NXB 10-Q
NextBoat Inc. (NXB)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly Period Ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from ______ to ______
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices) (Zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. ☒
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes
The number of shares of the registrant’s common stock, par value $ per share, outstanding as of May 8, 2026 was shares.
Off The Hook YS Inc.
Table of Contents
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CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of the federal securities laws concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate and management’s beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. Although we believe that the expectations reflected in the forward-looking statements contained herein are reasonable, our actual results and the timing of selected events may differ materially. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk factors” in Part II, Item 1A of this Quarterly Report and elsewhere in this Quarterly Report. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
OFF THE HOOK YS INC.
Condensed Consolidated Balance Sheets
As of March 31, 2026 and December 31, 2025
| March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Prepaid expense | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| Non-Current Assets | ||||||||
| Property, plant and equipment, net | ||||||||
| Other receivable | ||||||||
| Due from related party | ||||||||
| Right-of-use assets | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Total Non-Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Lease liabilities, current | ||||||||
| Current portion of long-term debt | ||||||||
| Due to related party | ||||||||
| Customer deposits | ||||||||
| Short-term debt | ||||||||
| Floor plan notes payable | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities | ||||||||
| Long-term debt, noncurrent | ||||||||
| Lease liabilities, noncurrent | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding as of March 31, 2026, and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Common stock payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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OFF THE HOOK YS INC.
Condensed Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended March 31, 2026 and 2025
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Gross Profit | ||||||||
| Operating Expenses: | ||||||||
| Depreciation and amortization | ||||||||
| Selling, general and administrative | ||||||||
| Advertising and marketing | ||||||||
| Professional services | ||||||||
| Salaries and wages | ||||||||
| Rent expenses | ||||||||
| Total Operating Expenses | ||||||||
| (Loss) Income from Operations | ( | ) | ||||||
| Other Income (Expenses): | ||||||||
| Interest expense, net | ( | ) | ( | ) | ||||
| Other income | ||||||||
| Total Other Expenses | ( | ) | ( | ) | ||||
| (Loss) Income Before Income Taxes | ( | ) | ||||||
| Income tax expenses | ||||||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Basic and Diluted Net (Loss) Income Per Common Share | $ | ) | $ | |||||
| Basic and diluted weighted average common share outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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OFF THE HOOK YS INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
For the Three Months Ended March 31, 2026 and 2025
| Common Stock | Additional Paid-in | Common Stock | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Capital | Payable | Deficit | Equity | |||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Member Distribution | - | ( | ) | ( | ) | |||||||||||||||||||
| Net income | - | |||||||||||||||||||||||
| Balance, March 31, 2025, Unaudited | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Share-based compensation | ||||||||||||||||||||||||
| Stock issued for professional service | ||||||||||||||||||||||||
Net (loss) | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2026, Unaudited | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
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OFF THE HOOK YS INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31, 2026 and 2025
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Non-cash lease expense | ||||||||
| Stock-based compensation | ||||||||
| Stock issued for professional fees | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Private label receivable | ||||||||
| Other receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ( | ) | ||||
| Prepaid expense | ( | ) | ( | ) | ||||
| Other current assets | ||||||||
| Due from related party | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ||||||
| Other current liabilities | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Capital expenditure for fixed assets | ( | ) | ( | ) | ||||
| Acquisition of intangible assets | ( | ) | ||||||
| Net Cash Used in Investing Activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Member distribution | ( | ) | ||||||
| Proceeds from short-term loan payable | ||||||||
| Proceeds from floorplan notes payable | ||||||||
| Payment to floor plan notes payable | ( | ) | ( | ) | ||||
| Payment to long-term debt | ( | ) | ( | ) | ||||
| Proceeds from related-party debt | ||||||||
| Repayments of related party debts | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Net Change in Cash | ( | ) | ( | ) | ||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and Cash Equivalents, End of Period | $ | $ | ||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
| 7 |
OFF THE HOOK YS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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,
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.
| 8 |
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:
| March 31, 2026 | December 31, 2025 | |||||||
| New boats | $ | $ | ||||||
| Used boats | ||||||||
| Trailers | ||||||||
| Total | $ | $ | ||||||
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property and equipment, net consisted of the following:
| March 31, 2026 | December 31, 2025 | |||||||
| Leasehold improvement | $ | $ | ||||||
| Buildings | ||||||||
| Furniture and Fixtures | ||||||||
| Equipment | ||||||||
| Vehicles | ||||||||
| Property, plant and equipment, gross | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property, plant and equipment, net | $ | $ | ||||||
During the three months ended March 31, 2026 and 2025, the Company incurred depreciation expense of $
| 9 |
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
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
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 $
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.
Estimated
Useful | March 31, 2026 | December 31, 2025 | |||||||||
| Website and intellectual property | $ | $ | |||||||||
| Software(1) | |||||||||||
| Accumulated amortization | ( | ) | ( | ) | |||||||
| Net book value | $ | $ | |||||||||
| (1) |
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:
| Calendar Year | Amount | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Total Intangible Asset Amortization | $ | |||
| 10 |
NOTE 6. ACCOUNTS PAYABLE
Accounts payable consisted of the following as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||
| Accounts Payable | $ | $ | ||||||
| Credit Card Payable | ||||||||
| $ | $ | |||||||
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
$
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.
Outstanding
borrowings under the agreement were $
NOTE 8. LONG-TERM LOAN PAYABLE
March 31, 2026 | December 31, 2025 | |||||||
| Payable to Wells Fargo bearing interest at | $ | $ | ||||||
| Payable to GMC Financial, secured by a Company vehicle. Monthly payments of principal and interest totaling $ | ||||||||
| Payable to Land Rover Financial Group, secured by a Company vehicle. Monthly interest payments are due at the beginning of each month. Interest accrues at a rate of | ||||||||
| Total Long-Term Debt | $ | $ | ||||||
Maturity of long-term debt is as follows:
| As of March 31: | Amount | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 and thereafter | ||||
| $ | ||||
| 11 |
NOTE 9. LEASES
The balances for operating leases where the Company is the lessee are presented within the condensed balance sheets as follows:
| Operating Leases | March 31, 2026 | December 31, 2025 | ||||||
| Right of use-assets | $ | $ | ||||||
| Lease liability-current | ||||||||
| Lease liability-non-current | ||||||||
| Total Operating Lease Liabilities | $ | $ | ||||||
| Weighted average remaining lease term (in years) | ||||||||
| Weighted average discount rate (%) | ||||||||
The components of lease expenses for the three months ended March 31, 2026 and 2025 were as follows:
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Operating lease cost | $ | $ | ||||||
| Cost of other leases with period less than one year and variable lease costs | ||||||||
| $ | $ | |||||||
The
components of lease expenses for the three months ended March 31, 2026 and 2025 were approximately $
Supplemental cash flow information related to leases for the three months ended March 31, 2026 and 2025 were as follows:
| For the Three Months Ended March 31, | ||||||||
| Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | 2026 | 2025 | ||||||
| Operating cash flows from operating leases | $ | $ | ||||||
As of March 31, 2026, the maturities of operating lease liabilities (excluding short-term lease) are as follows:
| For the Three Months Ended March 31, 2026 | Operating Lease | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| 2031 | ||||
| 2032 and thereafter | ||||
| Total Lease Payments | ||||
| Less: imputed interest | ( | ) | ||
| Present Value of Lease Liabilities | $ | |||
| Less: current portion | ( | ) | ||
| Lease Obligations, Noncurrent | $ | |||
| 12 |
NOTE 10. REVENUE
Net revenue by category:
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Pre-owned boat sales | $ | $ | ||||||
| New boats sales | ||||||||
| Finance income | ||||||||
| Service, parts & other sales | ||||||||
| Total Consolidated Revenue | $ | $ | ||||||
As
of March 31, 2026 and 2025, trade-in boats recorded as inventory totaled $
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, $
The movement in customer deposits is as follows:
March 31, 2026 | December 31, 2025 | |||||||
| Balance at Beginning of Period | $ | $ | ||||||
| Decrease due to revenue recognized during the period | ( | ) | ( | ) | ||||
| Increase from customer deposits received in advance of performance obligations | ||||||||
| Refunds to customers | ( | ) | ||||||
| Balance at End of Period | $ | $ | ||||||
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:
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Amounts Due To Related Parties
| March 31, 2026 | December 31, 2025 | |||||||
| Tom Ruegg (2) | $ | $ | ||||||
| Jason Ruegg (1) | ||||||||
| Andrew Simmons (1) | ||||||||
| Total | $ | $ | ||||||
| (1) | ||
| (2) |
Amounts Due From Related Parties
Amounts due from related parties consisted of the following for the periods indicated:
| March 31, 2026 | December 31, 2025 | |||||||
| OTH Equipment | $ | $ | ||||||
| OTH Realty II, LLC | ||||||||
| OTH Sloop Point LLC | ||||||||
| Jason Ruegg | ||||||||
| Lewis Landing LLC | ||||||||
| Total | $ | $ | ||||||
Member Distribution
Prior
to the Company’s initial public offering (“IPO”), the Company made distributions to members of $
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 $
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.
| 14 |
The income tax provision for the three months ended March 31, 2026 and 2025 consisted of the following:
| As of March 31, 2026 | As of December 31, 2025 | |||||||
| Entity Level State Income Tax on LLC Income | $ | $ | ||||||
| Income tax payable | ||||||||
| For the Three Months Ended March 31, 2026 | For the Three Months Ended March 31, 2025 | |||||||
| Current | $ | $ | ||||||
| Federal | ||||||||
| State | ||||||||
| Total Current Income Tax Provision | ||||||||
| Deferred | ||||||||
| Federal | ||||||||
| State | ||||||||
| Total deferred taxes | ||||||||
| Total Provision for Income Taxes | $ | $ | ||||||
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:
| March 31, 2026 | December 31, 2025 | |||||||
| Deferred Tax Assets: | $ | $ | ||||||
| Stock based compensation | ||||||||
| Operating lease, right-of-use assets | ||||||||
| Interest deduction limitation | ||||||||
| Net operating loss carryforward | ||||||||
| Accruals and reserves | ||||||||
| Operating lease liabilities | ||||||||
| Other assets | ||||||||
| Less: valuation allowance | ( | ) | ( | ) | ||||
| Total Deferred Tax Assets | $ | $ | ||||||
| Deferred Tax Liabilities: | ||||||||
| Interest deduction limitation | ( | ) | ||||||
| Net operating loss carryforward | ( | ) | ||||||
| Depreciation and allowance | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ||||||
| Goodwill and identifiable intangible assets | ( | ) | ||||||
| Operating lease, right-of-use assets | ( | ) | ||||||
| Total Deferred Tax Liabilities | $ | ( | ) | $ | ( | ) | ||
| Net Deferred Tax Asset (Liability) | $ | $ | ||||||
| * | In connection with the Company’s 2025 incorporation and related acquisition/accounting, the Company recorded deferred tax liabilities associated with purchase accounting adjustments (primarily identifiable intangible assets). These deferred tax liabilities were recorded as part of acquisition accounting and did not affect the current-year income tax provision. |
The Company’s effective tax rates for the
three months ended March 31, 2026 and March 31, 2025 were (
| 15 |
Net operating losses and tax credit carryforwards as of March 31, 2026 were as follows:
| As of March 31, 2026 | |||||||
| Amount | Expiration Year | ||||||
| Net operating losses, federal | $ | ||||||
| Net operating losses, state | |||||||
| Tax credits, federal | - | ||||||
| Tax credits, state | - | ||||||
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 shares, and
Each share of common stock has a par value of $. As of March 31, 2026 and December 31, 2025, the Company had and shares of common stock issued and outstanding, respectively.
Preferred Stock
The Company authorized 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.
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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 shares of common stock, par value
$ per share, at a public offering price of $ per share, resulting in net proceeds of approximately $
Member Distribution
Prior
to the Company’s IPO, the Company made distributions to members of $
Common Stock Payable
On April 25, 2025, The Company committed shares of common stock with a fair value of $ 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.
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 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 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 $ million of stock-based compensation expense related to RSUs. stock-based compensation expense was recognized during the three months ended March 31, 2025.
A summary of RSU activity is as follows:
| Total RSUs Issued | Total Fair Market Value of RSUs Issued as Compensation (1) | |||||||
| RSUs Granted but Not Vested at January 1, 2026 | $ | |||||||
| RSUs granted | ||||||||
| RSUs forfeited | ) | ) | ||||||
| RSUs vested and released | ) | ) | ||||||
| RSUs Granted but Not Vested at March 31, 2026 | $ | |||||||
| (1) |
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, RSUs had vested. Of these, RSUs had been settled through the issuance of shares of common stock, including shares issued during the three months ended March 31, 2026. The remaining vested RSUs had not yet been settled as of March 31, 2026.
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Stock Options
During the three months ended March 31, 2026, the Company granted 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 shares to nonemployees for services, resulting in total share-based compensation expense for the period of $ million.
