As filed with
the Securities and Exchange Commission on June 7, 2023
Registration Statement No 333-
| UNITED
STATES |
| SECURITIES
AND EXCHANGE COMMISSION |
| Washington,
D.C. 20549 |
| |
| FORM
S-1 |
| REGISTRATION
STATEMENT |
| UNDER |
| THE
SECURITIES ACT OF 1933 |
| |
| Forza
X1, Inc. |
| (Exact
name of Registrant as specified in its charter) |
| |
| Delaware |
|
3730 |
|
87-3159685 |
(State
or other jurisdiction of
incorporation or organization) |
|
(Primary
Standard Industrial
Classification Code Number) |
|
(I.R.S.
Employer
Identification Number) |
3101 S. US-1
Ft. Pierce, Florida 34982
(772) 429-2525
| (Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices) |
| |
Jim Leffew
President, Chief Executive Officer and Director
Forza X1, Inc.
3101 S. US-1
Ft. Pierce, Florida 34982
(772) 202-8039
| (Name, address, including zip code, and telephone number, including area code, of agent for service) |
| |
Copies to:
Leslie Marlow,
Esq.
Hank Gracin, Esq.
Patrick J. Egan, Esq.
Blank Rome LLP
1271 Avenue of the Americas
New York, New York 10020
Tel: (212) 885-5000 |
Gregory
Sichenzia, Esq.
Jay Yamamoto, Esq.
Sichenzia Ross Ference LLP
1185 Avenue of the Americas, 31st Floor
New York, New York
10036
Tel: (212) 930-9700 |
Approximate date of commencement of proposed sale
to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this
form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following
box. ☒
If this form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant
to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated
filer |
☐ |
Accelerated filer |
☐ |
| Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
| |
|
Emerging growth company |
☒ |
If an emerging growth company, indicate by check mark
if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
| The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. |
The information contained in this
preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with
the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS |
SUBJECT TO COMPLETION |
DATED JUNE 7, 2023 |
3,425,000 Shares
Common
Stock
Forza X1, Inc.
This is a firm commitment public offering of shares
of common stock par value $0.001 per share of Forza X1, Inc. based on an assumed public offering price of $2.92 per share (which is based
on the last reported sales price of our common stock of on June 5, 2023).
Our common stock is listed on the Nasdaq Capital Market
(“Nasdaq”) under the symbol “FRZA.” On June 6, 2023, the last reported sale price of our common stock was $2.87
per share. The actual public offering price per share of common stock will be determined between us and the representative of the underwriters
at the time of pricing and may be at a discount to the current market price. Therefore, the assumed public offering price used throughout
this prospectus may not be indicative of the final offering price.
We are an “emerging growth company” under
the federal securities laws and have elected to comply with certain reduced public company reporting requirements.
Investing in our common stock is involves a high
degree of risk. See “Risk Factors” beginning on page 10. Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
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Per
Share |
|
Total |
| Public
offering price |
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$ |
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|
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$ |
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| Underwriting
discounts and commissions(1) |
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$ |
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$ |
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| Proceeds
to us, before expenses |
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$ |
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$ |
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| (1) |
Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the public offering price payable to the underwriters. We refer you to “Underwriting” beginning on page 99 for additional information regarding underwriters’ compensation. |
We have granted a 45-day option to the representative
of the underwriters to purchase up to 513,750 additional shares of common stock solely to cover over-allotments, if any.
The underwriters expect to deliver the shares to purchasers
on or about , 2023.
ThinkEquity
The date of this prospectus is , 2023
TABLE OF CONTENTS
Prospectus
We and the underwriters have not authorized anyone
to provide you any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf
of us or to which we have referred you, and you should rely only on the information contained in this prospectus or in any such free writing
prospectus. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may
give you. We and the underwriters are not making an offer to sell nor a solicitation of any offer to buy these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the
date on the front cover of this prospectus. Our business, financial condition, results of operations and prospects may have changed since
that date.
For investors outside of the United States: we have
not and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any
jurisdiction where action for that purpose is required, other than the United States. Persons outside of the United States who come into
possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common
stock and the distribution of this prospectus outside of the United States.
TRADEMARKS
We own directly, or have rights to, trademarks, service
marks, and trade names that we use in connection with the operation of our business, such as Forza X1. In addition, our names, logos,
and website names and addresses are our service marks or trademarks. Other trademarks, service marks, and trade names appearing in this
prospectus are the property of their respective owners. Solely for convenience, the trademarks, service marks, trade names, and copyrights
referred to in this prospectus are listed without the ©, ®, and ™ symbols, but we will assert, to the fullest extent under
applicable law, our rights, the rights of our parent company, or the rights of the applicable licensors to these trademarks, service marks,
and trade names.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements.”
We use words such as “could,” “may,” “might,” “will,” “expect,” “likely,”
“believe,” “continue,” “anticipate,” “estimate,” “intend,” “plan,”
“project,” and other similar expressions to identify some forward-looking statements, but not all forward-looking statements
include these words. All of our forward-looking statements involve estimates and uncertainties that could cause actual results to differ
materially from those expressed in the forward-looking statements. Accordingly, any such statements are qualified in their entirety by
reference to the information described under the caption “Risk Factors” and elsewhere in this prospectus.
The forward-looking statements contained in this prospectus
are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions,
expected future developments, and other factors we believe are appropriate under the circumstances. As you read and consider this prospectus,
you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which
are beyond our control), and assumptions. Although we believe that these forward-looking statements are based on reasonable assumptions,
you should be aware that many factors could affect our actual operating and financial performance and cause our performance to differ
materially from the performance anticipated in the forward-looking statements. We believe these factors include, but are not limited to,
those described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations.” Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect,
our actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.
Further, any forward-looking statement speaks only
as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement
contained in this prospectus to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated
or unanticipated events or circumstances. New factors that could cause our business not to develop as we expect emerge from time to time,
and it is not possible for us to predict all of them. Further, we cannot assess the impact of each currently known or new factor on our
results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
MARKET, INDUSTRY AND OTHER DATA
This prospectus includes market and industry data
and forecasts that we have derived from independent consultant reports, publicly available information, various industry publications,
such as those of the National Marine Manufacturers Association, or NMMA, and Statistical Surveys, Inc., or SSI, other published industry
sources, and our internal data and estimates.
Our internal data and estimates are based upon information
obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding
of industry conditions. Although we believe that such information is reliable, we have not had this information verified by any independent
sources.
PROSPECTUS SUMMARY
This summary highlights selected information
that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information you should consider
before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial
statements and the related notes included elsewhere in this prospectus, before making an investment decision. Unless the context otherwise
requires, the terms “Forza X1,” “the Company,” “we,” “us” and “our” in this
prospectus refer to Forza X1, Inc.
Overview
About Forza X1
We aim to be among the first to develop and manufacture
electric boats targeting the recreational market. Our mission is to inspire the adoption of sustainable recreational boating by producing
stylish electric sport boats. We are focused on the creation and implementation of marine electric vehicle (“EV”) technology
to control and power our electric boats utilizing our proprietary outboard electric motor. Our electric boats are being designed as fully
integrated electric boats including the hull, outboard motor, and control system.
We believe that the boating industry will follow in
the footsteps of the electrification of the automotive industry by creating electric boats that meet or exceed the traditional boating
consumer’s expectations of price, value and run times. In other words, electric boats must offer a similar experience when compared
to traditional gas-powered boats in terms of size, capability, and price point.
To date, we have built and tested multiple units,
including: three FX-style catamarans, two baycats, one deck boat and three 22-foot center console monohulls. The motor design, lower units
and the control systems are continuously improved in each iteration, which we have tested in a variety of conditions and operating environments.
The batteries and motors are liquid-cooled and unique improvements to the heat exchanges have improved performance. Our boats include
a large electronic Garmin control screen providing well-designed pages showing operating characteristics and important control parameters
with an easy to use interface. The telematics software is available in the Apple app store under the name Forza Connect.
We anticipate revenue
from the sale of these fully integrated electric boats and motors to commence in late 2023 to early 2024. We will continue to build prototype
motors and boats for the next six to nine months.
We plan to market and sell our boats in a variety
of ways. One way will be to operate in a fundamentally different manner and structure than traditional marine manufacturers and boat dealers
by adopting a direct-to-consumer sales model. We are building a dedicated web and app-based platform for sales, deliveries, and service
operations to change the traditional boat buying and marine service experience through technological innovation, ease of use, and flexibility.
We intend to employ an integrated, digital-first strategy that is convenient and transparent for our customers and efficient and scalable
to support our growth. Additionally, to support those looking for a more traditional way of purchasing a boat, or to accommodate trade-ins,
financing needs, and training, we will market our boats through a partnership with OneWater Marine, Inc. (“OneWater”), one
of the largest dealership networks in the United States. We believe our approach will enable us to provide the best of both worlds to
prospective customers and support our mission to electrify recreational boating for mass production.
Recently, we have engaged
with several high-profile marine manufacturers and are offering our electrification expertise and hardware packages, acting as a supplier
of electric powertrains and boats. We are in the design
phase to provide our solution to a nationally recognized boat manufacturer and are expected to build two demonstration units for its late
summer open house and dealer meeting. We are also in the process of creating a robust Forza website for retail customers and a media day
to showcase our boats and electric motor has been scheduled for July 8, 2023 in
West Palm Beach, Florida.
We are currently designing a state-of-the-art manufacturing
facility to incorporate the latest in closed-molded composite boat building technologies and electric motor assembly processes. We are
designing a 100,000 square foot facility designed for capacity and production of 1,000 units annually that we intend to build over time
in various phases. We plan to first build out an approximately 50,000 square foot facility, which will have an estimated capacity of 550
units annually, at an estimated $8 million cost of construction. We have selected a site in McDowell County, North Carolina to build our
manufacturing facility and the North Carolina Economic investment committee has approved a Job Development Investment Grant providing
for reimbursement to us of up to $1,367,100 over a twelve-year period. The receipt of grant funding is conditioned upon us investing over
$10.5 million in land, buildings and fixtures, infrastructure and machinery and equipment by the end of 2025 and us creating as many as
170 jobs.
We were initially a wholly owned subsidiary of Twin
Vee PowerCats Co. (“Twin Vee”) (NASDAQ: VEEE) and completed our initial public offering in 2022.
Initial Forza Models
We have produced and powered three units of our initial
protype model, the FX1 Center Console. In October 2022, the running surface of the boat and all major components were tested successfully
on the Indian River Lagoon in Fort Pierce, Florida. While the motor and control systems have been successfully trialed previously, this
was the first voyage including all major components, production batteries, fully functioning “alpha” motor design, control
system including a 22” Garmin screen, and Osmosis telematics unit. The performance of the boat exceeded all expectations and provided
a great baseline for improvements, iterations, and design enhancements. We ultimately reached over thirty miles per hour.
Following our initial
prototype design, we completed the designs for four more prototypes: two more FX-style catamarans, one deck boat and
one 22-foot center console monohull. These prototypes have been fully built out and on the water testing began in March of 2023. The motor
design and lower units and the control system cabling have been revamped and improved in each iteration. The batteries and motors are
liquid-cooled and unique improvements to the heat exchanges have improved performance. After extensive testing, we now believe that our
22-foot monohull will be the first electric boat that we commercialize. While monohulls have greater drag than twin hull boats, a 22-foot
monohull can operate and reach peak performance with a single electric motor, whereas a twin hull boat requires two motors, one motor
behind each hull, to reach peak performance. The ability to build and sell a boat with a single motor will reduce the overall cost of
manufacturing and ultimately the price to the customer. We believe the 22-foot monohull electric boat will be ideal for more budget-conscious
purchasers who still want to promote environmental sustainability and enjoy a more serene time on the water. It is important to recognize
that monohull boats represent over 85% of the American consumer boat buying market. Our goal is to initially go to market with our 22-foot
monohull and then expand our model lineup as we scale up our business.
We have built and powered three units of our 22-foot
monohull to date. The 22-foot monohull has been tested on the water from sunrise to sunset on multiple days. The boat was taken to sand
bars along the Treasure Coast, often loaded with eight or more adults onboard. In addition to reaching speeds up to an estimated 40 miles
per hour, the boat operated for over six hours throughout the day and returned to the dock with 25% remaining on its 104-kilowatt hour
twin pack battery. We found that the 22-foot monohull was easy to use, got on plane quickly, and demonstrated significant single-motor
performance.
We have filed 11 US Patents, including 3 design, 6
provisional and two non-provisional patent applications with the U.S. Patent and trademark office relating to outboard propulsion system,
frame and cowling design, closed loop motor cooling and several other areas related to advancements in maneuverability and safety.
Forza’s Marketing Plans
We plan to market and sell our model offerings in a variety of ways. One way
will be to operate in a fundamentally different manner and structure than traditional marine manufacturers and boat dealers by adopting
a direct-to-consumer sales model. We are building a dedicated web and app-based platform for sales, deliveries, and service operations
to change the traditional boat buying and marine service experience through technological innovation, ease of use, and flexibility. We
intend to employ an integrated, digital-first strategy that is convenient and transparent for our customers and efficient and scalable
to support our growth. Additionally, to support those looking for a more traditional way of purchasing a boat, or to accompany trade-ins,
financing needs, and training, we will also market our boats through a partnership with OneWater, one of the largest dealership networks
in the United States. We believe our approach will enable us to provide the best of both worlds to prospective customers and support our
mission to electrify recreational boating for mass production.
Forza X1: An All Digital, Direct-to Consumer Platform
We intend to offer our EV products, services and support
through a web-based and mobile phone app that will be vertically integrated and a direct-to-consumer platform. We intend to create a high-quality
customer experience that spans the entire life of our products through an online system that is being designed to be a comprehensive,
seamless, and efficient customer experience, encompassing everything from buying, financing, delivery, service, and training. This customer-centric
approach to sales and service aims at simplifying access to necessary information for potential buyers and current owners alike. Customers
will be able to communicate directly with us to ensure their questions are answered and their needs are met. We have commenced the design
of the web-based platform but have not yet commenced design of the app. For consumers and states that require a physical location, we
will develop dealership partnerships, such as our partnership with OneWater.
Currently, our web and app-based platform is expected
to include the following:
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Build and Price Boats. The web and app platform will offer prospective buyers a place to examine photos and videos of our boats, which will all have a single price based on the model type and a few available options. For example, the consumer would have gel coat exterior choices, interior upholstery choices, and other options including charging cords and plugs, boating items such as bumpers, covers, and fun add-ons like apparel, allowing consumers to “personalize” their Forza purchase. |
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Financing. Prospective customers will be able to apply for third-party consumer financing to complete or supplement their purchase through our web and app platform. |
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Delivery. Once manufactured, the boat will be delivered directly to a customer’s home, marina, or wherever they choose. The scheduling, communication, and support necessary for coordinating delivery of our boats would all be accomplished over the website or app. |
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Servicing.
We intend to offer highly tailored and differentiated services that enable intuitive experiences throughout the entire customer lifecycle,
such as warranty, repair, or other service assistance for their boats. We expect this all-inclusive approach will provide higher
customer satisfaction, create strong brand loyalty, and increase operational efficiency while simultaneously allowing us to capture
a more significant share of the entire lifecycle value of every Forza boat produced. We anticipate having internal staff with the
capability to provide an OTA update to resolve the issue remotely without the boat ever leaving the customer’s sight. As part
of our customer satisfaction drive, we plan for our staff to make mobile service calls to the boat docks. We also intend to enter
into partnering arrangements with third parties to address service needs that require more than a mobile service visit, and we plan
to arrange for the boat to be picked up and brought to one of our partnered service centers. If a service center is not available
in a customer’s area, for approved warranty repairs we will permit the owners to take their boat to their local service center
who will then invoice us. |
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Customer
Service and Feedback. We will utilize customer insights and feedback submitted via our web and app-based platform
to improve our offerings by adding new capabilities and functionality. Expanded offerings based on consumer-driven feedback and data
is expected to attract more customers, deepen existing customer relationships, and allow us to innovate more quickly. |
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Training.
We intend to provide a series of videos that demonstrate our boats’ safe operation and upkeep. These videos would be accessible
on our web and app platform and the boat’s onboard computer for quick access. |
With respect to the foregoing, we have not yet entered
into any arrangements with third parties to provide financing services through our web and app platform, or hired staff for our intended
support and service department. We are still in the initial stages of establishing distribution and service plans. We expect to commence
selling to end-user customers by the end of 2023. We are currently in the process of identifying the states we will be allowed to sell
direct-to-consumer.
To the extent that certain
customers are located where OneWater dealerships and service centers are not available and, thus, are outside of our exclusive agreement
with OneWater, we are in the process of identifying potential marine service centers and technicians to ensure that we have a comprehensive
service support system in place when our boats are sold. We will also work to establish our 500-mile radius mobile service of vans and
trucks so that local customers will have the option of a service technician coming to their location. For customers outside of the 500-mile
radius, we intend to work with such customers to engage third-party service technicians to the extent possible.
Forza X1 Purpose
According to the Environmental Energy Student Institute,
a non-profit organization originally formed by a bipartisan group of members of Congress, fossil fuels, including coal, oil, and natural
gas, have been powering economies for over 150 years and currently supply about 80 percent of the world’s energy. When fossil fuels
are burned, the stored carbon and other greenhouse gases are released into the atmosphere. The excess buildup of greenhouse gases in the
atmosphere has caused dramatic changes to Earth’s climate—a trend that will worsen as more fossil fuels are burned. Further
climate changes may cause rises in sea level, extreme weather, biodiversity loss, and species extinction, as well as food scarcity, worsening
health, and poverty for millions of people worldwide.
The world’s waterways are also in danger from
pollutants caused by gas-powered motors. In the landmark environmental study and book, “Polluting for Pleasure”, author Andre
Mele stated that recreational boats, particularly outboards, were polluting as much as all the cars and trucks in America. At the time,
Mele discovered that pleasure boats have polluted 80 times more than automobile engines and put more oil into American waters than 15
Exxon Valdez oil spills, annually. The popularity of recreational boating has grown since then.
While headway is being made by the automotive industry
introducing more viable EV options to replace traditional automobiles, it is also vital that we look to preserve our waterways while reducing
carbon emissions. Large gas-powered engines often leak fuel and produce carbon emissions, both of which are harmful to fragile marine
ecosystems. We are a company comprised of people who are passionate to move the preservation and carbon free marine lifestyle forward.
According to the Bloomberg NEF’s 2021 Electric Vehicle Outlook, passenger automotive EV sales are set to increase from 3.1 million
units in 2020 to 14 million units in 2025.
Our core market corresponds most directly to those
who identify with environmentally friendly vehicles. Electric boats promote environmental sustainability and allow for a much more serene
and enjoyable time on the water. The adoption of electric vehicles has increased considerably over the years as they are more environmentally
friendly. As per the report by Bloomberg NEF, there are currently 12 million passenger EVs on the road, and the prevalence of electric-powered
boats is likely to follow suit. While electric boats only represented about 2% of the market in 2020, a report by IDTechEx shows that
the market for hybrid and pure electric boats is expected to rise rapidly to greater than $20 billion worldwide by 2027.
We plan to disrupt recreational marine customs that
rely on outdated processes and noxious engines by designing, engineering and manufacturing inspiring electric boats that operate in a
more sustainable and eco-friendly way.
Our Strengths and Competitive Advantages
We believe that the following are the critical investment
attributes of our company:
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Assembling a Technology, Engineering and Manufacturing Team. We continue to build and add valuable, experienced and knowledgeable team members. Jim Leffew, our President and Chief Executive Officer, comes to us from Maverick Boat Group, Inc. that was recently sold to Malibu Boats. Jim Leffew has been designing, building and manufacturing boats on a large-scale basis for over 25 years. The year Maverick Boat Group was sold to Malibu Boats, Jim Leffew was overseeing the manufacturing and Maverick Boat Group was building and selling over 1,400 boats annually. The experience and knowledge that Jim Leffew brings to the table is expected to be valuable to the requirements of designing and ramping up our manufacturing facility. |
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Singular Focus and Leadership in Electric Powertrain Technology. We are focused exclusively on developing our electric boats and electric powertrain technology to achieve a compelling combination of range and performance at a price point accessible to a large segment of the boating population. We intend to use our electric powertrain expertise to innovate rapidly and sustain technological and time-to-market advantages over other marine manufacturers. |
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Combination of Expertise from the Traditional Boat Manufacturing Industry and Electrical Engineers. Our company’s founders have been in the boat building business for over 25 years. Our boat design and manufacturing knowledge are supplemented by engineers with strong skills in electrical engineering and software and controls. |
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Rapid Customer-Focused Product Development. We are designing our product development process to rapidly react to data collected from our boats, direct interaction with our customers, and feedback from our web and app platform. That information should enable us to introduce new models and features to expand our customer base and brand recognition. |
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Direct To Consumer System. We are building a vertically integrated and premium direct-to-consumer system to achieve operating efficiencies and capture sales and service revenues traditional boat manufacturers do not generally receive in the distribution and service model they employ. |
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Capital Efficiency. We believe our rapid product development process, powertrain technology applicable for future boat models, and our plan to hold lower inventory levels while still meeting customer demand will help reduce the capital required to reach operating efficiencies. This approach is designed to allow us to achieve profitability at relatively low sales volumes and create a viable long-term business. |
Our Strategy
We intend to be a leading manufacturer and direct
seller of electric boats and electric powertrain and propulsion technologies through the following strategies:
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Successfully Launch our 22-foot Monohull. We believe the successful launch of our first commercially available electric boat is critical to our ability to capitalize on the marine electric vehicle market opportunity and establish ourselves as leaders in the industry. We expect to offer these products for sale to the public by the end of 2023. |
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Invest in Our Infrastructure. We plan to invest in our product development and operations infrastructure to enable our growth, product innovation, and customer experience. |
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Use a Common Platform to Introduce New Models. We intend to design our boats with an adaptable platform architecture and common electric powertrain to provide us the flexibility to use the platform to launch subsequent electric boat models cost-efficiently. |
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Focus on Technological Advancements and Cost Improvement. We intend to constantly look for ways to improve upon and further develop our proprietary electric powertrain system while reducing its manufacturing cost. |
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Build our Company-Owned Sales and Service Network. We are programming and building our expansive and vertically integrated customer-centric web and app platform to connect with customers for an end-to-end experience encompassing everything from buying, financing, delivery, service and training. This customer-centric approach to sales and service aims at simplifying access to necessary information for potential buyers and current owners alike. |
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Leverage Industry Advancements in Battery Cells. We intend to leverage the substantial investments made globally by battery cell manufacturers to improve power and capacity. |
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Build and Leverage Strategic Relationships. We intend to establish and develop strategic relationships with industry leaders to commercialize our electric boats and electric powertrain components. We envision significant opportunities with boat manufacturers to retrofit various hull configurations, replacing traditional gas outboard motors with our electric powertrain system. |
Implications of Being an Emerging Growth
Company and a Smaller Reporting Company
We qualify as an “emerging growth
company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. As an “emerging growth
company,” we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to
public companies. These provisions include, but are not limited to:
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requiring only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s discussion and analysis of financial condition and results of operations” in our Securities Act of 1933, as amended, or the Securities Act, filings; |
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reduced disclosure about our executive compensation arrangements; |
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no non-binding advisory votes on executive compensation or golden parachute arrangements; and |
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|
|
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exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes Oxley Act of 2002, or SOX. |
We may take advantage of these exemptions
for up to five years or such earlier time that we are no longer an “emerging growth company.” We will continue to remain an
“emerging growth company” until the earliest of the following: (i) the last day of the fiscal year following the fifth
anniversary of the date of the completion of our August 2022 IPO; (ii) the last day of the fiscal year in which our total annual
gross revenue is equal to or more than $1.235 billion; (iii) the date on which we have issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules
of the Securities and Exchange Commission, or the SEC.
We are also a “smaller reporting
company” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act, and have elected to take advantage
of certain of the scaled disclosures available to smaller reporting companies. To the extent that we continue to qualify as a “smaller
reporting company” as such term is defined in Rule 12b-2 under the Exchange Act, after we cease to qualify as an emerging growth
company, certain of the exemptions available to us as an “emerging growth company” may continue to be available to us as a
“smaller reporting company,” including exemption from compliance with the auditor attestation requirements pursuant to SOX
and reduced disclosure about our executive compensation arrangements. We will continue to be a “smaller reporting company”
until we have $250 million or more in public float (based on our common stock) measured as of the last business day of our most recently
completed second fiscal quarter or, in the event we have no public float (based on our common stock) or a public float (based on our common
stock) that is less than $700 million, annual revenues of $100 million or more during the most recently completed fiscal year.
We may choose to take advantage of some,
but not all, of these exemptions. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information
contained herein may be different from the information you receive from other public companies in which you hold stock. In addition, the
JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised
accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected
to avail ourselves of the extended transition period for complying with new or revised financial accounting standards. As a result of
the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as
other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies
more difficult.
Summary Risk
Factors
The following is a summary of the key risks relating to the Company. A
more detailed description of each of these risks can be found below under “Risk Factors.”
Risks Related To Our Business
| |
● |
We
are a start-up entity and expect to incur significant expenses and continuing losses for the foreseeable future. |
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● |
Our independent registered public accounting firm has expressed concern
about our ability to continue as a going concern. |
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● |
Our limited
operating history makes it difficult for us to evaluate our future business. |
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● |
Our planned fully electric sport boat has not yet been developed. |
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● |
Due to the nature of our app platform and our collection of customer data
in the process of taking orders, we are subject to privacy, data security, and data protection laws, regulations and obligations |
| |
● |
Our distribution model is different from the predominant current distribution
model for boat manufacturers, which subjects us to substantial risk. |
| |
● |
Our ability to generate meaningful
product revenue will depend on consumer adoption of electric boats. |
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● |
We may be unable to adequately control the capital expenditures and costs
associated with our business. |
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● |
We may
not be able to commence production of our electric boats as planned. |
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● |
We may
not receive anticipated grant funding. |
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● |
We could
experience cost increases or supply disruptions. |
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● |
We currently rely on Twin Vee employees for the design and construction
of our boats |
| |
● |
If the third parties we depend upon to manufacture and to supply key semiconductor
chip components necessary for our boats, become unwilling or unable to provide an adequate supply of semiconductor chips, our business
would be adversely impacted. |
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● |
Our ability to meet our manufacturing workforce needs is crucial to our
results of operations. |
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● |
We have
a large fixed cost base that will affect our profitability if our sales decrease. |
| |
● |
A significant
number of our shares of outstanding common stock is currently owned by a single stockholder, and it may therefore be able to substantially
control our management and affairs. |
| |
● |
Our management
overlaps substantially with the management and beneficial owners of our principal stockholder, which may give rise to potential conflicts
of interest. |
| |
● |
Our annual
and quarterly financial results are subject to significant fluctuations. |
| |
● |
Unfavorable weather conditions may have a material adverse effect on our
business. |
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● |
A
natural disaster, the effects of climate change, or disruptions at our manufacturing facility could adversely affect our business, financial
condition and results of operations. |
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● |
If we
fail to manage our manufacturing levels our business and margins may suffer. |
| |
● |
We will rely on third-party suppliers to provide components and raw materials
essential to our boats. |
| |
● |
Termination
or interruption of informal supply arrangements could have a material adverse effect on our business or results of operations. |
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● |
Product
liability, warranty, personal injury, property damage and recall claims may materially affect our financial condition and damage our
reputation. |
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● |
Our boats
will use lithium-ion battery cells, which, if not appropriately managed and controlled, have been observed to catch fire or vent smoke
and flame. |
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● |
Product
warranty claims or product recalls could have a material adverse impact on our results of operations. |
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● |
The nature
of our business exposes us to workers’ compensation claims and other workplace liabilities. |
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If we
are unable to comply with environmental and other regulatory requirements, our business may be exposed to material liability and/or fines. |
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The electronic vehicle (EV) industry and its technology are rapidly evolving
and changing. |
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● |
Our sales
and profitability depend, in part, on the successful introduction of new products. |
| |
● |
Our success
depends upon the continued strength of our brand, the value of our brand, and sales of our products could be diminished as a result of
negative publicity. |
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● |
Our passion
and focus on delivering a high-quality and engaging Forza X1 experience may not maximize short-term financial results. |
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● |
Extended
periods of low petroleum-based fuel prices could adversely affect demand for our boats. |
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● |
We will
rely on complex machinery for our operations, and production involves a significant degree of risk and uncertainty in terms of operational
performance, safety, security, and costs. |
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If our
boats fail to perform as expected, our business could be harmed. |
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Our boats
will rely on software and hardware that is highly technical. |
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● |
We have
no experience servicing our boats. |
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We may
not be able to execute our manufacturing strategy successfully. |
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We may need to raise additional capital that may be required to grow our business. |
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If we fail to manage future growth effectively, we may not be able to market or sell our products successfully. |
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We depend upon our executive officers and we may not be able to retain them. |
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We may attempt to grow our business through acquisitions or strategic alliances and new partnerships. |
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We rely on network and information systems and other technologies for our
business. |
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● |
Uninsured losses could result in payment of substantial damages. |
Intellectual Property Risks
| |
● |
Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours. |
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● |
We may not be able to prevent others from unauthorized use of our intellectual property. |
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If our patents expire or are not maintained, our patent applications are not granted or our patent rights are contested, circumvented, invalidated or limited in scope, we may not be able to prevent others from selling, developing or exploiting competing technologies or products. |
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● |
We may in the future become subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former employers. |
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● |
Our use of open source software in our applications could subject our proprietary software to general release. |
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A significant portion of our intellectual property is not protected through patents or formal copyright registration. |
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● |
Confidentiality agreements with employees may not adequately prevent disclosure of trade secrets. |
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● |
We may need to defend ourselves against patent, copyright or trademark infringement claims. |
Risks Related To Our Industry
| |
● |
Demand in the powerboat industry is highly volatile. |
| |
● |
Our industry is characterized by intense competition, which affects our sales and profits. |
| |
● |
General economic conditions, particularly in the U.S., affect our industry, demand for our products and our business, and results of operations. |
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● |
Global economic conditions could materially adversely impact demand for our products and services. |
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● |
Our sales may be adversely impacted by increased consumer preference for other activities or other boats. |
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● |
Terms of subsequent financings may adversely impact your investment. |
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● |
If securities analysts do not publish research or reports about our company, or if they issue unfavorable commentary about us or our industry, the price of our common stock could decline. |
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● |
The obligations associated with being a public company will require significant resources. |
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● |
For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements. |
Risks Relating to Ownership Of Our Common Stock
| |
● |
Our common stock price may be volatile or may decline regardless of our operating performance and you may not be able to resell your shares at or above the price you paid for your common stock. |
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● |
We do not intend to pay dividends on our common stock for the foreseeable future. |
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● |
FINRA sales practice requirements may limit your ability to buy and sell our common shares. |
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● |
Volatility in our common shares price may subject us to securities litigation. |
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● |
Provisions in our corporate charter documents and under Delaware law could make an acquisition of our company more difficult. |
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● |
Our amended and restated certificate of incorporation provides that the Delaware Court of Chancery will be the exclusive forum for certain types of state actions that may be initiated by our stockholders. |
THE OFFERING
| Common stock offered by us |
|
3,425,000 shares (or 3,938,750 shares if the underwriters exercise in full their option to purchase additional shares to cover over-allotments, if any) |
| |
|
|
| Common stock to be outstanding after this offering |
|
13,875,000 shares (or 14,388,750 shares if the underwriters exercise in full their option to purchase additional shares to cover over-allotments, if any)(1) |
| |
|
|
| Over-allotment option |
|
513,750 shares (which may be purchased from us for 45 days from the date of this prospectus to cover over-allotments, if any) |
| |
|
|
| Use of proceeds |
|
We estimate that the net proceeds from our issuance and sale of shares
of our common stock in this offering will be approximately $8.8 million, after deducting the underwriting discounts and commissions and
estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares in full to cover over-allotments,
if any, we estimate that our net proceeds will be approximately $10.2 million. |
| |
|
|
| |
|
We currently anticipate using the net proceeds from this offering, together with our existing resources for the later phases of construction of the property that we acquired for the development of our manufacturing facility, for working capital and general corporate purposes. See the section titled “Use of Proceeds” for additional information. |
| |
|
|
| Risk Factors |
|
See “Risk Factors” beginning on page 10 and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in our securities. |
| |
|
|
| Nasdaq Capital Market trading symbol |
|
Our common stock is listed on the Nasdaq Capital Market under the symbol “FRZA.” |
| (1) |
The number of shares of our common stock to be outstanding after this offering
is based on the 10,450,000 shares of our common stock outstanding as of June 6, 2023 and excludes the following: |
| |
● |
1,404,556 shares of common stock issuable upon the exercise of options to purchase shares of common stock outstanding as of June 6, 2023, with a weighted-average exercise price of $3.46 per share; |
| |
|
|
| |
● |
172,500 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock outstanding as of June 6, 2023, with a weighted-average exercise price of $6.25 per share; and |
| |
|
|
| |
● |
568,750 shares of common stock reserved for future issuance under our 2022 Stock Incentive Plan. |
| |
|
|
| Unless otherwise indicated, this prospectus reflects and assumes the following: |
| |
| |
● |
no exercise of outstanding options or warrants; |
| |
|
|
| |
● |
no exercise of the representative’s warrants to be issued upon consummation of this offering at an exercise price equal to 125% of the offering price of the common stock; and |
| |
|
|
| |
● |
no exercise by the underwriters of their option to purchase up to 513,750 additional shares of our common stock from us to cover over-allotments, if any. |
|
SUMMARY FINANCIAL DATA
The following table summarizes the relevant financial
data for our business for the periods and at the dates indicated and should be read with our financial statements, which are included
in this prospectus. We have not had any significant operations to date, so only balance sheet data is presented.
The following tables present our summary balance sheet
data and should be read together with our audited and unaudited financial statements and accompanying notes and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this prospectus. The summary balance
sheet data as of March 31, 2023 is derived from our unaudited annual financial statements, which financial statements are included elsewhere
in this prospectus. The unaudited financial statements have been prepared on a basis consistent with our audited financial statements
included in this prospectus and include, in our opinion, all adjustments, consisting only of normal recurring adjustments, necessary for
the fair presentation of the financial information in those statements. The historical results are not necessarily indicative of the results
to be expected in any future period.
| |
|
March 31, 2023 |
|
As |
| Balance Sheet Data: |
|
Actual |
|
Adjusted(1) |
| Working capital |
|
$ |
10,985,040 |
|
|
$ |
19,785,040 |
|
| Total current assets |
|
$ |
11,222,183 |
|
|
$ |
20,022,183 |
|
| Total current liabilities |
|
$ |
237,143 |
|
|
$ |
237,143 |
|
| Stockholder’s equity |
|
$ |
12,036,234 |
|
|
$ |
20,836,234 |
|
| (1) |
The as adjusted balance sheet data in the table above reflects the sale and issuance by us of shares of our common stock in this offering, based upon the assumed public offering price of $2.92, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. |
RISK FACTORS
Investing in our common stock involves a high degree
of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial
statements and the related notes and the section titled “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” in this prospectus, before deciding whether to invest in our common stock. The occurrence of any of the events or
developments described below could harm our business, financial condition, results of operations and growth prospects. In such an event,
the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial also may impair our business operations.
RISKS RELATED TO OUR BUSINESS
We are a start-up entity and expect to incur
significant expenses and continuing losses for the foreseeable future.
We are a start-up entity and have had very limited
operations to date. To date, we have designed and manufactured only prototypes of our electric sport boat, have not yet commercialized
our boats and have not sold any boats. We believe that we will continue to incur operating and net losses in the future while we grow,
including following our initial generation of revenues from the sale of our boats which may occur later than we expect or not at all.
We do not expect to be profitable for the foreseeable future as we invest in our business, build capacity and ramp up operations, and
we cannot assure you that we will ever achieve or be able to maintain profitability in the future. Even if we are able to successfully
develop our boats and attract customers, there can be no assurance that we will be financially successful. For example, as we develop
our product portfolio, we will need to manage costs effectively to sell those products at our expected margins. Failure to become profitable
would materially and adversely affect the value of your investment. If we are ever to achieve profitability, it will be dependent upon
the successful development and commercial introduction and acceptance of our electric sport boats and the development of a vertically
integrated direct-to-consumer distribution system to market and sell our boats, which may not occur. As such, for the foreseeable future,
we will have to fund all our operations and capital expenditures from cash on hand, and potentially, future offerings of securities. However,
unanticipated changes may occur that could consume our available capital before we expect, including changes in and progress of our development
activities.
Our independent registered public accounting
firm has expressed doubt about our ability to continue as a going concern.
The report of our independent registered public accounting
firm contains a note stating that the accompanying financial statements have been prepared assuming we will continue as a going concern.
During the three months ended March 31, 2023, we incurred a net loss of $2,005,132. During the year ended December 31, 2022, we incurred
a net loss of $3,630,081 and used cash in operations of $3,377,621. For the periods October 15, 2021 through December 31, 2021 (Successor)
and January 1, 2021 through October 14, 2021 (Predecessor), we incurred a net loss of $270,630 and $186,921, respectively. For the period
October 15, 2021 through December 31, 2021 (Successor), we used cash in operations of $317,131. For the period January 1, 2021 through
October 14, 2021 (Predecessor), we had cash provided by operations of $13,024. Losses have principally occurred as a result of the research
and development efforts coupled with no operating revenue.
Until we begin generating revenue, there is a doubt
about our ability to continue as a going concern through December 31, 2023.
Our limited operating history makes it difficult
for us to evaluate our future business prospects.
We are a company with an extremely limited operating
history and have not generated any revenue from sales of our boats or other products and services to date. As we attempt to transition
from research and development activities to production and sales, it is difficult, if not impossible, to forecast our future results,
and we have limited insight into trends that may emerge and affect our business. The estimated costs and timelines that we have developed
to design and complete the design and engineering of our boats and outboard electric motor and then reach full scale commercial production
are subject to inherent risks and uncertainties involved in the transition from a start-up company focused on research and development
activities to the large-scale manufacture and sale of vehicles. There can be no assurance that our estimates related to the costs and
timing necessary to complete the design and engineering of our boats and outboard electric motor, will prove accurate. These are complex
processes that may be subject to delays, cost overruns and other unforeseen issues. In addition, we have engaged in limited marketing
activities to date, so even if we are able to bring our initial boats or other commercial products to market, on time and on budget, there
can be no assurance that customers will embrace our products in significant numbers. Although we have received boat reservations, they
are non-binding and cancellable and therefore cannot be relied upon as true indications of interest in our products. Market conditions,
many of which are outside of our control and subject to change, including general economic conditions, the availability and terms of third-party
consumer financing, the impacts and ongoing uncertainties created by the COVID-19 pandemic, fuel and energy prices, regulatory requirements
and incentives, competition and the pace and extent of vehicle electrification generally, will impact demand for our boats and our other
commercial products, and ultimately our success.
You should consider our business and prospects in
light of the risks and significant challenges we face as a new entrant into our industry. If we fail to adequately address any or all
of these risks and challenges, our business, prospects, financial condition, results of operations, and cash flows may be materially and
adversely affected.
Our planned fully electric sport boat has not
yet been assembled into a fully integrated product, and even if assembled, an interest in it may not develop.
Our electric boats are being designed as fully integrated
electric boats, including the hull, outboard motor and control system. There can be no assurance that we will be able to complete development
and mass produce our boats when anticipated, if at all, or that the anticipated features or services to be included in our boats will
create substantial interest or a market, and therefore our anticipated products, and sales and growth for our product may not develop
as expected, or at all. For example, in May 2021 we experienced a failure in connection with the sea trial of a prototype of our electric
boat which resulted in a six-month delay in our design timetable as we implemented changes to the design for outboard electric motor system
as a result of the failure. Although recent trials have been successful, we cannot guarantee that similar events will not occur in the
future, or that we will be able to contain such events without damage or delay. Even if such a market for our boats develops, there can
be no assurance that we would be able to maintain that market.
Our operations to date have been primarily limited
to finalizing our design and engineering of our electric sport boat as well as organizing and staffing our company in preparation for
launching our initial and planned future electric boat models. As such we have not yet demonstrated, and our success is wholly dependent
upon, our ability to commercialize our products. The successful commercialization of any products will require us to perform a variety
of functions, including:
| |
● |
completing the design and testing for our initial and planned future boat models and our proprietary outboard electric motor; |
| |
|
|
| |
● |
manufacturing our boats; |
| |
|
|
| |
● |
developing a vertically integrated direct-to-consumer distribution system; and |
| |
|
|
| |
● |
conducting sales and marketing activities. |
We cannot be certain that our business strategy will
be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business,
prospects, financial condition, and results of operations could be materially and adversely affected, and we may not have the resources
to continue or expand our business operations.
Due to the nature of
our app platform as a social media application, and our collection of customer data in the process of taking orders, we are subject to
rapidly changing and increasingly stringent laws, regulations, obligations, and industry standards relating to privacy, data security,
and data protection. The restrictions and costs imposed by these laws and other obligations, or our actual or perceived failure to comply
with them, could subject us to liabilities that adversely affect our business, operations, and financial performance.
Through our app platform,
we will collect, process, store, and use a wide variety of data from current and prospective customers, including personal information,
such as home addresses and geolocation. These activities are regulated by a variety of federal, state, local, and foreign privacy, data
security, and data protection laws and regulations, which have become increasingly stringent in recent years.
Domestic privacy and data
security laws are complex and changing rapidly. Many states have enacted laws regulating the online collection, use, and disclosure of
personal information and requiring that companies implement reasonable data security measures. Laws in all states and U.S. territories
also require businesses to notify affected individuals, governmental entities, and/or credit reporting agencies of certain security incidents
affecting personal information. These laws are not consistent, and compliance with them in the event of a widespread data breach is complex
and costly.
Further, the California Consumer Privacy Act (CCPA)
took effect on January 1, 2020. The CCPA gives California residents expanded rights related to their personal information, including
the right to access and delete their personal information, and receive detailed information about how their personal information is used
and shared. The CCPA also created restrictions on “sales” of personal information that allow California residents to opt-out
of certain sharing of their personal information and may restrict the use of cookies and similar technologies for advertising purposes.
Our e-commerce platform, including our websites and mobile applications, rely on these technologies and could be adversely affected by
the CCPA’s restrictions. The CCPA prohibits discrimination against individuals who exercise their privacy rights, provides for civil
penalties for violations, and creates a private right of action for data breaches that is expected to increase data breach litigation.
Additionally, a new California ballot initiative, the California Privacy Rights Act, or CPRA, was recently passed in California. The CPRA
will restrict use of certain categories of sensitive personal information that we handle; further restrict the use of cross-context behavioral
advertising techniques on which our products may rely in the future; establish restrictions on the retention of personal information;
expand the types of data breaches subject to the private right of action; and establish the California Privacy Protection Agency to implement
and enforce the new law, as well as impose administrative fines. The majority of the CPRA’s provisions will go into effect on January 1,
2023, and additional compliance investment and potential business process changes will likely be required. Similar laws have been proposed
in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. Compliance
with such laws could be difficult and costly to achieve and we could be subject to fines and penalties in the event of non-compliance.
Our planned distribution model is different
from the predominant current distribution model for boat manufacturers, which subjects us to substantial risk and makes evaluating our
business, prospects, financial condition, results of operations, and cash flows difficult.
Our distribution model is still in the planning stages.
We currently plan to mainly sell our boats directly to customers rather than through franchised dealerships (unless required to do so
by certain states), primarily through our website and app platform, subject to obtaining applicable dealer licenses and equivalent permits
in such jurisdictions. The digital customer experience via our online platform will allow customers to research, shop, choose boat hull
color, interior upholstery color, and a possible upgrade of an additional battery to extend run times, order, track and take delivery
through our web-based and app platform. We have not yet: (i) completed development of our app platform; (ii) entered into any arrangements
with third parties to provide financing services through our web and app platform, or (iii) hired staff for our intended support and service
department. Once the customer places the order, their Forza X1 account will request several documents, including license, insurance, etc.,
which can be uploaded online without ever speaking with a salesperson. If the customer has questions, concerns, or needs support through
the sales and purchase process, they will be able to contact Forza X1 through the website or app with any questions, concerns.
Since our planned sales and marketing platform is
a newer way to shop, buy and take delivery of a new boat through a mostly virtual process, we are unable to predict or conclude precisely
what the customer will experience. We intend to follow up customer transactions with review and quality control questionnaires to collect
the data and continue to better our platform and how we interact with customers. Further, if the
quality or accuracy of the data maintained by the web and/or app platform is insufficient, our ability to continue to distribute our products
could be jeopardized or we could be subject to regulatory sanctions.
In addition to our website
and app platform, we have entered into an agreement with OneWater to be the sole physical dealer distributing our products through the
OneWater retail locations. They will be potential delivery points for customers to pick up our products, and where available, we will
utilize them for service needs. However, our relationship with OneWater is new and we have no prior history with OneWater upon which to
evaluate this relationship. In addition, the agreement with OneWater may be terminated by either of us at any time without cause.
This model of boat distribution is relatively new,
different from the predominant current distribution model for boat manufacturers and, with limited exceptions, unproven, which subjects
us to substantial risk. We have no experience in selling or leasing boats direct-to-consumer and therefore this model may require significant
expenditures and provide for slower expansion than the traditional dealer franchise system. For example, we will not be able to utilize
long established relationships developed by Twin Vee, with its dealer network. Moreover, we will be competing with companies with well
established distribution channels. Our success will depend in large part on our ability to effectively develop our own sales channels
and marketing strategies.
Implementing our direct sales model is subject to
numerous significant challenges, including obtaining permits and approvals from government authorities, and we may not be successful in
addressing these challenges. If our direct sales model does not develop as expected or develops more slowly than expected, we may be required
to modify or abandon our sales model, which could materially and adversely affect our business, prospects, financial condition, results
of operations, and cash flows.
We will be dependent upon OneWater for any sales
of our boats through traditional sales methods.
In order to attract
customers that prefer to buy our products through a traditional marketing method, on August 17, 2022, we entered into a five year
agreement with OneWater to establish our customer experience and service centers in OneWater’s current and future locations
and other strategic locations across the United States pursuant to which OneWater will be the sole physical dealer distributing our
products and OneWater’s retail locations may be used as potential delivery points for customers to pick up our
products. We retained the right to sell our products directly to customers. The
agreement may be terminated by either party for breach upon thirty days’ notice and without cause upon three months’
notice and by either party for breach upon thirty days’ notice. Our relationship with OneWater is new and we have no history upon which to evaluate the success of this relationship. Our
boats will not be the only boats sold by OneWater and therefore we will face competition from the other boats sold by OneWater. In
addition, either party may terminate the agreement for any reason upon three months’ notice. If OneWater were to terminate the
agreement, we would need to find other dealers to market and service our products, especially in states that do not allow for direct
marketing and there can be no assurance that we will be successful in doing so.
We have identified
material weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or
that additional material weaknesses will not occur in the future.
As a public company, we are
subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules
and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time
consuming and costly, and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures, and internal controls over financial reporting.
