Twin Vee PowerCats (VEEE) - 2024 Q4 - Annual Report

Part I Business Twin Vee PowerCats Co. designs and markets recreational and commercial power boats, focusing on gas-powered models through a dealer network and a new digital platform after merging with Forza X1 - The company designs, manufactures, and markets recreational and commercial power boats under two main brands: Twin Vee for catamarans and Aquasport for monohull vessels[27][28] - On November 26, 2024, the company completed a merger with its minority-owned subsidiary, Forza X1, Inc., which subsequently ceased its electric boat production and became a wholly-owned subsidiary of Twin Vee[28][33][95] - Sales are primarily conducted through a network of 22 independent dealers. In fiscal year 2024, the top three dealers accounted for 40% of total sales, indicating significant customer concentration[28][32][67] - The company is developing a new web-based platform, "Pro Direct," inspired by the automotive industry, to allow customers to customize boats, check inventory, apply for financing, and arrange delivery online[43][52] - The company relies on trade secrets and know-how for its gas-powered boats, as it does not hold patents for these products. It does hold patents for electric boat technology, which is no longer in development[80] Risk Factors The company faces significant risks including financial losses, heavy reliance on a few dealers, material weaknesses in internal controls, a shareholder lawsuit, and Nasdaq delisting risk - The company has a history of financial losses, reporting a net loss of $14.0 million for the year ended December 31, 2024, and $9.8 million for 2023[101] - Heavy reliance on a small number of independent dealers presents a concentration risk, with the top three dealers accounting for approximately 40% of consolidated revenues in fiscal 2024[121] - The company has identified material weaknesses in its internal controls over financial reporting and disclosure controls, which could impact the accuracy of its financial statements[199][201][205] - The company's common stock is at risk of being delisted from The Nasdaq Capital Market for failing to meet the minimum $1.00 bid price requirement. An extension to regain compliance has been granted until May 6, 2025[187][188] - A class action lawsuit was filed on March 10, 2025, by former Forza shareholders against the company and its directors, alleging breach of fiduciary duty in connection with the merger[167][237] - The company's CEO, Joseph Visconti, holds significant voting power with 22.6% of outstanding common stock, allowing him to exert substantial influence over corporate decisions[155] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[226] Cybersecurity The company has established a cyber risk management protocol based on the NIST Cybersecurity Framework, which is overseen by the management team and the Audit Committee - The company's cyber risk management protocol is based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework[228] - Oversight of cybersecurity is handled by the management team and the Audit Committee, with the Board of Directors reviewing risks at least annually[231][232] - As of the report date, the company has not had a cybersecurity incident[233] Properties The company leases its primary office and production facility, located at 3101 S US-1 in Fort Pierce, Florida, from Visconti Holdings, LLC, an entity owned by the company's CEO, Joseph C. Visconti - The company's principal office and production facilities in Fort Pierce, Florida are leased from Visconti Holdings, LLC, an entity owned by CEO Joseph C. Visconti[234] - The current lease agreement specifies a base rent of $36,465 per month, which increases by 5% annually[234] Legal Proceedings The company is currently involved in a putative class action lawsuit filed on March 10, 2025, by former shareholders of Forza X1, Inc., alleging breach of fiduciary duty by directors and officers in relation to the merger - On March 10, 2025, a class action lawsuit was filed against the company and certain directors and officers by former shareholders of Forza X1, Inc. concerning the merger[237][448] - The complaint asserts claims for breach of fiduciary duty and seeks unspecified damages. The company is unable to estimate the outcome and intends to defend against the claims vigorously[237][448] Mine Safety Disclosures This item is not applicable to the company - Not applicable[238] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has 274 stockholders, does not pay dividends, and provides details on its equity compensation plan - The company's common stock has traded on the Nasdaq Capital