NextBoat Inc.: Form 10-Q for the period ended Jun 30, 2026

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) should be read in conjunction with our financial statements and the related notes thereto included elsewhere herein. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Quarterly Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors.

Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.

Overview and Business Trends

We are a premier yacht and boat dealership specializing in the buying, selling, and wholesaling of yachts and boats. As one of the largest boat buyers and sellers in the industry, NextBoat Inc. has become a nationally recognized leader in the marine industry, offering a comprehensive suite of services that spans the entire boat value chain from purchasing, financing, servicing, to selling, disposing, asset recovery, and repossession of boats. The Company has eight physical locations strategically located across the United States and with brokers operating nationwide, that the Company believes that it provides unparalleled reach and accessibility to clients around the country, and believes that it is the largest used boat buyer and seller in the United States.

The Company has approximately 111 brokers, positioned throughout the United States, who specialize in navigating the pre-owned regional markets while maintaining a client-focused approach. By leveraging its nationwide broker network, advanced AI-enabled CRM technology, and synergistic portfolio of entities, the Company delivers exceptional value to clients.

Our research indicates that buyers are taking a more deliberate, research-driven approach, engagement remains strong as consumers recognize the lasting value of pre-owned boats compared to new models. We believe that we are ideally suited to servicing this pre-owned boating market with our digital tools and virtual sales platforms that empower smoother connections between buyers and sellers, streamlining the experience and expanding reach of opportunities. As the price maker in our markets, we can respond to changes in pre-owned boat pricing, and we are able to quickly capitalize on the changing market conditions, providing for consistency and predictability in our margins. Our investment in innovative technology and customer engagement tools allows us to connect with new audiences, nurture relationships, and deliver an exceptional ownership experience that builds long-term loyalty.

In addition to our corporate website, we own and operate www.webuyboats.com (http://www.webuyboats.com), a proprietary lead-generation platform that sources pre-owned boat inventory from sellers on a national basis. The site attracts private sellers and dealers looking to quickly liquidate trade-in boats and pre-owned vessels. These leads directly fuel the Company’s wholesale and brokerage operations, supporting our high volume, showroom-free model.

On May 1, 2026, the Company completed the acquisition of 100% of the equity interests of Apex Marine, LLC, Apex Marine Sales, LLC, and Apex Marine Stuart, LLC (collectively, “Apex Marine”). The acquisition was undertaken to obtain the assembled workforce of Apex Marine’s seasoned “new boat” brokerage team, as well as to realize expected synergies from combining operations, including expanded South Florida sales and service infrastructure and access to a broader international buyer network. On May 22, 2026, the Company completed the acquisition of 100% of the equity interests of Bellhart Marine Group and its affiliated entities in order to expand the Company’s in-house marine service, refit, and maintenance capabilities. Management believes the acquisition will further support the Company’s vertically integrated operating model and enhance inventory reconditioning and service capacity.

Looking ahead, our established market position, proprietary software platform, and forward-looking operating model position the Company to capitalize on opportunities within the pre-owned boating market in 2026 and beyond.

Corporate Structure and Background

NextBoat Inc. (“NXB”) is a Nevada holding company formed on January 3, 2025 with no independent operations. The Company conducts its business through its subsidiaries, which are 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’s operations include yacht and boat sales and brokerage, marine servicing and storage, and financing activities conducted through its subsidiary, Azure Funding, LLC.

The Company completed a corporate reorganization in connection with its initial public offering in 2025. For additional information regarding the Company’s organizational structure, see Item 1. Business and Note 1. Nature of Business and Organization to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025.

Results of Operations

Comparison of the Three Months Ended June 30, 2026 and 2025

Revenue

Overall, revenue increased by $27.7 million, or 88.4%, to $59.1 million for the three months ended June 30, 2026, from $31.3 million for the three months ended June 30, 2025. The increase was primarily attributable to the contribution of the Apex Marine and Bellhart businesses acquired during the quarter, an increase in our floor plan limit that supported higher inventory utilization throughout the period, and the continued expansion of our broker network at OTHYS and our premier brokerage division, Autograph Yacht Group. These factors contributed to an increase in the number of pre-owned boats sold and brokerage deals closed.

