What changed in EVI INDUSTRIES, INC.'s 2023 10-K compared to 2022?

Across the narrative sections we track, EVI INDUSTRIES, INC. (EVI) added 173 paragraphs, removed 202, and edited 138 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+61/−98), Item 1A. Risk Factors (+73/−63), Item 1. Business (+23/−26).

Did EVI INDUSTRIES, INC. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 73 new/edited paragraphs and 63 removed paragraphs versus the 2022 10-K.

What changed in EVI INDUSTRIES, INC.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 61 new/edited paragraphs and 98 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did EVI INDUSTRIES, INC.'s Legal Proceedings (Item 3) change in 2023?

Item 3 shows 1 added/edited paragraphs and 1 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this EVI 10-K diff come from?

The source filings are EVI INDUSTRIES, INC.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in EVI INDUSTRIES, INC.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of EVI INDUSTRIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+173 added−202 removedSource: 10-K (2023-10-05) vs 10-K (2022-09-13)

Top changes in EVI INDUSTRIES, INC.'s 2023 10-K

173 paragraphs added · 202 removed · 138 edited across 7 sections

Item 7. Management's Discussion & Analysis+61 / −98 · 52 edited
Item 1A. Risk Factors+73 / −63 · 49 edited
Item 1. Business+23 / −26 · 23 edited
Item 5. Market for Registrant's Common Equity+7 / −6 · 6 edited
Item 7A. Quantitative and Qualitative Disclosures About Market Risk+6 / −6 · 5 edited

Item 1. Business

Business — how the company describes what it does

23 edited+0 added−3 removed43 unchanged

2022 filing

2023 filing

Biggest changeThe acquired companies generally distribute commercial, industrial, and vended laundry products and provide installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. ● On October 10, 2016, the Company purchased substantially all of the assets of Western State Design, LLC, a California-based company, for a purchase price consisting of $18.5 million in cash and 2,044,990 shares of the Company’s common stock. ● On October 31, 2017, the Company purchased substantially all of the assets of Tri-State Technical Services, Inc., a Georgia-based company, for a purchase price consisting of approximately $7.95 million in cash and 338,115 shares of the Company’s common stock. ● On February 9, 2018, the Company purchased substantially all of the assets of Dallas-based companies, Zuf Acquisitions I LLC (d/b/a/ AAdvantage Laundry Systems) and Sky-Rent LP, for total consideration of approximately $20.4 million, consisting of approximately $8.1 million in cash and 348,360 shares of the Company’s common stock. ● On September 12, 2018, the Company purchased substantially all of the assets of Scott Equipment, Inc., a Houston-based company, for approximately $6.5 million in cash and 209,678 shares of the Company’s common stock. ● On February 5, 2019, the Company acquired PAC Industries Inc., a Pennsylvania-based company, for approximately $6.4 million in cash and 179,847 shares of the Company’s common stock. ● On November 3, 2020, the Company acquired Yankee Equipment Systems, LLC, a New Hampshire-based company, for approximately $4.6 million in cash and 278,385 shares of the Company’s common stock. ● On February 7, 2022, the Company acquired Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), a North Carolina-based company, for approximately $3.3 million in cash, net of cash acquired, and 179,087 shares of the Company’s common stock. 7 ● On June 1, 2022, the Company acquired Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”), a Colorado-based company, for approximately $5.4 million in cash.

The Company believes that its restricted stock program promotes this culture and long-term performance because restricted stock grants generally provide for long-term vesting, including in certain cases entirely at the end of the recipient’s career (age 62 or later).

The Company’s commercial and industrial laundry equipment and boilers are sold, rented or leased to a wide range of customers, including, but not limited to, vended laundry facilities, industrial laundry facilities, government institutions, correctional facilities, hospitals, hospital combines, nursing homes, veterinary clinics, professional sports franchises, educational institutions, hotels, motels, food and beverage establishments, cruise lines, and specialized users.

The Company’s commercial and industrial laundry equipment and boilers are sold or leased to a wide range of customers, including, but not limited to, vended laundry facilities, industrial laundry facilities, government institutions, correctional facilities, hospitals, hospital combines, nursing homes, veterinary clinics, professional sports franchises, educational institutions, hotels, motels, food and beverage establishments, cruise lines, and specialized users.