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net (loss) income attributable to the Company | $ | ( | ) | $ | ||||
| Weighted average number of shares * | ||||||||
| (Loss) earnings per share - Basic and Diluted | $ | ) | $ | |||||
| * | ||
| * |
NOTE 16. SEGMENT INFORMATION
The
Company operates primarily in
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.
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Segment information is as follows:
| For the Three Months Ended March 31, 2026 | ||||||||||||
| Dealerships | Financial Services | Consolidated | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating Expenses | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Advertising and marketing | ||||||||||||
| Professional services | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expenses | ||||||||||||
| Total operating expenses | ||||||||||||
| Other Income (Expenses) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ||||||||
| Other income | ||||||||||||
| Total Other (Expense) Income | ( | ) | ( | ) | ||||||||
| Income tax expenses | $ | |||||||||||
| Net Loss | $ | ( | ) | ( | ) | $ | ( | ) | ||||
| For the Three Months Ended March 31, 2025 | ||||||||||||
| Dealerships | Financial Services | Consolidated | ||||||||||
| Revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Gross profit | ||||||||||||
| Operating Expenses | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Advertising and marketing | ||||||||||||
| Professional services | ||||||||||||
| Salaries and wages | ||||||||||||
| Rent expenses | ||||||||||||
| Total Operating Expenses | ||||||||||||
| Other income (expenses) | ||||||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ||||||
| Other income | ||||||||||||
| Total Other Expenses | ( | ) | ( | ) | ( | ) | ||||||
| Net Income | $ | $ | $ | |||||||||
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.
| As of March 31, 2026 | ||||||||||||
| Dealerships | Financial Services | Consolidated | ||||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable, net | ||||||||||||
| Inventory | ||||||||||||
| Prepaid expense | ||||||||||||
| Other current assets | ||||||||||||
| Property, plant and equipment, net | ||||||||||||
| Other receivable | ||||||||||||
| Due from related party | ||||||||||||
| Intangible assets, net | ||||||||||||
| Right-of-use assets | ||||||||||||
| Goodwill | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
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| As of December 31, 2025 | ||||||||||||
| Dealerships | Financial Services | Consolidated | ||||||||||
| Assets | ||||||||||||
| Cash and cash equivalents | $ | $ | $ | |||||||||
| Accounts receivable, net | ||||||||||||
| Inventory | ||||||||||||
| Prepaid expense | ||||||||||||
| Other current assets | ||||||||||||
| Property, plant and equipment, net | ||||||||||||
| Other receivable | ||||||||||||
| Due from related party | ||||||||||||
| Intangible assets, net | ||||||||||||
| Right-of-use assets | ||||||||||||
| Goodwill | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
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 $
Reistad et al v. Off The Hook YS, Inc.
In
March 2026,
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.
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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 $
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.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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, OTH 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 65 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 webuyboats.com which provides lead generation services. Our proprietary lead-generation platform, www.webuyboats.com, 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.
During the first quarter of 2026, the Company entered into an agreement to acquire 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 would further support the Company’s vertically integrated operating model and enhance inventory reconditioning and service capacity. The transaction remains subject to customary closing conditions.
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.
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Corporate Structure and Background
Off The Hook YS Inc. (“OTH”) 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.
There have been no material changes to the Company’s corporate structure during the three months ended March 31, 2026.
Results of Operations
Comparison of the Three Months Ended March 31, 2026 and 2025
Revenue
Overall, revenue increased by $2.6 million, or 9.6%, to $29.8 million for the three months ended March 31, 2026, from $27.2 million for the three months ended March 31, 2025. The revenue growth is mainly driven by a higher floor plan limit, which enabled us to sustain greater utilization throughout the period. Additionally, the brokers we recently hired for OTHYS and our new premier brokerage division, Autograph Yacht Group, contributed to our revenue growth. These two moves allowed us to increase the number of pre-owned boats sold and brokerage deals closed.
New Boat Sales
New boat sales decreased by $4.2 million, or 76.4%, to $1.3 million for the three months ended March 31, 2026, from $5.5 million for the three months ended March 31, 2025. For the three months ended March 31, 2026, we sold 3 new units compared to approximately 7 units for the three months ended March 31, 2025, a decrease partially attributable to decreased marketing efforts and a slowdown in the new boat market.
Pre-owned Boat Sales
Pre-owned boat sales increased by $6.7 million, or 31.8%, to $27.8 million for the three months ended March 31, 2026, from $21.1 million for the three months ended March 31, 2025. For the three months ended March 31, 2026, we sold approximately 124 pre-owned units compared to approximately 80 pre-owned units for the three months ended March 31, 2025. Average price per pre-owned boat sale transaction was approximately $224,000 (124 units) for the three months ended March 31, 2026 and $263,000 (80 units) for the three months ended March 31, 2025. We sell a wide range of brands and sizes of pre-owned boats under different types of sales arrangements (e.g., trade-ins, brokerage and consignment), which causes periodic and seasonal fluctuations in the average sales price.
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 approximately $0.3 million, or approximately 50.0%, to $0.3 million for the three months ended March 31, 2026, from $0.6 million for the three months ended March 31, 2025. This decrease can be attributed to fluctuations in our customer mix, with more high-end buyers using cash to purchase, compared to entry-level and lower ticket customers who typically are more finance dependent.
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Service, Parts & Other Sales
Revenue from service, parts & other sales increased by $0.4 million, or 679.9%, to $0.4 million for the three months ended March 31, 2026, from less than $0.1 million for the three months ended March 31, 2025. The increase is mainly attributed to expanded focus on marine asset recovery services, increased Finance & Insurance (“F&I”) sales, and increased trailer sales, as well as an increase in processing fees from deals associated directly with the increase in overall units sold.
Gross Profit
Gross profit increased by $0.5 million, or 18.5%, to $3.2 million for the three months ended March 31, 2026, compared to $2.7 million for the three months ended March 31, 2025. Our gross profit as a percentage of sales increased modestly. The increase was primarily driven by higher gross profit from pre-owned boat sales and an increase in brokerage transactions, which generally carry higher margin profiles due to lower direct costs. These increases were partially offset by a decline in gross profit from new boat sales, reflecting margin compression and pricing pressures in that segment.
New Boat Gross Profit
New boat gross profit decreased by $0.2 million or 94.3%, to $0.01 million for the three months ended March 31, 2026, compared to $0.3 million for the three months ended March 31, 2025. Overall gross margins on new boat sales declined due to increased price sensitivity among consumers and broader industry-wide margin compression. New boat gross profit as a percentage of new boat revenue was 1.1% for the three months ended March 31, 2026, compared to 4.5% for the three months ended March 31, 2025. The decline in margin percentage reflects both the shift in market conditions and our strategic decision to accelerate inventory turnover in response to slowing demand.
Pre-owned Boat Gross Profit
Pre-owned boat gross profit increased by $0.6 million, or 30.0%, to $2.6 million for the three months ended March 31, 2026, compared to $2.0 million for the three months ended March 31, 2025. This modest increase occurred despite market seasonality, which resulted in downward pressure on pricing and the need to move certain inventory at reduced margins to maintain turnover and liquidity.
Pre-owned boat gross profit as a percentage of pre-owned boat revenue was 9.4% for the three months ended March 31, 2026 and 9.6% for the three months ended March 31, 2025. We sell a diverse mix of pre-owned boats across various price points, brands, and sales channels, including trade-ins, consignment, wholesale, and brokerage, which naturally contributes to fluctuations in gross profit margins due to varying transaction structures and sales dynamics.
Finance Income – Azure
Finance gross profit decreased by $0.1 million, to $0.2 million for the three months ended March 31, 2026, from $0.3 million for the three months ended March 31, 2025. Finance income is fee-based revenue for which we do not recognize incremental expenses.
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 $0.9 million, or 225.0%, to $1.3 million for the three months ended March 31, 2026, compared to $0.4 million for the three months ended March 31, 2025. The increase was primarily attributable to the cost of additional leases executed in 2025, higher indirect marketing expenses associated with our attendance at two boat shows during the quarter, 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.
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Salaries and Wages
Salaries and wages expense increased $2.2 million or 244.4%, to $3.1 million for the three months ended March 31, 2026, compared to $0.9 million for the three months ended March 31, 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. Further, the Company issued stock-based compensation to employees after the initial public offering which was $1.8 million for the three months ended March 31, 2026. These equity awards have several vesting conditions including service based and performance-based requirements and vest between one and five years.
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.
| 25 |
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. |
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 March 31, 2026, Compared to The Three Months Ended March 31, 2025
| For the Three Months Ended March 31, | ||||||||||||
| Description | 2026 | 2025 | Change | |||||||||
| Net (loss) income | $ | (3,467,522 | ) | $ | 289,774 | $ | (3,757,296 | ) | ||||
| Interest expense – other | 13,592 | - | 13,592 | |||||||||
| Income tax expenses | 163,032 | - | 163,032 | |||||||||
| Depreciation and amortization | 158,688 | 36,373 | 122,315 | |||||||||
| Stock-based compensation | 1,761,613 | - | 1,761,613 | |||||||||
| Adjusted EBITDA | $ | (1,370,597 | ) | $ | 326,147 | $ | (1,696,744 | ) | ||||
Adjusted EBITDA was a loss of $1.4 million for the three months ended March 31, 2026, compared to income of $0.3 million for the three months ended March 31, 2025. The decrease in Adjusted EBITDA resulted from an increase in operating expenses, primarily related to additional headcount and fees that were necessary in order to operate as a public company.
Liquidity and Capital Resources
The following table summarizes key liquidity and capital resources information as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | $ Change | ||||||||||
| Cash | $ | 5,330,457 | $ | 12,428,774 | $ | (7,098,317 | ) | |||||
| Current assets | 53,425,445 | 39,875,396 | 13,550,049 | |||||||||
| Current liabilities | 48,538,503 | 30,870,236 | 17,668,267 | |||||||||
| Working capital | 4,886,942 | 9,005,160 | (4,118,218 | ) | ||||||||
As of March 31, 2026, the Company had $5.3 million in cash and working capital of $4.9 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 $40.0 million, which are repaid as inventory is sold, as well as accounts payable, customer deposits, 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.
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Working capital decreased by $4.1 million to $4.9 million as of March 31, 2026 from $9.0 million as of December 31, 2025. The decrease was primarily driven by a $7.1 million reduction in cash, partially offset by an increase in inventory of $20.3 million, which was financed by a $14.7 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, was 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 jurisdictions in which they operate. Income tax expenses for the three months ended March 31, 2026 was $0.2 million.
Cash Flow Changes for the Three Months Ended March 31, 2026, and 2025
The following table summarizes our cash flows for the periods indicated:
For the Three Months Ended | ||||||||||||
| March 31, 2026 | March 31, 2025 | $ Change | ||||||||||
| Net cash used in operating activities | $ | (20,867,206 | ) | $ | (5,376,344 | ) | $ | (15,490,862 | ) | |||
| Net cash used in investing activities | (2,915,264 | ) | (10,833 | ) | (2,904,431 | ) | ||||||
| Net cash provided by financing activities | 16,684,153 | 3,394,323 | 13,289,830 | |||||||||
| Net change in cash | $ | (7,098,317 | ) | $ | (1,992,854 | ) | $ | (5,105,463 | ) | |||
Cash Flow from Operating Activities
For the three months ended March 31, 2026, net cash flows used in operating activities totaled $20.9 million compared to a use of $5.4 million for the three months ended March 31, 2025. The increase in cash used in operating activities was primarily attributable to a $20.3 million increase in inventory, reflecting higher inventory purchases supported by increased floorplan 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. This was partially offset by an increase in customer deposits of $0.8 million.
Net cash used in operating activities amounted to $5.4 million for the three months ended March 31, 2025, mainly derived from an increase in inventory of $4.1 million and an increase in customer deposits of $0.9 million.
Cash Flows from Investing Activities
For the three months ended March 31, 2026, net cash used in investing activities totaled $2.9 million, representing an increase of $2.9 million from the prior year. This increase is due to increased investment in fixed assets and software as the business grows.
Cash Flows from Financing Activities
Net cash provided by financing activities amounted to $16.7 million for the three months ended March 31, 2026, mainly derived from the proceeds from floorplan notes payables of $30.5 million. This was offset by a net payment to floor plan notes payable of $15.9 million.
Net cash provided by financing activities amounted to $3.4 million for the three months ended March 31, 2025, mainly derived from the contribution from proceeds from floorplan notes, mainly offset by payments to floor plan notes payables.
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Contractual Obligations and Other Commitments
The following table sets forth a summary of our material contractual obligations and commercial commitments as of March 31, 2026:
| Payments Due by Period as of March 31, 2026 | ||||||||||||||||||||
| Total | Less Than 1 Year | 1-3 Years | 4-5 Years | More Than 5 Years | ||||||||||||||||
| Long-term debt (1) | $ | 87,071 | $ | 31,105 | $ | 55,966 | $ | - | $ | - | ||||||||||
| Operating leases (2) | 6,603,919 | 1,064,941 | 2,098,369 | 1,541,943 | 1,898,666 | |||||||||||||||
| Total | $ | 6,690,990 | $ | 1,096,046 | $ | 2,154,335 | $ | 1,541,943 | $ | 1,898,666 | ||||||||||
(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 $40.0 million as of March 31, 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.
