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Operator: Welcome to the Twin Vee PowerCats Company Year-End 2022 Investor Call. As a reminder, this call is being recorded and all participants are on a listen-only mode. Your speaker for today’s program is Joseph Visconti, Chairman of the Board and CEO. Before I turn the call over to Joseph, please remember that certain statements made during this investor call are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements on this call, other than statements of historical facts, including statements regarding the company’s future operations and financial position, business strategy, and plans and objectives of management for future operations are forward-looking statements.

In some cases, forward-looking statements can be identified by terminologies such as beliefs, may, estimate, continue, anticipate, intend, should, plan, expect, predict, potential or the negative of these terms or other similar expressions. The company has based these forward-looking statements largely on our current expectations and projections about future events and financial trends that believes may affect its financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks and uncertainties and assumptions described, including those set forth in our filings with the Securities and Exchange Commission, which are available on our website at ir.twinvee.com.

You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflect in the forward-looking statements will be achieved or occur. Finally, this conference call is being webcast. The webcast will be available in the Investor Relations section of our website at ir.twinvee.com for at least 90 days. Audiocast quality is subject to your equipment, available bandwidth, and Internet traffic. If you are experiencing unsatisfactory audio quality, please use the telephone dial-in option. A question-and-answer session will follow the presentation. Please note that only those that have dialed in via telephone may ask a question. Those listening via webcast will be unable to submit questions and must call in instead.

I would now like to turn the call over to your host, Joseph Visconti.

Joseph Visconti: Thank you and good morning to everyone on the call today. Thank you for joining us and taking the time to participate in our 2022 year-end financial results. Today, I’d like to update you all on the significant progress that we have made this year and our plan as we move forward in 2023. I will start by providing fourth quarter updates including product development, expansion plans, facility developments, and the financials of our company, and then we will conclude with the Q&A. As an overview of our business, the name Twin Vee has been synonymous with offshore catamaran boats for almost 30 years and is considered by many to be the best riding boats on the water. Under the brand name Twin Vee PowerCats, our company designs manufacturers themselves a variety of catamaran sport boats here in Fort Pierce, Florida.

We currently offer gas-powered GFX and STX model lineup consisting of boats from 24-feet to 40-feet in length, and we currently employ approximately 170 people. So, let’s jump right in. 2022 was an exciting breakout year for our company, and Twin Vee was hitting on all cylinders. We increased sales and product of units by over a 100%. We designed and produced many new models, including our largest Twin Vee ever our 400 GFX. We spun out our electric division and took Forza XI public on NASDAQ, raising an additional $17 million where Twin Vee maintains almost a 70% ownership of Forza. We opened many new dealers, including one of the largest retail boat dealers in the United States, OneWater Marine. We increased dealer expansion and distribution with a key hire Zach Crane that opened doors to dealers and distribution in our Northeast United States.

We designed tooled and launched a new monohull boat brand named LFG Marine, with a large initial order from one of the best and largest boat clubs in the United States. We transitioned our lamination department to a state-of-the-art lamination process, known as infusion or closed mold lamination. And we are 90% through the site plan approval for our 30,000 square foot expansion that will give us over 100,000 square feet of manufacturing space here in Fort Pierce. We added key hires and senior management roles such as boat production, LEAN manufacturing, environmental health and safety, and our marketing department. We’re 90% completed with adding a comprehensive ERP system, which would be a vital piece of financial and control accountability software that will manage many aspects of our business, including build of material costing more — better and more efficient ordering systems, restocking and inventory controls that adds to the better margins and more efficient accounting and tracking.

So, the question is, how is the current state of the economy affecting our business? As we discussed in previous calls, the pandemic and post-pandemic demand for our products was extremely good. The current economy and steadily increasing interest rates have slowed the demand for most recreational based products, including ours. What does this mean? Number one, at peak demand over a year ago, the Twin Vee dealer network had less than 10 units in field inventory. These 10 units were spread throughout our entire dealer network consisting of approximately 20 dealers. Today we have approximately 80 units in the field, but we also have over 30 locations, plus-plus, as we continue to open new dealers. The 80 units is a manageable number and the most units that any dealer has on a single lot is seven units, which is not considered a lot for boat inventory for a boat dealer.

