Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's discussion and analysis of financial condition and results of operations.

Management's discussion and analysis of financial condition and results of operations ("MD&A") should be read together with the MD&A presented in the Registration Statement on Form S-1 for the year ended December 31, 2024 (the "Annual Report") and the unaudited condensed combined and consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q (this "Quarterly Report"), which include additional information about our accounting policies, practices and the transactions underlying our financial results.

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 wholesalers in the industry, OTHYS 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 nine 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 owned Autograph Yacht Group, located in Jupiter, Florida, and its approximately 45 brokers, positioned throughout the United States, specialize in navigating the pre-owned regional markets while maintaining a client-focused approach. By leveraging its nationwide broker network, advanced 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 company owned websites, Boatsandbuyers.com and Webuyboats.com provide boat auction and lead generation services.Www.webuyboats.com, our proprietary lead-generation platform, serves as a national pipeline for high-quality pre-owned boat inventory. 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. Www.boatsandbuyers.comis an auction platform that allows people to access a national audience of potential boat buyers and create seven day auctions on a no-reserve or fair reserve listing and sell the boat without negotiating or commissions. It allows buyers to create alerts for boats they are looking for and instantly make an offer without negotiating.

Looking ahead, our strong market presence and forward thinking approach, our company stands ready to lead the way in shaping the future of the pre-owned boating in 2026 and beyond.

Results of operations

Comparison of the Three Months Ended September 30, 2025 and 2024

Revenue

Revenue decreased by $1,859,853, or (7.19) %, to $24,005,345 for the three months ended September 30, 2025, from $25,865,198 for the three months ended September 30, 2024. The revenue decrease is attributed to several large deals slipping into the next period, resulting in this revenue being recognized in the 4^th quarter. We sold 38 more boats in the third quarter of 2025 selling 112 in the third quarter of 2025 versus 74 boats in the same period of 2024. Overall sales pipeline and customer demand remain strong and we believe sales can to continue to grow at a higher rate going forward do to an increased broker pool and a larger amount of capital to grow our floor plan and increase the number of boats we can transact.

Boat Sales

Revenue from boat sales decreased by $1,809,643, or (7.18)%, to $23,392,096 for the three months ended September 30, 2025, from $25,201,739 for the three months ended September 30, 2024. Despite a slight decrease in boat revenues, we are still seeing strong demand and expect this to be reflected in our 4th-quarter revenues.

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, was $613,249 for the three months ended September 30, 2025, versus $663,460 for the three months ended September 30, 2024. Over 85% of these loans come from non-OTHYS brakers and dealers reflecting an overall slowness in the boat business overall. This represents an opportunity for OTHYS to increase the attachment rate of Azure with our boat sales and thereby growing the business internally.

Gross Profit

Gross profit of $3,029,799 for the three months ended September 30, 2025, compared to $2,901,975 for the three months ended September 30, 2024, an increase of $127,824. Our gross profit as a percentage of sales increased modestly. This can be attributed to management's efforts to monitor overhead and direct expenses associated with our inventory consistently.

Boat sales Gross Profit

Boat sale gross profit of $2,663,122 for the three months ended September 30, 2025, compared to $2,451,958 for the three months ended September 30, 2024, an increase of $211,164. Our margin improvements are attributable to our purchasing team's skillful buying decisions for our used-boat inventory.

Finance Related - Azure

Finance related gross profit of $366,677 for the three months ended September 30, 2025, compares with $450,017 for the three months ended September 30, 2024.

Selling, General and Administrative Expenses

SG&A expenses were $617,396 for the three months ended September 30, 2025, compared to $360,780 for the three months ended September 30, 2024. The increase in SG&A was primarily attributable to $34,000 of financing fees related to the Floor Plan Notes Payable, and an increase of $46,000 related to insurance expenses.

Advertising and Marketing

Advertising and marketing expenses were $220,851 for the three months ended September 30, 2025, compared to $95,202 for the three months ended September 30, 2024. The increase in Advertising and Marketing expenses was primarily attributable to an increase in attendance and sponsorship of local boat shows in key markets for the Company.

Salaries and Wages

Salaries and wages expenses were $1,513,401 for the three months ended September 30, 2025, compared to $941,514 for the three months ended September 30, 2024. The increase in Salaries and wages was due to additional administrative hires and consultant services as a result of the IPO.

Interest Expense - Floor Plan

Interest expense - floor plan increased $151,030, or 56.03%, to $420,568 for the three months ended September 30, 2025, compared to $269,538 for the three months ended September 30, 2024.

Interest Expense - Other

The decrease in interest expense - other of $54,951 (40.78%), to $79,792 for the three months ended September 30, 2025, compared to $134,743 for the three months ended September 30, 2024.

Depreciation and Amortization

Depreciation and amortization expense increased $18,402, or 26.76%, to $87,162 for the three months ended September 30, 2025, compared to $68,760 for the three months ended September 30, 2024.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Revenue

Overall, revenue of $82,592,188 for the nine months ended September 30, 2025, increased by $13,366,317 or 19.31% from $69,225,871 for the nine months ended September 30, 2024. The revenue increase is primarily due to an increase in new and pre-owned boat sales.