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 March 31, 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.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide disclosure regarding quantitative and qualitative market risk.
Item 4. Controls and Procedures.
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 March 31, 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 March 31, 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 March 31, 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are from time to time subject to legal proceedings, claims and litigation arising in the ordinary course of business. We are not currently a party to any matters that management expects will have a material adverse effect on our condensed consolidated financial position, results of operations or cash flows.
Item 1A. Risk Factors.
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 complete or integrate acquisitions, which could adversely affect our business, financial condition, and results of operations.
We have completed, and are actively pursuing, strategic acquisitions as part of our growth strategy, including the pending acquisition of Bellhart Marine Group, LLC and the recently completed acquisition of Apex Marine Sales, LLC and its affiliates (see Note 18 – Subsequent Events). These transactions involve significant risks, including the inability to complete pending acquisitions on favorable terms or at all, the need to obtain additional financing on acceptable terms, and the potential diversion of management’s attention from our existing operations. If completed, acquisitions may 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. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
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Item 6. Exhibits.
INDEX TO EXHIBITS
| Exhibit Number | Exhibit Description | |
| 4.1 | ||
| 4.2 | Promissory Note dated May 13, 2026 in the amount of $2,466,667 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed May 14, 2026). | |
10.1*† |
||
| 10.2* | ||
| 31.1* | Section 302 Certification of Chief Executive Officer. | |
| 31.2* | Section 302 Certification of Chief Financial Officer. | |
| 32.1** | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer. | |
| 101.INS | Inline XBRL Instance Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
| * | Filed herewith. |
| ** | Exhibit 32.1 is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibit be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
| † | Indicates a management compensatory plan, contract or arrangement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Off The Hook YS Inc. | |||
| May 14, 2026 | By: | /s/ Brian John | |
| Date | Brian John Chief Executive Officer (Principal Executive Officer) | ||
| May 14, 2026 | By: | /s/ Chad Corbin | |
| Date | Chad Corbin Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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Exhibit 10.1
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (this “Amendment”) is entered into as of March 20, 2026 (the “Amendment Effective Date”), by and between Off The Hook YS, Inc., a Nevada corporation (the “Company”), and Chad Corbin, an individual (the “Employee”).
RECITALS
WHEREAS, the Company and the Employee entered into that certain Employment Agreement dated May 9, 2025 (the “Agreement”), pursuant to which the Employee is employed as the Chief Financial Officer of the Company; and
WHEREAS, the Company and the Employee desire to amend the Agreement to modify the Employee’s base salary and to revise the performance bonus structure, effective as of the Amendment Effective Date.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
AMENDMENT
1. Amendment to Section 4(a) – Base Salary
Section 4(a) of the Agreement is hereby amended and restated in its entirety, effective as of March 1, 2026, to read as follows:
“(a) Salary. During the Term of this Agreement, the Employee shall be paid a base salary (the “Base Salary”) paid twice monthly, at an annualized rate of Two Hundred Fifty Thousand Dollars ($250,000), effective March 1, 2026. The Employee’s Base Salary shall continue to be subject to the Cost of Living Adjustment provisions set forth in Section 4(e) of the Agreement.”
2. Amendment to Section 4(b) – Performance Bonus
Section 4(b) of the Agreement is hereby amended and restated in its entirety to read as follows:
“(b) Performance Bonus. The Employee shall be eligible to earn an annual performance bonus equal to twenty percent (20%) of the Employee’s then-current Base Salary (the “Performance Bonus”), subject to the following terms and conditions:
(i) Performance Metrics. The specific performance metrics and goals upon which the Performance Bonus shall be based (the “Performance Metrics”) shall be mutually agreed upon in writing by the Employee and the Chief Executive Officer of the Company no later than June 30, 2026 for the initial bonus year, and no later than March 31 of each subsequent calendar year for each year thereafter.
(ii) Eligibility Requirement. The Performance Bonus for any calendar year shall be payable to the Employee if, and only if, the Employee remains continuously employed by the Company through December 31 of such calendar year, and as of each December 31 thereafter during the Term. For the avoidance of doubt, the Employee must be employed by the Company on December 31 of the applicable calendar year in order to be eligible to receive the Performance Bonus for that year; provided, however, that if the Employee’s employment is terminated by the Company without Cause pursuant to Section 12(d) of the Agreement, or by the Employee for Good Reason pursuant to Section 12(e) of the Agreement, prior to December 31 of any applicable year, the Employee shall be entitled to receive the Performance Bonus for such year on a pro-rata basis, as determined by the Compensation Committee in its reasonable discretion.
(iii) Payment. The Performance Bonus, if earned, shall be paid to the Employee in a single lump-sum payment no later than March 15 following the end of the applicable calendar year in which the Performance Bonus was earned, subject to all applicable tax withholdings and deductions.
(iv) Discretionary Awards. Notwithstanding the foregoing, the Compensation Committee and the Board of Directors retain the right, in their sole discretion, to award additional compensation to the Employee for outstanding performance or achievement beyond the Performance Metrics.”
3. Amendment to Appendix A
Appendix A to the Agreement (Bonus Targets and Performance Goals) is hereby amended to provide that, commencing with the calendar year beginning January 1, 2026, the annual Performance Bonus shall be twenty percent (20%) of the Employee’s Base Salary, subject to the attainment of Performance Metrics mutually agreed upon in writing by the Employee and the Chief Executive Officer of the Company in accordance with Section 4(b), as amended herein. All other provisions of Appendix A not inconsistent with this Amendment remain in full force and effect.
4. Ratification of Agreement
Except as expressly amended or modified by this Amendment, the Agreement shall remain unchanged and in full force and effect. In the event of any conflict between this Amendment and the Agreement, the terms of this Amendment shall govern and control.
5. Entire Agreement
This Amendment, together with the Agreement, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, and understandings with respect to such subject matter.
6. Counterparts
This Amendment may be executed in one or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument. Electronic signatures shall be deemed valid and binding to the same extent as original signatures.
7. Governing Law
This Amendment shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to its conflicts of law principles, consistent with Section 14(j) of the Agreement.
IN WITNESS WHEREOF, the parties have executed this First Amendment to Employment Agreement as of the date first written above.
| OFF THE HOOK YS, INC. | EMPLOYEE | |||
| By: | /s/ Brian S. John | By: | /s/ Chad Corbin | |
| Name: | Brian S. John | Name: | Chad Corbin | |
| Title: | Chief Executive Officer | Title: | Chief Financial Officer | |
| Date: | 4/6/2026 | Date: | 4/6/2026 | |
Exhibit 10.2
Schedules and Exhibits
Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
EQUITY INTEREST PURCHASE AGREEMENT
This Equity Interest Purchase Agreement (this “Agreement”) is entered into as of February 27, 2026 (the “Effective Date”), by and among (i) Off The Hook YS, Inc., a Nevada corporation (“Buyer” or “OTH”), (ii) the parties listed on Schedule N attached hereto (each a “Seller” and collectively, “Sellers”), and (iii) Joshua Roberts (“Roberts”), solely in his capacity as the holder of one hundred percent (100%) of the shares of capital stock of Specialized Mechanical Services, Inc., a North Carolina corporation (“SMS NC”) (the “SMS NC Shares”), and solely for purposes of effecting the SMS NC Stock Transfer and fulfilling the obligations expressly applicable to Roberts under this Agreement, and (iv) Bellhart Marine Group, LLC, a North Carolina limited liability company, Bellhart Marine Services, LLC, a North Carolina limited liability company, Specialized Mechanical Services, LLC, a South Carolina limited liability company (each a “Company” and collectively, the “Companies”). Buyer and Sellers, the Companies, and Roberts sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Sellers collectively own, or will acquire prior to Closing, one hundred percent (100%) of the issued and outstanding Equity Interests of each of the following limited liability companies (collectively, the “Companies”):
Bellhart Marine Group, LLC, a North Carolina limited liability company;
Bellhart Marine Services, LLC, a North Carolina limited liability company; and
Specialized Mechanical Services, LLC, a South Carolina limited liability company;
WHEREAS, the Companies collectively engage in a marine sales and service, boat dealership business, including dealer and manufacturer relationships, inventory, equipment, intellectual property, contracts, customer and vendor relationships, goodwill, trade names, phone numbers, and related systems and data (the “Business”);
WHEREAS, Joshua Roberts (“Roberts”) is the sole legal and beneficial owner of one hundred percent (100%) of the issued and outstanding shares of capital stock of Specialized Mechanical Services, Inc., a North Carolina corporation (“SMS NC”) (the “SMS NC Shares”);
WHEREAS, the Parties desire that (i) prior to Closing, Roberts shall transfer the SMS NC Shares to Specialized Mechanical Services, LLC, a South Carolina limited liability company (“SMS SC”), and/or one or more Sellers, and (ii) at Closing, SMS SC and/or such Seller(s) shall transfer the SMS NC Shares to Buyer, in each case in accordance with this Agreement (the “SMS NC Stock Transfer”);”
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WHEREAS, the Parties acknowledge and agree that (a) SMS NC is not owned by Sellers as of the date hereof, (b) Sellers shall have no obligation to convey, and shall make no representation or warranty with respect to, title to the SMS NC Shares unless and until such SMS NC Shares have been transferred to SMS SC and/or one or more Sellers prior to Closing in accordance with this Agreement, (c) immediately prior to Closing, SMS SC and/or one or more Sellers shall be the sole legal and beneficial owner(s) of the SMS NC Shares, free and clear of all Liens (other than Liens expressly permitted by this Agreement), and (d) at Closing, the SMS NC Shares shall be transferred to Buyer as part of the Purchased Interests, free and clear of all Liens, together with all rights, privileges, and appurtenances thereto;
WHEREAS, Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer, all of Sellers’ respective right, title, and interest in and to the Purchased Interests, including (i) one hundred percent (100%) of the Equity Interests of the Companies and (ii) the SMS NC Shares, in each case on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Parties acknowledge that SMS NC has historically held certain dealer and manufacturer relationships (including Volvo Penta), and that the SMS NC Stock Transfer and the transactions contemplated hereby are intended to preserve continuity of such relationships for the benefit of the Business following Closing;
WHEREAS, the Parties desire that this Agreement constitute a binding and definitive agreement with respect to the transactions contemplated hereby, with Closing targeted to occur thirty (30) days after the Effective Date, subject to the terms and conditions set forth herein, including completion of due diligence and audits;
WHEREAS, a substantial portion of the Purchase Price is being paid in consideration of the transfer of the goodwill of the Companies, including their customer relationships, confidential information, trade name, and ongoing business operations; and
WHEREAS, as a material inducement to Buyer to enter into this Agreement and pay the Purchase Price, the Sellers and the Applicable Parties have agreed to the restrictive covenants set forth in Article IX, which are intended to protect the goodwill and other legitimate business interests being acquired by Buyer;
NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the Parties agree as follows:
ARTICLE I
DEFINITIONS; PURCHASE AND SALE
1.01 Definitions. Capitalized terms used herein have the meanings set forth below or elsewhere in this Agreement.
(a) “Company” means each of the Companies individually.
(b) “Companies” means all of the Companies collectively.
(c) “Business” means the marine sales and service, boat dealership, parts, warranty, repair, and related operations conducted by the Companies, including without limitation dealer and manufacturer relationships (including Volvo Penta), inventory, equipment, intellectual property, contracts, customer and vendor relationships, goodwill, trade names, phone numbers, and related systems and data.
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(d) “Equity Interests” means, with respect to any Person, (i) in the case of a limited liability company, all membership interests, limited liability company interests, units, and other equity or ownership interests of any nature in such limited liability company (including any capital interests and profit interests), and (ii) in the case of a corporation, all shares of capital stock (whether common or preferred) and any other equity securities of such corporation, in each case together with any and all rights, privileges, and appurtenances associated therewith.
(e) “Purchased Interests” means (i) all of Sellers’ right, title, and interest in and to one hundred percent (100%) of the Equity Interests of each Company and (ii) all of Sellers’ right, title, and interest in and to one hundred percent (100%) of the SMS NC Shares, in each case as owned by Sellers as of Closing, together with all rights and benefits associated therewith.
(f) “Purchase Price” has the meaning set forth in Section 1.03.
(g) “Assumed Debt” means the indebtedness, if any, secured by or relating to the Included Assets that Buyer agrees to assume at Closing, as set forth on Schedule D.
(h) “Included Assets” means the assets and intangible property of the Companies intended to be included in the transaction as set forth in Section 1.06.
(i) “Due Diligence Period” means the thirty (30) day period commencing upon the first business day following execution of this Agreement or such other start date as the Parties agree in writing.
(j) “SMS Payable” means the outstanding balance of approximately US $180,000 owed to Joshua Roberts for monies due under the SMS APA. This obligation shall be included in the Assumed Debt that Buyer agrees to assume at closing.