New Boat Sales

New boat sales increased by $7.1 million, or 189.3%, to $10.9 million for the three months ended June 30, 2026, from $3.8 million for the three months ended June 30, 2025. The increase was primarily attributable to new boat brands added through the Apex Marine and Bellhart acquisitions, including Pursuit, Solace, Fountain, NauticStar and Sportsman, together with higher new boat volume at our legacy operations.

Pre-owned Boat Sales

Pre-owned boat sales increased by $18.5 million, or 69.5%, to $45.0 million for the three months ended June 30, 2026, from $26.6 million for the three months ended June 30, 2025, with both periods presented inclusive of pre-owned inventory and brokerage transactions. The increase primarily reflects higher pre-owned boat transaction volume and the contribution of the Apex Marine operations acquired during the quarter. Brokerage commission income, which is not included in pre-owned boat sales, benefited from the contribution of our premier brokerage division, Autograph Yacht Group.

Finance Income – Azure

Revenue from arranging financing products, including financing, insurance and extended warranty contracts, to customers through various third-party financial institutions and insurance companies increased by $0.3 million, or 48.8%, to $1.0 million for the three months ended June 30, 2026, from $0.6 million for the three months ended June 30, 2025. The increase reflects a higher volume of units delivered during the quarter and a greater proportion of finance-dependent buyers in the customer mix.

Service, Parts & Other Sales

Revenue from service, parts and other sales increased by $1.8 million, or 465.6%, to $2.2 million for the three months ended June 30, 2026, from $0.4 million for the three months ended June 30, 2025. The increase in service, parts and other sales was attributable primarily to the marine service, refit and mechanical services operations acquired with Bellhart, the service center acquired with Apex Marine, expanded marine asset recovery services and increased trailer sales.

Gross Profit

Gross profit increased by $4.8 million, or 100.1%, to $9.5 million for the three months ended June 30, 2026, compared to $4.8 million for the three months ended June 30, 2025. Gross profit as a percentage of revenue was 16.1% for the three months ended June 30, 2026 compared to 15.2% for the three months ended June 30, 2025. The increase was driven primarily by the higher-margin service, brokerage and finance revenue added through the Apex Marine and Bellhart acquisitions.

New Boat Gross Profit

Gross profit from new boat sales increased by $0.9 million, or 291.4%, to $1.2 million for the three months ended June 30, 2026, from $0.4 million for the three months ended June 30, 2025. Gross profit as a percentage of new boat sales was 10.7% for the three months ended June 30, 2026 compared to 7.9% for the three months ended June 30, 2025, reflecting the higher-margin new boat brands added through the Apex Marine and Bellhart acquisitions.

Pre-owned Boat Gross Profit

Gross profit from pre-owned boat sales was approximately $6.7 million for the three months ended June 30, 2026, representing a margin of approximately 15.0%, compared to pre-owned gross profit of $3.7 million (a 13.9% margin) for the three months ended June 30, 2025.

Finance Income – Azure

Gross profit from finance income increased by $0.2 million, or 55.8%, to $0.6 million for the three months ended June 30, 2026, from $0.4 million for the three months ended June 30, 2025, representing a margin of 63.4% compared to 60.5% for the prior-year period.

Service, Parts & Other Sales

Gross profit from service, parts and other sales, was approximately $1.0 million for the three months ended June 30, 2026, representing a margin of approximately 46.5%, compared to $0.4 million for the three months ended June 30, 2025,

Selling, General and Administrative Expenses

Selling, general, and administrative expenses consist primarily of insurance, utilities, and other customary operating expenses. SG&A increased $1.0 million, or 259.7%, to $1.4 million for the three months ended June 30, 2026, compared to $0.4 million for the three months ended June 30, 2025. The increase was primarily attributable to the operating cost base of the Apex Marine and Bellhart businesses acquired during the quarter, higher indirect marketing expenses, and higher insurance costs related to increased inventory levels under floorplan financing arrangements, each in line with the Company’s planned business expansion for 2026.