Market under the symbol "VEEE" since July 21, 2021[239] - The company has not paid cash dividends in 2024 or 2023 and intends to retain future earnings to finance business growth[241] Equity Compensation Plan Information as of December 31, 2024 | Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Equity Compensation Plan Options* | Weighted Average Exercise Price of Outstanding Equity Compensation Plan Options | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 2,223,711 | $2.82 | 948,089 | Management's Discussion and Analysis of Financial Condition and Results of Operations In fiscal year 2024, the company experienced a significant 57% decrease in net sales to $14.4 million, resulting in a gross loss and a $14.0 million net loss, with cash declining to $7.7 million due to decreased demand Comparison of Operations for Years Ended December 31 | | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net sales | $14,388,517 | $33,425,912 | $(19,037,395) | (57%) | | Gross profit (loss) | $(751,425) | $3,266,888 | $(4,018,313) | (123%) | | Loss from operations | $(14,551,769) | $(11,987,299) | $(2,564,470) | 21% | | Net loss | $(14,009,906) | $(9,782,196) | $(4,227,710) | 43% | | Basic and dilutive loss per share | $(1.10) | $(0.76) | $(0.35) | 46% | - The number of boats sold decreased by 63% in FY2024 compared to FY2023. However, the average selling price per unit increased by 19% to approximately $167,096 due to a higher proportion of larger, more expensive Twin Vee models sold[256][267] - Gross margin turned negative, declining from 10% in 2023 to -5% in 2024, attributed to production inefficiencies from a significant drop in demand[269] - Operating expenses decreased 10% to $13.8 million, including a $1.67 million impairment charge on the partially constructed Forza building. Excluding this charge, operating expenses decreased 21%[270] Selected Financial Position Data as of December 31 | | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Cash and cash equivalents | $7,491,123 | $16,497,703 | (54.6%) | | Working capital | $6,671,151 | $22,429,973 | (70.3%) | Quantitative and Qualitative Disclosures About Market Risk This item is not applicable as the company is a smaller reporting company - Not applicable because the company is a smaller reporting company[304] Financial Statements and Supplementary Data This section presents the consolidated financial statements for 2024 and 2023, including balance sheets, statements of operations, and cash flows, highlighting key figures like a $14.0 million net loss and significant customer concentration Consolidated Balance Sheet Highlights (as of Dec 31) | | 2024 | 2023 | | :--- | :--- | :--- | | Total Current Assets | $10,419,141 | $26,646,318 | | Total Assets | $25,887,905 | $39,846,713 | | Total Current Liabilities | $3,747,990 | $4,216,345 | | Total Liabilities | $6,671,055 | $7,797,098 | | Total Stockholders' Equity | $19,216,849 | $32,049,615 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | | 2024 | 2023 | | :--- | :--- | :--- | | Net sales | $14,388,517 | $33,425,912 | | Gross (loss) profit | $(751,425) | $3,266,888 | | Loss from operations | $(14,551,769) | $(11,987,299) | | Net loss | $(14,009,906) | $(9,782,196) | - In 2024, three individual customers accounted for over 10% of total sales each, representing a combined 40% of total sales[435] - The company has a maximum repurchase obligation of $10,265,229 for 60 units under dealer floor plan agreements as of December 31, 2024[417] - A full valuation allowance of $16.7 million has been established against the company's deferred tax assets due to uncertainty of realization[438] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no disagreements with its accountants on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure - None reported[450] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of December 31, 2024, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management concluded that the company's disclosure controls and procedures were not effective as of December 31, 2024[451] - The ineffectiveness is due to material weaknesses in internal control over financial reporting, including issues with segregation of duties and insufficient staff with appropriate GAAP experience[451][453] - A remediation plan is in progress, which includes hiring a full-time Staff Accountant and a controller to address the weaknesses[456] Other Information During the year ended December 31, 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 fourth quarter of the fiscal year[460] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes key executives and a five-member staggered Board of Directors