What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2021-12-17 compared with 2020-12-03 · 1039 added, 822 removed, 350 unchanged (84% of the section changed)

14 unchanged sentences

We have audited the accompanying consolidated balance sheets of OneWater Marine Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of September 30, 2020 and 2019, the related consolidated statements of operations, changes

in stockholders’ and members’ equity, and cash flows for each of the three years in the period ended September 30, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of September 30, 2020 and 2019, and the results of its operations and

its cash flows for each of the three years in the period ended September 30, 2020, in conformity with accounting principles generally accepted in the United States of America.

(a Delaware corporation) and subsidiaries (the “Company”)

as of September 30, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ and members’ equity, and cash flows for each of the three years in the period ended September 30, 2021, and the related

notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the

results of its operations and its cash flows for each of the three years in the period ended September 30, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the

Company’s internal control over financial reporting as of September 30, 2021, based on criteria established in the 2013 Internal

Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated December 17, 2021 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases as of October 1,

2020, due to the adoption of Accounting Standards Codification Topic 842, Leases .

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the

Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the

Securities and Exchange Commission and the PCAOB.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,

whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining,

on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall

presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial

statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable

basis for our opinion.

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions

on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Contingent Consideration

As described further in note 4 to the consolidated financial statements, the Company recognized liabilities for contingent consideration

related to the acquisitions of Walker Marine Group and PartsVu.

The estimated liabilities for contingent consideration are remeasured at each reporting date based on updated assumptions.

At September 30, 2021, the contingent

consideration liabilities related to Walker Marine Group and PartsVu was $6.9 million and $3.3 million, respectively.

The estimated contingent consideration is subject to achievement of certain post-acquisition increases in adjusted

earnings before interest, taxes, depreciation, and amortization (“adjusted EBITDA”).

The contingent consideration was determined by management using weighted average projections for the estimated post-acquisition adjusted EBITDA and

was based on the Company’s historical experience with acquisitions as well as current forecasts for the industry.

We identified the valuation of the acquisition-date fair value and subsequent reporting period-end revaluation of the

contingent consideration related to Walker Marine Group and PartsVu as a critical audit matter because of the significant judgements required by management to estimate the liabilities.

The principal considerations for our determination that the valuation of contingent consideration related to Walker Marine Group and PartsVu

is a critical audit matter are that management’s assumptions for the amount and timing of forecasted adjusted EBITDA and discount rates utilized in the model are subjective in nature.

Auditing management’s assumptions involved a high

degree of auditor judgment and increased audit effort, including the use of valuation specialists, as changes in these assumptions could have a significant impact on the fair value of the contingent consideration.

Our audit procedures related to the Company’s valuation of contingent consideration related to Walker Marine Group and PartsVu included the

following, among others:

We tested the reasonableness of the forecasted adjusted EBITDA by (1) comparing projected amounts to historical periods and trends and (2) obtained an

understanding of drivers of underlying projected amounts, including consideration of industry information and economic trends.

We utilized a specialist, who:

Developed an independent estimate of the fair value of the contingent consideration utilizing a different model than management.

Valuation of trade names acquired

As described further in note 4 to the consolidated financial statements, during the year ended September 30, 2021, the Company acquired Walker

Marine Group, Roscioli Yachting Center, Tom George Yacht Group, Stone Harbor Marina and PartsVu.

The Company’s accounting for these acquisitions included determining the fair value of the $24.0 million of tradenames acquired.

Company applies an income approach for the fair value of trade names, which discounts the estimate of future net cash flow using an appropriate discount rate that reflects the risks associated with such projected future cash flow.

identified the valuation of tradenames acquired during the year ended September 30, 2021 as a critical audit matter because of the significant judgements required by management to estimate the fair value.

The principal considerations for our determination that the valuation of trade names acquired during the year ended September 30, 2021 is a

critical audit matter are that management assumptions for sales projections of acquired companies, royalty rates utilized in the relief from royalty methodology, and discount rates, are subjective in nature.

Our audit procedures related to the Company’s valuation of trade names acquired during the year ended September 30, 2021 included the

following, among others:

We tested the reasonableness of the revenue growth rates by (1) comparing projected amounts to historical periods and trends and (2) obtaining an

understanding of drivers of underlying projected amounts, including consideration of industry information and economic trends.

We utilized a specialist in evaluating the appropriateness of the Company’s methodology and the royalty rates and discount rates used in the valuation.

Our specialists calculated a range of rates using market participant inputs and performed analysis to test sensitivity to changes in the royalty and discount rates.

/s/ GRANT THORNTON LLP

13 unchanged sentences

Property and equipment, net

Operating lease right-of-use assets

Other assets:

2 unchanged sentences

Total other assets

Liabilities and Stockholders’ and Members’ Equity

Liabilities and Stockholders’ Equity

Current liabilities:

3 unchanged sentences

Notes payable – floor plan

Current portion of operating lease liabilities

Current portion of long-term debt

Current portion of tax receivable agreement liability

Total current liabilities

1 unchanged sentence

Other long-term liabilities

Warrant liability

Tax receivable agreement liability

Long-term debt, net of current portion and unamortized

debt issuance costs

Noncurrent operating lease liabilities

Long-term debt, net of current portion and unamortized debt issuance costs

Total liabilities

Redeemable preferred interest in subsidiary

Stockholders’ and Members’ Equity:

Members’ equity

Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding as of September 30, 2020 and September 30, 2019

Class A common stock, $0.01 par value, 40,000,000 shares authorized, 10,391,661 shares issued and outstanding as of September 30, 2020 and none issued and

outstanding as of September 30, 2019

Class B common stock, $0.01 par value, 10,000,000 shares authorized, 4,583,637 shares issued and outstanding as of September 30, 2020 and none issued and

outstanding as of September 30, 2019

Stockholders’ Equity:

Preferred stock, $ 0.01 par value, 1,000,000 shares authorized, none

issued and outstanding as of September 30, 2021 and September 30, 2020

Class A common stock, $ 0.01 par value, 40,000,000 shares authorized, 13,276,538

shares issued and outstanding as of September 30, 2021 and 10,391,661 issued and outstanding as of September 30, 2020

Class B common stock, $ 0.01 par value, 10,000,000 shares authorized, 1,819,112

shares issued and outstanding as of September 30, 2021 and 4,583,637 issued and outstanding as of September 30, 2020

Additional paid-in capital

1 unchanged sentence

Total stockholders’ equity attributable to OneWater Marine Inc.

and members’ equity

Equity attributable to non-controlling interests

Total stockholders’ and members’ equity

Total liabilities, stockholders’ and members’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

ONEWATER MARINE INC.

2 unchanged sentences

For the Years Ended September 30,

New boat sales

Pre-owned boat sales

Pre-owned boat

Finance & insurance income

Service, parts & other sales

Service, parts & other

Total revenues

Cost of sales (exclusive of depreciation and

amortization shown separately below)

Cost of sales (exclusive of depreciation and amortization shown separately below)

Pre-owned boat

10 unchanged sentences

Change in fair value of warrant liability

Loss (gain) on extinguishment of debt

Other expense (income), net

Loss on extinguishment of debt

Other (income) expense, net

Total other expense (income), net

9 unchanged sentences

Diluted weighted-average shares of Class A common stock outstanding (1)

Represents earnings per share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from February 11, 2020 through September 30, 2020, the period

following the Organizational Transactions (as defined below) and OneWater Marine Inc.’s initial public offering.

For the fiscal year ended September 30, 2020, represents earnings per

share of Class A common stock and weighted-average shares of Class A common stock outstanding for the period from February 11, 2020 through September 30, 2020, the period following OneWater Marine Inc.’s initial public

ONEWATER MARINE INC.

10 unchanged sentences

Balance at September 30, 2018

Non-controlling interest in subsidiary

Distributions to members

Accumulated unpaid preferred returns

Preferred issuance costs

Accretion of redeemable preferred and issuance costs

1 unchanged sentence

Balance at September 30, 2019

Distributions to members

Accumulated unpaid preferred returns

Accretion of redeemable preferred and issuance costs

Equity-based compensation

Balance at September 30, 2019

Net (loss) income prior to organizational transactions

Distributions to members prior to organizational transactions

Accumulated unpaid preferred returns prior to organizational transactions

Accretion of redeemable preferred and issuance costs prior to organizational transactions

Equity-based compensation prior to organizational transactions

Effect of organizational transactions

Net (loss) income prior to the initial public offering

Distributions to members prior to the initial public offering

Accumulated unpaid preferred returns prior to the initial public offering

Accretion of redeemable preferred and issuance costs prior to the initial public offering

Equity-based compensation prior to the initial public offering

Effect of the initial public offering and related transactions

Effect of September offering

Exchange of B shares for A shares

Distributions subsequent to organizational transactions

Distributions subsequent to the initial public offering

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in tax basis

Equity-based compensation subsequent to organizational transactions

Net income subsequent to organizational transactions

Equity-based compensation subsequent to the initial public offering

Net income subsequent to the initial public offering

Balance at September 30, 2020

Distributions to members

Dividends and distributions

Effect of September offering, including underwriter exercise of option to purchase shares

Exchange of B shares for A shares

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets associated with increases in

Shares issued upon vesting of equity-based awards, net of tax withholding

Shares issued in connection with a business combination

Adjustment to adopt Topic 842

Equity-based compensation

Balance at September 30, 2021

ONEWATER MARINE INC.

5 unchanged sentences

Depreciation and amortization

Equity-based awards

Loss (gain) on asset disposals

Change in fair value of long-term warrant liability

Loss (gain) on extinguishment of debt

Equity-based compensation

(Gain) loss on asset disposals

Change in fair value of warrant liability

Loss on extinguishment of debt

Non-cash interest expense

17 unchanged sentences

Net (payments) borrowings from floor plan

Net payment to related party

Proceeds from long-term debt

2 unchanged sentences

Payments of debt extinguishment costs

Payments of offering costs

Payments of preferred issuance costs

Payments of initial public offering costs

Payments of September offering costs

Payment of acquisition contingent consideration

2 unchanged sentences

Proceeds from issuance of Class A common stock sold in September offering, net of underwriting discounts and commissions

Payments of tax withholdings for equity-based awards

Dividends and distributions

Distributions to members

10 unchanged sentences

Acquisition purchase price funded by contingent consideration

Acquisition purchase price funded by issuance of Class A common stock

Accrued purchase consideration

Purchase of property and equipment funded by long-term debt

Dividends payable

Distributions payable

Offering costs, accrued not yet paid

Initial operating lease right-of-use-assets for adoption of Topic 842

OneWater Marine Inc.

4 unchanged sentences

OneWater Marine Inc.

(“OneWater Inc”) was incorporated in Delaware on April 3, 2019 and was a wholly-owned subsidiary of One Water Marine Holdings, LLC (“OneWater LLC”).

Pursuant to a reorganization on February 11, 2020 into a holding company structure for the purpose of facilitating an initial public offering (the “Offering”) and related transactions in order to carry on the business of OneWater LLC and its

subsidiaries (together with OneWater Marine Inc., the “Company”), OneWater Inc is the holding company and its sole material asset is the equity interest in OneWater LLC.

OneWater LLC was organized as a limited liability company under the law

of the State of Delaware in 2014 and is the parent company of One Water Assets & Operations (“OWAO”), and its wholly-owned subsidiaries.

The Company is one of the largest recreational boat retailers in the United States.

The Company engages primarily in the retail sale, brokerage, and service of new and pre-owned

boats, motors, trailers, marine parts and accessories, and offers slip and storage accommodations in certain locations.

The Company also arranges related boat financing, insurance, and extended service contracts for customers with third-party

lenders and insurance companies.

As of September 30, 2020, the Company operates a total of 61 stores in ten states, consisting of Alabama, Florida, Georgia, Kentucky, Maryland, Massachusetts, North Carolina, Ohio, South Carolina, and Texas.

Operating results are generally subject to seasonal variations.

Demand for products is generally highest during the third and fourth quarters of the fiscal year and,

accordingly, revenues are generally expected to be higher during these periods.

General economic conditions and consumer spending patterns can negatively impact the Company’s operating results.

Unfavorable local, regional, national, or global

economic developments, global public health concerns, including the COVID-19 pandemic, or uncertainties could reduce consumer spending and adversely affect the Company’s business.

Consumer spending on discretionary goods may also decline as a

result of lower consumer confidence levels, even if prevailing economic conditions are otherwise favorable.

Economic conditions in areas in which the Company operates stores, particularly in the Southeast, can have a major impact on the

Company’s overall results of operations.

Local influences such as corporate downsizing, inclement weather such as hurricanes and other storms, environmental conditions, and other events could adversely affect the Company’s operations in

certain markets and in certain periods.

Any extended period of adverse economic conditions or low consumer confidence is likely to have a negative effect on the Company’s business.

Sales of new boats from the Company’s top ten brands represent approximately 41.1%, 40.4% and 40.0% of total sales for the years ended September 30, 2020, 2019 and 2018,

respectively, making them major suppliers of the Company.

Of this amount, Malibu Boats, Inc, including its brands Malibu, Axis, Cobalt and Pursuit, accounted for 16.2%, 15.9% and 13.4% of our consolidated revenue for the years ended September

30, 2020, 2019 and 2018, respectively.

As is typical in the industry, the Company contracts with most manufacturers under renewable annual dealer agreements, each of which provides the right to sell various makes and models of boats within a

given geographic region.

Any change or termination of these agreements, or the agreements discussed above, for any reason, or changes in competitive, regulatory, or marketing practices, including rebate or incentive programs, could adversely

affect results of operations.

Inc”) was incorporated in Delaware on April 3, 2019 and was a wholly-owned subsidiary of One Water Marine Holdings, LLC (“OneWater LLC”).

Pursuant to a reorganization on February 11, 2020 into a holding company structure for the purpose of

facilitating an initial public offering (the “IPO”) and related transactions in order to carry on the business of OneWater LLC and its subsidiaries (together with OneWater Marine Inc., the “Company”), OneWater Inc is the holding company and

its sole material asset is the equity interest in OneWater LLC.

OneWater LLC was organized as a limited liability company under the law of the State of Delaware in 2014 and is the parent company of One Water Assets & Operations

(“OWAO”), and its wholly-owned subsidiaries.

The Company is one of the largest marine retailers in

the United States.

The Company engages primarily in the retail sale, brokerage, and service of new and pre-owned boats, motors, trailers, marine parts and accessories, and offers slip and storage accommodations in certain locations.

Company also arranges related boat financing, insurance, and extended service contracts for customers with third-party lenders and insurance companies.

As of September 30, 2021, the Company operates a total of 70 stores in eleven states,

consisting of Alabama, Florida, Georgia, Kentucky, Maryland, Massachusetts, New Jersey, North Carolina, Ohio, South Carolina, and Texas.

Operating results are generally subject to seasonal

Demand for products is generally highest during the third and fourth quarters of the fiscal year and, accordingly, revenues are generally expected to be higher during these periods.