Salaries and Wages

Salaries and wages expense increased $3.6 million, or 127.8%, to $6.5 million for the three months ended June 30, 2026, compared to $2.8 million for the three months ended June 30, 2025. Leading into and following our initial public offering, salaries and wages increased as we aligned our compensation with public-company market benchmarks and enhanced retention packages to ensure we can attract, motivate, and retain the talent required to deliver long-term shareholder value, and as we added the employee base of the businesses acquired during the quarter. Further, the Company recognized share-based compensation of $1.7 million for the three months ended June 30, 2026. These equity awards have several vesting conditions including service-based and performance-based requirements and vest between one and five years.

Advertising and Marketing

Advertising and marketing expenses increased $0.3 million, or 633.9%, to $0.3 million for the three months ended June 30, 2026, compared to less than $0.1 million for the three months ended June 30, 2025, reflecting increased digital lead-generation spend and the marketing cost base of the acquired businesses.

Professional Services

Professional services expense increased $1.4 million, to $1.4 million for the three months ended June 30, 2026, compared to less than $0.1 million for the three months ended June 30, 2025. The increase relates principally to legal, accounting, valuation and advisory fees incurred in connection with the acquisitions completed during the quarter and to the additional audit, legal and compliance costs of operating as a public company.

Rent Expenses

Rent expense increased $0.5 million, or 214.7%, to $0.7 million for the three months ended June 30, 2026, compared to $0.2 million for the three months ended June 30, 2025, reflecting leases assumed in connection with the acquisitions and additional facilities added since the second quarter of 2025.

Interest Expense, Net

Interest expense, net increased $0.6 million, or 109.6%, to $1.2 million for the three months ended June 30, 2026, compared to $0.6 million for the three months ended June 30, 2025, driven primarily by higher average floor plan borrowings outstanding during the quarter and by acquisition-related debt assumed and issued in connection with the Apex Marine and Bellhart transactions.

Net (Loss) Income

As a result of the foregoing, the Company recorded a net loss of $2.1 million for the three months ended June 30, 2026, compared to net income of $0.6 million for the three months ended June 30, 2025.

Comparison of the Six Months Ended June 30, 2026 and 2025

Revenue

Overall, revenue increased by $30.3 million, or 51.8%, to $88.9 million for the six months ended June 30, 2026, from $58.6 million for the six months ended June 30, 2025. The increase was driven primarily by the contribution of the Apex Marine and Bellhart businesses acquired in May 2026, a higher floor plan limit that allowed us to sustain greater inventory utilization throughout the period, and the continued build-out of our broker network at OTHYS and our premier brokerage division, Autograph Yacht Group.

New Boat Sales

New boat sales increased by $2.9 million, or 31.1%, to $12.2 million for the six months ended June 30, 2026, from $9.3 million for the six months ended June 30, 2025. The increase was driven primarily by the new boat brands added through the Apex Marine and Bellhart acquisition, including Pursuit, Solace, Fountain, Sportsman and NauticStar.

Pre-owned Boat Sales

Pre-owned boat sales were $72.8 million for the six months ended June 30, 2026, compared to pre-owned boat sales of $47.6 million for the six months ended June 30, 2025, which were presented inclusive of pre-owend inventory and brokerage transactions, an increase of $25.2 million, or 52.9%. The increase reflects higher wholesale transaction volume.

Finance Income – Azure

Revenue from arranging financing products, including financing, insurance and extended warranty contracts, to customers through various third-party financial institutions and insurance companies increased less than $0.1 million, or 3.2%, to $1.3 million for the six months ended June 30, 2026, from $1.2 million for the six months ended June 30, 2025.

Service, Parts & Other Sales

Revenue from service, parts and other sales increased by $2.2 million, or 492.5%, to $2.6 million for the six months ended June 30, 2026, from $0.4 million for the six months ended June 30, 2025. This increase was attributable primarily to the marine service, refit and mechanical services operations acquired with Bellhart, the service center acquired with Apex Marine, expanded marine asset recovery services and increased trailer sales.

