Forza X1, Inc.

ITEM 1A. RISK FACTORS.

Investing in our securities involves a high degree of risk. You should consider carefully the following risks and the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, together with all the other information in this Quarterly Report on Form 10-Q, including our condensed financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, Risk Factors, contained in our Annual Report on Form 10-K for the year ended December 31, 2023. Except as disclosed below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023.

RISKS RELATED TO OUR BUSINESS

There is substantial doubt about our ability to continue as a going concern. 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 sixnine months ended JuneSeptember 30, 2024 and 2023, we incurred a net loss of $3,999,3914,895,093 and $3,488,786,4,535,100, respectively and used cash in operations of $1,5526,2462,428,683 and $2,882,8693,877,991, respectively. During the year ended December 31, 2023, we incurred a net loss of $5,933,113 and used cash in operations of $4,150,280. Losses have principally occurred as the result of our research and development efforts coupled with a lack of operating revenue. Until we begin generating revenue, there is doubt about our ability to become a going concern in the future.

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 list Inasmuch as we have ceased 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, tour business related to the stockholders equity requirement or the minimum closing bid price requiredevelopment, The Nasdaq Capital Market may take steps to de-list our common stock or warrants. Such a de-list and sale of electric boats utilizing or even notification of failure to comply with such requirements would likely have a negative effect on the pur proprietary outboard electrice of our common stock and warrants would impair your ability to sell or purchase motor, which was our common stock when you wish to do so. In the event of a de-listingonly business operations, we would take actions to restore our compliance with The Nasdaq Capital Markets listing requirements, but we can provide no assurance that any such actiodo not anticipate generating revenue in taken by us would allow ohe future.

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 refailure to meet the continued listing requirement or prevent future non-compliance with s of The Nasdaq Capital Markets listing has requirements.

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On October 4, 2023, we received written notice from tsulted in the Listing Qualifications Department of The Nasdaq Stock Market LLC (Nasdaq) notifying us that for the precesuspension of trading 30 consecutive business days (August 22, 2023 through October 3, 2023), our of our common stock did not maintain a minimum closing bid price of $1.00 (Minimum Bid Price Requirement) per share as required by on The Nasdaq Listing Rule 5550(a)(2). The notice has no immediate effect on the listing or trading of our Capital Market.

Our shares of common stock and the commohave been stock will continue touspended from tradeing on The Nasdaq Capital Market under the symbol FRZA.

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were provided a compliance period of 180 calendar days, or until April 1, 2024, to regain . The Companys compliance with Nasdaq Listing Rule 5550(a)(2). We did not regain compliance with the Minimum Bid Price Requirement by April 1, 2024; however, on April 2, 2024, we received written notification from Nasdaq granting our request for a 180-day extension to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance is generally achieved by meeting the price requirement for a minimum of 10 consecutive business days. However, Nasdaq may, in its discretion, require a company to satisfy tmon stock currently trades on the OTC Markets system under the applicable price-based requirement for a period in excess of 10 consecutive business days, but generally no more than 20 consecutive business days, before determining that a company has demonstrated an abilittrading symbol FRZA. This suspension is likely to maintain long-term compliance. If we do not rhave a negain compliance with the Minimum Bid Price Requirement by September 30, 2024, Nasdaq will provide written notification to us that outive effect on the price of our common stock will be delisted. At that time, we mand may appeal the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. However, there can be no assurance that, if we do appeal the delisting determination by Nasdaq to the hearings panel, that such appeal would be successful.

We intend to actively monitor the bid price of oimpair the ability of our stockholders to sell or purchase our common stock and will consider available options to regain compliance with the Nasdaq listing requirements, including such actions as effecting a reverse stock split to maintain our Nasdaq listing.

when they wish to do so.

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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 listno longer traded on The Nasdaq Capital Market, oshares of our common stock iare no longer recognized as covered securities. Although the states are preempted from and we will be subject to regulating the sale of covered on in each state in which we offer our securities,.

If the federal statute does allow the states to investigate companiMerger is not consummated, we may seek other business opportunities if there is a suspicand need to raise addition of fraudal capital, and, if there is a finding of fraudulent activity, the we may not be able to raise capital on the states can regulateerms acceptable to us or bar the sale of covered securitiesat all.

On July 11, 2024, in a particularn effort to retain case. Further, if we were to be delisted from The Nasdaq Capital Market, our common stock would cease to be h and reduce expenditures and as a result of current market conditions, our Board of Direcognized as covertors determined securitiesto discontinue and we would be subjectind down our business related to regulation in each state in which we offerthe development and sale of electric boats utilizing our proprietary our securities.

