Forza X1, Inc. (OTC:FRZA) is a company with a bold vision to revolutionize the recreational boating industry through the development of cutting-edge electric sport boats. Founded in 2021, Forza has been on a mission to inspire the adoption of sustainable boating by offering a cleaner, quieter, and more efficient alternative to traditional gasoline-powered boats.

Company Background

The company's journey, however, has not been without its challenges. Forza was initially incorporated as Electra Power Sports, Inc. in October 2021 before changing its name to Forza X1, Inc. in October of the same year. The company's parent, Twin Vee PowerCats Co., was incorporated in the State of Florida in December 2009 and later reincorporated in Delaware in April 2021. Forza's focus has been on the creation, implementation, and sale of electric boats utilizing its electric vehicle (EV) technology to control and power its boats and proprietary outboard electric motor.

Initial Public Offering and Strategic Decisions

In 2022, Forza reached a significant milestone by completing its initial public offering, which raised $14.7 million in net proceeds. The company strategically allocated these funds to acquire property and initiate the development of a manufacturing plant dedicated to building, designing, and manufacturing its new line of electric boats. Additionally, Forza used the capital to ramp up production, increase inventory, and bolster its working capital.

In an effort to retain cash and reduce expenditures amid challenging market conditions, Forza's Board of Directors made the strategic decision on July 11, 2024, to discontinue and wind down the company's business related to the development and sale of electric boats utilizing its proprietary outboard electric motor. This decision came as a result of a marked deceleration in the global demand for recreational marine vehicles, influenced heavily by economic uncertainties and shifting consumer priorities.

Financials

The company's financial performance has reflected these industry-wide challenges. For the year ended December 31, 2023, Forza reported a net loss of $5.93 million, compared to a net loss of $3.63 million in the prior year. The company's cash, cash equivalents, and marketable securities stood at approximately $12.80 million as of December 31, 2023, up slightly from $12.77 million at the end of 2022.

Forza's research and development efforts have been a significant driver of its financial performance, with R&D costs totaling $1.54 million in 2023, compared to $957,220 in 2022. The company has completed the design phase of its outboard electric motor and was in the prototype phase before the decision to wind down operations.

The company's selling, general, and administrative expenses have also been a source of concern, rising to $4.75 million in 2023 from $2.40 million in the prior year. This increase was primarily due to higher salaries and wages, which grew to $3.28 million in 2023 from $1.77 million in 2022, as well as an increase in professional fees.

For the most recent fiscal year (2023), Forza reported revenue of $37,120, a net loss of $5,933,113, operating cash flow of -$4,150,280, and free cash flow of -$6,947,330. The company's performance deteriorated further in the most recent quarter (Q3 2024), with revenue dropping to $0, net loss of $895,702, operating cash flow of -$885,507, and free cash flow of -$902,004.

Liquidity

Despite these challenges, Forza has not been without its bright spots. In January 2024, the company announced a groundbreaking partnership with Avikus Co., Ltd., a startup specializing in autonomous navigation solutions, and its former parent company, Twin Vee PowerCats Co. The goal of this collaboration is to create the world's first autonomously equipped recreational sport boat company.

Additionally, Forza has made progress on the construction of its new 60,000-square-foot state-of-the-art manufacturing facility in Marion, North Carolina. The company announced the commencement of the first concrete pour at the future site in January 2024, representing a significant milestone in the facility's development.

As of September 30, 2024, Forza's liquidity position showed $7.20 million in cash. The company's debt-to-equity ratio stood at 0, indicating no long-term debt. Forza's current ratio of 66.38 and quick ratio of 65.85 suggest a strong short-term liquidity position, although these figures should be viewed in the context of the company's decision to wind down operations.

Future Prospects and Merger

However, the company's future now hangs in the balance as it navigates a potential merger with Twin Vee PowerCats Co. On August 12, 2024, Forza announced that it had entered into a definitive merger agreement with Twin Vee, pursuant to which Forza will merge with and into a wholly-owned subsidiary of Twin Vee. The merger is subject to customary closing conditions, including the approval of both Forza's and Twin Vee's shareholders.

If the merger is completed, the combined company will operate under the Twin Vee PowerCats Co. name, and Twin Vee's common stock is expected to continue trading on the Nasdaq Capital Market. The merger is expected to provide operational synergies and cost savings, but the ultimate impact on Forza's shareholders remains to be seen.

Management Changes and Industry Trends

On September 10, 2024, Forza entered into a Separation Agreement with Dan Norton, its President, pursuant to which Mr. Norton and the company mutually agreed to terminate his employment, effective as of September 30, 2024. Mr. Norton did not advise the company of any disagreement on any matter relating to its operations, policies or practices.

The recreational marine vehicle industry has experienced a significant slowdown in the past year, reflecting broader trends affecting recreational vehicle industries, including electric vehicles. The global shift towards EV adoption has been much slower than initially anticipated, which has impacted companies like Forza that were betting on rapid electrification in the boating sector.

Conclusion

In conclusion, Forza X1, Inc. finds itself at a critical juncture, navigating the shifting tides of the recreational boating market. The company's decision to discontinue its electric boat business and pursue a merger with Twin Vee PowerCats Co. highlights the challenges it has faced in recent years. While the partnership with Avikus and the progress on its new manufacturing facility provided some optimism earlier in the year, Forza's long-term success will now depend on the successful completion of the merger with Twin Vee and the combined company's ability to adapt to the evolving industry landscape. The company's financial results, showing no revenue and continued losses in the most recent quarter, underscore the difficulties Forza has faced and the necessity of its strategic pivot. As the merger process unfolds, stakeholders will be closely watching to see how the combined entity positions itself in the challenging recreational boating market.