Welcome to the Twin Vee PowerCats Company Year-End 2022 Investor Call. This call is being recorded and all participants are in listen-only mode. Your speaker for today is Joseph Visconti, Chairman of the Board and CEO. Before I pass the call to Joseph, please note that certain statements made during this investor call are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. All statements in this call, except those that are historical facts, including those about the company's future operations, financial position, business strategy, and management plans and objectives, are forward-looking statements. Forward-looking statements may be identified by terms like beliefs, may, estimate, continue, anticipate, intend, should, plan, expect, predict, potential, or similar expressions. The company has formed these forward-looking statements based mainly on our current expectations and projections about future events and financial trends that may affect our financial condition, operational results, business strategy, and financial needs. These forward-looking statements carry various risks, uncertainties, and assumptions, as described in our filings with the Securities and Exchange Commission, available on our website at ir.twinvee.com. You should not rely on forward-looking statements as predictions of future events. We cannot guarantee that the events and circumstances in the forward-looking statements will occur. Lastly, this conference call is being webcast and will be accessible in the Investor Relations section of our website at ir.twinvee.com for at least 90 days. Audiocast quality can vary based on your equipment, available bandwidth, and Internet traffic. If you are having issues with audio quality, please use the telephone dial-in option. A question-and-answer session will follow the presentation. Please note that only those who called in via telephone may ask a question. Those listening via webcast will not be able to submit questions and must call in instead. I would now like to turn the call over to your host, 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 and manufactures 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 unit output by over 100%. We designed and produced many new models, including our largest Twin Vee ever, the 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, who opened doors to new dealers and distribution in the 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. 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 in 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 will be a vital piece of financial and control accountability software that will manage many aspects of our business, including build of material costing, better and more efficient ordering systems, restocking and inventory controls that lead to 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 were 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? 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, 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 has 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 not to 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 include 24, 26, and 28. We are also currently working on a brand-new 28-foot dual console boat, which will help us broaden our customer base and compete in a segment that's dominated by a single competitor. We feel that by adding this dual console to our model lineup and simultaneously adding new dealers in that Northeast region of the United States, we are targeting a rich opportunity with this new dual console. Our timing could not be better for launching an exciting new boat brand that is 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 designed to energize recreational boating with 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 to include 22, 24, 26, 28, and 30 feet, both in the center console and the dual console, as the market permits. The original idea for the monohull brand was based on unmet demand from some of the largest boat clubs in the country for large amounts of single engine monohulls. As I get asked, why did we pivot and get into a monohull lineup? It originated from a request from a boat club, and these boat clubs buy lower-priced single-engine boats for their return on investment through rental rates, usage, low maintenance, brand value, and the ability to resell the vessels to club members after a year of 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 showcased at this event, our sales team sold over 50 LFG boats, which was 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, is the President and CEO of Forza, who previously was the head of manufacturing for Maverick Boat Group. Jim was building 1,700 boats a year at Maverick before it was sold to Malibu, and he helped our team develop the build process. 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. This is just 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, including a 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 as I mentioned, we will work our way up as the market allows. More information can be found on our website lfgmarine.com, which is a temporary site. We just wanted to get something up, and a more robust LFG Marine site will be launched in the next couple of months. We are also increasing the reach of our brand by working with new outboard motor companies, thus expanding our Twin Vee brand. Historically, our boats have utilized Suzuki outboard motors in the past; 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 use Suzuki, Yamaha, and Mercury motors. Now we can succeed in markets where motor brands have strong brand recognition, and sometimes these motor brands control market share based on that recognition. 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 and price feature, great imagery, and great videos. There's a lot to do, and we're seeing increased traffic because of the enhancements. 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 boats we manufacture and providing interactive features to enrich the boat buying process. We are also progressing on a 30,000 square 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, as I mentioned, 100,000 square feet when it's complete. We'll have two linear production lines. We believe that this addition 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 square foot extension. So, with that, I would like to go into the financials and then we can open up for some Q&A. Our net revenue for the year ending 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 purchased 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 in 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 the 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, in 2021, our subsidiaries had limited activity. For our electric boat segment, Forza's loss was $5.7 million; in that, Forza's 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 as of December 31st, 2022 is approximately $4 million compared to $1.8 million in the prior year. We are 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, diversifying out into multiple different vendors, it was tough to get parts. At one point, I was holding a meeting yesterday, stating that the supply chain kind of just fixed itself, and trucks were showing up every day. As we sit now, 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 in professional fees in 2023 now that that transaction is behind us. We also look forward to the utilization of their net operating losses (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.

