OFF THE HOOK YS INC.

NOTE 1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business

Off The Hook YS Inc. (“OTH”) was incorporated in Nevada on January 3, 2025 and operates as a holding company with no independent operations. Through its subsidiaries, the Company is engaged in the retail sale, brokerage, and servicing of new and pre-owned boats, yachts, and trailers, and in arranging related financing and insurance products.

The Company conducts its operations through several subsidiaries, including Off The Hook Yacht Sales NC, LLC, OTH Marine Asset Recovery LLC, Azure Funding, LLC, and Autograph Yacht Group Inc.

Effective February 10, 2026, the Boat Center’s business operations were transferred to OTH. On February 10, 2026, OTH Simon Marine YF, LLC (“Boat Center”) was liquidated and is no longer part of the Company’s operating structure.

On March 26, 2026, the Company entered into an Equity Interest Purchase Agreement to acquire Bellhart Marine Group, LLC, along with its affiliated entities Bellhart Marine Services, LLC, Specialized Mechanical Services, LLC, and Specialized Mechanical Services, Inc. (collectively, “Bellhart”), a marine service, refit, and mechanical services platform. Pursuant to the agreement, the Company agreed to acquire 100% of the equity interests of Bellhart for aggregate consideration of approximately $0.8 million in cash, plus the assumption or refinancing of certain indebtedness and other obligations, subject to customary closing adjustments. The transaction remains subject to customary closing conditions, including completion of due diligence procedures, receipt of required third-party approvals and consents, and satisfaction of other customary closing conditions.

There have been no other material changes to the Company’s business or organizational structure from those described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Basis of Presentation and Significant Accounting Policies

The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation, have been included. All intercompany balances and transactions have been eliminated in consolidation. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2026, or for any other interim period or for any other future year.

There have been no material changes to the Company’s significant accounting policies as described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Use of Estimates

The preparation of these financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosures of contingent assets and liabilities, at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which opted out of utilizing the emerging growth company reduced reporting requirements difficult.

Recent Accounting Pronouncements Recently Adopted

In November 2024, the FASB issued ASU No. 2024-04,Debt—Debt with Conversion and Other Options (Subtopic 470-20):Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this ASU on December 31, 2025 and no material impact is observed to the financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):Improvements to Income Tax Disclosures, which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2025, for emerging growth companies, with early adoption permitted. The amendments should be applied prospectively however, retrospective application is also permitted. We adopted this ASU on January 1, 2026, no material impact is observed to the financial statements.

NOTE 2. INVENTORY

Inventories consisted of the following:

NOTE 3. PROPERTY, PLANT AND EQUIPMENT

Property and equipment, net consisted of the following:

During the three months ended March 31, 2026 and 2025, the Company incurred depreciation expense of $0.1 million and $0.05 million, respectively.

NOTE 4. GOODWILL

Goodwill is an asset representing operational synergies and future economic benefits arising from other assets acquired in a business acquisition that are not individually identified and separately recognized.

On July 22, 2022, the Company acquired 100% of the outstanding shares of Boat Center, Inc. for total consideration of approximately $0.6 million. The excess of the purchase price over the fair value of the net assets acquired was recorded as goodwill. The Company did not recognize any separately identifiable intangible assets as the amounts were not material.

NOTE 5. INTANGIBLE ASSETS

On April 25, 2025, the Company entered into a Stock Purchase Agreement with the shareholders of Boats and Buyers, Inc. (the “Acquiree”), pursuant to which the Company acquired 100% of the issued and outstanding shares of the Acquiree, including all related websites (including www.boatscollective.com) and intellectual property assets. The total consideration for the acquisition was approximately $0.6 million, consisting of $0.2 million in cash and 100,000 shares of the Company’s common stock valued at $3.50 per share. Included in the purchase price was a gross-up for the tax component of approximately $0.1 million.

The transaction has been accounted for as an asset acquisition. Substantially all of the fair value of the gross assets acquired was concentrated in a group of similar identifiable assets, specifically, website and related intellectual property. Accordingly, the purchase price was allocated to intangible assets and an intangible asset of approximately $0.6 million was recognized.

The common stock consideration related to this acquisition has not been issued as of March 31, 2026 and was recorded as a Common Stock Payable on the consolidated balance sheet.

Amortization expense related to the Company’s intangible assets was immaterial for the three months ended March 31, 2026 and 2025. Estimated future amortization expense for the intangible assets is as follows:

NOTE 6. ACCOUNTS PAYABLE

Accounts payable consisted of the following as of March 31, 2026 and December 31, 2025:

NOTE 7. NOTES PAYABLE – FLOOR PLAN

The Company has a floor plan agreement with Red Oak Inventory Finance (“the Lender”), which has a stated borrowing capacity of $60.0 million for new and used marine inventory. From time to time, total borrowings may exceed stated limits due to the timing of floor plan draws for inventory shipments. The agreement is collateralized by new and used boat inventory.