General economic conditions and consumer

spending patterns can negatively impact the Company’s operating results.

Unfavorable local, regional, national, or global economic developments, global public health concerns, including the COVID-19 pandemic, or uncertainties could reduce

consumer spending and adversely affect the Company’s business.

Consumer spending on discretionary goods may also decline as a result of lower consumer confidence levels, even if prevailing economic conditions are otherwise favorable.

Economic conditions in areas in which the Company operates stores, particularly in the Southeast, can have a major impact on the Company’s overall results of operations.

Local influences such as corporate downsizing, inclement weather such

as hurricanes and other storms, environmental conditions, and other events could adversely affect the Company’s operations in certain markets and in certain periods.

Any extended period of adverse economic conditions or low consumer

confidence is likely to have a negative effect on the Company’s business.

Sales of new boats from the Company’s top ten brands represent approximately 42.9 %,

41.1 % and 40.4 %

of total sales for the years ended September 30, 2021, 2020 and 2019, respectively, making them major suppliers of the Company.

Of this amount, Malibu Boats, Inc, including its brands Malibu, Axis, Cobalt, Pursuit, Maverick, Hewes, Cobia

and Pathfinder accounted for 17.0 %, 17.0 % and 15.9 % of our consolidated revenue for the years ended

September 30, 2021, 2020 and 2019, respectively.

As is typical in the industry, the Company contracts with most manufacturers under renewable annual dealer agreements, each of which provides the right to sell various makes and models of

boats within a given geographic region.

could adversely affect results of operations.

Pre-owned boats are usually trade-ins from retail customers who are purchasing a boat from the Company.

Initial Public Offering

On February 11, 2020, OneWater Inc completed its Offering of 5,307,693 shares of Class A common stock, par value $0.01 per share (the “Class A common stock”), which includes the

exercise in full of the underwriters’ option to purchase up to 692,308 additional shares of Class A common stock pursuant to the Underwriting Agreement, at a price to the public of $12.00 per share.

After deducting underwriting discounts and

commissions, OneWater Inc received net proceeds of $59.2 million.

OneWater Inc contributed all of the net proceeds of the Offering received to OneWater LLC in exchange for limited liability company interests in OneWater LLC (“LLC Units”).

OneWater LLC used the net proceeds, cash on hand and borrowings under its Amended and Restated Credit and Guaranty Agreement by and among OneWater Inc, OneWater LLC and its subsidiaries, with Goldman Sachs Specialty Lending Group, L.P.

pay $3.2 million to one Legacy Owner in exchange for the surrender of a preferred distribution right and (ii) to contribute cash to OWAO in exchange for additional units therein, and OWAO used such cash to fully redeem the preferred interest

in subsidiary held by Goldman Sachs & Co.

On February 11, 2020, OneWater Inc completed its IPO of 5,307,693 shares of Class A common stock, par value $ 0.01

per share (the “Class A common stock”), which includes the exercise in full of the underwriters’ option to purchase up to 692,308

additional shares of Class A common stock pursuant to the Underwriting Agreement, at a price to the public of $ 12.00 per share.

After deducting underwriting discounts and commissions, OneWater Inc received net proceeds of $ 59.2 million.

contributed all of the net proceeds of the IPO received to OneWater LLC in exchange for limited liability company interests in OneWater LLC (“LLC Units”).

OneWater LLC used the net proceeds, cash on hand and borrowings under its Amended and

Restated Credit and Guaranty Agreement by and among OneWater Inc, OneWater LLC and its subsidiaries, with Goldman Sachs Specialty Lending Group, L.P.

(i) to pay $ 3.2 million to one Legacy Owner in exchange for the surrender of a preferred distribution right and (ii) to contribute cash to OWAO in exchange for additional units therein, and OWAO

used such cash to fully redeem the preferred interest in subsidiary held by Goldman Sachs & Co.

LLC and certain of its affiliates (collectively, “Goldman”) and affiliates of The Beekman Group (“Beekman”).

Additionally, the Company provided certain of the existing owners of OneWater LLC,

including Goldman and Beekman and certain members of the Company’s management team, the right to receive a tax distribution to cover taxable income arising as a result of OneWater LLC’s operating income through the period ending on the date

of the closing of the Offering.

Organizational Transactions

In connection with the Offering and the related reorganization, OneWater Inc and OneWater LLC completed the following transactions (collectively, the “Organizational

Transactions”):

OneWater LLC amended and restated its limited liability company agreement (the “Limited Liability Company Agreement”) to, among other things, provide for a single class of common units representing ownership interests in OneWater

LLC and provide a mechanism pursuant to which holders of OneWater LLC Units (“LLC Unitholders”) may exchange LLC Units, together with an equal number of shares of Class B common stock, par value $0.01 per share (the “Class B common

stock”), of OneWater Inc, for shares of Class A common stock of OneWater Inc on a one-for-one basis or, at OneWater LLC’s election, cash;

OneWater Inc amended and restated its certificate of incorporation and bylaws to, among other things, authorize (i) 40,000,000 shares of Class A common stock, par value $0.01 per share, (ii) 10,000,000 shares of Class B common

stock, par value $0.01 per share, and (iii) 1,000,000 shares of Preferred stock, par value $0.01 per share (the “Preferred stock”).

Shares of Class A common stock have one vote per share and have economic rights.

Shares of Class B

common stock have no economic rights, but have one vote per share;

Legacy Owners (references made herein to “Legacy Owners” refer to the owners of OneWater LLC as they existed immediately prior to OneWater Inc’s public offering) exchanged their existing membership interests in OneWater LLC for LLC

Certain Legacy Owners contributed, directly or indirectly, their OneWater LLC Units to OneWater Inc in exchange for 780,213 shares of Class A common stock;

OneWater Inc entered into a tax receivable agreement (the “Tax Receivable Agreement”) with certain of the Legacy Owners that will continue to be LLC Unitholders.

See Note 16 for additional details regarding the Tax Receivable

In connection with the Offering, the Board of Directors of OneWater Inc (the “Board”) adopted a long-term incentive plan (the “LTIP”) to incentivize individuals providing services to OneWater Inc and its subsidiaries and

The total number of shares reserved for issuance under the LTIP that may be issued pursuant to incentive stock options (which generally are stock options that meet the requirements of Section 422 of the Internal Revenue

Code (the “Code”)) is 1,385,799.

The LTIP is administered by the Board, except to the extent the Board elects a committee of directors to administer the LTIP.

Additionally, the Company

provided certain of the existing owners of OneWater LLC, including Goldman and Beekman and certain members of the Company’s management team, the right to receive a tax distribution to cover taxable income arising as a result of OneWater

LLC’s operating income through the period ending on the date of the closing of the IPO.

September Offering

On September 22, 2020, OneWater Inc completed an underwritten public offering (the “September Offering”) of 3,170,868 shares of Class A common stock, at a public offering price

On September 22, 2020, OneWater Inc completed an

underwritten public offering (the “September Offering”) of 3,170,868 shares of Class A common stock, at a public offering price

of $ 20.00 per share, less underwriting discounts and commissions.

OneWater Inc sold 425,000 shares of Class A common stock, and certain stockholders of the Company (the “Selling Stockholders”) sold 2,745,868 shares of Class A common stock.

connection with the September Offering, Goldman granted the underwriters a 30-day option to purchase up to an additional 475,630 shares of the Company’s Class A common stock (the “Optional Shares”).

On September 29, 2020, the underwriters

notified OneWater Inc and Goldman of their intent to purchase an additional 387,458 Optional Shares.

In connection with the September Offering, Goldman granted the underwriters a 30-day option to purchase up to an additional 475,630

shares of the Company’s Class A common stock (the “Optional Shares”).

On September 29, 2020, the underwriters notified OneWater Inc and Goldman of their intent to purchase an additional 387,458 Optional Shares.

The sale of the Optional Shares closed on October 2,2020.

The Company did not receive any proceeds from the sale of the Optional Shares or

the Class A common stock sold by Selling Stockholders.

After deducting underwriting discounts and commissions, OneWater Inc received net proceeds of $8.1 million.

OneWater Inc contributed all of the net proceeds of the September

Offering received to OneWater LLC in exchange for LLC Units.

The Company did not receive any proceeds from the sale of the Optional Shares or the

Class A common stock sold by Selling Stockholders.

After deducting underwriting discounts and commissions,

OneWater Inc received net proceeds of $ 8.1 million.

OneWater Inc contributed all of the net proceeds of the September Offering

received to OneWater LLC in exchange for LLC Units.

OneWater LLC used the net proceeds for general corporate purposes.

Principles of Consolidation

As the sole managing member of OneWater LLC, OneWater Inc operates and controls all of the businesses and affairs of OneWater LLC, and through OneWater LLC and its subsidiaries

One Water Assets and Operations, South Shore Assets and Operations, Bosun’s Assets and Operations, Singleton Assets and Operations, Legendary Assets and Operations, South Florida Assets and Operations and Midwest Assets and Operations

(collectively, the “Subsidiaries”), conducts its business.

As a result, OneWater Inc consolidates the financial results of OneWater LLC and its subsidiaries and reports non-controlling interests related to the portion of LLC Units not owned

by OneWater Inc, which will reduce net income (loss) attributable to OneWater Inc’s Class A stockholders.

As of September 30, 2020, OneWater Inc owned 69.4% of the economic interest of OneWater LLC.

As the sole managing member of OneWater LLC, OneWater

Inc operates and controls all of the businesses and affairs of OneWater LLC, and through OneWater LLC and its subsidiaries One Water Assets and Operations, South Shore Assets and Operations, Bosun’s Assets and Operations, Singleton Assets

and Operations, Legendary Assets and Operations, South Florida Assets and Operations, Central Assets and Operations and Midwest Assets and Operations (collectively, the “Subsidiaries”), conducts its business.

As a result, OneWater Inc

consolidates the financial results of OneWater LLC and its subsidiaries and reports non-controlling interests related to the portion of OneWater LLC Units (the “OneWater LLC Units”) not owned by OneWater Inc, which will reduce net income

attributable to OneWater Inc’s Class A stockholders.

As of September 30, 2021, OneWater Inc owned 87.9 % of the economic interest

of OneWater LLC.

Basis of Financial Statement Preparation

The accompanying consolidated financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and pursuant to the rules and

regulations of the Securities and Exchange Commission (“SEC”).

All adjustments, consisting of only normal recurring adjustments considered necessary for fair presentation, have been reflected in these consolidated financial statements.

All intercompany transactions have been eliminated in consolidation.

In addition, certain reclassifications of amounts previously reported have been made to the accompanying

consolidated financial statements in order to conform to current presentation.

The Company operates on a fiscal year basis with the first day of the fiscal year being October 1, and the last day of the year ending on September 30.

Additionally, since there are no differences between net income and comprehensive income, all references to comprehensive income have been excluded from the accompanying consolidated financial statements.

As discussed above, as a result of the Organizational Transactions, OneWater Inc is the sole managing member for OneWater LLC and consolidates OneWater LLC and its subsidiaries.

The Organizational Transactions were considered transactions between entities under common control.

As a result, the financial statements for periods prior to the completion of the Offering and Organizational Transactions have been adjusted

to combine the previously separate entities for presentation purposes.

Thus, for periods prior to completion of the Offering, the accompanying consolidated financial statements include the historical financial position and results of

operations of OneWater LLC and its subsidiaries.

The accompanying consolidated financial statements have

been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).

All adjustments, consisting of only normal recurring

adjustments considered necessary for fair presentation, have been reflected in these consolidated financial statements.

All intercompany transactions have been eliminated in

consolidation.

In addition, certain reclassifications of amounts previously reported have been made to the accompanying consolidated financial statements in order to conform to current presentation.

The Company operates on a fiscal year

basis with the first day of the fiscal year being October 1, and the last day of the year ending on September 30.

Additionally, since there are no differences between net income and comprehensive income, all references to comprehensive

income have been excluded from the accompanying consolidated financial statements.

As discussed above, the Company is the sole managing

member for OneWater LLC and consolidates OneWater LLC and its subsidiaries.

The financial statements for periods prior to the IPO have been adjusted to combine the previously separate entities for presentation purposes.

Thus, for periods

prior to completion of the IPO, the accompanying consolidated financial statements include the historical financial position and results of operations of OneWater LLC and its subsidiaries.

For the periods after the completion of the IPO, the financial position and results of operations include those of the Company and

the Subsidiaries and report non-controlling interest related to the portion of OneWater LLC Units not owned by OneWater Inc .

COVID-19 Pandemic

In the last two weeks of March 2020, the Company began seeing the impact of the COVID-19 global pandemic on its business.

Based on the guidance of local governments and health

officials, we temporarily closed or reduced staffing at certain departments and locations.

The Company has implemented cleaning and social distancing techniques at each of its locations.

In light of the current environment, the Company’s

sales team members are providing certain customers with virtual walkthroughs of inventory and/or private, at home or on water showings.

The duration and related impact on the Company’s consolidated financial statements is currently uncertain,

and it is possible that the pandemic, including the resurgence of COVID-19 in certain geographic areas, may negatively impact the Company’s future results of operations.

In March 2020, the Company began

seeing the impact of the COVID-19 global pandemic on its business.

the subsequent months the Company followed the guidance of local governments and health officials, we temporarily closed or reduced staffing at certain departments and locations.

All locations have reopened and the Company has implemented

cleaning and social distancing techniques at each of its locations.

In light of the current environment, the Company’s sales team members are providing customers with the option of in-person or virtual walkthroughs of inventory and/or

private, at home or on water showings.

The duration and related impact on the Company’s consolidated financial statements is currently uncertain, and it is possible that the pandemic, including the resurgence of COVID-19 in certain

geographic areas or the emergence of variant strains of the virus, may negatively impact the Company’s future results of operations.

impact of COVID-19 on our suppliers and the recent increase in demand for marine retail products has led to industry-wide supply chain constraints.

The Company is monitoring and assessing the situation and preparing for

1 unchanged sentence

Summary of Significant Accounting Policies

At times the amount of cash on deposit may exceed the federally insured limit of the bank.

Deposit accounts at each of the institutions are insured up to $250,000 by the Federal

Deposit Insurance Corporation (FDIC).

At times the amount of cash on deposit may exceed the federally insured

limit of the bank.

Deposit accounts at each of the institutions are insured up to $ 250,000 by the Federal Deposit Insurance

Corporation (FDIC).

At September 30, 2021 and 2020, the Company exceeded FDIC limits at various institutions.

The Company has not experienced any losses in such accounts and believes there is little to no exposure to any

significant credit risk.

The Company has not experienced any losses in such accounts and believes there is little to no exposure to any significant credit

Restricted Cash

Restricted cash relates to amounts collected for pre-owned sales, in certain states, which are held in escrow on behalf of the respective buyers and sellers for future purchases

Restricted cash relates to amounts collected for pre-owned sales, in

certain states, which are held in escrow on behalf of the respective buyers and sellers for future purchases of boats.