Thank you. We will now begin the question-and-answer session. Our first question comes from Paul Johnson, a private investor. Please go ahead with your question.

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.

On Twin Vee?

Yes.

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 the 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.

Okay. You mentioned inventory. I apologize for joining the call late. I didn’t see the press release with the inventory numbers. What is the year-over-year change in the inventory?

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. You're trying to bring these motor companies on, and there were times that boats are sitting in quality control waiting for the motor to show up, and motors were getting drop-shipped. It got to the point where we were trying to over-order motors because we wanted to keep the boats leaving on a regular basis. So, when the supply chain started fixing itself and you have multiple parallel paths, you've got the supply chain working, you've got rising interest rates, you've got a slowing economy, and now these manufacturers for components, motors, and composites are all kind of getting online and back caught up. Instead of parsing out smaller percentages to each vendor, they're fulfilling large orders. 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. 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.

Okay. And do you share backlog information through a year-over-year difference?

So, our backlog is based on dealer forecasts. 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. Then, we take those forecasted amounts and integrate them into our production schedule. I will tell you that it's changing rapidly. 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 they're not taking any more boats. I could get a call tomorrow and have a dealer say they need 20 more boats. So, it's not as predictable as it was a year ago. But we're 100% on top of it. We need to manage our field inventory. We are pushing the turbo button on our sales and marketing, 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. We had five boats there with pop-ups, full staff, all dressed nicely, and our sales and marketing department is performing exceptionally. I believe 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. Some boat companies are down 70% in registrations. If you look at Twin Vee, we're down about 20%. So, I feel like we're doing everything correctly. Could the economy get worse? Yes, but we are eyes wide open. We understand the market. The smaller boats are challenged to some extent. The boat clubs are still major buyers. We see a trend there; that’s why we pivoted and started building these LFGs for the boat clubs. The larger boats are still selling briskly, so we're focusing on our 34s and 40s right now to maintain those top-line numbers. We're also looking for other opportunities in the marketplace that maybe other boat companies 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 for those types of opportunities.

You announced a million-dollar repurchase program back in January. Have you purchased any shares at this point?

We did not. Those are tough decisions. Some investors like them, some don't. In smaller companies with limited cash, I understand the optics of it. But on the other hand, if the stock was going to drop way down below a dollar, I'd rather have that stock come back into treasury while we have almost $1.20 in cash on the books. That was kind of the methodology behind that repurchase. However, we have not purchased a single share of stock.

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

It is an option. So, we are still filing consolidated financials because Twin Vee is almost a 70% owner of the company. As we discussed yesterday, I'd like to keep the questions focused on Twin Vee because we had the Forza call, but as we spoke a couple of days ago, Forza's runway is 18 months based on our current capital position at Forza.

Okay. Thank you.

There are no further questions at this time. I would like to turn the call back over to Joseph Visconti for closing comments.

I want to thank everyone. I want to thank our employees for their hard work throughout the year. We've been working extremely hard to maintain our growth through various avenues, including new models, new products, and a new brand. We will continue to work hard for our shareholders. We appreciate your support, everyone. We are having an 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, and it's going to be a full-day event where we'll have boat rides and the facilities will be open, and you can meet all of our leads and managers. We're inviting every investor; if you do not receive an invite, please send your email to Glenn at [email protected], and we will ensure that you get an invite for this really special event for our stakeholders, shareholders, and dealers. So, thank you everyone. Have a great day.

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