Borrowings bear interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that varies based on whether the inventory is new or used and the length of time the inventory is held. The maximum interest rates for inventory held beyond 541 days are SOFR plus 8.85% for new inventory and SOFR plus 9.10% for used inventory.

Outstanding borrowings under the agreement were $40.0 million and $25.3 million as of March 31, 2026 and December 31, 2025, respectively.

NOTE 8. LONG-TERM LOAN PAYABLE

Maturity of long-term debt is as follows:

NOTE 9. LEASES

The balances for operating leases where the Company is the lessee are presented within the condensed balance sheets as follows:

The components of lease expenses for the three months ended March 31, 2026 and 2025 were as follows:

The components of lease expenses for the three months ended March 31, 2026 and 2025 were approximately $0.3 million and $0.2 million, respectively.

Supplemental cash flow information related to leases for the three months ended March 31, 2026 and 2025 were as follows:

As of March 31, 2026, the maturities of operating lease liabilities (excluding short-term lease) are as follows:

NOTE 10. REVENUE

Net revenue by category:

As of March 31, 2026 and 2025, trade-in boats recorded as inventory totaled $5.1 million and $3.7 million, respectively. For the three months ended March 31, 2026 and 2025, the Company recognized $1.3 million and $1.2 million, respectively, in revenue from the sale of trade-in boats.

Customer deposits are recorded as deferred revenue and recognized as revenue upon transfer of control to the customer, generally upon delivery or acceptance.

Of the customer deposits recorded as of December 31, 2025 and 2024, $1.2 million and $2.4 million, respectively, were recognized as revenue during the three months ended March 31, 2026 and 2025, respectively. Additional deposits received during the three months ended March 31, 2026 and 2025 were recognized as revenue in the respective periods received.

The movement in customer deposits is as follows:

NOTE 11. RELATED PARTIES TRANSACTIONS

The principal related parties with which the Company had transactions for the three months ended March 31, 2026, and 2025 are as follows:

Amounts Due To Related Parties

Amounts Due From Related Parties

Amounts due from related parties consisted of the following for the periods indicated:

Member Distribution

Prior to the Company’s initial public offering (“IPO”), the Company made distributions to members of $0.6 million during the three months ended March 31, 2025. Following the IPO, the Company has not declared or paid any dividends.

NOTE 12. INCOME TAXES

OTHYS, Boat Center, and Azure, each limited liability companies since inception, were taxed as partnerships for U.S. federal and applicable state income tax purposes. Accordingly, taxable income or loss was passed through to the respective members, and no provision for income taxes was recorded at the entity level.

OTH incorporated on January 3, 2025 and is taxed as C corporation under the Code. AYG was incorporated in the State of Florida on August 8, 2025 and is taxed as C corporation under the Code. Income tax liability as of March 31, 2026 was$0.2 million. Income tax liability for December 31, 2025 was immaterial. OTH and AYG are subject to U.S. federal and state income tax in certain jurisdictions.

The Company is an Emerging Growth Company and has elected to use the extended transition period for complying with new or revised accounting standards. The Company adopted ASU 2023-09, effective January 1, 2026. The adoption did not have a material impact on the Company’s condensed consolidated financial statements for the interim period.

On July 4th, 2025, the President signed into law significant federal tax legislation, H.R.1 (the “Tax Reform Act of 2025”). The legislation includes numerous changes to U.S. corporate income tax law, including but not limited to: permanent 100% bonus depreciation for qualified property, immediate expensing of domestic research and experimental expenditures, modifications to the limitation on business interest expense, increased Section 179 expensing limits, changes to the international tax regime, and expanded limitations on the deductibility of executive compensation under IRC Section 162(m). Most provisions are effective for tax years beginning after December 31, 2024, with certain transition rules and exceptions. The Company does not expect the Tax Reform Act of 2025 to have a material impact on its effective tax rate for the fiscal year ended December 31, 2026.

The income tax provision for the three months ended March 31, 2026 and 2025 consisted of the following:

The tax effect of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases that give rise to deferred tax assets and liabilities is as follows:

The Company’s effective tax rates for the three months ended March 31, 2026 and March 31, 2025 were(33.5)% and 0.0% respectively. The effective tax rate for the three months ended March 31, 2026 and 2025 varied from the United States statutory rate primarily due to valuation allowance activity.