Total customers deposits are shown as a liability on the consolidated balance sheets.

These liabilities may be more than the applicable restricted cash balances and fluctuate due to timing differences and because in certain states

the deposits are not restricted from use.

These liabilities may be more than

the applicable restricted cash balances and fluctuate due to timing differences and because in certain states the deposits are not restricted from use.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, accounts receivable, accounts payable, other payables and accrued expenses and debt.

The carrying values of cash, accounts

receivable, accounts payable and other payables and accrued expenses approximate their fair values due to their short-term nature.

The carrying value of debt approximates its fair value due to the debt agreements bearing interest at rates

that approximate current market rates for debt agreements with similar maturities and credit quality.

The Company’s financial instruments include cash, accounts receivable,

accounts payable, other payables and accrued expenses, contingent consideration and debt.

The carrying values of cash, accounts receivable, accounts payable and other payables and accrued expenses approximate their fair values due to their

short-term nature.

The carrying value of debt approximates its fair value due to the debt agreements bearing interest at rates that approximate current market rates for debt agreements with similar maturities and credit quality.

Inventories are stated at the lower of cost or net realizable value.

The cost of the new and pre-owned boat inventory is determined using the specific identification method.

assessing lower of cost or net realizable value the Company considers the aging of the boats, historical sales of a brand and current market conditions.

cost of the new and pre-owned boat inventory is determined using the specific identification method.

In assessing lower of cost or net realizable value the Company considers the aging of the boats, historical sales of a brand and current

market conditions.

The cost of parts and accessories is determined using the weighted average cost method.

Deferred Offering Costs

Deferred offering costs, consisting primarily of legal, accounting, printing and filing services, and other direct fees and costs related to the Offering were capitalized.

deferred offering costs were offset against proceeds from the Offering upon the closing of the Offering.

As of September 30, 2019, $2.6 million of deferred offering costs were recorded in prepaid expenses and other current assets.

no deferred offering costs as of September 30, 2020.

Vendor Consideration Received

Consideration received from vendors is accounted for in accordance with FASB Accounting Standards Codification 330, ‘‘Inventory’’

(‘‘ASC 330’’).

Pursuant to ASC 330, manufacturer incentives based upon cumulative volume of sales and purchases are recorded as a reduction of inventory cost and related cost of sales when the amounts are probable and reasonably estimable.

Consideration received from vendors is accounted for in accordance with

the Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 330, ‘‘Inventory’’ (‘‘ASC 330’’).

Pursuant to ASC 330, manufacturer

incentives based upon cumulative volume of sales and purchases are recorded as a reduction of inventory cost and related cost of sales when the amounts are probable and reasonably estimable.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation.

Depreciation of property and equipment is calculated using a straight-line method over the estimated

useful lives.

Property and equipment are stated at cost, less accumulated

depreciation.

Depreciation of property and equipment is calculated using a straight-line method over the estimated useful lives.

Leasehold improvements are amortized over the shorter of the lease period or the estimated useful lives.

The estimated useful lives of assets are as follows:

estimated useful lives of assets are as follows:

Company vehicles

3 unchanged sentences

Office equipment

Expenditures for property and equipment or additions and major improvements that extend the useful life of assets are capitalized.

Minor replacements, maintenance and repairs

which do not extend the useful life of an asset are expensed as incurred.

Property and equipment is reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable.

The carrying value of property and equipment and other long-term assets (other than goodwill and indefinite life intangible assets) is evaluated for impairment whenever events

or changes in circumstances indicate that the carrying value may not be recoverable.

If such an indication is present, the carrying amount of the asset is compared to the estimated undiscounted cash flows related to that asset.

would conclude that an asset may be impaired if the sum of such undiscounted expected future cash flows is less than the carrying amount of the related asset.

If an asset is impaired, the impairment loss would be the amount by which the

carrying amount of the related asset exceeds its fair value.

We did not record an impairment of our property and equipment in fiscal years 2020, 2019 and 2018.

Lease Commitments

The Company leases certain land, buildings, machinery, equipment, wet slips and vehicles related to its dealerships’ operations under third-party operating leases.

leases include provisions for renewal periods and rent escalations.

Rent expense under these agreements and month-to-month rentals were recognized on a straight-line basis and totaled $12.4 million, $10.1 million and $8.0 million for the

years ended September 30, 2020, 2019 and 2018, respectively.

Expenditures for property and equipment or additions and major

improvements that extend the useful life of assets are capitalized.

Minor replacements, maintenance and repairs which do not extend the useful life of an asset are expensed as incurred.

Property and equipment is reviewed for impairment

whenever events or circumstances indicate that the carrying amount may not be recoverable.

The carrying value of property and equipment and other long-term assets

(other than goodwill and indefinite life intangible assets) is evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If such an indication is present, the carrying

amount of the asset is compared to the estimated undiscounted cash flows related to that asset.

The Company would conclude that an asset may be impaired if the sum of such undiscounted expected future cash flows is less than the carrying

amount of the related asset.

If an asset is impaired, the impairment loss would be the amount by which the carrying amount of the related asset exceeds its fair value.

We did no t record an impairment of our property and equipment in fiscal years 2021, 2020 and 2019.

Goodwill and Other Identifiable Intangible Assets

Goodwill and intangible assets are accounted for in accordance with FASB Accounting Standards Codification 350, ‘‘ Intangibles - Goodwill and

Other ’’ (‘‘ASC 350’’), which provides that the excess of cost over the fair value of the net assets of businesses acquired, including other identifiable intangible assets, is recorded as goodwill.

Goodwill is an asset representing

operational synergies and future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

In accordance with ASC 350, Goodwill is tested for impairment at

least annually, or more frequently when events or circumstances indicate that impairment might have occurred.

ASC 350 also states that if an entity determines, based on an assessment of certain qualitative factors, that it is more likely than

not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative goodwill impairment test is unnecessary.

In evaluating goodwill for impairment, if the fair value of a reporting unit is less than its carrying value, the difference would represent the amount of required goodwill

To the extent the reporting unit’s earnings decline significantly or there are changes in one or more of these inputs that would result in a lower valuation, it could cause the carrying value of the reporting unit to exceed its

fair value and thus require the Company to record goodwill impairment.

The Company elected a qualitative assessment for our September 30, 2020 goodwill impairment testing and determined for both assessments as of September 30, 2020 and 2019,

that it was more likely than not that the fair value of the reporting unit was greater than its carrying amount, and as a result, no impairment for goodwill was required for the years then ended.

Identifiable intangible assets consist of trade names related to the acquisitions the Company has completed.

The Company has determined that trade names have an indefinite life,

as there are no economic, contractual or other factors that limit their useful lives and they are expected to generate value as long as the trade name is utilized by the dealer group, and therefore, are not subject to amortization.

Financial statement risk exists to the extent identifiable intangibles become impaired due to the decrease in the fair value of the identifiable assets.

The Company elected

qualitative assessments for our September 30, 2020 identifiable intangible assets impairment testing and determined for both assessments as of September 30, 2020 and 2019, that it was more likely than not that the fair values of the Company’s

identifiable intangible assets were greater than their carrying amounts, and as a result, no impairment for identifiable intangible assets was required for the years then ended.

The Company collects sales tax on all of the Company’s sales to nonexempt customers and remits the entire amount to the states that imposed the sales tax on and concurrent with

specific sales transactions.

The Company’s accounting policy is to exclude the tax collected and remitted to the states from revenues and cost of sales.

Goodwill and intangible assets are accounted for in accordance with FASB

ASC 350, ‘‘Intangibles - Goodwill and Other’’ (‘‘ASC 350’’), which provides that the excess of cost over the fair value of the net assets of businesses acquired, including other identifiable intangible assets, is recorded as goodwill.

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

In accordance with ASC 350,

Goodwill is tested for impairment at least annually, or more frequently when events or circumstances indicate that impairment might have occurred.

ASC 350 also states that if an entity determines, based on an assessment of certain

qualitative factors, that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative goodwill impairment test is unnecessary.

In evaluating goodwill for impairment, if the fair value of a reporting

unit is less than its carrying value, the difference would represent the amount of required goodwill impairment.

To the extent the reporting unit’s earnings decline significantly or there are changes in one or more of these inputs that

would result in a lower valuation, it could cause the carrying value of the reporting unit to exceed its fair value and thus require the Company to record goodwill impairment.

The Company elected a qualitative assessment for our September

30, 2021 goodwill impairment testing and determined for both assessments as of September 30, 2021 and 2020, that it was more likely than not that the fair value of the reporting unit was greater than its carrying amount, and as a result, no impairment for goodwill was required for the years then ended.

Identifiable intangible assets consist of trade names related to the

acquisitions the Company has completed.

The Company has determined that trade names have an indefinite life, as there are no economic, contractual or other factors that limit their useful lives and they are expected to generate value as

long as the trade name is utilized by the dealer group, and therefore, are not subject to amortization.

Financial statement risk exists to the extent identifiable intangibles

become impaired due to the decrease in the fair value of the identifiable assets.

The Company elected qualitative assessments for our September 30, 2021 identifiable intangible assets impairment testing and determined for both assessments

as of September 30, 2021 and 2020, that it was more likely than not that the fair values of the Company’s identifiable intangible assets were greater than their carrying amounts, and as a result, no impairment for identifiable intangible assets was required for the years then ended.

The Company collects sales tax on all of the Company’s sales to

nonexempt customers and remits the entire amount to the states that imposed the sales tax on and concurrent with specific sales transactions.

The Company’s accounting policy is to exclude the tax collected and remitted to the states from

revenues and cost of sales.

Revenue Recognition

On October 1, 2019, the Company adopted ASC 606 (as defined below) using the modified retrospective approach applied only to contracts not completed as of the date of adoption,

with no restatement of comparative periods.

No adjustment was made to retained earnings as of the adoption date as the impact of the standard adoption was de minimis.

Therefore, prior period comparative information has not been adjusted and

continues to be reported under previous accounting standards in effect for those periods.

Revenue is recognized from the sale of products and commissions earned on new and pre-owned boats (including used, brokerage, consignment and wholesale) when ownership is

transferred to the customer, which is generally upon acceptance or delivery to the customer.

At the time of acceptance or delivery, the customer is able to direct the use of, and obtain substantially all of the benefits at such time.

the principal with respect to revenue from new, used and consignment sales and such revenue is recorded at the gross sales price.

With respect to brokerage transactions, we are acting as an agent in the transaction, therefore the fee or

commission is recorded on a net basis.

Revenue from parts and service operations (boat maintenance and repairs) are recorded over time as services are performed.

Satisfaction of this performance obligation creates an

asset with no alternative use for which an enforceable right to payment for performance to date exists within our contractual agreements.

Each boat maintenance and repair service is a single performance obligation that includes both the parts

and labor associated with the service.

Payment for boat maintenance and repairs is typically due upon the completion of the service, which is generally completed within a period of one year or less from contract inception.

adoption of ASU 2014-09, “Revenue from Contracts with Customers, Topic 606,” revenue from parts and service operations were recognized when the customer took delivery of the part or serviced boat.

Deferred revenue from storage and marina operations is recognized on a straight-line basis over the term of the contract as services are completed.

Revenue from arranging

financing, insurance and extended warranty contracts to customers through various third-party financial institutions and insurance companies is recognized when the related boats are sold.

We do not directly finance our customers’ boat, motor

or trailer purchases.

Subject to our agreements and in the event of early cancellation of such loans or insurance contracts by the customer, we may be assessed a chargeback for a portion of the transaction price by the third-party financial

institutions and insurance companies.

We constrain our estimate of variable consideration associated with chargebacks based on our historical experience with repayments or defaults.

Chargebacks were not material to the consolidated financial

statements for the years ended September 30, 2020, 2019 and 2018.

Contract liabilities consist of deferred revenues from marina and storage operations and customer deposits and are classified in customer deposits in the Company’s consolidated

balance sheets.

Deposits received from customers are recorded as a liability until the related sales orders have been fulfilled by us and control of the vessel is transferred to the customer.

The activity in customer deposits for the year

ended September 30, 2020 is as follows:

On October 1, 2019, the Company adopted ASU 2014-09, ‘‘Revenue from

Contracts with Customers, Topic 606’’ (‘‘ASC 606’’) using the modified retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods.

No adjustment was made to retained

earnings as of the adoption date as the impact of the standard adoption was de minimis.

Therefore, prior period comparative information has not been adjusted and continues to be reported under previous accounting standards in effect for

those periods.

Revenue is recognized from the sale of products and commissions earned

on new and pre-owned boats (including used, brokerage, consignment and wholesale) when ownership is transferred to the customer, which is generally upon acceptance of, or delivery, to the customer.

At the time of acceptance or delivery, the

customer is able to direct the use of, and obtain substantially all of the benefits at such time.

We are the principal with respect to revenue from new, pre-owned and consignment sales and such revenue is recorded at the gross sales price.

With respect to brokerage transactions, we are acting as an agent in the transaction, therefore the fee or commission is recorded on a net basis.

Revenue from parts and service

operations (boat maintenance and repairs) are recorded over time as services are performed.

Satisfaction of this performance obligation creates an asset with no alternative use for which an enforceable right to payment for performance to

date exists within our contractual agreements.

Each boat maintenance and repair service is a single performance obligation that includes both the parts and labor associated with the service.

Payment for boat maintenance and repairs is

typically due upon the completion of the service, which is generally completed within a period of one year or less from contract inception.

The Company recorded contract assets in prepaid expenses and other current assets of $ 2.3 million and

$ 1.5 million as of September 30, 2021 and 2020, respectively .

Revenue from storage and marina operations is recognized on a

straight-line basis over the term of the contract as services are completed.

Revenue from arranging financing, insurance and extended warranty contracts to customers through various third-party financial institutions and insurance companies

is recognized when the related boats are sold.

We do not directly finance our customers’ boat, motor or trailer purchases.

We are acting as an agent in the transaction, therefore the commissions is recorded on a net basis.

Subject to our

agreements and in the event of early cancellation, prepayment or default of such loans or insurance contracts by the customer, we may be assessed a chargeback for a portion of the transaction price by the third-party financial institutions

and insurance companies.

We reserve for these chargebacks based on our historical experience with repayments or defaults.

Chargebacks were not material to the consolidated financial statements for the years ended September 30, 2021, 2020

Contract liabilities consist of deferred revenues from marina and

storage operations and customer deposits and are classified in customer deposits in the Company’s consolidated balance sheets.

Deposits received from customers are recorded as a liability until the related sales orders have been fulfilled

by us and control of the vessel is transferred to the customer.

