Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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 related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties. See "Forward-Looking Statements." Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto. You should also review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q and under Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

All share amounts and exercise or conversion prices in this Quarterly Report on Form 10-Q have been adjusted retrospectively for our 1-for-10 reverse stock split (the "2025 Reverse Stock Split"), which was effective on April 7, 2025 and our 1-for-37 reverse stock split (the "2026 Reverse Stock Split" and together with the 2025 Reverse Stock Split, the "Reverse Stock Split"), which was effective on May 4, 2026.

Management Matters

On October 8, 2026, the Company extended the consulting agreement of Michael P. Dickerson, the Company's former Chief Financial and Administrative Officer, for a period of three months, until December 31, 2026 at a rate of $25,000 per month with three additional one-month extensions possible. Pursuant to the terms of such consulting agreement, Mr. Dickerson serves as our Interim Chief Financial Officer.

OVERVIEW

Twin Vee PowerCats Co. ("Twin Vee", "we", "us" or the "Company") is a designer, manufacturer and marketer of recreational and commercial power boats. We believe our company, founded in 1996, has been an innovator in the recreational and commercial power catamaran industry. Our twin-hull catamaran running surface, known as a symmetrical catamaran hull design, adds to the Twin Vee ride quality by reducing drag, increasing fuel efficiency and offering users a stable riding boat. Our home base operations in Fort Pierce, Florida is a 7.5-acre facility with several buildings totaling approximately 100,000 square feet, including a recently completed 30,000 square foot expansion which began in mid-2024. We currently employ approximately 80 people.

Our products are marketed under two brands: Twin Vee for our catamarans, or dual hull vessels, and Bahama Boats and Bimini for our "V"-hull boats. Consumers can use our boats for a wide range of recreational activities including fishing, diving and water skiing and commercial activities including transportation, eco tours, fishing and diving expeditions. We believe that the performance, quality and value of our boats position us to achieve our goal of increasing our market share and expanding the power-boat market. We currently primarily sell our boats through a network of 22 independent boat dealers across North America, the Caribbean and Central America who resell our boats to the end user Twin Vee customers. We continue efforts to recruit high-quality boat dealers to join our network and seek to establish new dealers and distributors domestically and internationally to distribute our boats as we grow our production and introduce new models. Our boats are currently outfitted with gas-powered outboard combustion engines. During 2024, Forza X1, Inc. ("Forza"), our then minority owned electric boat subsidiary, determined to cease production of electric boats, and on November 26, 2024, Forza was merged into Twin Vee Merger Sub, Inc., our wholly-owned subsidiary, and became a wholly owned subsidiary.

Revenue from the sale of our boats accounted for nearly 100% of our net revenue in the third quarter of 2026 and 2025. Our boats are manufactured in Fort Pierce, Florida. We believe our company has been an innovator in the recreational and commercial power boat industry. We currently have 11 Twin Vee models in production ranging in size from 22-foot to 40-foot, and 6 monohull Bahama models in or nearing production ranging in size from 31-foot to 41-foot, and three Bimini monohull models ranging in size from 21-foot to 29-foot.

During the quarter ended September 30, 2026, three individual dealers each represented over 10% of our total sales and together represented 77% of total sales. During the quarter ended September 30, 2025, four individual dealers each represented over 10% of our total sales and together represented 83% of total sales.

Our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2026 were prepared under the assumption that we will continue as a going concern; however, we have incurred significant losses from operations to date and we expect our expenses to increase in connection with our ongoing activities. These factors raise substantial doubt about our ability to continue as a going concern for one year after the condensed consolidated financial statements included in this Quarterly Report are issued.

Recent Developments

Nasdaq Compliance

As previously disclosed, on April 2, 2026, the Company received written notice (the "Notification Letter") from the staff of the Listing Qualifications Department (the "Staff") of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that it no longer satisfies the $1.00 bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of thirty (30) consecutive business days (collectively, the "Bid Price Rule"). Based on the closing bid price of the Company's common stock for the thirty (30) consecutive business days from February 18, 2026 to March 31, 2026, the Company no longer satisfied the Bid Price Rule. While companies are typically afforded a 180-calendar day compliance period to comply with the Bid Price Rule, the Notification Letter stated that, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company was not eligible for any compliance period specified in Nasdaq Listing Rule 5810(c)(3)(A) due to the fact that the Company effected a reverse stock split over the prior one-year period. The Company effected a 1-for-10 reverse stock split on April 7, 2025. The Notification Letter stated that the Company's securities will be subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the "Panel"), which was timely requested and subsequently scheduled for May 7, 2026.