Net operating losses and tax credit carryforwards as of March 31, 2026 were as follows:

Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), annual use of the Company’s net operating losses (“NOLs”) and research and development (“R&D”) credit carryforwards may be limited in the event that a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not undergone an analysis to determine whether this limitation would apply to the utilization of the NOL carryforward. However, as the federal NOLs do not expire, the Company does not believe that any potential limitations to federal or state NOLs, or federal credit carryforwards, if applicable, would be material to the financial statements.

Uncertain Tax Positions

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measures the unrecognized benefits associated with the tax positions. As of March 31, 2026 and December 31, 2025, the Company did not have any significant unrecognized uncertain tax positions. The Company did not incur any interest and penalties related to potential underpaid income taxes for the three months ended March 31, 2026 and 2025.

As of March 31, 2026, there were no active taxing authority examinations in any of the Company’s major tax jurisdictions.

On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While the OBBBA did not have a significant impact on the Company’s total tax provision as of December 2025, the Company is still evaluating the Company’s position on the elective provisions of the law and the potential impacts of those elections on the condensed consolidated financial statements.

For the three months ended March 31, 2026, there was no cash paid for federal or state taxes.

NOTE 13. STOCKHOLDERS’ EQUITY

Common Stock

On January 3, 2025, Off The Hook YS Inc. was incorporated in Nevada and became the holding company pursuant to a reorganization. The total authorized shares of common stock were 100,000,000 shares, andeach common stock is entitled to one vote.

Each share of common stock has a par value of $0.001. As of March 31, 2026 and December 31, 2025, the Company had 24,320,000 and 24,020,000 shares of common stock issued and outstanding, respectively.

Preferred Stock

The Company authorized 100,000 shares of blank check 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 as of March 31, 2026 and 2025.

Additional Paid-in Capital

During the three months ended March 31, 2025, the Company did not receive any member contributions.

On November 14, 2025, the Company completed its initial public offering (“IPO”) of 3,750,000 shares of common stock, par value $0.001 per share, at a public offering price of $4.00 per share, resulting in net proceeds of approximately $13.4 million, after deducted underwriting discounts and offering expenses. Following the IPO, member contributions are no longer applicable.

Member Distribution

Prior to the Company’s IPO, the Company made distributions to members of $0.6 million during the three months ended March 31, 2025. Following the IPO, the Company has not declared or paid any dividends.

Common Stock Payable

On April 25, 2025, The Company committed 100,000 shares of common stock with a fair value of $3.50 per share in connection with the purchase of an intangible asset. These shares have not been issued and therefore remain as a Common Stock Payable in Stockholders’ Equity.

NOTE 14. STOCK COMPENSATION

Equity Incentive Plan

On April 29, 2025, the Company’s Board of Directors and stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”). The Compensation Committee of the Board of Directors has the authority to administer the 2025 Plan and to determine the recipients and terms of awards granted thereunder. The 2025 Plan provides for the issuance of up to 4,000,000 shares of the Company’s common stock to employees, directors, and consultants.

Restricted Stock Unit

Following the Company’s initial public offering on November 14, 2025, the Company granted restricted stock units (“RSUs”) to employees and contractors under the 2025 Plan. The vesting terms of these awards range from immediate vesting to five years, and more than 50% of the awards include performance-based conditions. The fair value of RSUs is determined based on the Company’s stock price on the grant date.

During the three months ended March 31, 2026, the Company recognized $1.8 million of stock-based compensation expense related to RSUs. No stock-based compensation expense was recognized during the three months ended March 31, 2025.

A summary of RSU activity is as follows:

The Company had no restricted stock units outstanding and no restricted stock unit activity during the three months ended March 31, 2025, as the Company’s 2025 Equity Incentive Plan had not yet been adopted.

As of March 31, 2026,470,000 RSUs had vested. Of these,435,000 RSUs had been settled through the issuance of shares of common stock, including 165,000 shares issued during the three months ended March 31, 2026. The remaining 35,000 vested RSUs had not yet been settled as of March 31, 2026.

Stock Options

During the three months ended March 31, 2026, the Company granted 10,000 stock options, all of which vested immediately. The fair value of these options was determined using the Black-Scholes option pricing model, and the related compensation expense was recognized in full on the grant date. The impact of these options was not material to the Company’s condensed consolidated financial statements.

Equity Issued for Services

During the three months ended March 31, 2026, the Company entered into multiple consulting and service arrangements with third-party providers. As consideration for services, the Company issued shares of its common stock upon execution of the respective agreements. These shares were not subject to vesting conditions and were deemed fully earned upon issuance.

The Company measured these awards at the grant-date fair value of its common stock. As the awards were not subject to substantive future service requirements, the total fair value of the equity consideration was recognized as share-based compensation expense on the respective grant dates.