Research and Development The Company’s research and development efforts and expenses are generally immaterial as most of the Company’s products are distributed for manufacturers that perform their own research and development. Service Marks and Tradenames The Company is the owner of certain service marks in the United States.

Research and Development The Company’s research and development efforts and expenses are generally immaterial as most of the Company’s products are distributed for manufacturers that perform their own research and development. 10 Service Marks and Tradenames The Company is the owner of certain service marks in the United States.

Orders for equipment and replacement parts and accessories are generally obtained by telephone, e-mail and fax inquiries originated by the customer or by the Company, from existing customer relationships and from newly formed customer relationships.

Orders for equipment and replacement parts and accessories are generally obtained by telephone, and e-mail inquiries originated by the customer or by the Company, from existing customer relationships and from newly formed customer relationships.

The Company supports its sales, rental and leasing activities through its websites and by advertising in trade publications, participating in trade shows and engaging in regional promotions and incentive programs.

The Company supports its sales and leasing activities through its websites and by advertising in trade publications, participating in trade shows and engaging in regional promotions and incentive programs.

However, from time to time, including in fiscal 2022 and 2021, the Company purchased inventory in advance to take advantage of favorable pricing at the time or for other purposes, including to support the Company’s sales growth initiatives in new distribution territories and in support of growth initiatives related to the establishment of new manufacturer and supplier distribution relationships, and more recently to acquire inventory in light of supply chain constraints.

However, from time to time, including in fiscal 2023 and fiscal 2022, the Company purchased inventory in advance to take advantage of favorable pricing at the time or for other purposes, including to support the Company’s sales growth initiatives in new distribution territories and in support of growth initiatives related to the establishment of new manufacturer and supplier distribution relationships, and more recently to acquire inventory in light of supply chain constraints.

Stock-based plans include a voluntary employee stock purchase plan and equity compensation plans under which restricted stock and other equity awards may be granted.

Stock-based plans include a voluntary employee stock purchase plan and an equity compensation plan under which restricted stock and other equity awards may be granted.

Stock-based plans include a voluntary employee stock purchase plan and equity compensation plans under which restricted stock and other equity awards may be granted.

Stock-based plans include a voluntary employee stock purchase plan and an equity compensation plan under which restricted stock and other equity awards may be granted.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part II, Item 7 of this Report and Note 3 to the Consolidated Financial Statements included in Item 8 of this Report for additional information about the acquisitions of YES, CLK and CDL as well as other acquisitions consummated by the Company during fiscal 2021 and fiscal 2022.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part II, Item 7 of this Report and Note 3 to the Consolidated Financial Statements included in Item 8 of this Report for additional information about the acquisitions of CLK and CDL as well as other acquisitions consummated by the Company during fiscal 2022 and fiscal 2023.

However, there is no assurance that the Company or any of its acquired businesses will maintain its relationships with any of its suppliers, and the loss of certain of these relationships, including the loss of a relationship with a principal supplier and any inability to successfully mitigate the effect of the loss of such supplier, could adversely affect the 8 Table of Contents Company’s business and results.

A number of industries, including the commercial and industrial dry cleaning and laundry equipment industries, are 9 Table of Contents subject to these evolving laws and implementing regulations. As a supplier to the industry, the Company serves customers who are primarily responsible for compliance with environmental regulations.

A number of industries, including the commercial and industrial dry cleaning and laundry equipment industries, are subject to these evolving laws and implementing regulations. As a supplier to the industry, the Company serves customers who are primarily responsible for compliance with environmental regulations.

While the Company has generally not experienced difficulty in purchasing products it distributes, recent supply chain constraints have resulted in extended inventory lead times and resulting delays in fulfilling certain order, as well as increases in product costs. In connection with certain business acquisitions, the business relationship between the acquired business and its principal supplier ceased.

While the Company has generally not experienced difficulty in purchasing products it distributes, supply chain constraints in recent years have resulted in extended inventory lead times and resulting delays in fulfilling certain orders, as well as increases in product costs. 9 In connection with certain business acquisitions, the business relationship between the acquired business and its principal supplier ceased.

Purchases from three manufacturers accounted for a total of approximately 56% and 62% of the Company’s product purchases for fiscal 2022 and fiscal 2021, respectively. No other manufacturers accounted for more than 10% of product purchases during fiscal 2022 or fiscal 2021. The Company believes that it has good working relationships with its current manufacturers and suppliers.