To that end, on April 30, 2026, the Company filed a Certificate of Change with the Nevada Secretary of State (the "Certificate of Change") to amend its Nevada Articles of Incorporation to effect a 1-for-37 reverse stock split of the Company's authorized shares of common stock, accompanied by a corresponding decrease in the Company's issued and outstanding shares of common stock (the "Reverse Stock Split"), effective as of 12:01 a.m. Eastern Time on May 4, 2026, purportedly pursuant to Nevada Revised Statutes ("NRS") 78.207. On June 17, 2026, the Panel found that Twin Vee is in compliance with the Listing Rules of The Nasdaq Stock Market.

Defective State of Nevada Reincorporation

On April 10, 2026, the Company purported to complete its reincorporation from the State of Delaware to the State of Nevada. On August 4, 2026, after discovering that the reincorporation was not approved by a sufficient vote of shares of the Company's common stock, the Company filed Certificates of Correction (a) in the State of Nevada to revoke the previously filed Nevada Articles of Conversion/Exchange/Merger and Nevada Articles of Incorporation and (b) in the State of Delaware to revoke the previously filed Delaware Certificate of Conversion. Separately, the Company sought stockholder approval to ratify the articles of incorporation amendment, which were filed with the State of Nevada on April 30, 2026 with an effective date of May 4, 2026, to effect the reverse stock split referred to elsewhere in this Quarterly Report. In light of the defective corporate acts referred to above, the Company did not effectively reincorporate to Nevada.

As the Company previously disclosed in a Current Report on Form 8-K that it filed with the SEC on August 5, 2026, the Company purported to effect its reincorporation from the State of Delaware to the State of Nevada through, among other things, a Certificate of Conversion which was filed with the Secretary of State of the State of Delaware (the "DE Secretary of State") on April 7, 2026. On September 8, 2026, following receipt of stockholder approval for the Ratification Proposal (as defined in the Proxy Statement), the Company filed with the DE Secretary of State a Certificate of Validation of Certificate of Amendment (the "Certificate") to give effect to the Reverse Stock Split (as defined below). The Certificate was deemed to have become effective as of May 4, 2026 at 12:01 a.m., Eastern Time.

Officer Compensation

On August 21, 2026, the Compensation Committee of the Board of Directors (the "Committee") of Twin Vee PowerCats Co. revised the base salary of Joseph Visconti, the Company's Chief Executive Officer and President, to $250,000. Additionally, Mr. Visconti shall be eligible to receive a bonus payment of $150,000 upon the successful completion and closing of the Agreement and Plan of Merger with USFM Corporation dated July 12, 2026 as amended October 7, 2026. In the event the Merger Agreement is successful and closes, the Company shall pay this bonus within ten (10) days after closing.

Results of Operations and Financial Conditions

Comparison of the Three Months Ended September 30, 2026 and 2025.

The following table provides certain selected financial information for the periods presented:

		Three Months Ended
		September 30,
		2026				2025				$ Change				% Change
Net sales		$	2,772,092			$	3,428,977			$	(656,885	)			(19	%)
Cost of products sold (excluding depreciation & amortization)		$	3,149,430			$	3,474,206			$	(324,776	)			(9	%)
Gross loss		$	(377,338	)		$	(45,229	)		$	(332,109	)			(734	%)
Operating expenses		$	2,731,538			$	2,731,466			$	72				0	%
Loss from operations		$	(3,108,876	)		$	(2,776,695	)		$	(332,181	)			(12	%)
Other income		$	95,824			$	21,182			$	74,642				352	%
Net loss		$	(3,013,052	)		$	(2,755,513	)		$	(257,539	)			(9	%)
Basic and dilutive loss per share of common stock		$	(5.19	)		$	(45.57	)		$	40.35				89	%
Weighted average number of shares of common stock outstanding			580,647				60,468

Net Sales and Cost of Sales

Our net sales decreased by $656,885, or 19%, to $2,772,092 for the three months ended September 30, 2026, from $3,428,977 for the three months ended September 30, 2025. This decrease was due primarily to market conditions of elevated interest rates and higher gas prices impacting consumer behavior and demand. During the third quarter of 2026, we sold 10 boats at an average selling price of approximately $277,000 per unit, compared to 31 units in the third quarter of 2025 with an average selling price of approximately $149,000. The increase in the average sales price is primarily due to a change in the product mix of boats sold, specifically, in the third quarter of 2025, 12 boats of 24 feet or less were sold versus in the third quarter of 2026 3 boats of 24 feet or less were sold.