Boat Sales

Revenue from boat sales of $80,733,434 for the nine months ended September 30, 2025, increased by $13,672,118, or 20.39%, versus $67,061,316 for the nine months ended September 30, 2024. The revenue increase is primarily attributed to our increased utilization of our floor plan financing facility.

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 decreased by $305,801, or (14.13)%, to $1,858,754 for the nine months ended September 30, 2025, from $2,164,555 for the nine months ended September 30, 2024.

Gross Profit

Gross profit of $8,373,210 for the nine months ended September 30, 2025, increased by $1,443,595, or 20.83%, to $6,929,615 for the nine months ended September 30, 2024. This increase was primarily driven by our increase in overall sales revenue, specifically our used boat segment. Our gross profit as a percentage of sales increased modestly.

Boat sales Gross Profit

Boat sale gross profit of $7,273,773 for the nine months ended September 30, 2025, increased by $1,649,974, or 29.34%, compared to $5,623,799 for the nine months ended September 30, 2024.

Finance Related - Azure

Finance related gross profit of $1,099,437 for the nine months ended September 30, 2025, decreased by $206,377, or (15.80)% to $1,305,816 for the nine months ended September 30, 2024.

Selling, General and Administrative Expenses

SG&A expenses were $1,441,248 for the nine months ended September 30, 2025, compared to $1,053,374 for the nine months ended September 30, 2024. The increase in SG&A was primarily attributable to $149,000 of financing fees related to the Floor Plan Notes Payable, an increase of $40,000 of bank charges and fees and an increase of $56,000 in documentation and titling fees related to increased activity.

Advertising and Marketing

Advertising and marketing expenses were $597,506 for the nine months ended September 30, 2025, compared to $314,081 for the nine months ended September 30, 2024. The increase in Advertising and Marketing expenses was primarily attributable to an increase in attendance and sponsorship of local boat shows in key markets for the Company.

Salaries and Wages

Salaries and wage expenses were $3,113,964 for the nine months ended September 30, 2025 compared to $2,148,143 for the nine months ended September 30, 2024. The increase in Salaries and wages was due to additional administrative hires and consultant services as a result of the IPO and an increase in Brokerage expenses which increased revenue.

Interest Expense - Floor Plan

Interest expense - floor plan increased $661,000, or 93.96%, to $1,364,519 for the nine months ended September 30, 2025, compared to $703,519 for the nine months ended September 30, 2024.

Interest Expense - Other

The decrease in interest expense - other of $249,766, or (49.74%), to $252,353 for the nine months ended September 30, 2025, compared to $502,119 for the nine months ended September 30, 2024.

Depreciation and Amortization

Depreciation and amortization expense increased $3,585, or 1.73%, to $210,372 for the nine months ended September 30, 2025, compared to $206,787 for the nine months ended September 30, 2024.

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.

Our Board and management team use Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure, fixed asset investments, and other non-recurring or non-cash adjustments. We present Adjusted EBITDA as a key performance measure that our management uses to assess our financial performance and for internal planning and forecasting purposes. This metric is 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. Net income is the GAAP measure most directly comparable to Adjusted EBITDA.

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 and amortization and stock-based compensation,
	●	interest expense and income tax expense or benefit; and

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.

		For the three months ended September 30,								For the nine months ended September 30,
		2025				2024				2025				2024
Net (loss) income		$	(66,666	)		$	960,468			$	776,949			$	1,672,474
Interest expense, net			500,360				404,281				1,616,872				1,205,638
Depreciation and amortization			87,162				68,760				210,372				206,787
Adjusted EBITDA		$	520,856			$	1,433,509			$	2,604,193			$	3,084,899

Liquidity and Capital Resources

The following table provides selected financial data about us as of September 30, 2025, and December 31, 2024.

		September 30, 2025				December 31, 2024				$ Change				% Change
Cash		$	2,267,564			$	2,927,126			$	(659,562	)			(22.53	)%
Current assets		$	29,177,411			$	28,858,990			$	318,421				1.10	%
Current liabilities		$	31,755,324			$	29,302,431			$	2,452,893				8.37	%
Working capital		$	(2,577,913	)		$	(443,441	)		$	(2,134,472	)			(481.34	)%

As of September 30, 2025, we had $2,267,564 in cash, total current assets were $29,177,411, total assets were $32,613,883, and our total liabilities were $33,224,418, resulting in a working capital deficit of $2,577,913. Liabilities were comprised primarily of floor plan notes payable of $23,478,756, line of credit of $2,842,682, and customer deposit of $1,690,533.

As of December 31, 2024, we had a working capital deficit of $443,441. As of December 31, 2024, we had $2,927,126 in cash, total current assets were $28,858,990, total assets were $31,635,740, and our total liabilities were $30,668,350. Liabilities were comprised primarily of floor plan notes payable of $20,595,517, and current liabilities of $29,302,431, which included accounts payable and accrued liabilities of $1,470,009, customer deposit of $2,350,219, due to related parties of $1,422,540 and current portion of operating lease right of use liability of $382,731.