(k) “Closing” and “Closing Date” have the meanings set forth in Article II.
(l) “Governmental Authority” means any federal, state, local, or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision thereof, or any arbitrator, court, or tribunal of competent jurisdiction.
(m) “Seller” or “Sellers” means the Members listed on Schedule N, each of whom is selling to Buyer such Seller’s Equity Interests in the Companies pursuant to this Agreement, and, solely to the extent the SMS NC Shares have been transferred to such Person prior to Closing in accordance with this Agreement, such Seller’s right, title, and interest in the SMS NC Shares as of Closing.
(n) “Applicable Parties” means each Seller who, as of immediately prior to Closing, owns more than ten percent (10%) of the Equity Interests of any of the Companies, and each of such Seller’s Affiliates.
(o) “Schedules and Exhibits” means the Schedules and Exhibits attached to this Agreement as Schedules A-O and the Exhibits attached to this Agreement, each of which is incorporated herein by this reference.
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(p) “Code” means the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, and any successor statute thereto, in each case as in effect from time to time.
(q) “Liens” means any lien, pledge, security interest, encumbrance, claim, mortgage, charge, restriction, or other adverse rights or interest of any kind.
(r) “SMS SC” means Specialized Mechanical Services, LLC, a South Carolina limited liability company.
(s) “SMS NC” means Specialized Mechanical Services, Inc., a North Carolina corporation.
(t) “SMS APA” means that certain Asset Purchase Agreement dated September 30, 2024, by and between SMS NC and SMS SC.
(u) “SMS Vehicles” means the vehicles described in Section 3(a)(i) through (viii) of the SMS
APA.
(v) “Roberts” means Joshua Roberts, solely in his capacity as the holder of the SMS NC Shares and solely for purposes of effecting the SMS NC Stock Transfer and fulfilling the obligations expressly applicable to him under this Agreement.
(w) “Roberts Estoppel” means an estoppel certificate executed by Joshua Roberts, in form and substance reasonably satisfactory to Buyer, confirming that (i) the SMS APA is valid, binding, and in full force and effect; (ii) the outstanding principal balance, accrued interest, and any other amounts due and owing under the SMS APA as of a specified date; (iii) no default or event of default exists under the SMS APA (or, if any exists, describing the same in reasonable detail); (iv) no notice of default has been delivered and no cure period is running; (v) no offsets, defenses, counterclaims, or other claims are asserted against SMS SC under or relating to the SMS APA; and (vi) to the extent applicable, Joshua Roberts acknowledges and does not object to the transactions contemplated by this Agreement.
(x) “SMS NC Shares” means one hundred percent (100%) of the issued and outstanding shares of capital stock of Specialized Mechanical Services, Inc., a North Carolina corporation, as of the Closing Date, together with all rights, privileges, and appurtenances thereto.
(y) “SMS NC Stock Transfer” means (i) the transfer of record and beneficial ownership of one hundred percent (100%) of the SMS NC Shares from Roberts to SMS SC and/or one or more Sellers prior to Closing, and (ii) the transfer of record and beneficial ownership of one hundred percent (100%) of the SMS NC Shares from SMS SC and/or such Seller(s) to Buyer at Closing, in each case as required pursuant to this Agreement.
(z) “Roberts Stock Transfer Documents” means collectively (i) one or more stock assignment agreements, stock powers, endorsements, affidavits of lost certificates (if applicable), and other instruments of transfer executed by Joshua Roberts transferring the SMS NC Shares, (ii) any required shareholder consents, corporate resolutions, reinstatement documents, and updated stock ledger or corporate records of SMS NC reflecting such transfer, and (iii) such other documentation reasonably requested by Buyer to evidence valid transfer and ownership of the SMS NC Shares free and clear of all Liens.
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(aa) “Members” means, with respect to any Company, the Persons who are members of such Company immediately prior to Closing.
(bb) “Managers” means, with respect to any Company, the Persons serving as managers (or in any similar managing capacity) of such Company immediately prior to Closing.
(cc) “Confidential Information” means all non-public, proprietary, or confidential information of or concerning the Companies, the Business, or the transactions contemplated by this Agreement, whether disclosed before, on, or after the Closing Date, and whether in oral, written, electronic, or other form, including without limitation:
(i) customer lists, customer data, prospective customer information, vendor and supplier information, pricing information, sales data, marketing plans, business strategies, financial statements, projections, budgets, and cost information;
(ii) trade secrets, know-how, technical information, processes, procedures, methods, software, intellectual property, and operational data;
(iii) employee and compensation information;
(iv) information relating to the negotiation, terms, structure, or existence of this Agreement and the transactions contemplated hereby; and
(v) any analyses, compilations, studies, summaries, notes, or other materials derived from or containing such information.
Notwithstanding the foregoing, Confidential Information does not include information that:
(i) is or becomes publicly available other than as a result of a breach of this Agreement;
(ii) is received from a third party not under a duty of confidentiality; or
(iii) was independently developed without use of or reference to Confidential Information.
For the avoidance of doubt, Confidential Information includes information constituting a “trade secret” under applicable law, and the Parties acknowledge that trade secrets shall receive protection for so long as they qualify as trade secrets under applicable law.
(dd) “Fundamental Representations” means, collectively, the representations and warranties set forth in Sections 3.01(a) (Organization; Authority), 3.01(b) (Title to Purchased Interests), 3.01(c) (No Conflicts; Consents), 3.01(i) (Indebtedness; Liens), 3.01(j) (Absence of Undisclosed Liabilities), 3.01(k) (Taxes; Tax Liens; Tax Debt), 3.01(l) (Litigation; Claims; Investigations), 3.02 (No Misstatements; Full Disclosure), and 3.04 (Representations of Roberts), and the covenants in Article VIII (Tax Matters) and Section 1.04 (Payoffs at Closing; Liens; Taxes), in each case as may be modified by the Schedules.
1.02 Purchase and Sale of Purchased Interests. Subject to the terms and conditions of this Agreement, at the Closing, Sellers shall sell, transfer, assign, and convey to Buyer, and Buyer shall purchase from Sellers, all of Sellers’ right, title, and interest in and to the Purchased Interests, including, without limitation, the SMS NC Shares as owned by Sellers as of Closing, free and clear of all Liens, pledges, security interests, and claims, other than Liens disclosed on Schedule B.
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1.03 Purchase Price; Consideration. The aggregate purchase price for the Purchased Interests is Seven Hundred Fifty Thousand Dollars ($750,000.00) (the “Purchase Price”), payable at Closing as follows:
(a) Cash Consideration. An amount in cash equal to (i) the Purchase Price minus (ii) the Assumed Debt agreed set and forth on Schedule D, by wire transfer in immediately available funds to the account(s) designated in writing by Sellers.
(b) Assumption of Debt. Buyer shall assume (or, if required by the applicable lender, refinance or cause to be refinanced) the Assumed Debt set forth on Schedules A - D, subject to lender consent and documentation. The Parties acknowledge that the Assumed Debt is consideration for the purchase, but is in addition to the $750,000, and not netted out therefrom.
(c) No Other Consideration. Except as expressly set forth in this Section 1.03 (and any separate written agreement addressing the SMS Payable), no other amounts shall be due by Buyer to Sellers in connection with the transactions contemplated hereby.
For the avoidance of doubt, the Purchase Price includes the acquisition of the SMS NC Shares, and no additional consideration shall be payable in connection with the SMS NC Stock Transfer.
1.04 Payoffs at Closing; Liens; Taxes. Other than the Assumed Debt, Sellers shall be solely responsible for satisfying and paying in full all tax liabilities, tax liens, penalties, and interest of the Companies and/or Sellers (including, without limitation, approximately US $450,000.00 in outstanding tax obligations), and for paying off and clearing all other liens affecting the Purchased Interests or the Included Assets, prior to or at Closing, except (i) Assumed Debt, (ii) Liens securing the Assumed Debt and (iii) the SMS Payable. Buyer shall pay off or refinance the Assumed Debt within ten (10) days of Closing.
1.05 Included Assets.
(a) The transaction contemplated hereby is a purchase of the Purchased Interests; however, the Parties acknowledge that, for purposes of diligence and the definitive transaction documentation, the business assets intended to be included (the “Included Assets”) include, without limitation: (i) trucks, vehicles, trailers and related equipment; (ii) cash; (iii) shop tools, equipment, machinery, lifts, and shop improvements (to the extent transferable); (iv) all parts inventory, supplies, consumables, and service-related inventory on hand; (v) customer lists, vendor relationships, goodwill, trade names, phone numbers, and other intangible business assets used in the Business; and (vi) any other tangible personal property used in the operations of the Business, in each case as further described. For the avoidance of doubt, all assets of the Companies are being acquired indirectly through the purchase of the Purchased Interests. The Included Assets concept is for diligence/transition clarity only and does not convert the transaction into an asset sale.
(b) Included Assets Inventory. Within five (5) business days after the Effective Date, Sellers shall deliver to Buyer a true, correct, and complete inventory and schedule of the Included Assets (the “Included Assets Inventory”), itemized in reasonable detail and including, to the extent applicable: (i) all vehicles, trailers, trucks and other titled assets (including VIN/serial numbers);
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(ii) all machinery, shop equipment, lifts, tools and other material fixed or non-fixed equipment (including serial numbers where available); (iii) all parts, supplies, consumables and other service inventory (with quantities and book value and/or physical count detail); (iv) all intangible assets and rights used in the Business (including trade names, phone numbers, URLs/domains, websites, social media accounts, and material systems and data); and (v) such other categories of property reasonably requested by Buyer for diligence, closing deliverables, lender requirements, or post-Closing transition.
(c) Schedule and Updating. The Included Assets Inventory shall be attached to this Agreement as Schedule O “Included Assets Inventory” and shall be updated by Sellers not less than five (5) business days prior to Closing to reflect changes in the ordinary course of business consistent with this Agreement. The Included Assets Inventory, as so updated, shall be subject to Buyer’s reasonable approval, and for purposes of this Agreement the “Included Assets” shall mean the assets set forth on Schedule O, as updated and approved.
1.06 Excluded Liabilities. Buyer shall not assume any liabilities, debts, obligations, or commitments of Sellers or the Companies of any kind, whether accrued, contingent, absolute, determined, determinable, known, or unknown, other than (a) the Assumed Debt expressly identified on Schedule D and (b) any liabilities expressly agreed in writing by Buyer.
1.07 SMS Payable. Buyer acknowledges the existence of the SMS Payable and agrees that the SMS Payable shall be included in the Assumed Debt that Buyer agrees to assume at closing and addressed under Section 1.04.
ARTICLE II
CLOSING
2.01 Closing. The Closing of the transactions contemplated by this Agreement (the “Closing”) shall occur the first business day that is thirty (30) days after the Effective Date (the “Closing Date”), subject to satisfaction or waiver of the conditions set forth in Article V, including Buyer’s completion of due diligence and audits (financial, inventory and otherwise). The Closing may be conducted remotely by exchange of executed documents and electronic delivery of funds unless the Parties agree otherwise.
2.02 Deliverables by Sellers. At or prior to Closing, Sellers shall deliver, or cause to be delivered, the following (as applicable):
(a) Certificates evidencing the Purchased Interests, free and clear of all Liens, together with executed assignments of the Purchased Interests and any other instruments of transfer reasonably required by Buyer to effect the transfer of the Purchased Interests to Buyer at Closing.
(b) A certificate executed by each Seller confirming (i) such Seller’s authority and capacity to execute and deliver this Agreement and the other Transaction Documents to which such Seller is a party, and (ii) that this Agreement constitutes a valid and binding obligation of such Seller, enforceable against such Seller in accordance with its terms.
(c) Resignations of the Members and Managers of the limited liability companies, effective as of the Closing Date.
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(d) A good standing certificate for each of the Companies from the secretary of state or similar Governmental Authority of the jurisdiction in which the Companies are organized and each jurisdiction where the Companies are required to be qualified, registered, or authorized to do business.
(e) A certificate pursuant to Treasury Regulations Section 1.1445-2(b) that each Seller is not a foreign person within the meaning of Section 1445 of the Internal Revenue Code of 1986 (as amended, the “Code”).
(f) Updated capitalization tables and equity registers for each Company in form prepared by Sellers;
(g) Written consents and/or resolutions of the Companies authorizing the execution and delivery of this Agreement and the Transaction Documents and certifying the authority of the signatory(ies) executing the same on behalf of each Company.
(h) Payoff letters and evidence reasonably satisfactory to Buyer that all indebtedness, Liens, and obligations required to be satisfied pursuant to Section 1.04 have been paid in full or will be paid at Closing, together with customary lien release documentation (including UCC termination statements, as applicable), other than Liens securing the Assumed Debt and the SMS Payable;
(i) Evidence of control/transfer arrangements for Company-owned domains, websites, URLs, phone numbers, email accounts, social media accounts, and any other systems and data used in the Business to the extent transferable on Schedule G;
(j) Such third-party consents, approvals or confirmations as are obtained pursuant to Section 4.05; and
(k) Such other documents as Buyer may request to consummate the transactions contemplated hereby.