Gross Profit

Gross profit increased by $5.6 million, or 67.6%, to $13.9 million for the six months ended June 30, 2026, compared to $8.3 million for the six months ended June 30, 2025. Gross profit as a percentage of revenue was 15.6% for the six months ended June 30, 2026 compared to 14.2% for the six months ended June 30, 2025. The increase was driven primarily by the higher-margin service, brokerage and finance revenue added through the Apex Marine and Bellhart acquisitions and by a greater number of brokerage transactions, which generally carry higher margin profiles due to lower direct costs.

Gross Profit by Category

Gross profit from new boat sales increased by $0.6 million, or 114.4%, to $1.2 million for the six months ended June 30, 2026, from $0.5 million for the six months ended June 30, 2025, representing a margin of 9.7% compared to 5.9% for the prior-year period.

Gross profit from pre-owned boat sales was approximately $10.6 million for the six months ended June 30, 2026, representing a margin of approximately 14.5%, compared to pre-owned gross profit of $6.6 million (a 13.8% margin) for the six months ended June 30, 2025, which included brokerage transactions under the prior-year presentation.

Gross profit from finance income increased less than $0.1 million, or 9.2%, to $0.8 million for the six months ended June 30, 2026, from $0.7 million for the six months ended June 30, 2025, representing a margin of 62.2% compared to 58.8% for the prior-year period.

Gross profit from service, parts and other sales, was approximately $1.4 million for the six months ended June 30, 2026, representing a margin of approximately 51.5%, compared to $0.4 million for the six months ended June 30, 2025, for which no cost of revenues was allocated to the category and brokerage transactions were included within pre-owned boat sales.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses consist primarily of lease expense, insurance, utilities, and other customary operating expenses. SG&A increased $1.9 million, or 231.7%, to $2.7 million for the six months ended June 30, 2026, compared to $0.8 million for the six months ended June 30, 2025. The increase was primarily attributable to the operating cost base of the Apex Marine and Bellhart businesses acquired in May 2026, higher indirect marketing expenses associated with our attendance at boat shows during the period, and higher insurance costs related to increased inventory levels under floorplan financing arrangements.

Salaries and Wages

Salaries and wages expense increased $6.2 million, or 137.3%, to $10.8 million for the six months ended June 30, 2026, compared to $4.5 million for the six months ended June 30, 2025. Leading into and following our initial public offering, salaries and wages increased as we aligned our compensation with public-company market benchmarks and enhanced retention packages to ensure we can attract, motivate, and retain the talent required to deliver long-term shareholder value, and as we added the employee base of the businesses acquired in May 2026. Further, the Company recognized share-based compensation of $3.5 million for the six months ended June 30, 2026. These equity awards have several vesting conditions including service-based and performance-based requirements and vest between one and five years.

Advertising and Marketing

Advertising and marketing expense increased $0.6 million, or 149.6%, to $0.9 million for the six months ended June 30, 2026, compared to $0.4 million for the six months ended June 30, 2025, reflecting increased attendance at boat shows during the first quarter, increased digital lead-generation spend and the marketing cost base of the acquired businesses.

Professional Services

Professional services expense increased $1.9 million, to $2.0 million for the six months ended June 30, 2026, compared to $0.1 million for the six months ended June 30, 2025. The increase relates principally to legal, accounting, valuation and advisory fees incurred in connection with the acquisitions completed during the period and to the additional audit, legal and compliance costs of operating as a public company.

Rent Expenses

Rent expense increased $0.6 million, or 160.9%, to $1.0 million for the six months ended June 30, 2026, compared to $0.4 million for the six months ended June 30, 2025, reflecting leases assumed in connection with the acquisitions and additional facilities added since 2025.

Interest Expense, Net

Interest expense, net increased $0.6 million, or 54.6%, to $1.7 million for the six months ended June 30, 2026, compared to $1.1 million for the six months ended June 30, 2025, driven primarily by higher average floor plan borrowings outstanding and by acquisition-related debt assumed and issued during the period.

Net (Loss) Income

As a result of the foregoing, the Company recorded a net loss of $5.5 million for the six months ended June 30, 2026, compared to net income of $0.8 million for the six months ended June 30, 2025. Of the net loss for the six months ended June 30, 2026, $0.2 million was attributable to the non-controlling interest and $5.3 million was attributable to NextBoat Inc.