Purchases from three manufacturers accounted for a total of approximately 61% and 56% of the Company’s product purchases for fiscal 2023 and fiscal 2022, respectively. No other manufacturers accounted for more than 10% of product purchases during fiscal 2023 or fiscal 2022. The Company believes that it has good working relationships with its current manufacturers and suppliers.

The Company seeks to establish customer satisfaction by offering: · an experienced sales and service organization; · comprehensive product offerings; · competitive pricing; · maintenance of comprehensive and well-stocked inventories of equipment, replacement parts and accessories, often with same day or overnight availability; 7 Table of Contents · design and layout services; · installation, maintenance and repair services; · on-site training performed by factory trained technicians; and · toll-free support lines and technical websites to resolve customer service problems.

The Company seeks to establish customer satisfaction by offering: ● an experienced sales and service organization; ● comprehensive product offerings; 8 ● competitive pricing; ● maintenance of comprehensive and well-stocked inventories of equipment, replacement parts and accessories, often with same day or overnight availability; ● design and layout services; ● installation, maintenance and repair services; ● on-site training performed by factory trained technicians; and ● toll-free support lines and technical websites to address customer service problems.

In addition to its distribution of products, the Company also provides installation, maintenance and repair services to its customers. The Company believes its services are competitively priced. 5 Table of Contents Buy-and-Build Growth Strategy As described above, in addition to its pursuit of organic growth initiatives, the Company implemented a “buy-and-build” growth strategy in 2015.

In addition to its distribution of products, the Company also provides installation, maintenance and repair services to its customers. The Company believes its services are competitively priced. 6 Buy-and-Build Growth Strategy As described above, in addition to its pursuit of organic growth initiatives, the Company implemented a “buy-and-build” growth strategy in 2015.

Human Capital Resources As of August 1, 2022, the Company had 640 full and part-time employees. All of the Company’s employees are based in the United States. None of the Company’s employees are subject to a collective bargaining agreement. The Company believes that its relations with its employees are satisfactory.

Human Capital Resources As of August 1, 2023, the Company had 705 full and part-time employees. All of the Company’s employees are based in the United States. None of the Company’s employees are subject to a collective bargaining agreement. The Company believes that its relations with its employees are satisfactory.

The Company’s equity compensation plans are designed to promote long-term performance, as well as to create long-term employee retention and continuity of leadership, and align the interests of management and employees with the long-term success of the Company.

The Company’s equity compensation plan is designed to promote long-term performance, as well as to create long-term employee retention and continuity of leadership, and align the interests of management and employees with the long-term success of the Company.

The Company’s technical personnel are retrained as the Company believes to be necessary, including in connection with the development of new technology. 10 Table of Contents

The Company’s technical personnel are retrained as the Company believes to be necessary, including in connection with the development of new technology. 11

Available Information The Company files Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, files or furnishes Current Reports on Form 8-K, files or furnishes amendments to those reports, and files proxy and information statements with the SEC.

The Company reports its results of operations through a single operating and reportable segment. 5 Available Information The Company files Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, files or furnishes Current Reports on Form 8-K, files or furnishes amendments to those reports, and files proxy and information statements with the SEC.

The financial position, including assets and liabilities, and results of operations of the acquired businesses following the respective closing dates of the acquisitions are included in the Company’s consolidated financial statements. Customers and Markets The Company’s customer base consists of approximately 60,000 customers located primarily in the United States, Canada, the Caribbean, and Latin America.

No single customer accounted for more than 10% of the Company’s revenues for fiscal 2022 or fiscal 2021.

Customers and Markets The Company’s customer base consists of approximately 65,000 customers located primarily in the United States of America (“United States” or “U.S.”), Canada, the Caribbean, and Latin America. No single customer accounted for more than 10% of the Company’s revenues for fiscal 2023 or fiscal 2022.

Removed

Prior to the completion of the Company’s first acquisition pursuant to its “buy-and-build” growth strategy in October 2016, the Company’s operations related to the activities described above consisted solely of the business and operations of Steiner-Atlantic Corp. (“Steiner-Atlantic”), a wholly-owned subsidiary of the Company.

Removed

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part II, Item 7 of this Report for a discussion of the impact of the COVID-19 pandemic on the Company’s business, results, financial condition and liquidity. 4 Table of Contents The Company reports its results of operations through a single reportable segment.

Removed

(“PAC”), a Pennsylvania-based company, for approximately $6.4 million in cash and 179,847 shares of the Company’s common stock. · On November 3, 2020, the Company acquired Yankee Equipment Systems, LLC (“YES”), a New Hampshire-based company, for approximately $4.6 million in cash and 278,385 shares of the Company’s common stock. · On February 7, 2022, the Company acquired Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), a North Carolina-based company, for approximately $3.3 million in cash, net of cash acquired, and 179,087 shares of the Company’s common stock. 6 Table of Contents · On June 1, 2022, the Company acquired Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”), a Colorado-based company, for approximately $5.4 million in cash.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

49 edited+24 added−14 removed55 unchanged

2022 filing

2023 filing

Biggest changeAs a “controlled company,” the Company is not required under the listing standards of the NYSE American to comply with certain corporate governance requirements set forth therein, including: ● the requirement that a majority of the Company’s Board of Directors consists of independent directors; ● the requirement that directors be recommended for nomination by, and other nominating and corporate governance matters be decided solely by, a nominating/corporate governance committee consisting of independent directors; and ● the requirement that executive compensation matters be decided by a compensation committee consisting of independent directors. 20 While executive compensation matters are determined by a compensation committee comprised solely of independent directors and the Company’s Board of Directors is currently comprised of a majority of independent directors, the Company does not have a standing nominating/corporate governance committee and the Company has in the past from time to time maintained a Board of Directors not comprised of a majority of independent directors.

The Company also maintains personally identifiable information about its employees. The integrity and protection of that customer, employee and company data is critical to the Company. The Company could make faulty decisions if that data is inaccurate or incomplete. The Company’s customers and employees also have a high expectation that their personal information will be adequately protected.

The Company also maintains personally identifiable information about its employees. The integrity and protection of customer, employee and company data is critical to the Company. The Company could make faulty decisions if that data is inaccurate or incomplete. The Company’s customers and employees also have a high expectation that their personal information will be adequately protected.

As permitted by Delaware law, the Company’s Board of Directors is authorized under the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to approve the issuance by the Company of up to 200,000 shares of preferred stock, and to designate the relative rights, preferences and limitations of any preferred stock so issued, in each case, without any further action on the part of the Company’s stockholders.

As permitted by Delaware law, the Company’s Board of Directors is authorized under the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to approve the issuance by the Company of up to 200,000 shares of preferred stock, and to designate the relative rights, preferences and limitations of any preferred stock so issued, in each case, without any action on the part of the Company’s stockholders.

Failure to maintain the integrity of internal or customer data could result in faulty business decisions or operational inefficiencies, damage the Company’s reputation and/or subject the Company to costs, fines or lawsuits. The Company collects and retains internal and customer data, including social security numbers, credit card numbers and other personally identifiable information of customers in various internal information systems.

Failure to maintain the integrity of internal or customer data could result in faulty business decisions or operational inefficiencies, damage the Company’s reputation and/or subject the Company to costs, fines or lawsuits. 17 The Company collects and retains internal and customer data, including social security numbers, credit card numbers and other personally identifiable information of customers, in various internal information systems.

If the Company’s insurance coverage is not adequate, or the Company otherwise incurs uninsured losses, the Company’s operating results and financial condition would be adversely impacted. The Company may also be subject to insured losses relating to breaches of its information technology systems.

If the Company’s insurance coverage is not adequate, or the Company otherwise incurs uninsured losses, the Company’s operating results and financial condition would be adversely impacted. 16 The Company may also be subject to insured losses relating to breaches of its information technology systems.

Further, the Company may be subject to lawsuits if, among other things, any of the products it distributes fails to operate properly or causes property or other physical damage. The Company faces substantial competition.

Further, the Company may be subject to lawsuits if, among other things, any of the products it distributes fails to operate properly or causes property or other physical damage. 14 The Company faces substantial competition.

In addition, while businesses acquired during the fiscal year covered by the applicable Annual Report on Form 10-K are permitted to be excluded from the scope of management’s report on internal control over financial reporting and the related auditor attestation for such Annual Report on Form 10-K (as is the case with the exclusion of the businesses acquired by the Company in fiscal 2022 from the scope of management’s report on internal control over financial reporting and the related auditor attestation for this Report), the Company will face challenges and be required to incur expenses in connection with, and devote significant management time to, the internal control over financial reporting of acquired businesses. .