We do not yet have effective
disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and
refine our internal controls over financial reporting. Our management is responsible for establishing and maintaining adequate internal
control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources
to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that
our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
We have identified material weaknesses in our internal
control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial
reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or
detected on a timely basis. The material weaknesses identified to date include that we have not yet retained sufficient staff or engaged
sufficient outside consultants with appropriate experience in GAAP presentation, especially of complex instruments, to devise and implement
effective disclosure controls and procedures, or internal controls.
We will be required to expend
time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot
assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in
the future.
Our current controls and
any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity
resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting
may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation
or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement
of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting
could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal
control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.
Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence
in our reported financial and other information, which would likely have a negative effect on the market price of our common stock.
Our independent registered
public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are
no longer an “emerging growth company” as defined in the JOBS Act and meet other requirements. At such time, our independent
registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal
control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal
control over financial reporting could have a material and adverse effect on our business and operating results and cause a decline in
the market price of our common stock.
Our ability to generate meaningful product revenue
will depend on consumer adoption of electric boats.
We are only developing electric boats and, accordingly,
our ability to generate meaningful product revenue will depend highly on sustained consumer demand for alternative fuel vehicles in general
and electric boats in particular. If the market for electric boats does not develop as we expect or develops more slowly than we expect,
or if there is a decrease in consumer demand for electric vehicles, our business, prospects, financial condition and results of operations
will be harmed. The market for electric and other alternative fuel vehicles is relatively new, rapidly evolving, characterized by rapidly
changing technologies, price competition, additional competitors, evolving government regulation (including government incentives and
subsidies) and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. Any number of changes
in the industry could negatively affect consumer demand for electric vehicles in general and our electric boats in particular.
In addition, demand for electric boats may be affected
by factors directly impacting boat prices or the cost of purchasing and operating boats such as sales and financing incentives including
tax credits, prices of raw materials and parts and components, cost of fuel, availability of consumer credit, and governmental regulations,
including tariffs, import regulation and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward
price pressure and adversely affect our business, prospects, financial condition and results of operations. Further, sales of boats in
the marine industry tend to be cyclical in many markets, which may expose us to increased volatility, especially as we expand and adjust
our operations and retail strategies. Specifically, it is uncertain how such macroeconomic factors will impact us as a new entrant in
an industry that has globally been experiencing a recent decline in sales.
Other factors that may influence the adoption of electric
boats include:
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perceptions about electric vehicle quality, safety, design, performance and cost; |
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perceptions about the limited range over which electric boats may be driven on a single battery charge; |
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perceptions about the total cost of ownership of electric boats, including the initial purchase price and operating and maintenance costs, both including and excluding the effect of any government and other subsidies and incentives designed to promote the purchase of electric boats; |
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perceptions about the sustainability and environmental impact of electric boats, including with respect to both the sourcing and disposal of materials for electric vehicle batteries and the generation of electricity provided in the electric grid; |
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the availability of other alternative fuel boats; |
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improvements in the fuel economy of the internal combustion engine; |
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the quality and availability of service for electric boats; |
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volatility in the cost of oil and gasoline; |
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government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; |
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access to charging stations and cost to charge an electric vehicle and related infrastructure costs and standardization; |
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the availability of tax and other governmental incentives to purchase and operate electric boats or future regulation requiring increased use of nonpolluting boats; and |
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macroeconomic factors. |
The influence of any of the factors described above
or any other factors may cause a general reduction in consumer demand for electric vehicles or our electric boats in particular, either
of which would materially and adversely affect our business, results of operations, financial condition and prospects
We may be unable to adequately control the capital
expenditures and costs associated with our business and operations.
We will require significant capital to develop and
grow our business, including developing our first boat to be manufactured, as well as building our brand, and we will not be able to rely
on Twin Vee as a source of such funding. We expect to make additional capital expenditures and incur substantial costs as we complete
the design and engineering of our boats and motor and prepare to commercially launch sales of our boats and grow our business, including
research and development expenses, raw material procurement costs, sales and distribution expenses as we build our brand and market our
boats and general and administrative expenses as we scale our operations, identify and commit resources to investigate new areas of demand
and incur costs as a public company. In addition, we expect to incur significant costs as we build our factory in North Carolina. Our
ability to become profitable in the future will not only depend on our ability to complete the design and development of our boats but
also to control our capital expenditures and costs. As we expand our product portfolio, we will need to manage costs effectively to sell
those products at our expected margins. If we are unable to cost efficiently design, manufacture, market, sell and distribute and service
our boats and provide our services, our business, prospects, financial condition, results of operations, and cash flows would be materially
and adversely affected.
We may not be able to commence production of
our electric boats as planned.
We currently plan to manufacture our electric boats
at a new state of the art carbon neutral factory that we plan to build in McDowell County, North Carolina. Until we are able to expand
our manufacturing capacity and build the planned manufacturing facility, we expect to continue to share Twin Vee’s current manufacturing
facility, which has a limited capacity and may not be able to satisfy our manufacturing needs. Although we entered into a Transition Services
Agreement with Twin Vee (the “Transition Services Agreement”) following the completion of our IPO, the Transition Services
Agreement does not provide for any dedicated manufacturing capacity for us. See “Certain Relationships and Related Party Transactions—Transition
Services Agreement.” Our ability to utilize Twin Vee’s manufacturing capacity pending completion of our own facility will
be subject to its availability as determined by Twin Vee and Twin Vee has no obligation to make any manufacturing capacity available to
us under the Transition Services Agreement. As a result, our ability to produce any boats will be limited to available capacity of the
Twin Vee facility until our future manufacturing facility is operational. If Twin Vee does not provide manufacturing capacity, we would
not be able to produce our electric boats unless or until we lease or purchase facilities and equipment necessary for our production purposes.
Any facility that we build will require a significant capital investment and is expected to take at least one year to eighteen months
to build and become fully operational. In addition, even if the construction of our planned facility is completed when anticipated, production
at our facility could be delayed whether due to lack of equipment, workforce issues or other reasons. If we are unable to complete our
own facility and commence production as planned, our business, prospects, financial condition, results of operations, and cash flows would
be materially and adversely affected and the value of your investment in our company may be materially adversely affected.
Changes in general economic conditions, geopolitical
conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business
and operating results.
Our operations and performance depend on global, regional
and U.S. economic and geopolitical conditions. General worldwide economic conditions have experienced significant instability in recent
years including the recent global economic uncertainty and financial market conditions. Russia’s invasion and military attacks on
Ukraine have triggered significant sanctions from U.S. and European leaders and financial markets around the world experienced volatility
following the invasion of Ukraine by Russia in February 2022. Resulting changes in U.S. trade policy could trigger retaliatory actions
by Russia, its allies and other affected countries, including China, resulting in a “trade war.” Furthermore, if other countries,
including the U.S., become further involved in the conflict, we could face significant adverse effects to our business and financial condition.
The uncertain financial markets, disruptions in supply
chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future. The COVID-19
outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses
and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and
demand for certain goods and services, such boats and other recreational components and supplies, have spiked, while demand for other
goods and services, such as travel, have fallen. The future progression of the pandemic and its effects on our business and operations
are uncertain.
Further, although we have not experienced material
adverse effects on our business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could
impact demand for our products, foreign exchange rates or employee wages. Inflation rates, particularly in the United States and
United Kingdom, have increased recently to levels not seen in years, and increased inflation may result in increases in our operating
costs (including our labor costs), reduced liquidity and limits on our ability to access credit or otherwise raise capital. In addition,
the Federal Reserve has raised, and may again raise, interest rates in response to concerns about inflation, which coupled with reduced
government spending and volatility in financial markets may have the effect of further increasing economic uncertainty and heightening
these risks.
Actual events involving reduced or limited liquidity,
defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services
industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may
in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, was closed by the California
Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Although we
did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, uncertainty and liquidity concerns in the broader
financial services industry remain and the failure of Silicon Valley Bank and its potential near- and long-term effects on the biotechnology
industry and its participants such as our vendors, suppliers, and investors, may also adversely affect our operations and stock price.
We are actively monitoring the effects these disruptions
and increasing inflation could have on our operations.
These conditions make it extremely difficult for us
to accurately forecast and plan future business activities.
In addition, the outbreak of a pandemic could
disrupt our operations due to absenteeism by infected or ill members of management or other employees, or absenteeism by members of management
and other employees who elect not to come to work due to the illness affecting others in our office or laboratory facilities, or due to
quarantines. Pandemics could also impact members of our Board of Directors resulting in absenteeism from meetings of the directors or
committees of directors and making it more difficult to convene the quorums of the full Board of Directors or its committees needed to
conduct meetings for the management of our affairs.
We may not receive the anticipated grant funding.
On July 28, 2022, we received notice that the North
Carolina Economic investment committee has approved a Job Development Investment Grant (“JDIG”) providing for reimbursement
to us of up to $1,367,100 over a twelve-year period to establish a new manufacturing plant in McDowell County, North Carolina. The receipt
of grant funding is conditioned upon us investing over $10.5 million in land, buildings and fixtures, infrastructure and machinery and
equipment by the end of 2025 and us creating as many as 170 jobs. We are currently in negotiations for a new site to build the Forza factory
in North Carolina. There can be no assurance that the negotiations will be successful. If unsuccessful, we will not meet the conditions
necessary to receive the grant funding and will be subject to the limited capacity at the Twin Vee factory that Twin Vee allows us, in
its discretion, to use. There can be no assurance that we will meet the conditions necessary to receive the grant funding. We are currently
in negotiations for a new site to build the Forza factory in North Carolina. There can be no assurance that the negotiations will be successful.
We could experience cost increases or disruptions
in supply of raw materials or other components used in our boats.
We expect to incur significant costs related to procuring
raw materials required to manufacture and assemble our boats. The prices for these raw materials fluctuate depending on factors beyond
our control including market conditions and global demand for these materials and could adversely affect our business, prospects, financial
condition, results of operations, and cash flows. Further, any delays or disruptions in our supply chain could harm our business. For
example, COVID-19, including associated variants, could cause disruptions to and delays in our operations, including shortages and delays
in the supply of certain parts, including semiconductors, materials and equipment necessary for the production of our boats, and the internal
designs and processes we may adopt in an effort to remedy or mitigate impacts of such disruptions and delays could result in higher costs.
In addition, our business also depends on the continued supply of battery cells for our boats. We currently only have a contract with
only one battery supplier and at times in the past sourcing batteries has been challenging. Although in the past we have sourced batteries
from two other suppliers, these other suppliers do not have contractual obligations to supply batteries to us. If the supply of batteries
available to us decreases our ability to complete manufacturing and distribution of our boats will be delayed, which would likely impact
our revenue. Any performance failure on the part of our existing supplier, or future suppliers, could delay further development and commercialization.
If for some reason our current supplier cannot perform as agreed, we may be required to replace that supplier. Although we believe there
are a number of potential replacements that could supply lithium-ion battery cells, we may incur added costs and delays in identifying
and qualifying any such replacements.
We are exposed
to multiple risks relating to availability and pricing of quality battery cells. These risks include:
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the inability or unwillingness of battery cell manufacturers to build or operate battery cell manufacturing plants to supply the numbers of battery cells (including the applicable chemistries) required to support the growth of the electric or plug-in hybrid vehicle industry as demand for such cells increases; |
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disruption in the supply of battery cells due to quality issues or recalls by the battery cell manufacturers; and |
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an increase in the cost, or decrease in the available supply of raw materials used in battery cells, such as lithium, nickel, and cobalt. |
Furthermore, currency fluctuations, tariffs or shortages
in petroleum and other economic or political conditions may result in significant increases in freight charges and raw material costs.
Substantial increases in the prices for our raw materials or components would increase our operating costs and could reduce our margins.
In addition, a growth in popularity of electric vehicles without a significant expansion in battery cell production capacity could result
in shortages which would result in increased materials costs to us, and would impact our projected manufacturing and delivery timelines,
and adversely affect our business, prospects, financial condition, results of operations, and cash flows.
We currently rely on
Twin Vee employees for the design and construction of our boats, which could delay or limit our ability to generate revenue.
Reliance on Twin Vee employees
for the design and construction of our boats may prevent our direct control of key aspects of those critical development processes. We
may not be able to control the amount and timing of resources that Twin Vee employees may devote to our products, or prevent Twin Vee
from withdrawing its support of our products. If Twin Vee employees fail to comply with applicable laws and regulations, fail to meet
expected deadlines, encounter natural or other disasters at their facilities or otherwise fail to perform their services to us in a satisfactory
or predicted manner, or at all, our ability to deliver product to meet commercial demand could be significantly impaired.
We depend upon third parties to manufacture
and to supply key semiconductor chip components necessary for our boats. We do not have long-term agreements with all of our semiconductor
chip manufacturers and suppliers, and if these manufacturers or suppliers become unwilling or unable to provide an adequate supply of
semiconductor chips, with respect to which there is a global shortage, we would not be able to find alternative sources in a timely manner
and our business would be adversely impacted.
Semiconductor chips are a vital input component to
the electrical architecture of our boats, controlling wide aspects of the boats’ operations. Many of the key semiconductor chips
we intend to use in our boats come from limited or single sources of supply, and therefore a disruption with any one manufacturer or supplier
in our supply chain would have an adverse effect on our ability to effectively manufacture and timely deliver our boats. We do not have
any long- term supply contracts with any suppliers and purchase chips on a purchase order basis. Due to our reliance on these semiconductor
chips, we are subject to the risk of shortages and long lead times in their supply. We are in the process of identifying alternative manufacturers
for semiconductor chips. We have in the past experienced, and may in the future experience, semiconductor chip shortages, and the availability
and cost of these components would be difficult to predict. For example, our manufacturers may experience temporary or permanent disruptions
in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, natural disasters, component or material shortages,
cost increases, acquisitions, insolvency, changes in legal or regulatory requirements, or other similar problems.
In particular, increased demand for semiconductor
chips in 2020, due in part to the COVID-19 pandemic and increased demand for consumer electronics that use these chips, has resulted in
a severe global shortage of chips in 2021. As a result, our ability to source semiconductor chips to be used in our boats has been adversely
affected. This shortage may result in increased chip delivery lead times, delays in the production of our boats, and increased costs to
source available semiconductor chips. To the extent this semiconductor chip shortage continues, and we are unable to mitigate the effects
of this shortage, our ability to deliver sufficient quantities of our boats to fulfill our preorders and to support our growth through
sales to new customers would be adversely affected. In addition, we may be required to incur additional costs and expenses in managing
ongoing chip shortages, including additional research and development expenses, engineering design and development costs in the event
that new suppliers must be onboarded on an expedited basis. Further, ongoing delays in production and shipment of boats due to a continuing
shortage of semiconductor chips may harm our reputation and discourage additional preorders and boat sales, and otherwise materially and
adversely affect our business and operations.
Our ability to meet our manufacturing workforce
needs is crucial to our results of operations and future sales and profitability.
We rely on the existence of an available hourly workforce
to manufacture our products. We also rely upon our engineers that are specialist in electric engineering. We cannot assure you that we
will be able to attract and retain qualified employees to meet current or future needs at a reasonable cost, or at all. For instance,
the demand for engineers has increased over the past several years and we will compete with many of the tech companies and automobile
companies. In addition, the demand for skilled employees has increased recently with the low unemployment rates in Florida and North Carolina
where we currently have manufacturing facilities and are building a manufacturing facility. Also, although none of our employees are currently
covered by collective bargaining agreements, we cannot assure you that our employees will not elect to be represented by labor unions
in the future. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of
employees. Significant increases in manufacturing workforce costs could materially adversely affect our business, financial condition
or results of operations.
We have a large fixed cost base that will affect
our profitability if our sales decrease.
The fixed cost levels of operating a powerboat manufacturer
can put pressure on profit margins when sales and production decline. Our profitability will depend, in part, on our ability to spread
fixed costs over a sufficiently large number of products sold and shipped, and if we make a decision to reduce our rate of production,
gross or net margins could be negatively affected. Consequently, decreased demand or the need to reduce production can lower our ability
to absorb fixed costs and materially impact our financial condition or results of operations.
Our outstanding common stock is substantially
controlled by our management.
Twin Vee PowerCats, Co. currently owns 67% of our outstanding common stock.
Joseph Visconti, who currently serves as our Executive Chairman and Chief of Product Development is also the Chairman of the Board and
Chief Executive Officer of our parent company, Twin Vee PowerCats Co., and is also the Chairman of the Board and Chief Executive Officer
of Twin Vee PowerCats Co. Mr. Visconti beneficially owns 24.38 % of the outstanding stock of f Twin Vee PowerCats Co. As a result, Mr.
Visconti is deemed to beneficially own 17.73% of Forza X1. As a result of these holdings, Mr. Visconti does and will have significant
influence over our management and affairs and over matters requiring stockholder approval, including the election of directors and approval
of significant corporate transactions. Therefore, Twin Vee PowerCats Co. will have substantial influence over any election of our directors
and our operations. It should also be noted that for the most part, authorization to modify our amended and restated certificate of incorporation,
as amended, requires only majority stockholder consent and approval to modify our amended and restated bylaws requires authorization of
only a majority of the board of directors. This concentration of ownership could also have the effect of delaying or preventing a change
in our control. Accordingly, our Executive Chairman and Chief of Product Development could cause us to enter into transactions or agreements
that we would not otherwise consider.
In addition, this concentration of ownership may delay
or prevent a change in our control and might affect the market price of our common stock, even when a change in control may be in the
best interest of all stockholders. Furthermore, the interests of this concentration of ownership may not always coincide with our interests
or the interests of other stockholders.
Our management overlaps substantially with the
management and beneficial owners of our principal stockholder, which may give rise to potential conflicts of interest.
Several of our executive officers and directors are
also officers and/or directors of our principal stockholder, Twin Vee PowerCats Co., and certain of such executive officers and directors
are, in turn, the principal stockholders of Twin Vee PowerCats Co. For example the Chairman of our Board of Directors is the Chairman
of the Board of Director and Chief Executive Officer of Twin Vee PowerCats Co. and our interim Chief Financial Officer currently serves
as the Chief Financial Officer of Twin Vee PowerCats Co. Accordingly, there may be inherent, albeit non-specific, potential conflicts
involved in the participation by members of each company’s management, audit committee, compensation committee, nominating committee
and other applicable board committees which will oversee questions of possible conflicts of interest and compensation, notwithstanding
our effort to appoint independent directors that do not have these inherent conflicts. In addition, as a matter of practicality, efficiency
and appropriate accounting, the costs of certain services (including salaries of executive officers) are allocated, which creates inter-company
obligations.
Our annual and quarterly
financial results are subject to significant fluctuations depending on various factors, many of which are beyond our control.
Our sales and operating results are expected to vary
significantly from quarter to quarter and year to year depending on various factors, many of which are beyond our control. These factors
include, but are not limited to:
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Seasonal consumer demand for our products; |
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Changes in pricing in, or the availability of supply in, the powerboat market; |
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Failure to maintain a premium brand image; |
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Disruption in the operation of our manufacturing facilities; |
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Variations in the timing and volume of our sales; |
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The timing of our expenditures in anticipation of future sales; |
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Sales promotions by us and our competitors; |
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Changes in competitive and economic conditions generally; |
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Consumer preferences and competition for consumers’ leisure time; |
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Impact of unfavorable weather conditions; |
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Due to these and other factors, our results of operations
may decline quickly and significantly in response to changes in order patterns or rapid decreases in demand for our products. We anticipate
that fluctuations in operating results will continue in the future.
Unfavorable weather conditions may have a material
adverse effect on our business, financial condition, and results of operations, especially during the peak boating season.
Adverse weather conditions in any year in any particular
geographic region may adversely affect sales in that region, especially during the peak boating season. Sales of our products are expected
to be generally stronger just before and during spring and summer, which represent the peak boating months, and favorable weather during
these months generally has a positive effect on consumer demand. Conversely, unseasonably cool weather, excessive rainfall, reduced rainfall
levels, or drought conditions during these periods may close area boating locations or render boating dangerous or inconvenient, thereby
generally reducing consumer demand for our products. Our annual results would be materially and adversely affected if our net sales were
to fall below expected seasonal levels during these periods. We may also experience more pronounced seasonal fluctuation in net sales
in the future as we expand our businesses. There can be no assurance that weather conditions will not have a material effect on the sales
of any of our products.
A natural disaster, the effects of climate change,
or disruptions at our manufacturing facility could adversely affect our business, financial condition, and results of operations.
We currently rely on the continuous operation of Twin
Vee’s manufacturing facility in Fort Pierce, Florida for the production of our prototypes and expect such reliance to continue until
such time, if ever, that we build a new facility to manufacture our electric boats. Any natural disaster or other serious disruption to
Twin Vee’s facility or any new facility due to fire, flood, earthquake, or any other unforeseen circumstance would adversely affect
our business, financial condition, and results of operations. Changes in climate could adversely affect our operations by limiting or
increasing the costs associated with equipment or fuel supplies. In addition, adverse weather conditions, such as increased frequency
and/or severity of storms, or floods could impair our ability to operate by damaging the Twin Vee facilities and equipment or restricting
product delivery to customers. The occurrence of any disruption at any such manufacturing facility, even for a short period of time, may
have an adverse effect on our productivity and profitability, during and after the period of the disruption. These disruptions may also
cause personal injury and loss of life, severe damage to or destruction of property and equipment, and environmental damage. Although
we maintain property, casualty, and business interruption insurance of the types and in the amounts that we believe are customary for
the industry, we are not fully insured against all potential natural disasters or other disruptions to our manufacturing facility.
If we fail to manage our manufacturing levels
while still addressing the seasonal retail pattern for our products, our business and margins may suffer.
The seasonality of retail demand anticipated for our
products, based upon sales of Twin Vee’s products, will require us to manage our manufacturing to address anticipated retail demand.
We will need to manage seasonal changes in consumer demand and inventory. If there is weakness in retail demand, we could be required
to reduce our production, resulting in lower rates of absorption of fixed costs in our manufacturing and, therefore, lower margins. As
a result, we will need to balance the economies of level production with the seasonal retail sales pattern we experience. Failure to adjust
manufacturing levels adequately may have a material adverse effect on our financial condition and results of operations.
We will rely on third-party suppliers to
provide components and raw materials essential to the construction of our boats and anticipate such reliance to continue once we commercialize
our products.
We expect to depend on third-party suppliers to provide
components and raw materials essential to the construction of our boats. While we believe that we will leverage Twin Vee’s relationships
with its current suppliers to provide the materials necessary to meet production demand, we cannot assure you that these relationships
will continue or that the quantity or quality of materials available from these suppliers will be sufficient to meet our future needs,
irrespective of whether we successfully implement our growth strategy. We expect that our need for raw materials and supplies will increase
as we produce boats for sale. Our suppliers must be prepared to ramp up operations and, in many cases, hire additional workers and/or
expand capacity in order to fulfill the orders that will be placed by us and other customers. Operational and financial difficulties that
our suppliers may face in the future could adversely affect their ability to supply us with the parts and components we need, which could
significantly disrupt our operations.
Termination or interruption of informal supply
arrangements could have a material adverse effect on our business or results of operations.
Although Twin Vee has long term relationships with
many of its suppliers that are also our suppliers, neither we nor Twin Vee have any formal agreements with any suppliers for the purchase
of parts needed and our purchases currently are made on a purchase order basis. We have no binding commitment from our suppliers to supply
any specified quantity of materials needed within any specified time period. In the event that our suppliers receive a large number of
orders from other customers, there is a possibility that they will not be able to support our needs. If any of our current suppliers were
to be unable to provide needed products to us, there can be no assurance that alternate supply arrangements will be made on satisfactory
terms. If we need to enter into supply arrangements on unsatisfactory terms, or if there are any delays to our supply arrangements, it
could adversely affect our business and operating results.
Product liability, warranty, personal injury,
property damage and recall claims may materially affect our financial condition and damage our reputation.
We are engaged in a business that exposes us to claims
for product liability and warranty claims in the event our products actually or allegedly fail to perform as expected or the use of our
products results, or is alleged to result, in property damage, personal injury or death. Although we maintain product and general liability
insurance of the types and in the amounts that we believe are customary for the industry, we are not fully insured against all such potential
claims. Our products involve kinetic energy, produce physical motion and are to be used on the water, factors which increase the likelihood
of injury or death. Our products will contain lithium-ion batteries, which have been known to catch fire or vent smoke and flame, and
chemicals which are known to be, or could later be proved to be, toxic or carcinogenic. Any judgment or settlement for personal injury
or wrongful death claims could be more than our assets and, even if not justified, could prove expensive to contest.
We may experience legal claims in excess of our insurance
coverage or claims that are not covered by insurance, either of which could adversely affect our business, financial condition and results
of operations. Adverse determination of material product liability and warranty claims made against us could have a material adverse effect
on our financial condition and harm our reputation. In addition, if any of our products or components in our products are, or are alleged
to be, defective, we may be required to participate in a recall of that product or component if the defect or alleged defect relates to
safety. Any such recall and other claims could be costly to us and require substantial management attention.
Our boats will use of lithium-ion battery cells,
which, if not appropriately managed and controlled, have been observed to catch fire or vent smoke and flame.
The battery packs within our boats are being designed
to use of lithium-ion cells. If not properly managed or subject to environmental stresses, lithium-ion cells can rapidly release the energy
they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While the battery
pack is designed to contain any single cell’s release of energy without spreading to neighboring cells, a field or testing failure
of battery packs in our boats could occur, which could result in bodily injury or death and could subject us to lawsuits, field actions
(including product recalls), or redesign efforts, all of which would be time consuming and expensive and could harm our brand image. Also,
negative public perceptions regarding the suitability of lithium-ion cells for boating applications, the social and environmental impacts
of mineral mining or procurement associated with the constituents of lithium-ion cells, or any future incident involving lithium-ion cells,
such as a vehicle or other fire, could materially and adversely affect our reputation and business, prospects, financial condition, results
of operations, and cash flows.
Significant product repair and/or replacement
due to product warranty claims or product recalls could have a material adverse impact on our results of operations.
We expect to provide a hull warranty for structural
damage of up to ten years. In addition, we expect to provide a three-year limited fiberglass small parts warranty on all on some small
fiberglass parts and components such as consoles. Gelcoat is expected to be covered up to one year. Additionally, fiberglass lids, plastic
lids, electrical panels, bilge pumps, aerator pumps or other electrical devices (excluding stereos, depth finders, radar, chart plotters
except for installation if installed by us), steering systems, electrical panels, and pumps are covered under a one-year basic limited
systems warranty. Some materials, components or parts of the boat that will not be covered by our limited product warranties will be separately
warranted by their manufacturers or suppliers. These other warranties are expected to include warranties covering components purchased
from suppliers. We also expect to offer to provide repairs for no additional cost as part of our new direct to consumer system.
Our standard warranties will require us to repair
or replace defective products during such warranty periods at no cost to the consumer. Although we will employ quality control procedures,
sometimes a product is distributed that needs repair or replacement. The repair and replacement costs we could incur in connection with
a recall could adversely affect our business. In addition, product recalls could harm our reputation and cause us to lose customers, particularly
if recalls cause consumers to question the safety or reliability of our products.
The nature of our business exposes us to workers’
compensation claims and other workplace liabilities.
Certain materials we use require our employees to
handle potentially hazardous or toxic substances. While our employees who handle these and other potentially hazardous or toxic materials
receive specialized training and wear protective clothing, there is still a risk that they, or others, may be exposed to these substances.
Exposure to these substances could result in significant injury to our employees and damage to our property or the property of others,
including natural resource damage. Our personnel are also at risk for other workplace-related injuries, including slips and falls. We
may in the future be subject to fines, penalties, and other liabilities in connection with any such injury or damage. Although we currently
maintain what we believe to be suitable and adequate insurance in excess of our self-insured amounts, we may be unable to maintain such
insurance on acceptable terms or such insurance may not provide adequate protection against potential liabilities.
If we are unable to comply with environmental
and other regulatory requirements, our business may be exposed to material liability and/or fines.
Our operations are subject to extensive and frequently
changing federal, state, local, and foreign laws and regulations, including those concerning product safety, environmental protection,
and occupational health and safety. Some of these laws and regulations require us to obtain permits and limit our ability to discharge
hazardous materials into the environment. If we fail to comply with these requirements, we may be subject to civil or criminal enforcement
actions that could result in the assessment of fines and penalties, obligations to conduct remedial or corrective actions, or, in extreme
circumstances, revocation of our permits or injunctions preventing some or all of our operations. In addition, the components of our boats
must meet certain regulatory standards, including stringent air emission standards for boat engines. Failure to meet these standards could
result in an inability to sell our boats in key markets, which would adversely affect our business. Moreover, compliance with these regulatory
requirements could increase the cost of our products, which in turn, may reduce consumer demand.
While we believe that we are in material compliance
with applicable federal, state, local, and foreign regulatory requirements, and hold all licenses and permits required thereunder, we
cannot assure you that we will, at all times, be able to continue to comply with applicable regulatory requirements. Compliance with increasingly
stringent regulatory and permit requirements may, in the future, cause us to incur substantial capital costs and increase our cost of
operations, or may limit our operations, all of which could have a material adverse effect on our business or financial condition.
As with most boat construction businesses, our manufacturing
processes involve the use, handling, storage, and contracting for recycling or disposal of hazardous substances and wastes. The failure
to manage or dispose of such hazardous substances and wastes properly could expose us to material liability or fines, including liability
for personal injury or property damage due to exposure to hazardous substances, damages to natural resources, or for the investigation
and remediation of environmental conditions. Under environmental laws, we may be liable for remediation of contamination at sites where
our hazardous wastes have been disposed or at our current facility, regardless of whether our facility is owned or leased or whether the
environmental conditions were created by us, a prior owner or tenant, or a third-party. While we do not believe that we are presently
subject to any such liabilities, we cannot assure you that environmental conditions relating to our prior, existing, or future sites or
operations or those of predecessor companies will not have a material adverse effect on our business or financial condition.
We will be dependent upon OneWater for direct
distribution of our boats.
On August 17, 2022, we entered into a five-year
agreement with OneWater to establish our customer experience and service centers in OneWater’s current and future locations
and other strategic locations across the United States pursuant to which OneWater will be the sole physical dealer distributing our
products (subject to exceptions for certain locations where OneWater dealerships are not available and, thus, are outside of our
exclusive agreement with OneWater) through their OneWater’s retail
locations, customers may use them as potential delivery points. Customers can also choose to purchase direct from Forza, on our
mobile app. During the terms of the agreement, we will be dependent for sales of our boats on the efforts of OneWater, over
which we have no control. OneWater will also distribute other boats and not just our boats and
therefore we will be competing for One Water customers. In addition, any negative publicity regarding OneWater could have a negative
effect upon our sales.
The electronic vehicle (EV) industry and its
technology are rapidly evolving and may be subject to unforeseen changes which could adversely affect the demand for our boats or increase
our operating costs.
We may be unable to keep up with changes in EV technology
or alternatives to electricity as a fuel source and, as a result, our competitiveness may suffer. Developments in alternative technologies,
such as advanced diesel, hydrogen, ethanol, fuel cells, or compressed natural gas, or improvements in the fuel economy of the internal
combustion engine or the cost of gasoline, may materially and adversely affect our business and prospects in ways we do not currently
anticipate. Existing and other battery cell technologies, fuels or sources of energy may emerge as customers’ preferred alternative
to our boats. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies,
could materially delay our development and introduction of new and enhanced alternative fuel and EVs, which could result in the loss of
competitiveness of our boats, decreased revenue and a loss of market share to competitors. Our research and development efforts may not
be sufficient to adapt to changes in alternative fuel and electric vehicle technology. As technologies change, we plan to upgrade or adapt
our boats with the latest technology. However, our boats may not compete effectively with alternative systems if we are not able to source
and integrate the latest technology into our boats. Additionally, the introduction and integration of new technologies into our boats
may increase our costs and capital expenditures required for the production and manufacture of our boats and, if we are unable to cost
efficiently implement such technologies or adjust our manufacturing operations, our business, prospects, financial condition, results
of operations, and cash flows would be materially and adversely affected.
Our sales and profitability depend, in part,
on the successful introduction of new products.
Market acceptance of our products will depend on our
technological innovation and our ability to implement technology in our boats. Our sales and profitability may be adversely affected by
difficulties or delays in product development, such as an inability to develop viable or innovative new products or to add new features.
Our failure to introduce new technologies and product offerings that consumers desire could adversely affect our business, financial condition,
and results of operations. If we fail to introduce new features or those we introduce fail to gain market acceptance, our bottom line
may suffer.
If we experience delays in the development of our
fully electric sport boat, fail to bring boats to market as and when planned or if it fails to gain market acceptance, our bottom line
will suffer.
In addition, some of our direct competitors and indirect
competitors may have significantly more resources to develop and patent new technologies. It is possible that our competitors will develop
and patent equivalent or superior technologies and other products that compete with ours. They may assert these patents against us and
we may be required to license these patents on unfavorable terms or cease using the technology covered by these patents, either of which
would harm our competitive position and may materially adversely affect our business.
We also cannot be certain that our products or features
have not infringed or will not infringe the proprietary rights of others. Any such infringement could cause third parties, including our
competitors, to bring claims against us, resulting in significant costs and potential damages.
Our success depends upon the continued strength
of our brand, the value of our brand, and sales of our products could be diminished if we, the consumers who use our products, or the
sports and activities in which our products are used are associated with negative publicity.
We believe that our brand will be a significant contributor
to the success of our business and that maintaining and enhancing our brand is important to expanding our consumer and dealer base. Failure
to continue to protect our brand may adversely affect our business, financial condition, and results of operations. We expect that our
ability to develop, maintain and strengthen the Forza X1 brand will also depend heavily on the success of our marketing efforts. To further
promote our brand, we may be required to change our marketing practices, which could result in substantially increased advertising expenses,
including the need to use traditional media such as television, radio and print. Many of our current and potential competitors have greater
name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain
strong brands, our business, prospects, financial condition and operating results will be materially and adversely impacted.
Negative publicity, including that resulting from
severe injuries or death occurring in the sports and activities in which our products are used, could negatively affect our reputation
and result in restrictions, recalls, or bans on the use of our products. If the popularity of the sports and activities for which we design,
manufacture, and sell products were to decrease as a result of these risks or any negative publicity, sales of our products could decrease,
which could have an adverse effect on our net sales, profitability, and operating results. In addition, if we become exposed to additional
claims and litigation relating to the use of our products, our reputation may be adversely affected by such claims, whether or not successful,
including by generating potential negative publicity about our products, which could adversely impact our business and financial condition.
Our passion and focus on delivering a high-quality
and engaging Forza X1 experience may not maximize short-term financial results, which may yield results that conflict with the market’s
expectations and could result in our stock price being negatively affected.
We are passionate about enhancing the Forza X1 experience
with a focus on driving long-term customer engagement through innovative, technologically advanced boats, which may not necessarily maximize
short-term financial results. We frequently make business decisions that may reduce our short-term financial results if we believe that
the decisions are consistent with our goals to improve the Forza X1 experience, which we believe will improve our financial results over
the long-term. In the near-term, we will focus significant resources on research and development and sales and marketing to deliver the
Forza experience to our customers, which could impact our short-term financial results. These decisions may not be consistent with the
short-term expectations of our stockholders and may not produce the long-term benefits that we expect, in which case our customer growth,
and our business, prospects, financial condition, results of operations, and cash flows could be harmed.
Extended periods of low gasoline or other petroleum-based
fuel prices could adversely affect demand for our boats, which would adversely affect our business, prospects, results of operations and
financial condition.
A portion of the current and expected demand for electric
vehicles results from concerns about volatility in the cost of gasoline and other petroleum-based fuel, the dependency of the United States
on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative forms
of energy, as well as concerns about climate change resulting in part from the burning of fossil fuels. If the cost of gasoline and other
petroleum-based fuel decreases significantly, the outlook for the long-term supply of oil to the United States improves, the government
eliminates or modifies its regulations or economic incentives related to fuel efficiency and alternative forms of energy or there is a
change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for electric vehicles, including
our boats, could be reduced, and our business and revenue may be harmed.
Gasoline and other petroleum-based fuel prices have
historically been extremely volatile, particularly during the ongoing COVID-19 pandemic, and it is difficult to ascertain whether such
volatility will continue to persist. Lower gasoline or other petroleum-based fuel prices over extended periods of time may lower the perception
in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If gasoline
or other petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for electric vehicles, including
our boats, may decrease, which would have an adverse effect on our business, prospects, financial condition and results of operations.
We will rely on complex machinery for our operations,
and production involves a significant degree of risk and uncertainty in terms of operational performance, safety, security, and costs.
We expect to rely heavily on complex machinery for
our operations and our production will involve a significant degree of uncertainty and risk in terms of operational performance, safety,
security, and costs. Twin Vee’s manufacturing plant consists of large-scale machinery combining many components. The manufacturing
plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations,
which may not be available when needed. Unexpected malfunctions of the manufacturing plant components may significantly affect operational
efficiency. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control,
such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning
of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems,
industrial accidents, pandemics, fire, seismic activity, and natural disasters. Should operational risks materialize, it may result in
the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, products, supplies,
tools and materials, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines,
increased insurance costs, and potential legal liabilities, all which could have a material adverse effect on our business, prospects,
financial condition, results of operations, and cash flows. Although we generally carry insurance to cover such operational risks, we
cannot be certain that our insurance coverage will be sufficient to cover potential costs and liabilities arising therefrom. A loss that
is uninsured or exceeds policy limits may require us to pay substantial amounts, which could adversely affect our business, prospects,
financial condition, results of operations, and cash flows.
If our boats fail to perform as expected, our
ability to develop, market and sell or lease our products could be harmed.
Once commercialization commences, our boats may contain
defects in design and manufacture that may cause them not to perform as expected or that may require repairs, recalls, and design changes,
any of which would require significant financial and other resources to successfully navigate and resolve. Our boats will use a substantial
amount of software code to operate, and software products are inherently complex and may contain defects and errors when first introduced.
If our boats contain defects in design and manufacture that cause them not to perform as expected or that require repair, or certain features
of our boats take longer than expected to become available, are legally restricted or become subject to additional regulation, our ability
to develop, market and sell our products and services could be harmed. Although we will attempt to remedy any issues we observe in our
products as effectively and rapidly as possible, such efforts could significantly distract management’s attention from other important
business objectives, may not be timely, may hamper production or may not be to the satisfaction of our customers. Further, our limited
operating history and limited field data reduce our ability to evaluate and predict the long-term quality, reliability, durability and
performance characteristics of our battery packs, powertrains and boats. There can be no assurance that we will be able to detect and
fix any defects in our products prior to their sale or lease to customers.
Any defects, delays or legal restrictions on boat
features, or other failure of our boats to perform as expected, could harm our reputation and result in delivery delays, product recalls,
product liability claims, breach of warranty claims and significant warranty and other expenses, and could have a material adverse impact
on our business, results of operations, prospects and financial condition. As a new entrant to the industry attempting to build customer
relationships and earn trust, these effects could be significantly detrimental to us. Additionally, problems and defects experienced by
other electric consumer vehicles could by association have a negative impact on perception and customer demand for our boats.
In addition, even if our boats function as designed,
we expect that the battery efficiency, and hence the range, of our electric boats, like other electric vehicles that use current battery
technology, will decline over time. Other factors, such as usage, time and stress patterns, may also impact the battery’s ability
to hold a charge, or could require us to limit boat battery charging capacity, including via over-the-air or other software updates, for
safety reasons or to protect battery capacity, which could further decrease our boats’ range between charges. Such decreases in
or limitations of battery capacity and therefore range, whether imposed by deterioration, software limitations or otherwise, could also
lead to consumer complaints or warranty claims, including claims that prior knowledge of such decreases or limitations would have affected
consumers’ purchasing decisions. Further, there can be no assurance that we will be able to improve the performance of our battery
packs, or increase our boats range, in the future. Any such battery deterioration or capacity limitations and related decreases in range
may negatively influence potential customers’ willingness to purchase our boats and negatively impact our brand and reputation,
which could adversely affect our business, prospects, results of operations and financial condition.
Our boats will rely on software and hardware
that is highly technical, and if these systems contain errors, bugs, vulnerabilities, or design defects, or if we are unsuccessful in
addressing or mitigating technical limitations in our systems, our business could be adversely affected.
Our boats are expected to rely on software and hardware
that is highly technical and complex and may require modification and updates over the life of the boats. In addition, our boats will
depend on the ability of such software and hardware to store, retrieve, process and manage large amounts of data. Our software and hardware
may contain errors, bugs, vulnerabilities or design defects, and our systems are subject to certain technical limitations that may compromise
our ability to meet our objectives. Some errors, bugs, vulnerabilities, or design defects inherently may be difficult to detect and may
only be discovered after the code has been released for external or internal use. Although we will attempt to remedy any issues we observe
in our boats effectively and rapidly, such efforts may not be timely, may hamper production or may not be to the satisfaction of our customers.
Additionally, if we deploy updates to the software
(whether to address issues, deliver new features or make desired modifications) and our over-the-air update procedures fail to properly
update the software or otherwise have unintended consequences to the software, the software within our customers’ boats will be
subject to vulnerabilities or unintended consequences resulting from such failure of the over-the-air update until properly addressed.
If we are unable to prevent or effectively remedy
errors, bugs, vulnerabilities or defects in our software and hardware, or fail to deploy updates to our software properly, we would suffer
damage to our reputation, loss of customers, loss of revenue or liability for damages, any of which could adversely affect our business,
prospects, financial condition, results of operations, and cash flows.
We have no experience servicing our boats. If
we are unable to adequately service our boats, our business, prospects, financial condition and results of operations may be materially
and adversely affected.
Because we have not begun commercial production of
our products, we have no experience servicing or repairing our electric boats or motors. Servicing electric vehicles is different than
servicing vehicles with internal combustion engines and requires specialized skills, including high voltage training and servicing techniques.
In addition, we plan to partner with certain third parties, such as we have with OneWater, to perform some of the service on our vehicles,
and there can be no assurance that we will be able to enter into acceptable arrangements with any such third-party providers. Further,
although such servicing partners may have experience in servicing other electric vehicles, they will initially have no experience in servicing
our boats. There can be no assurance that our service arrangements will adequately address the service requirements of our customers to
their satisfaction, or that we and our servicing partners will have sufficient resources, experience or inventory to meet these service
requirements in a timely manner as the volume of boats we deliver increases. This risk is enhanced by our limited operating history and
our limited data regarding our boats’ real-world reliability and service requirements. In addition, if we are unable to roll out
and establish a widespread service network that provides satisfactory customer service, our customer loyalty, brand and reputation could
be adversely affected, which in turn could materially and adversely affect our sales, results of operations, prospects and financial condition.
Our customers will also depend on our customer support
team to resolve technical and operational issues relating to the integrated software underlying our boats, a large portion of which we
have developed in-house. As we grow, additional pressure may be placed on our customer support team or partners, and we may be unable
to respond quickly enough to accommodate short-term increases in customer demand for technical support. We also may be unable to modify
the future scope and delivery of our technical support to compete with changes in the technical support provided by our competitors. Increased
customer demand for support, without corresponding revenue, could increase costs and negatively affect our results of operations. If we
are unable to successfully address the service requirements of our customers, or if we establish a market perception that we do not maintain
high-quality support, our brand and reputation could be adversely affected, and we may be subject to claims from our customers, which
could result in loss of revenue or damages, and our business, results of operations, prospects and financial condition could be materially
and adversely affected.
We may not be able to execute our manufacturing
strategy successfully, which could cause the profitability of our products to suffer.
Our manufacturing strategy is designed to improve
product quality and increase productivity, while reducing costs and increasing flexibility to respond to ongoing changes in the marketplace.
To implement this strategy, we must be successful in our continuous improvement efforts, which depend on the involvement of management,
production employees, and suppliers. Any inability to achieve these objectives could adversely impact the profitability of our products
and our ability to deliver desirable products to our consumers.
We may need to raise additional capital that may be required to grow
our business, and we may not be able to raise capital on terms acceptable to us or at all.
Operating our business and
maintaining our growth efforts will require significant cash outlays and advance capital expenditures and commitments. Our current plans
also involve constructing a 100,000 square foot state-of-the-art manufacturing facility dedicated to developing and manufacturing our
FX series electric boats, the cost of which is uncertain. Although the proceeds of our IPO should be sufficient to fund our operations,
if cash on hand and cash generated from operations and from the IPO are not sufficient to meet our cash requirements, we will need to
seek additional capital, potentially through debt or equity financings, to fund our growth. We cannot assure you that we will be able
to raise needed cash on terms acceptable to us or at all. Financings may be on terms that are dilutive or potentially dilutive to our
stockholders, and the prices at which new investors would be willing to purchase our securities may be lower than the price per share
of our common stock paid by shareholders. The holders of new securities may also have rights, preferences or privileges which are senior
to those of existing holders of common stock. If new sources of financing are required, but are insufficient or unavailable, we will be
required to modify our growth and operating plans based on available funding, if any, which would harm our ability to grow our business.
If we fail to manage future growth effectively,
we may not be able to market or sell our products successfully.
Any failure to manage our growth effectively could
materially and adversely affect our business, prospects, operating results and financial condition. We plan to expand our operations in
the near future. Our future operating results depend to a large extent on our ability to manage this expansion and growth successfully.
Risks that we face in undertaking this expansion include:
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expanding our management team; |
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hiring and training new personnel; |
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forecasting production and revenue; |
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expanding our marketing efforts; |
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controlling expenses and investments in anticipation of expanded operations; |
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establishing or expanding design, manufacturing, sales and service facilities; |
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implementing and enhancing administrative infrastructure, systems and processes; and |
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expanding into new markets and establishing sales, service and manufacturing operations in such markets. |
We intend to continue to hire a number of additional
personnel, including design and manufacturing personnel and service technicians for our electric boats and powertrains. Competition for
individuals with experience designing, manufacturing and servicing electric boats is intense, and we may not be able to attract, assimilate,
train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these
additional employees could seriously harm our business and prospects.
We depend upon our executive officers, and we
may not be able to retain them and their knowledge of our business and technical expertise would be difficult to replace.
Our future success will depend in significant part
upon the continued service of our executive officers. We cannot assure you that we will be able to continue to attract or retain such
persons. We do not have an insurance policy on the life of our Executive Chairman or our President and Chief Executive Officer, and we
do not have “key person” life insurance policies for any of our other officers or advisors. The loss of the technical knowledge
and management and industry expertise of any of our key personnel could result in delays in product development, loss of customers and
sales and diversion of management resources, which could adversely affect our operating results.
We may attempt to grow our business through
acquisitions or strategic alliances and new partnerships, which we may not be successful in completing or integrating.
We may in the future enter into acquisitions and strategic
alliances that will enable us to acquire complementary skills and capabilities, offer new products, expand our consumer base, enter new
product categories or geographic markets, and obtain other competitive advantages. We cannot assure you, however, that we will identify
acquisition candidates or strategic partners that are suitable to our business, obtain financing on satisfactory terms, complete acquisitions
or strategic alliances, or successfully integrate acquired operations into our existing operations. Once integrated, acquired operations
may not achieve anticipated levels of sales or profitability, or otherwise perform as expected. Acquisitions also involve special risks,
including risks associated with unanticipated challenges, liabilities and contingencies, and diversion of management attention and resources
from our existing operations. Similarly, our partnership with leading franchises from other industries to market our products or with
third-party technology providers to introduce new technology to the market may not achieve anticipated levels of consumer enthusiasm and
acceptance, or achieve anticipated levels of sales or profitability, or otherwise perform as expected.