We may need to raise additional capital that may be required to grow our business, andtboard electric motor. As a result, we currently do not have an operating business. If the Merger is not consummated, we may not be able to raise capital on termseek other business opportunities acceptable to us or at all.

Ond identifying, acquiring and operating our any such new business and maintaining our growth efforts willventure is expected to require significant cash outlays and advance capital expenditures and commitments. Although the proceeds of our initial public offering and our secondary offering should be sufficient to fund our operations, if cash on hIf cash on hand and cash generated from operations and from our initial public offering and subsequent follow-on offering are not sufficient to meet our future cash requirements, we will need to seek additional capital, potentially through debt or equity financings, to fund our growthoperations. We cannot assure you that we will be able to raise cash on terms acceptable to us or at all. Financing 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 existing holders. 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.

We have identified 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. The requirements of these rules and regulations 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.

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The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.

As of JuneSeptember 30, 2024, 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 disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and in accordance with GAAP. Our management is reshave ceased our remediation plan uponsible 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 will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we  entering into the Merger Agreement. 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 are in the process of hiring additional staff and providing them with the required training, we continue to engage 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 spend time and resources hiring and engaging additional staff and outside consultants with the appropriate experience to remedy these weaknesses. We cannot assure you that management will be successful in locating and retaining appropriate candidates; that newly engaged staff or outside consultants will be successful in remedying material weaknesses thus far identified or identifying material weaknesses in the future; or that appropriate candidates will be located and retained prior to these deficiencies resulting in material and adverse effects on our business.

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.

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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. 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.

RISKS RELATED TO THE MERGER

All of tThe Twin Vee and Forza executive officers and most of its directors have conflicts of interest that may influence them to support or approve the Merger without regard to your interests.

All of the TwExchange Ratio in Vee and Forza officers will be employed by the combined company and several of each of their directors will continue to serve on the Board of Directors of the combined company following the consummation of the Merger. In addition, all of the Twin Vee and Forza officers and most of their directors have a direct or indirect financial interest in both Forza and Twin Vee. These interests, among others, may influence such executive officers and directors of Twin Vee and Forza to support or approve the Merger.

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The Exchange Ratio is not a Agreement is not adjustable based on the market price of Twin Vee Common Stock so the Merger consideration at the closing may have a greater or lesser value than it had at the time the Merger Agreement was signed.

The parties to the Merger Agreement have set the Exchange Ratio for the Forza Cour common Sstock and the Exchange Ratio is not adjustable. Any changes in the market price of Twin Vee Common Stock or Forza Cour common Sstock will not affect the number of shares holders of Forza Cour common Sstock will be entitled to receive upon consummation of the Merger. Therefore, if the market price of Twin Vee Common Stock declines from the market price on the date of the Merger Agreement prior to the consummation of the Merger, Forza stockholders could receive Merger consideration with considerably less value. Similarly, if the market price of Twin Vee Common Stock increases from the market price on the date of the Merger Agreement prior to the consummation of the Merger, Forzaour stockholders could receive Merger consideration with considerably more value than their shares of Forza Cour common Sstock and the Twin Vee stockholders immediately prior to the Merger will not be compensated for the increased market value of the Twin Vee Common Stock. If the market price of Forza Cour common Sstock declines from the market price on the date of the Merger Agreement prior to the consummation of the Merger, Forzaour stockholders could receive Merger consideration with considerably more value. Similarly, if the market price of Forza Cour common Sstock increases from the market price on the date of the Merger Agreement prior to the consummation of the Merger, Forzaour stockholders could receive Merger consideration with considerably less value than their shares of Forza Cour common Sstock and the Forzaour stockholders immediately prior to the Merger will not be compensated for the increased market value of the Forza Cour common Sstock. The Merger Agreement does not include a price-based termination right. Because and the Exchange Ratio does not adjust as a result of changes in the value of Twin Vee Common Stock, for each one percentage point that the market value of Twin Vee Common Stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total Merger consideration issued to the Forza stockholders.

The Merger may be completed even though material adverse changes may result from the announcement of the Merger, industry-wide changes and other causes.

In general, either Twin Vee or Forzawe can refuse to complete the Merger if there is a material adverse change affecting the other party between August 12, 2024, the date of the Merger Agreement, and the closing. However, certain types of changes do not permit either party to refuse to complete the Merger, even if such change could be said to have a material adverse effect on Twin Vee or Forzaus, including:

If adverse changes occur and Twin Vee and Forza still complete the Merger, the combined company stock price may suffer. This in turn may reduce the value of the Merger to the stockholders of Twin Vee and Forza.

us.