In addition, while businesses acquired during the fiscal year covered by the applicable Annual Report on Form 10-K are permitted to be excluded from the scope of management’s report on internal control over financial reporting and the related auditor attestation for such Annual Report on Form 10-K (as is the case with the exclusion of the businesses acquired by the Company in fiscal 2023 from the scope of management’s report on internal control over financial reporting and the related auditor attestation for this Report), the Company will face challenges and be required to incur expenses in connection with, and devote significant management time to, the internal control over financial reporting of acquired businesses.

In addition, conversions to new information technology systems require effective change management processes and may result in cost overruns, delays or business interruptions. If the Company’s information technology systems are disrupted, become obsolete or do not adequately support the Company’s strategic, operational or compliance needs, the Company’s business, financial position, results of operations or cash flows may be adversely affected.

Further, conversions to new information technology systems require effective change management processes and may result in cost overruns, delays or business interruptions. If the Company’s information technology systems are disrupted, become obsolete or do not adequately support the Company’s strategic, operational or compliance needs, the Company’s business, financial position, results of operations or cash flows may be adversely affected.

Subject to applicable law and the rules and regulations of the NYSE American, the Company’s Board of Directors (or a committee thereof, in the case of shares issued under the Company’s equity-based compensation plan) has the power to approve the issuance of any authorized but unissued shares of the Company’s common stock, and any such issuances, including, without limitation, those under the Company’s equity-based compensation plan or pursuant to any acquisitions consummated by the Company or in connection with the financing thereof, would result in dilution to the Company’s stockholders.

Subject to applicable law and the rules and regulations of the NYSE American, the Company’s Board of Directors (or a committee thereof, in the case of shares issued under the Company’s equity-based compensation plan) has the power to approve the issuance of any authorized but unissued shares of the Company’s common stock, and any such issuances, including, without limitation, those under the Company’s equity-based compensation plan or pursuant to any acquisitions or other strategic transactions consummated by the Company or in connection with the financing thereof, would result in dilution to the Company’s stockholders.

Further, as the Company is dependent upon its ability to gather and promptly transmit accurate information to key decision makers, the Company’s business, results of operations and financial condition may be adversely affected if the Company’s information systems do not allow the Company to transmit 16 Table of Contents accurate information, even for a short period of time.

Further, as the Company is dependent upon its ability to gather and promptly transmit accurate information to key decision makers, the Company’s business, results of operations and financial condition may be adversely affected if the Company’s information systems do not allow the Company to transmit accurate information, even for a short period of time.

In addition, some of the Company’s competitors may have less indebtedness than the Company, and therefore may have more cash and working capital available for business purposes other than debt service. The Company’s results and financial condition would be materially and adversely impacted if the Company is unable to 14 Table of Contents compete effectively.

In addition, the Company is authorized under its Certificate of Incorporation to issue up to 20,000,000 shares of common stock. There are currently approximately 13.5 million shares of common stock outstanding.

In addition, the Company is authorized under its Certificate of Incorporation to issue up to 20,000,000 shares of common stock. There are currently approximately 13.8 million shares of common stock outstanding.

As a public company, the Company will also be subject to any rules and regulation of the SEC concerning environmental and other social issues, which may result in increased costs and compliance efforts. The Company is also subject to rules and regulations with respect to its contracts and dealings with government facilities.

As a public company, the Company will also be subject to any rules and regulation of the SEC and any applicable securities exchange concerning environmental and other social issues, which may result in increased costs and compliance efforts. The Company is also subject to rules and regulations with respect to its contracts and dealings with government facilities.

There is no assurance that the Company will receive any financing which the Company may seek to obtain in the future on acceptable terms or at all, including in the event additional funds are necessary to consummate an acquisition or support the Company’s business operations.

In addition, the Company’s accounting and other professional expenses associated with being a public company have increased as a result of the Company’s growth, and such expenses may continue to increase in the future. 12 Table of Contents Further, the Company may not be successful in consummating acquisitions or other strategic transactions.

In addition, the Company’s accounting expenses and other professional expenses associated with being a public company have increased as a result of the Company’s growth, and such expenses may continue to increase in the future. Further, the Company may not be successful in consummating acquisitions or other strategic transactions.