Our working capital decreased by $2,134,472 from $(443,441) on December 31, 2024, as compared to $(2,577,913) on September 30, 2025, due primarily to the increase in floorplan notes payable of $2,883,239 and the decrease in cash and cash equivalent of $659,562. An increase in floorplan notes payable gives the Company more inventory to produce more revenue and generate more cash.

Impact of Taxable Status on Future Results and Liquidity

Historically, the OTH Companies were treated as a partnership for U.S. federal and certain state income tax purposes and, as such, was not subject to entity-level income taxes. Upon completion of the Reorganization, OTH Companies together with the Company will be subject to U.S. federal income tax and state income taxes in jurisdictions where it conducts business. As a result, we expect our effective tax rate to increase, which will reduce our net income and cash flow compared to historical periods.

Based on our current operations and estimated statutory tax rates, we estimate that our pro forma income tax expense would have been approximately $163,159 and net income would have been $613,790 for the nine months ended September 30, 2025, as we had been taxed as a C corporation.

Cash Flow

		Nine Months Ended
		September 30,
		2025				2024				$ Change				% Change
Net cash used in operating activities		$	(664,236	)		$	(3,107,722	)		$	2,443,486				(78.63	)%
Net cash used in investing activities		$	(352,930	)		$	(47,220	)		$	(305,710	)			100.00	%
Net cash provided by financing activities		$	357,604			$	5,211,500			$	(4,853,896	)			(93.14	)%
Net change in cash		$	(659,562	)		$	2,056,558			$	(2,716,120	)			132.07	%

Cash Flow from Operating Activities

As of September 30, 2025, we generated negative cash flows from operating activities. For the nine months ended September 30, 2025, net cash flows used in operating activities totaled $664,236 compared to $3,107,722 used during the nine months ended September 30, 2024. The $2,443,486 improvement in cash used in operating activities was primarily driven by inventory stabilization after achieving floorplan limits and improved working capital management, partially offset by a decrease in customer deposits.

Net cash used in operating activities amounted to $3,107,721 for the nine months ended September 30, 2024, mainly due to significant inventory purchases.

Cash Flows from Investing Activities

For the nine months ended September 30, 2025, net cash used in investing activities totaled $352,930, representing an increase of $305,710 from $47,220 in the prior period. The higher cost was primarily attributable to payments related to the leasehold improvements for our Jupiter location and fixed assets during the current period.

Cash Flows from Financing Activities

Net cash provided by financing activities amounted to $357,604 for the nine months ended September 30, 2025, mainly derived from the proceeds from floorplan notes, mainly offset by payment to floor plan notes payables.

Net cash provided by financing activities amounted to $5,211,500 for the nine months ended September 30, 2024, mainly derived from proceeds from floorplan notes, mainly offset by payment to floor plan notes payables.

Commitments and Commercial Commitments

The following table sets forth a summary of our material contractual obligations and commercial commitments as of September 30, 2025:

		Payments Due by Period Ending September 30, 2025
		Total				Less Than 1 Year				1-3 Years				3-5 Years				More Than 5 Years
Floor plan notes payable (1)			23,478,756				23,478,756				-				-				-
Long-term debt (2)			287,245				219,321				67,924				-				-
Operating leases (3)			1,893,115				491,945				778,055				623,115				-
Total		$	25,659,116			$	24,190,022			$	845,979			$	623,115			$	-

(1) Estimates of future floor plan notes payable payments have been excluded from the tabular presentation, as the amounts due are contingent upon the outstanding balances and variable interest rates. For details regarding borrowing availability, interest rates, and terms related to our floor plan notes payable, refer to Note 10 of the Notes to Combined and Consolidated Financial Statements.

(2) The amounts included in long-term debts refer to future cash principal payments. Refer to Note 12 of the Notes to Combined and Consolidated Financial Statements for disclosure of borrowing availability, interest rates, and terms of our long-term debt.

(3) Amounts for operating lease commitments do not include certain operating expenses such as maintenance, insurance, and real estate taxes. These amounts are not a material component of operating expenses.

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 September 30, 2025, and December 31, 2024.

Critical Accounting Policies and Significant Judgments and Estimates

The MD&A is based upon our unaudited consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in the Annual Report.

Recent Accounting Pronouncements

Recent accounting pronouncements are disclosed in Note 2 to our unaudited condensed consolidated financial statements.

Internal Control Over Financial Reporting

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. Under standards established by the Public Company Accounting Oversight Board, or PCAOB, a deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis.

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses. The Company's plan to remediate the material weaknesses in its internal control over financial reporting includes utilizing a portion of the working capital from its initial public offering to increase staffing within its finance department sufficient to facilitate proper segregation of accounting functions and to enable appropriate review of its internally prepared financial statements. In addition, the Company plans to retain outside consultants, expert in, and specializing in SEC reporting for public company registrants.

Emerging Growth Company

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we are deemed to be a "large accelerated filer" under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering.