10-K: Twin Vee PowerCats Co. Reports Significant Revenue Decline in 2024, Focuses on Strategic Realignment

Twin Vee PowerCats Co. reports a 57% decrease in revenue for fiscal year 2024, prompting strategic shifts including the merger with Forza X1 and cost-cutting measures.

Summary

• Twin Vee PowerCats Co. experienced a 57% decrease in net sales, falling to $14.39 million in 2024 from $33.43 million in 2023.
• The number of boats sold decreased by 63% compared to the previous year, though the average selling price increased by 19% to $167,096 due to a higher proportion of Twin Vee models sold.
• The company incurred a net loss of $14.01 million in 2024, compared to a net loss of $9.78 million in 2023.
• Gross profit decreased by 123% to a negative $0.75 million, with gross profit as a percentage of sales dropping to -5% from 10% in the prior year.
• Operating expenses decreased by 10% to $13.80 million, including a $1.67 million impairment charge related to the Forza building.
• A merger with Forza X1, Inc. was completed on November 26, 2024, with Forza becoming a wholly-owned subsidiary of Twin Vee.
• The company is addressing Nasdaq compliance by seeking an extension and considering a reverse stock split.
• Twin Vee entered into a Sale Agreement with Revver Digital, LLC to acquire intellectual property related to online marketplace services for yachts and boats.
• The company's cash and cash equivalents totaled $7.49 million as of December 31, 2024.
• The company is actively managing working capital and inventory to align with reduced revenues and production.

Sentiment

Score: 3

Explanation: The document presents a largely negative outlook due to significant revenue decline, increased losses, and challenges in maintaining Nasdaq compliance. While there are some positive aspects, the overall tone is concerning from an investment perspective.

Positives

• The average selling price per unit increased by 19%, indicating a shift towards higher-value models.
• Operating expenses decreased by 10%, reflecting cost-cutting measures.
• The merger with Forza X1, Inc. could potentially lead to synergies and new opportunities.
• The Sale Agreement with Revver Digital, LLC could enhance the company's online presence and sales capabilities.
• The company is actively managing working capital and inventory to improve financial performance.

Negatives

• Net sales decreased significantly by 57%, indicating a substantial decline in demand.
• The company incurred a net loss of $14.01 million, highlighting financial challenges.
• Gross profit decreased significantly, resulting in a negative gross profit margin.
• The company is facing challenges in maintaining Nasdaq compliance, potentially impacting investor confidence.
• The impairment charge of $1.67 million related to the Forza building indicates a write-down of assets.

Risks

• The company's failure to meet continued listing requirements of The Nasdaq Capital Market could result in a de-listing of its common stock.
• The company has identified weaknesses in its internal controls, and there are no assurances that these weaknesses will be effectively remediated.
• The company's stock price has fluctuated in the past and may be volatile in the future, which could lead to substantial losses for investors.
• The company's operations and performance depend on global, regional, and U.S. economic and geopolitical conditions, which are subject to instability.
• The company's annual and quarterly financial results are subject to significant fluctuations depending on various factors, many of which are beyond its control.

Future Outlook

The company aims to grow its revenue base, manage working capital, and improve inventory turns. It also anticipates the sale of its partially constructed McDowell, North Carolina facility to generate cash.

Management Comments

• 2024 was a challenging year with overall boat production down 63%, which worsened throughout the year.
• We managed both variable and fixed operating costs, including reducing then shutting down the Forza research and development operation.
• The deleveraging of our fixed costs on such a low revenue base in 2024 led to significant losses.
• We have decreased our head count significantly and continue to right-size the business for the current state of the economy, while keep our core strengths intact.

Industry Context

The powerboat industry, including the performance sport boat category, is highly competitive for consumers and dealers. The saltwater outboard market experienced a decline of 9.26% in 2024 compared to 2023, with a total of 18,684 new units sold in the United States during 2024.

Comparison to Industry Standards

• According to SSI data, 179,168 new watercraft were sold in the U.S. in 2024, a decline of 9.59% across the entire industry compared to 2023.
• The saltwater outboard market experienced a decline of 9.26% in 2024 compared to 2023, with a total of 18,684 new units sold in the United States during 2024.
• The global catamaran market was expected to expand at a compound annual growth rate (CAGR) of 5.8% from 2022 to 2030.
• The U.S. catamaran market was worth $342.5 million in 2021 and was expected to expand at a CAGR of 5.4% from 2022 to 2030.

Management Changes

Legal Proceedings

• On March 10, 2025, shareholders Nabeel Youseph and Marisa Hardyal-Youseph (Plaintiffs), who are former holders of common stock of Forza X1, Inc. (Forza), commenced an action in the Chancery Court of the State of Delaware, captioned Youseph, et al. v. Visconti, et al., Case No. 2025-0262, by filing a putative class action complaint (the Complaint) against Defendants Joseph Visconti, Kevin Schuyler, Neil Ross, Twin Vee Powercats Co. and Twin Vee Powercats, Inc. (collectively, Defendants), related to Forzas merger with us seeking an unspecified award of damages, plus interest, costs, and attorneys fees.

Related Party Transactions

• The Company leases its office and production facilities from Visconti Holdings, LLC, owned by CEO Joseph Visconti.
• During the years ended December 31, 2024 and 2023, respectively, the Company recorded $ 0 and $ 36,000 of professional fees, for consulting work for Twin Vee performed by Jim Leffew, the former Chief Executive Officer of Forza.
• In August of 2023, the then 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.

Stakeholder Impact

• Shareholders may experience dilution due to potential capital raises and reverse stock splits.
• Employees may face uncertainty due to cost-cutting measures and headcount reductions.
• Dealers may be affected by changes in inventory management and sales strategies.
• Customers may experience changes in product offerings and pricing.

Next Steps

• The company intends to actively monitor the bid price of its common stock and will consider available options to regain compliance with the Nasdaq listing requirements, including such actions as effecting a reverse stock split to maintain our Nasdaq listing.
• The company is in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses.
• The company is actively monitoring the effects these disruptions and increasing inflation could have on our operations.

Key Dates

Keywords

Twin Vee, PowerCats, Forza X1, Merger, Revenue decline, Financial results, Nasdaq, Compliance, Boat sales, Marine industry