Gross loss

Gross loss declined by $332,109 to a negative $377,338 for the three months ended September 30, 2026, from $45,229 for the three months ended September 30, 2025. Gross loss as a percentage of sales for the three months ended September 30, 2026 was -13.6% compared to -1.3% in the third quarter of 2025. The decline in gross profit of 14.9 percentage points, is primarily due to the unfavorable leverage effect of lower boat sales on fixed overhead costs.

Operating Expenses

During the three months ended September 30, 2026 and 2025, total operating expenses were $2,731,538 and $2,731,466. Significant declines in salaries and wages as well as a $360,151 impairment in the third quarter of 2025 were offset by an increase in legal and other expenses related to the proposed merger with USFM and the ratification of the defective Nevada reincorporation, May 2026 reverse stock split, and associated defective corporate acts.

Selling, general, and administrative expenses decreased by approximately 5%, or $33,630, to $617,098 for the three months ended September 30, 2026, compared to $650,728 for the three months ended September 30, 2025.

Salaries and wage related expenses decreased 59%, or $601,307, to $415,587 for the three months ended September 30, 2026, compared to $1,016,894 for the three months ended September 30, 2025. The decrease in salaries and wages is across the board, including salaries, director expenses, and benefits due to ongoing resource management, in addition, the conversion of our prior CFO to consultant status resulted in a reduction in salaries, bonus accruals as well as stock-based compensation expenses.

Professional fees increased by 511%, or $1,056,489, to $1,263,287 for the three months ended September 30, 2026, compared to $206,798 for the three months ended September 30, 2025, primarily due to legal and other expenses related to the proposed merger with USFM and the ratification of the defective Nevada reincorporation, May 2026 reverse stock split, and associated defective corporate acts.

Depreciation and amortization expense increased by 4%, or $15,741 to $435,566 for the three months ended September 30, 2026, as compared to $419,825 for the three months ended September 30, 2025. This increase is due to the capitalization of Ft. Pierce building expansion and the 5-axis C&C machine installed in late 2025.

Other income increased by $74,642 to $95,824 for the three months ended September 30, 2026, as compared to $21,182 for the three months ended September 30, 2025. This increase was due primarily to an increase in dividend and interest income from higher cash and cash equivalent balances, following the three equity sale transactions in the first quarter of 2026 and interest income related to the Company's note receivable related to the building in North Carolina which the Company sold on October 31, 2025.

Net Loss

Net loss for the three months ended September 30, 2026 was $3,013,052, as compared to $2,755,513 for the three months ended September 30, 2025, an increase of $257,539 or 9%. The overall year-over-year increase in the reported loss for the period was primarily due to the reduction in gross margin and an increase in legal fees as described above, Basic and dilutive loss per share of common stock for the three months ended September 30, 2026, adjusted for the May 4, 2026 1 for 37 reverse stock split, was ($5.19), as compared to ($45.57) for the three months ended September 30, 2025, an improvement of 89%.

Comparison of the Nine Months Ended September 30, 2026 and 2025

The following table provides certain selected financial information for the periods presented:

		Nine Months Ended
		September 30
		2026				2025				$ Change				% Change
Net sales		$	9,865,172			$	11,796,886			$	(1,931,714	)			(16	%)
Cost of products sold (excluding depreciation & amortization)		$	10,228,841			$	10,650,948			$	(422,107	)			(4	%)
Gross (loss) profit		$	(363,669	)		$	1,145,938			$	(1,509,607	)			(132	%)
Operating expenses		$	7,902,678			$	7,277,533			$	625,145				9	%
Loss from operations		$	(8,266,347	)		$	(6,131,595	)		$	(2,134,752	)			(35	%)
Other income		$	261,005			$	111,771			$	149,234				134	%
Net loss		$	(8,005,342	)		$	(6,019,824	)		$	(1,985,518	)			(33	%)
Basic and dilutive loss per share of common stock		$	(17.66	)		$	(118.63	)		$	100.37				85	%
Weighted average number of shares of common stock outstanding			453,249				50,743