The activity in customer deposits for the years ended September 30, 2021 and 2020 is as follows:

($ in thousands)

For the Year Ended September 30, 2021

For the Year Ended September 30, 2020

Beginning contract liability

Revenue recognized from contract liabilities included in the beginning balance

Increases due to cash received, net of amounts recognized in revenue during the period

Revenue recognized from contract

liabilities included in the beginning balance

Increases due to cash received, net of

amounts recognized in revenue during the period

Ending contract liability

In accordance with the new revenue standard requirements, the Company recorded a $1.5 million contract asset in prepaid expenses and other current assets as of September 30,

Net income increased $0.9 million, basic and diluted EPS each increased $0.14 per share for the year ended September 30, 2020 in accordance with the adoption.

Contract assets related to the repair and maintenance services are transferred to receivables when a repair order is completed and invoiced to the customer.

The following table sets forth percentages on the timing of revenue recognition for the year ended September 30, 2020.

In accordance with the new revenue standard requirements, the Company

recorded a $ 1.5 million contract asset in prepaid expenses and other current assets as of September 30, 2020.

increased $ 0.9 million, basic and diluted EPS each increased $ 0.14 per share for the year ended September 30, 2020 in accordance with the adoption.

Contract assets related to the repair and maintenance services are

transferred to receivables when a repair order is completed and invoiced to the customer.

The following table sets forth percentages on the timing of revenue

recognition for the years ended September 30, 2021 and 2020.

For the Year Ended September 30, 2021

Goods and services transferred at a point in time

For the Year Ended September 30, 2020

Goods and services transferred at a point

Goods and services transferred over time

1 unchanged sentence

Advertising Costs

We expense advertising and promotional costs as incurred and include them in selling, general, and administrative expenses in the accompanying consolidated statements of

Pursuant to ASC 606, we net amounts received under our co-op assistance programs from our manufacturers against the related advertising expenses.

We expense advertising and promotional costs as incurred and include

them in selling, general, and administrative expenses in the accompanying consolidated statements of operations.

Pursuant to ASC 606, we net amounts received under our co-op assistance programs from our manufacturers against the related

advertising expenses.

Advertising costs are expensed as incurred.

Total advertising costs for the years

ended September 30, 2020, 2019 and 2018, were $5.4 million, $7.0 million and $4.8 million, which are net of related co-op assistance of $0.7 million, $0.9 million and $0.8 million, respectively.

Total advertising costs for the years ended September 30, 2021, 2020 and 2019, were $ 4.5 million, $ 5.4 million and $ 7.0 million, which are net of related co-op assistance of $ 0.7

million, $ 0.7 million and $ 0.9

million, respectively.

Equity-Based Compensation

Equity-based compensation plans are accounted for following the provisions of FASB Accounting Standards Codification 718, ‘‘ Compensation —

Stock Compensation ’’ (‘‘ASC 718’’).

Equity-based awards are designed to reward employees for their long-term contributions to the Company and to provide incentives for them to remain with the Company.

Valuation models and the quoted

market price of our common stock are used to value all equity-based compensation.

Compensation for awards is measured at fair value on the grant date based on the number of shares expected to vest.

The Company recognizes compensation cost for

all awards on a straight-line basis over the requisite service period of the award.

Equity-based compensation plans are accounted for following the

provisions of FASB Accounting Standards Codification 718, ‘‘Compensation — Stock Compensation’’ (‘‘ASC 718’’).

Equity-based awards are designed to reward employees for their long-term contributions to the Company and to provide incentives

for them to remain with the Company.

Valuation models and the quoted market price of our common stock are used to value all equity-based compensation.

Compensation for awards is measured at fair value on the grant date based on the number

of shares expected to vest.

The Company recognizes compensation cost for all awards on a straight-line basis over the requisite service period of the award.

OneWater Inc is a corporation and as a result, is subject to U.S.

federal, state and local income taxes.

We account for income taxes under the asset and liability method, which

requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in the consolidated financial statements.

Under this method, we determine deferred tax assets and liabilities on the

basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax

assets and liabilities is recognized in income in the period in which the enactment date occurs.

We recognize deferred tax assets to the extent we believe these assets are more-likely-than-not to be realized.

In making such a determination,

we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events included in

the consolidated financial statements.

Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the book value and tax bases of assets and liabilities by using enacted tax rates in effect

for the year in which the differences are expected to reverse.

The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period in which the enactment date occurs.

We recognize deferred tax

assets to the extent we believe these assets are more-likely-than-not to be realized.

In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary

differences, projected future taxable income, tax planning strategies and recent results of operations.

OneWater LLC is treated as a partnership for U.S.

federal income tax purposes and therefore does not pay U.S.

federal income tax

purposes and therefore does not pay U.S.

federal income tax on its taxable income.

Instead, the OneWater

LLC members are liable for U.S.

federal income tax on their respective shares of the Company’s taxable income reported on the members’ U.S.

Instead, the OneWater LLC members are liable for U.S.

federal income tax on their respective shares of the Company’s taxable income reported on the members’

federal income tax returns.

When there are situations with uncertainty as to the timing of the deduction, the amount of the deduction, or the validity of the deduction, the Company adjusts the financial

statements to reflect only those tax positions that are more-likely-than-not to be sustained.

Positions that meet this criterion are measured using the largest benefit that is more than 50% likely to be realized.

Interest and penalties

related to income taxes are included in the benefit (provision) for income taxes in the consolidated statements of operations.

The Company accounts for its loan costs in accordance with FASB ASU No.

When there are situations with uncertainty as to the timing of the

deduction, the amount of the deduction, or the validity of the deduction, the Company adjusts the financial statements to reflect only those tax positions that are more-likely-than-not to be sustained.

Positions that meet this criterion are

measured using the largest benefit that is more than 50% likely to be realized.

Interest and penalties related to income taxes are included in the benefit (provision) for income taxes in the consolidated statements of operations.

The Company accounts for its loan costs in accordance with FASB

Accounting Standards Updated (‘‘ASU’’) No.

2015-03, ‘‘ Interest-Imputation Subtopic (835-30):

Simplifying the Presentation of Debt

Issuance Costs’’ , which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction of the carrying amount of that debt liability.

Loan costs are amortized to interest expense on a straight-line basis over the life of the loan, which approximates the effective interest method.

Simplifying the Presentation of Debt Issuance Costs ’’, which requires that debt issuance costs related to

a recognized debt liability be presented in the balance sheet as a direct deduction of the carrying amount of that debt liability.

Loan costs are amortized to interest expense on a straight-line basis

over the life of the loan, which approximates the effective interest method.

Sale and Leaseback

In accordance with ASC 840-40 ‘‘ Sales-Leaseback Transactions, ’’ the Company has recorded a deferred gain as of September 30, 2020 and

2019 in relation to the sale and leaseback of certain of the Company’s operating facilities and equipment during the year ended September 30, 2019.

As such, the gains have been deferred and are being amortized on a straight-line basis over

the life of the leases.

In accordance with ASC 840-40 ‘‘Sales-Leaseback Transactions,’’ the

Company recorded a deferred gain as of September 30, 2020 in relation to the sale and leaseback of certain of the Company’s operating facilities and equipment during the year ended September 30, 2019.

As such, the gain had been deferred and

was being amortized on a straight-line basis over the life of the lease .

As part of the adoption of ASU 2016-02, ‘‘Leases (Topic 842)’’ (“Topic 842”), the gain was recognized as a cumulative effect adjustment to equity at the beginning of the period of adoption .

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,

disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the periods presented.

The preparation of financial statements in conformity with GAAP requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and

expenses during the periods presented.

Actual results could differ materially from these estimates.

Estimates and assumptions are reviewed periodically, and the effects of any revisions are reflected in the consolidated financial statements in the period they are determined to be necessary.

Significant estimates made in the accompanying

consolidated financial statements include, but are not limited to, those relating to inventory mark downs, certain assumptions related to intangible and long-lived assets, share based compensation, fair value of warrants and accruals for

expenses relating to business operations.

Estimates and assumptions are reviewed periodically, and the effects of any revisions are reflected in the consolidated financial statements

in the period they are determined to be necessary.

Significant estimates made in the accompanying consolidated financial statements include, but are not limited to, those relating to inventory mark downs, certain assumptions related to

intangible and long-lived assets, share based compensation, fair value of warrants, valuation of acquisition contingent consideration and accruals for expenses relating to business operations.

Segment Information

As of September 30, 2021 and September 30, 2020, the Company had one operating segment, marine retail.

The marine retail segment consists of retail boat dealerships offering the

sale of new and pre-owned boats, arrangement of finance and insurance products, performance of repair and maintenance services and offering marine related parts and accessories.

The marine retail business has discrete financial information

and is regularly reviewed by the Company’s chief operating decision maker (“CODM”) to assess performance and allocate resources.

The marine retail segment consists of the sale of new and pre-owned boats, arrangement of finance and

insurance products, performance of repair and maintenance services and offering marine related parts and accessories.

The marine retail business has discrete financial information and is regularly reviewed by the Company’s chief operating

decision maker (“CODM”) to assess performance and allocate resources.

The Company has identified its Chief Executive Officer as its CODM.

The Company has determined its marine retail

operating segment is its reporting unit and is also the reportable segment.

New Accounting Pronouncements

As an ‘‘emerging growth company’’ (‘‘EGC’’), the Jumpstart Our Business Startups Act (‘‘JOBS Act’’) allows the Company to delay adoption of new or revised accounting

pronouncements applicable to public companies until such pronouncements are made applicable to private companies.

The Company has elected to use this extended transition period under the JOBS Act.

The adoption dates discussed below reflect

this election.

Adoption of New Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (‘‘ASU’’) No.

2014-09, ‘‘Revenue from Contracts with Customers (Topic 606)’’

(‘‘ASU 2014-09’’), as subsequently amended, a converged standard on revenue recognition.

The new pronouncement requires revenue recognition to depict the transfer of promised goods or services to customers in an amount that reflects the

consideration to which the entity expects to be entitled in exchange for those goods or services.

The guidance also specifies the accounting for some costs to obtain or fulfill a contract with a customer, as well as enhanced disclosure

requirements.

ASU 2014-09 is effective for a public company’s annual reporting periods beginning after December 15, 2017.

As an EGC the Company has elected to adopt ASU 2014-09 following the effective dates for private companies beginning

with annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019.

The Company adopted this update on October 1, 2019 using the modified

retrospective approach applied only to contracts not completed as of the date of adoption, with no restatement of comparative periods.

The details and the quantitative impact of the adoption are described in Note 2.

As part of the adoption of the ASU, the Company elected to use the following practical expedients (i) not to adjust the promised amount of consideration for the effects of a

significant financing component when the Company expects, at contract inception, that the period between the Company’s transfer of a promised product or service to a customer and when the customer pays for that product or service will be one

year or less and (ii) to expense costs as incurred for costs to obtain a contract when the amortization period would have been one year or less.

In August 2016, the FASB issued ASU 2016-15, ‘‘Statement of Cash Flows (Topic 230)’’ (‘‘ASU 2016-15’’).

Additionally, in November 2016,

the FASB issued ASU 2016-18, ‘‘Statement of Cash Flows (Topic 230)’’ (‘‘ASU 2016-18’’).

These updates require organizations to reclassify certain cash receipts and cash payments within the Statement

of Cash Flows and modify the classification and presentation of restricted cash.

These ASU’s are effective for a public company’s annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods.

an EGC, the Company has elected to adopt these ASU’s following the effective dates for private companies beginning with annual reporting periods beginning after December 15, 2018, including interim reporting periods within fiscal years

The Company has determined its marine retail operating segment is its reporting unit and is also the

reportable segment.

Recent Accounting Pronouncements

In the fiscal fourth quarter of 2021, the Company lost its status as an ‘‘emerging growth company’’ (‘‘EGC’’) as defined by the Jumpstart Our Business Startups Act (‘‘JOBS Act’’) due to

annual gross revenues exceeding $1.07 billion .

As an EGC, the Company was allowed to delay adoption of new or revised accounting pronouncements applicable to public companies until such

pronouncements are made applicable to private companies.

The Company had elected to use this extended transition period under the JOBS Act and therefore retroactive to October 1, 2020, the first day of the current fiscal year, the Company was required to transition to the adoption dates applicable to public companies.

Recently Adopted Accounting Standards

In February 2016, the FASB issued Topic 842.

This update requires organizations to recognize lease assets and lease liabilities on the balance sheet and disclose key information about

leasing arrangements.

Topic 842 was effective for a public company’s annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods.

As an EGC, the Company

had previously elected to adopt Topic 842 following the effective dates for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years

beginning after December 15, 2022.

The Company adopted this update on October 1, 2019 and it did not have a material impact on the consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, ‘‘Business Combinations (Topic 805)’’ (‘‘ASU 2017-01’’).

This update clarifies the

definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses.

The definition of a business affects many

areas of accounting including acquisitions, disposals, goodwill, and consolidation.

As an EGC, the Company has elected to adopt ASU 2017-01 following the effective dates for private companies beginning with annual reporting periods beginning

after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019.

The Company adopted this update on October 1, 2019, and it did not impact the consolidated financial statements.

Standards Issued But Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, ‘‘Leases (Topic 842)’’ (‘‘ASU 2016-02’’).

This update requires organizations to

recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.

ASU 2016-02 is effective for a public company’s annual reporting periods beginning after December 15, 2018, and interim

periods within those annual periods.

As an EGC, the Company has elected to adopt ASU 2016-02 following the effective dates for private companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods

within fiscal years beginning after December 15, 2022, earlier application is permitted.

The Company is currently in the process of evaluating the effects of this pronouncement on its consolidated financial statements, related disclosures and

internal controls over financial reporting.

The Company plans to adopt ASU 2016-02 in fiscal year 2023 and expects the adoption of ASU 2016-02 to have a significant and material impact on the consolidated balance sheet given the current lease

agreements for the Company’s stores.

Based on the current assessment, it is expected that most of the operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of use assets upon

adoption, resulting in a material increase in the assets and liabilities recorded on the consolidated balance sheet.

The Company is continuing its assessment, which may identify additional impacts this standard will have on the consolidated

financial statements and related disclosures and internal control over financial reporting.

Due to the loss of EGC status as indicated above, the Company was required to adopt Topic 842 for fiscal year 2021.

Subsequent updates to Topic 842 provided an optional transition method that allows companies to elect to apply the standard using the modified retrospective approach at

its effective date, versus recasting the prior periods presented.

Company adopted the new standard as of October 1, 2020 using the modified retrospective transition.

The Consolidated Financial Statements for the twelve months ended September 30, 2021 are presented in accordance with ASC 842, while comparative years presented are not adjusted and

continue to be reported in accordance with guidance under ASC 840.

We elected the package of practical expedients, which permits us to not reassess the prior conclusions about lease

identification, lease classification and initial direct costs.

We elected the short-term lease recognition exemption for all leases that qualify.

We have both real estate leases and equipment leases that are impacted by the new guidance.

Our leases do not provide an implicit rate, therefore we use our incremental borrowing rate at the lease commencement date in determining the present value of lease payments.