(l) SMS Vehicle Documentation. Evidence satisfactory to Buyer that all SMS Vehicles included in this Agreement are duly registered and titled in the name of Specialized Mechanical Services, Inc., a North Carolina corporation, and/or Bellhart Marine Services, LLC, a North Carolina limited liability company. With respect to any SMS Vehicles that are not subject to any lien, security interest, or financing arrangement, Sellers shall deliver to Buyer at Closing the original certificates of title, duly endorsed for transfer, or such other instruments of transfer reasonably acceptable to Buyer. Sellers shall also deliver evidence satisfactory to Buyer that all Liens affecting the SMS Vehicles (other than Liens expressly approved in writing by Buyer) have been or will be released at or prior to Closing, together with customary lien release documentation. At Closing, Sellers shall certify that no SMS Vehicles are titled or registered in the name of any Person other than Specialized Mechanical Services, Inc. or Bellhart Marine Services, LLC.
(m) Joshua Roberts Estoppel. An executed estoppel certificate from Joshua Roberts, in form and substance satisfactory to Buyer (the “Roberts Estoppel”), confirming: (i) the SMS APA is in full force and effect; (ii) the execution, delivery, and performance of the SMS APA have not been modified except as disclosed in writing to Buyer; (iii) the outstanding principal balance, accrued interest, and any other amounts due and owing under the SMS APA as of a stated date; (iv) whether any defaults or events of default exist (and if so, describing them); (v) that no notice of default has been delivered and no cure period is running; (vi) that Roberts has no claims, offsets, or defenses against SMS SC or any other Person under or relating to the SMS APA; and (vii) that Roberts acknowledges and consents to the transfer of the SMS APA assets and related rights as contemplated by this Agreement.
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(n) Roberts Stock Transfer Documents (Pre-Closing Transfer). The Roberts Stock Transfer Documents duly executed by Roberts effecting the transfer of one hundred percent (100%) of the SMS NC Shares to SMS SC and/or one or more Sellers prior to Closing.
(o) Evidence of Seller Ownership of SMS NC Shares. Evidence satisfactory to Buyer that, prior to Closing, SMS SC and/or one or more Sellers is the sole legal and beneficial owner of one hundred percent (100%) of the SMS NC Shares, including an updated stock ledger of SMS NC reflecting the pre-Closing transfer of the SMS NC Shares from Roberts to SMS SC and/or such Seller(s).
(p) Transfer of SMS NC Shares to Buyer. At Closing, the stock certificate(s) representing the SMS NC Shares or, if the SMS NC Shares are uncertificated, an executed stock assignment and updated stock ledger of SMS NC reflecting Buyer as the sole legal and beneficial owner of one hundred percent (100%) of the SMS NC Shares, together with such corporate resolutions and instruments of transfer as Buyer may reasonably request, transferring the SMS NC Shares to Buyer free and clear of all Liens.
(q) SMS NC Corporate and Transfer Documentation (Seller Deliverables). All corporate resolutions, shareholder consents (other than those executed by Roberts), reinstatement filings, updated stock ledger entries reflecting Buyer’s ownership of the SMS NC Shares as of Closing (or delivered into escrow at Closing for release upon Closing), and other corporate records or documentation of SMS NC and/or SMS SC necessary to evidence completion of the SMS NC Stock Transfer and the valid transfer of the SMS NC Shares to Buyer at Closing, in form and substance reasonably satisfactory to Buyer.
(r) Certificated or Uncertificated Shares. For purposes of this Agreement, the SMS NC Shares may be certificated or uncertificated. At Closing, Sellers shall deliver to Buyer all instruments and evidence of transfer reasonably requested by Buyer to effectuate and evidence the transfer of the SMS NC Shares to Buyer, including (i) the original stock certificate(s) representing the SMS NC Shares together with duly executed stock powers, (ii) if the SMS NC Shares are uncertificated, a duly executed stock assignment and an updated stock ledger of SMS NC reflecting Buyer as the sole legal and beneficial owner of one hundred percent (100%) of the SMS NC Shares, and (iii) such corporate resolutions, consents, and related records as are reasonably necessary to reflect such transfer on the books and records of SMS NC.
2.03 Buyer Deliverables. At Closing, Buyer shall deliver (or cause to be delivered) to Sellers the following:
(a) the Cash Payment, by wire transfer of immediately available funds to the accounts designated in writing by Sellers;
(b) documentation evidencing Buyer’s assumption or refinancing of the Assumed Debt (to the extent applicable), including lender consents and related agreements, in form reasonably satisfactory to the applicable lender and the Parties;
(c) such other instruments and documents as may be reasonably required to consummate the transactions contemplated hereby.
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2.04 Adjustments to the Purchase Price. The Parties agree that cash or cash equivalents on hand on the Closing Date shall belong to Sellers except for deposits in escrow on sold boats as to which the sales have not closed. Further, all accounts receivable of the Companies not collected as of the Closing Date belong to Sellers. Sellers shall be responsible for payment of all accounts payable of the Companies not paid by the Closing Date but not for any accounts payable arising from transactions occurring on or after the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Representations and Warranties of Sellers. Sellers and the Companies, jointly and severally represent and warrant to Buyer as of the Effective Date and as of the Closing Date as follows, except as set forth in the disclosure schedules:
(a) Organization; Authority. Each Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of formation and has full power and authority to enter into and perform this Agreement.
(b) Title to Purchased Interests. As of the Closing Date, each Seller will own of record and beneficially, and have good and valid title to, all of the Purchased Interests to be conveyed by such Seller at Closing, free and clear of all Liens other than Permitted Liens expressly approved in writing by Buyer, or disclosed herein. At Closing, Sellers shall transfer to Buyer good, valid, and marketable title to the Purchased Interests, free and clear of all Liens other than Permitted Liens expressly approved in writing by Buyer.
Without limiting the foregoing, Sellers represent and warrant that, immediately prior to Closing, SMS SC and/or one or more Sellers shall be the sole legal and beneficial owner(s) of one hundred percent (100%) of the SMS NC Shares, free and clear of all Liens (other than Permitted Liens expressly approved in writing by Buyer), and that at Closing Buyer shall acquire good, valid, and marketable title to the SMS NC Shares, free and clear of all Liens (other than Permitted Liens expressly approved in writing by Buyer).
Notwithstanding the foregoing, Sellers make no representation or warranty in this Section 3.01(b) with respect to the SMS NC Shares prior to the completion of the pre-Closing transfer of the SMS NC Shares contemplated by this Agreement; provided, however, that Sellers shall be responsible for ensuring that such pre-Closing transfer is validly completed in accordance with this Agreement and that the SMS NC Shares are owned by SMS SC and/or one or more Sellers immediately prior to Closing as required herein.
(c) No Conflicts; Consents. The execution, delivery and performance of this Agreement do not violate the Companies’ organizational documents, applicable law, or material contracts, except as disclosed. Required consents for change of control/transfer are listed on Schedule C.
(d) Financial Information. The Companies have provided Buyer with true and complete financial information made available during diligence, subject to customary limitations and the absence of audit unless expressly stated.
(e) Inventory. The Companies own the inventory reflected on its books and records, including (without limitation) new boat inventory, used boats, parts and accessories, shop supplies, and any other service-related inventory on hand, subject to normal obsolescence and used condition. Inventory schedules are listed on Schedule F.
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(f) Material Contracts; Manufacturer/Brand Agreements. Schedule H lists all material contracts, including all manufacturers, dealer, warranty, and brand agreements and authorizations. Each is valid and in full force and effect, and no notice of termination or default has been received, except as disclosed on Schedule H.
(g) Intellectual Property and Name. The Companies own or have valid rights to use the BELLHART Marine name and derivatives, trademarks, logos, websites, domain names and other intellectual property used in the Business as listed on Schedule G.
(h) Systems and Data. The Companies use business systems and data necessary to operate the Business as listed on Schedule G, and the Companies control such accounts and data or have the right to transfer/transition them in compliance with applicable law and contractual requirements.
(i) Indebtedness; Liens. All indebtedness and Liens of the Companies that will remain outstanding after Closing (including the Assumed Debt, if any) are disclosed on Schedules A - D. All other liens will be paid and released by Sellers as set forth in Section 1.04, except the SMS Payable which is addressed separately.
(j) Absence of Undisclosed Liabilities. Except as set forth on Schedules D and E, the Companies have no liabilities of any kind, whether accrued, contingent, absolute, determined, determinable, known, or unknown, other than liabilities incurred in the ordinary course consistent with past practice since the date of the most recent financials provided to Buyer.
(k) Taxes; Tax Liens; Tax Debt. (a) Each Company has timely filed all material federal, state, local, and foreign tax returns required to be filed and have paid all taxes due and owing. (b) There are no tax liens, assessments, or claims for taxes against the Companies, their assets, or the Equity Interests, except as set forth on Schedules E and I that will be satisfied and paid in full prior to or at Closing, including the tax obligations described in Section 1.04.
(l) Litigation; Claims; Investigations. (a) Except as fully disclosed on Schedule J, there is no action, suit, arbitration, inquiry, or proceeding pending or, to the Companies’ or Sellers’ knowledge, threatened against the Companies, the Business, or Sellers relating to the Business. (b) Schedule J also discloses all claims (written or oral), demand letters, warranty disputes, governmental investigations, administrative proceedings, judgments, consent decrees, settlements, and circumstances that could reasonably be expected to give rise to a claim. (c) Sellers have delivered to Buyer all pleadings, correspondence, and settlement communications in their possession relating to any such matters.
(m) Compliance with Laws; Permits; Violations. To each respective Seller’s knowledge, each Company is in compliance in all material respects with applicable laws, including licensing and permitting requirements, except as disclosed on Schedule M.
(n) SMS APA. SMS SC represents and warrants that (i) it is the purchaser under the SMS APA, (ii) the SMS APA is valid and in full force and effect, (iii) no default exists thereunder, and (iv) all payments required thereunder are current, and (v) except as disclosed, all assets purportedly transferred pursuant to the SMS APA are in the lawful possession of SMS SC. Sellers acknowledge that certain assets, including the SMS Vehicles, have not yet had legal title transferred into SMS SC.
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3.02 No Misstatements; Full Disclosure. No representation or warranty contained in this Agreement, and no information provided by Sellers or the Companies to Buyer in connection with the transactions contemplated hereby, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made not misleading in light of the circumstances in which they were made. Sellers and the Companies acknowledge Buyer is relying on the completeness of disclosure regarding taxes, indebtedness, liens, litigation, and claims.
3.03 Representations and Warranties of Buyer. Buyer represents and warrants to Sellers as of the Effective Date and as of the Closing Date that: (a) Buyer is duly organized and validly existing under the laws of the jurisdiction of its formation; (b) Buyer has full power and authority to enter into and perform this Agreement; (c) this Agreement constitutes a legal, valid and binding obligation of Buyer; and (d) Buyer has sufficient funds to pay the Purchase Price at Closing, subject to the terms of this Agreement.
3.04 Representations of Roberts. Roberts represents and warrants to Buyer, as of the Effective Date and as of the Closing Date, that he is the sole legal and beneficial owner of one hundred percent (100%) of the issued and outstanding SMS NC Shares, free and clear of all Liens, and that he has full legal right, power, and authority to execute and deliver this Agreement and the Roberts Stock Transfer Documents and to consummate the SMS NC Stock Transfer contemplated hereby, and that upon delivery of the Roberts Stock Transfer Documents at Closing, Buyer will acquire good and valid title to the SMS NC Shares, free and clear of all Liens. The SMS NC Shares constitute all issued and outstanding shares of SMS NC and there are no outstanding options, warrants, convertible securities, or other rights to acquire equity in SMS NC.
ARTICLE IV
COVENANTS
4.01 Conduct of Business. From the Effective Date until Closing, Sellers shall cause the Companies to operate the Business in the ordinary course consistent with past practice, preserve relationships with customers and suppliers, maintain inventory and assets, and not, without Buyer’s prior written consent, (a) incur material indebtedness other than in the ordinary course,
(b) grant Liens, (c) make distributions or other transfers of value to equity holders outside the ordinary course, (d) sell or dispose of material assets outside the ordinary course, or (e) amend organizational documents in a manner adverse to Buyer.
4.02 Access; Due Diligence and Audits. Sellers with appropriate prior notice from Buyer shall provide Buyer and its representatives with reasonable access during normal business hours to facilities, personnel, books and records, inventory, floor plan statements, and systems as reasonably necessary to conduct due diligence and audits (financial, inventory and otherwise), subject to customary confidentiality and safety requirements. Notwithstanding the foregoing, without the express written consent of Sellers, Buyer shall not discuss the existence of this Agreement or the terms of the transactions reflected herein with any employee of or consultant to Sellers or to any other third party except Buyer’s legal counsel, accountants, and other third parties on an absolute need to know basis.