Comparison of Non-GAAP Financial Measures

In addition to our results of operations and measures of performance determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans, and making strategic decisions, as they are similar to measures reported by our public competitors.

Adjusted EBITDA is a key performance measure that our management uses to assess our financial performance and for internal planning and forecasting purposes. These metrics are not intended to be substitutes for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Additionally, investors should not solely rely on our non-GAAP financial measures as they do not reflect our current or future cash requirements and working capital needs.

There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in GAAP financial presentation. The items excluded from GAAP financial measures to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. Non-GAAP financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with GAAP.

Adjusted EBITDA

We define and calculate Adjusted EBITDA as GAAP net income (loss) before interest income or expense, income tax (benefit) expense, depreciation and amortization, and further adjusted for the items as described in the reconciliation below. We believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business.

Adjusted EBITDA excludes certain expenses that are required to be presented in accordance with GAAP because management believes they are non-core to our regular business. These include, but are not limited to the following:

• Non-cash expenses, such as depreciation, amortization and stock-based compensation;
• Non-floorplan related interest expense; and
• Income tax expense or benefit.

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The following tables present a reconciliation of Adjusted EBITDA to our net (loss) income, which is the most directly comparable GAAP measure for the periods presented.

The Three Months Ended June 30, 2026, Compared to The Three Months Ended June 30, 2025

Adjusted EBITDA was an income of $0.8 million for the three months ended June 30, 2026, compared to income of $0.8 million for the three months ended June 30, 2025, a slight increase less than $0.1 million.

The Six Months Ended June 30, 2026, Compared to The Six Months Ended June 30, 2025

Adjusted EBITDA was a loss of $0.5 million for the six months ended June 30, 2026, compared to income of $1.1 million for the six months ended June 30, 2025, a decrease of $1.7 million. The decrease resulted primarily from an increase in operating expenses, including additional headcount, share-based compensation and professional fees necessary to operate as a public company and to execute and integrate the acquisitions completed during the period.

Liquidity and Capital Resources

The following table summarizes key liquidity and capital resources information as of June 30, 2026 and December 31, 2025:

As of June 30, 2026, the Company had $7.7 million in cash and working capital of $3.0 million, compared to $12.4 million in cash and working capital of $9.0 million as of December 31, 2025. Current liabilities were primarily comprised of floor plan notes payable of $51.6 million, which are repaid as inventory is sold, as well as accounts payable, customer deposits, lease liabilities and short-term obligations.

Management believes that existing cash, operating cash flows, and available borrowing capacity under its floor plan facility are sufficient to meet the Company’s short-term liquidity needs.

Working capital decreased by $6.1 million to $3.0 million as of June 30, 2026 from $9.0 million as of December 31, 2025. The decrease was primarily driven by a $4.7 million reduction in cash and a $37.6 million increase in current liabilities, partially offset by a $34.4 million increase in inventory, which was financed largely by a $26.2 million increase in floor plan notes payable.

Income Tax Expenses

Historically, the OTH Companies were treated as a partnership for U.S. federal and certain state income tax purposes and, as such, were not subject to entity-level income taxes. Upon completion of the Reorganization, the OTH Companies, together with the Company, became subject to U.S. federal income tax and state income taxes in the jurisdictions in which they operate. The Company recorded an income tax expenses of $1,150 for the six months ended June 30, 2026, compared to no income tax expense for the six months ended June 30, 2025.

Cash Flow Changes for the Six Months Ended June 30, 2026, and 2025

The following table summarizes our cash flows for the periods indicated:

Cash Flow from Operating Activities

For the six months ended June 30, 2026, net cash used in operating activities totaled $18.1 million compared to $0.2 million for the six months ended June 30, 2025. The increase in cash used in operating activities was primarily attributable to an $18.0 million increase in inventory, reflecting higher inventory purchases supported by increased floor plan financing capacity and proceeds from the Company’s initial public offering, as well as seasonal inventory build in advance of the spring and summer selling periods, together with the net loss for the period, a $1.1 million increase in accounts receivable and a $0.5 million increase in prepaid expenses. These uses were partially offset by non-cash share-based compensation and stock issued for services of $3.9 million, a $1.3 million increase in customer deposits and a $0.7 million increase in accounts payable.