The incremental borrowing rate represents an estimate of the

interest rate we would incur at lease commencement to borrow an amount equal to the lease payments on a collateralized basis over the term of the lease.

Total adjustment related to the adoption of Topic 842, net of tax, was recorded as $ 1.1 million increase in retained earnings.

See Note 18 for additional disclosure.

In June 2016, the FASB issued ASU 2016 - 13, ‘‘Financial instruments — Credit Losses’’ (“ASU 2016 - 13 ”).

ASU 2016-13 requires entities to report ‘‘expected’’

credit losses on financial instruments and other commitments to extend credit rather than the current ‘‘incurred loss’’ model.

These expected credit losses for financial assets held at the reporting date are to be based on historical

experience, current conditions, and reasonable and supportable forecasts.

This ASU will also require enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality.

2016-13 is effective for a public company’s annual reporting periods beginning after December 15, 2019, and interim periods within those annual periods.

As an EGC, the Company has elected to adopt ASU 2016-13 following the effective date for

private companies beginning with annual reporting periods beginning after December 15, 2022, including interim periods within those annual periods.

The Company is currently evaluating the impact that this standard will have on the

consolidated financial statements.

The Company plans to adopt ASU 2016-13 in fiscal year 2024.

ASU 2016 - 13 requires entities to report ‘‘expected’’ credit losses on financial instruments and other commitments to extend credit rather than the current ‘‘incurred loss’’ model.

These expected credit losses for

financial assets held at the reporting date are to be based on historical experience, current conditions, and reasonable and supportable forecasts.

This ASU requires enhanced disclosures relating to significant estimates and judgments

used in estimating credit losses, as well as the credit quality.

ASU 2016 - 13 is effective for a public company’s annual reporting periods beginning after

December 15, 2019, and interim periods within those annual periods.

As an EGC, the Company had previously elected to adopt ASU 2016 - 13 following the effective date for private companies beginning with annual reporting periods beginning after December 15, 2022, including interim periods within those

annual periods.

Due to the loss of EGC status as indicated above, the Company was required to adopt ASU 2016 - 13 for fiscal year 2021.

The adoption of the standard did not have an impact on the consolidated financial statements.

Standards Issued But Not Yet Adopted

In December 2019, the FASB issued ASU 2019 - 12, “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” .

The pronouncement is effective

for a public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods.

As an EGC, the Company has elected to adopt the pronouncement following the effective date for private

companies beginning with annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact that this standard will have on the

consolidated financial statements.

The pronouncement is effective for a

public company’s annual reporting periods beginning after December 15, 2020, and interim periods within those annual periods.

The Company is currently evaluating the impact that this standard

will have on the consolidated financial statements.

The Company plans to adopt the pronouncement in fiscal year 2022.

In March 2020, the FASB issued ASU No.

2020-04, “Reference Rate Reform” , which provides temporary optional guidance to companies impacted by the

transition away from the London Interbank Offered Rate (“LIBOR”).

The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other

transactions that reference LIBOR as a benchmark rate are modified.

The guidance is effective upon issuance and expires on December 31, 2022.

The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s

financial statements.

In the years ended September 30, 2019 and 2018, the Company completed acquisitions of multiple retail boat dealer groups in the United States.

No acquisitions were completed

during the year ended September 30, 2020.

In March 2020, the FASB issued ASU 2020 - 04, “Reference Rate Reform” , which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”).

The guidance provides

certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified.

The guidance is

effective upon issuance and expires on December 31, 2022.

The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements.

In October 2021, the FASB issued ASU 2021 - 08, “Business Combinations (Topic 805) – Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” , which is intended to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an acquired contract

liability and payment terms and their effect on subsequent revenue recognized by the acquirer.

The pronouncement is effective for a public company’s annual reporting periods beginning after December 15, 2022, and interim periods within those annual periods.

The Company is currently evaluating the impact that this standard will have on the consolidated financial

The Company plans to adopt the pronouncement in fiscal year 2024.

In the years ended September 30, 2021 and 2019, the Company completed

acquisitions of multiple businesses in the United States.

No acquisitions were completed during the year ended September 30,

The results of operations of acquisitions are included in the accompanying consolidated financial statements from the acquisition date forward.

The purchase price of acquisitions was allocated to

identifiable tangible assets and intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill.

In fiscal 2019, we completed the following transactions:

On December 1, 2018, the Slalom Shop with two locations in Texas

On February 1, 2019, Ocean Blue Yacht Sales with three locations in Florida

On February 1, 2019, Ray Clepper Boat Center with one location in South Carolina

On May 1, 2019, Caribee Boat Sales and Marina with one location in Florida

On August 1, 2019, Central Marine with three locations in Florida

Total purchase price of the fiscal 2019 acquisitions was $48.6 million and was paid with $19.4 million in cash and the remaining $29.2 million was financed with long-term debt and seller notes

Included in our results for the year ended September 30, 2019, the acquisitions contributed $62.0 million to our consolidated revenue and $4.0 million to our net income.

Costs related to

acquisitions are included in transaction costs and primarily relate to legal, accounting, and valuation fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of

$1.3 million for the year ended September 30, 2019.

In fiscal 2018, we completed the following transactions:

On February 1, 2018, Texas Marine with three locations in Texas

On April 1, 2018, Spend-A-Day Marine with two locations in Ohio

On June 1, 2018, Bosun’s Marine with four locations in Massachusetts

Total purchase price of the fiscal 2018 acquisitions was $31.0 million and was paid with $13.8 million in cash, an estimated payment of contingent consideration of $2.6 million, $12.0 million

was financed with long-term debt and seller notes payable and $2.5 million was reinvested in Bosun’s Marine.

Included in our results for the year ended September 30, 2018, the acquisitions contributed $68.4 million to our consolidated revenue

and $6.1 million to our net income.

Costs related to acquisitions are included in transaction costs and primarily relate to legal, accounting, and valuation fees, which are charged directly to operations in the accompanying consolidated

statements of operations as incurred in the amount of $0.4 million for the year ended September 30, 2018.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill recorded as a result of the fiscal 2019

transactions:

Assets acquired and liabilities assumed for the Year Ended September 30,

Prepaid expenses

The purchase price of acquisitions was allocated to identifiable tangible assets and

intangible assets acquired based on their estimated fair values at the acquisition date, with the excess being allocated to goodwill.

The valuation of tangible assets and assumed liabilities for the acquisition of Stone Harbor Marina and

PartsVu is preliminary as the acquisitions are subject to certain customary closing and post-closing adjustments.

Fiscal Year 2021

Walker Marine Group Acquisition

On December 31, 2020, we acquired substantially all of the assets of Walker Marine Group (“Walker”) with five locations in Florida.

The acquisition enhances the Company’s presence on the southwest coast of Florida and expands new and pre-owned

boat sales, as well as finance and insurance services, service and parts.

The purchase price was $ 33.8 million with $ 29.7 million paid at closing and an estimated fair value of contingent consideration of $ 4.1 million.

The estimated contingent consideration is part of an earnout subject to achievement of certain post-acquisition increases in adjusted EBITDA.

acquisition contingent consideration was determined using weighted average projections for the estimated post-acquisition adjusted EBITDA and was based on the Company’s historical experience with acquisitions as well as current forecasts

for the industry.

The minimum payout due on the acquisition contingent consideration is $ 0.2 million.

The maximum amount of the

earnout is unlimited.

The table below summarizes the fair values of the assets acquired and liabilities assumed at the acquisition date, including the goodwill

recorded as a result of the transaction:

Summary of Assets Acquired and Liabilities Assumed

($ in thousands)

Accounts receivable

Prepaid expenses

Property and equipment

Identifiable intangible assets

Liabilities assumed

Accounts payable

Customer deposits

Notes payable – floor plan

Total purchase price

The following unaudited pro forma results of operations for the years ended September 30, 2019 and 2018 assumes that all 2019 and 2018 acquisitions were completed on October 1,

Roscioli Yachting Center Acquisition

On December 31, 2020, we acquired substantially all of the assets of Roscioli Yachting Center (“Roscioli”) with one location in southeast Florida.

The acquisition expands the Company’s presence in the yacht category and amplifies the Company’s service

and repair offerings.

As part of the acquisition, we acquired the related real estate and in-water slips.

The purchase price was $ 45.5

million, paid at closing.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the

goodwill recorded as a result of the transaction:

Summary of Assets Acquired and Liabilities Assumed

($ in thousands)

Prepaid expenses

Property and equipment

Identifiable intangible assets

Accounts payable

Accrued expenses

Total purchase price

Other Acquisitions

In fiscal year 2021, we also completed the following transactions:

On December 1, 2020, Tom George Yacht Group with two

locations in Florida

On August 1, 2021, Stone Harbor Marina with one

location in New Jersey

On September 1, 2021, PartsVu, an online marketplace for OEM marine parts, electronics and accessories

Total purchase price of the acquisitions of Tom George Yacht Group, Stone Harbor Marina and PartsVu was $ 42.8 million and was paid with $ 32.2

million in cash, $ 2.1 million in seller notes payable, $ 5.1 million in estimated fair value of contingent consideration, $ 1.9

million in accrued purchase consideration and the remaining $ 1.5 million with the issuance of shares of Class A common stock.

The estimated contingent consideration is part of earnouts subject to achievement of certain post-acquisition increases in adjusted EBITDA.

The acquisition contingent consideration was determined using weighted average projections for the

estimated post-acquisition adjusted EBITDA and was based on the Company’s historical experience with acquisitions as well as current forecasts for the industry.

There is no minimum payout due on the acquisition contingent consideration

and the maximum amount of the earnout is unlimited.

The acquisitions of PartsVu and Stone Harbor Marina are preliminary.

The valuation of identifiable intangible assets

is preliminary pending receipt of final valuation analyses.

The valuation of tangible assets and assumed liabilities is preliminary as the acquisitions are subject to certain customary closing and post-closing adjustments.

The table below summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, including the

goodwill recorded as a result of the transactions:

Summary of Assets Acquired and Liabilities Assumed

Accounts receivable

Prepaid expenses

Property and equipment

Identifiable intangible assets

Accrued expenses

Customer deposits

Notes payable – floor plan

Total purchase price

Included in our results for the year ended September 30, 2021, the acquisitions contributed $ 107.9 million to our consolidated revenue and $ 13.3 million to our income before income tax expense.

Costs related to acquisitions are included in transaction costs

and primarily relate to legal, accounting, and valuation fees, which are charged directly to operations in the accompanying consolidated statements of operations as incurred in the amount of $ 0.8 million for the year ended September 30, 2021.

Fiscal Year 2019

In fiscal year 2019, we completed the following transactions:

On December 1, 2018, the Slalom Shop with two locations in Texas

On February 1, 2019, Ocean Blue Yacht Sales with three locations in Florida

On February 1, 2019, Ray Clepper Boat Center with one location in South Carolina

On May 1, 2019, Caribee Boat Sales and Marina with one location in Florida

On August 1, 2019, Central Marine with three locations in Florida

Total purchase price of the fiscal 2019 acquisitions was $ 48.6 million and was paid with $ 19.4

million in cash and the remaining $ 29.2 million was financed with long-term debt and seller notes payable.

Included in our results for the year ended September 30, 2019, the acquisitions contributed $ 62.0 million to

our consolidated revenue and $ 4.0 million to our net income.

Costs related to acquisitions are included in transaction costs

The following unaudited pro forma results of operations for the years ended September 30, 2021, 2020 and 2019 assumes that all acquisitions were completed on October 1, 2018.

Pro forma revenues

1 unchanged sentence

Accounts Receivable

The accounts receivable balance at September 30, 2020 and 2019, represents trade and other receivables.

Accounts receivable primarily consists of contracts in transit.

1 unchanged sentence

These finance contracts are typically funded within 30 days .

Trade receivables include amounts due

from customers on the sale of boats, parts, service, and storage.

Amounts due from manufacturers represent receivables for various manufacturer incentive programs and parts and service work performed pursuant to the manufacturers’ warranties.

Trade receivables include amounts due from customers on the sale of boats, parts, service, and storage.

Amounts due from manufacturers represent receivables

for various manufacturer incentive programs and parts and service work performed pursuant to the manufacturers’ warranties.

Accounts receivable consisted of the following:

8 unchanged sentences

Total accounts receivable, net

The allowance for uncollectible receivables was not material to the consolidated financial statements as of September 30, 2020 or 2019.

Management closely monitors outstanding

accounts receivable for collectability based on the age of the receivable and the history of past collections and will write off any balances that are considered to be uncollectible.

Inventories consisted of the following at:

Inventories consisted of the

following at:

($ in thousands)

2 unchanged sentences

Pre-owned vessels

Work in process, parts and accessories

Work in process, parts

and accessories

Total inventories

13 unchanged sentences

Total property and equipment, net

For the years ended September 30, 2020, 2019 and 2018, depreciation and amortization expense totaled $3.2 million, $2.7 million and $1.7 million, respectively.

For the years ended September 30, 2021, 2020 and 2019, depreciation and

amortization expense totaled $ 5.4 million, $ 3.2 million and $ 2.7 million, respectively.

Goodwill and Other Identifiable Intangible Assets

Our acquisitions have resulted in the recording of goodwill and other identifiable intangible assets.

Goodwill is an asset representing operational synergies and future economic

benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Our acquisitions have resulted in the recording of goodwill and other

identifiable intangible assets.

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

Identifiable intangible assets consist of trade names related to the acquisitions the Company has completed.

There were no acquisitions for the year ended September 30, 2020.

The changes in goodwill and identifiable intangible assets for the year ended September 30, 2019 are as follows:

The changes in goodwill and identifiable intangible assets are as follows:

($ in thousands)

Balance as of September 30, 2019

Goodwill acquisitions during the year

Goodwill acquisitions/divestitures during

Balance as of September 30, 2020

Goodwill acquisitions/divestitures during the year

Goodwill acquisitions/divestitures during

Balance as of September 30, 2021

2 unchanged sentences

Balance as of September 30, 2019

Identifiable intangible assets acquisitions during the year

Identifiable intangible assets

acquisitions/divestitures during the year

Balance as of September 30, 2020

Identifiable intangible assets acquisitions/divestitures during the year

Identifiable intangible assets

acquisitions/divestitures during the year

Balance as of September 30, 2021

See Note 2 for more information about our annual impairment tests of goodwill and identifiable intangible assets.

See Note 2 for more information about our annual impairment tests of

goodwill and identifiable intangible assets.

Other Payables and Accrued Expenses

10 unchanged sentences

Notes Payable — Floor Plan

The Company maintains an ongoing wholesale marine products inventory financing program with a syndicate of banks.

The program is administered by Wells Fargo Commercial

Distribution Finance, LLC (“Wells Fargo”).