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The combined companys stock price is expected to be volatile, and the market price of its common stock may drop following the Merger.

The market price of the combined companys common stock could be subject to significant fluctuations following the Merger especially when the shareholder base is increased. Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the combined companys common stock.

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In the past, following periods of volatility in the market price of a companys securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm the combined companys profitability and reputation.

The market price of the combined companys common stock may decline as a result of the Merger.

The market price of the combined companys common stock may decline as a result of the Merger if the combined company does not achieve the perceived benefits of the Merger as rapidly or to the extent anticipated by Twin Vee or Forzaus or investors, financial or industry analysts.

The combined company may not experience the anticipated strategic benefits of the Merger.

The respective managements of Twin Vee and Forzaus believe that the Merger would provide certain strategic benefits that may not be realized by each of the companies operating as standalones. There can Specifically, Twin Vee believes the Merger would enable the combined companies to take advantage of approximately $700,000 in annual cost savings. There can be no assurance that these anticipated benefits of the Merger will materialize or that if they materialize will result in increased stockholder value or revenue stream to the combined company.

Twin Vee and Forza stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Twin Vee and Forzaour securityholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger.

If the conditions to the Merger are not met, the Merger will not occur.

Even if the Merger is approved by the stockholders of Twin Vee and Forzaus, specified conditions must be satisfied or waived in order to complete the Merger, including, among others:

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These and other conditions are described in detail in the Merger Agreement. We and Twin Vee and Forza cannot assure youinvestors that all of the conditions to the Merger will be satisfied. If the conditions to the Merger are not satisfied or waived, the Merger will not occur or will be delayed, and we and Twin Vee and Forza each may lose some or all of the intended benefits of the Merger.

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Twin Vee and Forza will incur substantial expenses whether or not the Merger is completed.

Twin Vee and Forza have each incurred and will incur substantial expenses related to the Merger whether or not the Merger is completed. Twin Vee currently expects to incur approximately $400,000 in transactional expenses and wea currently expect to incur approximately $100,000 in transactional expenses.

During the pendency of the Merger, we and Twin Vee and Forza may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

Covenants in the Merger Agreement impede the ability of Twin Vee and Forzaus to make acquisitions, subject to certain exceptions relating to fiduciary duties, or complete other transactions that are not in the ordinary course of business pending the closing of the merger. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third-party, subject to certain exceptions. Any such transactions could be favorable to such partys stockholders.

Certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Twin Vee and Forzaus from soliciting alternative takeover proposals or cooperating with persons making unsolicited takeover proposals, except in certain circumstances where the Twin Vee Board of Directors or Forzaour Board of Directors, as applicable, determines in good faith, after consultation with its financial advisor and outside legal counsel, that an unsolicited alternative takeover proposal constitutes or is reasonably likely to result in a superior takeover proposal and that failure to take such action would be reasonably likely to result in a breach of the fiduciary duties of the Forzaour Board of Directors.

The Merger and related transactions are subject to approval by the stockholders of both Twin Vee and Forza.

In order for the Merger to be completed, under applicable Nasdaq rules Twin Vees stockholders must approve the issuance of the shares of Twin Vee Common Stock pursuant to the terms of the Merger Agreement, which requires the affirmative vote of the holders of at least a majority of tShould the Twin Vee Common Stock present in person or by proxy at the Twin Vee Annual Meeting and entitled to vote. Forzas stockholders must also approve the MerMerger and the Merger Agreement, which requires the affirmative vote of the holders of at least a majority of the outstanding shares of Forza Common Stock entitled to vote and a majority of the Forza Common Stock present in person or by proxy at the Forza Annual Meeting excluding Twin Vee.

Should the Merger not not qualify as a tax-free reorganization, Forzaour stockholders may recognize capital gain or loss with respect to the shares of Twin vee common stock received in the Merger.

The Merger is expected to be treated as a reorganization within the meaning of Section 368 of the Code, however, neither Twin Vee nor Forza has received an Internal Revenue Services ruling to that effect. The failure of the Merger to qualify as a reorganization within the meaning of Section 368 of the Code would result in a Forza stockholder recognizing capital gain or loss with respect to the shares of Forza Common Stock surrendered for Twin Vee Common Stock received in the Merger.

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