Twin Vee PowerCats Co. — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Twin Vee designs and manufactures recreational and commercial powerboats. Its consolidated business includes gas-powered boats, electric-boat developer Forza X1 (44% owned and controlled by Twin Vee), and an inactive franchise-development subsidiary.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $33.43 million | $31.99 million |
| Gross profit / gross margin | $9.72 million / 29% | $10.66 million / 33% |
| Operating expenses | $21.71 million | $16.68 million |
| Loss from operations | $11.99 million | $6.02 million |
| Consolidated net loss | $9.78 million | $5.79 million |
| Net cash used in operating activities | $6.93 million | $4.15 million |
| Net cash used in investing activities | $6.63 million | $0.20 million |
| Net cash provided by financing activities | $6.82 million | $20.87 million |
- Sales increased 4%; management reported boat units sold rose 21%. Average selling price fell about 16% to approximately $137,692, reflecting the addition of lower-priced monohull models.
- Operating expenses rose 30%, driven in part by higher payroll, depreciation, research and development, and public-company costs. Salaries and wages included $1.90 million in non-cash stock-based compensation.
- Year-end cash, cash equivalents and restricted cash were $16.76 million, including $0.26 million restricted; marketable securities were $4.46 million. Combined cash and marketable securities were $21.22 million.
- Current assets were $26.65 million, current liabilities $4.22 million, and working capital $22.43 million. Total liabilities were $7.80 million. These included a $0.50 million SBA disaster loan and $2.86 million in finance lease liabilities; operating lease liabilities were also recorded.
- Inventory increased to $4.88 million net of a $0.42 million excess-and-obsolete reserve. Capital spending included boat molds, equipment, leasehold improvements and land.
Changes, outlook and material matters
- Gross margin declined four percentage points, while operating loss nearly doubled. Management attributed margin pressure to weaker marine-sector demand and said expenses rose as the company expanded production, developed products and supported Forza.
- The U.S. watercraft market declined 14.5% in 2023, according to industry data cited by the company; Twin Vee reported sales growth of 4%. The company closed its White Bluff, Tennessee, manufacturing facility in November 2023 after weaker demand for legacy AquaSport models and consolidated operations in Florida.
- Forza had not commercialized electric boats by year-end. It continued motor redesign and verification testing; management described factory construction in North Carolina, with initial planned capacity of 500 units annually. Grant reimbursements of up to $1.37 million depend on investment and job-creation conditions.
- Management said available cash and securities, together with expected operating cash flows, should fund operations for at least 12 months from the filing date. It also expected increased Forza spending on its planned factory. No specific revenue or earnings guidance was provided.
- Other income included $1.27 million of Employee Retention Credit income and $0.91 million of dividend income. These items helped offset operating losses and are important when assessing recurring performance.
- Dealer concentration and financing are notable exposures: the top five dealers accounted for about 35% of consolidated revenue. Repurchase obligations under dealer floor-plan arrangements covered up to 76 units, with a stated maximum obligation of $10.51 million; no repurchases occurred in 2023 or 2022.
- Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses, including inadequate segregation of duties and insufficient accounting staffing and expertise. Remediation was underway but had not been demonstrated effective. The auditor gave an unqualified opinion on the financial statements but did not audit internal-control effectiveness.
- Subsequent events included announced departures of the CFO and Forza’s CEO, both in March 2024. The filing gives differing effective-date descriptions for Forza’s CEO departure; verify the final transition details.
- Key risks include continuing losses, fixed manufacturing costs, seasonal and cyclical demand, dealer and supplier dependence, facility capacity, product warranty and recall exposure, and Forza’s development, battery-safety, commercialization and direct-sales execution risks. The filing reports no material legal proceedings.
Investor verification priorities
- Reconcile the filing’s inconsistent loss figures: the audited statements report consolidated net loss of $9.78 million and loss attributable to Twin Vee shareholders of $7.19 million, while MD&A narrative cites a different 2023 net-loss amount. Confirm the relevant measure before comparing results.
- Verify the drivers and sustainability of 2023 revenue growth, unit growth, lower average selling prices and gross-margin compression, including the contribution and economics of AquaSport models.
- Assess operating cash burn, inventory levels and reserves, and the company’s stated 12-month liquidity outlook against continuing losses and planned Forza factory spending.
- Confirm Forza’s factory timetable, funding needs, grant eligibility, motor-test milestones, commercialization plans and progress establishing sales, financing and service support.
- Track remediation and testing of internal-control weaknesses, as well as leadership succession following the announced executive departures.
- Review dealer concentration, floor-plan repurchase exposure, related-party facility leases, and the filing’s differing descriptions of dealer counts and other operating details.