | :--- | :--- | | Production & marketing of larger boats | ~$1,500,000 | | Design & development of electric boats | ~$2,500,000 | | Design & development of electric propulsion system | ~$6,000,000 | | Acquisition & development of waterfront testing center | ~$3,500,000 | | Working capital | Balance | [Other Disclosures](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, and other disclosures are not applicable - The company is not presently a party to any material legal proceedings[120](index=120&type=chunk)