Our top line revenue for the past two quarters have remained relatively strong due to restocking the dealer inventories from those historic low numbers and also getting inventory to new dealers as they were coming online. We’ve been very careful to not overstock dealers. While we find new avenues to increase revenue through new Twin Vee models and the launch of our new LFG brand, our goal is to keep our top line revenue strong while managing that field inventory. New models create new opportunities for expanding our market by offering more products to a broader consumer base. In addition to our current GFX model lineup, we’ve added three additional models named the STX for Sport Tournament. The STX models included 24, 26 and 28. We are also currently working on a brand new 28-foot dual console boat, which will help us really broaden our customer base and compete in a segment that’s pretty much dominated by a single competitor.

We feel that by adding this dual console to our model lineup and at the kind of simultaneous parallel path we’re adding new dealers in that northeast region of the United States. That is a target rich opportunity for us with this new dual console. Our timing could not be better on launching an exciting new boat brand that is a 100% owned and operated by Twin Vee. We announced an all new monohull brand LFG Marine about a month ago. LFG Marine is a bold new stylized monohull brand design to energize recreational boating with a unique, fresh and versatile boat models. Our goal is that we are starting with a 22-foot center console, and we will grow this brand and model lineup from 22, 24, 26, 28, 30, both in the center console and the dual console, and walk it and walk it up as the market permits.

The original idea for the monohull brand was based on the demand not being met by some of the largest boat clubs in the country with large amounts of single engine monohull. As I get asked, why did we pivot and get into a monohull lineup? And it originated request from a boat club and these boat clubs buy these kind of lower price single engine boats in the ROI with rental rates usage, low maintenance, brand value, and the ability to resell the vessels to club members after a year or rental use. After the first LFG monohull was produced, we had the opportunity to showcase that first boat at several events where the boat performed incredibly. On a single weekend with our first 22 being showcased at this event, our sales team sold over 50 LFG boats, a 50 boat order just over that weekend.

Some key industry players said that our 22 LFG was one of the best small boats they’ve had the opportunity to test ride. This boat was designed by our in-house Chief Marine Architect named Greg McLogan and Jim Leffew, who you know, who’s the President and the CEO of Forza, who previously was the head of manufacturing for Maverick Boat Group. And Jim was building 1700 boats a year at Maverick before it was sold to Malibu. And Jim helped the work with the team to develop the build process. And of course, the rest of our team, including our Vice President, Preston Yarborough, were instrumental in getting this new 22 LFG from an idea to a boat in the water in less than three months. I mean, this is just like incredible that we worked that efficiently and effectively to get that product into the marketplace.

This time is exceptional in terms of tooling and manufacturing a new model. We are currently developing several additional models under the LFG Marine name, 22 Dual Console, which should be in production by April 15th in a couple of weeks. We’re working on the next size of 24-foot center console and dual console. And like I mentioned, we will work our way up as the market permits. More information can be found on a website lfgmarine.com, which is a temporary site. We just wanted to get something up and a more robust LFG Marine site will be up over the next couple of months. We are also increasing the reach of our brand by working with new outboard motor companies, increasing our Twin Vee brand by working with new outboard motor brands. Our boats historically have utilized Suzuki outboard motors in the past and however, we’ve worked hard to become an OEM for Mercury and Yamaha.

This was a huge achievement. These motor companies don’t just accept anyone. It was quite a process, but this achievement allows Twin Vee and LFG Marine to Hanks, Zuki, Yamaha and Mercury Motors. And now we can succeed in markets where motor brands have strong brand recognition and sometimes these motor brands control market share based on that brand. We’ve expanded our sales and marketing department to encourage our company’s growth further. To support our sales and marketing team, Twin Vee launched its new website, which you can see at twinvee.com. This is a brand new website from the ground up. It’s very robust. We’ve got a clothing store on this site now, a build in price, great imagery, great videos. There’s a lot to do and we’re getting increased traffic because of the enhancements.

So, this new website enhances the boat buying experience for Twin Vee customers and dealers. During the redesign, we wanted to craft an upgraded online experience offering customers engaging and easily digestible content about the boat we manufacture and providing interactive features to enrich the boat buying process. We are also progressing on a 30,000 foot extension at our Twin Vee facility here in Fort Pierce. The extension structure will connect the back and the front buildings, which will give us, like I mentioned, a 100,000 square feet when it’s complete. We’ll have two linear lines of production. We believe that this additional will help us go from 220 units, which we’re currently manufacturing up to possibly 600 units out of this existing facility with this 30,000 foot extension.