Net cash used in operating activities amounted to $0.2 million for the six months ended June 30, 2025, mainly derived from an increase in inventory of $2.0 million, partially offset by net income of $0.8 million, an increase in customer deposits of $0.7 million and a decrease in other current assets of $0.5 million.

Cash Flows from Investing Activities

For the six months ended June 30, 2026, net cash used in investing activities totaled $3.9 million, compared to $0.2 million for the six months ended June 30, 2025. The increase was primarily attributable to $3.0 million of purchases of fixed assets, $0.8 million of cash paid for business acquisitions, net of cash acquired, and $0.1 million of intangible asset additions.

Cash Flows from Financing Activities

Net cash provided by financing activities amounted to $17.3 million for the six months ended June 30, 2026, mainly derived from proceeds from floor plan notes payable of $60.3 million, partially offset by payments to floor plan notes payable of $47.7 million. Financing activities also included $3.5 million of proceeds from short-term loans payable (offset by $1.5 million of repayments), $2.0 million of proceeds from long-term debt and $1.4 million of proceeds from related-party debt (offset by $0.5 million of repayments).

Net cash provided by financing activities amounted to $0.6 million for the six months ended June 30, 2025, mainly derived from proceeds from floor plan notes of $39.6 million, mainly offset by payments to floor plan notes payable of $37.4 million and member distributions of $1.4 million.

Contractual Obligations and Other Commitments

The following table sets forth a summary of our material contractual obligations and commercial commitments as of June 30, 2026:

(1) The amounts included in long-term debt refer to future cash principal payments. Refer to Note 8. Long-Term Loan Payable of the Notes for disclosure of borrowing availability, interest rates, and terms of our long-term debt.

(2) Amounts for operating lease commitments do not include certain operating expenses such as maintenance, insurance, and real estate taxes.

The Company utilizes a floor plan financing facility to fund inventory purchases. Borrowings under this facility were $51.6 million as of June 30, 2026 and are repaid as inventory is sold. As such, repayment timing is dependent on inventory turnover and borrowing activity and is not included in the tabular presentation above. For details regarding borrowing availability, interest rates, and terms related to our floor plan notes payable, refer to Note 7. Notes Payable – Floor Plan of the Notes.

In addition, the Company had $2.0 million of current portion of long-term debt outstanding as of June 30, 2026. Refer to Note 8. Long-Term Loan Payable of the Notes.

Off Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of June 30, 2026 and December 31, 2025.

Critical Accounting Policies, Significant Judgments and Estimates

The preparation of our financial statements requires that we make estimates and judgments. We base these on historical experience and on other assumptions that we believe to be reasonable. Except as disclosed in Note 1. Description of Business, Basis of Presentation and Significant Accounting Policies, included in Item 1, Part I, Financial Statements of this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in Critical Accounting Policies and Significant Judgments and Estimates, included in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Note 2. Basis of Presentation and Summary of Significant Accounting Policies, included in Part II, Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K for the year ended December 31, 2025.

As a smaller reporting company, we are not required to provide disclosure regarding quantitative and qualitative market risk.

Evaluation of Disclosure Controls and Procedures Over Financial Reporting

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of June 30, 2026.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by a company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective at a reasonable assurance level due to aspects of our disclosure control framework that are still being formalized and documented, including processes for accumulating and communicating information required to be disclosed in our reports filed under the Exchange Act that are not yet fully implemented or consistently applied. As a newly public company we are in the process of designing and implementing our disclosure controls and procedures to comply with the requirements of the Exchange Act. We are taking steps to establish formal processes and controls and documenting our internal controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. During the quarter, management continued efforts to design and document formal internal controls; however, these efforts have not yet resulted in changes that materially affect internal control over financial reporting.

