Twin Vee PowerCats (US:VEEE)2024-05-15 20:30PART I—FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for the quarter ended March 31, 2024, highlighting a net loss of $2.34 million and a 41% drop in net sales Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2024, reflects a decrease in total assets to $36.5 million and total stockholders' equity to $30.1 million Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $21,778,752 | $26,646,318 | | Total Assets | $36,454,352 | $39,846,713 | | Total Current Liabilities | $2,896,963 | $4,216,345 | | Total Liabilities | $6,313,649 | $7,797,098 | | Total Stockholders' Equity | $30,140,703 | $32,049,615 | Condensed Consolidated Statements of Operations The statement of operations for Q1 2024 shows a net loss of $2.34 million, a significant increase from the prior year, driven by a 41% decline in net sales Statement of Operations Summary (Unaudited) | Metric | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net Sales | $5,276,343 | $8,877,215 | | Gross Profit | $277,314 | $1,609,558 | | Loss from Operations | $(2,543,206) | $(2,369,523) | | Net Loss | $(2,335,194) | $(1,828,465) | | Basic and Dilutive Loss Per Share | $(0.18) | $(0.12) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $30.14 million as of March 31, 2024, primarily due to the $2.34 million net loss for the quarter - Total stockholders' equity decreased by approximately $1.9 million during the first quarter of 2024, from $32,049,615 to $30,140,70318 - The decrease in equity was primarily due to a net loss of $2,335,194, which includes a net loss of $1,686,227 attributable to Twin Vee stockholders and $648,967 attributable to noncontrolling interests18 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $1.75 million in Q1 2024, partially offset by $1.48 million from investing activities, resulting in a net cash decrease Cash Flow Summary (Unaudited) | Activity | Three Months Ended Mar 31, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,749,920) | $(2,232,650) | | Net cash provided by (used in) investing activities | $1,476,448 | $(243,007) | | Net cash used in financing activities | $(83,735) | $(2,835) | | Net change in cash | $(357,207) | $(2,478,492) | Notes to the Condensed Consolidated Financial Statements (Unaudited) Notes detail accounting policies, segment performance across Gas-powered, Franchise, and Electric Boats, and significant customer concentration with 49% of sales from three dealers - The company operates through three segments: Gas-powered Boats (Twin Vee, AquaSport), Franchise (Fix My Boat), and Electric Boats (Forza X1)2224101 - In Q1 2024, three individual dealers accounted for 49% of the company's total sales, indicating significant customer concentration99 Segment Performance for Q1 2024 | Segment | Net Sales | Loss from Operations | | :--- | :--- | :--- | | Gas-Powered Boats | $5,276,343 | $(1,227,096) | | Franchise | $0 | $(772) | | Electric Boat and Development | $0 | $(1,315,339) | - The company has repurchase obligations under floor plan agreements totaling $13.2 million for 84 units as of March 31, 202483 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 41% decline in Q1 2024 net sales due to reduced demand and product mix, while affirming sufficient liquidity for the next 24 months Q1 2024 vs Q1 2023 Performance | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,276,343 | $8,877,215 | (41%) | | Gross Profit | $277,314 | $1,609,558 | (83%) | | Loss from Operations | $(2,543,206) | $(2,369,523) | 7% | | Net Loss | $(2,335,194) | $(1,828,465) | 28% | - The decrease in net sales was due to a 39% decrease in the number of boats sold and a shift in product mix towards lower-priced monohull boats119 - Working capital decreased by $3.5 million to $18.9 million as of March 31, 2024, primarily due to development efforts at the non-revenue generating Forza subsidiary and investments in new boat molds132 - Management believes that existing cash, cash equivalents, and marketable securities will be sufficient to finance operations for the next 24 months133 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - 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 risk151 Controls and Procedures Management concluded that disclosure controls were ineffective as of March 31, 2024, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management, including the CEO and CFO, concluded that disclosure controls and procedures were not effective as of March 31, 2024152 - The ineffectiveness is due to material weaknesses related to not having retained sufficient staff with appropriate experience in GAAP presentation152 - A remediation plan is being executed, which includes retaining a full-time Senior Staff Accountant, implementing a robust ERP system, and planning to hire a Controller during 2024153 PART II—OTHER INFORMATION This section covers other material information, including legal proceedings, risk factors, and recent corporate developments Legal Proceedings The company is involved in various civil litigations but does not consider any current proceedings material to its business or financial condition - The company is not currently a party to any legal proceedings that would be expected to have a material adverse effect on its business or financial condition157 Risk Factors Key risks include a Nasdaq minimum bid price non-compliance notice, a history of operating losses, high dealer concentration, and material weaknesses in internal controls - On May 10, 2024, the company received a notice from Nasdaq for failing to maintain a minimum closing bid price of $1.00 per share, with a compliance deadline of November 6, 2024160 - The company has incurred significant recent losses, including a net loss of $2.3 million for Q1 2024, and had an accumulated deficit of approximately $16.0 million as of March 31, 2024165 - The company depends heavily on its dealer network, with three dealers accounting for 49% of total sales in Q1 2024, creating significant concentration risk166167 - The company has identified material weaknesses in its internal controls and cannot provide assurance that these will be effectively remediated or that others will not occur168 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity sales occurred, and IPO proceeds were reallocated from electric propulsion development and property acquisition to working capital and facility expansion - There were no unregistered sales of equity securities during the quarter ended March 31, 2024175 - The company has reallocated proceeds from its 2021 IPO, with funds for a standalone electric propulsion system now designated for working capital, and funds for a new testing center to expand the current Fort Pierce manufacturing facility178179 Defaults Upon Senior Securities This item is not applicable as the company has no defaults upon senior securities to report - Not Applicable182 Mine Safety Disclosures This item is not applicable to the company's operations - Not Applicable183 Other Information This section includes a Nasdaq minimum bid price non-compliance notice received on May 10, 2024, and confirms no Rule 10b5-1 trading arrangements by directors or officers - On May 10, 2024, the company received a written notice from Nasdaq for its common stock failing to maintain a minimum closing bid price of $1.00 for 30 consecutive business days184 - The company has a 180-day compliance period, until November 6, 2024, to regain compliance with the Nasdaq listing rule184 - No director or officer of the Company adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2024188 Exhibits This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including required certifications from executive officers - The Exhibit Index lists all documents filed with the report, including CEO and CFO certifications pursuant to Sarbanes-Oxley Act sections 302 and 906189191 Signatures This section contains the official signatures authorizing the filing of the report - The report was duly signed and authorized on May 15, 2024, by Joseph C. Visconti, Chairman and Chief Executive Officer, and Michael P. Dickerson, Chief Financial Officer193195