with three independent members, overseeing Audit, Compensation, and Nominating committees, and adhering to a code of conduct - The Board of Directors consists of five members: Joseph C. Visconti, Preston Yarborough, Neil Ross, Kevin Schuyler, and Marcia Kull[464] - The board is divided into three staggered classes, with directors serving three-year terms[479][483] - The board has determined that Neil Ross, Kevin Schuyler, and Marcia Kull are independent directors[485] - The company has established an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee, each composed of independent directors[488][489] Executive Compensation Executive compensation for named executive officers, including CEO Joseph Visconti's $1,022,073 total compensation in 2024, comprises salary, bonuses, and equity awards governed by employment agreements and stock incentive plans 2024 Summary Compensation Table | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | All Other Compensation ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Joseph C. Visconti, President and CEO | 2024 | 384,233 | 500,000 | 84,900 | 52,940 | 1,022,073 | | Michael P. Dickerson, CFO | 2024 | 141,538 | 130,000 | 114,300 | 36,094 | 421,932 | | Preston Yarborough, Vice President | 2024 | 182,584 | 67,761 | 28,300 | 33,578 | 312,223 | - CEO Joseph Visconti's employment agreement includes a $250,000 base salary, a target bonus of 120% of base salary, a car allowance, and health insurance[514][515] - The company maintains the 2021 Stock Incentive Plan, which has an evergreen provision to increase available shares annually. As of January 1, 2025, 3,841,150 shares were available for issuance[548][445] - Non-employee director compensation includes annual cash retainers, with the lead independent director receiving $100,000 per year and other independent directors receiving $45,000 per year[557][565] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 17, 2025, CEO Joseph C. Visconti beneficially owned 21.3% of the company's outstanding common stock, with all current executive officers and directors as a group beneficially owning 24.3% Security Ownership of Beneficial Owners (as of March 17, 2025) | Name of Beneficial Owner | Percentage of Shares Beneficially Owned | | :--- | :--- | | Named Executive Officers and Directors | | | Joseph C. Visconti | 21.3% | | Michael P. Dickerson | 1.1% | | Preston Yarborough | 1.8% | | All current executive officers and directors as a group (6 persons) | 24.3% | | 5% Stockholders | | | Marathon Micro Fund, L.P. | 6.4% | | Palm Management (US) LLC | 5.5% | Certain Relationships and Related Transactions, and Director Independence The company engages in related party transactions, including leasing its primary facility from an entity owned by its CEO and providing management services to its former subsidiary, with all such transactions reviewed by the Audit Committee - The company leases its main facility from Visconti Holdings, LLC, an entity controlled by CEO Joseph Visconti. The monthly rent is $36,456[577] - Prior to the merger, Twin Vee provided management services to Forza under a Transition Services Agreement for a variable monthly fee, which averaged $41,593 in 2024 until the merger[578] - The Board of Directors has adopted a written policy requiring that any related party transaction be reviewed and approved or ratified by the Audit Committee[588] Principal Accounting Fees and Services Grassi & Co., CPAs, P.C. serves as the company's independent registered public accounting firm, with aggregate fees billed for fiscal years 2024 and 2023 being $187,658 and $142,822, respectively, all pre-approved by the Audit Committee Auditor Fees | | Year ended Dec 31, 2024 | Year ended Dec 31, 2023 | | :--- | :--- | :--- | | Audit Fees | $173,273 | $138,712 | | Audit-Related Fees | $14,385 | $4,110 | | Tax Fees | — | — | | All Other Fees | — | — | | Total | $187,658 | $142,822 | - The Audit Committee has adopted procedures for pre-approving all audit and non-audit services provided by the independent auditor[592] Part IV Exhibits and Financial Statement Schedules This section lists the exhibits filed with the Annual Report on Form 10-K, including key agreements and certifications, with financial statement schedules omitted as inapplicable or redundant - The financial statements required are included in Part II, Item 8 of the report[596] - A list of exhibits filed with the report is provided, including key agreements such as the Merger Agreement with Forza, employment agreements with executive officers, and the 2021 Stock Incentive Plan[597][598][599] Form 10-K Summary This item is not applicable - Not Applicable[595]