As we continue to mature as a public company, we expect to further formalize and enhance our internal control environment. As an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012, we are not required to provide an auditor’s attestation report on management’s assessment of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act.

Our business, financial condition, and results of operations are subject to various risks and uncertainties, including those described in Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2025.

There have been no material changes to those risk factors except as set forth below. You should carefully consider those risk factors, together with the other information contained in this Quarterly Report on Form 10-Q.

We may not successfully integrate acquisitions or realize their anticipated benefits, which could adversely affect our business, financial condition, and results of operations.

We have completed strategic acquisitions as part of our growth strategy, including the acquisition of Apex Marine Sales, LLC and its affiliates, which was completed on May 1, 2026 for approximately $6.1 million, and the acquisition of Bellhart Marine Group, LLC and its affiliated entities, which was completed on May 22, 2026 for approximately $0.9 million. These completed acquisitions present integration challenges, including difficulties in combining operations, technology systems, and personnel, retaining key employees, and may result in the assumption of unknown or contingent liabilities. We may also be required to record goodwill and other intangible assets that are subject to impairment testing on a regular basis and potential periodic impairment charges. In addition, we may not realize the anticipated benefits of such acquisitions, including expected synergies, cost savings, or revenue growth, and the costs of integrating acquired businesses may exceed our current estimates. On June 25, 2026, the Company entered into a Strategic Partnership and Revenue Sharing Agreement with MarineMax, Inc. (“MarineMax”), pursuant to which the Company and MarineMax will collaborate on certain sales, service, and operational initiatives. In connection with the Partnership Agreement, the Company expects to issue to MarineMax, on a date to be determined, a Common Stock Purchase Warrant to purchase up to 1,250,000 shares of common stock at exercise prices ranging from $3.25 to $7.00 per share, subject to performance-based vesting conditions tied to MarineMax’s Wholesale Volume. The warrant has not yet been issued, and the timing of its issuance has not been finalized. The partnership involves significant operational coordination and resource-sharing, the successful execution of which is subject to risks including, but not limited to, potential conflicts in strategic priorities, management distraction, reliance on the partner’s performance and reputation, and the possibility that the anticipated benefits may not be realized on the timeline or at the scale expected. The future issuance of the warrant and the potential exercise thereof would result in dilution to existing stockholders. Any of these factors could adversely affect our business, financial condition, and results of operations.

We are subject to litigation that could adversely affect our business and financial condition.

We are, and may in the future become, subject to various legal proceedings, claims, and governmental investigations in the ordinary course of business and otherwise. Such matters are subject to many uncertainties, and outcomes are not predictable. An adverse outcome in one or more of these matters could have a material adverse effect on our financial condition, results of operations, or cash flows. Even where we ultimately prevail, litigation can be costly and time-consuming and may divert the attention of management and key personnel from business operations. See Note 17. Commitments and Contingencies to our Condensed Consolidated Financial Statements included in this Quarterly Report for additional information regarding our pending legal proceedings.

Our convertible debt and related securities may result in significant dilution to existing stockholders and may impose restrictive covenants on our operations.

On August 5, 2026, the Company entered into a Loan Agreement with Greentree Financial Group, Inc. pursuant to which the Company issued a 10% Convertible Promissory Note in the principal amount of $510,000, together with a Common Stock Purchase Warrant to purchase up to 100,000 shares of common stock, and 20,000 commitment shares. The Greentree Note is convertible into shares of common stock at a conversion price of $1.785 per share, subject to a semi-annual downward reset to the closing bid price and adjustment for certain dilutive issuances. The Greentree Warrant exercise price is also subject to “down round” anti-dilution protection. These features could result in significant dilution to existing stockholders, particularly if the market price of our common stock declines. In addition, the Greentree Loan Agreement contains a covenant restricting the Company from issuing any securities with a variable conversion or exercise rate for a period of 12 months, which may limit the Company’s ability to raise capital through certain financing structures. In the event of a Qualified Financing (as defined in the Greentree Loan Agreement), the Company may be required to apply proceeds from such financing to repay the Greentree Note. These restrictions and obligations could adversely affect the Company’s financial flexibility, liquidity, and results of operations.