We rely on network and information systems and
other technologies for our business activities and certain events, such as computer hackings, viruses or other destructive or disruptive
software or activities may disrupt our operations, which could have a material adverse effect on our business, financial condition and
results of operations.
Network and information systems and other technologies
are important to our business activities and operations. Network and information systems-related events, such as computer hackings, cyber
threats, security breaches, viruses, or other destructive or disruptive software, process breakdowns or malicious or other activities
could result in a disruption of our services and operations or improper disclosure of personal data or confidential information, which
could damage our reputation and require us to expend resources to remedy any such breaches. Moreover, the amount and scope of insurance
we maintain against losses resulting from any such events or security breaches may not be sufficient to cover our losses or otherwise
adequately compensate us for any disruptions to our businesses that may result, and the occurrence of any such events or security breaches
could have a material adverse effect on our business and results of operations. The risk of these systems-related events and security
breaches occurring has intensified, in part because we maintain certain information necessary to conduct our businesses in digital form
stored on cloud servers. While we intend to develop and maintain systems seeking to prevent systems-related events and security breaches
from occurring, the development and maintenance of these systems is costly and requires ongoing monitoring and updating as technologies
change and efforts to overcome security measures become more sophisticated. Despite these efforts, there can be no assurance that disruptions
and security breaches will not occur in the future. Moreover, we may provide certain confidential, proprietary and personal information
to third parties in connection with our businesses, and while we obtain assurances that these third parties will protect this information,
there is a risk that this information may be compromised.
Likewise, data privacy breaches by employees or others
with permitted access to our systems may pose a risk that sensitive data may be exposed to unauthorized persons or to the public. While
we have invested in protection of data and information technology, there can be no assurance that our efforts will prevent breakdowns
or breaches in our systems that could adversely affect our business. The occurrence of any of such network or information systems-related
events or security breaches could have a material adverse effect on our business, financial condition and results of operations.
Uninsured losses could result in payment of
substantial damages, which would decrease our cash reserves and could harm our cash flow and financial condition.
In the ordinary course of business, we may be subject
to losses resulting from product liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage.
While we currently carry commercial general liability, commercial boat liability, excess liability, product liability, cybersecurity,
crime, special crime, drone, cargo stock throughput, builder’s risk, owner controlled insurance program, property, owners protective,
workers’ compensation, employment practices, employed lawyers, production, fiduciary liability and directors’ and officers’
insurance policies, we may not maintain as much insurance coverage as other original equipment manufacturers do, and in some cases, we
may not maintain any at all. Additionally, the policies that we have may include significant deductibles, and we cannot be certain that
our insurance coverage will be sufficient to cover all or any future claims against us. A loss that is uninsured or exceeds policy limits
may require us to pay substantial amounts, which could adversely affect our financial condition and results of operations. Further, insurance
coverage may not continue to be available to us or, if available, may be at a significantly higher cost, especially if insurance providers
perceive any increase in our risk profile in the future.
Intellectual Property Risks
Our patent applications may not issue as patents,
which may have a material adverse effect on our ability to prevent others from commercially exploiting products similar to ours.
We cannot be certain that
we are the first inventor of the subject matter to which we have filed a particular patent application, or that we are the first party
to file such a patent application. If another party has filed a patent application for the same subject matter as we have, we may not
be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult
to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will
afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which
may adversely affect our business, prospects, financial condition, results of operations, and cash flows.
We may not be able
to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
We may not be able to prevent
others from unauthorized use of our intellectual property, which could harm our business and competitive position. We rely on a combination
of patent, trade secret (including those in our know-how), and other intellectual property laws, as well as employee and third-party
nondisclosure agreements, intellectual property licenses, and other contractual rights to establish and protect our rights in our technology
and intellectual property. Our patent or trademark applications may not be granted, any patents or trademark registrations that may be
issued to us may not sufficiently protect our intellectual property and any of our issued patents, trademark registrations or other intellectual
property rights may be challenged by third parties. Any of these scenarios may result in limitations in the scope of our intellectual
property or restrictions on our use of our intellectual property or may adversely affect the conduct of our business. Despite our efforts
to protect our intellectual property rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or
seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual
property is difficult and costly, and the steps we have taken or will take to prevent misappropriation may not be successful. From time
to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and
diversion of our resources.
Patent, trademark, and trade
secret laws vary significantly throughout the world. A number of foreign countries do not protect intellectual property rights to the
same extent as do the laws of the United States. Therefore, our intellectual property rights may not be as strong or as easily enforced
outside of the United States. Failure to adequately protect our intellectual property rights could result in our competitors offering
similar products, potentially resulting in the loss of some of our competitive advantage and a decrease in our revenue which would adversely
affect our business, prospects, financial condition, results of operations, and cash flows.
If our patents expire
or are not maintained, our patent applications are not granted or our patent rights are contested, circumvented, invalidated or limited
in scope, we may not be able to prevent others from selling, developing or exploiting competing technologies or products, which could
have a material adverse effect on our business, prospects, financial condition, results of operations, and cash flows.
We cannot assure you that
our pending applications will issue as patents. Even if our patent applications issue into patents, these patents may be contested, circumvented
or invalidated in the future. In addition, the rights granted under any issued patents may not provide us with adequate protection or
competitive advantages. The claims under any patents that issue from our patent applications may not be broad enough to prevent others
from developing technologies that are similar or that achieve results similar to ours. The intellectual property rights of others could
also bar us from licensing and exploiting any patents that issue from our pending applications. Numerous patents and pending patent applications
owned by others exist in the fields in which we have developed and are developing our technology. Many of these existing patents and patent
applications might have priority over our patent applications and could subject our patents to invalidation or our patent applications
to rejection. Finally, in addition to patents and patent applications that were filed before our patents and patent applications, any
of our existing or future patents may also be challenged by others on the basis that they are invalid or unenforceable.
We may in the future
become, subject to claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our employees’ former
employers.
Many of our employees were
previously employed by other companies with similar or related technology, products or services. We are, and may in the future become,
subject to claims that we or these employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary information
of former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, we may be forced
to pay monetary damages or be enjoined from using certain technology, products, services or knowledge. Even if we are successful in defending
against these claims, litigation could result in substantial costs and demand on management resources.
Our use of open source
software in our applications could subject our proprietary software to general release, adversely affect our ability to sell our services
and subject us to possible litigation, claims or proceedings.
We plan to use open source
software in connection with the development and deployment of our products and services. Companies that use open source software in connection
with their products have, from time to time, faced claims challenging the use of open source software and/or compliance with open source
license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or
claiming noncompliance with open source licensing terms. Some open source software licenses may require users who distribute proprietary
software containing or linked to open source software to publicly disclose all or part of the source code to such proprietary software
and/or make available any derivative works of the open source code under the same open source license, which could include proprietary
source code. In such cases, the open source software license may also restrict us from charging fees to licensees for their use of our
software. While we will monitor the use of open source software and try to ensure that open source software is not used in a manner that
would subject our proprietary source code to these requirements and restrictions, such use could inadvertently occur, in part because
open source license terms are often ambiguous and have generally not been interpreted by U.S. or foreign courts.
Further, in addition to risks
related to license requirements, use of certain open source software carries greater technical and legal risks than does the use of third-party
commercial software. For example, open source software is generally provided as-is without any support or warranties or other
contractual protections regarding infringement or the quality of the code, including the existence of security vulnerabilities. To the
extent that our platform depends upon the successful operation of open source software, any undetected errors or defects in open source
software that we use could prevent the deployment or impair the functionality of our systems and injure our reputation. In addition, the
public availability of such software may make it easier for attackers to target and compromise our platform through cyber-attacks. Any
of the foregoing risks could materially and adversely affect our business, prospects, financial condition, results of operations, and
cash flows.
A significant portion
of our intellectual property is not protected through patents or formal copyright registration. As a result, we do not have the full benefit
of patent or copyright laws to prevent others from replicating our products, product candidates and brands.
We have not protected certain
of our intellectual property rights through patents or formal copyright registration, and we do not currently have any issued patents
and only have three design and four utility patent applications that we filed for, among other things, our propulsion system being developed
and boat design. There can be no assurance that any patent will issue or if issued that the patent will protect our intellectual property.
As a result, we may not be able to protect our intellectual property and trade secrets or prevent others from independently developing
substantially equivalent proprietary information and techniques or from otherwise gaining access to our intellectual property or trade
secrets. In such an instance, our competitors could produce products that are nearly identical to ours resulting in us selling less products
or generating less revenue from our sales.
Confidentiality agreements with employees and
others may not adequately prevent disclosure of trade secrets and other proprietary information.
We rely on trade secrets, know-how and technology,
which are not protected by patents, to protect the intellectual property behind our electric powertrain and for the construction of our
boats. We have recently begun to use confidentiality agreements with our collaborators, employees, consultants, outside collaborators
and other advisors to protect our proprietary technology and processes. We intend to use such agreements in the future, but these agreements
may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized
disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information, and
in such cases we could not assert any trade secret rights against such party. Costly and time-consuming litigation could be necessary
to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely
affect our competitive business position.
We may need to defend ourselves against patent, copyright or trademark
infringement claims, which may be time-consuming and would cause us to incur substantial costs.
The status of the protection of our intellectual property
is unsettled as we do not have any issued patents, registered trademarks or registered copyrights and other than three design, five utility
and two full non-provisional patent applications, we have not applied for the same. Companies, organizations or individuals, including
our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our ability
to make, use, develop, sell or market our powerboats and electric powertrains or use third-party components, which could make it more
difficult for us to operate our business. In the future, we may receive communications from third parties that allege our products or
components thereof are covered by their patents or trademarks or other intellectual property rights, we have not received any communication
of this kind to date. Companies holding patents or other intellectual property rights may bring suits alleging infringement of such rights
or otherwise assert their rights. If we are determined to have infringed upon a third-party’s intellectual property rights, we may
be required to do one or more of the following:
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cease making, using, selling or offering to sell processes, goods or services that incorporate or use the third-party intellectual property; |
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pay substantial damages; |
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seek a license from the holder of the infringed intellectual property right, which license may not be available on reasonable terms or at all; |
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redesign our boats or other goods or services to avoid infringing the third-party intellectual property; |
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establish and maintain alternative branding for our products and services; or |
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find-third providers of any part or service that is the subject of the intellectual property claim. |
In the event of a successful claim of infringement
against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our business,
prospects, operating results and financial condition could be materially adversely affected. In addition, any litigation or claims, whether
or not valid, could result in substantial costs, negative publicity and diversion of resources and management attention.
Risks Related to Our Industry
Demand in the powerboat industry is highly volatile.
Volatility of demand in the powerboat industry, especially
for recreational powerboats and electric powerboats, may materially and adversely affect our business, prospects, operating results and
financial condition. The markets in which we will be competing have been subject to considerable volatility in demand in recent periods.
Demand for recreational powerboats depends to a large extent on general, economic and social conditions in a given market. Historically,
sales of recreational powerboats decrease during economic downturns. We have fewer financial resources than more established powerboat
manufacturers to withstand adverse changes in the market and disruptions in demand.
Our industry is characterized by intense competition,
which affects our sales and profits.
The performance sport boat category and the powerboat
industry as a whole are highly competitive for consumers and dealers. We also compete against consumer demand for used boats. Competition
affects our ability to succeed in both the markets we currently plan to serve and new markets that we may enter in the future. Competition
is based primarily on brand name, price, product selection, and product performance. We will compete with several large manufacturers
that may have greater financial, marketing, and other resources than we do and who are represented by dealers in the markets in which
we now operate and into which we plan to expand. We also will compete with a variety of small, independent manufacturers. In addition,
when marketing our boats through OneWater, we will compete with other boats marketing by OneWater. We cannot assure you that we will not
face greater competition from existing large or small manufacturers or that we will be able to compete successfully with new competitors.
Our failure to compete effectively with our current and future competitors would adversely affect our business, financial condition, and
results of operations.
General economic conditions, particularly in
the U.S., affect our industry, demand for our products and our business, and results of operations.
Demand for premium boat brands has been significantly
influenced by weak economic conditions, low consumer confidence, high unemployment, and increased market volatility worldwide, especially
in the U.S. In times of economic uncertainty and contraction, consumers tend to have less discretionary income and tend to defer or avoid
expenditures for discretionary items, such as our products. Sales of our products are highly sensitive to personal discretionary spending
levels. Our business is cyclical in nature and its success is impacted by economic conditions, the overall level of consumer confidence
and discretionary income levels. Any substantial deterioration in general economic conditions that diminishes consumer confidence or discretionary
income may reduce our sales and materially adversely affect our business, financial condition and results of operations. We cannot predict
the duration or strength of an economic recovery, either in the U.S. or in the specific markets where we sell our products. Corporate
restructurings, layoffs, declines in the value of investments and residential real estate, higher gas prices, higher interest rates, and
increases in federal and state taxation may each materially adversely affect our business, financial condition, and results of operations.
Consumers often finance purchases of our products.
Although consumer credit markets have improved, consumer credit market conditions continue to influence demand, especially for boats,
and may continue to do so. There continue to be fewer lenders, tighter underwriting and loan approval criteria, and greater down payment
requirements than in the past. If credit conditions worsen, and adversely affect the ability of consumers to finance potential purchases
at acceptable terms and interest rates, it could result in a decrease in the sales of our products.
The uncertain financial markets, disruptions in supply
chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future. The COVID-19
outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses
and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and
demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services,
such as travel, have fallen. The future progression of the pandemic and its effects on our business and operations are uncertain. In addition,
the outbreak of a pandemic could disrupt our operations due to absenteeism by infected or ill members of management or other employees,
or absenteeism by members of management and other employees who elect not to come to work due to the illness affecting others in our office
or laboratory facilities, or due to quarantines. Pandemics could also impact members of our Board of Directors resulting in absenteeism
from meetings of the directors or committees of directors and making it more difficult to convene the quorums of the full Board of Directors
or its committees needed to conduct meetings for the management of our affairs.
Further, due to increasing inflation, operating costs
for many businesses including ours have increased and, in the future, could impact demand or pricing manufacturing of our drug candidates
or services providers, foreign exchange rates or employee wages. Inflation rates, particularly in the United States, have increased
recently to levels not seen in years, and increased inflation may result in increases in our operating costs (including our labor costs),
reduced liquidity and limits on our ability to access credit or otherwise raise capital. In addition, the Federal Reserve has raised,
and may again raise, interest rates in response to concerns about inflation, which coupled with reduced government spending and volatility
in financial markets may have the effect of further increasing economic uncertainty and heightening these risks.
Actual events involving reduced or limited liquidity,
defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services
industry or the financial services industry generally or concerns or rumors about any events of these kinds, have in the past and may
in the future lead to market-wide liquidity problems. For example, on March 10, 2023, Silicon Valley Bank, was closed by the California
Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver. Although we
did not have any cash or cash equivalent balances on deposit with Silicon Valley Bank, uncertainty and liquidity concerns in the broader
financial services industry remain and the failure of Silicon Valley Bank and its potential near- and long-term effects on the biotechnology
industry and its participants such as our vendors, suppliers, and investors, may also adversely affect our operations and stock price.
We are actively monitoring the effects these disruptions
and increasing inflation could have on our operations.
conditions make it extremely difficult for us to accurately
forecast and plan future business activities.
Global economic conditions
could materially adversely impact demand for our products and services.
Our operations and performance
depend significantly on economic conditions. Global financial conditions continue to be subject to volatility arising from international
geopolitical developments and global economic phenomenon, as well as general financial market turbulence, including a significant recent
market reaction to the novel coronavirus (COVID-19), resulting in a significant reduction in many major market indices. Uncertainty about
global economic conditions could result in material adverse effects on our business, results of operations or financial condition. Access
to public financing and credit can be negatively affected by the effect of these events on U.S. and global credit markets. The health
of the global financing and credit markets may affect our ability to obtain equity or debt financing in the future and the terms at which
financing, or credit is available to us. These instances of volatility and market turmoil could adversely affect our operations and the
trading price of our common shares resulting in.
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customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services; and |
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third-party suppliers being unable to produce parts and components for our products in the same quantity or on the same timeline or being unable to deliver such parts and components as quickly as before or subject to price fluctuations, which could have a material adverse effect on our production or the cost of such production. |
Our sales may be adversely impacted by increased
consumer preference for other leisure activities or used boats or the supply of new boats by competitors in excess of demand.
Our boats are not necessities and in times of economic
hardship, consumers may cease purchasing non-essential items. Demand for our boats may be adversely affected by competition from other
activities that occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern or taste. Similarly, an overall
decrease in consumer leisure time may reduce consumers’ willingness to purchase and enjoy our boats.
During the economic downturn that commenced in 2008,
for example, there was a shift in consumer demand toward purchasing more used boats, primarily because prices for used boats are typically
lower than retail prices for new boats. If this were to occur again, it could have the effect of reducing demand among retail purchasers
for our new boats. Also, while we have balanced production volumes for our boats to meet demand, our competitors could choose to reduce
the price of their products, which could have the effect of reducing demand for our new boats. Reduced demand for new boats could lead
to reduced sales by us, which could adversely affect our business, results of operations, and financial condition.
Risks Relating to this Offering and Ownership of
our Common Stock
Terms of subsequent financings may adversely
impact your investment.
We may have to engage in common equity, debt, or preferred
stock financing in the future. Stockholders’ rights and the value of any investment in our securities could be reduced. Interest
on debt securities could increase costs and negatively impacts operating results. Preferred stock could be issued in series from time
to time with such designation, rights, preferences, and limitations as needed to raise capital. The terms of preferred stock could be
more advantageous to those investors than to the holders of common shares. In addition, if we need to raise more equity capital from the
sale of common shares, institutional or other investors may negotiate terms at least as, and possibly more, favorable than the terms of
your investment. Common shares which we sell could be sold into any market which develops, which could adversely affect the market price
and could result in dilution to existing shareholders.
Future sales and issuances
of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans and outstanding warrants, could
result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant
additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization
efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell
common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from
time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent
sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences
and privileges senior to the holders of our common stock. Pursuant to the Forza X1, Inc. 2022 Stock Incentive Plan (the “2022 Plan”)
our management is authorized to grant equity awards to our employees, officers, directors and consultants.
Initially, the aggregate
number of shares of our common stock that might be issued pursuant to stock awards under our 2022 Plan was 1,500,000 shares, which has
been since increased to 1,970,250 pursuant to the evergreen provision in the 2022 Plan, and of which remain available for grant as of
the date hereof. Increases in the number of shares available for future grant or purchase may result in additional dilution, which could
cause our stock price to decline.
As of June 6, 2023, we had outstanding (i) warrants to purchase 172,500
shares of common stock outstanding at an exercise price of $6.25, and (ii) options to purchase 1,404,556 shares of common stock at a weighted
average exercise price of $3.46 per share. The issuance of the shares of common stock underlying the options and warrants will have a
dilutive effect on the percentage ownership held by holders of our common stock.
The issuance of the shares
of common stock underlying the options and warrants will have a dilutive effect on the percentage ownership held by holders of our common
stock.
If securities analysts do not publish research
or reports about our company, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price
of our common stock could decline.
The trading market for our common stock will depend
in part on the research and reports that third-party securities analysts publish about our company and our industry. We may be unable
or slow to attract research coverage and if one or more analysts cease coverage of our company, we could lose visibility in the market.
In addition, one or more of these analysts could downgrade our common stock or issue other negative commentary about our company or our
industry. As a result of one or more of these factors, the trading price of our common stock could decline.
The obligations associated with being a public
company will require significant resources and management attention, which may divert from our business operations.
As a result of the IPO, we are subject to the reporting
requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly, and current reports
with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain
effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting, and other
expenses that we did not previously incur.
Our failure to meet
the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock.
Our shares of common stock
are listed for trading on The Nasdaq Capital Market under the symbol “FRZA.” If we fail to satisfy the continued listing requirements
of The Nasdaq Capital Market such as the corporate governance requirements, the stockholder’s equity requirement or the minimum
closing bid price requirement, The Nasdaq Capital Market may take steps to de-list our common stock or warrants. Such a de-listing or
even notification of failure to comply with such requirements would likely have a negative effect on the price of our common stock and
warrants would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a de-listing, we would
take actions to restore our compliance with The Nasdaq Capital Market’s listing requirements, but we can provide no assurance that
any such action taken by us would allow our common stock become listed again, stabilize the market price or improve the liquidity of our
common stock, prevent our common stock from dropping below The Nasdaq Capital Market, minimum bid price requirement or prevent future
non-compliance with The Nasdaq Capital Market’s listing requirements.
The National Securities Markets
Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which
are referred to as “covered securities.” Because our common stock is listed on The Nasdaq Capital Market, our common stock
is covered securities. Although the states are preempted from regulating the sale of covered securities, the federal statute does allow
the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states
can regulate or bar the sale of covered securities in a particular case. Further, if we were to be delisted from The Nasdaq Capital Market,
our common stock would cease to be recognized as covered securities and we would be subject to regulation in each state in which we offer
our securities.
For as long as we are an emerging growth company,
we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure
about our executive compensation, that apply to other public companies.
We are an “emerging growth company,” as
defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,”
including, but not limited to, (i) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley
Act, (ii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (iii) exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and of stockholder approval of any golden parachute
payments not previously approved. We have elected to adopt these reduced disclosure requirements. We cannot predict if investors will
find our common stock less attractive as a result of our taking advantage of these exemptions and as a result, there may be a less active
trading market for our common stock and our stock price may be more volatile.
We could remain an “emerging growth company”
for up to five years or until the earliest of (a) the last day of the first fiscal year in which our annual gross revenues exceed $1.235
billion, (b) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would
occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most
recently completed fiscal quarter, and (c) the date on which we have issued more than $1 billion in non-convertible debt securities during
the preceding three-year period.
We are also a “smaller reporting company”
as defined in the Exchange Act and have elected to take advantage of certain of the scaled disclosures available to smaller reporting
companies. To the extent that we continue to qualify as a “smaller reporting company” as such term is defined in Rule 12b-2
under the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an “emerging
growth company” may continue to be available to us as a “smaller reporting company,” including exemption from compliance
with the auditor attestation requirements pursuant to SOX and reduced disclosure about our executive compensation arrangements. We
will continue to be a “smaller reporting company” until we have $250 million or more in public float (based on our common
stock) measured as of the last business day of our most recently completed second fiscal quarter or, in the event we have no public float
(based on our common stock) or a public float (based on our common stock) that is less than $700 million, annual revenues of $100 million
or more during the most recently completed fiscal year.
Our common stock price has been and may continue
to be volatile or may decline regardless of our operating performance and you may not be able to resell your shares at or above the price
paid for your stock.
The trading price of our common stock has been and
is expected to continue to be volatile and has been and may continue to be subject to wide fluctuations in response to various factors,
some of which are beyond our control, including limited trading volume. On August 12, 2022, the reported closing price of our common stock
was $7.49, while on June 6, 2023 the closing price of our common stock was $2.87. We may incur rapid and substantial decreases in our
stock price in the foreseeable future that are unrelated to our operating performance for prospects.
Volatility in the market price of our common stock
may prevent stockholders from being able to sell their shares at or above the price they paid for them. Many factors, which are outside
our control, may cause the market price of our common stock to fluctuate significantly, including those described elsewhere in this “Risk
Factors” section and this Registration Statement, as well as the following:
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Our operating and financial performance and prospects; |
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Our quarterly or annual earnings or those of other companies in our industry compared to market expectations; |
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Conditions that impact demand for our products; |
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Future announcements concerning our business or our competitors’ businesses; |
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The public’s reaction to our press releases, other public announcements, and filings with the SEC; |
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The size of our public float; |
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Coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; |
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Market and industry perception of our success, or lack thereof, in pursuing our growth strategy; |
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Strategic actions by us or our competitors, such as acquisitions or restructurings; |
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Changes in laws or regulations that adversely affect our industry or us; |
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Changes in accounting standards, policies, guidance, interpretations, or principles; |
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Changes in senior management or key personnel; |
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Issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; |
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Changes in our dividend policy; |
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Adverse resolution of new or pending litigation against us; and |
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Changes in general market, economic, and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, and responses to such events. |
As a result, volatility in the market price of our
common stock may prevent investors from being able to sell their common stock at or above the price paid for such shares or at all. These
broad market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance.
In addition, price volatility may be greater if the public float and trading volume of our common stock is low. As a result, shareholders
may suffer a loss on their investment.
Additionally, recently, securities of certain companies
have experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short
squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per
share of those companies to trade at significantly inflated rates that is disconnected from the underlying value of the company. Many
investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original
investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our
shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and shareholders may lose
a significant portion or all of their investment if they purchase our shares at a rate that is significantly disconnected from our underlying
value.
Our common stock has
often been thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money
or otherwise desire to liquidate your shares.
To date, there have been
many days on which limited trading of our common stock took place. We cannot predict the extent to which investors’ interests will
lead to an active trading market for our common stock or whether the market price of our common stock will be volatile. If an active trading
market does not develop, investors may have difficulty selling any of our common stock that they buy. We are likely to be too small to
attract the interest of many brokerage firms and analysts. We cannot give you any assurance that an active public trading market for our
common stock will develop or be sustained. The market price of our common stock could be subject to wide fluctuations in response to quarterly
variations in our revenues and operating expenses, announcements of new products or services by us, significant sales of our common stock,
including “short” sales, the operating and stock price performance of other companies that investors may deem comparable to
us, and news reports relating to trends in our markets or general economic conditions.
We do not intend to pay dividends on our common
stock for the foreseeable future.
We presently have no intention to pay dividends on
our common stock at any time in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion
of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual
restrictions, and other factors that our board of directors may deem relevant. Furthermore, our ability to declare and pay dividends may
be limited by instruments governing future outstanding indebtedness we may incur.
FINRA sales practice requirements may limit
your ability to buy and sell our common shares, which could depress the price of our shares.
FINRA rules require broker-dealers to have reasonable
grounds for believing that an investment is suitable for a customer before recommending that investment to the customer. Prior to recommending
speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status and investment objectives, among other things. Under interpretations of these
rules, FINRA believes that there is a high probability such speculative low-priced securities will not be suitable for at least some customers.
Thus, FINRA requirements may make it more difficult for broker-dealers to recommend that their customers buy our common shares, which
may limit your ability to buy and sell our shares, have an adverse effect on the market for our shares and, thereby, depress their market
prices.
Volatility in our common shares price may subject
us to securities litigation.
The market for our common shares may have, when compared
to seasoned issuers, significant price volatility, and we expect that our share price may continue to be more volatile than that of a
seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company
following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert management’s attention and resources.
Provisions in our corporate charter documents
and under Delaware law could make an acquisition of our company, which may be beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove our current management.
Provisions in our corporate charter and our bylaws
may discourage, delay or prevent a merger, acquisition or other change in control of our company that stockholders may consider favorable,
including transactions in which you might otherwise receive a premium for your shares. These provisions could also limit the price that
investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock.
In addition, because our board of directors is responsible for appointing the members of our management team, these provisions may frustrate
or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to
replace members of our board of directors. Among other things, these provisions:
| |
● |
our board of directors is divided into three classes, one class of which is elected each year by our stockholders with the directors in each class to serve for a three-year term; |
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● |
the authorized number of directors can be changed only by resolution of our board of directors; |
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● |
directors may be removed only by the affirmative vote of the holders of at least sixty percent (60%) of our voting stock, whether for cause or without cause; |
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● |
our bylaws may be amended or repealed by our board of directors or by the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of our stockholders; |
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● |
stockholders may not call special meetings of the stockholders or fill vacancies on the board of directors; |
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● |
our board of directors will be authorized to issue, without stockholder approval, preferred stock, the rights of which will be determined at the discretion of the board of directors and that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that our board of directors does not approve; |
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● |
our stockholders do not have cumulative voting rights, and therefore our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors; and |
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● |
our stockholders must comply with advance notice provisions to bring business before or nominate directors for election at a stockholder meeting. |
Moreover, because we are incorporated in Delaware,
we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess
of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction
in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed
manner.
Our amended and restated certificate of incorporation
provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain types of state actions that may be
initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with
us or our directors, officers, or employees.
Our amended and restated certificate of incorporation
provides that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive
forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any of our directors, officers, or other employees to us or our stockholders, (iii) any action arising pursuant to any provision
of the DGCL or our amended and restated certificate of incorporation or bylaws (as either may be amended from time to time), or (iv) any
action asserting a claim governed by the internal affairs doctrine. The exclusive forum provision does not apply to suits brought to enforce
any liability or duty created by the Securities Act or the Exchange Act or any other claim for which the federal courts have exclusive
jurisdiction. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive
federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations
thereunder. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits
brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
These exclusive-forum provisions may limit a stockholder’s
ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, employees, control persons,
underwriters, or agents, which may discourage lawsuits against us and our directors, employees, control persons, underwriters, or agents.
Additionally, a court could determine that the exclusive forum provision is unenforceable, and our stockholders will not be deemed to
have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find these provisions
of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur
additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition,
or results of operations.
We presently intend to retain our earnings, if any,
to finance the development and growth of our business and operations and do not anticipate declaring or paying cash dividends on our common
stock in the foreseeable future.
Any future determination as to the declaration and
payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including
our operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our
board of directors may deem relevant. See “Risk Factors — Risks Relating to Ownership of Our Common Stock — We do not
intend to pay dividends on our common stock for the foreseeable future”.
Our common stock price may be volatile or may
decline regardless of our operating performance and you may not be able to resell your shares at or above the public offering price.
Our common stock is listed on the Nasdaq Capital Market;
however, it is possible that an active trading market will not develop or continue or, if developed, that any market will be sustained,
which could make it difficult for you to sell your shares of our common stock at an attractive price or at all. The public offering price
of our common stock will be determined by negotiations between us and the representative of the underwriters based upon a number of factors
and may not be indicative of prices that will prevail in the open market following the consummation of this offering. Consequently, you
may not be able to sell our shares of common stock at prices equal to or greater than the price you paid in this offering.
Volatility in the market price of our common stock
may prevent you from being able to sell your shares at or above the price you paid for them. Many factors, which are outside our control,
may cause the market price of our common stock to fluctuate significantly, including those described elsewhere in this “Risk Factors”
section and this prospectus, as well as the following:
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● |
Our operating and financial performance and prospects; |
| |
|
|
| |
● |
Our quarterly or annual earnings or those of other companies in our industry compared to market expectations; |
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|
|
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Conditions that impact demand for our products; |
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|
|
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● |
Future announcements concerning our business or our competitors’ businesses; |
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|
|
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The public’s reaction to our press releases, other public announcements, and filings with the SEC; |
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|
|
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● |
The size of our public float; |
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|
|
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● |
Coverage by or changes in financial estimates by securities analysts or failure to meet their expectations; |
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|
|
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Market and industry perception of our success, or lack thereof, in pursuing our growth strategy; |
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|
|
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Strategic actions by us or our competitors, such as acquisitions or restructurings; |
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|
|
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● |
Changes in laws or regulations that adversely affect our industry or us; |
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|
|
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Changes in accounting standards, policies, guidance, interpretations, or principles; |
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|
|
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Changes in senior management or key personnel; |
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|
|
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● |
Issuances, exchanges or sales, or expected issuances, exchanges or sales of our capital stock; |
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|
|
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● |
Changes in our dividend policy; |
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|
|
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● |
Adverse resolution of new or pending litigation against us; and |
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|
|
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● |
Changes in general market, economic, and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, terrorist attacks, acts of war, and responses to such events. |
As a result, volatility in the market price of our
common stock may prevent investors from being able to sell their common stock at or above the public offering price or at all. These broad
market and industry factors may materially reduce the market price of our common stock, regardless of our operating performance. In addition,
price volatility may be greater if the public float and trading volume of our common stock is low. As a result, you may suffer a loss
on your investment.
Additionally, recently, securities of certain companies
have experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short
squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per
share of those companies to trade at significantly inflated rates that is disconnected from the underlying value of the company. Many
investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original
investment as the price per share has declined steadily as interest in those stocks have abated. While we have no reason to believe our
shares would be the target of a short squeeze, there can be no assurance that we won’t be in the future, and you may lose a significant
portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.
You will suffer immediate and substantial dilution
in the net tangible book value of the common stock you purchase.
The price you pay for shares of our common stock sold in this offering is substantially
higher than our as adjusted net tangible book value per share. Based on the assumed public offering price for our common stock of $2.92
per share, you will incur immediate dilution in net tangible book value per share of $1.42. Dilution is the difference between the offering
price per share and the as adjusted net tangible book value per share of our common stock immediately after the offering. As a result
of this dilution, investors purchasing stock in this offering may receive significantly less than the full purchase price that they paid
for the stock purchased in this offering in the event of liquidation. See “Dilution.”
We have broad discretion in the use of the net
proceeds from this offering and may not use them effectively.
Our management has broad discretion in the application
of the net proceeds from that offering, and you do not have the opportunity to assess whether the net proceeds are being used appropriately.
Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use
may vary substantially from their currently intended use. The failure by our management to apply those funds effectively could harm our
business.
USE OF PROCEEDS
We estimate that the net proceeds from our issuance
and sale of shares of our common stock in this offering will be approximately $8.8 million, assuming a public offering price of $2.92
per share, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters
exercise their option to purchase additional shares in full to cover overallotments, if any, we estimate that our net proceeds will be
approximately $10.2 million.
A $1.00 increase (decrease) in the assumed public
offering price of $2.92 per share would increase (decrease) the aggregate net proceeds to us from this offering by approximately $3.1
million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting
underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 250,000 shares
in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $0.7 million,
assuming that the assumed public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us.
The principal purposes of this offering are to obtain additional capital to
acquire property and develop a manufacturing plant, support our operations, establish a public market for our common stock and facilitate
our future access to the public capital markets. We currently anticipate that we will use the net proceeds from this offering, together
with our existing resources for the later phases of construction of the property that we acquired for the development of our manufacturing
facility, for working capital and general corporate purposes.
As a wholly owned subsidiary of Twin Vee, prior to
our IPO, our sole source of funding had been from Twin Vee. Twin Vee has financed our working capital needs, primarily prototyping, consulting
services, rent, interest and payroll through an initial $2,000,000 equity investment and a subsequent $500,000 investment. In addition,
at our inception on October 15, 2021, we and Twin Vee did not have separate bank accounts or vendors established. Until that occurred,
Twin Vee paid for Forza-related expenses in the amount of approximately $600,000. As a stand-alone, publicly traded entity, we do not
intend to receive or rely on further funding from Twin Vee. Nonetheless, due to the lack of our own manufacturing facility and production
employees dedicated for Forza, we intend to continue to design and build our electric boats out of Twin Vee’s manufacturing facility,
for which we will pay rent, until the second facility is fully operational, unless we are able to find a suitable space to rent until
our facility is complete. We have also leased factory space that we have upfitted for use as an motor and wire harness fabrication and
test facility, we started motor production and wire fabrication in March of 2023.
We believe opportunities may exist from time to time
to expand our current business through acquisitions of, or investments in, complementary businesses, products or technologies. While we
currently have no agreements or commitments to complete any such transaction at this time, we may use a portion of the net proceeds for
these purposes.
The expected use of net proceeds from this offering
represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business
conditions evolve. The amounts and timing of our actual expenditures may vary significantly depending on numerous factors, including the
progress of our development and any unforeseen cash needs. As a result, our management will retain broad discretion over the allocation
of the net proceeds. We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the closing
of this offering.
Based on our current operational plans and assumptions,
we expect that the net proceeds from this offering together with our existing cash and grant funding balances will be sufficient to fund
our operating expenses and capital expenditure requirements for at least 12 months from the closing of this offering. We have based this
estimate on assumptions that may prove to be incorrect, and we could use our available capital resources sooner that we currently expect.
Pending use of the proceeds as described above, we intend to invest the proceeds in a variety of capital preservation investments, including
interest-bearing, investment-grade instruments and U.S. government securities.
DIVIDEND POLICY
We presently intend to retain our earnings, if any,
to finance the development and growth of our business and operations and do not anticipate declaring or paying cash dividends on our common
stock in the foreseeable future.
Any future determination as to the declaration and
payment of dividends, if any, will be at the discretion of our board of directors and will depend on then-existing conditions, including
our operating results, financial condition, contractual restrictions, capital requirements, business prospects, and other factors our
board of directors may deem relevant. See “Risk Factors — Risks Relating to This Offering and Ownership of Our Common Stock
— We do not intend to pay dividends on our common stock for the foreseeable future” and “Description of Certain Indebtedness.”
CAPITALIZATION
The following table sets forth our cash and capitalization
as of March 31, 2023, as follows:
| |
● |
on an actual basis; and |
| |
|
|
| |
● |
on an as adjusted basis to reflect the pro forma adjustments set forth above and the further effect to our issuance and sale of shares of our common stock in this offering at an assumed public offering price of $2.92 per share, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable. |
| |
|
As of |
| |
|
March 31, 2023 |
| |
|
|
|
|
| |
|
Actual |
|
As Adjusted(1) |
| |
|
|
|
(unaudited) |
| Cash and cash equivalents |
|
$ |
10,683,000 |
|
|
$ |
19,483,000 |
|
| Total liabilities |
|
|
355,798 |
|
|
|
355,798 |
|
| Stockholder’s equity: |
|
|
12,036,234 |
|
|
|
21,138,274 |
|
| |
|
|
|
|
|
|
|
|
| Common stock, par value $0.001 per share; 100,000,000 shares authorized; 10,450,000 shares issued and outstanding, actual; 100,000,000 shares authorized; 13,875,000 shares issued and outstanding, as adjusted |
|
|
10,450 |
|
|
|
13,875 |
|
| Additional paid-in capital |
|
|
18,118,548 |
|
|
|
26,915,123 |
|
| Accumulated deficit |
|
|
(6,092,764 |
) |
|
|
(6,092,764 |
) |
| Total stockholders’ equity |
|
|
12,036,234 |
|
|
|
20,836,234 |
|
| Total liabilities and stockholders’ equity |
|
$ |
12,392,032 |
|
|
$ |
21,192,032 |
|
| |
(1) |
The as adjusted balance sheet data in the table above reflects the adjustments and the sale and issuance by us of shares of our common stock in this offering, based upon the assumed public offering price of $2.92 per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. |
Each $1.00 increase (decrease) in the assumed public
offering price of $2.92 per share, would increase (decrease) our as adjusted cash, additional paid-in capital, total stockholders’
equity (deficit) and total capitalization by approximately $3.1 million, assuming the number of shares offered by us, as set forth on
the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering
expenses payable by us. Each increase (decrease) of 250,000 shares in the number of shares of common stock offered by us would increase
(decrease) our as adjusted cash, additional paid-in capital, total stockholders’ equity (deficit) and total capitalization by approximately
$0.7 million, assuming the public offering price of $2.92 per share, remains the same, and after deducting underwriting discounts
and commissions and estimated offering expenses payable by us. The as adjusted information discussed above is illustrative only and will
be adjusted based on the actual public offering price and other terms of this offering determined at pricing.
The number of shares of common stock that will be
outstanding after this offering is based on 10,450,000 shares of common stock outstanding as of March 31, 2023 as adjusted to reflect
the shares issued in our initial public offering, and excludes the following:
| |
● |
1,404,556 shares of common stock issuable upon the exercise of options
to purchase shares of common stock outstanding, with a weighted-average exercise price of $3.46 per share; |
| |
|
|
| |
● |
172,500 shares of common stock issuable upon the exercise of warrants to
purchase shares of common stock outstanding, with a weighted-average exercise price of $6.25 per share; and |
| |
|
|
| |
● |
568,750 shares of common stock reserved for future issuance under our 2022 Stock Incentive Plan. |
DILUTION
If you invest in our common stock in this offering,
your ownership interest will be diluted immediately to the extent of the difference between the public offering price per share of our
common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering.
Our historical net tangible book value as of March
31, 2023 was $12 million, or $1.15 per share of our common stock. Our historical net tangible book value (deficit) is the amount of our
total tangible assets less our total liabilities. Historical net tangible book value per share represents historical net tangible book
value (deficit) divided by the number of shares of our common stock outstanding as of March 31, 2023.
After giving further effect to our issuance and sale of shares of common stock
in this offering at an assumed public offering price of $2.92 per share, and after deducting underwriting discounts and commissions, estimated
offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2023 would have been approximately $20.8 million,
or approximately $1.50 per share. This represents an immediate increase in as adjusted net tangible book value per share of $0.35 to
our existing stockholders and an immediate dilution in as adjusted net tangible book value per share of approximately $1.42 to new investors
purchasing common stock in this offering. Dilution per share to new investors purchasing common stock in this offering is determined by
subtracting as adjusted net tangible book value per share after this offering from the assumed public offering price per share paid by
new investors.
The following table illustrates this dilution on a
per share basis:
| Assumed public offering price per share |
|
$ |
|
|
|
|
2.92 |
|
| Historical net tangible book value (deficit) per share as of March 31, 2023 |
|
$ |
1.15 |
|
|
|
|
|
| Increase attributable to adjustment |
|
$ |
0.35 |
|
|
|
|
|
| As adjusted net tangible book value |
|
$ |
|
|
|
|
1.50 |
|
| Dilution per share to new investors purchasing shares in this offering |
|
$ |
|
|
|
|
1.42 |
|
Each $1.00 increase (decrease) in the assumed public offering price of $2.92
per share, would increase (decrease) the as adjusted net tangible book value per share after this offering by $ 0.23 per share
and the dilution to new investors purchasing common stock in this offering by $.77 per share, assuming the number of shares offered
by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us. An increase of 250,000 shares in the number of shares offered by us would increase the
as adjusted net tangible book value per share after this offering by $0.02 and the dilution to new investors participating in this
offering by $0.19, assuming no change in the assumed public offering price and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us. A decrease of 250,000 shares in the number of shares offered by us would decrease the as
adjusted net tangible book value per share after this offering by ($0.05) and the dilution to new investors participating in this offering
by $0.16, assuming no change in the assumed public offering price and after deducting underwriting discounts and commissions and estimated
offering expenses payable by us.
If the underwriters exercise their option to purchase additional shares of
common stock in this offering in full at the assumed public offering price of $2.92 per share, and assuming the number of shares offered
by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions
and estimated offering expenses payable by us, the as adjusted net tangible book value per share after this offering would be $1.57 per
share, and the dilution in as adjusted net tangible book value per share to new investors purchasing common stock in this offering would
be $1.35 per share.
The number of shares of common stock that will be
outstanding after this offering is based on 10,450,000 shares of common stock outstanding as of March 31, 2023 as adjusted to reflect
the shares issued in our initial public offering, and excludes the following:
| |
● |
1,404,556 shares of common stock issuable upon the exercise of options to purchase shares of common stock outstanding as of June 6, 2023, with a weighted-average exercise price of $3.46 per share; |
| |
|
|
| |
● |
172,500 shares of common stock issuable upon the exercise of warrants to purchase shares of common stock outstanding as of June 6, 2023, with a weighted-average exercise price of $6.25 per share; and |
| |
|
|
| |
● |
568,750 shares of common stock reserved for future issuance under our 2022 Stock Incentive Plan. |
To the extent that any outstanding options are exercised,
or new options are issued under the equity benefit plans, or we issue additional shares of common stock or convertible securities in the
future, there will be further dilution to investors participating in this offering.
The following table summarizes, on an as adjusted
basis as of March 31, 2023, after giving effect to the aggregate of shares of our common stock upon the closing of this offering, the
total consideration paid or to be paid and the average price per share paid or to be paid by existing stockholders and by new investors
in this offering at an assumed public offering price of $2.92 per share, before deducting estimated underwriting discounts and commissions
and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an
average price per share substantially higher than our existing stockholders paid.
| | |
Shares
Purchased | |
Total
Consideration | |
Weighted
Average Price Per Share |
| | |
Number | |
Percent | |
Amount | |
Percent | |
|
| Existing
stockholders before this offering | |
| 10,450,000 | | |
| 75 | % | |
$ | 18,118,548 | | |
| 64 | % | |
$ | 1.31 | |
| Investors
participating in this offering | |
| 3,425,000 | | |
| 25 | % | |
$ | 10,001,000 | | |
| 36 | % | |
$ | 0.72 | |
| Total | |
| 13,875,000 | | |
| 100 | % | |
$ | 28,119,548 | | |
| 100 | % | |
$ | 2.03 | |
The table above assumes no exercise
of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional
shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to 73% of the total
number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors participating
in the offering would be increased to 27% of the total number of shares outstanding after this offering.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis
of our financial condition and results of operations together with our financial statements and the related notes to those statements
included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements
based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties
and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results
and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several
factors, including those set forth under the section titled “Risk Factors” and elsewhere in this prospectus. You should carefully
read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially
from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”
Overview
Forza X1 Business
We aim to be among the first to develop and manufacture
electric boats targeting the recreational market. Our mission is to inspire the adoption of sustainable recreational boating by producing
stylish electric sport boats. We are focused on the creation and implementation of marine EV technology to control and power our electric
boats utilizing our proprietary outboard electric motor. Our electric boats are being designed as fully integrated electric boats including
the hull, outboard motor, and control system.
We believe that the boating industry will follow in
the footsteps of the electrification of the automotive industry by creating electric boats that meet or exceed the traditional boating
consumer’s expectations of price, value and run times. In other words, electric boats must offer a similar experience when compared
to traditional gas-powered boats in terms of size, capability, and price point.
To date, Forza X1 has built and tested multiple units,
including: three FX-style catamarans, two baycats, one deck boat and three 22-foot center console monohulls. The motor design and lower
units and the control systems are continuously improved in each iteration, which we have tested in a variety of conditions and operating
environments. The batteries and motors are liquid-cooled and unique improvements to the heat exchanges have improved performance. Our
boats include a large electronic Garmin control screen providing well-designed pages showing operating characteristics and important control
parameters with an easy to use interface. The telematics software is available on the Apple app store under the name Forza Connect.
We anticipate revenues from the sale of these fully
integrated electric boats and motors to commence in late 2023 to early 2024. Forza X1 will continue to build prototype motors and boats
for the next six to nine months.
We plan to market and sell our boats in a variety
of ways. One way will be to operate in a fundamentally different manner and structure than traditional marine manufacturers and boat dealers
by adopting a direct-to-consumer sales model. We are building a dedicated web and app-based platform for sales, deliveries, and service
operations to change the traditional boat buying and marine service experience through technological innovation, ease of use, and flexibility.
We intend to employ an integrated, digital-first strategy that is convenient and transparent for our customers and efficient and scalable
to support our growth. Additionally, to support those looking for a more traditional way of purchasing a boat, or to accommodate trade-ins,
financing needs, and training, we will market our boats through a partnership with OneWater, one of the largest dealership networks in
the United States. We believe our approach will enable us to provide the best of both worlds to prospective customers and support our
mission to electrify recreational boating for mass production.