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4.03 Exclusivity. From the Effective Date until the earlier of Closing or termination of this Agreement, Sellers shall not, and shall cause the Companies and their representatives not to, solicit, initiate or enter into discussions with any third party regarding any sale of equity interests or material assets of any Companies or any similar transaction involving the Business, other than the transactions contemplated hereby.
4.04 No Leakage. Except as expressly disclosed on Schedule K or in the ordinary course consistent with past practice, Sellers shall not and shall cause the Companies not to declare or pay dividends, make distributions, pay management fees to related parties, or otherwise transfer value to Sellers or their affiliates prior to Closing.
4.05 Third-Party Consents; Manufacturer/Dealer Continuity. The Parties shall use commercially reasonable efforts to obtain all consents, approvals and confirmations required under material contracts and dealer/manufacturer agreements in connection with the transactions contemplated hereby, including any change-of-control consent. If any such agreement is not assignable or cannot continue after Closing, the Parties shall cooperate in good faith to seek to implement a lawful and commercially reasonable alternative arrangement intended to preserve the economic benefits for Buyer to the greatest extent practicable.
4.06 Transition Assistance. For a period of one-hundred twenty (120) days following Closing (or such other period as the Parties may agree), Sellers shall provide reasonable transition assistance to Buyer to facilitate continuity of operations, including orderly transfer of administrative control of Companies-owned domains, websites, phone numbers, customer/vendor lists, and other business systems and data.
4.07 SMS Vehicle Title Correction. Sellers shall ensure all SMS Vehicles included in this Agreement are duly registered and titled in the name of Specialized Mechanical Services, Inc., a North Carolina corporation, and/or Bellhart Marine Services, LLC, a North Carolina limited liability company. With respect to any SMS Vehicles that are not subject to any lien, security interest, or financing arrangement, Sellers shall deliver to Buyer at Closing the original certificates of title, duly endorsed for transfer, or such other instruments of transfer reasonably acceptable to Buyer. Sellers shall also deliver evidence satisfactory to Buyer that all Liens affecting the SMS Vehicles (other than Liens expressly approved in writing by Buyer) have been or will be released at or prior to Closing, together with customary lien release documentation. At Closing, Sellers shall certify that no SMS Vehicles are titled or registered in the name of any Person other than Specialized Mechanical Services, Inc. or Bellhart Marine Services, LLC.
4.08 Corrective Actions; Asset and Contract Confirmation. From and after the Effective Date through the Closing, SMS SC and Sellers shall take all steps reasonably necessary, and shall cooperate with Joshua Roberts, to prepare, execute, and deliver all documents and take all actions reasonably necessary to (a) effectuate the SMS NC Stock Transfer in accordance with this Agreement, and (b) confirm SMS NC’s good and marketable title to its assets and contract rights, including those relating to any dealer or manufacturer relationships (including Volvo Penta), in each case in form and substance reasonably satisfactory to Buyer.
Sellers shall deliver to Buyer, not later than five (5) business days prior to Closing, evidence of the actions taken pursuant to this Section 4.08 and copies of all material filings and documents related thereto.
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4.09 Roberts Estoppel Cooperation. From and after the Effective Date through the Closing, SMS SC and Sellers shall use commercially reasonable efforts to obtain and deliver to Buyer the Roberts Estoppel promptly upon request and in any event not later than five (5) business days prior to the Closing Date.
4.10 SMS NC Reinstatement. Prior to Closing, Sellers and SMS SC shall take all steps reasonably necessary to reinstate SMS NC to good standing with the North Carolina Secretary of State and shall maintain SMS NC in good standing through Closing. Sellers shall deliver to Buyer, not later than five (5) business days prior to Closing, evidence reasonably satisfactory to Buyer of such reinstatement and good standing.
4.11 Roberts Pre-Closing Transfer of SMS NC Shares. Roberts shall execute and deliver the Roberts Stock Transfer Documents and shall take all actions necessary to consummate the transfer of one hundred percent (100%) of the SMS NC Shares to SMS SC and/or one or more Sellers no later than five (5) business days prior to Closing.
If the SMS NC Shares are certificated, Roberts shall deliver the original stock certificate(s) representing the SMS NC Shares, together with duly executed stock powers or other instruments of transfer. If the SMS NC Shares are uncertificated, Roberts shall execute a written stock assignment and cause the stock ledger (or other official share register) of SMS NC to be updated to reflect SMS SC and/or such Seller(s) as the sole legal and beneficial owner(s) of one hundred percent (100%) of the SMS NC Shares.
Sellers and SMS SC shall cooperate with Roberts and shall take all actions reasonably requested by Buyer to facilitate such transfer, including board resolutions, shareholder consents, reinstatement filings, stock ledger updates, and other corporate documentation reasonably necessary to evidence completion of such transfer.
4.12 Seller Ownership of SMS NC Shares Prior to Closing. Sellers acknowledge that Roberts is the current owner of the SMS NC Shares. Sellers shall ensure that immediately prior to Closing, SMS SC and/or one or more Sellers is the sole legal and beneficial owner of one hundred percent (100%) of the SMS NC Shares, free and clear of all Liens (other than Liens approved in writing by Buyer). Sellers shall deliver to Buyer, not later than five (5) business days prior to Closing, the Roberts Stock Transfer Documents and such other evidence as Buyer may reasonably request to confirm completion of the pre-Closing transfer of the SMS NC Shares. If the SMS NC Shares are uncertificated, Roberts shall execute a written stock assignment and cause the stock ledger of SMS NC to be updated to reflect the transfer of the SMS NC Shares in accordance with Section 4.11.
4.13 Volvo Penta/OEM Cooperation and Deliverables. From and after the Effective Date through the Closing, Sellers, SMS SC, and Roberts (to the extent applicable) shall cooperate with Buyer in good faith to preserve and maintain the Volvo Relationship and any other material dealer, manufacturer, or OEM relationships of the Business. Without limiting the foregoing, Sellers and SMS SC shall: (a) deliver to Buyer true, complete, and correct copies of all agreements, amendments, and correspondence relating to the Volvo Relationship promptly upon request; (b) use commercially reasonable efforts to obtain any required consents, acknowledgments, or approvals from Volvo Penta or other applicable OEMs in connection with the transactions contemplated by this Agreement; and (c) take such actions as Buyer may reasonably request to facilitate transition or update of dealer account information (including entity name, ownership, and tax identification information) following Closing, provided that Sellers and SMS SC shall not be required to incur material out-of-pocket costs without Buyer’s prior written consent. The obligations under this Section shall survive the Closing to the extent necessary to effectuate the purposes hereof.
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4.14 Further Assurances; Transfer Perfection. From time to time after the Effective Date and following the Closing, each of Sellers and Roberts shall execute and deliver such additional documents, instruments, assignments, stock powers, certificates, resolutions, consents, and other writings, and shall take such further actions, as Buyer may reasonably request in order to (a) evidence, effectuate, and perfect the transfer of the Purchased Interests and the SMS NC Shares to Buyer, (b) update and correct corporate records and stock ledgers of SMS NC and the Companies to reflect Buyer’s ownership, (c) effectuate and record any required vehicle title transfers, lien releases, UCC terminations, or other filings with the North Carolina Division of Motor Vehicles or any other Governmental Authority, and (d) confirm or preserve the continuation of any dealer, manufacturer, or OEM relationships (including Volvo Penta) contemplated by this Agreement.
The obligations set forth in this Section shall survive the Closing and shall not be limited by the consummation of the transactions contemplated hereby.
ARTICLE V
CONDITIONS TO CLOSING
5.01 Conditions to Buyer’s Obligations. Buyer’s obligation to consummate the Closing is subject to satisfaction (or waiver by Buyer) of the following conditions:
(a) Due Diligence. Buyer has completed due diligence and audits to its satisfaction in its sole discretion.
(b) Accuracy of Representations; Performance. Sellers’ representations and warranties are true and correct in all material respects, and Sellers have performed all material covenants.
(c) Payoffs; Releases. Buyer has received payoff letters and evidence of arrangements to deliver releases of Liens and UCC terminations for the obligations to be released under Section 1.04.
(d) Consents. Buyer has received the material third-party consents/confirmations identified on Schedule C.
(e) No Material Adverse Effect. No event has occurred that has had or would reasonably be expected to have a material adverse effect on the Companies taken as a whole.
(f) No Termination or Threatened Termination. No termination or threatened termination of any material manufacturer/brand agreement as a result of the transactions contemplated hereby.
(g) Sellers’ Closing Deliverables. Sellers’ Closing Deliverables listed in Section 2.02 shall have been provided to the Buyer.
(h) Approval of Schedules and Exhibits. Buyer has approved in writing all Schedules and Exhibits to this Agreement.
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(i) Included Assets Inventory. Buyer has received the Included Assets Inventory (Schedule O), including the pre-Closing update and approved the same in writing.
(j) SMS SC Not in Default Under SMS APA. Buyer has received satisfactory evidence that SMS SC is not in default under the SMS APA and that no event exists which would permit rescission or repossession under the SMS APA.
(k) SMS Vehicle Title and Registration. Buyer shall have received evidence reasonably satisfactory to Buyer that all SMS Vehicles included in this Agreement are duly registered and titled in the name of Specialized Mechanical Services, Inc., a North Carolina corporation, and/or Bellhart Marine Services, LLC, a North Carolina limited liability company. With respect to any SMS Vehicles not subject to any lien, security interest, or financing arrangement, Buyer shall have received at Closing the original certificates of title, duly endorsed for transfer, or such other instruments of transfer reasonably acceptable to Buyer. Buyer shall also have received evidence reasonably satisfactory to Buyer that all Liens affecting the SMS Vehicles (other than Liens expressly approved in writing by Buyer) have been or will be released at or prior to Closing. At Closing, Sellers shall certify that no SMS Vehicles are titled or registered in the name of any Person or entity other than Specialized Mechanical Services, Inc. or Bellhart Marine Services, LLC.
(l) SMS APA; Chain of Title; Vehicle Carve-Out. Buyer shall have received evidence reasonably satisfactory to Buyer that (i) the SMS APA is in full force and effect and no default or event of default exists thereunder (other than as disclosed in writing to Buyer), and (ii) except for the SMS Vehicles and any other assets expressly subject to correction and transfer pursuant to Section 4.07, the assets purported to have been transferred to SMS SC under the SMS APA have been validly transferred to SMS SC and SMS SC has good and marketable title thereto, free and clear of all Liens other than Liens expressly approved in writing by Buyer.
(m) Roberts Estoppel. Buyer shall have received the Roberts Estoppel, duly executed and delivered by Joshua Roberts, and the same shall be in form and substance reasonably satisfactory to Buyer.
(n) SMS NC Reinstatement. Buyer shall have received evidence satisfactory to Buyer that SMS NC has been reinstated and is in good standing with the North Carolina Secretary of State.
(o) Roberts Pre-Closing Transfer of SMS NC Shares. Buyer shall have received evidence reasonably satisfactory to Buyer that, prior to Closing, Roberts has executed and delivered the Roberts Stock Transfer Documents and has taken all actions necessary to consummate the transfer of one hundred percent (100%) of the SMS NC Shares to SMS SC and/or one or more Sellers no later than five (5) business days prior to Closing (or such other date approved in writing by Buyer). Sellers and SMS SC shall have cooperated with Roberts and shall have taken all actions reasonably requested by Buyer to facilitate such transfer, including providing reinstatement filings and corporate records to the extent required. Buyer may require that the Roberts Stock Transfer Documents and related original stock instruments be delivered into escrow with the Closing agent to be released only upon Closing.
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(p) Delivery of SMS NC Shares to Buyer. At Closing, Buyer shall receive the SMS NC Shares (or stock powers and other instruments of transfer sufficient to transfer the SMS NC Shares to Buyer), free and clear of all Liens.
(q) Volvo Penta/OEM Relationship Continuity. Buyer shall have received, and shall be satisfied in its reasonable discretion with, evidence that the Volvo Penta dealer and/or parts purchasing relationship historically conducted through SMS NC and/or the SMS Business (the “Volvo Relationship”) will continue in full force and effect following the Closing without termination, suspension, material restriction, or loss of dealer pricing or purchasing rights as a result of the transactions contemplated by this Agreement. Such evidence may include, as applicable, (i) a copy of the Volvo dealer agreement and all amendments, (ii) written confirmation from Volvo Penta (or its authorized representative) acknowledging the transactions contemplated hereby and confirming continuity of the Volvo Relationship, and/or (iii) evidence that all required OEM consents have been obtained.
(r) SMS NC Title and Transfer Integrity. Buyer shall have received evidence reasonably satisfactory to Buyer that (i) the SMS NC Shares have been duly authorized, validly issued, and are outstanding, (ii) the chain of title to the SMS NC Shares from Joshua Roberts to SMS SC and/or the applicable Seller(s) has been validly completed in accordance with this Agreement, and (iii) Buyer will acquire at Closing good, valid, and marketable title to one hundred percent (100%) of the SMS NC Shares, free and clear of all Liens (other than Liens expressly permitted by this Agreement), together with all rights, privileges, and appurtenances thereto.
