
PART I—FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements present the company's financial position as of June 30, 2024, and its performance for the three and six months then ended, highlighting a significant decrease in total assets and a widening accumulated deficit, alongside a sharp decline in revenue and gross profit leading to a substantial increase in net loss, with a major subsequent event being the decision to wind down the Forza electric boat subsidiary and pursue a merger with Twin Vee Condensed Consolidated Balance Sheets Total assets decreased by 15.3% to $33.75 million as of June 30, 2024, from $39.85 million at December 31, 2023, primarily due to a decrease in cash and marketable securities, while total liabilities remained relatively stable at approximately $7.8 million, and total stockholders' equity declined by 19.1% to $25.94 million, largely due to an increase in the accumulated deficit from $14.35 million to $18.98 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 | Dec 31, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $13,927 | $16,498 | (15.6%) | | Marketable securities | $995 | $4,463 | (77.7%) | | Total Current Assets | $19,582 | $26,646 | (26.5%) | | Total Assets | $33,753 | $39,847 | (15.3%) | | Total Liabilities | $7,814 | $7,797 | 0.2% | | Total Stockholders' Equity | $25,939 | $32,050 | (19.1%) | | Accumulated Deficit | ($18,979) | ($14,347) | 32.3% | Condensed Consolidated Statements of Operations The company experienced a significant downturn in performance, with second quarter 2024 net sales falling 47% year-over-year to $4.3 million and gross profit plummeting 78% to $0.2 million, leading to a net loss widening to $4.5 million from $1.9 million in the prior-year quarter, and a similar trend for the six-month period with a 44% drop in net sales and an 84% increase in net loss to $6.9 million, which included a $1.67 million impairment charge Q2 2024 vs Q2 2023 Performance (in thousands) | Metric | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $4,327 | $8,125 | (47%) | | Gross Profit | $202 | $936 | (78%) | | Loss from Operations | ($4,659) | ($3,044) | 53% | | Net Loss | ($4,519) | ($1,904) | 137% | | Basic & Diluted EPS | ($0.31) | ($0.14) | 121% | H1 2024 vs H1 2023 Performance (in thousands) | Metric | H1 2024 | H1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Sales | $9,603 | $17,002 | (44%) | | Gross Profit | $480 | $2,545 | (81%) | | Loss from Operations | ($7,202) | ($5,414) | 33% | | Net Loss | ($6,854) | ($3,732) | 84% | | Basic & Diluted EPS | ($0.49) | ($0.26) | 88% | - A property and equipment impairment charge of $1,674,000 was recorded in Q2 2024, significantly contributing to the increased loss from operations1219 Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, net cash used in operating activities was $2.2 million, an improvement from the $3.4 million used in the same period of 2023, while investing activities used $0.25 million, primarily for property and equipment purchases, and financing activities used $0.14 million, a stark contrast to the $6.9 million provided by financing in the prior year due to a stock issuance by Forza, resulting in a total cash position decrease of $2.6 million during the period Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($2,232) | ($3,430) | | Net Cash Used in Investing Activities | ($248) | ($656) | | Net Cash (Used in) Provided by Financing Activities | ($137) | $6,922 | | Net Change in Cash | ($2,617) | $2,836 | Notes to the Condensed Consolidated Financial Statements (Unaudited) The notes detail significant corporate actions and accounting policies, including the decision by subsidiary Forza X1 to discontinue its electric boat business, resulting in a $1.67 million impairment charge, and the subsequent merger agreement between Twin Vee and Forza, also highlighting a significant customer concentration with four dealers accounting for 49% of sales in the first half of 2024, and segment reporting revealing that the Electric Boat division is the primary source of operating losses - On July 11, 2024, Forza's Board decided to wind down its electric boat business, leading to a $1,674,000 impairment charge on its partially constructed facility as of June 30, 202419122 - On August 12, 2024, the Company entered into a merger agreement with its subsidiary Forza, where each Forza share will be converted into 0.61166627 shares of Twin Vee common stock123 - For the six months ended June 30, 2024, four individual dealers accounted for 49% of the Company's total sales, indicating significant customer concentration113 Segment Operating Loss for Six Months Ended June 30, 2024 (in thousands) | Segment | Loss from Operations | | :--- | :--- | | Gas-Powered Boats | ($2,943) | | Franchise | ($1) | | Electric Boat and Development | ($4,259) | | Total | ($7,202) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the poor financial results to a significant industry-wide reduction in demand for marine products, with boat units sold in Q2 2024 decreasing 68% year-over-year, leading to a 47% revenue decline in the same period, and in response to market conditions and slower-than-expected EV adoption, the company is discontinuing its Forza electric boat development and pursuing a merger, yet management believes existing cash, equivalents, and marketable securities are sufficient to fund operations for the next 24 months despite the losses and decreased working capital - The company experienced a significant reduction in demand, with total units sold dropping 68% in Q2 2024 (24 units) compared to Q2 2023 (75 units)131 - Due to slow market adoption of electric vehicles, the Board of Forza determined on July 11, 2024, to discontinue and wind down its business related to electric boats and explore a merger with Twin Vee134 - Working capital decreased by $7.4 million to $15.0 million as of June 30, 2024, from $22.4 million at year-end 2023, primarily due to development efforts at Forza160 - Management believes that current cash, cash equivalents, and marketable securities will be sufficient to finance operations for the next 24 months161 Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and is therefore not required to provide information for this item - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the company is not required to provide quantitative and qualitative disclosures about market risk179 Controls and Procedures Management, including the CEO and CFO, concluded that as of June 30, 2024, the company's disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting, specifically related to not having sufficient staff with appropriate GAAP experience, and a remediation plan is underway, which includes hiring additional accounting staff and implementing a new ERP system, but it is not yet fully effective - Management concluded that disclosure controls and procedures were not effective as of June 30, 2024180 - The ineffectiveness is due to material weaknesses related to insufficient staffing with appropriate experience in GAAP presentation180 - A remediation plan is in progress, including hiring a Senior Staff Accountant and implementing a robust ERP system, but testing of controls is ongoing181183 PART II—OTHER INFORMATION Legal Proceedings The company is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business, financial condition, or operations - The Company is not presently a party to any legal proceedings that would have a material adverse effect on its business185 Risk Factors The company highlights several significant risks, including the failure to meet Nasdaq's minimum bid price requirement, a history of operating losses, heavy dependence on a small network of independent dealers, and identified material weaknesses in internal financial controls, along with numerous risks associated with the proposed merger with Forza, such as conflicts of interest for executives, a non-adjustable exchange ratio, and the possibility that the merger may not be completed or yield the expected benefits - The company received a notice from Nasdaq on May 10, 2024, for failing to maintain a minimum closing bid price of $1.00 per share and has until November 6, 2024, to regain compliance189 - The company has a history of losses, with a net loss of $9.8 million in 2023 and $6.9 million for the first six months of 2024, and an accumulated deficit of $19.0 million as of June 30, 2024192 - The company is dependent on a few key dealers, with three dealers accounting for 38% of total sales in the first six months of 2024194195 - Significant risks related to the Forza merger are disclosed, including potential conflicts of interest for officers and directors, a fixed exchange ratio that is not adjustable for market price changes, and the risk that the merger may not be completed or achieve its strategic benefits203205212 Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities, and the company provides an update on the use of proceeds from its July 2021 IPO, noting that the original plan to develop electric motors for retrofitting and acquire waterfront property has been altered, with funds reallocated from motor development to general working capital due to consumer preference for fully integrated electric boats, and plans to purchase waterfront property abandoned due to high real estate prices, with those funds now intended for expanding the existing manufacturing facility - The company has changed its use of IPO proceeds, deciding not to pursue the design of electric motors for retrofitting due to consumer preference for fully integrated electric boats228 - The plan to acquire waterfront property for a testing center was abandoned due to high real estate prices in Florida; the $3.5 million allocated will instead be used to build additional manufacturing space at the current Fort Pierce location229 Defaults Upon Senior Securities Not applicable Mine Safety Disclosures Not applicable Other Information During the three months ended June 30, 2024, no director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2024229 Exhibits This section provides an index of the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications by the principal executive and financial officers