Net Sales and Cost of Sales

Our net sales decreased by $1,931,714, or 16% to $9,865,172 for the nine months ended September 30, 2026 from $11,796,886 for the nine months ended September 30, 2025. This decrease was due primarily to market conditions of elevated interest rates and higher gas prices impacting consumer behavior and demand. We sold 47 and 78 boats during the first nine months of 2026 and 2025, respectively. The average unit price per boat was approximately $210,000 in the first nine months of 2026 compared to $151,000 in the first nine months of 2025. This increase is due primarily to the sale of a 35', 37' and 41' Bahama's in 2026 versus none in 2025.

Gross Profit (Loss)

Gross profits decreased by $1,509,607 or 132%, to a gross loss of $363,669 for the nine months ended September 30, 2026, from $1,145,938 gross profit for the nine months ended September 30, 2025. Gross profit as a percentage of sales, for the nine months ended September 30, 2026 and 2025, was -3.7% and 9.7% respectively. The decline in gross profit of 13.4 percentage points, is primarily due to an increase in labor related to the completion and re-launch of the new Bahama Boat line of boats at the Palm Beach International Boat Show and the unfavorable leverage effect of lower boat sales on fixed overhead costs.

During the second quarter of 2026, the Company recorded a non-cash impairment charge of approximately $699,710 related to capitalized software development costs. The software platform was developed and commercialized during 2025 with the expectation of generating future revenues through licensing, subscription arrangements, customer access fees, and other commercialization opportunities. Following commercialization, management actively pursued customer adoption, strategic partnerships, and other monetization initiatives. After evaluating market demand, expected future investment requirements, strategic priorities, and the absence of supportable future revenue opportunities, management determined during the second quarter of 2026 to discontinue commercialization efforts and abandon the software as a revenue-generating initiative. As a result, the Company concluded that the carrying value of the software was no longer recoverable and recorded a full impairment charge of approximately $699,710, representing the remaining net book value of the asset.

Operating Expenses

During the nine months ended September 30, 2026, operating expenses were $7,902,678 compared to $7,277,533 in the same period in 2025, an increase of $625,145 or 9%. The nine-month period ended September 30, 2026 and 2025 includes an impairment charge related to capitalized software of $699,711 and the North Carolina building of $360,151, respectively. Before giving effect to these impairment charges, operating expenses would have been down $285,585 compared to the comparable prior year period.

Selling, general, and administrative expenses increased by approximately 12%, or $223,202, to $2,077,755 for the nine months ended September 30, 2026, compared to $1,854,553 for the nine months ended September 30, 2025. The increase was driven by both property taxes and Delaware franchise taxes as well as approximately $168,000 of penalties assessed by the Internal Revenue Service related to section 6721 and 6722 for the tax year 2022. The Company is actively seeking to resolve this disagreement with the IRS.

Salaries and wage related expenses decreased 30%, or $914,889, to $2,124,070 for the nine months ended September 30, 2026, compared to $3,038,959 for the nine months ended September 30, 2025. The decrease in salaries and wages is across the board, including salaries, director expenses, and benefits due to ongoing resource management, in addition, the retirement of our prior CFO resulted in a reduction in salaries and bonus accruals. Included in salaries and wage related expenses for the nine months ended September 30, 2026 and 2025 was stock-based compensation expense of $166,034 and $179,493, respectively.

Professional fees increased by 201% or $1,096,014, to 1,639,330 for the nine months ended September 30, 2026, compared to $543,316 for the nine months ended September 30, 2025. This increase is primarily due to legal and other expenses related to the proposed merger with USFM and the ratification of the defective Nevada reincorporation, May 2026 reverse stock split, and associated defective corporate acts.

Depreciation and amortization expense increased by 6%, or $74,764, to $1,361,812 for the nine months ended September 30, 2026, as compared to $1,287,048 for the nine months ended September 30, 2025. This increase is due to the capitalization of Ft. Pierce building expansion and the 5-axis C&C machine installed in late 2025.

Other income increased by $149,234 to $261,005 for the nine months ended September 30, 2026, as compared to $111,771 for the nine months ended September 30, 2025. This increase was due primarily to an increase in dividend and interest income from higher cash and cash equivalent balances, following the three equity sale transactions in the first quarter of 2026 and interest income related to the Company's note receivable on the former building in North Carolina.

Net Loss

Net loss for the nine months ended September 30, 2026 was $8,005,342, as compared to $6,019,824 for the nine months ended September 30, 2025, an increase of $1,985,518 or 33%. The overall year-over-year increase in the net loss for the period was primarily due to the reduction in gross margin, an increase in legal fees described above, and the write off of capitalized software of $699,710. Basic and dilutive loss per share of common stock for the nine months ended September 30, 2026, adjusted for the May 4, 2026 1 for 37 reverse stock split, was ($18.26), as compared to ($118.63) for the nine months ended September 30, 2025, an improvement of 85%.

Liquidity and Capital Resources

Going Concern

For the year ended December 31, 2025, we incurred a loss from operations of $8,781,299 and a net loss of $8,607,273. For the nine months ended September 30, 2026, we incurred a loss from operations of $8,266,347 and a net loss of $8,005,342. As of September 30, 2026, we had accumulated deficits of $42,005,570. To address these conditions:

	●	We closed three equity offerings during the first quarter of 2026 totaling 468,862 shares of common stock for total net proceeds of $5,800,025.
	●	As of September 30, 2026, we maintain a cash, cash equivalents and restricted cash balance of $1,828,616.
	●	During the fourth quarter of 2025, we completed the sale of our Marion, North Carolina facility, generating $500,000 in cash in the fourth quarter of 2025, and expected cash payments of $500,000 in 2026 and $3,250,000 in 2027, plus interest at 5%.
	●	Management continues to implement cost controls, operational improvements, and revenue initiatives to further strengthen our financial position.

Despite our ongoing efforts to mitigate these conditions, there can be no assurance that our expenses will not increase in future periods or that the cash generated from operations in future periods will be sufficient to satisfy our operating needs. If we need to raise additional capital to fund our continued operations, there can be no assurance that funding will be available on acceptable terms on a timely basis, or at all. The various ways that we could raise capital carry potential risks. Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. If we do not succeed in raising additional funds on acceptable terms or at all, we may be unable to fill new orders and develop new products. As such, we cannot conclude that such plans will be effectively implemented within one year after the date that the condensed consolidated financial statements included in this Quarterly Report are filed with the SEC, and there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient revenue from operations and/or raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate efforts to expand our dealer network or develop new models and may be forced to cease operations or liquidate assets.

A primary source of funds for the three and nine months ended September 30, 2026 was net cash received from our three follow-on equity offerings closed during the first quarter of 2026, and revenue generated from operations. Our primary use of cash was related to funding our operations including capital improvements, and development of the Bahama Boat lineup.

During the nine months ended September 30, 2026, the Company completed three equity offerings resulting in aggregate gross proceeds of $7,192,640 and aggregate net proceeds of $5,800,025, after deducting placement agent fees and expenses and the Company's offering expenses.

In connection with these offerings, the Company issued as compensation to the placement agent warrants to purchase shares of its common stock. The warrants are exercisable immediately and are classified as equity instruments. As a result, the issuance of these warrants did not result in any remeasurement adjustments or impact to the Company's statements of operations.

The Company intends to use the net proceeds from these offerings for working capital and general corporate purposes.

Selected Balance Sheet Information

The following table provides selected financial data about us as of September 30, 2026 and December 31, 2025.

		September 30,				December 31,
		2026				2025				Change				% Change
Cash and cash equivalents		$	1,620,473			$	1,431,578			$	188,895				13.2	%
Restricted cash		$	208,143			$	215,117			$	(6,974	)			(3.2	%)
Current assets		$	6,593,654			$	4,897,217			$	1,696,437				34.6	%
Current liabilities		$	4,390,843			$	2,244,513			$	2,146,330				95.6	%
Working capital		$	2,202,811			$	2,652,704			$	(449,893	)			(17.0	%)

As of September 30, 2026, we had $1,828,616 of cash, cash equivalents, and restricted cash, total current assets of $6,593,654 and total assets of $18,305,427. Our total liabilities were $6,876,899. Our total liabilities were comprised of current liabilities of $4,390,843, which included accounts payable and accrued liabilities of $2,708,380, lease liabilities of $485,677 and contract liability of $1,196,786. Long term liabilities were $2,486,056. As of December 31, 2025, we had $1,646,695 of cash, cash equivalents, and restricted cash, total current assets of $4,897,217 and total assets of $16,234,369. Our total current liabilities were $2,244,513 and total liabilities were $2,766,558.

The accumulated deficit was $42,005,570 as of September 30, 2026 compared to accumulated deficit of $34,000,228 as of December 31, 2025.

Our working capital decreased by $449,893 to $2,202,811 as of September 30, 2026, compared to $2,652,704 on December 31, 2025 primarily due to the three first quarter 2026 equity offerings totaling 468,863 shares, netting approximately $5,800,025 after fees and expenses, partially offset by continued operating losses incurred in the period.

Cash Flow

		Nine Months Ended
		September 30,
		2026				2025				Change				% Change
Cash used in operating activities		$	(5,203,057	)		$	(5,129,964	)		$	(73,093	)			(1	%)
Cash used in investing activities		$	(399,763	)		$	(1,950,362	)		$	1,550,599				80	%
Cash provided by financing activities		$	5,784,741			$	2,293,774			$	3,490,967				152	%

Cash Flow from Operating Activities

For the nine months ended September 30, 2026 net cash used in operating activities was $5,203,057, compared to $5,129,964 during the nine months ended September 30, 2025. The use of cash in operating activities for the nine months ended September 30, 2026 was due primarily to a $8,266,347 operating loss adjusted for non-cash depreciation and amortization of $1,361,812, stock-based compensation of $166,034, and asset impairment losses of $699,711.

Cash Flow from Investing Activities

During the nine months ended September 30, 2026, cash used in investing activities was $399,763, due to investments in property, plant and equipment, primarily related to contingent consideration capitalized as Bahama Boat Works boat hulls. This compares to use of cash in investing activities of $1,950,362 in the nine months ended September 30, 2025 resulting from purchase of property and equipment.

Cash Flows from Financing Activities

For the nine months ended September 30, 2026, net cash provided by financing activities was approximately $5,784,741 due primarily to the three first quarter 2026 equity offerings totaling 468,863 shares, netting approximately $5,800,025 after fees and expenses. For the nine months ended September 30, 2025, net cash used in financing activities was approximately $2,293,774.

USFM Merger Impact to Our Liquidity

As described in note 15 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, the Company entered into the A&R Merger Agreement on October 7, 2026, which sets forth the terms associated with the USFM Merger. Among other things, pursuant to the USFM Merger Agreement, the Company must consummate the Pre-Closing CVR Restructuring, pursuant to which the Company must to transfer all of the Company Assets and Liabilities (which includes all of the Company's cash in excess of $700,000) to Assetco. This amount of retained cash was reduced from $1,500,000 in the initial USFM merger agreement entered into on July 12, 2026.

CRITICAL ACCOUNTING POLICIES AND 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 consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated 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 unaudited condensed consolidated 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:

Revenue Recognition

The Company accounts for revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 606 which was adopted at the beginning of fiscal year 2018 using the modified retrospective method. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption as the effect was immaterial.

Payment received for the future sale of a boat to a customer is recognized as a customer deposit, which is included in contract liabilities on the condensed consolidated balance sheets. Customer deposits are recognized as revenue when control over promised goods is transferred to the customer.

Use of Estimates

The preparation of condensed consolidated 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 allowances for inventory obsolescence, useful life of fixed assets, and warranty reserves.

Inventories

Inventories are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method. Net realizable value is defined as sales price less cost of completion, disposable and transportation and a normal profit margin. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

Product Warranty Costs

As required by FASB ASC Topic 460, Guarantees, the Company is including the following disclosure applicable to its product warranties.

The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience. The Company's warranty reserve is calculated as the gross sales multiplied by the historical warranty expense return rate.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.