5.02 Conditions to Sellers’ Obligations. Sellers’ obligation to consummate the Closing is subject to satisfaction (or waiver by Sellers) of the following conditions:
(a) Accuracy of Buyer Representations. Buyer’s representations and warranties are true and correct in all material respects.
(b) Performance; Deliveries. Buyer has performed all material covenants and delivered the consideration required by Article I and all of Buyer’s deliverables required by Section 2.03.
(c) Financing/Authority. Buyer has taken all necessary corporate or other action to authorize the transactions contemplated hereby and to fund and pay the Purchase Price at Closing.
(d) Approval of Schedules and Exhibits. Buyer has approved in writing all Schedules and Exhibits to this Agreement.
ARTICLE VI
INDEMNIFICATION
6.01 Indemnification by Sellers. Subject to the other terms and conditions of this Article VI, except to the extent specifically disclosed in the schedules in a manner reasonably sufficient to identify the nature and scope of the matter disclosed by Sellers to Buyer (whether in a Schedule hereto or otherwise) each Seller (each, a “Seller Indemnitor”) shall, in proportion to such Seller’s percentage ownership of the Interests sold pursuant to this Agreement, indemnify, defend, and hold harmless Buyer and its Affiliates (including the Companies following Closing) and their respective Representatives (collectively, the “Buyer Indemnitees”) from and against, and shall pay and reimburse the Buyer Indemnitees for, any and all liabilities, obligations, claims, taxes, fines, deficiencies, demands, assessments, losses, damages, costs, and expenses (including reasonable attorneys’ fees and expenses and all court costs and costs of other corrective and remedial actions) (collectively, “Losses”) to the extent arising out of or resulting from: (a) any material inaccuracy in or breach of any material representation or warranty of Sellers contained in this Agreement or any other Transaction Document, or (b) any breach or non-fulfillment of any material covenant, agreement, or obligation of Sellers under this Agreement or any other Transaction Document.
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Notwithstanding any limitations set forth herein, Sellers shall indemnify, defend, and hold harmless the Buyer Indemnitees from and against any and all Losses arising out of or resulting from:
(i) any failure to consummate the SMS NC Stock Transfer in accordance with this Agreement, including any failure of Roberts, SMS SC, or any Seller to validly transfer the SMS NC Shares prior to or at Closing;
(ii) any defect in, or failure of, good and valid title to the SMS NC Shares, including any failure of Buyer to receive good, valid, and marketable title to one hundred percent (100%) of the SMS NC Shares, free and clear of all Liens (other than Liens expressly permitted by this Agreement);
(iii) any inaccuracy in or breach of the representations, warranties, covenants, or obligations relating to SMS NC, the SMS NC Shares, or the SMS NC Stock Transfer, including those set forth in Article III, Article IV, and Section 2.02;
(iv) any breach or default under the SMS APA or any failure of the transactions contemplated thereby to have been properly completed;
(v) any failure to properly transfer title to the SMS Vehicles;
(vi) any failure to properly reinstate SMS NC or maintain it in good standing through Closing; and
(vii) any failure to preserve or validly transfer any dealer, manufacturer, or OEM relationships (including Volvo Penta) to the extent such failure arises from or relates to SMS NC, the SMS NC Shares, or the SMS NC Stock Transfer.
For the avoidance of doubt, Sellers’ indemnification obligations under this Section 6.01 shall apply regardless of whether any failure or defect described herein arises from the acts or omissions of Roberts or any third party, and Sellers shall be responsible for ensuring the completion and validity of the SMS NC Stock Transfer.
6.02 Indemnification by Buyer. Buyer shall indemnify, defend, and hold harmless Sellers from and against any Losses arising out of or resulting from: (a) any material inaccuracy in or breach of any material representation or warranty of Buyer contained in this Agreement; (b) any breach or non-fulfillment of any covenant or agreement of Buyer contained in this Agreement; and (c) the Assumed Debt (if any) and any liabilities expressly assumed by Buyer pursuant to this Agreement. Notwithstanding anything to the contrary herein, Buyer’s aggregate liability for indemnification under this Section 6.02 shall not exceed the Purchase Price; provided, however, that Buyer shall not have any indemnification liability for (i) Taxes attributable to any Pre-Closing Tax Period, (ii) any Indebtedness or Liens of Sellers or the Companies not constituting Assumed Debt, (iii) any claims arising from Seller’s or the Companies’ breach of this Agreement, or (iv) any Excluded Liabilities.
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The representations and warranties of Buyer, and Buyer’s indemnification obligations under Section 6.02, shall survive for twenty-four (24) months following the Closing Date (except for claims involving fraud, which shall survive until the expiration of the applicable statute of limitations).
6.03 Survival; Limitations; Basket; Cap. For purposes of this Section 6.03 only, “Basket” means Twenty-Five Thousand Dollars ($25,000) and “Cap” means an amount equal to one hundred percent (100%) of the Purchase Price.
(a) Survival. The representations and warranties of the Parties shall survive Closing for a period of twenty-four (24) months, except (i) the Fundamental Representations and (ii) representations relating to Taxes, which shall survive until the expiration of the applicable statute of limitations, and (iii) claims based on fraud, intentional misrepresentation, or willful concealment, which shall survive indefinitely (or for the maximum period permitted by applicable Law).
(b) Basket (Deductible-Style). Except for claims (i) based on fraud, intentional misrepresentation, or willful concealment, (ii) arising from or relating to any breach of the Fundamental Representations, and (iii) arising from or relating to Taxes (including any breach of tax covenants or tax representations), the Sellers shall have no obligation to indemnify any Buyer Indemnitee under this Article VI unless and until the aggregate amount of Losses for which the Sellers would otherwise be liable exceeds the Basket, and then Sellers shall be liable for all such Losses from the first dollar (i.e., the Basket shall be a tipping basket). “Basket” means Twenty-Five Thousand Dollars ($25,000).
(c) Cap. Except for claims (i) based on fraud, intentional misrepresentation, or willful concealment, (ii) arising from or relating to any breach of the Fundamental Representations, and
(iii) arising from or relating to Taxes, the maximum aggregate liability of Sellers for indemnification under this Article VI shall not exceed the Cap. “Cap” means an amount equal to one hundred percent (100%) of the Purchase Price.
(d) No Limitations on Carve-Outs. For the avoidance of doubt, the Basket and Cap shall not apply to, and shall not limit, Sellers’ liability for (i) fraud, intentional misrepresentation, or willful concealment, (ii) breaches of the Fundamental Representations, or (iii) Taxes (including any tax liabilities, tax liens, and tax covenants), in each case to the fullest extent permitted by applicable Law.
(e) Special Matters. Notwithstanding anything to the contrary in this Agreement, the limitations set forth in this Section 6.03 shall not limit Sellers’ indemnification obligations expressly set forth in (i) through (vii) of Section 6.01 (SMS APA breach/default, SMS Vehicle title failures, and SMS NC reinstatement failures).
6.04 Limited Obligation of Roberts. Notwithstanding anything to the contrary contained in this Agreement, Joshua Roberts is a party to this Agreement solely for purposes of effecting the SMS NC Stock Transfer and fulfilling the obligations expressly applicable to Roberts under this Agreement. Roberts shall have no liability or indemnification obligation under this Article VI or otherwise with respect to the representations, warranties, covenants, or agreements of Sellers or the Companies, except to the extent arising from (i) his failure to execute and deliver the Roberts Stock Transfer Documents as required herein, (ii) a breach of any representation or covenant expressly made by Roberts in this Agreement, or (iii) fraud or intentional misrepresentation by Roberts.
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ARTICLE VII
TERMINATION
7.01 Termination. This Agreement may be terminated prior to Closing: (a) by mutual written agreement of the Parties; (b) by Buyer at any time during the Due Diligence Period in its sole discretion without penalty upon written notice to Sellers; (c) by either Party if the other Party materially breaches this Agreement and fails to cure such breach within five (5) days after written notice; or (d) by either Party if the Closing has not occurred on or prior to thirty (30) days from the Effective Date (the “Outside Date”), provided that the terminating Party is not in material breach; provided, that, the Outside Date may be extended by mutual written agreement of the Parties.
7.02 Effect of Termination. Upon termination, this Agreement shall be of no further force and effect, except that provisions that by their nature should survive (including confidentiality, governing law, venue, and liability for willful breach) shall survive termination.
ARTICLE VIII
TAX MATTERS
8.01 Tax Covenants.
(a) Without the prior written consent of Buyer, Sellers shall not, to the extent it may affect or relate to the Companies: (i) make, change, or rescind any Tax election; (ii) materially amend any Tax Return; (iii) take any position on any Tax Return; or (iv) take any action, omit to take any action, or enter into any other transaction that would have the effect of increasing the Tax liability or reducing any Tax asset of the Companies, in respect of any taxable period that begins after the Closing Date or, in respect of any taxable period that begins before and ends after the Closing Date (each such period, a “Straddle Period”), the portion of any Straddle Period beginning after the Closing Date, unless required under applicable Law.
(b) All applicable transfer, documentary, sales, use, stamp, registration, value added, and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement and the other Transaction Documents (“Transfer Taxes”) shall be borne and paid fifty percent (50%) by Sellers and fifty percent (50%) by Buyer when due. Sellers shall, at their own expense, timely file any Tax Return or other document with respect to such Transfer Taxes or fees (and Buyer shall cooperate with respect thereto and remit to Seller its portion (if any) of such Transfer Taxes as necessary).
(c) Sellers shall prepare and timely file, or cause to be prepared and timely filed, all Tax Returns of, or with respect to, the Companies or its assets for taxable periods that end on or before the Closing Date and that are required to be filed on or prior to the Closing Date (taking into account any extensions). All such Tax Returns shall be prepared in a manner consistent with past practice (unless otherwise required by applicable Law). Sellers shall be responsible for and pay all Taxes due and owing with respect to such Tax Returns or for which they are otherwise responsible to pay. Buyer shall prepare, or cause to be prepared, all Tax Returns required to be filed by the Companies after the Closing Date and all Straddle Period Tax Returns. Any such Tax Return shall be subject to Sellers’ reasonable written consent prior to filing and shall be prepared in a manner consistent with past practice (unless otherwise required by Law) and without a change of any election or any accounting method.
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8.02 Straddle Period. In the case of Taxes that are payable with respect to a Straddle Period, the portion of any such Taxes that are allocated to Pre-Closing Tax Periods for purposes of this Agreement shall be: (a) in the case of Taxes: (i) based upon, or related to, income, receipts, profits, wages, capital, or net worth; (ii) imposed in connection with the sale, transfer, or assignment of property; or (iii) required to be withheld, the amount of Taxes which would be payable if the taxable year ended with the Closing Date; and (b) in the case of other Taxes, the amount of such Taxes for the entire period multiplied by a fraction, the numerator of which is the number of days in the period ending on the Closing Date and the denominator of which is the number of days in the entire period.
8.03 Cooperation and Exchange of Information. Sellers and Buyer shall provide each other with such cooperation and information as either of them reasonably may request of the other in filing any Tax Return pursuant to this Article or in connection with any proceeding in respect of Taxes of the Companies, including providing copies of relevant Tax Returns filed by Buyer pursuant to this Agreement and accompanying documents. Each of Sellers and Buyer shall retain all Tax Returns and other documents in its possession relating to Tax matters of the Companies for any Pre-Closing Tax Period (collectively, “Tax Records”) until the expiration of the statute of limitations of the taxable periods to which such Tax Records relate.
ARTICLE IX
NON-COMPETITION; NON-SOLICITATION
9.01 Non-Competition; Non-Solicitation; Protection of Goodwill.
(a) Acknowledgment; Consideration; Goodwill. Each Applicable Party acknowledges and agrees that: (i) Buyer is acquiring the goodwill of the Companies and the going-concern value of the Business; (ii) the covenants in this Article IX are ancillary to the sale of the Equity Interests and goodwill and are a material inducement to Buyer to enter into this Agreement and pay the Purchase Price; and (iii) a substantial portion of the Purchase Price constitutes consideration for the transfer of goodwill and for the agreements set forth in this Article IX.
(b) Definitions. For purposes of this Article IX:
(i) “Restricted Business” means the business of boat sales or boat brokerage conducted by the Companies as of the Closing Date.
(ii) “Territory” means New Hanover County, North Carolina and the contiguous counties of Brunswick, and Pender, North Carolina.
(iii) “Restricted Period” means the period commencing on the Closing Date and ending on the date that is twenty-four (24) months after the Closing Date.
(c) Non-Competition (Independent Covenants / Step-Down). During the Restricted Period, each Applicable Party shall not, directly or indirectly, within the Territory, engage in or assist others in engaging in the Restricted Business; provided that the following are independent and severable covenants, each intended to be enforceable to the fullest extent permitted by applicable Law, and ordered from greatest to least restriction: If Terminated, non-compete is waived.