On July 22, 2020, the Company entered into the First Amendment to the Sixth Amended and Restated Inventory Financing Agreement (the “2020 Inventory Financing Facility”), to, among other things,

address the refinancing on July 22, 2020 with Truist Bank, permit the payment of fees and expenses in connection with the termination of the Term and Revolver Credit Facility and permit the payment of transaction costs in connection with the

Credit Agreement.

The maximum borrowing amount available, interest rates and the termination date of the agreement remained unchanged.

The Company maintains an ongoing wholesale marine products inventory

financing program with a syndicate of banks.The program is administered by Wells Fargo Commercial Distribution Finance, LLC (“Wells Fargo”).

On September 23, 2021, the Company entered into the Third Amendment to the Sixth Amended and

Restated Inventory Financing Agreement (the “Inventory Financing Facility”), to, among other things, address the future discontinuance of LIBOR by clarifying the mechanics related to the transition to a replacement benchmark rate and to

extend the term of the Inventory Financing Facility to November 1, 2021.

The maximum borrowing amount available remained unchanged.

The Inventory Financing Facility is used to purchase new and pre-owned inventory (boats, engines, and

The outstanding balance of the facility was $ 114.2 million and $ 124.0 million, as of September 30, 2021 and 2020, respectively.

On February 11, 2020, in connection with the Offering, the Company and certain of its subsidiaries entered into the 2020 Inventory Financing Facility and, among other things,

permitted certain payments and transactions in connection with the Offering, including payments under the Tax Receivable Agreement.

The maximum borrowing amount available, interest rates and the termination date of the agreement remained

On November 26, 2019, the Company and certain of its subsidiaries entered into the Fifth Amended and Restated Inventory Financing Agreement (the “Inventory Financing Facility”)

and, among other things, extended the maturity of the Inventory Financing Facility to September 28, 2021 and increased the maximum amount of borrowings under the Inventory Financing Facility from $292.5 million to $392.5 million.

Interest on new boats and for rental units is calculated using the one month London Inter-Bank Offering Rate (“LIBOR”) plus an applicable margin of 2.75% to 5.00% depending on

the age of the inventory.

On December 10, 2020, the Company and certain of its subsidiaries entered into the Second Amendment to the Inventory Financing Facility to change certain compliance reporting from weekly to monthly.

The maximum borrowing amount

available, interest rates and the termination date of the agreement remained unchanged.

For the years ended September 30, 2021, 2020 and 2019, interest on new

boats and for rental units is calculated using the one month London Inter-Bank Offering Rate (“LIBOR”) plus an applicable margin

of 2.75 % to 5.00 %

depending on the age of the inventory.

Interest on pre-owned boats is calculated at the new boat rate plus 0.25 %.

Wells Fargo will finance 100.0% of the vendor invoice price for new boats, engines and trailers.

will finance 100.0 % of the vendor invoice price for new boats, engines and trailers.

As of September 30, 2021 the interest rate

on the Inventory Financing Facility ranged from 3.08 % to 5.33 % for new inventory and 3.33 % to 5.58 % for pre-owned inventory.

As of September 30, 2019 the interest rate on the Inventory Financing Facility ranged from 4.77% to 7.02% for new

inventory and 5.02% to 7.27% for pre-owned inventory.

As of September 30, 2020 the interest rate on the Inventory Financing Facility ranged from 3.15 % to 5.40 % for new inventory

and 3.40 % to 5.65 %

for pre-owned inventory.

Borrowing capacity available at September 30, 2021 and September 30, 2020 was $ 278.3 million and $ 268.5 million, respectively.

The Inventory Financing Facility has certain financial and non-financial covenants as specified in the agreement.

The financial covenants include requirements to comply with a

maximum funded debt to EBITDA ratio as well as a minimum fixed charge coverage ratio.

In addition, certain non-financial covenants could restrict the Company’s ability to sell assets (excluding inventory in the normal course of business),

engage in certain mergers and acquisitions, incur additional debt and pay cash dividends or distributions, among others.

The Company was in compliance with all convenants at September 30, 2020.

The collateral for the 2020 Inventory Financing Facility consists primarily of our inventory that is financed through the 2020 Inventory Financing Facility and related assets,

including accounts receivable, bank accounts and proceeds of the foregoing, and excludes the collateral that underlies the Credit Agreement (defined below).

As part of the Third Amendment to the Inventory Financing

Facility, effective October 1, 2021, the reference rate on the Inventory Financing Facility will change from LIBOR.

Subsequent to the change, the interest rate for amounts outstanding under the Inventory Financing Facility will be

calculated using an applicable margin of 2.75 % to 5.00 % for new boats (and at the new boat rate plus 0.25 % for

pre-owned boats) plus the greater of 1) the Adjusted 30 -Day Average SOFR (as defined in the Third Amendment to the Inventory

Financing Facility) or 2) a floor of 0.0 %.

The Inventory

Financing Facility has certain financial and non-financial covenants as specified in the agreement.

The financial covenants include requirements to comply with a maximum funded debt to EBITDA ratio as well as a minimum fixed charge coverage

In addition, certain non-financial covenants could restrict the Company’s ability to sell assets (excluding inventory in the normal course of business), engage in certain mergers and acquisitions, incur additional debt and pay cash

dividends or distributions, among others.

The Company was in compliance with all covenants at September 30, 2021.

collateral for the Inventory Financing Facility consists primarily of our inventory that is financed through the Inventory Financing Facility and related assets, including accounts receivable, bank accounts and proceeds of the foregoing,

and excludes the collateral that underlies the Credit Agreement (defined below).

Long-term Debt and Line of Credit

2020 Credit Agreement

On July 22, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”), with Truist Bank.

On February 2, 2021, the Company entered into the Incremental Amendment

1 (the “First Amendment”) to Amend the Credit Agreement (as defined below), to among other things, provide for an incremental term loan (the “Incremental Term Loan”) in an aggregate principal amount equal to $ 30.0 million, which will be added to, and constitute a part of, the existing $ 80.0 million term loan.

The Incremental Term Loan will increase the existing term loan and will be on the same terms applicable to the existing term loan.

On July 22, 2020, the Company entered into a Credit Agreement (the

“Credit Agreement”), with Truist Bank.

The Credit Agreement provides for a $ 30.0 million revolving credit facility that may be

used for revolving credit loans (including up to $ 5.0 million in swingline loans) and up to $ 5.0 million in letters of credit from time to time, and a $ 80.0 million term loan.

Subject to certain conditions, the available amount under the

revolving credit facility and the term loans may be increased by $50.0 million in the aggregate.

The Credit Agreement bears interest at a rate that is equal to LIBOR for such interest period plus an

applicable margin of up to 3.00%, subject to step-downs to be determined based on the consolidated leverage ratio.

The revolving credit facility is subject to an unused line fee of up to 0.40%, subject to step-downs to be determined based

on the consolidated leverage ratio .

Subject to certain conditions, the available amount under the revolving credit facility and the term loans may be increased by $ 50.0 million in the aggregate.

The Credit Agreement bears interest at a rate that is equal to LIBOR for

such interest period plus an applicable margin of up to 3.00 %, subject to step-downs to be determined based on the

consolidated leverage ratio.

The revolving credit facility is subject to an unused line fee of up to 0.40 %, subject to

step-downs to be determined based on the consolidated leverage ratio .

The revolving credit facility matures on July 22, 2025 .

The term loan is repayable in installments beginning on March 31, 2021, with the remainder due

on July 22, 2025.

In connection with the refinance on July 22, 2020, the Company used $30.9 million cash on hand and the $80.0 million term loan under the Credit Agreement to repay the $104.8 million outstanding

principal and interest and a $4.2 million early termination fee under Term and Revolver Credit Facility (defined below).

The remaining $1.9 million was recorded as debt issuance costs and will be amortized over the life of the Credit

In connection with the extinguishment, the Company also recognized $2.4 million of expense for unamortized debt issuance costs related to the Term and Revolver Credit Facility in the Consolidated Statements of Operations.

The Credit Agreement is collateralized by certain real and personal property (including certain capital stock) of the Company and its subsidiaries.

The collateral under the Credit Agreement

does not include inventory and certain other assets of the Company’s subsidiaries financed under the 2020 Inventory Financing Facility.

The Credit Agreement is subject to certain financial covenants related to the maintenance of a minimum

fixed charge coverage ratio and a maximum consolidated leverage ratio.

The credit agreement also contains non-financial covenants and restrictive provisions that, among other things, limit the ability of the Company to incur additional debt,

transfer or dispose of all of its assets, make certain investments, loans or payments and engage in certain transactions with affiliates.

The Company was in compliance with all convenants at September 30, 2020.

Term and Revolver Credit Facility

On February 11, 2020, in connection with the Offering, the Company entered into an Amended and Restated Credit and Guaranty Agreement (the “Term and Revolver

Credit Facility”) by and among OneWater Inc, OneWater LLC and its subsidiaries, with Goldman Sachs Specialty Lending Group, L.P.

The amendment, among other things, modified the terms to (i) increase the Revolving Facility from $5.0 million

to $10.0 million, (ii) increase the maximum available under the Multi-Draw Term Loan from $60.0 million to $100.0 million, (iii) provide an uncommitted and discretionary multi-draw term loan accordion feature of up to $20.0 million, (iv)

amend the repayment schedule of the Multi-Draw Term Loan to commence on March 31, 2022 (v) amend the scheduled maturity date of the Revolving Facility and Multi-Draw Term Loan to be February 11, 2025 and (vi) remove OWM BIP Investor, LLC as

The Term and Revolver Credit Facility bore interest at a rate that is equal to LIBOR for such interest period (subject to a 1.50% floor) plus an applicable margin of up to 7.00%, subject to step-downs to be determined based on

certain financial leverage ratio measures.

The Term and Revolver Credit Facility included the option for the Company to defer cash payments of interest for twelve months and add the accrued interest to the outstanding principal of the note

This election was made and as a result, the interest rate was increased by 2.0%.

Immediately upon closing of the agreement, the Company borrowed an additional $35.3 million on the Multi-Draw Term Loan.

The Term and Revolver

Credit Facility was repaid in full on July 22, 2020 in connection with the Credit Agreement.

The Term and Revolver Credit Facility was collateralized by all real, personal and mixed property (including capital units) of the Company.

Under the agreement, the Company was

required to be in compliance with various financial covenants including a minimum fixed charge coverage ratio, a maximum senior leverage ratio, a maximum total leverage ratio and $1,000,000 minimum consolidated liquidity.

In addition, certain

non-financial covenants could have restricted the Company’s ability to incur additional debt, make certain investments, enter into certain transactions with stockholders or affiliates, dispose of assets or pay dividends or distributions

excluding distributions related to the payment of taxes by members

On May 1, 2019, the Company further expanded the multi-draw term loan with Goldman and BIP.

The maximum available under the facility was increased from $50.0 million to $60.0

The applicable interest rate, maturity, terms, conditions and covenants were unchanged.

On February 1, 2018, the Company expanded the multi-draw term loan with Goldman and Beekman.

The maximum available under the facility was increased from $20.0 million to $50.0

The applicable interest rate, maturity, terms, conditions and covenants were unchanged.

The Company entered into a $20.0 million multi-draw term loan and a $5.0 million revolving line of credit with Goldman and Beekman on October 28, 2016.

The loans and line of

credit were subject to an applicable interest rate of 10.0% per annum.

The multi-draw term loan was also subject to a 0.5% unused line fee.

The multi-draw term loan was to be repaid in equal consecutive quarterly payments in the annual amount

equal to 5.0% of the aggregate principal amount outstanding immediately prior to December 31, 2019.

The loan was to mature on October 28, 2021 and the full principal and any accrued unpaid interest was due in full on that date.

Repayments on

the revolving line of credit could be made at any time.

The term loan is repayable in installments beginning on March 31, 2021, with the remainder due on July 22, 2025 .

The Credit Agreement is collateralized by certain real and personal

property (including certain capital stock) of the Company and its subsidiaries.

The collateral does not include inventory and certain other assets of the Company’s subsidiaries financed under the Inventory Financing Facility.

Agreement is subject to certain financial covenants related to the maintenance of a minimum fixed charge coverage ratio and a maximum consolidated leverage ratio.

The credit agreement also contains non-financial covenants and restrictive

provisions that, among other things, limit the ability of the Company to incur additional debt, transfer or dispose of all of its assets, make certain investments, loans or payments and engage in certain transactions with affiliates.

The Company was in compliance with all covenants at September 30, 2021.

Long-term debt consisted of the following at:

2 unchanged sentences

September 30, 2020

Term note payable to Truist Bank, secured and bearing interest at 2.40% at September 30, 2020.

The note requires quarterly principal payments commencing on

March 31, 2021 and maturing with a full repayment on July 22, 2025

Multi-draw term note payable to Goldman Sachs Specialty Lending Group, L.P.

and OWM BIP Investor, LLC, secured and bearing interest at 10.0% at September 30,

The note was repaid in full

Term note payable to Truist Bank, secured and

bearing interest at 2.75 % at September 30, 2021 and 3.0 % at September 30, 2020.

The note requires quarterly principal payments commencing on March 31, 2021 and maturing with a full repayment on July 22, 2025

Revolving note payable for an amount up to $ 30.0 million to Truist Bank

Revolving note payable for an amount up to $30.0 million to Goldman Sachs Specialty Lending Group, L.P.

and OWM BIP Investor, LLC

Note payable to commercial vehicle lenders secured by the value of the vehicles bearing interest at rates ranging from 0.0% to 8.9% per annum.

The note requires

monthly installment payments of principal and interest ranging from $100 to $5,600 through August 2025

Note payable to Central Marine Services, Inc., unsecured and bearing interest at 5.5% per annum.

The note requires monthly interest payments, with a balloon payment of principal

due on February 1, 2022

Note payable to Ocean Blue Yacht Sales, unsecured and bearing interest at 5.0% per annum.

The note requires quarterly interest payments, with a balloon payment of principal due on

February 1, 2022

Note payable to Lab Marine, Inc., unsecured and bearing interest at 6.0% per annum.

The note requires annual interest payments, with a balloon payment of principal due on March 1,

Note payable to Slalom Shop, LLC, unsecured and bearing interest at 5.0% per annum.

The note requires quarterly interest payments, with a balloon payment of principal due on

December 1, 2021

Note payable to Bosun’s Marine, Inc., unsecured and bearing interest at 4.5% per annum.

The note requires annual interest payments with a balloon payment due on

Note payable to Rebo, Inc., unsecured and bearing interest at 5.5% per annum.

The note requires annual interest payments with a balloon payment due on April 1,

Note payable to Rambo Marine, Inc., unsecured and bearing interest at 7.5% per annum.

The note was repaid in full

Note payable to Marina Mikes, LLC, unsecured and bearing interest at 5.0% per annum.

The note was repaid in full

Note payable to Sunrise Marine, Inc.

and Sunrise Marine of Alabama, Inc., unsecured and bearing interest at 6.0% per annum.

The note was repaid in full

Note payable to Texas Marine, Inc., unsecured and bearing interest at 4.5% per annum.