Recently, we have engaged with several high-profile
marine manufacturers and are offering our electrification expertise and hardware packages, acting as a supplier of electric powertrains
and boats. We are in the design phase to provide our solution to a nationally recognized boat manufacturer and are expected to build two
demonstration units for its late summer open house and dealer meeting. We are also in the process of creating a robust Forza website and
a media day to showcase our boats and electric motor has been scheduled for July 8, 2023 in West Palm Beach, Florida.
We are currently designing a state-of-the-art manufacturing
facility to incorporate the latest in closed-molded composite boat building technologies and electric motor assembly processes. We are
designing a 100,000 square foot facility designed for capacity and production of 1,000 units annually that we intend to build over time
in various phases. We plan to first build out an approximately 50,000 square foot facility, which will have an estimated capacity of 550
units annually, at an estimated $8 million cost of construction. We have selected a site in McDowell County, North Carolina to build our
manufacturing facility and the North Carolina Economic investment committee has approved a Job Development Investment Grant providing
for reimbursement to us of up to $1,367,100 over a twelve-year period. The receipt of grant funding is conditioned upon us investing over
$10.5 million in land, buildings and fixtures, infrastructure and machinery and equipment by the end of 2025 and us creating as many as
170 jobs.
We were initially a wholly owned subsidiary of Twin
Vee and completed our initial public offering in 2022.
Results of Operations
Comparison of the Three Months Ended March 31,
2023 and 2022
The following table provides certain selected financial
information for the periods presented:
| |
|
Three
months ended March 31, |
|
|
|
|
| |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Net
sales |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
| Cost
of products sold |
|
$ |
49,941 |
|
|
$ |
11,078 |
|
|
|
38,863 |
|
|
|
351 |
% |
| Gross
loss |
|
$ |
(49,941 |
) |
|
$ |
(11,078 |
) |
|
|
(38,863 |
) |
|
|
351 |
% |
| Operating
expenses |
|
$ |
2,079,810 |
|
|
$ |
502,636 |
|
|
|
1,577,174 |
|
|
|
314 |
% |
| Loss
from operations |
|
$ |
(2,129,751 |
) |
|
$ |
(513,714 |
) |
|
|
(1,616,037 |
) |
|
|
315 |
% |
| Other
income (expense) |
|
$ |
124,619 |
|
|
$ |
(578 |
) |
|
|
125,197 |
|
|
|
(21,660 |
)% |
| Net
loss |
|
$ |
(2,005,132 |
) |
|
$ |
(514,292 |
) |
|
|
(1,490,840 |
) |
|
|
290 |
% |
| Net
loss per common share: Basic and Diluted |
|
$ |
(0.19 |
) |
|
$ |
(0.07 |
) |
|
|
(0.12 |
) |
|
|
161 |
% |
| Weighted
average number of shares of common stock outstanding |
|
|
10,450,000 |
|
|
|
7,000,000 |
|
|
|
3,450,000 |
|
|
|
|
|
Operating Expenses
Operating expenses for the three months ended
March 31, 2022 increased by $1,577,174 to $2,079,810 as compared to $502,636 for the three months ended March 31, 2022. Operating
expenses include salaries, selling and general and administrative, research and development, professional fees and depreciation.
Research and development fees for the three months ended March 31, 2023 were $702,648 compared to $215,670 for the three months
ended March 31, 2022. As we have moved to prototype and testing of our electric motors and control systems on boats, our expense
have increase compared to the same period a year ago when we were in the early stages of development. Salaries and wages for the
three months ended March 31, 2023 were $862,764 compared to $182,286 for the three months ended March 31, 2022, and were related to
the design of our fully electric motor, control system and boat. Our staffing has increased from 6 during the first quarter of 2022
to 15 during the first quarter of 2023. For the three months ended March 31, 2023 salaries and wages included $341,163 of stock
option expense, compared to $0 for the three months ended March 31, 2022. Our expenses for selling, general and administrative for
the months ended March 31, 2023, were $354,662 and $77,865 for the three months ended March 31, 2022. Professional fees for the
three months ended March 31, 2023 were $124,040 and $19,078 for the three months ended March 31, 2022. Now that we are publicly
traded our professional fees have significantly increased to meet the requirements or the SEC. During the three months ended March
31, 2022, we did not incur the related expense, as such our professional fees were only $19,078. Depreciation for the three months
ended March 31, 2023 was $35,696 compared to $7,737 for the three months ended March 31, 2022, this is due to the addition of
assets, we would anticipate continued increases as we purchase equipment and molds.
Other expense and income
Interest expense was $291 and $601, respectively for
the three months ended March 31, 2023 and 2022.
Dividend and Interest income was $124,910 and $23,
respectively for the three months ended March 31, 2023 and 2022. These proceeds from our IPO have been invested resulting in the increase
in dividend income.
Comparison of the Years Ended December
31, 2022 and 2021
The following table provides certain selected financial
information for the periods presented:
| |
|
Successor
Company |
|
Successor
Company |
|
Predecessor
Company |
|
|
|
|
| |
|
Years
Ended December 31, |
|
October
15 - December 31, |
|
January
1 - October 14, |
|
|
|
|
| |
|
2022 |
|
2021 |
|
2021 |
|
Change |
|
%
Change |
| Net
sales |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
| Cost
of products sold |
|
$ |
232,744 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
232,744 |
|
|
|
— |
|
| Gross
loss |
|
$ |
(232,744 |
) |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(232,744 |
) |
|
|
— |
|
| Operating
expenses |
|
$ |
3,420,515 |
|
|
$ |
263,349 |
|
|
$ |
118,179 |
|
|
$ |
3,038,987 |
|
|
|
796 |
% |
| Loss
from operations |
|
$ |
(3,653,259 |
) |
|
$ |
(263,349 |
) |
|
$ |
(118,179 |
) |
|
$ |
(3,271,731 |
) |
|
|
858 |
% |
| Other
income (expense) |
|
$ |
23,178 |
|
|
$ |
(7,281 |
) |
|
$ |
(68,742 |
) |
|
$ |
99,201 |
|
|
|
(131 |
)% |
| Net
loss |
|
$ |
(3,630,081 |
) |
|
$ |
(270,630 |
) |
|
$ |
(186,921 |
) |
|
$ |
(3,172,530 |
) |
|
|
693 |
% |
| Net
loss per common share: Basic and Diluted |
|
$ |
(0.44 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
|
(0.37 |
) |
|
|
17 |
% |
| Weighted
average number of shares of common stock outstanding |
|
|
8,332,735 |
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
|
|
|
|
|
|
|
|
Operating Expenses
Operating expenses for the year ended December 31,
2022 increased by $3,038,987 to $3,420,515 (Successor) as compared to $263,349 and $118,179, respectively, for the period October 15,
2021 through December 31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor). Operating expenses include salaries,
selling and general and administrative, research and development, professional fees and depreciation. All of our operating expense increase
significantly over the prior period, as we were able to get funded through our IPO which allowed us to fully engage in our research and
development. Research and development fees for the year ended December 31, 2022 were $957,220 compared to $150,020 and $61,091, respectively,
for the period October 15, 2021 through December 31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor). Salaries
and wages for the year ended December 31, 2022 were $1,770,126 as compared to $41,189 and $0, respectively, for the period October 15,
2021 through December 31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor), and most of which was paid to
the designers of our fully electric motor, control system and boat. For the year ended December 31, 2022 salaries and wages included $458,346
of stock option expense, compared to $0 and $0, respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and
January 1, 2021 through October 14, 2021 (Predecessor). Our expenses for selling, general and administrative for the year ended December
31, 2022, were $473,900 compared to $28,806 and $56,955, respectively, for the period October 15, 2021 through December 31, 2021 (Successor),
and January 1, 2021 through October 14, 2021 (Predecessor), Professional fees for the year ended December 31, 2022 were $159,304 compared
to $40,259 and $0, respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and January 1, 2021 through October
14, 2021 (Predecessor). Depreciation for the year ended December 31, 2022 was $59,965 compared to $3,075 and $133, respectively, for the
period October 15, 2021 through December 31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor), this is due
to the addition of assets throughout 2022, we would anticipate continued increases as we purchase equipment and molds. We have incurred
and expect to continue to incur significant costs in pursuit of our financing and construction of our new manufacturing facility.
Other expense and income
Interest expense for the year ended December 31, 2022
was $3,286 compared to $7,281 and $8,490 respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and January
1, 2021 through October 14, 2021 (Predecessor).
Interest income for the year ended December 31, 2022
was $14,752 compared to $0 and $0 respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and January 1,
2021 through October 14, 2021 (Predecessor).
Dividend income for the year ended December 31, 2022
was $43,294 compared to $0 and $0 respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and January 1,
2021 through October 14, 2021 (Predecessor).
For the year ended December 31, 2022, we recorded
a loss on the sales of assets of $31,582, this was the result of expense paid to secure land in Fort Pierce, Florida to build a new manufacturing
facility. It was determined that the costs associated with building on that lot were prohibitive, we cancelled the contract resulting
in the loss of $31,582.
Liquidity and Capital Resources
The following table provide selected financial data as of March 31, 2023
and December 31, 2022:
| |
|
March
31, |
|
December
31, |
|
|
|
|
| |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Cash
and cash equivalents |
|
$ |
10,683,000 |
|
|
$ |
12,767,199 |
|
|
|
(2,084,199 |
) |
|
|
(16.3 |
)% |
| Current
assets |
|
$ |
11,222,183 |
|
|
$ |
13,286,934 |
|
|
|
(2,064,751 |
) |
|
|
(15.5 |
)% |
| Current
liabilities |
|
$ |
237,143 |
|
|
$ |
453,191 |
|
|
|
(216,048 |
) |
|
|
(47.7 |
)% |
| Working
capital |
|
$ |
10,985,040 |
|
|
$ |
12,833,743 |
|
|
|
(1,848,703 |
) |
|
|
(14.4 |
)% |
As of March 31, 2023, we had cash and cash equivalents,
and working capital of $10,683,000 and $10,985,040, respectively, compared to $12,767,199 and $12,833,743, respectively, on December 31,
2022. We have incurred and expect to continue to incur significant costs in pursuit of our financing and construction of our new manufacturing
facility. Our management plans to use the proceeds from the IPO to finance these expenses. We believe that our current capital resources
will be sufficient to fund our operations and growth initiative for at least 18 months following the date of the filing of our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2023. The Company expects to continue to incur net losses, and we anticipate that
our quarterly loss rate will increase, as we move into building and testing additional prototypes, we will have significant cash outflows
for at least the next 12 months.
| |
|
Three
Months Ended |
|
|
|
|
| |
|
March
31, |
|
|
|
|
| |
|
2023 |
|
2022 |
|
Change |
|
%
Change |
| Cash
used in operating activities |
|
$ |
(1,582,582 |
) |
|
$ |
(425,537 |
) |
|
|
(1,157,045 |
) |
|
|
272 |
% |
| Cash
used in investing activities |
|
$ |
(199,559 |
) |
|
$ |
(39,870 |
) |
|
|
(159,689 |
) |
|
|
401 |
% |
| Cash
used in financing activities |
|
$ |
(302,058 |
) |
|
$ |
(698,800 |
) |
|
|
396,742 |
|
|
|
-57 |
% |
| Net
Change in Cash |
|
$ |
(2,084,199 |
) |
|
$ |
(1,164,207 |
) |
|
|
(919,992 |
) |
|
|
79 |
% |
The following table provide selected financial data as of December 31,
2022 and December 31, 2021:
| |
|
December
31, |
|
December
31, |
|
|
|
|
| |
|
2022 |
|
2021 |
|
Change |
|
%
Change |
| Cash
and cash equivalents |
|
$ |
12,767,199 |
|
|
$ |
1,803,285 |
|
|
$ |
10,963,914 |
|
|
|
608.0 |
% |
| Current
assets |
|
$ |
13,286,934 |
|
|
$ |
1,891,762 |
|
|
$ |
11,395,172 |
|
|
|
602.4 |
% |
| Current
liabilities |
|
$ |
453,191 |
|
|
$ |
690,378 |
|
|
$ |
(237,187 |
) |
|
|
(34.4 |
)% |
| Working
capital |
|
$ |
12,833,743 |
|
|
$ |
1,201,384 |
|
|
$ |
11,632,359 |
|
|
|
968.2 |
% |
Cash Flow from Operating Activities
During the three months ending March 31, 2023 and
2022, we generated negative cash flows from operating activities of $1,582,582 and $425,537, respectively. During the three months ending
March 31, 2023 and 2022, we had a net loss of $2,005,132, and $514,292, respectively. During the three months ending March 31, 2023 our
cash used in operating activities was impacted by an increase of inventories of $42,829 and decrease of $49,473 for accounts payable,
$15,598 of accrued liabilities and $21,072 of operating lease liabilities. During the three months ending March 31, 2023 our cash provided
by operating activities was impacted by a decrease of prepaid expenses of $152,752 and an increase of $500 in contract liabilities –
customer deposits and by non-cash expenses of $398,270, of which $341,163 was due to stock based compensation, $35,696 of depreciation
and $21,411 for the change of right-of use asset.
During the year ended
December 31, 2022 we generated negative cash flows from operating activities of $3,377,621 compared to $317,131 for the period October
15, 2021 through December 31, 2021 (Successor). During the period January 1, 2021 through October 14, 2021 (Predecessor) we generated
cash flows from operating activities of $13,024. During the year ended December 31, 2022, we had a net loss of $3,630,081 compared to
$270,630 and $186,921 respectively, for the period October 15, 2021 through December 31, 2021 (Successor), and January 1, 2021 through
October 14, 2021 (Predecessor). During the year ended December 31, 2022 our cash used in operating activities was impacted by an increase
of prepaid expenses of $431,258 and security deposits of $7,517. The increase in prepaid expenses relates to large deposits required to
vendors for production related, long lead time items. During the year ended December 31, 2022 (Successor), our cash used in operating
activities was impacted by an increase of accounts payable of $85,695, contract liabilities of $5,300, accrued liabilities of $57,639,
operating lease liabilities of $154,777 and by non-cash expenses of $387,824 due to depreciation, stock option expense, change of right-of-use
asset and a loss on the disposal of assets.
During the periods October
15, 2021 through December 31, 2021 (Successor) and January 1, 2021 through October 14, 2021 (Predecessor), our cash used in operating
activities was increased by prepaid expense of $88,477 and $0, respectively and decreased by non-cash expenses of $3,075 and $190,385,
respectively, due to depreciation and loss on the disposal of assets, we further had a reduction in working capital of $38,902 and $9,559,
respectively.
Cash Flows from Investing Activities
For the three months ended March 31, 2023 and 2022,
we used $199,559, and $39,870 in investing activities for the purchase of property and equipment, primarily for molds.
For the year ended
December 31, 2022, we used $606,726 in investing activities for the purchase of property and equipment, primarily for the molds for the
new Forza deck and hull. We anticipate increased investing in 2023, as we start construction of our new manufacturing facility in North
Carolina.
For the periods October 15,
2021 through December 31, 2021 (Successor) and January 1, 2021 through October 14, 2021 (Predecessor) we used $66,079 and $362,946 in
investing activities for the purchase of property and equipment
Cash Flows from Financing Activities
During the three months ended March 31, 2023 and 2022,
net cash used in financing activities was $302,058, and $698,800, respectively. During the three months ended March 31, 2023, we had cash
advances from Twin Vee of $110,283, which were offset by repayments of advances of $409,505. Additional cash from financing activities
of $2,836 was due from equipment financing. During the three months ended March 31, 2022 we had cash advances from Twin Vee of $18,151,
which were offset by repayments of advances of $600,557. Additional cash used in financing for the three months ended March 31,2022, was
$116,394 for deferred offering costs.
Prior to our IPO we had financed our operations primarily
from capital provided from Twin Vee in the form of an equity investment and advances. During the year ended December 31, 2022 and for
the periods October 15, 2021 through December 31, 2021 (Successor) and January 1, 2021 through October 14, 2021 (Predecessor), net cash
provided by financing activities was $14,948,261, $2,186,495 and $349,922, respectively. On August 16, 2022, we closed our IPO of
3,450,000 shares of our common stock at a public offering price of $5.00 per share, including 450,000 shares sold upon full exercise of
the underwriter’s option, for net proceeds of $15,231,350. Additional cash from financing activities of $612,740 and $500,000
were provided from Twin Vee as advance and as capital contributions, for the period ended December 31, 2022, Twin Vee additionally contributed
$690,625 in advances and $2,000,000 in capital contributions in the period October 15 – December 31, 2021. The advancements where
offset by repayments to Twin Vee of $1,099,468 for the year ended December 31, 2022, and $398,630 for the period October 15 – December
31, 2021. The advances bear interest at the rate of 6% per annum and during the year ended December 31, 2022 and for the periods October
15, 2021 through December 31, 2021 (Successor) and January 1, 2021 through October 14, 2021 (Predecessor), we incurred $3,286, $7,281
and $8,490 in interest expense, respectively.
Results of Operations and Known Trends or Future Events
The accompanying financial data includes the historical
accounts of Forza X1, Inc. and its predecessor, the carve-out of the electric segment business of Twin Vee. Forza is in the business of
design and development of electric boats. Forza has a December 31st fiscal year-end.
Forza succeeded to substantially all of the business
of the electric segment of Twin Vee and Forza’s own operations before the succession, October 15, 2021, were non-existent. Accordingly,
the carve-out financial statements of the electric segment of Twin Vee are included as Predecessor herein. Management has reached this
conclusion based upon an evaluation of the requirements and the facts and circumstances, including the historical life of the electric
segment, the historical level of operations of the electric segment, and the fact that Forza’s operations, prior to the succession
were non-existent.
To date much of our operational activity has been
related to the design and build of prototype, as such we do not have any sales or cost of goods sold. The design of our new electric boat
shell has been completed and we are now preparing to begin our production process by utilizing the FX molds and by creating additional
electric models, including deck boats and monohulls. The design of the motors and the motor control system is largely complete; however,
the testing and iteration phase may result in significant changes, improvements, and upgrades. To date we have not generated any revenue.
We will not generate any operating revenues until we complete the design and build of our EV boats and commercialize them. As stated above,
however, we have engaged with several high-profile marine manufacturers and are offering our electrification expertise as a service. We
will generate non-operating income in the form of interest income on cash and cash equivalents. We continue to anticipate revenues
from the sale of these fully integrated electric boats and motors to commence in late 2023. Forza X1 will continue to build prototype
motors and boats for the next six to nine months.
CRITICAL ACCOUNTING ESTIMATES
We believe that several accounting policies are important
to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas
generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different
estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.
Our management’s discussion and analysis of
financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP.
The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based
on historical experience and make various assumptions, which management believes to be reasonable under the circumstances, which form
the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
The notes to our financial statements contained herein
contain a summary of our significant accounting policies. We consider the following accounting policies critical to the understanding
of the results of our operations:
Controls and Procedures
As a smaller
reporting company, our internal control over financial reporting was not subject to audit by our independent registered public accounting
firm pursuant to rules of the Securities and Exchange Commission (the “SEC”) that permit us to provide only management’s
report. Only in the event that we are deemed to be a large accelerated filer or an accelerated filer, and no long qualify as an
emerging growth company, would we be required to comply with the independent registered public accounting firm attestation requirement.
Further, for as long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions
from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but
not limited to, not being required to comply with the independent registered public accounting firm attestation requirement.
Property and Equipment
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of property
and equipment range from three to seven years. Upon sale or retirement, the cost and related accumulated depreciation and amortization
are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance
charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the United States (“U.S. GAAP”) required management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Included in
those estimates are assumptions about useful life of fixed assets.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid
investments with original maturities of three months or less at the time of purchase. On March 31, 2023, the Company had cash and cash
equivalents of $10,683,000 on December 31, 2022 and 2021, the Company had cash and cash equivalents of $12,767,199 and $1,803,285, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of property
and equipment range from three to seven years. Upon sale or retirement, the cost and related accumulated depreciation and amortization
are eliminated from their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance
charges, which do not increase the useful lives of the assets, are charged to operations as incurred.
Impairment of Long-lived Assets
Management assesses the recoverability of its long-lived
assets when indicators of impairment are present. If such indicators are present, recoverability of these assets is determined by comparing
the undiscounted net cash flows estimated to result from those assets over the remaining life to the assets’ net carrying amounts.
If the estimated undiscounted net cash flows are less than the net carrying amount, the assets would be adjusted to their fair value,
based on appraisal or the present value of the undiscounted net cash flows.
Research and Development
Research and development costs are expensed when incurred.
Such costs for the three months ended March 31, 2023 were $702,648 compared to $215,670 for the period ending March 31, 2022.Such costs
for the year ended December 31, 2022 were $957,220. Such costs for the periods October 15, 2021 through December 31, 2021 (Successor),
January 1, 2021 through October 14, 2021 (Predecessor) approximated $150,020 and $61,091, respectively.
Advertising Costs
Advertising and marketing costs are expensed as incurred.
Advertising and marketing costs are expensed as incurred. For the three months ended March 31, 2023 and 2022, advertising and marketing
costs incurred by the Company totaled $12,556 and $2,485, respectively. For the year ended December 31 2022, advertising and marketing
costs incurred by the Company totaled $11,177. For the periods October 15, 2021 through December 31, 2021 (Successor), January 1, 2021
through October 14, 2021 (Predecessor), advertising and marketing costs incurred by the Company totaled $7,130 and $0, respectively. Advertising
and marketing costs are included in selling and general and administrative expenses in the accompanying statements of operations.
Income Taxes
The Company is a C Corporation under the Internal
Revenue Code and a similar section of the state code.
All income tax amounts reflect the use of the liability
method under accounting for income taxes. Income taxes are provided for the tax effects of transactions reported in the financial statements
and consist of taxes currently due plus deferred taxes arising primarily from differences between financial and tax reporting purposes.
Deferred income taxes, net of appropriate valuation
allowances, are determined using the tax rates expected to be in effect when the taxes are actually paid. Valuation allowances are recorded
against deferred tax assets when it is more likely than not that such assets will not be realized. When an uncertain tax position meets
the more likely than not recognition threshold, the position is measured to determine the amount of benefit or expense to recognize in
the financial statements.
In accordance with U.S GAAP, the Company follows the
guidance in FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes. At December 31, 2022 and December 31, 2021, the Company does
not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.
The Company’s income tax returns are subject
to review and examination by federal, state and local governmental authorities.
BUSINESS
Overview
About Forza X1
We aim to be among the first to develop and manufacture
electric boats targeting the recreational market. Our mission is to inspire the adoption of sustainable recreational boating by producing
stylish electric sport boats. We are focused on the creation and implementation of marine EV technology to control and power our electric
boats utilizing our proprietary outboard electric motor. Our electric boats are being designed as fully integrated electric boats including
the hull, outboard motor and control system.
We believe that the boating industry will follow in
the footsteps of the electrification of the automotive industry by creating electric boats that meet or exceed the traditional boating
consumer’s expectations of price, value and run times. In other words, electric boats must offer a similar experience when compared
to traditional gas-powered boats in terms of size, capability and price point.
To date, we have built and tested multiple units,
including: three FX-style catamarans, two baycats, one deck boat and three 22-foot center console monohulls. The motor design, lower units
and the control systems are continuously improved in each iteration, which we have tested in a variety of conditions and operating environments.
The batteries and motors are liquid-cooled and unique improvements to the heat exchanges have improved performance. Our boats include
a large electronic Garmin control screen providing well-designed pages showing operating characteristics and important control parameters
with an easy to use interface. The telematics software is available in the Apple app store under the name Forza Connect.
We anticipate revenue
from the sale of these fully integrated electric boats and motors to commence in late 2023 to early 2024. We will continue to build prototype
motors and boats for the next six to nine months.
We plan to market and sell our boats in a variety
of ways. One way will be to operate in a fundamentally different manner and structure than traditional marine manufacturers and boat dealers
by adopting a direct-to-consumer sales model. We are building a dedicated web and app-based platform for sales, deliveries, and service
operations to change the traditional boat buying and marine service experience through technological innovation, ease of use, and flexibility.
We intend to employ an integrated, digital-first strategy that is convenient and transparent for our customers and efficient and scalable
to support our growth. Additionally, to support those looking for a more traditional way of purchasing a boat, or to accommodate trade-ins,
financing needs, and training, we will market our boats through a partnership with OneWater Marine, Inc. (“OneWater”), one
of the largest dealership networks in the United States. We believe our approach will enable us to provide the best of both worlds to
prospective customers and support our mission to electrify recreational boating for mass production.
Recently, we have engaged
with several high-profile marine manufacturers and are offering our electrification expertise and hardware packages, acting as a supplier
of electric powertrains and boats. We are in the design
phase to provide our solution to a nationally recognized boat manufacturer and are expected to build two demonstration units for its late
summer open house and dealer meeting. We are also in the process of creating a robust Forza website ,
for retail customers, and a media day to showcase our boats and electric motor has been scheduled for July 8, 2023 in West Palm Beach,
Florida.
We are currently designing a state-of-the-art manufacturing
facility to incorporate the latest in closed-molded composite boat building technologies and electric motor assembly processes. We are
designing a 100,000 square foot facility designed for capacity and production of 1,000 units annually that we intend to build over time
in various phases. We plan to first build our approximately 50,000 square foot facility, which will have an estimated capacity of 550
units annually at an estimated $8 million cost of construction. We have selected a site in McDowell County, North Carolina to build our
manufacturing facility and the North Carolina Economic investment committee has approved a Job Development Investment Grant providing
for reimbursement to us of up to $1,367,100 over a twelve-year period. The receipt of grant funding is conditioned upon us investing over
$10.5 million in land, buildings and fixtures, infrastructure and machinery and equipment by the end of 2025 and us creating as many as
170 jobs.
We were initially a wholly owned subsidiary of Twin
Vee and completed our initial public offering in 2022.
Initial Forza Models
We have produced and powered three units of our initial
protype model, the FX1 Center Console. In October 2022, the running surface of the boat and all major components were tested successfully
on the Indian River Lagoon in Fort Pierce, Florida. While the motor and control systems have been successfully trialed previously, this
was the first voyage including all major components, production batteries, fully functioning “alpha” motor design, control
system - including a 22” Garmin screen and Osmosis telematics unit. The performance of the boat exceeded all expectations and provided
a great baseline for improvements, iterations, and design enhancements. We ultimately reached over thirty miles per hour.
Following our initial prototype design, we completed
the designs for four more prototypes: two more FX-style catamarans, one deck boat and one 22-foot center console monohull. These prototypes
have been fully built out and on the water testing began in March of 2023. The motor design and lower units and the control system cabling
have been revamped and improved in each iteration. After extensive testing, we now believe that our 22-foot monohull will be the
first electric boat that we commercialize. While monohulls have greater drag than twin hull boats, a 22-foot monohull can operate and
reach peak performance with a single electric motor, where a twin hull boat requires two motors, one motor behind each hull to reach peak
performance. The ability to build and sell a boat with a single motor will reduce the overall cost of manufacturing and ultimately the
price to the customer. We believe the 22-foot monohull electric boat will be ideal for more budget-conscious purchasers who still want
to promote environmental sustainability and enjoy a more serene time on the water. It is important to recognize that monohull boats represent
over 85% of the American consumer boat buying market. Our goal is to initially go to market with our 22-foot monohull and then expand
our model lineup as we scale up our business.
We have built and powered three units of our 22-foot
monohull to date. The 22-foot monohull has been tested on the water from sunrise to sunset on multiple days. The boat was taken to sand
bars along the Treasure Coast, often loaded with eight or more adults onboard. In addition to reaching speeds up to an estimated 40 miles
per hour, the boat operated for over six hours throughout the day and returned to the dock with 25% remaining on its 104-kilowatt hour
twin pack battery. We found that the 22-foot monohull was easy to use, got on plane quickly, and demonstrated significant single-motor
performance.
We have filed 11 US Patents, including 3 design, 6
provisional and two non-provisional patent applications with the U.S. Patent and trademark office relating to outboard propulsion system,
frame and cowling design, closed loop motor cooling and several other areas related to advancements in maneuverability and safety.
Forza’s Marketing Plans
We plan to market and sell our model offerings in
a variety of ways. One way will be to operate in a fundamentally different manner and structure than traditional marine manufacturers
and boat dealers by adopting a direct-to-consumer sales model. We are building a dedicated web and app-based platform for sales, deliveries,
and service operations to change the traditional boat buying and marine service experience through technological innovation, ease of use,
and flexibility. We intend to employ an integrated, digital-first strategy that is convenient and transparent for our customers and efficient
and scalable to support our growth. Additionally, to support those looking for a more traditional way of purchasing a boat, or to accompany
trade-ins, financing needs, and training, we will also market our boats through a partnership with OneWater Marine, Inc. (“OneWater”),
one of the largest dealership networks in the United States. We believe our approach will enable us to provide the best of both worlds
to prospective customers and support our mission to electrify recreational boating for mass production.
Forza X1: An All Digital, Direct-to Consumer Platform
We intend to offer our EV products, services and support
through a Web-based and mobile phone app that will be vertically integrated and a direct-to-consumer platform. We intend to create a high-quality
customer experience that spans the entire life of our products through an online system that is being designed to be a comprehensive,
seamless, and efficient customer experience, encompassing everything from buying, financing, delivery, service, and training. This customer-centric
approach to sales and service aims at simplifying access to necessary information for potential buyers and current owners alike. Customers
will be able to communicate directly with us to ensure their questions are answered and their needs are met. We have commenced the design
of the web-based platform but have not yet commenced design of the app. For consumers and states that require a physical location we will
develop dealership partnerships, such as our partnership with OneWater.
Currently, our web and app-based platform is expected
to include the following:
| |
● |
Build and Price Boats. The web and app platform will offer prospective buyers a place to examine photos and videos of our boats, which will all have a single price based on the model type and a few available options. For example, the consumer would have gel coat exterior choices, interior upholstery choices, and other options including charging cords and plugs, boating items such as bumpers, covers, and fun add-ons like apparel, allowing consumers to “personalize” their Forza purchase. |
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● |
Financing. Prospective customers will be able to apply for third-party consumer financing to complete or supplement their purchase through our web and app platform. |
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Delivery. Once manufactured, the boat will be delivered directly to a customer’s home, marina, or wherever they choose. The scheduling, communication, and support necessary for coordinating delivery of our boats would all be accomplished over the website or app. |
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● |
Servicing. We intend to offer highly tailored and differentiated services that enable intuitive experiences throughout the entire customer lifecycle, such as warranty, repair, or other service assistance for their boats. We expect this all-inclusive approach will provide higher customer satisfaction, create strong brand loyalty, and increase operational efficiency while simultaneously allowing us to capture a more significant share of the entire lifecycle value of every Forza boat produced. We anticipate having internal staff with the capability to provide an OTA update to resolve the issue remotely without the boat ever leaving the customer’s sight. As part of our customer satisfaction drive, we plan for our staff to make mobile service calls to the boat docks. We also intend to enter into partnering arrangements with third parties to address service needs that require more than a mobile service visit, and we plan to arrange for the boat to be picked up and brought to one of our partnered service centers. If a service center is not available in a customer’s area, for approved warranty repairs we will permit the owners to take their boat to their local service center who will then invoice us. |
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● |
Customer Service and Feedback. We will utilize customer insights and feedback submitted via our web and app-based platform to improve our offerings by adding new capabilities and functionality. Expanded offerings based on consumer-driven feedback and data is expected to attract more customers, deepen existing customer relationships, and allow us to innovate more quickly. |
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Training. We intend to provide a series of videos that demonstrate our boats’ safe operation and upkeep. These videos would be accessible on our web and app platform and the boat’s onboard computer for quick access. |
With respect to the foregoing, we have not yet entered
into any arrangements with third parties to provide financing services through our web and app platform, or hired staff for our intended
support and service department. We are still in the initial stages of establishing distribution and service plans. We expect to commence
selling to end-user customers by the end of 2023. We are currently in the process of identifying the states we will be allowed to sell
direct-to-consumer.
To the extent that certain
customers are located where OneWater dealerships and service centers are not available and, thus, are outside of our exclusive agreement
with OneWater, we are in the process of identifying potential marine service centers and technicians to ensure that we have a comprehensive
service support system in place when our boats are sold. We will also work to establish our 500-mile radius mobile service of vans and
trucks so that local customers will have the option of a service technician coming to their location. For customers outside of the 500-mile
radius, we intend to work with such customers to engage third-party service technicians to the extent possible.
Forza X1 Purpose
According to the Environmental Energy Student Institute,
a non-profit organization originally formed by a bipartisan group of members of Congress, fossil fuels, including coal, oil, and natural
gas, have been powering economies for over 150 years and currently supply about 80 percent of the world’s energy. When fossil fuels
are burned, the stored carbon and other greenhouse gases are released into the atmosphere. The excess buildup of greenhouse gases in the
atmosphere has caused dramatic changes to Earth’s climate—a trend that will worsen as more fossil fuels are burned. Further
climate changes may cause rises in sea level, extreme weather, biodiversity loss, and species extinction, as well as food scarcity, worsening
health, and poverty for millions of people worldwide.
The world’s waterways are also in danger from
pollutants caused by gas-powered motors. In the landmark environmental study and book, “Polluting for Pleasure”, author Andre
Mele stated that recreational boats, particularly outboards, were polluting as much as all the cars and trucks in America. At the time,
Mele discovered that pleasure boats have polluted 80 times more than automobile engines and put more oil into American waters than 15
Exxon Valdez oil spills, annually. The popularity of recreational boating has grown since then.
While headway is being made by the automotive industry
introducing more viable EV options to replace traditional automobiles, it is also vital that we look to preserve our waterways while reducing
carbon emissions. Large gas-powered engines often leak fuel and produce carbon emissions, both of which are harmful to fragile marine
ecosystems. We are a company comprised of people who are passionate to move the preservation and carbon free marine lifestyle forward.
According to the Bloomberg NEF’s 2021 Electric Vehicle Outlook, passenger automotive EV sales are set to increase from 3.1 million
units in 2020 to 14 million units in 2025.
Our core market corresponds most directly to those
who identify with environmentally friendly vehicles. Electric boats promote environmental sustainability and allow for a much more serene
and enjoyable time on the water. The adoption of electric vehicles has increased considerably over the years as they are more environmentally
friendly. As per the report by Bloomberg NEF, there are currently 12 million passenger EVs on the road, and the prevalence of electric-powered
boats is likely to follow suit. While electric boats only represented about 2% of the market in 2020, a report by IDTechEx shows that
the market for hybrid and pure electric boats is expected to rise rapidly to greater than $20 billion worldwide by 2027.
We plan to disrupt recreational marine customs that
rely on outdated processes and noxious engines by designing, engineering and manufacturing inspiring electric boats that operate in a
more sustainable and eco-friendly way.
Forza’s Electric Outboard Motor
We have completed the design and prototype phases
of our proprietary electric outboard motor, and have manufactured six units to date which continue to undergo rigorous testing. These
motors have been used to power and test various electric boats, including our FX1, deck boat and our 22-foot monohull.
Figure 3 — Current specifications of the system
Outboard Design
The outboard system is designed with modular sub systems.
The subsystems connect to a central upper assembly in a common way so that development task management and subsequent engineering activities
can take place concurrently if needed. The subsystems include steering, cooling, lower POD drive units, trim and tilt, and cover assemblies.
Core Motor and Gear Reducer Information
The motor is the heart of the entire outboard drive
system. Because its output RPM is up to 10,000 RPM it must be reduced to achieve the proper torque on the output propeller. To accomplish
this our team had to develop a proprietary custom gear reducer which is incorporated in the core motor. This gear reducer features a two-stage
planetary gear assembly. The planetary gear reducer is designed to accommodate vertical orientation which is ideal for mounting inside
the Forza X1 Outboard.
Upper Assembly
The upper assembly is the central “torso”
of the outboard structure. It houses the main core motor and gear reducer, as well as provides a modular mounting structure for the motor
controller, cooling system, steering system, trim and tilt as well as the covers.
The upper assembly is being designed with aircraft
grade aluminum alloys. The Trim/Tilt mount is attached to the upper frame block with high strength socket head cap screws. The mount features
a cross pattern which will support and distribute the load for the entire weight of the outboard, as well as transmit the static stress
loads through the structure while under operation.
The central frame design is also proprietary in that
it allows for an easy vertical mounting of the core motor assembly but also allows the entire core motor assembly to be removed from one
side of the outboard, without a complete teardown of the system. The shape of the uni-body profile includes engineered clearance to accommodate
the rare occasion of a motor needing extended service and replacement. We have filed a design patent application for the design of the
central frame, which application is currently pending approval.
The motor controller frame attaches to the uni-body
frame with a set of M8 socket head cap screws. The frame is CNC machined, like the uni-body structure, however it is designed to be removed
and replaced as needed as the design of the system matures.
Steering System
The initial version of our motor will utilize a traditional
marine steering system. We are also developing a novel steering system for our version 2.0 motor. It incorporates slew bearing technology
that is proven in heavy equipment, wind turbines, and military systems, and combines it with custom gearing, and a coupling interface
with the lower POD drive unit. This mechanical steering system in combination with electronically controlled power steering from the helm
results in up to 360-degree POD rotation for the lower unit. The upper assembly for the outboard is fixed which is designed to keep the
center of gravity stable at high-speed turning, and the 360-degree power steering is expected to result in an un-matched user experience
to make boat docking and maneuvering easier than ever before.
The slewing bearing assembly is precision engineered
with high grade 400 series stainless steel bearings, fully sealed encased pinion gear system that is modular. A slewing bearing or slewing
ring (also called a turntable bearing) is a rotational rolling-element bearing that typically supports a heavy but slow-turning or slowly
oscillating loads in combination (axial, radial and moment loads), often a horizontal platform such as a conventional crane, a swing yarder,
or the wind-facing platform of a horizontal-axis (yaw) windmill. In other orientations (e.g., a horizontal axis of rotation) they are
used in materials handling grapples, forklift attachments, welding turnover jigs and so on.
Compared to a “normal” ball bearing the
rings are quite wide and usually have holes drilled in them to provide fixation to a structure. Seals will be provided between the rings
to protect the rolling elements. Compared to other rolling-element bearings, slewing bearings are relatively thin sections and require
that the structure to which they are bolted is stiff enough so that under load predefined limits of distortion are not exceeded.
Slewing bearing designs range from single row ball
or roller style, through double row ball or roller, triple row roller, combined (1 roller/ 1 ball) or wore guided raceways — each
design having its own special characteristics and application. The Forza X1 design features precision engineered ceramic ball bearings
which are designed to withstand the marine environment and are easily replaceable for teardown and rebuilds.
Cooling System
The cooling system consists of a raw water circuit
that feeds up from the lower pod propeller unit and into a heat exchanger. The heat exchanger passes an internal glycol fluid over a series
of interspersed tubes where heat conduction takes place to regulate the temperature of the glycol. The glycol is circulated through the
gear reducer assembly, core motor and controller/inverter. The circuit uses a glycol pump mounted on or near the uni-body frame. The raw
water exits from the heat exchanger and is released through a tube from the upper assembly.
Forza X1 Battery Details
Nowadays, the most expensive part of an electric vehicle
is the battery, which represents as much as 50% of the price of the electric propulsion system, depending on the technology used. Lithium-ion
batteries are the most used technology in EVs due to their high energy density and increased power per mass battery unit.
The disadvantage of Lithium-ion batteries is their
high developed operational temperature, which could affect energetic performances, along with lifetime expectations. This technology requires
a battery management system (BMS) to control and monitor internal cell temperature. Apart from the disadvantages caused by exploitation
temperature, there are also problems related to high production costs, recycling capacity of batteries out of use, and recharging infrastructure.
Our designers have the following general parameters
in mind for the outboard battery system:
1) A module size of 36"
x 12” x 4"
2) Mountable vertically or horizontally
3) Liquid cooling.
4) An IP rating of at least IP64,
preferably IP65
5) Internal shock
absorption.
Mounting the battery packs is a crucial task especially
for the 104kW battery range. These packs must be mounted with careful engineering for vibration isolation, cooling systems and ease of
access in order to have the proper working and successful service procedures.
We have entered into a five- year supply agreement
with a third-party lithium battery reseller to begin supplying us with a line-up of standardized high-voltage battery packs. The battery
packs are highly flexible and modular that can be scaled in series or in parallel.
The battery packs are based on the world-class 2170
cylindrical cells and have the highest energy density solution in the market with approximately 200 Wh/kg, while also allowing advanced
monitoring and diagnostic reporting. The packs contain a highly efficient, liquid cooled thermal management system and the sealed enclosures
are rated IP65, which eliminates potential for debris and weather to get inside the battery pack.
| Forza X1 Battery Characteristic |
|
Unit |
|
Specification* |
| Voltage, Nominal |
|
|
V |
|
|
|
352 |
|
| Voltage, Range |
|
|
V |
|
|
|
270 — 403 |
|
| Energy, Total |
|
|
kWh |
|
|
|
52 |
|
| Capacity |
|
|
Ah |
|
|
|
150 |
|
| Continuous Current |
|
|
A |
|
|
|
230 |
|
| Peak Current (10 sec) |
|
|
A |
|
|
|
440 |
|
| Volume |
|
|
L |
|
|
|
252 |
|
| Mass |
|
|
Kg |
|
|
|
247 |
|
| Energy Density |
|
|
Wh/L |
|
|
|
205 |
|
| Specific Energy |
|
|
Wh/kg |
|
|
|
200 |
|
| Dimensions (L x W x H) |
|
|
mm |
|
|
|
1,306 x 717 x 270 |
|
| Operating Temperature |
|
|
°C |
|
|
|
-30 to 55 |
|
Onboard Battery Charging System
We intend to utilize multiple charging options that
are currently available in the marketplace. The battery charging market has designed and commercially sold faster charging systems for
years, but along with the increased speed of charging times, the cost of the equipment also goes up in price. We intend to offer an AC
charging system that will be standard with the base boat. Additionally, we intend to offer a Direct Current or “DC” fast charging
protocol as an option or as standard equipment on larger, higher priced boats. Specifically, we will adopt the most common connector plug
for EV charging, the J1772, which was chosen by the Society of Automotive Engineers (SAE) as the standard in North America and Japan.
We will mostly utilize an alternating current (AC)
charging current. Alternating current (AC) is typically how people charge their electric vehicles overnight. AC charging uses a lower
voltage, either Level 1 (120 volts or normal household current) or Level 2 (240 volts or the equivalent power of an electric dryer). Though
the low voltage levels mean a slower charge, AC charging can be easily installed in most households. It is a convenient solution for residential,
workplace, multi-unit dwellings, and other longer-term parking locations like hotels and municipal or airport parking garages.
Direct current (DC) charging for electric vehicles
allows for higher charging speeds, since DC can be supplied directly to the electric vehicle’s battery at power levels normally
higher than AC charging. The higher the DC power supplied, the faster the electric vehicle can be charged—provided the EV is designed
to handle such power. Charging will slow down toward the end of each charging session in order to preserve the battery. This typically
happens around 80% full.
The Combined Charging System (CCS) is a direct current
(DC) fast charging protocol that is Society of Automotive Engineers (SAE) certified and is featured on vehicles produced by European and
American car companies. The “combined” term in the CCS name designates its capability to incorporate the Level 2 (J1772 standard)
plug and DC fast charging connector into the same larger plug.
The unit of energy to power an electric motor and
charge a battery pack is based on the kWh or Kilo Watt Hour. A kWh unit of energy equivalent to the energy transferred or expended in
one hour by one kilowatt of power. Electric car or boat battery sizes are measured in kilowatt-hours.
Our boats may have the option for a 6.6 kW or 12 kW
onboard charger compatible with Level 2 in-house charging. This means our boats can be charged at home from any outlet. When connected
to a standard 120V 10A outlet, the charge rate is limited to 4 kW. We expect that from a capacity of 25% the charge time using a fast
charging or Inboard 50A system will range from 1.8 hours to 6.7 hours for our boats. Charge times are as shown below:
| Power source |
Charging Rate |
DC Charging Current |
Charge time |
| Fast Charge |
45.0 kW |
125A |
1.8 hours |
| Inboard 50A |
12.0 kW |
33A |
6.7 hours |
| Inboard 30A dryer outlet |
6.6 kW |
18A |
12.1 hours |
| Standard 120 Outlet |
4.0 kW |
11A |
20.0 hours |
Screen Integration
We have integrated Garmin’s screen into our
consoles. The screens will be utilized for functionality including GPS mapping, depth finder, fish finder, speedometer, electronic compass,
battery sensors, power rating, battery usage reporting, lighting controls, bilge and water pumps controls, autopilot and more. The screens
will reduce traditional buttons that typically clutter a boat console and enhance a customer’s boating experience. We have designed
a customized graphical user interface at the helm to provide boat owners access to a suite of various systems, sonar technologies, autopilot,
apps, motor data, and multimedia, all on one screen. Specifically, we plan to install a large-format multifunction display featuring a
full HD screen with touch control in our boats. The sunlight-readable anti-glare large display should enable owners to experience a powerful,
completely networked helm.
Our plans include a fully digital switching system
that will allow users to power up their boat while away from the dock, switch on pumps, control lights, and underwater lights. Moreover,
customers would be able to configure the entire system to provide 1-touch setting access for docking, cruising, fishing, and anchoring
without manually switching each monitor separately.