So, with that, I would like to go into the financials and then we can open up for a little Q&A. So, our net revenue for the year end of December 31st was up 103% to $31,988,000. We’re pleased with the consistent growth that we’ve been able to achieve and maintain over the last year. Our gross profits for the year 2022 were up 70% to $10,657,000. We continue to monitor the cost of raw materials and purchase components along with dealer inventory and are adjusting our sales prices and discount structures accordingly. We did record a one-time cycle count adjustment in the fourth quarter. Our cycle count adjustment for the year was 1,460,000 compared to 609,000 in the prior year. During the year, we discontinued our classic line of boats and we are working on structuring bills of material for new models.

This coupled with us purging a lot of inventory for our new ERP system, which is coming online, resulted for this large inventory write-down. Our operating expenses for the year ending December 31st, 2022 increased approximately $8,772,000 to $16,679,000 compared to almost $8 million in 2021. Our operating expenses as a percent of sales for the year were 52% compared to 50% for the year ended December 31st, 2021. However, if we look at just gas-powered boat segment, our operating expenses as a percent of sales for the year were 41% compared to 47% in 2021. So, we’re pleased with this improvement at a 6% year-over-year. Our net loss for the year 2022 is approximately $5.8 million compared to $1 million in 2021. However, 2021, our subsidiaries had limited activity.

Forza our electric boat segment, the loss was of the $5.7 million, the Forza loss was $3.5 million. Further, when we look at our adjusted net income for the year, which excluded non-cash charges, our adjusted net loss for our core business gas-powered boats was approximately $135,000, and our EBITDA was about $21,000. So, we broke even on the year EBITDA. Our net loss is a reflection of the investment the company continues to make in our electric boat division Forza XI, as well as our continued investment in gas-powered boats, including the all new LFG Marine brand. Turning to the balance sheet. We had cash and cash equivalents of marketable securities approximately $26,429,000 as of December 31st, 2022. Our inventory value, December 31st, 2022 is approximately $4 million compared to $1.8 million in the prior year.

And we’re going to work to unlock this value and reduce these inventories as we move into 2023. I can get into why that happened, but post-pandemic supply chain over ordering, trying to maintain units, kind of diversifying out into multiple different vendors, it was tough to get parts. And at one point I was holding this meeting yesterday that the supply chain kind of just fixed itself and trucks were showing up every day. So, as we sit now, our stocks — our shelves are stocked, but we’ll work hard to reduce that inventory over the coming months. We are seeing lead times decrease on our component parts and our new ERP system will give us significantly more foresight and forecasting demand and inventory turns. On December 5th, 2022, we merged with Twin Vee PowerCats, the parent company.

We anticipate a reduction to — in professional fees in 2023. Now that that transaction is behind us. We also look forward to utilization of their NOLs. We picked up approximately a $7 million NOL with that merger, as we move into an income position. At this time, we believe our cash and cash equivalents and cash from operations provide sufficient cash to finance ongoing operations. And so with that, I’d like to open it up for Q&A.

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Operator: Thank you. At this time, we’ll be conducting a question-and-answer session. Our first question comes from Paul Johnson , a private investor. Please proceed with your question.

Unidentified Analyst: Yes. Good morning. We spoke yesterday on the Forza call. Have a similar question just about the expected cash burn going forward, first of all.

Joseph Visconti: On Twin Vee?

Unidentified Analyst: Yes.

Joseph Visconti: So, we are not burning cash on Twin Vee. We broke even on a cash basis. So, everything that we’re doing on Twin Vee including development of new models, launching LFG Marine, tooling the 28 dual console, we are not burning cash. I mean — so we’re not showing a large profit and we’re showing a loss, with depreciation and amortization, but Twin Vee is not burning cash.

Unidentified Analyst: Okay. And you talked about inventory. I apologize, I joined the call late. Did you — I didn’t see the press release inventory numbers released, did you — what is the year-over-year change in the inventory?

Joseph Visconti: Significant. It was $1.9 million last year. It’s approximately $4 million this year. A majority of that is motors, as we brought on Mercury. So, let me give you an example. Like, so, you’re trying to bring these motor companies and there were times that boats are sitting and quality control waiting for the motor to show up and motors were getting drop shipped. And it got to the point that we just — we’re trying to over-order motors because of, keeping the boats leaving on a regular basis. So, when the supply chain kind of started fixing itself and you have multiple parallel paths, you got the supply chain working itself out, you got rising interest rates, you got a slowing of the economy and now these manufacturers for components and motors and composites and everything else are all kind of getting online and getting back caught up.