The note was repaid in full

Note payable to commercial vehicle lenders

secured by the value of the vehicles bearing interest at rates ranging from 0.0 % to 8.9 % per annum.

The note requires monthly

installment payments of principal and interest ranging from $ 100 to $ 5,600 through July 2028

Note payable to Central Marine Services,

Inc., unsecured and bearing interest at 5.5 % per annum.

The note requires monthly interest payments, with a balloon

payment of principal due on February 1, 2022

Note payable to Tom George Yacht Group, unsecured and bearing interest at 5.5 % per annum.

The note requires monthly interest payments, with a balloon payment of principal due on December 1, 2023

Note payable to Ocean Blue Yacht Sales,

unsecured and bearing interest at 5.0 % per annum.

The note requires quarterly interest payments, with a balloon

payment of principal due on February 1, 2022

Note payable to Lab Marine, Inc., unsecured

and bearing interest at 6.0 % per annum.

The note was repaid in full on March 1, 2021

Note payable to Slalom Shop, LLC, unsecured

and bearing interest at 5.0 % per annum.

The note requires quarterly interest payments, with a balloon payment of

principal due on December 1, 2021

Note payable to Bosun’s Marine, Inc.,

unsecured and bearing interest at 4.5 % per annum.

The note was repaid in full on June 1, 2021

Note payable to Rebo, Inc., unsecured and

bearing interest at 5.5 % per annum.

The note was repaid in full on April 1, 2021

Total debt outstanding

1 unchanged sentence

Less unamortized portion of debt issuance costs

Long-term debt, net of current portion of unamortized debt issuance costs

Principal repayment requirements of long-term debt at September 30, 2020 are as follows (in thousands):

Long-term debt, net of current portion and

unamortized debt issuance costs

Principal repayment requirements of long-term debt at September 30, 2021 are as

follows (in thousands):

Year ending September 30,

Total principal payments

Debt issuance costs are amortized on a straight-line basis over the life of the loan, which approximates the effective interest method.

During 2020 and 2019, the Company

capitalized loan costs of $3.9 million and $0.2 million, respectively, and had accumulated amortization of $0.1 million and $0.7 million as of September 30, 2020 and 2019, respectively.

In connection with the prepayment of the Term and

Revolver Credit Facility, the Company wrote off unamortized debt issuance costs of $2.4 million which was included in loss on extinguishment of debt in the Consolidated Statements of Operations.

Amortization for the years ended September 30,

2020, 2019 and 2018 amounted to $0.4 million, $0.3 million and $0.2 million, respectively, and is included in interest expense.

Debt issuance costs are amortized on a straight-line

basis over the life of the loan, which approximates the effective interest method.

During 2021 and 2020, the Company capitalized loan costs of $ 0.7

million and $ 3.9 million, respectively, and had accumulated amortization of $ 0.8 million and $ 0.1 million as of September 30, 2021 and

2020, respectively.

In connection with the prepayment of the Term and Revolver Credit Facility with Goldman Sachs Specialty Lending Group, L.P., the Company wrote off unamortized debt issuance costs of $ 2.4 million which was included in loss on extinguishment of debt in the Consolidated Statements of Operations for the year ended September 30,

Amortization for the years ended September 30, 2021, 2020 and 2019 amounted to $ 0.7 million, $ 0.4 million and $ 0.3 million,

respectively, and is included in interest expense.

The Company had no outstanding letters of credit as of September 30, 2021.

Stockholders’ and Members’ Equity

Stockholders’ Equity

Equity-Based Compensation

In periods prior to the Offering, the Company issued Profit in Interests awards to select members of executive management.

These awards were for Class B units which represent

non-voting units.

These awards were to vest over three to five years and are designed to motivate and retain the executives through long-term performance incentives.

As part of the Organizational Transactions, previously issued Profit in

Interests awards fully and immediately vested and were exchanged for 32,754 OneWater LLC Units.

In connection with the Offering, the Board adopted an LTIP to incentivize individuals providing services to OneWater Inc and its subsidiaries and affiliates.

The LTIP provides

for the grant, from time to time, at the discretion of the Board or a committee thereof, of (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units, (5) stock awards, (6) dividend equivalents, (7)

other stock-based awards, (8) cash awards, (9) substitute awards and (10) performance awards.

The total number of shares reserved for issuance under the LTIP that may be issued pursuant to incentive stock options (which generally are stock

options that meet the requirements of Section 422 of the Code) is 1,385,799.

The LTIP will be administered by the Board, except to the extent the Board elects a committee of directors to administer the LTIP.

Class A common stock subject to an

award that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares (including forfeiture of restricted stock awards) and shares withheld to pay the exercise price of, or to satisfy the

withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the LTIP.

In connection with the consummation of the Offering, OneWater Inc granted to its named executive officers equity-based awards under the LTIP, which consist of (i) 17,333 restricted stock units

subject to time-based vesting for each of Messrs.

Singleton (Chief Executive Officer) and Aisquith (Chief Operating Officer), and (ii) 10,000 restricted stock units subject to time-based vesting for Mr.

Ezzell (Chief Financial Officer).

We maintain the OneWater Marine Inc.

Omnibus Incentive

Plan (the “LTIP”) to incentivize individuals providing services to OneWater Inc.

and its subsidiaries and affiliates.

The LTIP provides for the grant, from time to time, at the discretion of the board of directors of OneWater Marine Inc.

(the “Board”) or a committee thereof, of (1) stock options, (2) stock appreciation rights, (3) restricted stock, (4) restricted stock units, (5) stock awards, (6) dividend equivalents, (7) other stock-based awards, (8) cash awards, (9)

substitute awards and (10) performance awards.

The total number of shares reserved for issuance under the LTIP that may be issued pursuant to incentive stock options (which generally are stock options that meet the requirements of Section

422 of the Code) is 1,509,565 .

The LTIP is and will continue to be administered by the Board, except to the extent the Board

elects a committee of directors to administer the LTIP.

Class A common stock subject to an award that expires or is cancelled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares (including forfeiture of

restricted stock awards) and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery pursuant to other awards under the LTIP.

During the fiscal year ended September 30, 2021, the Board approved the grant

of 143,947 time-based restricted stock units.

25,620 restricted stock units fully vest on October 1, 2021 and the remaining 118,327

restricted stock units vest in four equal annual installments commencing on September 30, 2021.

During the fiscal year ended September 30, 2021, the Board approved the grant of 102,490 performance-based restricted stock units, which represents 100 % of the target award.

Performance-based restricted stock units provide an opportunity for the recipient to receive a number of shares of our common stock based on our

performance during fiscal year 2021 as measured against objective performance goals as determined by the Board.

The actual number of units earned for the 2021 awards may range from 0 % to 200 % of the target number of units depending upon

achievement of the performance goals.

Performance-based restricted stock units vest in three equal annual installments.

vesting, each performance-based restricted stock unit equals one share of common stock of the Company.

As of September 30,

2021, the Company fully achieved the performance targets at 200 % for the 2021 awards.

I n connection with the consummation of the IPO, OneWater Inc granted 44,666 time-based restricted stock units.

These restricted stock units vest in four equal annual installments commencing on February 7, 2021.

During the period following the Offering through September 30, 2020, the Board approved the grant of an additional 139,727 time-based vesting restricted stock units.

39,727 restricted stock units fully vest on

February 7, 2021 and the remaining 100,000 restricted stock units vest in four equal annual installments commencing on February 7, 2021.

Compensation cost for restricted stock units is based on the closing price of our common stock on the date immediately preceding the grant and is recognized on a straight-line basis over the applicable vesting

During the period following the offering through September 30, 2020, the Board approved the grant of 67,000 performance share units, which represents 100% of the target award.

Performance share units provide an

opportunity for the recipient to receive a number of shares of our common stock based on our performance during fiscal year 2020 as measured against objective performance goals as determined by the Board.

The actual number of units earned

may range from 0% to 175% of the target number of units depending upon achievement of the performance goals.

Performance share units vest in four equal annual installments.

Upon vesting, each performance share unit equals one share of

common stock of the Company.

Compensation cost for performance share units is based on the closing price of our common stock on the date immediately preceding the grant and the ultimate performance level achieved, and is recognized on a

graded basis over the four-year vesting period.

As of September 30, 2020, the Company fully achieved the performance targets at 175% and therefore $0.5 million of expense related to the performance awards was recorded in the year ended

September 30, 2020.

The following table further summarizes activity related to restricted stock units for the period from the Offering to September 30, 2020:

During the period following the IPO through September 30, 2020, the Board approved the grant of

an additional 139,727 time-based vesting restricted stock units of which 39,727 restricted stock units fully vest on February 7, 2021, and the remaining 100,000 restricted stock units vest in four equal annual

installments commencing on March 2, 2021.

During the period following the IPO through September 30, 2020, the Board approved the grant of

67,000 performance-based restricted stock units, which represents 100 % of the target award.

Performance-based restricted stock units provide an opportunity for the recipient to receive a number of shares of our common stock based on

our performance during fiscal year 2020 as measured against objective performance goals as determined by the Board.

The actual number of units earned for the 2020 awards may range from 0 % to 175 % of the target number of units depending

upon achievement of the performance goals.

Performance-based restricted stock units vest in three equal annual installments.

Upon vesting, each performance share unit equals one share of common stock of the Company.

As of September 30, 2020, the

Company fully achieved the performance targets at 175 % for the 2020 awards.

Compensation cost for time-based restricted stock units is based on the closing price of our

common stock on the date immediately preceding the grant and is recognized on a graded basis over the applicable vesting periods.

Compensation cost for performance share units is based on the closing price of our common stock on the date

immediately preceding the grant and the ultimate performance level achieved and is recognized on a graded basis over the three-year

The Company recognized $ 5.7 million and $ 1.6 million of compensation expense for the fiscal years ended September 30, 2021 and 2020, respectively, which includes $ 2.6 million and $ 0.5 million of compensation expense for the fiscal

years ended September 30, 2021 and 2020, respectively, for performance share units .

The following table further summarizes activity related to restricted stock

units for the period from the IPO to September 30, 2021:

Restricted Stock Unit Awards

4 unchanged sentences

Unvested at September 30, 2020

For the year ended September 30, 2020, the Company recognized $1.6 million of compensation expense related to the grant of restricted stock units.

As of September 30, 2020, the total

unrecognized compensation expense related to outstanding equity awards was $3.2 million, which the Company expects to recognize over a weighted-average period of 1.6 years.

Investor Voting Warrants

On October 28, 2016, the Company issued 25,000 OneWater LLC common unit warrants in exchange for $1.0 million.

The common unit warrants had a ten-year life from the date of issuance and provided

the holders with a put right after 5 years, or potentially earlier, under certain circumstances.

The holders of the warrants maintained full voting rights in OneWater LLC.

As the common unit warrants could be settled in cash at the election

of the holder, the fair value of the common unit warrants were included in warrant liability in the accompanying consolidated balance sheets as of September 30, 2019.

The common unit warrants were exercised for $0.0001 per unit in exchange

for cash or common units of OneWater LLC.

In connection with the Offering, Goldman and Beekman received 2,148,806 OneWater LLC units upon exercise of the warrants.

The Company engaged a third-party valuation specialist to assist management in performing a valuation of the fair value of the common unit warrants.

Accordingly, the warrant liability was

accounted for based on inputs that were unobservable and significant to the overall fair value measurement (Level 3).

The valuation considered both a market and a discounted cash flows approach in arriving at the fair value of the common unit

As previously noted, the common unit warrants were exercised at the Offering for common units of OneWater LLC and therefore no warrant liability existed as of September 30, 2020.

As of September 30, 2019 the fair value of the

warrant liability was $50.9 million.

The Company recognized (income) expense of $(0.8) million, $(1.3) million and $33.2 million for the years ended September 30, 2020, 2019 and 2018, respectively, and this change in the fair value was

recorded as a change in the fair value of warrants in the accompanying consolidated statements of operations.

OneWater LLC Preferred Distribution

As of September 30, 2019, the unpaid balance of the preferred distribution was $3.2 million.

The 5% cumulative interest on the preferred distribution was recognized as a distribution when declared

by the Board.

As of September 30, 2019, unpaid cumulative interest on the preferred distribution was zero.

On February 11, 2020, in connection with the Offering, the Company paid $3.2 million in exchange for the surrender of the preferred

distribution right.

Non-Controlling Interest

In connection with the Offering, the former owners of Bosun’s Assets and Operations (“BAO”) and South Shore Assets and Operations (“SSAO”) received 290,466 and 306,199 shares of Class A common stock,

respectively, for the surrender of their respective 25.0% ownership interests.

The results of operations for BAO and SSAO have been included in the Company’s consolidated financial statements and the

former owners’ minority interests have been recorded , accordingly , through the date of the Offering.

As discussed in Note 1, OneWater Inc consolidates the financial results of OneWater LLC and its subsidiaries and reports a non-controlling interest related to the portion of OneWater LLC owned by the LLC

Changes in ownership interest in OneWater LLC while OneWater Inc retains its controlling interest will be accounted for as equity transactions.

Future direct exchanges of LLC units will result in a change in ownership and reduce

the amount recorded as a non-controlling interest and increase additional paid-in-capital.

As of September 30, 2020, OneWater Inc owned 69.4% of the economic interest of OneWater LLC with the LLC

Unitholders owning the remaining 30.6%.

Unvested at September 30, 2021

As of September 30, 2021, the total unrecognized compensation expense related

to outstanding equity awards was $ 7.0 million, which the Company expects to recognize over a weighted-average period of 1.5 years.

We issue shares of our Class A common stock upon the vesting of

performance-based restricted stock units and time-based restricted stock units.

These shares are issued from our authorized and not outstanding common stock.

In addition, in connection with the vesting of restricted stock units, we

repurchase a portion of shares equal to the amount of employee income tax withholding.

Earnings Per Share

Basic and diluted earnings per share of Class A common stock is computed by dividing net income attributable to OneWater Inc for the period from February 11, 2020 through September 30, 2020 (the period following

the Organizational Transactions and the Offering), by the weighted-average number of shares of Class A common stock outstanding during the same period.

Diluted earnings per share is computed by giving effect to all potentially dilutive

There were no shares of Class A or Class B common stock outstanding prior to February 11, 2020, therefore no earnings per share information has been presented for any period prior to that date.

The following table sets forth the calculation of earnings per share for the year ended September 30, 2020 (in thousands, except per share data):

Basic and diluted earnings per share of Class A common stock is computed

by dividing net income attributable to OneWater Inc by the weighted-average number of shares of Class A common stock outstanding during the same period.

For the year ended September 30, 2020, earnings per share is calculated for the

period from February 11, 2020 through September 30, 2020, the period following the IPO.

Diluted earnings per share is computed by giving effect to all potentially dilutive shares.

There were no shares of Class A or Class B common stock outstanding prior to February 11, 2020, therefore no earnings per share information has been presented for any period

prior to that date.