Forza X1 Intellectual Property
We are working to create a portfolio of proprietary designs and technology
that we expect to serve as the foundation of our product development. To date, we have three design and eight utility patent applications
on file with the United States Patent and Trademark Office. Below is a list of pending patent applications that we are seeking approval
for from the United States Patent and Trademark Office. For some of the applications we may decide it is strategically beneficial to apply
for patent protection in foreign countries as a means of strengthening the value of our portfolio. We cannot be certain that the patent
applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. See
“Intellectual Property Risks.”
| IDEA / CONCEPT NAME |
DESCRIPTION |
IP TYPE |
App Number and Filing Date |
| 360 Steering Lower Pod with Disconnect |
For outboard, lower pod steering mechanism using slewing bearing and spur gear mechanism allowing for a full 360-degree rotation. Also features a pass through the center method for cooling fluid, and an easy way to interchange lower drive units with the fixed upper unit. |
Full Non-provisional Patent |
App # 17,698,212
FILING DATE 03/18/23 |
| Original Outboard Cover Design |
Original shape of outboard cover |
Design Patent |
App # 29/818,844
FILING DATE 12/10/21 |
| Unibody Frame |
Shape of frame that allows vertical mounting of motor and transmission inside the outboard |
Design Patent |
App # 29/818,842
FILING DATE 12/10/21 |
| Outboard cover design — ALPHA 01 version |
shape of the updated prototype cover and cowling |
Design Patent |
App # 29/819,262
FILING DATE 12/14/21 |
| Trim and Tilt with cable routing thru pivot axis |
A trim and tilt assembly that routes cables through the pivot axis which protects cables, keeps the bundle from excessive bending and results in a cleaner design |
Utility Patent |
App # 63,287,740
FILING DATE 12/09/21 |
| Jet Drive Lower Unit for an Electric Outboard |
The design of the lower jet drive as it is configured for the integration with the electric outboard |
Utility Patent |
App # 63,293,420
FILING DATE 12/23/21 |
| Closed Loop Heat Exchanger Integrated in a Lower Drive Unit |
Integrate a cooling radiator inside of the lower drive propeller or jet drive unit itself. Simplify the cooling circuit by eliminating the need for a raw sea water intake. |
Full Non-provisional Patent |
App # 18/150,943
FILING DATE 1/06/22 |
| Closed Loop Heat Exchanger Integrated in a Lower Drive Unit |
Iteration of the application above with more detail into 3D printed metal heat exchanger “insert” that would integrate into the lower unit casting. |
Utility Patent |
App#63,437,411
Filing Date: 1/06/23 |
| Outboard
Motor Cowling Latch Assembly |
The outboard top cover should not be removed until the electric motor and inverter is safely de-energized which typically takes 4 to 5 seconds after powering down. This invention features a special latch mechanism, a sensor to detect position of latch, and a locking solenoid which will prevent inadvertent removal of cowling cover which will prevent a user from being electrocuted. |
Utility Patent |
App # 63/424,985
Filing Date 11/14/22 |
| Docking Assist Motor Control and Auto-pilot mode for Trailer loading and launching |
Similar to docking assist GPS guided auto-pilot systems but this one is specifically intended to assist with single handed boat launching or loading to and from a trailer. Use position sensors on the trailer, have the boat automatically guided safely by itself while the captain is backing trailer into the water, or on the trailer preparing the winch, etc. |
Utility Patent |
App # 63/402,124
FILED 8/30/2022 |
| Double Motor Stack for an outboard powerhead arrangement |
Cascadia and other EV motor vendors offer a configuration where the DC motor can be stacked on top of another motor to double the power output of the vehicle. Packing this into an outboard motor design might be a first for the industry and will be worth patenting if possible. |
Utility Patent |
App # 63/402,124
FILING DATE 8/30/22 |
Forza X1 Manufacturing Facility
We are currently designing a state-of-the-art manufacturing
facility to incorporate the latest in closed-molded composite boat building technologies and electric motor assembly processes. We are
designing a 100,000 square foot facility designed for capacity and production of 1,000 units annually that we intend to build over time
in various phases. We plan to first build out an approximately 50,000 square foot facility, which will have an estimated capacity of 550
units annually, at an estimated $8 million cost of construction. We have selected a site in McDowell County, North Carolina to build our
manufacturing facility and the North Carolina Economic investment committee has approved a Job Development Investment Grant providing
for reimbursement to us of up to $1,367,100 over a twelve-year period. The receipt of grant funding is conditioned upon us investing over
$10.5 million in land, buildings and fixtures, infrastructure and machinery and equipment by the end of 2025 and us creating as many as
170 jobs.
Before the completion of new factory construction,
all fabrication for our Forza X1 boats will be performed onsite at Twin Vee’s facility. While there is limited additional manufacturing
capacity at Twin Vee’s current facility for the manufacture of our electric boats, we believe the Twin Vee site can handle approximately
325 units annually, without capital improvements, in addition to current Twin Vee production.
Our ability to utilize Twin Vee’s manufacturing capacity pending
completion of our own facility will be subject to its availability as determined by Twin Vee. See “Risk Factors—Risks Related
to Our Business—We may not be able to commence production of our electric boats as planned.”
Industry Overview
We believe traditional marine manufacturers are at
a crossroads and face significant industry-wide challenges. Much like in the automotive industry, the reliance on the gasoline-powered
internal combustion engine as the principal marine powertrain technology has raised environmental concerns, created dependence among industrialized
and developing nations on oil-primarily imported from foreign countries, exposed consumers to volatile fuel prices, and inhibited innovation
in alternative fuel powertrain technologies.
We expect that shifting consumer preferences will
result in significant growth in the market for electric boats, especially as the demand for recreational powerboats, in general, remains
strong. We estimate many consumers are increasingly willing to consider buying electric-powered boats due to the environmental and economic
consequences of using gasoline-powered vehicles, as demonstrated by the increased sales of hybrid and electric automobiles in recent years.
In its Electric Vehicle Outlook 2021, BloombergNEF estimated that there are currently 12 million passenger EVs on the road. The prevalence
of electric-powered boats is likely to follow suit. In an August 2020 Boating Industry online article, the marine-focused magazine indicated
that electric boat drives represented about 2% of the market, but hybrid and pure electric boats sales were expected to rise rapidly in
the coming years. Specifically, the article cites a report from independent market research company IDTechEx where it examined the electric
boat and ship sector. The report estimates that the market for hybrid and pure electric boats and ships would be greater than $20 billion
worldwide by 2027, finding that recreational boats is the largest and fastest growing electric marine market in sales number.
Our initiative into sustainable marine technologies
and products is well-timed. The prevalence of batteries necessary to sustain a marine EV model line is expected to rise and become cheaper.
BloombergNEF’s Long-Term Electric Vehicle Outlook reports that annual lithium-battery demand has proliferated in recent years, and
meeting the demand will require unprecedented but achievable increases in materials, components, and cell production. Battery production
capacity is expanding as more factories are brought online. Moreover, battery technology that improves power and capacity is being designed,
developed, and adopted regularly. According to BloombergNEF’s report, it found that the volume-weighted average price of a lithium-ion
battery pack fell 13% from 2019 to $137/kWh (kilowatt-hour) in 2020. The report estimates the volume-weighted average cost of battery
packs will drop below $100/kW in 2024. The Company is establishing itself in the market at the right time to help keep production costs
as low as possible and make our boats affordable for our customers.
Our Solution
Our company believes our solid foundation in boat
building, electric vehicle engineering expertise, and planned direct-to-consumer system will help us rapidly innovate and introduce new
boats and technologies cost-effectively. By operating our sales and service network, we believe we can offer a compelling and premium
customer-centric experience while achieving operating efficiencies and capturing sales and service revenues
that traditional boat manufacturers do not receive in the independent dealer model. We also plan to leverage our electric powertrain technology
to develop and sell powertrain components to other boat manufacturers and owners.
We believe our proprietary electric
powertrain system will enable us to design and develop zero-emission boats that overcome the design, styling, and performance issues that
have historically limited broad consumer adoption of electric boats. As a result, we believe customers of our vehicles will enjoy many
benefits, including:
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Extended Run Times and Recharging Flexibility. We are designing our FX1 to offer an intermediate-range option and an option that would increase the battery pack capacity for extended run times. Charging stations specifically designed for electric boats will eventually be an option for customers as well. Norway and Venice, Italy, are beginning to construct a network of electric boat charging stations. In the United States, Lake Tahoe is now home to a rapid-charging electric boat charging station. While the US and the rest of the world begin to adopt a network of electric boat-specific stations, our design for the Forza X1 boats incorporates an onboard charging system, permitting recharging from almost any electrical outlet and residential and commercial charging stations previously only utilized for electric automobiles. |
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Energy Efficiency and Cost of Ownership. We believe our FX1 will offer consumers an attractive cost of ownership compared to similar outboard powerboats. By using a single powertrain and customizing the systems within the electric powertrain and the rest of the boat, our boats are more energy-efficient, and therefore less expensive to operate and maintain. |
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Environmental sustainability. Large gas-powered engines often leak and produce carbon emissions, both of which are generally harmful to fragile marine ecosystems. By offering a fully electric boat to our customers and an alternative to traditional propulsion systems, we can foster a more environmentally sustainable boat brand. Our greatest hope is to be purposeful stewards of the marine industry and lead by example in environmentally friendly innovation. |
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Noise Level. So often, powerboats create large amounts of noise, disturbing wildlife and making it difficult for fellow passengers to hear one another while underway. FX1’s electric powertrain will produce little to no sound, making it easier to enjoy the sounds of nature, family, and friends. Our products will also help tremendously with fishing and other sporting and water-based activities that favor less noise. |
Our Strengths and Competitive Advantages
We believe that the following are the critical investment
attributes of our company:
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Assembling a Technology, Engineering and Manufacturing Team. We continue to build and add valuable, experienced and knowledgeable team members. Jim Leffew, our President and Chief Executive Officer, comes to us from Maverick Boat Group, Inc. that was recently sold to Malibu Boats. Jim Leffew has been designing, building and manufacturing boats on a large-scale basis for over 25 years. The year Maverick Boat Group was sold to Malibu Boats, Jim Leffew was overseeing the manufacturing and Maverick Boat Group was building and selling over 1,400 boats annually. The experience and knowledge that Jim Leffew brings to the table is expected to be valuable to the requirements of designing and ramping up our manufacturing facility. |
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Singular Focus and Leadership in Electric Powertrain Technology. We are focused exclusively on developing our electric boats and electric powertrain technology to achieve a compelling combination of range and performance at a price point accessible to a large segment of the boating population. We intend to use our electric powertrain expertise to innovate rapidly and sustain technological and time-to-market advantages over other marine manufacturers. |
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Combination of Expertise from the Traditional Boat Manufacturing Industry and Electrical Engineers. Our company’s founders have been in the boat building business for over 25 years. Our boat design and manufacturing knowledge are supplemented by engineers with strong skills in electrical engineering and software and controls. |
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Rapid Customer-Focused Product Development. We are designing our product development process to rapidly react to data collected from our boats, direct interaction with our customers, and feedback from our web and app platform. That information should enable us to introduce new models and features to expand our customer base and brand recognition. |
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Direct To Consumer System. We are building a vertically integrated and premium direct-to-consumer system to achieve operating efficiencies and capture sales and service revenues traditional boat manufacturers do not generally receive in the distribution and service model they employ. |
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Capital Efficiency. We believe our rapid product development process, powertrain technology applicable for future boat models, and our plan to hold lower inventory levels while still meeting customer demand will help reduce the capital required to reach operating efficiencies. This approach is designed to allow us to achieve profitability at relatively low sales volumes and create a viable long-term business. |
Our Strategy
We intend to be a leading manufacturer and direct
seller of electric boats and electric powertrain and propulsion technologies through the following strategies:
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Successfully Launch our 22-foot Monohull. We believe the successful launch of our first commercially available electric boat is critical to our ability to capitalize on the marine electric vehicle market opportunity and establish ourselves as leaders in the industry. We expect to offer these products for sale to the public by the end of 2023. |
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Invest in Our Infrastructure. We plan to invest in our product development and operations infrastructure to enable our growth, product innovation, and customer experience. |
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Use a Common Platform to Introduce New Models. We intend to design our boats with an adaptable platform architecture and common electric powertrain to provide us the flexibility to use the platform to launch subsequent electric boat models cost-efficiently. |
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Focus on Technological Advancements and Cost Improvement. We intend to constantly look for ways to improve upon and further develop our proprietary electric powertrain system while reducing its manufacturing cost. |
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Build our Company-Owned Sales and Service Network. We are programming and building our expansive and vertically integrated customer-centric web and app platform to connect with customers for an end-to-end experience encompassing everything from buying, financing, delivery, service and training. This customer-centric approach to sales and service aims at simplifying access to necessary information for potential buyers and current owners alike. |
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Leverage Industry Advancements in Battery Cells. We intend to leverage the substantial investments made globally by battery cell manufacturers to improve power and capacity. |
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Build and Leverage Strategic Relationships. We intend to establish and develop strategic relationships with industry leaders to commercialize our electric boats and electric powertrain components. We envision significant opportunities with boat manufacturers to retrofit various hull configurations, replacing traditional gas outboard motors with our electric powertrain system. |
Our Future Service Network
We intend to develop a support and service department
that will include technicians, service representatives, quality control specialists and customer satisfaction agents. Moreover, we aim
to provide convenient and comprehensive service coverage in all markets where our boats are sold, which customers may access through a
comprehensive service and support website and app.
The website and app platform will be the cornerstone
of our services and repair program. We have selected a web design firm for the development of our website and app. Our goal is to have
the app completed by the second quarter of 2024. Our customers would be able to report through our app or interact directly with our service
support team to schedule an appointment with a Forza X1 mobile service van, perform remote diagnostics or help arrange appointments with
partnered boat repair technicians, marinas, and service centers with whom we have strategic relationships, arrange for service or repair
work, or even schedule the boat’s transportation back to the Forza X1 factory if needed.
We believe that Forza X1 mobile service vans and trucks
will be able to perform a majority of physical service calls at a customer’s home, marina, dock, or wherever our boats might be
located, offering a level of convenience at lower cost than traditional dealer-owned service centers. These mobile service vans and trucks
will travel to the location of the electric boats for repair, or if the boat cannot be repaired at such location, then the Forza technician
will have a vehicle capable of towing the boat back to the Forza factory, where the boat will have access to a more significant amount
of repair and support staff.
We believe that our electric vehicles will require
less service than gas vehicles because electric vehicles are simpler to maintain than internal combustion vehicles. Our outboard motor
system is expected to be less susceptible to wear and tear by exchanging hundreds of moving parts for only a few. There are no spark plugs
or engine motor oil to change or worry about.
Additionally, remote diagnostics will allow the Company
to find issues with customer boats remotely, in real time. In many cases, our service team will be able to provide an OTA update to resolve
the issue without the customer’s boat ever leaving the customer’s sight. Our mission will be to make the servicing of our
products as simple as possible by connecting to and utilizing the diagnostics technology in every Forza X1 boat. Whether a customer needs
maintenance or needs repairs, we intend to provide convenient and comprehensive service and warranty coverage for our customers throughout
the country.
Customers who lack Forza X1 service access through
our network of mobile services vans and trucks will be able to utilize the traditional warranty claim process, which is standard throughout
the recreational boat industry. In our case, a customer will contact us through our website or app and speak with our support and service
department and provide them with details about the issues they are experiencing with their boat. If over-the-air updates to software or
hardware are insufficient to solve the problems and FX1 customer experience and service center or mobile service van are not within range
of the customer, our support and service department will provide assistance.
In the case of a covered warrantable issue, our support
and service department will put them in contact with a local partnered boat repair service technicians or arrange transportation of the
boat to one of our partnered marinas and service centers. If none are available in a customer’s area, our support and service department
would instruct the customer to obtain a quote for the covered warranty repair work and labor at a marine service center of their choosing.
They would transmit the quote for the necessary repair work to our support and service department for approval. Once approved, the work
is completed on the covered warrantable repairs, and we will pay the marine service center directly.
There may be instances where the customer’s
issue is too technical for a traditional marine service center (e.g., issues related to the EV components of the boat). In such cases,
our support and service department would coordinate with the customer to have the boat picked up on a trailer and towed to our manufacturing
facility in Fort Pierce, Florida, for service.
If a customer contacts our support and service department
for maintenance or an issue not covered under warranty, then our support and service department would be able to coordinate with them
to arrange service with a mobile service van, partnered boat repair technician, or partnered marina or service center and the customer
will be responsible for paying them directly.
We are still in the initial stages of establishing
our service plans. We are in the process of identifying potential marinas, service centers, and technicians we would like to form strategic
relationships with to ensure that we have a comprehensive service support system in place when our FX1 boats are sold. Although we are
planning to eventually internalize most aspects of boat warranty and service through our mobile service vans and trucks over time, initially,
we plan to operate them within 500 miles of the Forza X1 factory and partner with third parties elsewhere to enable nationwide coverage
for our customers’ boat service and warranty repair needs.
Competition
The performance sport boat category and the powerboat
industry as a whole are highly competitive for consumers and dealers. We also compete against consumer demand for used boats. Competition
affects our ability to succeed in both the markets we currently plan to serve and new markets that we may enter in the future. Competition
is based primarily on brand name, price, product selection, and product performance. We will compete with several large manufacturers
that may have greater financial, marketing, and other resources than we do and who are represented by dealers in the markets in which
we now operate and into which we plan to expand. We also will compete with a variety of small, independent manufacturers. We cannot assure
you that we will not face greater competition from existing large or small manufacturers or that we will be able to compete successfully
with new competitors. Our failure to compete effectively with our current and future competitors would adversely affect our business,
financial condition, and results of operations.
We also compete with other leisure activities. Our
boats are not necessities and in times of economic hardship, consumers may cease purchasing non-essential items. Luxury items may not
be used for recreational and sport purposes, and demand for our boats may be adversely affected by competition from other activities that
occupy consumers’ leisure time and by changes in consumer lifestyle, usage pattern or taste.
We also face competition for employees. Competition
for individuals with experience designing, manufacturing and servicing electric boats is intense, and we may not be able to attract, assimilate,
train or retain additional highly qualified personnel in the future. The failure to attract, integrate, train, motivate and retain these
additional employees could seriously harm our business and prospects.
For more information, see “Risk Factors—Risks
Related to Our Business—Our industry is characterized by intense competition, which affects our sales and profits” and “If
we fail to manage future growth effectively, we may not be able to market or sell our products successfully.”
Environmental and Safety
Matters
Certain materials used in
our manufacturing, including the resins used in production of our boats, are toxic, flammable, corrosive or reactive and are classified
by the federal and state governments as “hazardous materials.” Control of these substances is regulated by the Environmental
Protection Agency, or EPA, and state pollution control agencies. The United States Clean Air Act (the “CAA”) and corresponding
state and provincial rules regulate emissions of air pollutants. The Occupational Safety and Health Administration, or OSHA, standards
limit the amount of emissions to which an employee may be exposed without the need for respiratory protection or upgraded plant ventilation.
Twin Vee’s facilities are, and our future factory will be, regularly inspected by OSHA and by state and local inspection agencies
and departments. We believe that Twin Vee’s facilities comply in all material aspects with these regulations. Although we anticipate
that once our factory is built, we will incur capital expenditures related to compliance with environmental laws, we do not currently
anticipate incurring any material expenditure in order to comply with environmental or safety regulations in connection with our future
manufacturing facility.
Powerboats sold in the United
States must be manufactured to meet the standards of certification required by the United States Coast Guard. In addition, boats manufactured
for sale in the European Community must be certified to meet the European Community’s imported manufactured products standards.
These certifications specify standards for the design and construction of powerboats. We believe that all of our boats will meet these
standards. In addition, safety of recreational boats is subject to federal regulation under the Boat Safety Act of 1971, which requires
boat manufacturers to recall products for replacement of parts or components that have demonstrated defects affecting safety. Twin Vee
has instituted recalls for defective component parts produced by certain of its third-party suppliers. None of Twin Vee’s recalls
has had a material adverse effect on it. We expect to begin production of our two FX1 electric boats and commence selling to end user
customers by late 2023. Once we have commenced production of our electric boats, we intend to institute recalls for any defective component
parts produced by our third-party suppliers.
If we are not able to pass these additional costs
along to our customers, it may have a negative impact on our business and financial condition.
Privacy and Security
According to the Federal
Trade Commission (the “FTC”), failing to take appropriate steps to keep consumers’ personal information secure constitutes
unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act. The FTC expects a
company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information
it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually
identifiable health information is considered sensitive data that merits stronger safeguards.
In addition, certain
states and non-U.S. laws, such as the General Data Protection Regulation , govern the privacy and security of personal data. Failure to
comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.
For example, California recently enacted the California Consumer Privacy Act, or CCPA, which took effect on January 1, 2020 and was amended
and expanded by the California Privacy Rights Act, or CPRA, which took effect on January 1, 2023. The CCPA, as amended by the CPRA, among
other things, creates new data privacy obligations for covered companies and provides new privacy rights to California residents, including
the right to opt out of certain disclosures of their information and the right to access information about how their data is being used.
State Dealership and Servicing Regulations
We intend to comply with specific state regulations,
if any, regarding boat dealerships and servicing when we establish our direct-to-consumer sales and service model. While there are limitations
on the ability of a motor vehicle manufacturer to act as its own dealer to provide direct sales in many states, these limitations generally
do not apply to boat manufacturers.
We will investigate each state’s laws before
our products become available for purchase in that jurisdiction. To determine how the laws would apply to our business would require fact-specific
analysis of numerous factors of business in the state, including whether we have a physical presence or employees, whether we advertise
or conduct other marketing activities, how sale transactions are structured, the volume of sales into the state, and whether the state
prohibits boat manufacturers from acting as dealers or servicing boats.
We plan to establish direct-to-consumer sales in those
states where we are permitted to engage in direct-sales of our products. Moreover, in states where the law is unclear or prohibitive of
direct sales, we intend to work with the governments of those states to carve out an exception for the sale of zero emission boats that
are not available at other dealers within the state and use OneWater sites, where applicable, for the purpose of selling, delivering and
servicing our boats within that particular state.
As a result, we may not be able to sell to customers
in each state in the United States or provide service from a location in every state.
Employees/Human Capital
We believe we maintain excellent
relations with our employees. As of June 6, 2023, we employed eighteen people as
full-time employees, in addition to these employees additional administrative support is provided by
Twin Vee. We also work with a variety of third-party consultants, including naval architects, electrical engineers, prototype professionals
and procurement professionals. None of our employees are represented by a labor union. See “Certain Relationships and Related Party
Transactions—Transition Services Agreement.”
Corporate Information
Our principal executive office is located at 3101
S. US-1, Ft. Pierce, Florida 34982, and our telephone number is 772-202-8039. We maintain our corporate website at www.forzax1.com. Investors
should not rely on any such information in deciding whether to purchase our common stock.
Forza X1, Inc. was initially incorporated as Electra
Power Sports, Inc. on October 15, 2021, but we subsequently changed our name to Forza X1, Inc. on October 29, 2021. Our majority shareholder
was incorporated in the State of Florida as Twin Vee Catamarans, Inc. on December 1, 2009, and reincorporated in Delaware on April 7,
2021, as Twin Vee PowerCats Co.
On July 22, 2022, our Board and our sole stockholders
approved a forward split that was effected on July 22, 2022 at a ratio of 1.076923077:1, such that after the forward split our outstanding
shares of common stock increased to 7,000,000 shares of common stock.
Facilities
We currently share our corporate headquarters located
at 3101 US Highway 1, Fort Pierce, Florida, 34982 with Twin Vee. Twin Vee’s parent company, Twin Vee PowerCats, Inc., leases the
facility from Visconti Holdings, LLC, (“Visconti Holdings”) an entity owned and controlled by our Executive Chairman and Chief
of Product Development, Joseph Visconti pursuant to a lease agreement (the “Lease Agreement”), dated January 1, 2020, by and
among the Company, Visconti Holdings, LLC and Twin Vee PowerCats, Inc. The Lease Agreement currently has a 5-year term, with an option
to renew for an additional 5-year term. Twin Vee PowerCats, Co., currently pays Visconti Holdings $26,500 per month plus applicable sales
and use tax, which is currently 7% in St. Lucie County. While we believe these headquarters are adequate for our current operations and
needs, we do believe that the capacity at the facility will not be sufficient to support both our full-scale production and Twin Vee’s
full-scale production. We are currently in negotiations for a new site to build the Forza factory. We are currently designing a state-of-the-art
manufacturing facility to be built on a new parcel of land as our future boat manufacturing facility. The parcel of land to be acquired
and the manufacturing facility to be built on such property will be owned by us, and not Twin Vee. In October of 2022, we signed a two-year
lease agreement, on an 8,800 square foot warehouse facility in Old Fort, North Carolina to begin building our prototype motors. The monthly
base rent will be $7,517 the first year, including taxes and common area maintenance, the lease required a $7,517 security deposit. The
bases rent will increase three (3%) on the anniversary of the annual term. See “Forza FX1 Future Factory.”
MANAGEMENT
Executive Officers and Directors
The following table sets forth the names, ages and
positions of our executive officers and directors as of the date of this Registration Statement:
| Name |
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Age |
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Position |
| Executive Officers: |
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| Joseph C. Visconti |
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58 |
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Executive Chairman of the Board and Chief of Product Development |
| Jim Leffew |
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59 |
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President, Chief Executive Officer and Director |
| Carrie Gunnerson |
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48 |
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Interim Chief Financial Officer |
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| Non-Employee Directors: |
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| Marcia Kull (1)(2)(3) |
|
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65 |
|
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Director |
| Neil Ross (1)(2)(3)(6) |
|
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61 |
|
|
Director |
| Kevin Schuyler (1)(2)(3)(4)(5) |
|
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54 |
|
|
Director |
(1) Member of the audit committee
(2) Member of the compensation committee
(3) Member of the corporate governance and nominating
committee
(4) Chair of audit committee
(5) Chair of compensation committee
(6) Chair of corporate governance and nominating committee
Executive Officers
Joseph Visconti, Executive Chairman of the Board
and Chief of Product Development
Mr. Visconti has been our Executive Chairman of the
Board and Chief of Product Development since July 22, 2022. From our inception (October 15, 2021) until July 22, 2022, Mr. Visconti served
as our Chairman of the Board and the Chief Executive Officer. He also serves as the Chief Executive Officer, President and Director of
Twin Vee PowerCats Co., our majority owner, since 2015, which is listed on the Nasdaq Capital Market. He is also the Chairman of the Board
and Chief Executive Officer of, Twin Vee PowerCats, Inc., the parent company of Twin Vee PowerCats Co. With over 25 years of executive
level operational and financial experience, Mr. Visconti was the founder, CEO and President of two previous companies, the first company
was a regional Investment Bank that he built to over 400 employees and sold in 2000. The second company was ValueRich, a financial media
company that was taken public on the American Stock Exchange in 2007. ValueRich transitioned from media related business to Twin Vee PowerCats,
Inc. in 2015. Mr. Visconti has experience building teams of professionals with a focus on product development and bringing those products
to market. Mr. Visconti received his Associate’s degree from Lynn University in 1984. We believe that Mr. Visconti’s operational
and financial experience makes him well qualified to serve on our board of directors as our Executive Chairman of the Board.
Mr. Visconti currently devotes approximately 20% of
his working time to our affairs.
Jim Leffew, President, Chief Executive Officer
and Director
Jim Leffew was appointed as our President in December
2021, and then to our Chief Executive Officer on July 22, 2022. Mr. Leffew served as the Senior Vice President, Manufacturing of Maverick
Boat Group, Inc. from September 1999 until April 2021, where he was responsible for overseeing manufacturing operations and over 450 direct
employees at a company with over $125 million in sales. Prior to joining Maverick Boat Group, Inc., from September 1994 to September 1999
he was a Facilities Director at the Harbor Branch Oceanographic Institution where he directed all construction and maintenance needs for
an over 500,000 square foot mixed-use space and managed a budget exceeding $5 million a year. Mr. Leffew received his Bachelor of Science
in Mechanical Engineering from the University of Central Florida in July 1987. Mr. Leffew’s history and experience manufacturing
products, budgeting and forecasting and managing direct employees will make him a valuable member of our management and member of our
board of directors.
Carrie Gunnerson, Interim Chief Financial Officer
Ms. Gunnerson was appointed
Interim Chief Financial Officer on February 6, 2023, upon the resignation of Nicole Camacho, as Chief Financial Officer. Ms. Gunnerson
served as our Chief Financial Officer since our inception (October 15, 2021) until the consummation of our IPO in August 2022 and the
Chief Financial Officer of Twin Vee PowerCats Co., our parent company, since October 2021. Ms. Gunnerson served as the President
and Chief Executive Officer of Art’s Way Manufacturing Co., Inc. (‘Art’s Way”) from October 18, 2007 until July
21, 2020, as its Chief Financial Officer from July 2004 until January 2012 and interim from September 2012 until January 22, 2015 and
again from May 31, 2018 until February 1, 2020. Prior to joining Art’s Way in 2004, from 2001 until 2004 Ms. Gunnerson was employed
by Tyco Plastics Inc., where she was responsible for all of the functions of a controller. Ms. Gunnerson was named a director of the Farm
Equipment Manufacturers Association, effective in November 2016.
Independent Directors
Kevin Schuyler, CFA, Director
Kevin Schuyler has been a member of our Board of Directors
since December 2021 and a member of the Board of Directors of Twin Vee PowerCats Co., our majority shareholder, since July 2022. Mr. Schuyler
is the Vice Chairman of the board of directors and Lead Independent Director of Adial Pharmaceuticals, Inc. (NASDAQ: ADIL) where he has
served as a director since April 2016. He currently also serves as a senior managing director at CornerStone Partners, a full-service
institutional CIO and investment office located in Charlottesville, VA, with approximately $12 billion under management. Prior to joining
CornerStone Partners in 2006, he held various positions with McKinsey & Company, Louis Dreyfus Corporation and The Nature Conservancy.
Mr. Schuyler serves on various boards and committees of Sentara Martha Jefferson Hospital, the US Endowment for Forestry and Communities,
and Stone Barns Center. He is a member of the investment committee of the Margaret A. Cargill Philanthropies. Mr. Schuyler graduated with
honors from Harvard College and received his MBA from The Darden Graduate School of Business at the University of Virginia. He is a member
of the Chartered Financial Analyst Society of Washington, DC. We selected Mr. Schuyler to serve on our board of directors because he brings
extensive knowledge of the financial markets. Mr. Schuyler’s business background provides him with a broad understanding of the
financial markets and the financing opportunities available to us.
Neil Ross, Director
Mr. Ross has been a member of our Board of Directors
since December 2021 and a member of the Board of Directors of Twin Vee PowerCats Co., our majority shareholder, since April 2021. He has
over 30 years of experience in launching products and companies and promoting and growing brands. He has served as the Chief Executive
Officer of James Ross Advertising since founding it in February 2003. Most notably, Neil has extensive marine experience partnering with
brands like Galati Yachts Sales, Jefferson Beach Yacht Sales, Allied Marine, Bertram Yachts, Twin Vee, Jupiter Marine and Sealine to name
a few. Mr. Ross received his Bachelor’s degree from Florida State University. We believe Mr. Ross’ experience in the yacht
and boating industry as well as his expertise in brand awareness and growth makes him well qualified to be a director of the Company.
Marcia Kull, Director
Ms. Kull has been a member of our Board of Directors
since July 2022. Since November 2017, Ms. Kull has served as President of SheGoes, Inc., where she provides consulting services that guide
manufacturers’ strategic efforts to prepare regulators and distribution chains to accept and advocate for new technologies. From
April 2017 through October 2017, she served as President of Torqeedo, Inc., a pioneer in the field of water-based electromobility, where
she guided the global sales team to exceed revenue target, resulting in a successful acquisition. From April 2005 through March 2017,
Ms. Kull worked at Volvo Penta where she served as Vice President-Marine Sales (from November 2011 through March 2017) where she led a diverse
sales team offering products in both leisure (gasoline stern drive, diesel inboard, stern drive, jet and Volvo Penta IPS) and commercial
marine segments throughout the United States, Canada, Mexico, the Caribbean and Central America. Ms. Kull also practiced as a trial attorney
for over 11 years where she specialized in defending manufacturers in complex products liability, warranty and other business litigation.
Ms. Kull received her Bachelor’s degree from the University of Iowa and her JD from the University of Iowa College of Law. We
believe Ms. Kull’s business experience, particularly in the boating industry as well as her legal expertise makes her well qualified
to be a director of the Company.
Family Relationships
No family relationships exist between any director,
executive officer or person nominated or chosen to be a director or officer.
Board of Directors Composition
Our board of directors currently consists of five
members. Each of our current directors will continue to serve as a director until the election and qualification of his or her successor,
or until his or her earlier death, resignation or removal.
Our amended and restated certificate of incorporation
provides that our board of directors is divided into three classes with staggered three-year terms. Only one class of directors will be
elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms.
Our current directors are divided among the three classes as follows:
| |
● |
the Class I directors are Jim Leffew and Kevin Schuyler, and their terms will expire at the annual meeting of stockholders to be held in 2023; |
| |
● |
the Class II director is Marcia Kull, and her term will expire at the annual meeting of stockholders to be held in 2024; and |
| |
|
|
| |
● |
the Class III directors are Neil Ross and Joseph Visconti, and their terms will expire at the annual meeting of stockholders to be held in 2025. |
At each annual meeting of stockholders, upon the expiration
of the term of a class of directors, the successor to each such director in the class will be elected to serve from the time of election
and qualification until the third annual meeting following his or her election and until his or her successor is duly elected and qualified,
in accordance with our amended and restated certificate of incorporation. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of
our directors.
This classification of our board of directors may
have the effect of delaying or preventing changes in control of our company.
In addition, under the terms of our amended and restated
certificate of incorporation and our amended and restated bylaws, members of our board of directors may only be removed for cause. This
may also have the effect of delaying or preventing changes in control of our company.
Director Independence
Our common stock has traded The Nasdaq Capital Market,
or Nasdaq, under the symbol “FRZA” since August 12, 2022. Under the rules of Nasdaq, independent directors must comprise a
majority of a listed company’s board of directors within one year of the completion of its initial public offering. In addition,
the rules of Nasdaq require that, subject to specified exceptions, each member of a listed company’s audit, compensation and corporate
governance and nominating committees be independent. Audit committee members and compensation committee members must also satisfy the
independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under the Exchange Act. Under the rules of Nasdaq,
a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that
person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities
of a director.
To be considered to be independent for purposes of
Rule 10A-3 and under the rules of Nasdaq, a member of an audit committee of a listed company may not, other than in his or her capacity
as a member of the audit committee, the board of directors, or any other board of directors committee: (1) accept, directly or indirectly,
any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person
of the listed company or any of its subsidiaries.
To be considered independent for purposes of Rule 10C-1
and under the rules of Nasdaq, the board of directors must affirmatively determine that each member of the compensation committee is independent,
including a consideration of all factors specifically relevant to determining whether the director has a relationship to the company which
is material to that director’s ability to be independent from management in connection with the duties of a compensation committee
member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other
compensatory fee paid by the company to such director; and (ii) whether such director is affiliated with the company, a subsidiary
of the company or an affiliate of a subsidiary of the company.
Our board of directors undertook a review of its composition,
the composition of its committees and the independence of our directors and considered whether any director has a material relationship
with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon
information requested from and provided by each non-employee director concerning his or her background, employment and affiliations, including
family relationships, our board of directors has determined that none of Messrs. Ross and Schuyler and Ms. Kull have relationships that
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors
is “independent” as that term is defined under the rules of Nasdaq and Rule 10A-3 and Rule 10C-1under the Exchange
Act.
In making these determinations, our board of directors
considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances
our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Party
Transactions.”
Board of Directors Leadership Structure
Mr. Visconti serves as our Executive Chairman and
Jim Leffew serves as our Chief Executive Officer. Our Board does not have a lead independent director. Our Board determined that the creation
of a separate Executive Chairman role, distinct from the Chief Executive Officer role, enables Mr. Visconti to continue to work with
our future Chief Executive Officer, Mr. Leffew, and our senior management, to help shape and execute our strategy and direction, as well
as other key business initiatives, subject in all cases to the direction of the Board of Directors. Our Board has determined its
leadership structure is appropriate and effective given our stage of development.
Board of Directors Committees
We currently have an audit committee, a compensation
committee and a corporate governance and nominating committee, each of which have the composition and the responsibilities described below.
The following table shows the directors who are currently members or Chairman of each of these committees.
| Board Members |
|
Audit
Committee |
|
Compensation
Committee |
|
Corporate
Governance and Nominating
Committee |
| Marcia Kull |
|
Member |
|
Member |
|
Member |
| Neil Ross |
|
Member |
|
Member |
|
Chairman |
| Kevin Schuyler |
|
Chairman |
|
Chairman |
|
Member |
Audit Committee
The members of our audit committee consist of Marcia
Kull, Neil Ross and Kevin Schuyler. Mr. Schuyler serves as the chair of our audit committee. All of the members of the audit committee
are independent, as that term is defined under the rules of Nasdaq. The primary purpose of the audit committee is to oversee the quality
and integrity of our accounting and financial reporting processes and the audit of our financial statements. Specifically, the audit committee
will:
| |
● |
select
and hire the independent registered public accounting firm to audit our financial statements; |
| |
● |
help
to ensure the independence and performance of the independent registered public accounting firm; |
| |
● |
approve
audit and non-audit services and fees; |
| |
● |
review
financial statements and discuss with management and the independent registered public accounting firm our annual audited and quarterly
financial statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding
internal controls over financial reporting and disclosure controls; |
| |
● |
prepare
the audit committee report that the SEC requires to be included in our annual proxy statement; |
| |
● |
review
reports and communications from the independent registered public accounting firm; |
| |
● |
review
the adequacy and effectiveness of our internal controls and disclosure controls and procedure; |
| |
● |
review
our policies on risk assessment and risk management; |
| |
● |
review
related party transactions; and |
| |
● |
establish
and oversee procedures for the receipt, retention and treatment of accounting related complaints and the confidential submission
by our employees of concerns regarding questionable accounting or auditing matters. |
Our audit committee operates under a written charter
that satisfies the applicable rules of the SEC and the listing standards of Nasdaq. The Board has determined that Mr. Schuyler is an audit
committee financial expert, as such term is used in Section 407 of Regulation S-K.
Compensation Committee
Our compensation committee consists of Kevin Schuyler,
Neil Ross and Marcia Kull. Mr. Schuyler serves as the chair of our compensation committee. All of the members of our compensation committee
are independent, as that term is defined under the rules of Nasdaq. Our compensation committee oversees our compensation policies, plans
and benefits programs. The compensation committee also:
| |
● |
oversees
our overall compensation philosophy and compensation policies, plans and benefit programs; |
| |
● |
reviews
and recommends to our board of directors for approval compensation for our executive officers and directors; |
| |
● |
prepares
the compensation committee report that the SEC would require to be included in our annual proxy statement if we were no longer deemed
to be an emerging growth company or a smaller reporting company; and |
| |
● |
administers
our equity compensation plans. |
Our compensation committee operates under a written
charter that satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Corporate Governance and Nominating Committee
The members of our corporate governance and nominating
committee consist of Neil Ross, Marcia Kull and Kevin Schuyler. Neil Ross serves as the chair of our corporate governance and nominating
committee. Each is independent, as that term is defined under the rules of Nasdaq. Our corporate governance and nominating committee oversees
and assists our board of directors in reviewing and recommending nominees for election as directors. Specifically, the corporate governance
and nominating committee:
| |
● |
identifies,
evaluates and makes recommendations to our board of directors regarding nominees for election to our board of directors and
its committees; |
| |
● |
considers
and make recommendations to our board of directors regarding the composition of our board of directors and its committees; |
| |
● |
reviews
developments in corporate governance practices; |
| |
● |
evaluates
the adequacy of our corporate governance practices and reporting; and |
| |
● |
evaluates
the performance of our board of directors and of individual directors. |
Our corporate governance and nominating committee
operates under a written charter that satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
The FX1 Engineering and Technical Team
Daniel Norton, Director of Engineering.
Mr. Norton has spent over 20 years working in the
technical design engineering arena for companies including Caterpillar Inc., Gerber Technology, and ATI Industrial Automation, in various
project management and engineering development positions. He currently holds over 20 patents related to innovative electromechanical solutions
to automation, boat docking, and work piece clamping. He is also the inventor of the NLS (Nautical Landing System) technology and has
been developing the Smartlander positive restraint system for use in heavy duty marine applications. From February 1, 2021 until December
2021, when he commenced working for us as our Director of Engineering, Mr. Norton served as Twin Vee’s Chief Engineer. Mr. Norton
received his Bachelor of Science degree in Mechanical Engineering in 1998, from Northeastern University and is a member of the American
Society of Mechanical Engineers. He received his Certified Scrum Product Owner certification in 2019.
Jean-Marc Zanni, Chief Technology
Officer.
Mr. Zanni specializes in integrating solutions for
marine and industrial automation projects focusing on fluid dynamics and marine engineering. Mr. Zanni has more than 20 years of industrial
high-voltage electrical system practical experience developing and implementing proprietary software control technology used to optimize
electrical energy management and battery chemistry. Mr. Zanni served as a consultant to Twin Vee until January 2022 when he became our
Chief Technology Officer. Mr. Zanni has served from June 2015 to December 2021 as the President of AE&M Engineering, a company he
founded, designing clean hybrid energy solutions for specialty markets. Prior to founding AE&M Engineering, from October 2010 to May
2015, Mr. Zanni served as the Director of Engineering ReGen Nautic USA. In this capacity he served as a proxy member for the American
Boating & Yachting Counsel (ABYC) Committee for Electric Propulsion. Mr. Zanni received his Engineering Master’s degree at E.N.S.
des Arts et Métiers (ParisTech) in June 1983.
Chandan R. Chittimalle, Chief Electrical Engineer.
Mr. Chittmalle served as Senior Controls Engineer
of Twin Vee from July 2021 until January 2022, when he commenced working for us as our Chief Electrical Engineer. He also served as the
Senior Controls Engineer of Thrustmaster of Texas, Inc. from August 2019 to November 2021 designing and developing battery charging control
systems and battery cooling systems. From August 2015 to August 2019, he served as an Electrical Design Engineer III, and from August
2012 to August 2015, her served as an Electrical Intern/ Electrical Design Engineer, at Thrustmaster of Texas, Inc. Mr. Chittimalle received
his Master of Science, Engineering from California State University in 2014.
Family Relationships
No family relationships exist between any director,
executive officer or person nominated or chosen to be a director or officer.
Board of Directors Composition
Our board of directors currently consists of seven
members. Each of our current directors will continue to serve as a director until the election and qualification of his or her successor,
or until his or her earlier death, resignation or removal.
Our amended and restated certificate of incorporation
provides that our board of directors is divided into three classes with staggered three-year terms. Only one class of directors will be
elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms.
Our current directors are divided among the three classes as follows:
| |
● |
the Class I directors are Jim Leffew and Kevin Schuyler, and their terms will expire at the annual meeting of stockholders to be held in 2023; |
| |
|
|
| |
● |
the Class II director is Marcia Kull, and her term will expire at the annual meeting of stockholders to be held in 2024; and |
| |
|
|
| |
● |
the Class III directors are Neil Ross and Joseph Visconti, and their terms will expire at the annual meeting of stockholders to be held in 2025. |
At each annual meeting of stockholders, upon the expiration
of the term of a class of directors, the successor to each such director in the class will be elected to serve from the time of election
and qualification until the third annual meeting following his or her election and until his or her successor is duly elected and qualified,
in accordance with our amended and restated certificate of incorporation. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of
our directors.
This classification of our board of directors may
have the effect of delaying or preventing changes in control of our company.
In addition, under the terms of our amended and restated
certificate of incorporation and our amended and restated bylaws, members of our board of directors may only be removed for cause. This
may also have the effect of delaying or preventing changes in control of our company.
Director Independence
Our common stock is listed on the Nasdaq Capital Market,
or Nasdaq. Under the rules of Nasdaq, independent directors must comprise a majority of a listed company’s board of directors within
one year of the completion of its initial public offering. In addition, the rules of Nasdaq require that, subject to specified exceptions,
each member of a listed company’s audit, compensation and corporate governance and nominating committees be independent. Audit committee
members and compensation committee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1,
respectively, under the Exchange Act. Under the rules of Nasdaq, a director will only qualify as an “independent director”
if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director.
To be considered to be independent for purposes of
Rule 10A-3 and under the rules of Nasdaq, a member of an audit committee of a listed company may not, other than in his or her capacity
as a member of the audit committee, the board of directors, or any other board of directors committee: (1) accept, directly or indirectly,
any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person
of the listed company or any of its subsidiaries.
To be considered independent for purposes of Rule 10C-1
and under the rules of Nasdaq, the board of directors must affirmatively determine that each member of the compensation committee is independent,
including a consideration of all factors specifically relevant to determining whether the director has a relationship to the company which
is material to that director’s ability to be independent from management in connection with the duties of a compensation committee
member, including, but not limited to: (i) the source of compensation of such director, including any consulting, advisory or other
compensatory fee paid by the company to such director; and (ii) whether such director is affiliated with the company, a subsidiary
of the company or an affiliate of a subsidiary of the company.
Our board of directors undertook a review of its composition,
the composition of its committees and the independence of our directors and considered whether any director has a material relationship
with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon
information requested from and provided by each non-employee director concerning his or her background, employment and affiliations, including
family relationships, our board of directors has determined that none of Messrs. Ross and Schuyler and Ms. Kull have relationships that
would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors
is “independent” as that term is defined under the rules of Nasdaq and Rule 10A-3 and Rule 10C-1under the Exchange
Act.
In making these determinations, our board of directors
considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances
our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Party
Transactions.”
Board of Directors Leadership Structure
Mr. Visconti serves as our Executive Chairman and
Jim Leffew serves as our Chief Executive Officer. Our Board does not have a lead independent director. Our Board determined that the creation
of a separate Executive Chairman role, distinct from the Chief Executive Officer role, enables Mr. Visconti to continue to work with our
future Chief Executive Officer, Mr. Leffew, and our senior management, to help shape and execute our strategy and direction, as well as
other key business initiatives, subject in all cases to the direction of the Board of Directors. Our Board has determined its leadership
structure is appropriate and effective given our stage of development.
Board of Directors Committees
Our board of directors has an audit committee, a compensation
committee and a corporate governance and nominating committee, having the composition and the responsibilities described below.
Audit Committee
The members of our audit committee consist of Marcia
Kull, Neil Ross and Kevin Schuyler. Mr. Schuyler is the chair of our audit committee. All of the members of the audit committee are independent,
as that term is defined under the rules of Nasdaq. The primary purpose of the audit committee is to oversee the quality and integrity
of our accounting and financial reporting processes and the audit of our financial statements. Specifically, the audit committee will:
| |
● |
select and hire the independent registered public accounting firm to audit our financial statements; |
| |
|
|
| |
● |
help to ensure the independence and performance of the independent registered public accounting firm; |
| |
|
|
| |
● |
approve audit and non-audit services and fees; |
| |
|
|
| |
● |
review financial statements and discuss with management and the independent registered public accounting firm our annual audited and quarterly financial statements, the results of the independent audit and the quarterly reviews and the reports and certifications regarding internal controls over financial reporting and disclosure controls; |
| |
|
|
| |
● |
prepare the audit committee report that the SEC requires to be included in our annual proxy statement; |
| |
● |
review reports and communications from the independent registered public accounting firm; |
| |
|
|
| |
● |
review the adequacy and effectiveness of our internal controls and disclosure controls and procedure; |
| |
|
|
| |
● |
review our policies on risk assessment and risk management; |
| |
|
|
| |
● |
review related party transactions; and |
| |
|
|
| |
● |
establish and oversee procedures for the receipt, retention and treatment of accounting related complaints and the confidential submission by our employees of concerns regarding questionable accounting or auditing matters. |
Our audit committee operates under a written charter
which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Our board of directors has determined that Mr. Schuyler
is an “audit committee financial expert” as defined in applicable SEC rules.