During the three months ended March 31, 2026, the Company issued an aggregate of 135,000 shares to nonemployees for services, resulting in total share-based compensation expense for the period of $0.4 million.

NOTE 15. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2026 and 2025:

NOTE 16. SEGMENT INFORMATION

The Company operates primarily intwo distinct business segments: Dealerships and Financial Services.

Dealerships: Specializing in the buying, selling, servicing and wholesaling of yachts and boats.

Financial Services: A recreational loan broker and lender providing financing solutions for individuals, dealerships, and brokerages.

The Company’s segments are evaluated based on operating income (loss), which is the primary measure used by the chief operating decision maker (“CODM”) to assess performance and allocate resources. The CODM is the Company’s President and Founder.

Gross profit, defined as revenue less direct costs, is also reviewed for operational purposes.

Segment information is as follows:

The total assets for each segment are presented in accordance with segment reporting requirements of ASC 280-10, which requires the disclosure of total assets for each reportable segment.

NOTE 17. COMMITMENTS AND CONTINGENCIES

Commitments

As of March 31, 2026 and December 31, 2025, the Company did not have any significant capital and other commitments.

Contingencies

Legal Proceedings

From time to time, the Company may become involved in litigation and other legal proceedings arising in the ordinary course of business. While the Company does not currently believe that any pending legal proceeding will have a material adverse effect on its financial position, results of operations, or cash flows, litigation is inherently uncertain and adverse outcomes could occur.

Although we cannot predict the outcome of legal or other proceedings with certainty, where there is at least a reasonable possibility that a loss may be incurred, GAAP requires us to disclose an estimate of the reasonably possible loss or range of loss or make a statement that such an estimate cannot be made. We follow a process in which we seek to estimate the reasonably possible loss or range of loss, and only if we are unable to make such an estimate do we conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below in our discussion of legal proceedings, a reasonably possible loss or range of loss associated with any individual legal proceeding cannot be estimated.

Carl Austin Rosen v. Off The Hook yacht Sales NC LLC

Carl Austin Rosen v. Off The Hook Yacht Sales NC, LLC et al (Case No. 2024-004493-CA-01), pending in Miami-Dade’s Complex Business Litigation Division, Plaintiff Carl Rosen alleges he was fraudulently induced into purchasing a $2.6 million Yellowfin 54 yacht that had sustained damage during a manufacturer-authorized seatrial prior to delivery. The defendants—Yellowfin Yachts, Off The Hook Yacht Sales, broker Corey Simon, and Warbird Marine Holdings—deny all wrongdoing, maintaining that the grounding was a routine, low-speed “soft grounding” during testing, that any cosmetic damage was promptly repaired, and that the vessel was delivered in seaworthy condition following multiple post-repair inspections and sea trials. The parties plan to actively defend themselves against this claim.

Reistad et al v. Off The Hook YS, Inc.

In March 2026, three former employees filed a civil action against the Company in the Southern District of Florida. The complaint asserts a breach of employment agreements and the Stock Purchase Agreement. The plaintiffs seek lost compensation, severance benefits, totaling $0.6 million and the issuance of 100,000 shares of the Company’s common stock. The Company recognized an obligation to issue 100,000 shares of common stock pursuant to the April 2025 Stock Purchase Agreement, and that obligation is reflected in the Company’s financial statements.

Regarding the remaining claims, the Company believes it terminated the plaintiffs for cause in accordance with the applicable employment agreements and therefore, no severance or additional compensation is owed. The Company has filed its answer in the matter and has asserted counterclaims. The Company intends to defend the matter fully.

OneWater Marine Inc. v. Off The Hook YS Inc. et al

The Company and two of its subsidiaries are named as defendants in OneWater Marine Inc. v. Off The Hook YS Inc. a civil case pending in the State of Florida in the Circuit Court for Palm Beach County wherein claims have been made against the Company and such subsidiaries for tortious interference with contract and related claim. The Company has filed its answer and intends to fully defend the matter.

NOTE 18. SUBSEQUENT EVENTS

Apex Marine Acquisition

On May 13, 2026, the Company completed the acquisition of Apex Marine, LLC, Apex Marine Sales, LLC and Apex Marine Stuart, LLC for aggregate consideration of approximately $6.0 million, consisting of $1.2 million in cash,679,012 shares of the Company’s common stock valued at $2.70 per share, and promissory notes totaling approximately $3.0 million.

The acquisition will be accounted for as a business combination under ASC 805. The Company is in the process of determining the preliminary allocation of the purchase price to the assets acquired and liabilities assumed. Accordingly, the initial accounting for the acquisition is incomplete as of the date of issuance of these financial statements.