So, now instead of them parsing out, smaller percentages to each one of their vendors, they’re fulfilling large orders. So, our inventory grew from less than $2 million to $4 million in a matter of like three months. The good news is that all this material does not have a shelf life on it. It’s all usable and has value. So, we’ve been meeting daily to reduce the inventory and I think you’re going to start to see that inventory number come back down over the next couple of months.

Unidentified Analyst: Okay. And do you share backlog information through a year-over-year differences?

Joseph Visconti: So, our backlog is dealers forecasting. So, we sit down once a year with every dealer or a dealer that comes online and we ask them for a forecasted amount of boats. And then we take those forecasted amounts and we build that into our production schedule. I will tell you that it’s changing rapidly. Like, a year and a half ago we had almost probably a two year backlog. I would say it’s around six months right now. And these are real orders. I mean, I could get a call tomorrow and a dealer could say, I’m not taking any more boats. And I can get a call tomorrow and have a dealer say, I need 20 more boats. So, it’s not as predictable as it was a year ago. But we’re a 100% on top of it. We need on a daily basis. We are managing our field inventory.

We are pushed a turbo button on our sales and marketing. We’re pulling every lever possible from sales incentives to broker competitions, to increased boat shows. I don’t know if you saw the Javis boat show. We were there, we looked incredible. Better than we’ve ever looked at any boat show ever. We had five boats there with all pop-ups, full staff, all dressed really nicely, and our sales and marketing department is killing it. And I think that’s why we’ve been able to maintain our top line revenue numbers. There’s a company called CCI Data that manages registrations for boats. And there are some boat companies that are down 70% in registrations. And if you go and look at Twin Vee, we’re down about 20%. So, we’re — I feel like we’re doing everything right.

Could the economy get worse? Yes. But we are eyes wide open. We understand what the market is. The smaller boats are challenged to some extent. The boat clubs are still big buyers. So, we see a trend there. That’s why we pivoted and start building these LFGs for the boat club. The larger boats are still selling briskly, so, we’re focusing on our 34s and our 40s right now to maintain those top line numbers. And we’re also looking for other opportunities in the marketplace that maybe a boat company didn’t have the benefit of an IPO and having some money in the bank and maybe they tripped up. So, we’re keeping our eyes open with those type of opportunities.

Unidentified Analyst: And you announced a million dollar repurchase program back in January. Did you — have you purchased any shares at this point?

Joseph Visconti: We did not. So, I mean, those are tough. Some investors like them, some don’t. On smaller companies with limited cash, I get the optics of it. But on the other hand, if the stock was going to get pushed way down below a dollar, I’d rather have that stock come back into treasury when we have almost $1.20 in cash on the books. So that was kind of the methodology behind that repurchase. But we have not purchased a single share of stock.

Unidentified Analyst: Okay. And just one more question regarding Forza. So, obviously, they’re a separate company in a sense now. And you — and they’ve got their own funding, but how does it work if they need additional funding? Could that — could they come to you as a majority owner and try to get some of that cash in the balance sheet? Or is that not an option?

Joseph Visconti: It is an option. So, we are still filing consolidated financial, because Twin Vee is almost a 70% owner of the company. And so, like we spoke yesterday, I’d like to kind of keep the questions on Twin Vee because we had the Forza call, but like we spoke a couple days ago, Forza’s runway is 18 months based on our current cap position at Forza.

Unidentified Analyst: Okay. Thank you.

Operator: There are no further questions at this time. At this point, I’d like to turn the call back over to Joseph Visconti for closing comments.

End of Q&A:

Joseph Visconti: I want to thank everyone. I want to thank our employees for the hard work throughout the year. And we’ve been working extremely hard to maintain our growth through various avenues, new models, new products, a new brand. And we will continue to work hard for our shareholders. We appreciate your support, everyone. We are having a owner’s appreciation day, and a sales event over the next month. So, we’re going to send an invite out to all of our shareholders. We’d love to have you here. It’s going to be on a Saturday. It’s going to be a full day event where we’re going to have boat rides and the facts that you’ll be open and you can meet all of our leads and managers. So, we have every investor, but if you do not, please send your email to Glenn, glenn@twinvee.com, and we will make sure that you get an invite for this really special event that we’re going to have for our stakeholders, shareholders, and dealers. So, thank you everyone. Have a great day.

Operator: This concludes today’s conference. You may disconnect your lines at this time, and we thank you for your participation.