Compensation Committee
Our compensation committee consists of Kevin Schuyler,
Neil Ross and Marcia Kull. Mr. Schuyler is the chair of our compensation committee. All of the members of our compensation committee are
independent, as that term is defined under the rules of Nasdaq. Our compensation committee oversees our compensation policies, plans and
benefits programs. The compensation committee will also:
| |
● |
oversee our overall compensation philosophy and compensation policies, plans and benefit programs; |
| |
|
|
| |
● |
review and recommend to our board of directors for approval compensation for our executive officers and directors; |
| |
|
|
| |
● |
prepare the compensation committee report that the SEC would require to be included in our annual proxy statement if we were no longer deemed to be an emerging growth company or a smaller reporting company; and |
| |
|
|
| |
● |
administer our equity compensation plans. |
Our compensation committee operates under a written
charter which satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Corporate Governance and Nominating Committee
The members of our corporate governance and nominating
committee consist of Neil Ross and Marcia Kull. Mr. Ross is the chair of our corporate governance and nominating committee. All are independent,
as that term is defined under the rules of Nasdaq. Our corporate governance and nominating committee oversees and assists our board of
directors in reviewing and recommending nominees for election as directors. Specifically, the corporate governance and nominating committee
will:
| |
● |
identify, evaluate and make recommendations to our board of directors regarding nominees for election to our board of directors and its committees; |
| |
|
|
| |
● |
consider and make recommendations to our board of directors regarding the composition of our board of directors and its committees; |
| |
|
|
| |
● |
review developments in corporate governance practices; |
| |
|
|
| |
● |
evaluate the adequacy of our corporate governance practices and reporting; and |
| |
|
|
| |
● |
evaluate the performance of our board of directors and of individual directors. |
Our corporate governance and nominating committee
operates under a written charter which will satisfies the applicable rules of the SEC and the listing standards of Nasdaq.
Director Compensation
Prior to our IPO, our directors had not received any
compensation for their service as directors. Since our IPO, directors who are not employees will receive compensation for their service
as directors, including service as members of each committee on which they serve.
Cash Compensation
All non-employee directors will be entitled to receive
the following cash compensation for their services following the effective date of the registration statement of which this prospectus
forms a part:
| |
● |
$10,000
per year for service as a board member; |
| |
|
|
| |
● |
$20,000
per year additionally for service as chair of the audit committee; |
| |
|
|
| |
● |
$7,500
per year additionally for service as member of the audit committee (excluding committee chair); |
| |
● |
$15,000
per year additionally for service as chair of the compensation committee; |
| |
|
|
| |
● |
$5,000
per year additionally for service as member of the compensation committee (excluding committee chair); |
| |
|
|
| |
● |
$7,500
per year additionally for service as chair of the corporate governance and nominating committee; |
| |
|
|
| |
● |
$3,000
per year additionally for service as member of the corporate governance and nominating committee (excluding committee chair); |
All cash payments to non-employee directors who served
in the relevant capacity at any point during the immediately preceding prior fiscal quarter will be paid quarterly in arrears. A non-employee
director who served in the relevant capacity during only a portion of the prior fiscal quarter will receive a pro-rated payment of the
quarterly payment of the applicable cash retainer.
Equity Compensation
Effective upon the closing of our IPO, each non-employee
director received an initial grant of non-qualified stock options under our 2022 Plan to purchase 5,500 shares of our common stock, which
options will vest pro rata on a monthly basis over a period of twelve months from the grant date, subject to the grantee’s
continued service through that date. We intend to make annual equity grants to non-employee directors coincident with each annual meeting
of stockholders.
Compensation Committee Interlocks and Inside Participation
None of the members of our compensation committee
are or have been an officer or employee of our company. None of our executive officers currently serve, or in the past fiscal year has
served, on the board of directors or compensation committee (or other board of directors’ committee performing equivalent functions)
of any entity that has one or more executive officers serving on such board of directors or compensation committee, other than our parent
company.
Risk Oversight
In its governance role, and particularly in exercising
its duty of care and diligence, the board of directors is responsible for ensuring that appropriate risk management policies and procedures
are in place to protect the company’s assets and business. Our board of directors has broad and ultimate oversight responsibility
for our risk management processes and programs and executive management is responsible for the day-to-day evaluation and management of
risks to our company.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct
and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar functions. Following the completion of this offering, the code
of business conduct and ethics will be available on our website at www.forzax1.com. We intend to disclose future amendments to such code,
or any waivers of its requirements, applicable to any principal executive officer, principal financial officer, principal accounting officer
or controller or persons performing similar functions or our directors on our website identified above. The inclusion of our website address
in this prospectus does not include or incorporate by reference the information on our website into this prospectus. We will provide any
person, without charge, upon request, a copy of our code of conduct and ethics. Such requests should be made in writing to the attention
of Glenn Sonoda, Secretary, Forza X1, Inc., 3101 US-1 Fort Pierce, Florida 34982.
Limitation of Liability and Indemnification
Our amended and restated certificate of incorporation
and amended and restated bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents,
to the fullest extent permitted by Delaware law. Delaware law prohibits our amended and restated certificate of incorporation from limiting
the liability of our directors for the following:
| |
● |
any breach of the director’s duty of loyalty to us or to our stockholders; |
| |
|
|
| |
● |
acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; |
| |
|
|
| |
● |
unlawful payment of dividends or unlawful stock repurchases or redemptions; and |
| |
|
|
| |
● |
any transaction from which the director derived an improper personal benefit. |
If Delaware law is amended to authorize corporate
action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or
limited to the fullest extent permitted by Delaware law, as so amended. Our amended and restated certificate of incorporation does not
eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of
non-monetary relief, remain available under Delaware law. This provision also does not affect a director’s responsibilities under
any other laws, such as the federal securities laws or other state or federal laws. Under our bylaws, we will also be empowered to purchase
insurance on behalf of any person whom we are required or permitted to indemnify.
In the case of an action or proceeding by or in the
right of our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified
party is prohibited from receiving indemnification. We believe that these charter and bylaw provisions are necessary to attract and retain
qualified persons as directors and officers.
The limitation of liability and indemnification provisions
in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit
against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors
and officers, even though an action, if successful, might benefit us and our stockholders. Moreover, a stockholder’s investment
may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification
provisions.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which
indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification
by any director or officer.
We have entered into separate indemnification agreements
with each of our directors and executive officers, in addition to the indemnification that will be provided for in our amended and restated
certificate of incorporation and bylaws. The indemnification agreements and our amended restated certificate of incorporation and bylaws
require us to indemnify our directors, executive officers and certain controlling persons to the fullest extent permitted by Delaware
law. See the section titled “Description of Capital Stock — Limitations on Liability and Indemnification of Officers and Directors”
for additional information.
EXECUTIVE COMPENSATION
Our named executive officers for the year ended December
31, 2022, which consisted of our principal executive officer and the next most highly compensated executive officers, were:
| |
● |
Joseph
C. Visconti, Executive Chairman and Chief of Product Development |
| |
● |
Jim
Leffew, President and Chief Executive Officer |
| |
● |
Carrie
Gunnerson, Interim Chief Financial Officer |
Summary Compensation Table
The following table sets forth information regarding
the compensation that was paid to our named executive officers during the years ended December 31, 2022 and December 31, 2021.
| Name and Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Option Awards (1) |
|
All Other Compensation |
|
Total ($) |
| Joseph C. Visconti (2) |
|
|
2022 |
|
|
|
27,115 |
|
|
|
— |
|
|
|
1,742,757 |
|
|
|
— |
|
|
|
1,769,872 |
|
| Executive Chairman and Chief of Product Development |
|
|
2021 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Jim Leffew (3) |
|
|
2022 |
|
|
|
225,961 |
|
|
|
10,000 |
|
|
|
1,742,757 |
|
|
|
9,354 |
|
|
|
1,988,072 |
|
| President and Chief Executive Officer |
|
|
2021 |
|
|
|
4,808 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,808 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrie Gunnerson (4) |
|
|
2022 |
|
|
|
— |
|
|
|
— |
|
|
|
107,516 |
|
|
|
— |
|
|
|
107,516 |
|
| Interim Chief Financial Officer |
|
|
2021 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| (1) |
The amounts in the “Option Awards” column reflect the dollar amounts of the grant date fair value for the financial statement reporting purposes for stock options for the fiscal year ended December 31, 2022 in accordance with ASC 718. The fair value of the options was determined using the Black-Scholes model. For a discussion of the assumptions used in computing this valuation, see Note 12 of the Notes to audited Financial Statements included elsewhere in the Registration Statement of which this Prospectus forms a part |
| (2) |
During the year ended December 31, 2021, we did not pay any compensation for services rendered by Mr. Visconti; however, Mr. Visconti did receive compensation from Twin Vee for services performed for us and for Twin Vee. Mr. Visconti was appointed our Executive Chairman and Chief of Product Development in July 2022. |
| (3) |
Mr. Leffew was appointed our Chief Executive Officer in July 2022. |
| |
|
| (4) |
Consists of 9,354 of health insurance expenses paid in 2022. |
| |
|
| (5) |
During the year ended December 31, 2022 and 2021, we did not pay any cash compensation for services rendered by Mrs. Gunnerson, however Mrs. Gunnerson did receive compensation from Twin Vee for services performed for us and for Twin Vee and an option grant. Mrs. Gunnerson served as our Chief Financial Officer until the appointment of Ms. Camacho in August 2022 and was appointed as our Interim Chief Financial Officer on February 6, 2023 upon the resignation of Ms. Camacho. |
Outstanding Equity Awards at Fiscal Year-End (December 31, 2022)
The following table provides information about the
number of outstanding equity awards held by each of our named executive officers as of December 31, 2022:
| Option Awards |
|
|
|
Stock Awards |
| Name |
|
Number of Securities Underlying Unexercised Options (Exercisable) |
|
Number of Securities Underlying Unexercised Options (Unexercisable) |
|
Option Exercise Price |
|
Option Expiration Date |
|
Equity Incentive Plan Awards: Number of Unearned Shares That Have Not Vested |
|
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares That Have Not Vested |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Joseph C. Visconti |
|
|
133,333 |
|
|
|
266,667(1) |
|
|
|
5.00 |
|
|
8/10/2032 |
|
|
— |
|
|
|
— |
|
| Executive Chairman and Chief of Product Development |
|
|
19,444 |
|
|
|
80,556(1) |
|
|
|
1.33 |
|
|
12/14/2032 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Jim Leffew |
|
|
133,333 |
|
|
|
266,667(1) |
|
|
|
5.00 |
|
|
8/10/2032 |
|
|
— |
|
|
|
— |
|
| President and Chief Executive Officer |
|
|
19,444 |
|
|
|
80,556(1) |
|
|
|
1.33 |
|
|
12/14/2032 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Carrie Gunnerson(1) |
|
|
19,444 |
|
|
|
80,556(2) |
|
|
|
1.33 |
|
|
12/14/2032 |
|
|
— |
|
|
|
— |
|
| Interim Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Mr.
Visconti’s and Mr. Leffew’s options vest monthly over three years from the date of grant. |
| |
(2) |
Mrs.
Gunnerson served as our Chief Financial Officer until the appointment of Ms. Camacho in August 2022 and was appointed as our
Interim Chief Financial Officer on February 6, 2023 upon the resignation of Ms. Camacho. Mrs. Gunnerson’s stock vests monthly
over three years from the date of grant. |
Employment Arrangements with Our Named Executive
Officers
Jim Leffew
We have entered into a three-year employment agreement
with Mr. Leffew (the “Leffew Employment Agreement”) effective as of December 15, 2021 (the “Effective Date”) as
amended on July 22, 2022. Under the Leffew Employment Agreement, as amended Mr. Leffew serves as our President and Chief Executive Officer.
He receives an annual base salary of $125,000 and is eligible to receive an annual performance cash bonus with a target amount equal to
100% of his annual base salary, based upon achievement of performance goals established by the compensation committee of the board of
directors. In addition, upon the completion of the IPO, Mr. Leffew’s annual base salary was increased to $250,000 and he will be
granted a stock option to purchase 400,000 shares of our common stock under our proposed 2022 Stock Option Plan, which will vest pro
rata on a monthly basis over a three-year period subject to continued employment through each vesting date.
The Leffew Employment Agreement provides that Mr.
Leffew will be eligible to participate in all benefit and fringe benefit plans generally made available to our other executive officers.
In addition, he is entitled to four weeks of paid vacation per year.
The Leffew Employment Agreement provides that it shall
continue until terminated (i) by mutual agreement; (ii) due to death or disability of Mr. Leffew; (iii) by Mr. Leffew without good reason
upon 90 days written notice to us; (iv) by us for cause (as defined in the Leffew Employment Agreement); (v) by us without cause; or (vi)
by Mr. Leffew for good reason (as defined in the Leffew Employment Agreement).
Pursuant to the Leffew Employment Agreement, Mr. Leffew
is subject to a one-year post-termination non-compete and non-solicit of employees and clients. He is also bound by confidentiality provisions.
In the event of a termination by us without cause
or a termination by Mr. Leffew for good reason during the first six months following the Effective Date, he will receive a severance payment
equal to his monthly base salary as is in effect on the termination date multiplied by three (less applicable tax withholdings), such
amounts to be paid out monthly in substantially equal installments over the three month period following such termination in accordance
with our normal payroll policies. If Mr. Leffew’s employment is terminated by us without cause or if he resigns for Good Reason
after the first six months following the Effective Date, he will receive a severance payment equal to his monthly base salary as is in
effect on the termination date multiplied by six (less applicable tax withholdings), such amounts to be paid out monthly in substantially
equal installments over the six month period following such termination in accordance with the Company’s normal payroll policies.
The receipt of any termination benefits described
above is subject to Mr. Leffew’s execution of a release of claims in favor of the Company, a form of which is attached as an exhibit
to the Leffew Employment Agreement.
In the event of Mr. Leffew’s termination due
to death or disability, Mr. Leffew will receive full vesting for any outstanding, unvested equity awards granted under the 2022 Plan.
Mr. Leffew’s outstanding vested stock options will generally remain exercisable no longer than six months following such a termination.
Joseph Visconti
Upon the completion of the IPO, we entered into a
five-year employment agreement with Mr. Visconti (the “Visconti Forza Employment Agreement”). Under the Visconti Forza Employment
Agreement, Mr. Visconti serves as our Executive Chairman and Chief of Product Development. He receives an annual base salary of $75,000
and is eligible to receive an annual performance cash bonus with a target amount equal to 100% of his annual base salary, based upon achievement
of performance goals established by the compensation committee of our board of directors. In addition, Mr. Visconti was granted a stock
option to purchase 400,000 shares of common stock under our 2022 Plan, which will vest monthly over a three-year period subject to continued
employment through each vesting date.
The Visconti Forza Employment Agreement provides that
Mr. Visconti is eligible to participate in all benefit and fringe benefit plans generally made available to our other executive officers.
The Visconti Forza Employment Agreement provides that
it shall continue until terminated (i) by mutual agreement; (ii) due to death or disability of Mr. Visconti; (iii) by Mr. Visconti without
good reason upon 90 days written notice to us; (iv) by us for cause (as defined in the Visconti Forza Employment Agreement); (v) by us
without cause; or (vi) by Mr. Visconti for good reason (as defined in the Visconti Forza Employment Agreement).
Pursuant to the Visconti Forza Employment Agreement,
Mr. Visconti is subject to a one-year post-termination non-compete and non-solicit of employees and clients. He is also bound by confidentiality
provisions.
In the event of a termination by us without cause
or a termination by Mr. Visconti for good reason other than in connection with a change in control, Mr. Visconti will receive: an aggregate
of twelve months of salary continuation at his then-current base annual salary, paid out in equal installments over a 6 month period;
payment of any amount of annual bonus accrued for the year prior to the date of termination; payment of the bonus Mr. Visconti would have
received based on the attainment of performance goals had he remained employed through the end of the year of termination, pro-rated based
on the number of days in the termination year that Mr. Visconti was employed by us (paid when our other senior executives receive payment
of their annual bonuses); reimbursement of COBRA premiums for up to twelve months; and full vesting for any outstanding, unvested equity
awards granted under our 2022 Plan. Mr. Visconti’s outstanding vested stock options in Forza X1 will generally remain exercisable
no longer than six months following such a termination.
In the event of a termination by us without cause
or a resignation by Mr. Visconti for good reason within twelve months following a change in control, Mr. Visconti will receive an aggregate
of 18 months of salary continuation at his then-current base annual salary, paid out in equal installments over a twelve month period;
payment of any amount of annual bonus accrued for the year prior to the year of termination; payment of a pro-rated target annual bonus
for the year of termination based on the number of days in the termination year that Mr. Visconti was employed by us; payment of one time
his then-current target annual bonus; reimbursement of COBRA premiums for up to 18 months; and full vesting for any outstanding, unvested
equity awards granted under our 2022 Plan. Mr. Visconti’s outstanding vested stock options will generally remain exercisable no
longer than six months following such a termination.
The receipt of any termination benefits described
above is subject to Mr. Visconti’s execution of a release of claims in favor of the Company, a form of which is attached as an exhibit
to the Visconti Forza Employment Agreement.
In the event of Mr. Visconti’s termination due
to death or disability, Mr. Visconti will receive full vesting for any outstanding, unvested equity awards granted under our 2022 Plan.
Mr. Visconti’s outstanding vested stock options will generally remain exercisable no longer than six months following such a termination.
Former Chief Financial Officer -Nicole Camacho
We entered into an employment agreement with Ms. Camacho
(the “Camacho Employment Agreement”) effective in April 4, 2022. Ms. Camacho resigned as our Chief Financial Officer on February
3, 2023. Under the Camacho Employment Agreement, Ms. Camacho served as our Chief Financial Officer. She received an annual base salary
of $90,000 and was eligible to receive an annual performance cash bonus with a target amount equal to 20% of her annual base salary, based
upon achievement of performance goals established by the compensation committee of Twin Vee’s board of directors.
The Camacho Employment Agreement provided that Ms.
Camacho was eligible to participate in all benefit and fringe benefit plans generally made available to our other executive officers.
In addition, she was entitled to two weeks of paid vacation per year.
The Camacho Employment Agreement provided that it
continued until terminated (i) by mutual agreement; (ii) due to death or disability of Ms. Camacho; (iii) by Ms. Camacho without good
reason upon 90 days written notice to us; (iv) by us for cause (as defined in the Gunnerson Employment Agreement); (v) by us without cause;
or (vi) by Ms. Camacho for good reason (as defined in the Gunnerson Employment Agreement).
Pursuant to the Camacho Employment Agreement, Ms.
Camacho is subject to a one-year post-termination non-compete and non-solicit of employees and clients. She is also bound by confidentiality
provisions.
The receipt of any termination benefits described
above is subject to Ms. Camacho’s execution of a release of claims in favor of the Company, a form of which is attached as an exhibit
to the Camacho Employment Agreement.
Carrie Gunnerson
Employment Agreement with Twin Vee
Twin Vee entered into a five-year employment agreement
with Ms. Gunnerson (the “Gunnerson Employment Agreement”) effective in October 2021. Under the Gunnerson Employment Agreement,
Ms. Gunnerson serves as Twin Vee’s Chief Financial Officer. She receives an annual base salary of $175,000 and is eligible to receive
an annual performance cash bonus with a target amount equal to 30% of her annual base salary, based upon achievement of performance goals
established by the compensation committee of Twin Vee’s board of directors. Ms. Gunnerson also received a stock option to purchase
136,000 shares of Twin Vee’s common stock under its 2021 Plan, vesting monthly over a five-year period subject to continued employment
through each vesting date. Ms. Gunnerson also received a stock option to purchase 100,000 shares of our common stock for her provision
of consulting services to us.
The Gunnerson Employment Agreement provides that Ms.
Gunnerson would be eligible to participate in all benefit and fringe benefit plans generally made available to Twin Vee’s other
executive officers. In addition, she is entitled to four weeks of paid vacation per year.
The Gunnerson Employment Agreement provides that it
shall continue until terminated (i) by mutual agreement; (ii) due to death or disability of Ms. Gunnerson; (iii) by Ms. Gunnerson without
good reason upon 90 days written notice to Twin Vee; (iv) by Twin Vee for cause (as defined in the Gunnerson Employment Agreement); (v)
by Twin Vee without cause; or (vi) by Ms. Gunnerson for good reason (as defined in the Gunnerson Employment Agreement).
Pursuant to the Gunnerson Employment Agreement, Ms.
Gunnerson is subject to a one-year post-termination non-compete and non-solicit of employees and clients. She is also bound by confidentiality
provisions.
In the event of a termination by Twin Vee without
cause or a termination by Ms. Gunnerson for good reason during the first six (6) months following the effective date of the Gunnerson
Employment Agreement, Ms. Gunnerson will receive an aggregate of three months of salary continuation at her then-current base annual salary,
paid out in equal installments over a three-month period. In the event of a termination by Twin Vee without cause or a termination by
Ms. Gunnerson for good reason after the first six (6) months following the effective date of the Gunnerson Employment Agreement, Ms. Gunnerson
will receive an aggregate of six months of salary continuation at her then-current base annual salary, paid out in equal installments
over a six-month period. Ms. Gunnerson’s outstanding vested stock options will generally remain exercisable no longer than six months
following such a termination.
The receipt of any termination benefits described
above is subject to Ms. Gunnerson’s execution of a release of claims in favor of the Company, a form of which is attached as an
exhibit to the Gunnerson Employment Agreement.
In the event of Ms. Gunnerson’s termination
due to death or disability, Ms. Gunnerson will receive full vesting or any outstanding, unvested equity awards granted under Twin Vee’s
2021 Plan. Ms. Gunnerson’s outstanding vested stock options will generally remain exercisable no longer than six months following
such a termination.
Employee Benefit and Stock Plans
Simple IRA Plan
We maintain a Simple IRA retirement savings plan for
the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements. Under the Simple IRA,
eligible employees may elect to defer a portion of their compensation, within the limits prescribed by the Code, on a pre-tax basis through
contributions to the Simple IRA plan. The Simple IRA plan authorizes employer safe harbor matching contributions equal to 3% of covered
compensation for eligible employees. The Simple IRA plan is intended to qualify under Sections 401(a) and 501(a) of the Code. As
a tax-qualified retirement program, contributions to the Simple IRA plan and earnings on those contributions are not taxable to the employees
until distributed from the Simple IRA plan.
2022 Stock Incentive Plan
We adopted the Forza X1 2022 Stock Incentive Plan,
or the 2022 Plan. The principal provisions of the 2022 Plan are summarized below.
Administration
The 2022 Plan vests broad powers in a committee to
administer and interpret the 2022 Plan. Our board of directors has initially designated the compensation committee to administer the 2022
Plan. Except when limited by the terms of the 2022 Plan, the compensation committee has the authority to, among other things: select the
persons to be granted awards; determine the type, size and term of awards; establish performance objectives and conditions for earning
awards; determine whether such performance objectives and conditions have been met; and accelerate the vesting or exercisability of an
award. In its discretion, the compensation committee may delegate all or part of its authority and duties with respect to granting awards
to one or more of our officers, subject to certain limitations and provided applicable law so permits.
Our board of directors may amend, alter or discontinue
the 2022 Plan and the compensation committee may amend any outstanding award at any time; provided, however, that no such amendment or
termination may adversely affect awards then outstanding without the holder’s permission. In addition, any amendments seeking to
increase the total number of shares reserved for issuance under the 2022 Plan or modifying the classes of participants eligible to receive
awards under the 2022 Plan will require ratification by our stockholders in accordance with applicable law. Additionally, as described
more fully below, neither the compensation committee nor the board of directors is permitted to reprice outstanding options or stock appreciation
rights without shareholder consent.
Eligibility
Any of our employees, directors, consultants, and
other service providers, or those of our affiliates, are eligible to participate in the 2022 Plan and may be selected by the compensation
committee to receive an award.
Vesting
The compensation committee determines the vesting
conditions for awards. These conditions may include the continued employment or service of the participant, the attainment of specific
individual or corporate performance goals, or other factors as determined in the compensation committee’s discretion (collectively,
“Vesting Conditions”).
Shares of Stock Available for Issuance
Subject to certain adjustments, the maximum number
of shares of common stock that may be issued under the 2022 Plan in connection with awards is 1,970,250 shares, which takes into account
awards made available on January 1, 2023 due to the evergreen provision in the 2022 Plan. In addition, the maximum number of shares of
common stock that may be issued under the 2022 Plan will automatically increase on January 1 of each calendar year for a period of ten
years commencing on January 1, 2023 and ending on (and including) January 1, 2032, in a number of shares of common stock equal to 4.5%
of the total number of shares of common stock outstanding on December 31 of the preceding calendar year; provided, however that the board
of directors may act prior to January 1 of a given calendar year to provide that the increase for such year will be a lesser number of
shares of common stock. We have issued options to purchase an aggregate of 1,441,500 shares of our common stock. All available shares
may be utilized toward the grant of any type of award under the 2022 Plan. The 2022 Plan imposes a $250,000 limitation on the total grant
date fair value of awards granted to any non-employee director in his or her capacity as a non-employee director in any single calendar
year.
Director Compensation
2022 Director Compensation
Prior to the closing of our IPO in August 2022, our
directors did not receive any compensation for their service as directors. After the closing of our IPO, directors who are not employees
received compensation for their service as directors, including service as members of each committee on which they serve.
Cash Compensation
All non-employee directors are entitled to receive
the following cash compensation for their services:
| |
● |
$10,000
per year for service as a board member; |
| |
● |
$20,000
per year additionally for service as chair of the audit committee; |
| |
● |
$7,500
per year additionally for service as member of the audit committee (excluding committee chair); |
| |
● |
$15,000
per year additionally for service as chair of the compensation committee; |
| |
● |
$5,000
per year additionally for service as member of the compensation committee (excluding committee chair); |
| |
● |
$7,500
per year additionally for service as chair of the corporate governance and nominating committee; |
| |
● |
$3,000
per year additionally for service as member of the corporate governance and nominating committee (excluding committee chair); |
All cash payments to non-employee directors who served
in the relevant capacity at any point during the immediately preceding prior fiscal quarter will be paid quarterly in arrears. A non-employee
director who served in the relevant capacity during only a portion of the prior fiscal quarter will receive a pro-rated payment of the
quarterly payment of the applicable cash retainer.
Equity Compensation
Effective upon the closing of our IPO, each non-employee
director received an initial grant of non-qualified stock options under our 2022 Plan to purchase 5,500 shares of our common stock, which
options vest pro rata on a monthly basis over a period of twelve months from the grant date, subject to the grantee’s
continued service through that date. We intend to make annual equity grants to non-employee directors coincident with each annual meeting
of stockholders.
Director Compensation Table
The following table sets forth information regarding
the compensation earned for service on our board of directors by our non-employee directors during the year ended December 31, 2022. The
compensation for each of Messrs. Visconti and Leffew as an executive officer is set forth above under “—Summary Compensation
Table.” Messrs. Visconti and Leffew receive no compensation for service as a director.
(a)
Name |
|
(b)
Fees Earned or Paid in Cash ($) |
|
(c)
Stock Awards ($) |
|
(d)
Option Awards(1) ($) |
|
(e)
Non-Equity Incentive Plan Compensation ($) |
|
(f)
Nonqualified Deferred Compensation Earnings ($) |
|
(g)
All Other Compensation ($) |
|
(h)
Total ($) |
| Marcia Kull |
|
|
10,625 |
|
|
|
— |
|
|
|
22,485 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,110 |
|
| Neil Ross |
|
|
15,000 |
|
|
|
— |
|
|
|
22,485 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
37,485 |
|
| Kevin Schuyler |
|
|
20,000 |
|
|
|
— |
|
|
|
22,485 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,485 |
|
| |
(1) |
The
amounts in the “Option Awards” column reflect the dollar amounts of the grant date fair value for the financial statement
reporting purposes for stock options for the fiscal year ended December 31, 2022 in accordance with ASC 718. The fair value of the
options was determined using the Black-Scholes model. For a discussion of the assumptions used in computing this valuation, see Note
12 of the Notes to the audited Financial Statements included elsewhere in the Registration Statement of which this Prospectus forms
a part. |
| |
(2) |
As
of December 31, 2022, the following are the outstanding aggregate number of option awards held by each of our directors who were
not also Named Executive Officers: |
| Name |
|
Option Awards (#) |
| Marcia Kull |
|
|
5,500 |
|
| Neil Ross |
|
|
5,500 |
|
| Kevin Schuyler |
|
|
5,500 |
|
During 2022, each non-employee member of the Board of Directors receives
an annual cash fee of $5,000, all non-employee directors receive an annual cash fee of $5,000, $4,000 and $3,000 for service on the Audit,
Compensation and Corporate Governance and Nominating Committee, respectively, and the Chairman of the Audit, Compensation and Corporate
Governance and Nomination Committee receives a cash fee of $12,000, $10,000 and $5,000, respectively. In addition, each non-employee member
of the Board of Directors was issued an option exercisable for 5,500 shares of our common stock, for a term of one year, vesting monthly
over one year of the date of grant.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Each of the related party transactions described below
was negotiated on an arm’s length basis. We believe that the terms of such agreements are as favorable as those we could have obtained
from parties not related to us. The following are summaries of certain provisions of our related party agreements and are qualified in
their entirety by reference to all of the provisions of such agreements. Because these descriptions are only summaries of the applicable
agreements, they do not necessarily contain all of the information that you may find useful. We therefore urge you to review the agreements
in their entirety. Copies of the forms of the agreements have been filed as exhibits to the registration statement and are available electronically
on the website of the SEC at www.sec.gov.
In addition to the compensation arrangements, including
employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed
in the sections titled “Management” and “Executive Compensation,” the following is a description of each transaction
since January 1, 2021 or any currently proposed transaction in which:
| |
● |
we have been or are to be a party to; |
| |
|
|
| |
● |
the amount involved exceeded or exceeds $120,000 or 1% of the average of our total assets as of the end of the last two completed fiscal years; and |
| |
|
|
| |
● |
any of our directors, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest. |
For information on our compensation arrangements,
including employment, termination of employment and change in control arrangements, with our directors and executive officers, see the
section titled “Executive Compensation”.
Joseph Visconti, our Executive Chairman and Chief
of Product Development is also the Chairman of the Board and Chief Executive Officer of our parent company, Twin Vee. These shares are
owned directly by Twin Vee PowerCats Co. Mr. Visconti owns 25.84% of the outstanding stock of Twin Vee PowerCats Co. Twin Vee PowerCats
Co. is the owner of 9,520,000 shares of common stock. As a controlling shareholder of Twin Vee PowerCats Co., Mr. Visconti is deemed to
have control over the shares of common stock of our company owned by Twin Vee PowerCats Co. Mr. Visconti disclaims beneficial ownership
of these securities.
As of March 31, 2023 and December 31, 2022, we had $0 and $169,851 due
to Twin Vee. Twin Vee funded our working capital needs, primarily for prototyping, consulting services and payroll, prior to their $2,000,000
investment. On May 25, 2022, Twin Vee provided an additional $500,000 for ongoing operating costs.
As of March 31, 2023 and December 31, 2022 we had
current assets of $129,371 and $0, respectively, due from Twin Vee, due to intercompany transactions.
Pursuant to a management
agreement with Twin Vee, dated October 2021, and a subsequent agreement dated September 2022, for various management services, we
paid $5,000 monthly through August of 2021, and $6,800 monthly thereafter for management fee associated with the use of shared management
resources. The September 2022 agreement has a term of one year and will expire on August 31, 2023 During the period of inception (October
15, 2021) through December 31, 2021, we recorded management fees of $15,000 and for the three months ended March 31, 2023, we recorded
management fees of $20,400, pursuant to a management agreement with Twin Vee paid to Twin Vee pursuant to a management agreement, dated
October 1, 2021, with it for various management services. The management services include human resources, accounting services, investor
relations, shareholder relations, consultation during the IPO process and review of the assets owned and operated by us. Following the
completion of the IPO we transitioned the management agreement with Twin Vee from an agreement providing management services to an administrative
services agreement under which Twin Vee provides us with certain administrative services, such as procurement, shipping, receiving, storage
and use of Twin Vee’s facility until our new planned facility is completed. We recently began using the services of Ms. Gunnerson
for our accounting needs pursuant to the agreement.
Our corporate headquarters
is located at Twin Vee’s premises, in addition to the above management fee, we have a month-to month arrangement and pay rent to
Twin Vee monthly, based on the square footage we require. For the three months ended March 31, 2023 we recorded rent expense of approximately
$10,200, associated with our month- to- month arrangement to utilize certain space at Twin Vee’s facility. For the year ended December
31, 2022 we recorded rent expense of $20,386, associated with our month- to- month arrangement to utilize certain space at our Twin Vee’s
facility. We incurred $850 per month for rent expense for approximately 1,000 square feet, from January of 2021 through August 2022, in
September of 2022 the month-to-month rent was adjusted to $3,400 per month, as the number of test boats had increased from 1 to 5,
and we required additional space, approximately 4,100 square feet. The Company’s use of Twin Vee’s facilities does vary based
on the number of prototype units on property and in process.
During the three
months ended March 31, 2023, we repaid advancements from Twin Vee of $409,505 and had advancements from Twin Vee of $110,283. During
the year ended December 31, 2022 we repaid advancements from Twin Vee of $1,099,468.
Indemnification Agreements
We intended to enter, into separate indemnification
agreements with each of our directors and executive officers, in addition to the indemnification that is provided for in our amended and
restated certificate of incorporation and bylaws. The indemnification agreements and our amended restated certificate of incorporation
and bylaws require us to indemnify our directors, executive officers and certain controlling persons to the fullest extent permitted by
Delaware law. See the section titled “Management—Limitation of Liability and Indemnification” additional information.
Assignment of Assets Agreement; Assignment of Intellectual
Property
We and Twin Vee have entered into an agreement pursuant
to which Twin Vee has assigned to us (i) certain technology, assets and property rights, and (ii) certain intellectual property related
to Twin Vee’s EV business.
Assignment of Land Contract
We and Twin Vee had entered into an assignment of
land contract pursuant to which Twin Vee had assigned to us a land purchase agreement that provides us with an option to acquire 14.5
acres of undeveloped land in Fort Pierce, Florida for $750,000. On December 6, 2021, we paid the $50,000 refundable deposit on the land
purchase agreement from our working capital. The land purchase agreement provided that we must diligently pursue zoning change and site
plan approval with St. Lucie County for the manufacturing facility within two hundred ten (210) days of the effective date of the contract
(the “Site Plan Contingency”). In the event we cannot obtain the Site Plan Contingency, by the 210-day deadline, within three
(3) business days after the expiration of the deadline, we may either (i) elect to terminate the land purchase contract or (ii) waive
the Site Plan Contingency and proceed to the closing. It has since been determined that the cost associated with building our factory
on the Fort Pierce, Florida site is prohibitive. As a result, on April 28, 2022, Twin Vee and we requested, and were granted, a release
and termination of the land contract for this vacant parcel of land.
Transition Services Agreement
Following the completion of the IPO we transitioned
the management agreement with Twin Vee from an agreement providing management services to a transition services agreement under which
Twin Vee provides us at their cost with certain services, such as procurement, shipping, receiving, storage and use of Twin Vee’s
facility until our new planned facility is completed. In addition, we recently began using the services of Ms. Gunnerson for our accounting
needs pursuant to the agreement. There is limited additional manufacturing capacity at Twin Vee’s current facility for the manufacture
of our electric boats. As such, our ability to utilize Twin Vee’s manufacturing capacity pending completion of our own facility
will be subject to its availability as determined by Twin Vee. The transition services agreement will operate on a month-to-month basis.
Our Policy Regarding Related Party Transactions
Our board of directors recognizes the fact that transactions
with related persons present a heightened risk of conflicts of interest and/or improper valuation (or the perception thereof). Our board
of directors has adopted a written policy on transactions with related persons that is in conformity with the requirements for issuers
having publicly held common stock that is listed on the Nasdaq Stock Market. Under the new policy:
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any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by the Audit Committee; and |
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any employment relationship or transaction involving an executive officer and any related compensation must be approved by the compensation committee of the board of directors or recommended by the compensation committee to the board of directors for its approval. |
In connection with the review and approval or ratification
of a related person transaction:
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management must disclose to the committee or disinterested directors, as applicable, the name of the related person and the basis on which the person is a related person, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction; |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction complies with the terms of our agreements governing our material outstanding indebtedness that limit or restrict our ability to enter into a related person transaction; |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction will be required to be disclosed in our applicable filings under the Securities Act or the Exchange Act, and related rules, and, to the extent required to be disclosed, management must ensure that the related person transaction is disclosed in accordance with the Securities Act and the Exchange Act and related rules; and |
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management must advise the committee or disinterested directors, as applicable, as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act. |
In addition, the related person transaction policy
provides that the committee or disinterested directors, as applicable, in connection with any approval or ratification of a related person
transaction involving a non-employee director, should consider whether such transaction would compromise the director’s status as
an “independent,” “outside,” or “non-employee” director, as applicable, under the rules and regulations
of the SEC, the Nasdaq Stock Market, and the Code.
Director Independence
The information included under the heading “Management—Director
Independence”.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership
of our common stock as of June 6, 2023, by:
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each
person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock; |
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each
of the named executive officers listed in the Summary Compensation Table; |
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each
of our directors; and |
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all
of our current executive officers and directors as a group. |
As of June 6, 2023, we had 10,450,000 shares of common
stock outstanding.
We have determined beneficial ownership in accordance
with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting
power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to
the exercise of profits interest units, options, warrants or other rights that are either immediately exercisable or exercisable on or
before August 4, 2023, which is approximately 60 days after the date of this Registration Statement. These shares are deemed to be outstanding
and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person,
but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Shares owned after
the offering is based upon 13,875,000 shares of common stock to be outstanding after this offering. Unless otherwise indicated, the persons
or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them,
subject to applicable community property laws.
Unless otherwise indicated, the address of each beneficial
owner listed in the table below is c/o Forza X1, Inc. 3101 S. US-1 Ft. Pierce, Florida 34982.
| Name of Beneficial Owner | |
Shares Beneficially Owned | |
Before Offering Percentage | |
After Offering Percentage |
| Named Executive Officers and Directors | |
| | | |
| | | |
| | |
| Joseph Visconti (1) | |
| 1,879,377 | | |
| 17.73 | % | |
| 13.40 | % |
| Carrie Gunnerson(2) | |
| 19,444 | | |
| — | | |
| — | |
| Jim Leffew(3) | |
| 156,177 | | |
| 1.48 | % | |
| 1.11 | % |
| Neil Ross(4) | |
| 5,500 | | |
| — | | |
| — | |
| Marcia Kull(4) | |
| 10,105 | | |
| — | | |
| — | |
| Kevin Schuyler(4) | |
| 19,164 | | |
| — | | |
| — | |
| All executive officers and directors as a group (7 persons) | |
| 2,089,767 | | |
| 19.40 | | |
| 14.72 | % |
| 5% Stockholders | |
| | | |
| | | |
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| Twin Vee PowerCats Co. and Twin Vee PowerCats, Inc.(1) | |
| 7,000,000 | | |
| 66.99 | % | |
| 50.45 | % |
| * |
Represents beneficial ownership of less than one percent. |
| (1) |
Joseph
Visconti is our Executive Chairman and Chief of Product Development. He
is also the Chairman of the Board and Chief Executive Officer of our parent company, Twin Vee. These shares are owned directly by Twin
Vee. Mr. Visconti owns 24.38% of the outstanding stock of Twin Vee. Twin Vee is the owner of 7,000,000 shares of common stock. Mr. Visconti
is deemed to have control over the shares of common stock of our company owned by Twin Vee. Mr. Visconti disclaims beneficial ownership
of these securities. Includes.152,777 shares issuable pursuant to stock options exercisable within 60 days of June 6, 2023. Mr. Visconti
was issued options to purchase (i) 100,000 shares of our common stock on December 15, 2022, of which 19,444 will vest and be exercisable
and be exercisable within 60 days of June 6, 2023 and (ii) an option to purchase 400,000 shares of our common stock immediately after
the IPO of which 133,333 will vest and be exercisable and be exercisable within 60 days of June 6, 2023 |
| (2) |
Includes
19,444 shares issuable pursuant to stock options exercisable within 60
days of June 6, 2023. Includes 233,000 shares issuable pursuant to stock options exercisable within 60 days of June 6, 2023. Ms. Gunnerson
was issued options to purchase 100,000 shares of our common stock on December 15, 2022, of which 19,444 will vest and be exercisable and
be exercisable within 60 days of June 6, 2023 |
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|
| (3) |
Includes
152,777 shares issuable pursuant to stock options exercisable within 60
days of June 6, 2023. Mr. Leffew was issued options to purchase (i)100,000 shares of our common stock on December 15, 2022, of which
19,444 will vest and be exercisable and be exercisable within 60 days of June 6, 2023 and (ii) an option to purchase 400,000 shares of
our common stock immediately after the IPO of which 133,333 will vest and be exercisable and be exercisable within 60 days of June 6,
2023 |
| (4) |
Our
non-employee directors, Messrs. Ross and Schuyler and Ms. Kull were issued
an option to purchase 5,500 shares of our common stock immediately after the IPO all of which will vest and be exercisable within 60 days
of June 6, 2023.Mr. Visconti, Mr. Leffew and Mrs. Gunnerson were issued options to purchase 100,000 shares of our common stock on December
15, 2022, of which 19,444 will vest and be exercisable and be exercisable within 60 days of June 6, 2023. |
Changes In Control
None.
Equity Compensation Plan Information
On August 12, 2022, we adopted
the Forza X1, Inc. 2022 Stock Incentive Plan (the “2022 Plan”). The following table provides information, as of December 31,
2022 with respect to options outstanding under the 2022 Plan.
| Plan
Category |
|
Number
of Securities to be Issued upon Exercise of Outstanding Equity Compensation Plan Options* |
|
Weighted-
Average Exercise Price of Outstanding Equity Compensation Plan Options |
|
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the
first column) |
| Equity
compensation plans approved by security holders |
|
|
1,500,000 |
|
|
|
3.41 |
|
|
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58,500 |
|
| Equity
compensation plans not approved by security holders |
|
|
— |
|
|
|
|
|
|
|
|
|
| Total |
|
|
1,500,000 |
|
|
|
3.41 |
|
|
|
58,500 |
|
DESCRIPTION OF CAPITAL STOCK
The following description
of our capital stock and the provisions of our amended and restated certificate of incorporation and our amended and restated bylaws are
summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws.
We have filed copies of these documents with the SEC as exhibits to our registration statement of which this prospectus forms a part.
The descriptions of the common stock and preferred stock reflect changes to our capital structure that will occur prior to and upon the
closing of this offering.
General
Our authorized capital stock consists of:
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100,000,000 shares of common stock, par value $0.001 per share; and |
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10,000,000 shares of preferred stock, par value $0.001 per share. |
We currently have 10,450,000 shares of common stock
outstanding. We are selling shares of common stock in this offering based on an assumed public offering price of $2.92 per share. All of our
common stock outstanding upon consummation of this offering will be fully paid and non-assessable.
The following description of our capital stock and
provisions of our amended and restated certificate of incorporation and bylaws are summaries and are qualified by reference to the amended
and restated certificate of incorporation and bylaws. We urge you to read our amended and restated certificate of incorporation and bylaws
which are included as exhibits to the registration statement of which this prospectus forms a part.
Certain provisions of our amended and restated certificate
and our amended and restated bylaws summarized below may be deemed to have an anti-takeover effect and may delay or prevent a tender offer
or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over
the market price for the shares of common stock.
Common Stock
Holders of shares of our common stock are entitled
to one vote for each share held of record on all matters submitted to a vote of stockholders. Except as otherwise provided in our amended
and restated certificate of incorporation or as required by law, all matters to be voted on by our stockholders other than matters relating
to the election and removal of directors must be approved by a majority of the shares present in person or by proxy at the meeting and
entitled to vote on the subject matter or by a written resolution of the stockholders representing the number of affirmative votes required
for such matter at a meeting. The holders of our common stock do not have cumulative voting rights in the election of directors.
Holders of shares of our common stock are entitled
to receive dividends when and if declared by our board of directors out of funds legally available therefor, subject to any statutory
or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any
outstanding preferred stock.
Upon our dissolution or liquidation or the sale of
all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and subject to any rights
of preferred stockholders, the holders of shares of our common stock will be entitled to receive pro rata our remaining assets available
for distribution.
Holders of shares of our common stock do not have
preemptive, subscription, redemption, or conversion rights. There will be no redemption or sinking fund provisions applicable to the common
stock.
Preferred Stock
Our Board of Directors has the authority, without
action by our stockholders, to designate and issue up to 10,000,000 shares of preferred stock in one or more series or classes and to
designate the rights, preferences and privileges of each series or class, which may be greater than the rights of our common stock. There
are no shares of preferred stock designated or outstanding. It is not possible to state the actual effect of the issuance of any shares
of preferred stock upon the rights of holders of our common stock until our Board of Directors determines the specific rights of the holders
of the preferred stock. However, the effects might include:
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restricting
dividends on our common stock; |
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diluting
the voting power of our common stock; |
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impairing
liquidation rights of our common stock; or |
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delaying
or preventing a change in control of us without further action by our stockholders. |
The Board of Directors’ authority to issue preferred
stock without stockholder approval could make it more difficult for a third-party to acquire control of our company and could discourage
such attempt. We have no present plans to issue any shares of preferred stock.
Forum Selection
Our amended and restated certificate of incorporation
provides that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will,
to the fullest extent permitted by applicable law, be the sole and exclusive forum for (i) any derivative action or proceeding brought
on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees
to us or our stockholders; (iii) any action asserting a claim against us, any director or our officers or employees arising pursuant to
any provision of the DGCL, our amended and restated certificate of incorporation or our bylaws; or (iv) any action asserting a claim against
us, any director or our officers or employees that is governed by the internal affairs doctrine, except, as to each of clauses (i) through
(iv) above, for any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction
of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten
(10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery,
or for which the Court of Chancery does not have subject matter jurisdiction. The amended and restated certificate of incorporation further
provides that the choice of the Court of Chancery as the sole and exclusive forum for any derivative action or proceeding brought on behalf
of the Corporation does not apply to suits to enforce a duty or liability created by the Securities Act or the Exchange Act or any other
claim for which the federal courts have exclusive jurisdiction.
Anti-Takeover Provisions
Our amended and restated certificate of incorporation
and bylaws contain provisions that may delay, defer, or discourage another party from acquiring control of us. We expect that these provisions,
which are summarized below, will discourage coercive takeover practices or inadequate takeover bids. These provisions are also designed
to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an
improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power
to discourage acquisitions that some stockholders may favor.
Section 203 of the Delaware General Corporation
Law. We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a
publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder”
for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status
with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination”
includes, among other things, a merger or consolidation involving us and the “interested stockholder” and the sale of more
than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of
our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.
Classified Board of Directors. Our amended
and restated certificate of incorporation divides our board of directors into staggered three-year terms. In addition, our amended and
restated certificate of incorporation and our amended and restated bylaws provide that directors may be removed only for cause. Under
our amended and restated certificate of incorporation and amended and restated bylaws, any vacancy on our board of directors, including
a vacancy resulting from an enlargement of our board of directors, may be filled only by the affirmative vote of a majority of our directors
then in office, even though less than a quorum of the board of directors. The classification of our board of directors and the limitations
on the ability of our stockholders to remove directors and fill vacancies could make it more difficult for a third party to acquire, or
discourage a third party from seeking to acquire, control of us.
Authorized but Unissued Shares. The authorized
but unissued shares of our common stock are available for future issuance without stockholder approval, subject to any limitations imposed
by the listing standards of the Nasdaq Stock Market. These additional shares may be used for a variety of corporate finance transactions,
acquisitions, and employee benefit plans. The existence of authorized but unissued and unreserved common stock could make it more difficult
or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger, or otherwise.