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(d) Non-Solicitation of Customers and Suppliers (Independent Covenants). During the Restricted Period, each Applicable Party shall not, directly or indirectly, (i) solicit for the purpose of providing a Restricted Business service, or divert, any customer or prospective customer of the Companies with whom the Companies had material business contact during the twelve (12) months prior to Closing, or (ii) intentionally interfere in any material respect with the business relationships between the Companies and their material suppliers or vendors; in each case within the Territory. The covenants in clauses (i) and (ii) are independent and severable.
(e) Non-Solicitation / Non-Hire of Employees (Independent Covenants). During the Restricted Period, each Applicable Party shall not, directly or indirectly, hire or solicit for employment any person who is an employee of the Companies as of the Closing Date or who was an employee of the Companies at any time during the twelve (12) months prior to the Closing Date; provided, however, that nothing in this Section 9.01(e) shall prohibit: (i) general solicitations not targeted specifically at such employees; (ii) hiring any employee terminated by the Companies; or (iii) hiring an employee more than one hundred eighty (180) days after such employee’s voluntary resignation.
(f) Passive Investment Exception. Notwithstanding the foregoing, an Applicable Party may own, solely as a passive investment, securities of any Person traded on a national securities exchange so long as such Applicable Party does not control such Person and does not beneficially own five percent (5%) or more of any class of voting securities of such Person.
(g) Injunctive Relief. Each Applicable Party acknowledges that a breach or threatened breach of this Article IX would cause irreparable harm for which monetary damages would be an inadequate remedy, and Buyer shall be entitled to seek temporary, preliminary, and permanent injunctive relief and specific performance, without the requirement to post bond, in addition to any other remedies available at law or in equity.
(h) Severability / Blue-Pencil Intent. The Parties intend that each covenant and each Tier set forth in Section 9.01(c) is a separate, independent covenant. If any covenant, geographic scope, activity restriction, or time period is determined to be invalid or unenforceable, such provision shall be severed to the minimum extent necessary so that the remaining covenants (and/or the next most limited Tier) may be enforced to the fullest extent permitted by law.
(i) Carve-Out. Notwithstanding anything to the contrary in this paragraph Article IX, none of the restrictive covenants in such Article shall apply to any Applicable Party who shall be terminated by the Buyer or any affiliate of Buyer, even if conducting a Restricted Business within the Restricted Area, within the Restricted Period.
9.02 Non-Disparagement. (a) During the Restricted Period, and thereafter for a period of five (5) years following the Closing Date, each Seller and each Applicable Party shall not (and shall cause their respective Affiliates and Representatives not to) make, publish, or communicate to any Person any statement that disparages or is reasonably likely to harm the reputation, goodwill, or business relationships of Buyer, the Companies, or the Business; provided, however, that this Section shall not prohibit truthful statements (i) required by law, legal process, or Governmental Order, or (ii) made in connection with enforcing rights or defending claims under this Agreement.
(b) Nothing in this Section 9.02 prohibits communications with counsel, accountants, or other professional advisors, or communications made in confidence to governmental authorities, in each case to the extent reasonably necessary.
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ARTICLE X
MISCELLANEOUS
10.01 Governing Law; Venue; Arbitration. This Agreement and all claims or causes of action (whether in contract, tort, or statute) that may be based upon, arise out of, or relate to this Agreement, or the negotiation, execution, or performance of this Agreement (including any claim or cause of action based upon, arising out of, or related to any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement), shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to any principle or rule of conflicts of laws that would cause the application of the laws of any other jurisdiction.
Any dispute, claim, or controversy arising out of, in connection with, or relating to this Agreement (a “dispute”) shall be resolved exclusively by final and binding arbitration under the North Carolina Revised Uniform Arbitration Act (NCRUAA) The arbitration shall be conducted before a single arbitrator as mutually agreed by the parties, or, if the parties are unable to agree, appointed in accordance with the NCRUAA rules. The arbitrator shall have authority to award monetary damages and such other relief as may be available at law; provided, however, that the arbitrator shall have no authority to award injunctive relief, specific performance, or other equitable relief, all of which shall be reserved exclusively to the courts as set forth below.
Notwithstanding the foregoing, and without limiting the enforceability of Article IX, any Party may seek temporary, preliminary, or permanent injunctive relief, specific performance, or other equitable relief in any State court of competent jurisdiction or Federal Court located in New Hanover County, North Carolina, including for the enforcement of Article IX, if such Party reasonably determines that such relief is necessary to prevent irreparable harm or to preserve the status quo pending arbitration.
Each party hereby irrevocably consents to the jurisdiction of the state courts of the State of North Carolina and the United States District Court for the Eastern District of North Carolina (or any successor court), in each case located in New Hanover County, North Carolina, for purposes of enforcing this Section 10.01, enforcing any arbitration award, and seeking injunctive or equitable relief as permitted herein, and each party hereby waives any objection to venue or forum non conveniens with respect thereto.
10.02 Waiver of Jury Trial. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO A TRIAL BY JURY in any action, proceeding, or counterclaim arising out of or relating to this Agreement, the transactions contemplated hereby, or any document executed in connection herewith, whether now existing or hereafter arising, and whether sounding in contract, tort, or otherwise. Each Party acknowledges and agrees that (a) this waiver is a material inducement for the Parties to enter into this Agreement, (b) it has knowingly and voluntarily waived its jury trial rights, and (c) it has had the opportunity to consult with counsel regarding this waiver.
10.03 Attorneys’ Fees. In the event of any action, suit, arbitration, or proceeding arising out of or relating to this Agreement, the transactions contemplated hereby, or the breach, enforcement, or interpretation hereof, the substantially prevailing Party shall be entitled to recover from the non-prevailing Party all reasonable attorneys’ fees and costs incurred in connection therewith, including fees and costs incurred at trial, on appeal, in bankruptcy proceedings, and in any post- judgment enforcement or collection efforts, in addition to any other relief to which such substantially prevailing Party may be entitled.
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For purposes of this Section, “attorneys’ fees” includes paralegal fees, expert fees, court costs, and other litigation expenses recoverable under North Carolina law. If more than one Party is determined to be a substantially prevailing Party, the arbitration panel, or court (where applicable) shall allocate fees and costs in a manner it deems equitable. This Section shall apply to actions seeking legal or equitable relief, including specific performance and injunctive relief.
The Parties intend this Section to be enforceable under N.C. Gen. Stat. § 6-21.6 and any other applicable authority, and to the extent of any conflict, this Section shall be interpreted to comply with such statute.
10.04 Entire Agreement; Amendments; Counterparts. This Agreement (including all Schedules and Exhibits) constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior discussions, negotiations and agreements. This Agreement may be amended only by a written instrument executed by Buyer and Sellers. This Agreement may be executed in counterparts, each of which shall be deemed an original, and signatures delivered electronically shall be effective.
10.05 Assignment. Buyer, on no less than seven (7) days’ notice to Sellers, may assign this Agreement to an affiliate without Sellers’ consent, provided that no such assignment shall relieve Buyer of its obligations hereunder.
10.06 Confidentiality. The Parties acknowledge that the confidentiality obligations in this Section 10.06 are a material part of the purchase of the Companies and their goodwill and are intended to protect the goodwill and legitimate business interests acquired by Buyer in the transactions contemplated by this Agreement. From and after the Closing, each Party shall, and shall cause its Affiliates and its and their respective managers, directors, officers, employees, consultants, counsel, accountants, and other agents (collectively, “Representatives”) to, hold in confidence all Confidential Information and shall not disclose, publish, or use any Confidential Information except as expressly permitted under this Section 10.06, except to the extent that the Party can show that such information: (a) is generally available to and known by the public through no fault of that Party, any of its Affiliates, or their respective Representatives; or (b) is lawfully acquired independently by the Party, any of its Affiliates, or their respective Representatives from and after the Closing from sources which are not prohibited from disclosing such information by any obligation. If a Party or any of its Affiliates or their respective Representatives are compelled to disclose any information by Governmental Order or Law, that Party shall promptly notify the other Party in writing and shall disclose only that portion of such information which is legally required to be disclosed; provided, however, each Party shall use reasonable best efforts to obtain as promptly as possible an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information. Notwithstanding the foregoing, after execution of this Agreement, Buyer may issue a Press Release or other similar communication to the public generally describing the purchase and sale transaction set forth in this Agreement, after first providing a copy of such written communication to Sellers for their information provided that such communication or communications are accurate in their description of the transaction as set forth in this Agreement, and Buyer may also take such pre-closing and post-closing actions in terms of public type written communications where required or permitted under applicable securities laws, with reasonable prior notice to Sellers thereof.
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Survival. The obligations under this Section 10.06 shall survive the Closing indefinitely with respect to trade secrets (as defined under applicable law) and for five (5) years following the Closing Date with respect to all other Confidential Information; and shall survive any termination of this Agreement pursuant to Article VII to the extent applicable.
10.07 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
10.08 Notices. All notices, claims, demands, and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt or refusal); (b) when received or refused by the addressee if sent by a nationally recognized overnight courier (receipt requested); or (c) on receipt or refusal where sent by United States first class registered or certified mail, return receipt requested, and postage prepaid if sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given on at least five (5) days’ notice) in accordance with this Section):
If to Sellers:
c/o Bellhart Marine Group, LLC
Attn: Dwayne Dehart
6821 Market Street
Wilmington, NC 28405
If to Buyer:
Brian S. John, CEO
1701 J.E.L. Wade Drive
Wilmington, NC 28401
Christopher M. Galeta, Esq., In-House Legal Counsel
1701 J.E.L. Wade Drive
Wilmington, NC 28401
10.09 Interpretation; Headings. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
10.10 Severability. If any term or provision of this Agreement is invalid, illegal, or unenforceable in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other term or provision of this Agreement.
10.11 Counterparts; Electronic Signatures. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by email or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.
BUYER:
OFF THE HOOK YS, INC.,
a Nevada corporation
| By: | /s/ Brian S. John | |
| Brian S. John, CEO | ||
| Date: | 3/26/2026 | |
SELLERS:
| By: | /s/ Everett D. Dehart | |
| Everett D. Dehart, an individual | ||
| Date: | 3/26/2026 | |
| By: | /s/ Brandi Dehart | |
| Brandi Dehart, an individual | ||
| Date: | 3/26/2026 | |
| By: | /s/ Robb C. Cass, Jr | |
| Robb C. Cass, Jr, an individual | ||
| Date: | 3/27/2026 | |
COMPANIES
BELLHART MARINE SERVICES, LLC,
a North Carolina limited liability company
| By: | /s/ Brandi Dehart_ | |
| Name: | Brandi Dehart | |
| Title: | Authorized Signatory | |
| Date: | 3/26/2026 |
BELLHART MARINE GROUP, LLC,
a North Carolina limited liability company
| By: | /s/ Brandi Dehart | |
| Name: | Brandi Dehart | |
| Title: | Authorized Signatory | |
| Date: | 3/26/2026 |
SPECIALIZED MECHANICAL SERVICES, LLC,
a South Carolina limited liability company
| By: | /s/ Brandi Dehart | |
| Name: | Brandi Dehart | |
| Title: | Authorized Signatory | |
| Date: | 3/26/2026 |
ROBERTS (LIMITED PURPOSE PARTY):
JOSHUA ROBERTS, solely in his capacity as the holder of the SMS NC Shares and solely for purposes of effecting the SMS NC Stock Transfer and fulfilling the obligations expressly applicable to Roberts under this Agreement:
| By: | /s/ Joshua Roberts | |
| Joshua Roberts, solely in his capacity as holder of the SMS NC Shares and solely for the limited purposes set forth in the Agreement. | ||
| Date: | 3/27/2026 | |
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SCHEDULES AND EXHIBITS
Schedule A – Ownership and Capitalization of the Companies
Schedule B – Liens Affecting Purchased Interests
Schedule C – Required Consents and Approvals Schedule D – Assumed Debt
Schedule E – Tax Liabilities; Lien Payoffs (Sellers’ Responsibility)
Schedule F – Inventory
Schedule G – Intellectual Property; Domains; Systems and Data
Schedule H – Material Contracts; Manufacturer/Brand Agreements Schedule I – Taxes
Schedule J – Litigation/Claims
Schedule K – Permitted Leakage/Related-Party Transactions Schedule L – Indemnification Procedures
Schedule M – Compliance with Laws; Permits; Violations Schedule N – List of Sellers
Schedule O – Included Assets Inventory
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Exhibit 31.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian John, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Off The Hook YS, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2026
| /s/ Brian John | |
| Brian John | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14(A) AND 15D-14(A)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Chad Corbin, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Off The Hook YS, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 14, 2026
| /s/ Chad Corbin | |
| Chad Corbin | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Off The Hook YS, Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2026, as filed with the Securities and Exchange Commission (the “Report”), Brian John, Chief Executive Officer of the Company, and Chad Corbin, Chief Financial Officer of the Company, do each hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| ● | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and | |
| ● | The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: May 14, 2026
| /s/ Brian John | |
| Brian John | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| /s/ Chad Corbin | |
| Chad Corbin | |
| Chief Financial Officer | |
| (Principal Financial Officer and Principal Accounting Officer) |