The following table sets forth the calculation of earnings per share for

the years ended September 30, 2021 and 2020 (in thousands, except per share data):

Earnings per share:

September 30, 2021

September 30, 2020

Net income attributable to OneWater Inc

Weighted-average number of unrestricted outstanding common shares used to calculate basic net income per share

Weighted-average number of unrestricted

outstanding common shares used to calculate basic net income per share

Effect of dilutive securities:

Restricted stock units

Diluted weighted-average shares of Class A common stock outstanding used to calculate diluted net income per share

Earnings per share of Class A common stock – basic

Earnings per share of Class A common stock – diluted

Shares of Class B common stock do not share in the income (losses) of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings per

share of Class B common stock under the two-class method has not been presented.

The following number of weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive

shares would have been antidilutive upon conversion (in thousands):

Diluted weighted-average shares of Class

A common stock outstanding used to calculate diluted net income per share

Earnings per share of

Class A common stock – basic

Earnings per share of

Class A common stock – diluted

Shares of Class B common stock and unvested restricted

stock units do not share in the income (losses) of the Company and are therefore not participating securities.

As such, separate presentation of basic and diluted earnings per share of Class B common stock under the two-class method has

not been presented.

The following number of

weighted-average potentially dilutive shares were excluded from the calculation of diluted earnings per share because the effect of including such potentially dilutive shares would have been antidilutive upon conversion (in thousands)

September 30, 2021

September 30, 2020

Class B common stock

Restricted stock units

Retirement Plan

The Company offers a 401(k) retirement plan to its full-time employees over the age of 21.

The Company currently makes discretionary matching contributions of 50.0% for the

first 4.0% of employee salary deferrals.

The Company made discretionary contributions of $0.8 million, $0.6 million and $0.4 million for the years ended September 30, 2020, 2019 and 2018, respectively.

Fair Value Measurements

In determining fair value, OneWater LLC uses various valuation approaches including market, income and/or cost approaches.

FASB standard ‘‘ Fair

Value Measurements ’’ (Topic 820) establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be

used when available.

Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Unobservable inputs are those that reflect the Company’s

expectation of the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is broken down into three levels based on the reliability of

inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that OneWater LLC has the ability to access.

Assets utilizing Level 1 inputs

include marketable securities that are actively traded.

Level 2 – Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

Asset and liability measurements utilizing Level 3 inputs

include those used in estimating fair value of non-financial assets and non-financial liabilities in purchase acquisitions, those used in assessing impairment of property, plant and equipment and other intangibles and those used in the

reporting unit valuation in the annual goodwill impairment evaluation contingent consideration and those used in the valuation of the warrant liability.

The availability of observable inputs can vary and is affected by a wide variety of factors.

To the extent that valuation is based on models or inputs that are less observable

or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgment required in determining fair value is greatest for assets and liabilities categorized in Level 3.

In certain cases, the

inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined

based on the lowest level input that is significant to the fair value measurement.

Fair value measurements can be volatile based on various factors that may or may not be within the Company’s control.

Employee Stock Purchase Plan

At the Company’s 2021 Annual

Meeting of Stockholders (the “Annual Meeting”), held on February 23, 2021, the Company’s stockholders approved the OneWater Marine Inc.

2021 Employee Stock Purchase Plan (the “ESPP”), which was approved and adopted by the Board as of

January 13, 2021 (the “Adoption Date”), subject to stockholder approval at the Annual Meeting.

The effective date of the ESPP is February 23, 2021, and, unless earlier terminated, the ESPP will expire on the twentieth anniversary of the

Adoption Date.

The ESPP will be administered by the Board or by one or more committees to which the Board delegates such administration.

The ESPP enables eligible employees to

purchase shares of the Company’s Class A common stock at a discount through participation in discrete offering periods.

The ESPP is intended to qualify as an employee stock purchase plan under section 423 of the Internal Revenue Code of

1986, as amended.

Up to a maximum of 299,505 shares of the Company’s Class A common stock may be issued under the ESPP,

subject to certain adjustments as set forth in the ESPP.

On the first day of each fiscal year during the term of the ESPP, beginning on October 1, and ending on (and including) September 30, the number of shares of Class A common stock

that may be issued under the ESPP will increase by a number of shares equal to the least of (i) 1 % of the outstanding shares

on the Adoption Date, or (ii) such lesser number of shares (including zero) that the administrator determines for purposes of the annual increase for that fiscal year.

The number of shares of Class A common stock that may be granted to

any single participant in any single option period will be subject to certain limitations set forth in the plan.

As of September 30, 2021, there has not yet been an offering period under the ESPP.

Investor Voting Warrants

On October 28, 2016, the Company issued 25,000 OneWater LLC common unit warrants in exchange for $ 1.0

The common unit warrants had a ten-year life from the date of issuance and provided the holders with a put right after

5 years , or potentially earlier, under certain circumstances.

The holders of the warrants maintained full voting rights in

OneWater LLC.

As the common unit warrants could be settled in cash at the election of the holder, the fair value of the common unit warrants was included in warrant liability.

In connection with the IPO, we issued 2,148,806 OneWater LLC units upon exercise of the warrants.

The Company engaged a third-party valuation specialist to assist management in

performing a valuation of the fair value of the common unit warrants.

Accordingly, the warrant liability was accounted for based on inputs that were unobservable and significant to the overall fair value measurement (Level 3).

The valuation

considered both a market and a discounted cash flows approach in arriving at the fair value of the common unit warrants.

As previously noted, the common unit warrants were exercised in connection with the IPO for common units of OneWater

LLC and therefore no warrant liability existed as of September 30, 2021 and 2020.

The Company recognized income of $ 0.8 million and $ 1.3 million for

the years ended September 30, 2020 and 2019, respectively, and this change in the fair value was recorded as a change in the fair value of warrant liability in the accompanying consolidated statements of operations.

Distributions

During the fiscal year

ended September 30, 2021, the Company made distributions to OneWater Unit Holders for certain permitted tax payments.

Dividends paid to holders of Class A common stock, distributions paid to OneWater

Unit Holders and dividends payable to restricted stock unit holders are referred to herein collectively as “dividends”.

Dividends declared are reported as a reduction of retained earnings.

Dividends paid to OneWater Unit Holders are

recorded as a reduction in non-controlling interest.

On June 17, 2021, the Board declared a special cash dividend of $ 1.80 per

The cash dividend of approximately $ 27.1 million was paid on July 19, 2021 to holders of Class A common stock and OneWater

Unit Holders.

Additionally, a $ 1.0 million cash dividend for restricted stock unit holders will be paid to holders upon vesting

of the awards.

The accrued dividends are recorded in other payables and accrued expenses in the consolidated balance sheets as of September 30, 2021.

Non-Controlling Interest

In connection with the IPO, the former owners of Bosun’s Assets and Operations (“BAO”) and South

Shore Assets and Operations (“SSAO”) received 290,466 and 306,199 shares of Class A common stock, respectively, for the surrender of their respective 25.0 % ownership interests.

The results of operations for BAO and SSAO have been included in the Company’s consolidated

financial statements and the former owners’ minority interests have been recorded , accordingly , through the date of the IPO.

As discussed in Note 1,

OneWater Inc consolidates the financial results of OneWater LLC and its subsidiaries and reports a non-controlling interest related to the portion of OneWater LLC owned by the holders of OneWater LLC Units (the “OneWater Unit Holders”).

Changes in ownership interest in OneWater LLC, while OneWater Inc retains its controlling interest, will be accounted for as equity transactions.

Future direct exchanges of OneWater LLC units will result in a change in ownership and

reduce the amount recorded as a non-controlling interest and increase additional paid-in-capital.

As of September 30, 2021, OneWater Inc owned 87.9 % of the economic interest of OneWater LLC with the OneWater Unit Holders owning the remaining 12.1 %.

Redeemable Preferred Interest in Subsidiary

On September 1, 2016, the Company organized OWAO.

1, 2016, the Company organized OWAO.

As of September 30, 2016, OWAO was not funded.

In conjunction with Goldman and Beekman, OneWater LLC contributed a majority of

its assets, including subsidiaries operating all of its retail operations, to OWAO in return for 100,000 common units.

In conjunction with Goldman and Beekman, OneWater LLC contributed a majority of its assets, including subsidiaries operating all of its retail operations,

to OWAO in return for 100,000 common units.

Additionally, as a part of the transaction, OWAO issued 68,000 preferred units in OWAO to Goldman and Beekman.

preferred interest had a stated 10.0% rate of return and there was no allocation of profits in excess of the stated return.

The preferred interests were not convertible but may have been redeemed by the holder after 5 years or upon certain

triggering events at face value plus accrued interest.

The Company had classified the redeemable preferred interest as temporary equity in the consolidated balance sheets.

The discount on the issuance of the redeemable preferred

interest was being accreted to members’ equity as a dividend from the date of issuance through the fifth anniversary of the issuance date.

On February 11, 2020, in connection with the Offering, OWAO used $89.2 million in cash to fully redeem

the preferred interest in subsidiary held by Goldman and Beekman.

The Company is a corporation and, as a result is subject to U.S.

The preferred interest had a stated 10.0 % rate of return and there was no allocation of profits in excess of the stated return.

The preferred interests were not convertible but may have been redeemed by

the holder after 5 years or upon certain triggering events at face value plus accrued interest.

had classified the redeemable preferred interest as temporary equity in the consolidated balance sheets.

The discount on the issuance of the redeemable preferred interest was being accreted to retained common interests as a dividend from

the date of issuance through the fifth anniversary of the issuance date.

On February 11, 2020, in connection with the IPO, OWAO used $ 89.2

million in cash to fully redeem the preferred interest in subsidiary held by Goldman and Beekman.

Retirement Plan

The Company offers a 401(k) retirement plan to its full-time employees over the age of 21 .

The Company currently makes discretionary matching contributions of 50.0 % for the first 4.0 % of employee salary deferrals.

The Company made discretionary contributions of $ 1.5 million, $ 0.8 million and $ 0.6 million for the years ended

September 30, 2021, 2020 and 2019, respectively.

Fair Value Measurements

In determining fair value, the Company uses various

valuation approaches including market, income and/or cost approaches.

FASB standard ‘‘ Fair Value Measurements ’’ (Topic 820) establishes a hierarchy

for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are inputs that market

participants would use in pricing the asset or liability developed based on market data obtained from independent sources.

Unobservable inputs are those that reflect the Company’s expectation of the assumptions market participants would use

in pricing the asset or liability developed based on the best information available in the circumstances.

The hierarchy is broken down into three levels based on the reliability of inputs as follows:

Level 1 – Valuations based on quoted prices in active markets for

identical assets or liabilities that the Company has the ability to access.

Assets utilizing Level 1 inputs include marketable securities that are actively traded.

Level 2 – Valuations based on quoted prices in markets that are not active

or for which all significant inputs are observable, either directly or indirectly.

Level 3 – Valuations based on inputs that are unobservable and significant

to the overall fair value measurement.

Asset and liability measurements utilizing Level 3 inputs include those used in estimating fair value of non-financial assets and non-financial liabilities in purchase acquisitions, those used in

assessing impairment of property, plant and equipment and other intangibles and those used in the reporting unit valuation in the annual goodwill impairment evaluation ,

contingent consideration and those used in the valuation of the warrant liability.

The availability of observable inputs can vary and is

affected by a wide variety of factors.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of

judgment required in determining fair value is greatest for assets and liabilities categorized in Level 3.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases,

for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Fair value measurements can

be volatile based on various factors that may or may not be within the Company’s control .

The following tables summarize the Company’s financial liabilities measured at fair value in the accompanying Consolidated Balance Sheets as of September 30,

($ in thousands)

Contingent Consideration

($ in thousands)

Contingent Consideration

There were no

transfers between the valuation hierarchy Levels 1, 2, and 3 for the fiscal years ended September 30, 2020, and 2021.

We estimate the fair value of contingent consideration using a probability-weighted discounted cash flow model based

on forecasted future earnings.

The acquisition contingent consideration liability has been accounted for based on inputs that are unobservable and significant to the overall fair value measurement (Level 3).

The contingent consideration

balance is recorded in in other payables and accrued expenses and other long-term liabilities in the Consolidated Balance Sheets.

Changes in fair value and net present value of contingent consideration are included in loss (gain) on

contingent consideration in the Consolidated Statements of Operations.

The fair value of contingent consideration is reassessed on a quarterly basis.

The following table sets forth the changes in fair value of our contingent consideration for the fiscal years ended

September 30, 2020 and 2021:

($ in thousands)

Contingent Consideration

Balance as of September 30, 2019

Additions from acquisitions

Settlement of contingent consideration

Change in fair value and net present value of contingency

Balance as of September 30, 2020

Additions from acquisitions

Settlement of contingent consideration

Change in fair value and net present value of contingency

Balance as of September 30, 2021

We determined the carrying value of our cash and cash equivalents, accounts receivable, accounts payable, other

payables and accrued expenses, floor plan notes payable, term note payable with Truist Bank, seller notes payable and company vehicle notes payable approximate their fair values because of the nature of their terms and current market

rates of these instruments.

Company is a corporation and, as a result is subject to U.S.

federal, state and local income taxes.

OneWater LLC is treated as a pass-through entity for U.S.

purposes and in most state and local jurisdictions.

As such, OneWater LLC’s members, including the Company, are liable for federal and state income taxes on their respective shares of OneWater LLC’s taxable income.

The components of income tax expense are:

federal tax purposes and in most state and local jurisdictions.

As such, OneWater

LLC’s members, including the Company, are liable for federal and state income taxes on their respective shares of OneWater LLC’s taxable income.

components of income tax expense are:

($ in thousands)

September 30,

Income tax expense

A reconciliation of the United States statutory income tax rate to the Company’s effective income tax rate is as follows:

A reconciliation of the United

States statutory income tax rate to the Company’s effective income tax rate is as follows:

For the Years Ended September 30,

3 unchanged sentences

Effective income tax rate

Details of the Company’s deferred tax assets and liabilities are as follows:

of the Company’s deferred tax assets and liabilities are as follows:

($ in thousands)

September 30,

Deferred tax assets:

5 unchanged sentences

Deferred tax assets, net

There was no valuation allowance recorded against the deferred tax asset as of September 30, 2020.

As of September 30, 2020, we had income taxes payable of $5.6 million which is included in Accounts Payable.

As of September 30, 2020 and 2019, the Company has not recognized any uncertain tax positions, penalties, or interest as management has concluded that no such positions exist.

The Company is subject to

examination for the tax years beginning with the year ended September 30, 2020.

The Company is not currently subject to income tax audits in any U.S.

The Company recognizes deferred tax assets to the extent it believes these assets are more-likely-than-not to be

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing temporary differences, projected future taxable income, tax planning strategies and

What changed 10-K

Item 8. Financial Statements and Supplementary Data