Stockholder Action by Written Consent. Our
amended and restated certificate of incorporation and our amended and restated bylaws provide that any action required or permitted to
be taken by our stockholders at an annual meeting or special meeting of stockholders may only be taken if it is properly brought before
such meeting and may be taken by written consent in lieu of a meeting only if the action to be effected by such written consent and the
taking of such action by such written consent have been previously approved by the board of directors.
Special Meetings of Stockholders. Our amended
and restated bylaws also provide that, except as otherwise required by law, special meetings of the stockholders may only be called by
our board of directors.
Advance Notice Requirements for Stockholder Proposals
and Director Nominations. In addition, our amended and restated bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders, including proposed nominations of candidates for election to our board of directors.
In order for any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice and
duration of ownership requirements and provide us with certain information. Stockholders at an annual meeting may only consider proposals
or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board of directors or by
a qualified stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has delivered timely
written notice in proper form to our secretary of the stockholder’s intention to bring such business before the meeting. These provisions
could have the effect of delaying stockholder actions that are favored by the holders of a majority of our outstanding voting securities
until the next stockholder meeting.
Amendment of Certificate of Incorporation or Bylaws.
The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any
matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. Upon completion of this offering, our amended and restated
bylaws may be amended or repealed by a majority vote of our board of directors or by the affirmative vote of the holders of at least 66
2/3% of the votes which all our stockholders would be eligible to cast in an election of directors. In addition, the affirmative vote
of the holders of at least 66 2/3% of the votes which all our stockholders would be eligible to cast in an election of directors will
be required to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our amended and restated certificate
described in the prior three paragraphs.
Limitations on Liability and Indemnification of
Officers and Directors
Our amended and restated certificate and amended and
restated bylaws provide indemnification for our directors and officers to the fullest extent permitted by the Delaware General Corporation
Law. Prior to the completion of this offering, we intend to enter into indemnification agreements with each of our directors that may,
in some cases, be broader than the specific indemnification provisions contained under Delaware law. In addition, as permitted by Delaware
law, our amended and restated certificate of incorporation includes provisions that eliminate the personal liability of our directors
for monetary damages resulting from breaches of certain fiduciary duties as a director. The effect of these provisions is to restrict
our rights and the rights of our stockholders in derivative suits to recover monetary damages against a director for breach of fiduciary
duties as a director, except that a director will be personally liable for:
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any breach of his duty of loyalty to us or our stockholders; |
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acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; |
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any transaction from which the director derived an improper personal benefit; or |
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improper distributions to stockholders. |
These limitations of liability do not apply to liabilities
arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive relief
or rescission.
Our amended and restated bylaws provide that we will
indemnify our directors and officers to the fullest extent permitted by law, and may indemnify employees and other agents. Our amended
and restated bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition
of any action or proceeding.
We plan to enter into separate indemnification agreements
with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers for any and
all expenses (including reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees) judgments, fines and amounts
paid in settlement actually and reasonably incurred by such directors or officers or on his or her behalf in connection with any action
or proceeding arising out of their services as one of our directors or officers, or any of our subsidiaries or any other company or enterprise
to which the person provides services at our request provided that such person follows the procedures for determining entitlement to indemnification
and advancement of expenses set forth in the indemnification agreement. We believe that these bylaw provisions and indemnification agreements
are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions
in our amended and restated certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even
though an action, if successful, might provide a benefit to us and our stockholders. Our results of operations and financial condition
may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification
provisions.
Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that, in the opinion
of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
At present, there is no pending litigation or proceeding
involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened
litigation or proceeding that may result in a claim for indemnification.
Dissenters’ Rights of Appraisal and Payment
Under the Delaware General Corporation Law, with certain
exceptions, our stockholders will have appraisal rights in connection with a merger or consolidation of Forza X1, Inc. Pursuant to the
Delaware General Corporation Law, stockholders who properly request and perfect appraisal rights in connection with such merger or consolidation
will have the right to receive payment of the fair value of their shares as determined by the Delaware Court of Chancery.
Stockholders’ Derivative Actions
Under the Delaware General Corporation Law, any of
our stockholders may bring an action in our name to procure a judgment in our favor, also known as a derivative action, provided that
the stockholder bringing the action is a holder of our shares at the time of the transaction to which the action relates or such stockholder’s
stock thereafter devolved by operation of law.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock
is Interwest Transfer Company, Inc.
Trading Symbol and Market
Our common stock is listed on the Nasdaq Capital Market
under the symbol “FRZA.”
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS OF OUR COMMON STOCK
The following is a summary of the material U.S. federal
income tax consequences of the ownership and disposition of our common stock acquired in this offering by a “non-U.S. holder”
(as defined below), but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary
is based upon the provisions of the United States Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated
thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively,
so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought, and do not intend to
seek, any ruling from the Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following
summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.
This summary also does not address the tax considerations
arising under the laws of any state or local or non-U.S. jurisdiction or under U.S. federal gift and estate tax rules, or rising out of
other non-income tax rules, except to the limited extent set forth below. In addition, this discussion does not address tax considerations
applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without
limitation:
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banks, insurance companies, regulated investment companies, real estate investment trusts or other financial institutions; |
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persons subject to the alternative minimum tax or the tax on net investment income; |
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persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement; |
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tax-exempt organizations or governmental organizations; |
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pension plans and tax-qualified retirement plans; |
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controlled foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income tax; |
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partnerships or other entities or arrangements treated as partnership for U.S. federal income tax purposes (and investors therein); |
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brokers or dealers in securities or currencies; |
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traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; |
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persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth below); |
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certain former citizens or long-term residents of the United States; |
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persons who hold our common stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction or integrated investment; |
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persons who hold or receive our common stock pursuant to the exercise of any option or otherwise as compensation; |
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persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment); and |
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persons deemed to sell our common stock under the constructive sale provisions of the Code. |
In addition, if a partnership, entity or arrangement
classified as a partnership or flow-through entity for U.S. federal income tax purposes holds our common stock, the tax treatment of a
partner generally will depend on the status of the partner and upon the activities of the partnership or other entity. A partner in a
partnership or other such entity that will hold our common stock should consult his, her or its own tax advisor regarding the tax consequences
of the ownership and disposition of our common stock through a partnership or other such entity, as applicable.
This summary is for informational purposes only
and is not tax advice. Each non-U.S. holder is urged to consult its own tax advisor with respect to the application of the U.S. federal
income tax laws to its particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common
stock arising under the U.S. federal gift or estate tax rules or under the laws of any state, local, non-U.S. or other taxing jurisdiction
or under any applicable tax treaty.
Non-U.S. Holder Defined
For purposes of this discussion, a “non-U.S.
holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is neither a “U.S. person”
nor an entity (or arrangement) treated as a partnership. A “U.S. person” is any person that, for U.S. federal income tax purposes,
is or is treated as any of the following:
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an individual who is a citizen or resident of the United States; |
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a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or any political subdivision thereof, or otherwise treated as such for U.S. federal income tax purposes; |
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an estate whose income is subject to U.S. federal income tax regardless of its source; or |
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a trust (x) whose administration is subject to the primary supervision of a U.S. court and that has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (y) that has made a valid election under applicable Treasury Regulations to be treated as a U.S. person. |
Distributions
As described in the section titled “Dividend
Policy,” we have never declared or paid cash dividends on our common stock, and we do not anticipate paying any dividends on our
common stock following the completion of this offering. However, if we do make distributions of cash or property on our common stock to
non-U.S. holders, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current
or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed
both our current and our accumulated earnings and profits, the excess will first constitute a return of capital and will reduce each non-U.S.
holder’s adjusted tax basis in our common stock, but not below zero. Any additional excess will then be treated as capital gain
from the sale of stock, as discussed under “Gain on Disposition of Common Stock.”
Subject to the discussions below on effectively connected
income, and backup withholding and Compliance Act, or FATCA, withholding, any dividend paid to a non-U.S. holder generally will be subject
to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by
an applicable income tax treaty between the United States and such non-U.S. holder’s country of residence. In order to receive a
reduced treaty rate, such non-U.S. holder must provide the applicable withholding agent with an IRS Form W-8BEN or W-8BEN-E or other appropriate
version of IRS Form W-8 certifying qualification for the reduced treaty rate. A non-U.S. holder of shares of our common stock eligible
for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld
by filing an appropriate claim for refund with the IRS. If such non-U.S. holder holds our common stock through a financial institution
or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation
to such agent, which then will be required to provide certification to the applicable withholding agent, either directly or through other
intermediaries. Each non-U.S. holder should consult its own tax advisors regarding their entitlement to benefits under any applicable
income tax treaty.
Dividends received by a non-U.S. holder that are treated
as effectively connected with such non-U.S. holder’s conduct of a trade or business within the United States (and, if an applicable
income tax treaty so provides, such non-U.S. holder maintains a permanent establishment or fixed base in the United States to which such
dividends are attributable) are generally exempt from the 30% U.S. federal withholding tax, subject to the discussion below on backup
withholding and FATCA withholding. To claim this exemption, a non-U.S. holder must provide the applicable withholding agent with a properly
executed IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although
not subject to U.S. federal withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions
and credits, subject to an applicable income tax treaty providing otherwise. In addition, if a non-U.S. holder is a corporation, dividends
such non-U.S. holder receives that are effectively connected with its conduct of a U.S. trade or business may also be subject to a branch
profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty between the United States and such
non-U.S. holder’s country of residence. Each non-U.S. holder should consult its own tax advisor regarding the tax consequences of
the ownership and disposition of our common stock, including any applicable tax treaties that may provide for different rules.
Gain on Disposition of Common Stock
Subject to the discussion below regarding backup withholding
and FATCA withholding, a non-U.S. holder generally will not be required to pay U.S. federal income tax on any gain realized upon the sale
or other disposition of our common stock unless:
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the gain is effectively connected with such non-U.S. holder’s conduct of a U.S. trade or business (and, if an applicable income tax treaty so provides, such non-U.S. holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable); |
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such non-U.S. holder is an individual who is present in the United States for an aggregate 183 days or more during the taxable year in which the sale or disposition occurs and certain other conditions are met; or |
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our common stock constitutes a United States real property interest, or USRPI, by reason of our status as a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes. |
We believe that we are not currently and will not
become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination
of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our
U.S. and worldwide real property interests plus our other business assets, there can be no assurance that we will not become a USRPHC
in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market,
your common stock will be treated as U.S. real property interests only if you actually (directly or indirectly) or constructively hold
more than 5% of such regularly traded common stock at any time during the shorter of the five-year period preceding your disposition of,
or your holding period for, our common stock.
A non-U.S. holder described in the first bullet above
will be required to pay U.S. federal income tax on the gain derived from the sale (net of certain deductions and credits) under regular
graduated U.S. federal income tax rates. Such a non-U.S. holder that is a corporation may be subject to the branch profits tax at a 30%
rate on a portion of its effectively connected earnings and profits for the taxable year that are attributable to such gain, as adjusted
for certain items. A lower rate may be specified by an applicable income tax treaty.
A non-U.S. holder described in the second bullet above
will be subject to tax at 30% (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which
gain may be offset by U.S. source capital losses of such non-U.S. holder for the taxable year, provided such non-U.S. holder has timely
filed U.S. federal income tax returns with respect to such losses.
Each non-U.S. holder should consult its own tax advisor
regarding any applicable income tax or other treaties that may provide for different rules.
Information Reporting and Backup Withholding
Generally, we or an applicable withholding agent must
report annually to the IRS the amount of dividends paid to a non-U.S. holder, such non-U.S. holder’s name and address, and the amount
of tax withheld, if any. A similar report is sent to such non-U.S. holder. Pursuant to any applicable income tax treaty or other agreement,
the IRS may make such report available to the tax authority in such non-U.S. holder’s country of residence.
Dividends paid by us (or our paying agent) to a non-U.S.
holder may also be subject to backup withholding at a current rate of 24%.
Such information reporting and backup withholding
requirements may be avoided, however, if such non-U.S. holder establishes an exemption by providing a properly executed, and applicable,
IRS Form W-8, or otherwise establishes an exemption. Generally, such information reporting and backup withholding requirements will not
apply to a non-U.S. holder where the transaction is affected outside the United States, through a non-U.S. office of a non-U.S. broker.
Notwithstanding the foregoing, backup withholding and information reporting may apply, however, if the applicable withholding agent has
actual knowledge, or reason to know, that such non-U.S. holder is a U.S. person.
Backup withholding is not an additional tax; rather,
the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information
is furnished to the IRS in a timely manner.
Foreign Account Tax Compliance Act (FATCA)
Sections 1471 to 1474 of the Code, Treasury Regulations
issued thereunder and related official IRS guidance, commonly referred to as FATCA, generally impose a U.S. federal withholding tax of
30% on dividends on our common stock paid to a “foreign financial institution” (as defined under FATCA, and which may include
banks, traditional financial institutions, investment funds, and certain holding companies), unless such institution enters into an agreement
with the U.S. Department of the Treasury to, among other things, identify accounts held by certain “specified United States persons”
or “United States-owned foreign entities” (each as defined under FATCA), report annually substantial information about such
accounts, and withhold on certain payments to non-compliant foreign financial institutions and certain other account holders. FATCA also
generally imposes a U.S. federal withholding tax of 30% on dividends on our common stock paid to a “non-financial foreign entity”
(as specially defined under FATCA), unless such entity provides identifying information regarding each direct or indirect “substantial
United States owners” (as defined under FATCA), certifies that it does not have any substantial United States owners, or otherwise
establishes an exemption. Accordingly, the institution or entity through which our common stock is held will affect the determination
of whether such withholding is required.
The withholding obligations under FATCA generally
apply to dividends on our common stock. Such withholding will apply regardless of whether the beneficial owner of the payment otherwise
would be exempt from withholding pursuant to an applicable tax treaty with the United States, the Code, or other exemptions described
above. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes.
Under proposed regulations, FATCA withholding on payments
of gross proceeds has been eliminated. These proposed regulations are subject to change.
An intergovernmental agreement between the United
States and an applicable foreign country may modify the requirements described in this section. Prospective investors are encouraged to
consult with their own tax advisors regarding the application of FATCA withholding to their investment in, and ownership and disposition
of, our common stock.
The preceding discussion of U.S. federal tax considerations
is for general information only. It is not tax advice to investors in their particular circumstances. Each prospective investor should
consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding
and disposing of our common stock, including the consequences of any proposed change in applicable laws.
UNDERWRITING
ThinkEquity LLC is acting as representative of the
underwriters. Subject to the terms and conditions of an underwriting agreement between us and the representative, we have agreed to sell
to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less
the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name
in the following table:
| Underwriters |
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Number of
Shares |
| ThinkEquity LLC |
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The underwriting agreement provides that the obligations
of the underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to various conditions
and representations and warranties, including the approval of certain legal matters by their counsel and other conditions specified in
the underwriting agreement. The shares of common stock are offered by the underwriters, subject to prior sale, when, as and if issued
to and accepted by them. The underwriters reserve the right to withdraw, cancel or modify the offer to the public and to reject orders
in whole or in part. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if
any such shares of common stock are taken, other than those shares of common stock covered by the over-allotment option described below.
We have agreed to indemnify the underwriters against
specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required
to make in respect thereof.
Over-Allotment Option
We have granted a 45-day option to the representative of the underwriters
to purchase up to additional shares of our common stock, solely to cover over-allotments, if any. If the representative exercises all
or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover
page of this prospectus, less the underwriting discount. If this option is exercised in full, the total offering price to the public will
be $11.5 million and the total net proceeds, before expenses, to us will be $10.6 million.
Discounts and Commissions
The underwriters propose initially to offer the shares
of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at those prices
less a concession not in excess of $0.22 per share of common stock. If all of the shares of common stock offered by us are not sold at the
public offering price, the underwriters may change the offering price and other selling terms by means of a supplement to this prospectus.
The following table shows the public offering price,
underwriting discounts and commissions and proceeds before expenses to us. The information assumes either no exercise or full exercise
of the over-allotment option we granted to the representative of the underwriters.
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Per Share |
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Over-
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Over-
allotment
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We have agreed to pay a non-accountable expense allowance
to the representative of the underwriters equal to 1% of the gross proceeds received at the closing of the offering.
We have also agreed to pay up to $175,000 of accountable representative’s
expenses relating to the offering, including; (a) fees and expenses of the underwriter’s legal counsel; (b) cost associated with
the underwriters use of Ipreo’s book-building, prospectus tracking and compliance software for the offering; (c) data services and
communications expenses; (d) actual accountable “road show” expenses; (e) market making and trading, and clearing firm settlement
expenses for the offering; (f) all fees, expenses and disbursements relating to background checks of our officers, directors and affiliates;
and (g) the costs associated with bound volumes of the public offering materials as well as commemorative mementos and lucite tombstones,
each of which is to be provided by us or our designee within a reasonable time after the closing of this offering in such quantities as
the representative may reasonably request. We have paid an expense deposit of $10,000 to the representative, which will be applied against
the out-of-pocket accountable expenses that will be paid by us to the underwriters in connection with this offering, and will be reimbursed
to us to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
Our total estimated expenses of the offering, including
registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions,
are approximately $350,000.
Representative’s Warrants
Upon closing of this offering, we have agreed to issue
to the representative as compensation warrants to purchase up to 196,938 shares of common stock (5% of the aggregate number of shares
of common stock sold in this offering including the shares sold in the over-allotment option, or the representative’s warrants).
The representative’s warrants will be exercisable at a per share exercise price equal to 125% of the public offering price per share
in this offering, which would be a maximum of shares underlying such representative’s warrants assuming a total of shares are issued
in this offering. The representative’s warrants are exercisable at any time and from time to time, in whole or in part, during the
four and one half year period commencing 180 days from the effective date of the registration statement of which this prospectus
is a part.
The representative’s warrants have been deemed
compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1)(A) of FINRA. The representative
(or permitted assignees under Rule 5110(e)(1)(A)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities
underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in
the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date
of the registration statement of which this prospectus is a part. In addition, the warrants provide for registration rights upon request,
in certain cases. The sole demand registration right provided will not be greater than five years from the effective date of the
registration statement in compliance with FINRA Rule 5110(g)(8)(C). The piggyback registration rights provided will not be greater than
seven years from the effective date of the registration statement in compliance with FINRA Rule 5110(g)(8)(D). We will bear all fees
and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred
and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain
circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the
warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant
exercise price.
Prior Relationship With ThinkEquity
ThinkEquity served as the representative of the underwriters for our IPO and received
compensation including warrants to purchase up to 172,500 shares of our common stock at an exercise price equal to $6.25 per share. In
addition, ThinkEquity served as the representative of the underwriters for our majority owner Twin Vee’s IPO in July 2021 and received
cash and warrant compensation. Furthermore, ThinkEquity served as the representative of the underwriters for our majority owner Twin Vee’s
follow-on offering in September 2022 and received cash and warrant compensation.
Lock-Up Agreements
Pursuant to “lock-up”
agreements, we, our executive officers and directors, and our major stockholder prior to completion of this offering, have agreed, without
the prior written consent of the representative not to directly or indirectly, offer to sell, sell, pledge or otherwise transfer or dispose
of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or
disposition by any person at any time in the future of) our common stock, enter into any swap or other derivatives transaction that transfers
to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for
or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration
of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any other securities
of ours or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for a period of three months
after the date of this prospectus We also agreed without the prior written consent of the representative that for a period of 24 months
after the date of this prospectus we will not directly or indirectly offer to sell, sell, contract to sell, grant any option to sell
or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for
shares of capital stock of the Company in any "at-the-market", continuous equity or variable rate transaction.
Discretionary Accounts
The underwriters do not intend to confirm sales of
the shares of common stock offered hereby to any accounts over which they have discretionary authority.
Nasdaq Capital Market Listing
Our common stock is listed on the Nasdaq Capital Market
under the symbol “FRZA.”
Determination of Offering Price
The public offering price of the securities we are
offering was negotiated between us and the underwriters. Factors considered in determining the public offering price of the shares include
the history and prospects of the Company, the stage of development of our business, our business plans for the future and the extent to
which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering
and such other factors as were deemed relevant.
Other
From time to time, certain of the underwriters and/or
their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive
customary fees. In the course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for
their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long
or short positions in such securities or loans. Except for services provided in connection with this offering, no underwriter has provided
any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus and we do not
expect to retain any underwriter to perform any investment banking or other financial services for at least 90 days after the date
of this prospectus.
Price Stabilization, Short Positions and Penalty
Bids
In connection with this offering, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. Specifically, the underwriters
may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates
a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position.
In a covered short position, the number of shares of common stock over-allotted by the underwriters is not greater than the number of
shares of common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of common
stock involved is greater than the number of shares common stock in the over-allotment option. To close out a short position, the underwriters
may elect to exercise all or part of the over-allotment option. The underwriters may also elect to stabilize the price of our common stock
or reduce any short position by bidding for, and purchasing, common stock in the open market.
The underwriters may also impose a penalty bid. This
occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing shares of common stock in this
offering because the underwriter repurchases the shares of common stock in stabilizing or short covering transactions.
Finally, the underwriters may bid for, and purchase,
shares of our common stock in market making transactions, including “passive” market making transactions as described below.
These activities may stabilize or maintain the market
price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The
underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These
transactions may be effected on the national securities exchange on which our shares of common stock are traded, in the over-the-counter
market, or otherwise.
Passive Market Making
In connection with this offering, the underwriters
may engage in passive market making transactions in our common stock on the Nasdaq Capital Market in accordance with Rule 103 of Regulation
M under the Exchange Act, during a period before the commencement of offers or sales of the common stock and extending through the completion
of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security.
However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified
purchase limits are exceeded.
Stamp Taxes
If you purchase common stocks offered in this prospectus,
you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering
price listed on the cover page of this prospectus.
Indemnification
We have agreed to indemnify the underwriters against
liabilities relating to this offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some
or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters
may be required to make for these liabilities.
Electronic Distribution
This prospectus in electronic format may be made available
on websites or through other online services maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus
in electronic format, the information on any underwriter’s website and any information contained in any other website maintained
by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved
and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Offer restrictions outside the United States
Other than in the United States, no action has been
taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where
action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor
may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed
or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations
of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or
a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a
solicitation is unlawful.
Australia
This prospectus is not a disclosure document under
Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does
not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly,
(i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure
under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations
Act, (ii) this prospectus is made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree
must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set
forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia
any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
Canada
The shares of common stock may be sold only to purchasers
purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus
Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with
an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories
of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains
a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed
by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions
of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
China
The information in this document does not constitute
a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes
of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be
offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional
investors.”
European Economic Area—Belgium, Germany,
Luxembourg and Netherlands
The information in this document has been prepared
on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”),
as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce
a prospectus for offers of securities.
An offer to the public of securities has not been
made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive
as implemented in that Relevant Member State:
| |
● |
to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; |
| |
● |
to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements); |
| |
|
|
| |
● |
to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining the prior consent of the Company or any underwriter for any such offer; or |
| |
|
|
| |
● |
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by the Company of a prospectus pursuant to Article 3 of the Prospectus Directive. |
France
This document is not being distributed in the context
of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of
the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 et seq. of the General Regulation of the
French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be
offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating
to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed
or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and
shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and
in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1 ;and D.764-1 of the French Monetary and Financial
Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs)
acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1; and D.764-1
of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation
of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors
otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
Ireland
The information in this document does not constitute
a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority
as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish
Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or
sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified
investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified
investors.
Israel
The securities offered by this prospectus have not
been approved or disapproved by the Israeli Securities Authority (the ISA), nor have such securities been registered for sale in Israel.
The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA
has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the
details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being
offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions
on transferability and must be affected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of
Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa,
or “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities
may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t)
of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
| |
● |
to Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and |
| |
● |
in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
| |
|
|
| |
● |
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be: |
| |
|
|
| |
● |
made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and |
| |
|
|
| |
● |
in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy
must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No.
11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities
being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
Japan
The securities have not been and will not be registered
under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”)
pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional
Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly,
the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other
than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person
in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution
of an agreement to that effect.
Portugal
This document is not being distributed in the context
of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article
109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and
will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating
to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado
de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or
indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese
Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors”
(as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information
contained in it to any other person.
Sweden
This document has not been, and will not be, registered
with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available,
nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under
the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering
of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading
Act). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland
and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland.
This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the
Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing
rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material
relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material
relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document
will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and
not for general circulation in Switzerland.
United Kingdom
Neither the information in this document nor any other
document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus
(within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”) has been published or
is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors”
(within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom
by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication
of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part,
nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment
activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated
or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which
section 21(1) of FSMA does not apply to the Company.
In the United Kingdom, this document is being distributed
only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5)
(investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii)
who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations,
etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments
to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with,
relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Pursuant to section 3A.3 of National Instrument 33-105
Underwriting Conflicts, or NI 33-105, the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with this offering.
LEGAL MATTERS
The validity of the securities being offered by this
prospectus will be passed upon for us by Blank Rome LLP, New York, New York. Sichenzia Ross Ference LLP, New York, New York is acting
as counsel for the underwriters.
EXPERTS
Grassi & Co., CPAs, P.C. (“Grassi”), independent registered public
accounting firm, has audited our financial statements at December 31, 2022 and 2021, and for the period from October 15, 2021 through
December 31, 2021 (successor), the period from January 1, 2021 through October 14, 2021 (predecessor), as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Grassi’s report,
given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement
on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. This prospectus, which
constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, as
permitted by the rules and regulations of the SEC. For further information with respect to us and our common stock, we refer you to the
registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as
an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC also maintains
an Internet website that contains the registration statement of which this prospectus forms a part, as well as the exhibits thereto. These
documents, along with future reports, proxy statements and other information about us, are available at the SEC’s website, www.sec.gov.
We are subject to the information and reporting requirements
of the Exchange Act, as amended, and, in accordance with this law, we file periodic reports, proxy statements and other information with
the SEC. These periodic reports, proxy statements and other information will be available at the SEC’s website, www.sec.gov. We
also maintain a website www.forzax1.com. You may access these materials free of charge as soon as reasonably practicable after
they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus, and
the inclusion of our website address in this prospectus is an inactive textual reference only.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been informed
that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
INDEX TO UNAUDITED FINANCIAL STATEMENTS
| Audited Financial Statements of Forza
X1, Inc.: |
|
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
AUDITED FINANCIAL STATEMENTS (RESTATED): |
|
| BALANCE SHEET AT DECEMBER 31, 2022 |
F-2 |
| STATEMENT OF OPERATIONS FOR THE PERIOD OCTOBER 15, 2021 THROUGH DECEMBER 31, 2022 (SUCCESSOR), AND YEAR ENDED DECEMBER 31, 2021 (PREDECESSOR) |
F-3 |
| STATEMENT OF STOCKHOLDER’S EQUITY FOR THE PERIOD OCTOBER 15, 2021 THROUGH DECEMBER 31, 2022 (SUCCESSOR), JANUARY 1, 2021 THROUGH OCTOBER 14, 2021 (PREDECESSOR), AND YEAR ENDED DECEMBER 31, 2021 (PREDECESSOR) |
F-4 |
| STATEMENT OF CASH FLOWS FOR THE PERIOD OCTOBER 15, 2021 THROUGH DECEMBER 31, 2022 (SUCCESSOR), JANUARY 1, 2021 THROUGH OCTOBER 14, 2021 (PREDECESSOR) |
F-5 |
| NOTES TO FINANCIAL STATEMENTS |
F-6 |
INDEX TO UNAUDITED FINANCIAL STATEMENTS
| FORZA X1, INC. |
| Balance Sheets |
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current Assets: |
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
12,767,199 |
|
|
$ |
1,803,285 |
|
| Prepaid expenses and other current assets |
|
|
519,735 |
|
|
|
88,477 |
|
| Total Current Assets |
|
|
13,286,934 |
|
|
|
1,891,762 |
|
| |
|
|
|
|
|
|
|
|
| Deferred offering costs |
|
|
— |
|
|
|
105,500 |
|
| Operating lease right of use asset |
|
|
162,069 |
|
|
|
— |
|
| Security deposit |
|
|
7,517 |
|
|
|
— |
|
| Property and equipment, net |
|
|
765,406 |
|
|
|
235,565 |
|
| Total Assets |
|
$ |
14,221,926 |
|
|
$ |
2,232,827 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
99,028 |
|
|
$ |
13,333 |
|
| Accrued liabilities |
|
|
92,767 |
|
|
|
35,128 |
|
| Operating lease right of use liability |
|
|
86,245 |
|
|
|
— |
|
| Contract liabilities – customer deposits |
|
|
5,300 |
|
|
|
— |
|
| Due to Twin Vee |
|
|
169,851 |
|
|
|
641,917 |
|
| Total Current Liabilities |
|
|
453,191 |
|
|
|
690,378 |
|
| |
|
|
|
|
|
|
|
|
| Operating lease liability – noncurrent |
|
|
68,532 |
|
|
|
— |
|
| Total Liabilities |
|
|
521,723 |
|
|
|
690,378 |
|
| |
|
|
|
|
|
|
|
|
| Commitments and contingencies (Note 8) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ Equity: |
|
|
|
|
|
|
|
|
| Common stock: 25,000,000 authorized; $0.001 par value; 10,450,000 and 7,000,000 shares issued and outstanding at December 31, 2022 and 2021, respectively |
|
|
10,450 |
|
|
|
7,000 |
|
| Additional paid in capital |
|
|
17,777,385 |
|
|
|
1,993,000 |
|
| Accumulated deficit |
|
|
(4,087,632 |
) |
|
|
(457,551 |
) |
| Total Stockholders’ Equity |
|
|
13,700,203 |
|
|
|
1,542,449 |
|
| |
|
|
|
|
|
|
|
|
| Total Liabilities and Stockholders’ Equity |
|
$ |
14,221,926 |
|
|
$ |
2,232,827 |
|
The accompanying notes are an integral part of these
financial statements
| FORZA X1, INC. |
| Statements of Operations |
| |
|
Successor Company |
|
Predecessor Company |
| |
|
Year Ended December 31, 2022 |
|
October 15 - December 31, 2021 |
|
January 1 - October 14, 2021 |
| |
|
|
|
|
|
|
| Net sales |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Cost of products sold |
|
|
232,744 |
|
|
|
— |
|
|
|
— |
|
| Gross profit |
|
|
(232,744 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling, general and administrative |
|
|
473,900 |
|
|
|
28,806 |
|
|
|
56,955 |
|
| Salaries and wages |
|
|
1,770,126 |
|
|
|
41,189 |
|
|
|
— |
|
| Research and development |
|
|
957,220 |
|
|
|
150,020 |
|
|
|
61,091 |
|
| Professional fees |
|
|
159,304 |
|
|
|
40,259 |
|
|
|
— |
|
| Depreciation |
|
|
59,965 |
|
|
|
3,075 |
|
|
|
133 |
|
| Total operating expenses |
|
|
3,420,515 |
|
|
|
263,349 |
|
|
|
118,179 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(3,653,259 |
) |
|
|
(263,349 |
) |
|
|
(118,179 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
(3,286 |
) |
|
|
(7,281 |
) |
|
|
(8,490 |
) |
| Interest income |
|
|
14,752 |
|
|
|
— |
|
|
|
— |
|
| Dividend income |
|
|
43,294 |
|
|
|
— |
|
|
|
— |
|
| Loss on disposal of assets |
|
|
(31,582 |
) |
|
|
— |
|
|
|
(190,252 |
) |
| Gain from insurance recovery |
|
|
— |
|
|
|
— |
|
|
|
130,000 |
|
| Total other income (expenses) |
|
|
23,178 |
|
|
|
(7,281 |
) |
|
|
(68,742 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss before income tax |
|
|
(3,630,081 |
) |
|
|
(270,630 |
) |
|
|
(186,921 |
) |
| Income taxes provision |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Net loss |
|
$ |
(3,630,081 |
) |
|
$ |
(270,630 |
) |
|
$ |
(186,921 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted (loss) per common share |
|
$ |
(0.44 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average common shares outstanding basic and diluted |
|
|
8,332,735 |
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
The accompanying notes are an integral part of these
financial statements
| FORZA X1, INC. |
| Statements of Stockholders’ Equity |
For the Years End December 31, 2022 and 2021
| |
|
Common Stock |
|
Additional
Paid-in |
|
(Accumulated |
|
Total Stockholders’ |
| |
|
Shares |
|
Amount |
|
Capital |
|
Deficit) |
|
Equity |
| Predecessor Balance, December 31, 2020 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
| Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(186,921 |
) |
|
|
(186,921 |
) |
| Predecessor Balance, October 14, 2021 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(186,921 |
) |
|
$ |
(186,921 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Successor Balance, October 14, 2021 |
|
|
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(186,921 |
) |
|
$ |
(186,921 |
) |
| Successor net loss October 15, 2021 - December 31, 2021 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(270,630 |
) |
|
|
(270,630 |
) |
| Capital contributions from Twin Vee |
|
|
7,000,000 |
|
|
|
7,000 |
|
|
|
1,993,000 |
|
|
|
— |
|
|
|
2,000,000 |
|
| Successor Balance, December 31, 2021 |
|
|
7,000,000 |
|
|
|
7,000 |
|
|
|
1,993,000 |
|
|
|
(457,551 |
) |
|
|
1,542,449 |
|
| Capital contributions from Twin Vee |
|
|
— |
|
|
|
— |
|
|
|
500,000 |
|
|
|
— |
|
|
|
500,000 |
|
| Common stock issued for cash |
|
|
3,450,000 |
|
|
|
3,450 |
|
|
|
14,826,039 |
|
|
|
— |
|
|
|
14,829,489 |
|
| Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
458,346 |
|
|
|
— |
|
|
|
458,346 |
|
| Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,630,081 |
) |
|
|
(3,630,081 |
) |
| Successor Balance, December 31, 2022 |
|
|
10,450,000 |
|
|
|
10,450 |
|
|
|
17,777,385 |
|
|
|
(4,087,632 |
) |
|
|
13,700,203 |
|
The accompanying notes are an integral part of these
financial statements
| FORZA X1, INC. |
| Statements of Cash Flows |
| |
|
Successor Company |
|
Predecessor Company |
| |
|
Year Ended December 31, 2022 |
|
October 15 - December 31, 2021 |
|
January 1, - October 14, 2021 |
| |
|
|
|
|
|
|
| Cash Flows From Operating Activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(3,630,081 |
) |
|
$ |
(270,630 |
) |
|
$ |
(186,921 |
) |
| Adjustments to reconcile net loss: |
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation |
|
|
59,965 |
|
|
|
3,075 |
|
|
|
133 |
|
| Stock based compensation |
|
|
458,346 |
|
|
|
— |
|
|
|
— |
|
| Change of right-of-use asset |
|
|
(162,069 |
) |
|
|
— |
|
|
|
— |
|
| Loss on disposal of assets |
|
|
31,582 |
|
|
|
— |
|
|
|
190,252 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Prepaid expenses and other current assets |
|
|
(431,258 |
) |
|
|
(88,477 |
) |
|
|
— |
|
| Security deposits |
|
|
(7,517 |
) |
|
|
|
|
|
|
|
|
| Accounts payable |
|
|
85,695 |
|
|
|
13,333 |
|
|
|
— |
|
| Accrued liabilities |
|
|
57,639 |
|
|
|
25,569 |
|
|
|
9,559 |
|
| Operating lease liabilities |
|
|
154,777 |
|
|
|
— |
|
|
|
— |
|
| Contract liabilities – customer deposits |
|
|
5,300 |
|
|
|
— |
|
|
|
— |
|
| Net cash (used in) provided by operating activities |
|
|
(3,377,621 |
) |
|
|
(317,131 |
) |
|
|
13,024 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Investing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Purchase of property and equipment |
|
|
(606,726 |
) |
|
|
(66,079 |
) |
|
|
(362,946 |
) |
| Net cash used in investing activities |
|
|
(606,726 |
) |
|
|
(66,079 |
) |
|
|
(362,946 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash Flows From Financing Activities |
|
|
|
|
|
|
|
|
|
|
|
|
| Net proceeds from issuance of common stock |
|
|
15,231,350 |
|
|
|
— |
|
|
|
— |
|
| Deferred offering costs |
|
|
(296,361 |
) |
|
|
(105,500 |
) |
|
|
— |
|
| Capital contributions from Twin Vee |
|
|
500,000 |
|
|
|
2,000,000 |
|
|
|
— |
|
| Repayments of advances from Twin Vee |
|
|
(1,099,468 |
) |
|
|
(398,630 |
) |
|
|
— |
|
| Advances from Twin Vee |
|
|
612,740 |
|
|
|
690,625 |
|
|
|
349,922 |
|
| Net cash provided by financing activities |
|
|
14,948,261 |
|
|
|
2,186,495 |
|
|
|
349,922 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
|
|
10,963,914 |
|
|
|
1,803,285 |
|
|
|
— |
|
| Cash and cash equivalents at beginning of year |
|
|
1,803,285 |
|
|
|
— |
|
|
|
— |
|
| Cash and cash equivalents at year end |
|
$ |
12,767,199 |
|
|
$ |
1,803,285 |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Cash Flow Information |
|
|
|
|
|
|
|
|
|
|
|
|
| Cash paid for interest |
|
$ |
3,286 |
|
|
$ |
7,281 |
|
|
$ |
8,490 |
|
| Increases in right-of-use asset |
|
$ |
183,106 |
|
|
|
|
|
|
|
|
|
The accompanying notes
are an integral part of these financial statements.
FORZA X1, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Forza X1, Inc. (“Forza”) was initially
incorporated as Electra Power Sports, Inc. on October 15, 2021, but subsequently changed its name to Forza X1, Inc. on October 29, 2021.
Twin Vee, the Company’s majority shareholder, was incorporated in the State of Florida as Twin Vee Catamarans, Inc. on December
1, 2009, and reincorporated in Delaware on April 7, 2021, as Twin Vee PowerCats Co. (“Twin Vee”).
Prior to October 15, 2021, Twin Vee dedicated resources
to designing and building prototype electric boats. These resources and expenditures were segregated in Twin Vee’s financial statements
and have been carved out and included as the predecessor herein for the period January 1, 2021 through December 31, 2021.
The accompanying financial statements include the
historical accounts of Forza X1, Inc. and its predecessor, the carve-out of the electric segment business of Twin Vee. Forza is in the
business of design and development of electric boats. Forza has a December 31st fiscal year-end.
Forza succeeded to substantially all of the business
of the electric segment of Twin Vee and Forza’s own operations before the succession, October 15, 2021, were non-existent. Accordingly,
the carve-out financial statements of the electric segment of Twin Vee are included as Predecessor herein. Management has reached this
conclusion based upon an evaluation of the requirements and the facts and circumstances, including the historical life of the electric
segment, the historical level of operations of the electric segment, and the fact that the Company’s operations, prior to the succession
were non-existent.
| |
2. |
Significant Accounting Policies |
Basis of Presentation
The accompanying successor financial statements are
prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of American
(“U.S. GAAP”).
Carve-out
The accompanying predecessor financial statements
for the period from January 1, 2021 through October 14, 2021 have been prepared in accordance U.S GAAP from the financial statements and
accounting records of Twin Vee PowerCats, Co. using the historical results of operations and historical cost basis of the assets and liabilities
of Twin Vee PowerCats, Co. that comprise its electric segment of which Forza is the successor. These financial statements have been prepared
solely to demonstrate its historical results of operations, financial position, and cash flows for the indicated periods under Twin Vee’s
management.
The accompanying predecessor financial statements
include the assets, liabilities, revenues, and expenses that are specifically identifiable or allocable to the electric segment of Twin
Vee. The segment’ operations were dependent upon Twin Vee’ ability to perform these services and support functions. The costs
associated with these services and support functions (indirect costs) have been allocated on a basis of estimated utilization levels of
these services. The allocations related primarily to corporate administrative expenses, employee related costs, legal services, accounting,
human resources, and other corporate services.
Management believes the assumptions and allocations
underlying the financial statements are reasonable and appropriate under the circumstances. The expenses and cost allocation have been
determined on a basis considered by Twin Vee to be a reasonable reflection of the utilization of services provided to or the benefit received
by the predecessor electric segment of Twin Vee during the periods presented relative to the total costs incurred by Twin Vee. However,
the amounts recorded for these transactions are not necessarily representative of the amount that would have been reflected in the financial
statements had the business been an entity that operated independently of Twin Vee. Consequently, future results of operations Forza will
include costs and expenses that may be materially different than these historical results of operations, financial position, and cash
flows. Accordingly, the financial statements for these periods are not indicative of Forza X1’s future results of operations, financial
position, and cash flow.
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
Use of Estimates
The preparation of financial statements in conformity
with U.S. GAAP required management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates. Included in those estimates are assumptions about useful life of fixed assets.
Common Stock Split
On July 22, 2022, the Company filed an amendment to
its certificate of incorporation affecting a 1.076923077 forward stock split. All information in these financial statements give effect
to the stock split.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid
investments with original maturities of three months or less at the time of purchase. Cash equivalents was $12,767,199 and $1,803,285
as of December 31, 2022 and 2021, respectively.
Property and Equipment
Property and equipment are stated at cost. Depreciation
is provided using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of property
and equipment range from three to seven years. Upon sale or retirement, the cost and related accumulated depreciation is eliminated from
their respective accounts, and the resulting gain or loss is included in results of operations. Repairs and maintenance charges, which
do not increase the useful lives of the assets, are charged to operations as incurred.
Impairment of Long-lived Assets
Management assesses the recoverability of its long-lived
assets when indicators of impairment are present. If such indicators are present, recoverability of these assets is determined by comparing
the undiscounted net cash flows estimated to result from those assets over the remaining life to the assets’ net carrying amounts.
If the estimated undiscounted net cash flows are less than the net carrying amount, the assets would be adjusted to their fair value,
based on appraisal or the present value of the undiscounted net cash flows.
Research and Development
Research and development costs are expensed when incurred.
Such costs approximated $957,220, $150,020 and $61,091 for the year ended December 31, 2022 and the periods October 15, 2021 through December
31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor), respectively.
Advertising Costs
Advertising and marketing costs are expensed as incurred.
Such costs approximated $11,177, $7,129 and $0 for the year ended December 31, 2022, the periods October 15, 2021 through December 31,
2021 (Successor) and January 1, 2021 through October 14, 2021 (Predecessor), respectively, and are included in selling, general and administrative
expenses in the accompanying statements of operations.
Leases
The Company determines if an arrangement is a lease
at inception. Operating lease right-of-use (“ROU”) assets and lease liabilities are recognized at the commencement date based
on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, it uses its
incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.
The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based
on a credit-adjusted secured borrowing rate commensurate with the term of the lease. The operating lease ROU asset also includes any lease
payments made and is reduced by lease incentives. The Company’s lease terms may include options to extend or terminate the lease
when it is reasonably certain that the Company will exercise that option. Lease expenses for lease payments is recognized on a straight-line
basis over the lease term.
Stock-Based Compensation
The Company recognizes stock-based compensation costs
for its restricted stock and restricted stock units, measured at the fair value of each award at the time of grant, as an expense over
the period during which an employee is required to provide service. Compensation cost is recognized over the service period for the fair
value of awards that vest.
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
Income Taxes
The Company is a C Corporation under the Internal
Revenue Code and a similar section of the state code.
All income tax amounts reflect the use of the liability
method under accounting for income taxes. Income taxes are provided for the tax effects of transactions reported in the financial statements
and consist of taxes currently due plus deferred taxes arising primarily from differences between financial and tax reporting purposes.
Deferred income taxes, net of appropriate valuation
allowances, are determined using the tax rates expected to be in effect when the taxes are actually paid. Valuation allowances are recorded
against deferred tax assets when it is more likely than not that such assets will not be realized. When an uncertain tax position meets
the more likely than not recognition threshold, the position is measured to determine the amount of benefit or expense to recognize in
the financial statements.
In accordance with U.S GAAP, the Company follows the
guidance in FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes. At December 31, 2022 and 2021, the Company does not believe
it has any uncertain tax positions that would require either recognition or disclosure in the accompanying financial statements.
The Company’s income tax returns are subject
to review and examination by federal, state and local governmental authorities.
Recent Accounting Pronouncements
All newly issued accounting pronouncements not yet
effective have been deemed either immaterial or not applicable.
The Company has incurred a net loss of $3,630,081,
$270,630 and $186,921 for the year ended December 31, 2022- and periods October 15, 2021 through December 31, 2021 (Successor) and January
1, 2021 through October 14, 2021 (Predecessor), respectively. As of December 31, 2022, the Company had cash and cash equivalents, and
working capital of $12,767,199 and $12,833,743, respectively, compared to $1,803,285 and $1,201,384, respectively, on December 31, 2021.
In August of 2022 the Company completed its initial public offering that closed on August 16, 2022 (the “IPO”), which increased
its cash by $15,231,350. The Company has incurred a net loss of $3,630,081, $270,630 and $186,921 for the year ended December 31, 2022
and for the periods October 15, 2021 through December 31, 2021 (Successor), January 1, 2021 through October 14, 2021 (Predecessor), respectively.
Losses have principally occurred as a result of the research and development efforts coupled with no operating revenue.
The Company has no current source of revenue and may
seek additional equity and/or debt financing. A successful transition to attaining profitable operations is dependent upon achieving a
level of positive cash flows adequate to support the Company’s cost structure.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern, as the Company will not generate revenue until late 2023. A successful transition
to attaining profitable operations is dependent upon do not include any adjustments that might be required should the Company be unable
to continue as a going concern.
| 4. |
Property and Equipment |
At December 31, 2022 and 2021, property and equipment
consisted of the following:
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| Building - construction in progress |
|
|
10,031 |
|
|
|
53,250 |
|
| Equipment |
|
|
59,806 |
|
|
|
— |
|
| Computer hardware and software |
|
|
37,016 |
|
|
|
8,998 |
|
| Software and website development |
|
|
35,572 |
|
|
|
— |
|
| Prototype |
|
|
142,526 |
|
|
|
142,525 |
|
| Molds and Fixtures |
|
|
528,966 |
|
|
|
34,000 |
|
| |
|
|
813,917 |
|
|
|
238,773 |
|
| Less accumulated depreciation |
|
|
(48,511 |
) |
|
|
(3,208 |
) |
| |
|
$ |
765,406 |
|
|
$ |
235,565 |
|
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
Depreciation expense of property and equipment of
$59,965, $3,075 and $133 for the year ended December 31, 2022 and for the periods October 15, 2021 through December 31, 2021 (Successor),
January 1, 2021 through October 14, 2021 (Predecessor), respectively.
5. Leases
Operating right of use (“ROU”) assets
and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the present value
of lease payments not yet paid. Operating right of use assets represent the Company’s right to use an underlying asset and is based upon
the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct costs, lease incentives, and impairment
of operating lease assets. To determine the present value of lease payments not yet paid, the Company estimates incremental secured borrowing
rates corresponding to the maturities of the leases. We used the U.S. Treasury rate of 0.33% at December 31, 2022.
The Company leases a warehouse facility, and the land
which are located at 150 Commerce Street, Old Fort, North Carolina (the “Property”) from NC Limited Liability Company. The
Company entered into the lease on October 7, 2022, the lease has a term of two years. The current base rent payment is $7,517 per
month including property taxes, insurance, and common area maintenance. The lease required a $7,517 security deposit. The base rent
will increase three percent (3%) on October 15, 2023.
At December 31, 2022 and December 31, 2021, supplemental
balance sheet information related to leases were as follows:
| | |
December
31, | |
December
31, |
| | |
2022 | |
2021 |
| Operating
lease ROU asset | |
$ | 162,069 | | |
$ | — | |
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| Operating lease liabilities: |
|
|
|
|
|
|
|
|
| Current portion |
|
$ |
86,245 |
|
|
$ |
— |
|
| Non-current portion |
|
|
68,532 |
|
|
|
— |
|
| Total lease liabilities |
|
$ |
154,777 |
|
|
$ |
— |
|
At December 31, 2022, future minimum lease payments
under the non-cancelable operating leases are as follows:
Years Ending December 31,
| |
2023 |
|
|
$ |
91,102 |
|
| |
2024 |
|
|
|
61,937 |
|
| |
Total lease payment |
|
|
$ |
153,039 |
|
The following summarizes other supplemental information about the Company’s
operating lease:
| |
|
December 31, 2022 |
| Weighted average discount rate |
|
|
4 |
% |
| Weighted average remaining lease term (years) |
|
|
1.71 |
|
| |
|
December 31, 2022 |
| Operating lease cost |
|
$ |
30,067 |
|
| Total lease cost |
|
$ |
30,067 |
|
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
6. Accrued Liabilities
At December 31, 2022 and December 31, 2021, accrued
liabilities consisted of the following:
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| Accrued wages and benefits |
|
$ |
56,581 |
|
|
$ |
16,090 |
|
| Accrued operating expenses |
|
|
36,186 |
|
|
$ |
13,007 |
|
| Other |
|
|
— |
|
|
$ |
6,031 |
|
| Total |
|
$ |
92,767 |
|
|
$ |
35,128 |
|
7. Commitments and Contingencies
Short-term lease
In August of 2022,
the Company signed a six-month lease for a duplex, to be used by its employees to minimize travel expense as it started construction on
its new manufacturing facility, for $2,500 per month which includes utilities, on a property in Black Mountain, North Carolina. During
the year ended December 31, 2022, the lease expense was $10,000, which was included in selling, general and administrative expense on
the statements of operations.
Covid-19
The COVID-19 outbreak in the United States has caused
business disruptions through mandated and voluntary closings of multiple industries. While disruption is currently expected to be temporary,
there is considerable uncertainty regarding the duration of the closings. The extent to which COVID-19 impacts future results, which are
highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the
actions to contain it or treat its impact, among others. At this time, the Company cannot estimate with meaningful precision the potential
impact to its financial and operational results.
Litigation
The Company is currently involved in a civil litigation
in the normal course of business none of which is considered material.
8. Stockholders’ Equity
Common Stock Warrants
As of December 31, 2022, the Company had outstanding
warrants to purchase 172,500 shares of common stock issuable at a weighted-average exercise price of $6.25 per share that
were issued to the representative of the underwriters on August 16, 2022 in connection with the Company’s IPO. The representative’s
warrants are currently exercisable at any time and from time to time, in whole or in part, and expire on August 16, 2027. There was no
warrant activity during the year ended December 31, 2022.
Equity Compensation Plan
The Company maintains an
equity compensation plan, the Forza X1, Inc. 2022 Stock Incentive Plan (the “2022 Plan”) under which it may award employees,
directors and consultants’ incentive and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based
awards with terms established by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors
to administer the plan. The number of awards under the 2022 Plan will automatically increase on January 1, 2023. As of December 31, 2022,
there were 58,500 shares remaining available for grant under the 2022 Plan. Stock based compensation expense is included in
the Statements of Operations, under salaries and wages.
Accounting for Stock -Based Compensation
Stock Compensation Expense - For
the years ended December 31, 2022 and 2021, the Company recorded $458,346 and $0, respectively, of stock-based compensation
expense which is included in salaries and wages on the accompanying statement of operations.
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
Pursuant to Forza’s
2022 Plan Forza has issued stock options. A stock option grant gives the holder the right, but not the obligation to purchase a certain
number of shares at a predetermined price for a specific period of time. Forza typically issues options that vest pro rata on a monthly
basis over various periods. Under the terms of the 2022 Plan, the contractual life of the option grants may not exceed ten years.
The Company utilizes the
Black-Scholes model to determine fair value of stock option awards on the date of grant. The Company utilized the following assumptions for
option grants during the year ended December 31, 2022:
| |
|
Year ended |
| |
|
December 31, |
| |
|
2022 |
| Expected term |
|
|
5 years |
|
| Expected average volatility |
|
|
112-115 |
% |
| Expected dividend yield |
|
|
— |
|
| Risk-free interest rate |
|
|
2.98-3.62 |
% |
The expected volatility of the option is determined
using historical volatilities based on historical stock price of comparable boat manufacturing companies. The Company estimated the expected
life of the options granted based upon historical weighted average of comparable boat manufacturing companies. The risk-free interest
rate is determined using the U.S. Department of the Treasury yield curve rates with a remaining term equal to the expected life of the
option. The Company has never paid a dividend, and as such the dividend yield is 0.0%
| |
|
Options Outstanding |
|
Weighted Average |
|
|
| |
|
Number of |
|
Weighted Average |
|
Remaining life |
|
Fair value of |
| |
|
Options |
|
Exercise Price |
|
(years) |
|
option |
| |
|
|
|
|
|
|
|
|
| |
Outstanding, December 31, 2021 |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
| |
Granted |
|
|
|
1,441,500 |
|
|
|
3.41 |
|
|
|
9.77 |
|
|
|
4,009,913 |
|
| |
Exercised |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
| |
Forfeited/canceled |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Outstanding, December 31, 2022 |
|
|
|
1,441,500 |
|
|
$ |
3.41 |
|
|
|
9.77 |
|
|
$ |
4,009,913 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercisable options, December 31, 2022 |
|
|
|
117,986 |
|
|
$ |
5.00 |
|
|
|
9.77 |
|
|
|
|
|
9. Related Party Transaction
As of December 31, 2022 and December 31, 2021, the
Company had current liabilities of $169,851 and $641,917, respectively, due to Twin Vee. Twin Vee funded the Company’s working capital
needs, primarily for prototyping, consulting services, rent, interest and payroll.
Associated with amounts advanced and due to Twin Vee,
for the year ended December 31, 2022 and for the periods October 15, 2021 through December 31, 2021 (Successor), and January 1, 2021 through
October 14, 2021 (Predecessor), we recorded interest expense of $3,286, $7,281 and $8,490, respectively, based on a rate of 6% interest
on the Company’s average monthly balance.
Pursuant to a management agreement with Twin Vee,
dated October 2021, and a subsequent agreement dated September 2022, for various management services, the Company paid $5,000 monthly
through August of 2021, and $6,800 monthly, thereafter for management fee associated with the use of shared management resources. The
September 2022 agreement has a term of one year and will expire on August 31, 2023. The Company has incurred management fees of $67,200,
$15,000 and $45,000 for the year ended December 31, 2022 and for the periods October 15, 2021 through December 31, 2021 (Successor), January
1, 2021 through October 14, 2021 (Predecessor), respectively, pursuant to a management agreements with Twin Vee, for various management
services. Management fees are included in selling, general and administrative expenses on the statements of operations.
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
For the year ended December 31, 2022 and for the periods
October 15, 2021 through December 31, 2021 (Successor), January 1, 2021 through October 14, 2021 (Predecessor), respectively the Company
recorded rent expense of approximately $20,386, $1,700 and $8,500, respectively, associated with its month- to- month arrangement to utilize
certain space at Twin Vee’s facility. The Company incurred $850 per month for rent expense for approximately 1,000 square feet,
from January of 2021 through August 2022, in September of 2022 the month-to-month rent was adjusted to $3,400 per month, as the number
of test boats has increased from 1 to 5, and the Company required additional space, approximately 4,100 square feet. The Company’s
use of Twin Vee’s facilities does vary based on the number of prototype units on property and in process, our corporate headquarters
are located at Twin Vee’s location, however a number of our employees and consultants work remotely.
For the year ended December 31, 2022 and for the periods
October 15, 2021 through December 31, 2021 (Successor), January 1, 2021 through October 14, 2021 (Predecessor), respectively the Company
received advances from Twin Vee of $612,740, $690,625 and $349,922, respectively. For the year ended December 31, 2022 and for the periods
October 15, 2021 through December 31, 2021 (Successor), January 1, 2021 through October 14, 2021 (Predecessor), respectively the Company
repaid advancement from Twin Vee of approximately $1,099,468, $398,630 and $0, respectively. In May of 2022, Twin Vee invested an additional
$500,000 in the Company, for ongoing operating costs. No additional shares of common stock or other rights were issued to Twin Vee for
such additional investment.
10. Gain from Insurance Recovery
The Company experienced a thermal event on the electric
boat prototype rendering it unusable for further testing. During the year ended December 31, 2022, and the periods October 15, 2021 through
December 31, 2021 (Successor), and January 1, 2021 through October 14, 2021 (Predecessor), respectively, the Company recorded a loss on
disposal of asset $0, $0 and $190,252, respectively and gain from insurance recovery of $0, $0 and $130,000, respectively.
11. Income Tax
Due to operating losses and the recognition of valuation
allowances, the Company has no provision for a current and deferred federal or state income taxes in 2022. In 2021, the Company reversed
valuation allowances against previously reserved deferred tax assets, accordingly, there was no provision for current and deferred federal
or state income taxes.
Deferred income taxes reflect the net tax effects
of temporary and permanent differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are
as follows as of:
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| |
|
|
|
|
| Non-operating loss carryforward |
|
$ |
532,000 |
|
|
$ |
— |
|
| Valuation allowance |
|
|
(532,000 |
) |
|
|
— |
|
| Net deferred tax asset |
|
$ |
— |
|
|
$ |
— |
|
The Company has established a valuation allowance
against its deferred tax assets due to the uncertainty surrounding the realization of such assets. During year ended December 31, 2022,
the valuation allowance increased by approximately $532,000. The Company has net operating and economic loss carry-forwards of approximately
$532,000 available to offset future federal and state taxable income.
A reconciliation between expected income taxes, computed
at the federal income tax rate of 21% applied to the pretax accounting loss, and our blended state income tax rate of 2%, and the income
tax net expense included in the statements of operations for the years ended December 31, 2022 and 2021 is as follows:
FORZA
X1, INC.
NOTES
TO THE FINANCIAL STATEMENTS
DECEMBER
31, 2022 and 2021
| |
|
December 31, |
|
December 31, |
| |
|
2022 |
|
2021 |
| Tax at federal statutory rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
| Tax at state rate net of federal benefit |
|
|
2.0 |
% |
|
|
2.0 |
% |
| Change in valuation allowance |
|
|
(23.0 |
)% |
|
|
(23.0 |
)% |
| Provision for taxes |
|
|
0.0 |
% |
|
|
0.0 |
% |
The Company’s tax positions for 2019 to 2021
have been analyzed and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions
taken on returns filed for open tax years. Tax returns for the years 2019 to 2021, are subject to review by the tax authorities.
12. Net Loss Per Share
Basic net loss per share has been computed on the
basis of the weighted average number of shares of common stock outstanding. Diluted net loss per share of common stock has been computed
on the basis of the weighted average number of shares outstanding plus equivalent shares of common stock assuming exercise of stock options.
Potential shares of common stock that have an anti-dilutive effect (i.e., those that share or decrease loss per share) are excluded from
the calculation of diluted net loss per share of common stock.
Basic and diluted loss per common share have been
computed based on the following, for the year ended December 31, 2022 and for the periods October 15, 2021 through December 31, 2021 (Successor),
and January 1, 2021 through October 14, 2021 (Predecessor):
| |
|
Successor Company |
|
Predecessor Company |
| |
|
December 31, |
|
October 15-December 31, |
|
January 1 - October 14, |
| |
|
2022 |
|
2021 |
|
2021 |
| Numerator for basic and diluted net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss |
|
$ |
(3,630,081 |
) |
|
$ |
(270,630 |
) |
|
$ |
(186,921 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
| For basic net loss per share - weighted average common shares outstanding |
|
|
8,332,735 |
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
| Effect of dilutive stock options |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| For diluted net loss per share - weighted average common shares outstanding |
|
|
8,332,735 |
|
|
|
7,000,000 |
|
|
|
7,000,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share -Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share |
|
$ |
(0.44 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share - Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share |
|
$ |
(0.44 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
For the year ended December 31, 2022 and for the periods
October 15, 2021 through December 31, 2021 (Successor), January 1, 2021 through October 14, 2021 (Predecessor ), all potentially dilutive
securities were antidilutive.
13. Subsequent Events
The Company has evaluated all event or transactions
that occurred after December 31,2022 through March 27, 2023, during this period, there were no material subsequent events other than the
ones listed below.
On January 1, 2023, our 2022 Stock Incentive Plan
automatically increased, and will continue to increase on January 1 of each calendar year for a period of ten years commencing on January
1, 2022 and ending on (and including) January 1, 2031, in a number of shares of common stock equal to 4.5% of the total number of shares
of common stock outstanding on December 31 of the preceding calendar year. For 2023, the maximum number of common stock shares that can
be issued will be 1,567,500.
On February 3, 2023, Ms.
Nicole Camacho, the Company’s then Chief Financial Officer, provided the Company notice of her resignation as an executive officer
of the Company, effective February 24, 2023. Ms. Camacho informed the Company that she was resigning from the Company as an executive
officer to pursue another opportunity and that her resignation was not the result of any disagreement relating to the Company’s
operations, policies or practices.
On February 6, 2023, the
Board of Directors of the Company, appointed Carrie Gunnerson to the position of Interim Chief Financial Officer and Interim Principal
Financial and Accounting Officer.
| FORZA
X1, INC. |
| Condensed
Balance Sheets |
| (Unaudited) |
| | |
March 31, | |
December 31, |
| | |
2023 | |
2022 |
| | |
| |
|
| ASSETS | |
| | | |
| | |
| Current Assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 10,683,000 | | |
$ | 12,767,199 | |
| Inventories | |
| 42,829 | | |
| — | |
| Due from Twin Vee | |
| 129,371 | | |
| — | |
| Prepaid expenses and other current assets | |
| 366,983 | | |
| 519,735 | |
| Total Current Assets | |
| 11,222,183 | | |
| 13,286,934 | |
| | |
| | | |
| | |
| Operating lease right of use asset | |
| 140,658 | | |
| 162,069 | |
| Security deposit | |
| 7,517 | | |
| 7,517 | |
| Property and equipment, net | |
| 1,021,674 | | |
| 765,406 | |
| Total Assets | |
$ | 12,392,032 | | |
$ | 14,221,926 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| Current Liabilities: | |
| | | |
| | |
| Accounts payable | |
$ | 49,555 | | |
$ | 99,028 | |
| Accrued liabilities | |
| 77,169 | | |
| 92,767 | |
| Finance leases - current portion | |
| 16,830 | | |
| — | |
| Operating lease right of use liability | |
| 87,789 | | |
| 86,245 | |
| Contract liabilities - customer deposits | |
| 5,800 | | |
| 5,300 | |
| Due to Twin Vee | |
| — | | |
| 169,851 | |
| Total Current Liabilities | |
| 237,143 | | |
| 453,191 | |
| | |
| | | |
| | |
| Finance leases - noncurrent | |
| 72,739 | | |
| — | |
| Operating lease liability - noncurrent | |
| 45,916 | | |
| 68,532 | |
| Total Liabilities | |
| 355,798 | | |
| 521,723 | |
| | |
| | | |
| | |
| Commitments and contingencies (Note 7) | |
| — | | |
| — | |
| | |
| | | |
| | |
| Stockholders’ Equity: | |
| | | |
| | |
| Common stock: 25,000,000 authorized; $0.001 par value; 10,450,000 shares issued and outstanding | |
| 10,450 | | |
| 10,450 | |
| Additional paid in capital | |
| 18,118,548 | | |
| 17,777,385 | |
| Accumulated deficit | |
| (6,092,764 | ) | |
| (4,087,632 | ) |
| Total Stockholders’ Equity | |
| 12,036,234 | | |
| 13,700,203 | |
| | |
| | | |
| | |
| Total Liabilities and Stockholders’ Equity | |
$ | 12,392,032 | | |
$ | 14,221,926 | |
The accompanying notes are an integral part
of these unaudited condensed financial statements
| FORZA
X1, INC. |
| Condensed
Statements of Operations |
| (Unaudited) |
| | |
Three months ended March 31, |
| | |
2023 | |
2022 |
| | |
| |
|
| Net sales | |
$ | — | | |
$ | — | |
| Cost of products sold | |
| 49,941 | | |
| 11,078 | |
| Gross loss | |
| (49,941 | ) | |
| (11,078 | ) |
| | |
| | | |
| | |
| Operating expenses: | |
| | | |
| | |
| Selling, general and administrative | |
| 354,662 | | |
| 77,865 | |
| Salaries and wages | |
| 862,764 | | |
| 182,286 | |
| Research and development | |
| 702,648 | | |
| 215,670 | |
| Professional fees | |
| 124,040 | | |
| 19,078 | |
| Depreciation | |
| 35,696 | | |
| 7,737 | |
| Total operating expenses | |
| 2,079,810 | | |
| 502,636 | |
| | |
| | | |
| | |
| Loss from operations | |
| (2,129,751 | ) | |
| (513,714 | ) |
| | |
| | | |
| | |
| Other income (expense): | |
| | | |
| | |
| Interest expense | |
| (291 | ) | |
| (601 | ) |
| Interest income | |
| — | | |
| 23 | |
| Dividend income | |
| 124,910 | | |
| — | |
| Total other income (expense) | |
| 124,619 | | |
| (578 | ) |
| | |
| | | |
| | |
| Income before income tax | |
| (2,005,132 | ) | |
| (514,292 | ) |
| Income taxes provision | |
| — | | |
| — | |
| Net loss | |
$ | (2,005,132 | ) | |
$ | (514,292 | ) |
| | |
| | | |
| | |
| Basic and diluted (loss) per common share | |
$ | (0.19 | ) | |
$ | (0.07 | ) |
| | |
| | | |
| | |
| Weighted average common shares outstanding basic and diluted | |
| 10,450,000 | | |
| 7,000,000 | |
The accompanying notes are an integral part
of these unaudited condensed financial statements
| FORZA
X1, INC. |
| Condensed
Statements of Stockholders’ Equity |
| (Unaudited) |
For
the Three months end March 31, 2023 and 2022
| | |
Common
Stock | |
Additional
Paid-in | |
(Accumulated | |
Total
Stockholders’ |
| | |
Shares | |
Amount | |
Capital | |
Deficit) | |
Equity |
| Balance,
January 1, 2022 | |
| 700,000 | | |
$ | 7,000 | | |
$ | 1,993,500 | | |
$ | (457,551 | ) | |
$ | 1,542,949 | |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| (514,292 | ) | |
| (514,292 | ) |
| Balance,
March 31, 2022 | |
| 700,000 | | |
$ | 7,000 | | |
$ | 1,993,500 | | |
$ | (971,843 | ) | |
$ | 1,028,657 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
January 1, 2023 | |
| 10,450,000 | | |
$ | 10,450 | | |
$ | 17,777,385 | | |
$ | (4,087,632 | ) | |
$ | 13,700,203 | |
| Stock-based
compensation | |
| — | | |
| — | | |
| 341,163 | | |
| — | | |
| 341,163 | |
| Net
loss | |
| — | | |
| — | | |
| — | | |
| (2,005,132 | ) | |
| (2,005,132 | ) |
| Balance,
March 31, 2023 | |
| 10,450,000 | | |
| 10,450 | | |
$ | 18,118,548 | | |
$ | (6,092,764 | ) | |
$ | 12,036,234 | |
The accompanying notes are an integral part
of these unaudited condensed financial statements
| FORZA
X1, INC. |
| Condensed
Statements of Cash Flows |
| (Unaudited) |
| | |
Three months ended |
| | |
March 31, 2023 | |
March 31, 2022 |
| | |
| |
|
| Cash Flows From Operating Activities | |
| | | |
| | |
| Net loss | |
$ | (2,005,132 | ) | |
$ | (514,292 | ) |
| Adjustments to reconcile net loss: | |
| | | |
| | |
| Depreciation | |
| 35,696 | | |
| 7,737 | |
| Stock based compensation | |
| 341,163 | | |
| — | |
| Change of right-of-use asset | |
| 21,411 | | |
| — | |
| Inventories | |
| (42,829 | ) | |
| — | |
| Prepaid expenses and other current assets | |
| 152,752 | | |
| 68,602 | |
| Accounts payable | |
| (49,473 | ) | |
| 23,645 | |
| Contract liabilities - customer deposits | |
| 500 | | |
| (11,229 | ) |
| Accrued liabilities | |
| (15,598 | ) | |
| — | |
| Operating lease liabilities | |
| (21,072 | ) | |
| — | |
| Net cash used in operating activities | |
| (1,582,582 | ) | |
| (425,537 | ) |
| | |
| | | |
| | |
| Cash Flows From Investing Activities | |
| | | |
| | |
| Purchase of property and equipment | |
| (199,599 | ) | |
| (39,870 | ) |
| Net cash used in investing activities | |
| (199,559 | ) | |
| (39,870 | ) |
| | |
| | | |
| | |
| Cash Flows From Financing Activities | |
| | | |
| | |
| Deferred offering costs | |
| — | | |
| (116,394 | ) |
| Finance lease liabilities | |
| (2,836 | ) | |
| — | |
| Repayments of advances from parent | |
| (409,505 | ) | |
| (600,557 | ) |
| Advances from parent | |
| 110,283 | | |
| 18,151 | |
| Net cash used in financing activities | |
| (302,058 | ) | |
| (698,800 | ) |
| | |
| | | |
| | |
| Net change in cash and cash equivalents | |
| (2,084,199 | ) | |
| (1,164,207 | ) |
| Cash and cash equivalents at beginning of period | |
| 12,767,199 | | |
| 1,803,285 | |
| Cash and cash equivalents at end of period | |
$ | 10,683,000 | | |
$ | 639,078 | |
| | |
| | | |
| | |
| Supplemental Cash Flow Information | |
| | | |
| | |
| Cash paid for income taxes | |
$ | — | | |
$ | — | |
| Cash paid for interest | |
$ | 291 | | |
$ | 601 | |
| | |
| | | |
| | |
| Non Cash Financing Activities | |
| | | |
| | |
| Finance lease | |
$ | 92,405 | | |
$ | — | |
The accompanying notes are an integral part
of these unaudited condensed financial statements.
FORZA X1, INC.
NOTES TO THE UNAUDITED CONDENSED
FINANCIAL STATEMENTS
MARCH 31, 2023
| 1. |
Organization and Summary of Significant Accounting Policies |
Organization
Forza X1, Inc. (“Forza”) was initially incorporated
as Electra Power Sports, Inc. on October 15, 2021, but subsequently changed its name to Forza X1, Inc. on October 29, 2021. The
Company’s parent company was incorporated in the State of Florida as Twin Vee Catamarans, Inc. on December 1, 2009, and reincorporated
in Delaware on April 7, 2021, as Twin Vee PowerCats Co. (“Twin Vee”).
Basis of Presentation
The accompanying unaudited condensed financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial statements and with the instructions to Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission
(“SEC”). Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted
in the United States of America for annual financial statements.
In the opinion of the Company’s management,
the accompanying unaudited condensed financial statements contain all the adjustments necessary (consisting only of normal recurring
accruals) to present the financial position of the Company as of March 31, 2023 and the results of operations and cash flows for
the periods presented. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the
operating results for the full fiscal year or any future period. These unaudited condensed financial statements should be read
in conjunction with the financial statements and related notes thereto for the year ended December 31, 2022 included in the Company’s
10-K filed with the SEC on March 28, 2023.
Use of Estimates
The preparation of financial statements in
conformity with accounting principles generally accepted in the United States “U.S. GAAP” requires management to make
estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those
estimates. Included in those estimates are assumptions about useful life of fixed assets.
Cash and Cash Equivalents
Cash and cash equivalents include all highly
liquid investments with original maturities of three months or less at the time of the purchase. On March 31, 2023 and December
31, 2022, the Company had cash and cash equivalents of $10,683,000 and $12,767,199, respectively.
Concentrations of Credit and Business Risk
The Company minimizes the concentration of
credit risk associated with its cash by maintaining its cash with high quality federally insured financial institutions. However,
cash balances in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limit of $250,000 are at risk.
As of March 31, 2023 and December 31, 2022, the Company had $10,271,464 and $12,446,216, respectively, in excess of FDIC insured
limits.
| 2. |
Property and Equipment |
At March 31, 2023 and December 31, 2022, property
and equipment consisted of the following:
| | |
March 31, | |
December 31, |
| | |
2023 | |
2022 |
| Building - construction in progress | |
| 25,071 | | |
| 10,031 | |
| Equipment | |
| 195,148 | | |
| 59,806 | |
| Computer hardware and software | |
| 38,847 | | |
| 37,016 | |
| Software and website development | |
| 90,396 | | |
| 35,572 | |
| Furniture and fixtures | |
| 2,152 | | |
| — | |
| Vehicles | |
| 48,825 | | |
| — | |
| Prototype | |
| 142,526 | | |
| 142,526 | |
| Molds and fixtures | |
| 562,916 | | |
| 528,966 | |
| | |
| 1,105,881 | | |
| 813,917 | |
| Less accumulated depreciation | |
| (84,207 | ) | |
| (48,511 | ) |
| | |
$ | 1,021,674 | | |
$ | 765,406 | |
Depreciation expense of property and equipment
of $35,696 and $7,737 for the three months ended March 31, 2023 and 2022, respectively.
3. Leases
Operating right of use (“ROU”)
assets and operating lease liabilities are recognized at the lease commencement date. Operating lease liabilities represent the
present value of lease payments not yet paid. Operating right of use assets represent the Company’s right to use an underlying
asset and is based upon the operating lease liabilities adjusted for prepayments or accrued lease payments, initial direct
costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid,
the Company estimates incremental secured borrowing rates corresponding to the maturities of the leases. We used the U.S. Treasury
rate of 0.33% at December 31, 2022.
The Company leases a warehouse facility, and the
land upon which the warehouse is located which are located at 150 Commerce Street, Old Fort, North Carolina (the
“Property”) from NC Limited Liability Company. The Company entered into the lease on October 7, 2022, the lease has a
term of 2 two
years. The current base rent payment is $7,517 per
month including property taxes, insurance, and common area maintenance. The lease required a $7,517 security
deposit. The base rent will increase three percent (3%) on October 15, 2023.
At March 31, 2023 and December 31, 2022, supplemental
balance sheet information related to leases were as follows:
| | |
March 31, | |
December 31, |
| | |
2023 | |
2022 |
| Operating lease ROU asset | |
$ | 140,658 | | |
$ | 162,069 | |
| | |
March 31, | |
December 31, |
| | |
2023 | |
2022 |
| Operating lease liabilities: | |
| | | |
| | |
| Current portion | |
$ | 87,789 | | |
$ | 86,245 | |
| Non-current portion | |
| 45,916 | | |
| 68,532 | |
| Total lease liabilities | |
$ | 133,705 | | |
$ | 154,777 | |
At March 31, 2023, future minimum lease payments
under the non-cancelable operating leases are as follows:
Years Ending December 31,
| 2023 | | |
$ | 68,552 | |
| 2024 | | |
| 61,937 | |
| Total lease payment | | |
$ | 130,489 | |
The following summarizes other supplemental information about the
Company’s operating lease:
| |
|
March 31, 2023 |
| Weighted average discount rate |
|
|
4 |
% |
| Weighted average remaining lease term (years) |
|
|
1.58 |
|
| | |
Three Months Ended March 31, 2023 |
| Operating lease cost | |
$ | 22,550 | |
| Total lease cost | |
$ | 22,550 | |
The Company has finance leases for a vehicle
and a forklift. The Company entered into the forklift lease in January of 2023, it is a 60-month lease at a 7.5% interest rate.
The Company entered into the vehicle lease in February of 2023, it is a 60-month lease at a 3% interest rate. The current portion
of the lease liabilities was $16,830 for the three months ended March 31, 2023, and the non-current portion was $72,739.
| 4. |
Related Party Transaction |
As of March 31, 2023 and December 31, 2022,
the Company had current liabilities of $0 and $169,851, respectively, due to Twin Vee. Prior to the Company’s initial public
offering (“IPO”), Twin Vee funded the Company’s working capital needs, primarily for prototyping, consulting
services, rent, interest and payroll. As of March 31, 2023 and December 31, 2022 the Company had current assets of $129,371 and
$0, respectively, due from Twin Vee, due to intercompany transactions.
Associated with amounts advanced and due to
Twin Vee, for the three months ended March 31, 2023 and 2022, the Company recorded interest expense of $426 and $601,
respectively, based on a rate of 6% interest on the Company’s average monthly balance.
Pursuant to a management agreement with Twin
Vee, dated October 2021, and a subsequent agreement dated September 2022, for various management services, the Company paid $5,000
monthly through August of 2021, and $6,800 monthly thereafter for management fee associated with the use of shared management resources.
The September 2022 agreement has a term of one year and will expire on August 31, 2023. For the three months ended March 31, 2023
and 2022, the Company recorded management fees of $20,400 and $15,000, respectively, pursuant to a management agreement with Twin
Vee, for various management services.
For the three months ended March 31, 2023 and
2022 the Company recorded rent expense of approximately $10,200 and $2,550, respectively, associated with its month- to- month
arrangement to utilize certain space at Twin Vee’s facility. The Company incurred $850 per month for rent expense for approximately
1,000 square feet, from January of 2021 through August 2022, in September of 2022 the month-to-month rent was adjusted to $3,400
per month, as the number of test boats had increased from 1 to 5, and the Company required additional space, approximately 4,100
square feet. The Company’s use of Twin Vee’s facilities does vary based on the number of prototype units on property
and in process. The Company’s corporate headquarters are located at Twin Vee’s location, however a number of its employees
and consultants work remotely.
During the three months ended March 31, 2023
and 2022, the Company repaid advancements from Twin Vee of $409,505 and $600,557, respectively, and had advancements from Twin
Vee of $110,283 and $18,151, respectively.
At March 31, 2023 and December 31, 2022, accrued
liabilities consisted of the following:
| | |
March 31, | |
December 31, |
| | |
2023 | |
2022 |
| Accrued wages and benefits | |
$ | 47,910 | | |
$ | 56,581 | |
| Accrued operating expense | |
| 29,259 | | |
| 36,186 | |
| Total | |
$ | 77,169 | | |
$ | 92,767 | |
As
of March 31, 2023, the Company had cash and cash equivalents and working capital of $10,683,000
and $10,985,040,
respectively, compared to $12,767,199
and
$12,833,743,
respectively, on December 31, 2022. The Company has incurred a net loss of $2,005,132 and $514,292
for
the three months ended March 31, 2023 and 2022, respectively. Losses have principally occurred as a result of the research and development
efforts coupled with no operating revenue.
The Company has no current source of revenue
and may seek additional equity and/or debt financing. A successful transition to attaining profitable operations is dependent upon
achieving a level of positive cash flows adequate to support the Company’s cost structure.
| 7. |
Commitments and Contingencies |
Short-term lease
In August of 2022, the Company signed a six-month
lease for a duplex, to be used by its employees to minimize travel expense as it started construction on its new manufacturing
facility, for $2,200 per month, on a property in Black Mountain, North Carolina. During the three months ended March 31, 2023,
the lease expense was $2,200.
Litigation
The Company is currently involved in a civil
litigation in the normal course of business, the Company does not consider this to be material.
Common Stock Warrants
As of March 31, 2023, the Company had outstanding
warrants to purchase 172,500 shares of common stock issuable at a weighted-average exercise price of $6.25 per share
that were issued to the representative of the underwriters on August 16, 2022 in connection with the Company’s IPO. The representative’s
warrants are exercisable at any time and from time to time, in whole or in part, and expire on August 16, 2027. There was no warrant
activity during the three months ended March 31, 2023.
Equity Compensation Plan
The Company maintains
an equity compensation plan (the “Plan”) under which it may award employees, directors and consultants’ incentive
and non-qualified stock options, restricted stock, stock appreciation rights and other stock-based awards with terms established
by the Compensation Committee of the Board of Directors which has been appointed by the Board of Directors to administer the plan.
The number of awards under the Plan automatically increased on January 1, 2023. As of March 31, 2023, there were 568,750 shares
remaining available for grant under this Plan. Stock based compensation expense is included in the Statements of Operations, under
salaries and wages.
Accounting for Stock -Based Compensation
Stock Compensation Expense -
For the three months ended March 31, 2023 and 2022, the Company recorded $341,163 and $0, respectively, of stock-based
compensation expense which is included in salaries and wages on the accompanying condensed statement of operations.
Forza’s
2022 Stock Incentive Plan (the “Plan”)- Forza has issued stock options. A stock option grant gives the holder
the right, but not the obligation to purchase a certain number of shares at a predetermined price for a specific period of time.
Forza typically issues options that vest pro rata on a monthly basis over various periods. Under the terms of the Plan, the contractual
life of the option grants may not exceed ten years.
The Company utilizes
the Black-Scholes model to determine fair value of stock option awards on the date of grant. The Company utilized the following
assumptions for option grants during the three months ended March 31, 2023:
| |
|
Three months ended |
| |
|
March 31, |
| |
|
2023 |
| Expected term |
|
|
5 years |
|
| Expected average volatility |
|
|
111 - 115 |
% |
| Expected dividend yield |
|
|
— |
|
| Risk-free interest rate |
|
|
2.98-3.62 |
% |
The expected volatility of the option is determined
using historical volatilities based on historical stock price of comparable boat manufacturing companies. The Company estimated
the expected life of the options granted based upon historical weighted average of comparable boat manufacturing companies. The
risk-free interest rate is determined using the U.S. Department of the Treasury yield curve rates with a remaining term equal to
the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%
| |
|
Options Outstanding |
|
Weighted Average |
|
|
| |
|
Number of |
|
Weighted Average |
|
Remaining life |
|
Fair value of |
| |
|
Options |
|
Exercise Price |
|
(years) |
|
option |
| |
|
|
|
|
|
|
|
|
| |
Outstanding, December 31, 2021 |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
| |
Granted |
|
|
|
1,441,500 |
|
|
|
3.41 |
|
|
|
10.00 |
|
|
|
4,009,913 |
|
| |
Exercised |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
| |
Forfeited/canceled |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Outstanding, December 31, 2022 |
|
|
|
1,441,500 |
|
|
$ |
3.41 |
|
|
|
10.00 |
|
|
$ |
4,009,913 |
|
| |
Granted |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
| |
Exercised |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
| |
Forfeited/canceled |
|
|
|
(36,944 |
) |
|
|
1.33 |
|
|
|
9.74 |
|
|
|
— |
|
| |
Outstanding, March 31, 2023 |
|
|
|
1,404,556 |
|
|
$ |
3.46 |
|
|
|
9.51 |
|
|
$ |
4,009,913 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Exercisable options, March 31, 2023 |
|
|
|
240,583 |
|
|
$ |
4.21 |
|
|
|
9.44 |
|
|
|
|
|
The Company has evaluated all events or transactions
that occurred after March 31, 2023 through May 9, 2023, which is the date that the condensed financial statements were available
to be issued. During this period, there were no material subsequent events requiring recognition or disclosure.
3,425,000 Shares of
Common Stock
Forza
X1, Inc.
ThinkEquity
, 2023
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and
Distribution
The following table sets forth the expenses to be incurred in connection with
the offering described in this Registration Statement, other than underwriting discounts and commissions, all of which will be paid by
us. All amounts are estimates except the SEC’s registration fee and the Financial Industry Regulatory Authority, Inc.’s filing
fee.
| | |
Amount to be Paid |
| SEC Registration Fee | |
$ | 1,347 | |
| FINRA filing fee | |
| 2,333 | |
| Printing and engraving expenses | |
| 20,000 | |
| Legal fees and expenses | |
| 250,000 | |
| Accounting fees and expenses | |
| 50,000 | |
| Transfer agent and registrar fees | |
| 15,000 | |
| Miscellaneous expenses | |
| 11,320 | |
| Total | |
$ | 350,000 | |
Item 14. Indemnification of Directors and
Officers
Section 145 of the Delaware General Corporation
Law empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that the person acted in good faith and in a manner the person reasonably
believed to be in our best interests, and, with respect to any criminal action, had no reasonable cause to believe the person’s
actions were unlawful. The Delaware General Corporation Law further provides that the indemnification permitted thereunder shall not be
deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation’s bylaws, any agreement,
a vote of stockholders or otherwise. The certificate of incorporation of the registrant provides for the indemnification of the registrant’s
directors and officers to the fullest extent permitted under the Delaware General Corporation Law. In addition, the bylaws of the registrant
require the registrant to fully indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding (whether civil, criminal, administrative or investigative) by reason of the fact that such person
is or was a director or officer of the registrant, or is or was a director or officer of the registrant serving at the registrant’s
request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney’s fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, to the fullest extent permitted by applicable law.
Section 102(b)(7) of the Delaware General Corporation
Law permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach
of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for payments of unlawful dividends or unlawful stock repurchases
or redemptions; or (iv) for any transaction from which the director derived an improper personal benefit. The registrant’s
certificate of incorporation provides that the registrant’s directors shall not be personally liable to it or its stockholders for
monetary damages for breach of fiduciary duty as a director and that if the Delaware General Corporation Law is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then the liability of the registrant’s directors shall
be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended.
As permitted by the Delaware General Corporation Law,
the registrant intends to enter into separate indemnification agreements with each of the registrant’s directors and certain of
the registrant’s officers which require the registrant, among other things, to indemnify them against certain liabilities which
may arise by reason of their status as directors, officers or certain other employees.
The registrant expects to obtain and maintain insurance
policies under which its directors and officers are insured, within the limits and subject to the limitations of those policies, against
certain expenses in connection with the defense of, and certain liabilities which might be imposed as a result of, actions, suits or proceedings
to which they are parties by reason of being or having been directors or officers. The coverage provided by these policies may apply whether
or not the registrant would have the power to indemnify such person against such liability under the provisions of the Delaware General
Corporation Law.
These indemnification provisions and the indemnification
agreements entered into between the registrant and the registrant’s officers and directors may be sufficiently broad to permit indemnification
of the registrant’s officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities
Act of 1933, as amended.
The proposed form of underwriting agreement between
the registrant and the representative of the underwriters to be filed as Exhibit 1.1 to this registration statement provides for
the indemnification by the underwriters of the registrant’s directors and officers and certain controlling persons against specified
liabilities, including liabilities under the Securities Act with respect to information provided by the underwriters specifically for
inclusion in the registration statement.
Item 15. Recent Sales of Unregistered Securities
None.
Item 16. Exhibit and Financial Statement
Schedules
(a) Exhibits.
The exhibit index attached hereto is incorporated
herein by reference.
(b) Financial Statement Schedules.
(a)
Exhibits. See the Exhibit Index immediately preceding the signature pages hereto, which is incorporated by reference as if fully
set forth herein.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
| |
(1) |
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) To include
any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement.
(iii) To
include any material information with respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the registration statement;
| |
(2) |
That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. |
| |
(3) |
To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering. |
| |
(4) |
That,
for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser
in the initial distribution of the securities, that in a primary offering of securities of the undersigned registrant pursuant
to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if
the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| |
a. |
Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant
to Rule 424 (§ 230.424 of this chapter); |
| |
b. |
Any
free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by
the undersigned registrant; |
| |
c. |
The
portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and |
| |
d. |
Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| |
(5) |
That,
insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of such issue. |
| |
(6) |
That,
for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement
as of the time it was declared effective. |
| |
(7) |
That,
for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, as amended, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Ft. Pierce, State of Florida, on the 6th day of June, 2023.
| |
FORZA X1,
INC. |
| |
|
|
| |
By: |
/s/
Jim Leffew |
| |
Name: |
Jim Leffew |
| |
Title: |
President and Chief Executive
Officer |
| |
|
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Act
of 1933, as amended, this registration statement on Form S-1 has been signed by the following persons in the capacities and on the dates
indicated.
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| /s/ Joseph C. Visconti |
|
Executive Chairman of the Board and Chief of Product Development |
|
June 6, 2023 |
| Joseph C. Visconti |
|
|
|
|
| |
|
|
|
|
| /s/ Jim Leffew |
|
President and Chief Executive Officer and Director (Principal Executive Officer) |
|
June 6, 2023 |
| Jim Leffew |
|
|
|
|
| |
|
|
|
|
| /s/ Carrie Gunnerson |
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
|
June 6, 2023 |
| Carrie Gunnerson |
|
|
|
|
| |
|
|
|
|
| /s/ Marcia Kull |
|
Director |
|
June 6, 2023 |
| Marcia Kull |
|
|
|
|
| |
|
|
|
|
| /s/ Neil Ross |
|
Director |
|
June 6, 2023 |
| Neil Ross |
|
|
|
|
| |
|
|
|
|
| /s/ Kevin Schuyler |
|
Director |
|
June 6, 2023 |
| Kevin Schuyler |
|
|
|
|
EXHIBIT INDEX
| Exhibit No. |
|
Description of Exhibit |
| 1.1+ |
|
Form of Underwriting Agreement by and between Forza X1, Inc. and ThinkEquity LLC, as representative of the underwriters |
| |
|
|
| 3.1 |
|
Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 the Current Report on Form 8-K filed with the SEC on August 16, 2022 (File No. 001-41469) |
| |
|
|
| 3.2 |
|
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 the Current Report on Form 8-K filed with the SEC on August 16, 2022 (File No. 001-41469) |
| |
|
|
| 4.1 |
|
Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form S-1 on Form 8-K filed with the SEC on February 9 (File No. 001-41469) |
| |
|
|
| 4.2+ |
|
Form of Representative’s Warrant Agreement |
| |
|
|
| 5.1* |
|
Opinion of Blank Rome LLP |
| |
|
|
| 10.1# |
|
Forza X1, Inc. 2022 Stock Incentive Plan and form of Incentive Plan Option Agreement, Non-Qualified Stock Option Agreement, and Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.1 to Amendment No. 5 to Registration Statement on Form S-1 filed with the SEC on July 25, 2022 (File No. 333-261884) |
| |
|
|
| 10.2 |
|
Management Agreement, dated as of October 1, 2021, by and between Forza X1, Inc. and Twin Vee PowerCats Co. (incorporated by reference to Exhibit 10.2 the Amendment to Registration Statement on Form S-1 filed with the SEC on December 23, 2021 (File No. 333-261884) |
| |
|
|
| 10.3# |
|
Employment Agreement, dated December 15, 2021, between Forza X1, Inc. and Jim Leffew (incorporated by reference to Exhibit 10.3 the Amendment to the Registration Statement on Form S-1 filed with the SEC on December 23, 2021 (File No. 333-261884) |
| |
|
|
| 10.4† |
|
Supply Agreement, dated December 20, 2021, by and between Forza X1, Inc. and American Battery Systems, Inc. (incorporated by reference to Exhibit 10.4 the Amendment to Registration Statement on Form S-1 filed with the SEC on December 23, 2021 (File No. 333-261884) |
| |
|
|
| 10.5 |
|
Employment Agreement, dated June 9, 2021, between Twin Vee PowerCats Co. and Joseph Visconti (incorporated by reference to Exhibit 10.5 the Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on February 9, 2022 (File No. 333-261884) |
| |
|
|
| 10.6 |
|
Employment Agreement, dated October 1, 2021, between Twin Vee PowerCats Co. and Carrie Gunnerson (incorporated by reference to Exhibit 10.6 to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on February 9, 2022 (File No. 333-261884) |
| |
|
|
| 10.7 |
|
Employment Agreement, dated June 9, 2021, between Twin Vee PowerCats Co. and Preston Yarborough (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on February 9, 2022 (File No. 333-261884) |
| |
|
|
| 10.8# |
|
Employment Agreement between Forza X1, Inc. and Joseph Visconti (incorporated by reference to Exhibit 10.4 the Current Report on Form 8-K filed with the SEC on August 16, 2022 (File No. 001-41469) |
| |
|
|
| 10.9 |
|
Transition Services Agreement between Twin Vee PowerCats Co. and Forza X1, Inc. (incorporated by reference to Exhibit 10.2 the Current Report on Form 8-K filed with the SEC on August 16, 2022 (File No. 001-41469) |
| |
|
|
| 10.10 |
|
Assignment of Assets Agreement between Twin Vee PowerCats Co. and Forza X1, Inc. (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form S-1 on Form 8-K filed with the SEC on March 17, 2022 (File No. 333-261884) |
| 10.11 |
|
Assignment of Intellectual Property between Daniel Norton. and Forza X1, Inc. (incorporated by reference to Exhibit 10.6 to Amendment No. 2 to the Registration Statement on Form S-1 on Form 8-K filed with the SEC on March 17, 2022 (File No. 333-261884 |
| |
|
|
| 10.12# |
|
Amendment, dated July 22, 2022, to Employment Agreement between Forza X1, Inc. and Jim Leffew (incorporated by reference to Exhibit 10.6 to Amendment No. 5 to the Registration Statement on Form S-1 filed with the SEC on July 25, 2022 (File No. 333-261884 |
| |
|
|
| 10.13 |
|
Vacant Land Contract between CBL, LLC and Twin Vee PowerCats Co. (incorporated by reference to Exhibit 10.13 to the Company’s registration statement on Form S-1, as filed on April 20, 2022 (333-261884) |
| |
|
|
| 10.14 |
|
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 the Current Report on Form 8-K filed with the SEC on August 16, 2022 (File No. 001-41469) |
| |
|
|
| 10.15 |
|
Forza X1 and OneWater Agreement (incorporated by reference to Exhibit 10.1 the Current Report on Form 8-K filed with the SEC on August 18, 2022 (File No. 001-41469) |
| |
|
|
| 21.1 |
|
List of Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2023 (File No. 001-41469) |
| |
|
|
| 23.1* |
|
Consent of Grassi & Co., CPAs, P.C., Independent Registered Public Accounting Firm |
| |
|
|
| 23.2* |
|
Consent of Blank Rome LLP (contained in Exhibit 5.1) |
| |
|
|
| 24.1 |
|
Power of Attorney (included on the signature page of this Registration Statement) |
| |
|
|
| 107* |
|
Calculation of Filing Fee Table |
| * |
Filed herewith |
| + |
To be filed by amendment |
| † |
Certain portions of the Supply Agreement have been omitted in accordance with Item 601(b)(10) of Regulation S-K. Forza X1 hereby undertakes to furnish to the Securities and Exchange Commission supplementally copies of any of the omitted portions of the Supply Agreement upon request. |
| # |
Indicates a contract, compensatory plan or arrangement to which a director or executive officer is a party or in which one or more directors or executive officers are eligible to participate. |
II-6