In addition, the information systems of businesses that the Company may acquire may not be sufficient to meet the Company’s standards or the Company may not be able to successfully convert them to provide acceptable information on a timely and cost-effective basis.

In addition, the information systems of acquired businesses may not be sufficient to meet the Company’s standards or the Company may not be able to successfully convert them to provide acceptable information on a timely and cost-effective basis.

As a “smaller reporting company,” the Company has relied on exemptions from 19 Table of Contents certain disclosure requirements that are applicable to other public companies. The Company may continue to rely on such exemptions for so long as the Company remains a “smaller reporting company.” These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation.

As a “smaller reporting company,” the Company has relied on exemptions from certain disclosure requirements that are applicable to other public companies. The Company may continue to rely on such exemptions for so long as the Company remains a “smaller reporting company.” These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation.

Borrowings (other than swingline loans) under the Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) the BSBY rate plus a margin that ranges from 1.25% to 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.

Borrowings (other than swingline loans) under the Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”) plus a margin that ranges from 1.25% to 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.

In addition, the Company’s compliance efforts will continue to require significant expenditures and devotion of 20 Table of Contents management time, and may divert management’s attention from the Company’s operations.

In addition, the Company’s compliance efforts will continue to require significant expenditures and devotion of management time, and may divert management’s attention from the Company’s operations.

Acquisitions and the Company’s pursuit of acquisitions and other strategic transactions subject the Company to a number of risks. Acquisitions are an important element of the Company’s growth strategy.

Risks Related to the Company’s Business and Operations Acquisitions and the Company’s pursuit of acquisitions and other strategic transactions subject the Company to a number of risks. Acquisitions are an important element of the Company’s growth strategy.

Any of the above factors may materially and adversely affect the Company’s business, prospects, operating results or financial condition. 15 Table of Contents Damages to or disruptions at the Company’s facilities or the facilities of a supplier could adversely impact the Company’s business, operating results and financial condition.

Any of the above factors may materially and adversely affect the Company’s business, prospects, operating results or financial condition. Damages to, or disruptions at, the Company’s facilities or the facilities of a supplier or customer could adversely impact the Company’s business, operating results and financial condition.

As a result, the Company’s stockholders may not have certain of the same protections as a stockholder of other publicly-traded companies and the market price of the Company’s common stock may be adversely affected.

As a result, the Company’s stockholders may not have certain of the same protections as a stockholder of other publicly-traded companies which are not “controlled companies” and the market price of the Company’s common stock may be adversely affected.

Further, the Company may not be able to adjust efficiently or effectively or otherwise operate profitably if the competitive environment changes. The Company also competes for qualified employees and, in light of labor market disruptions, such competition has been more intense and led to increases in the costs of labor. The Company faces risks associated with environmental and other regulation.

In addition, as described above, damages to the facility of a supplier, whether due to, fire, natural disaster or other events, would adversely impact the Company’s ability to obtain products from that supplier when expected or at all and, accordingly, may result in delays in the delivery of the Company’s products or the provision of its services and adversely impact the Company’s business, operating results and financial condition.

In addition, damages to the facility of a supplier, whether due to, fire, natural disaster or other events, would adversely impact the Company’s ability to obtain products from that supplier when expected or at all and, accordingly, may result in delays in the delivery of the Company’s products or the provision of its services.

In this Report, the Company’s management has provided an assessment as to the effectiveness of the Company’s internal control over financial reporting. In addition, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, management’s assessment of the effectiveness of the Company’s internal control over financial reporting is subject to attestation by the Company’s independent registered public accounting firm.

In addition, pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, management’s assessment of the effectiveness of the Company’s internal control over financial reporting is subject to attestation by the Company’s independent registered public accounting firm. This Report includes such attestation.

In addition to the foregoing, delays in construction of customers’ facilities, whether due to supply or labor shortages or any other factors, have resulted, and may continue to result in, delays in the Company’s fulfillment of orders to such facilities, which may adversely impact the Company’s operating results and financial condition.

In many instances, customer demand is outpacing available supply, which has resulted in, and may continue to result in, delays in delivering products or services to the Company’s customers, as well as increases in product costs.

In recent years, customer demand has outpaced available supply, which has resulted in, and may continue to result in, delays in delivering products or services to the Company’s customers, as well as increases in product costs.

A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million.

A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. The maturity date of the Credit Agreement is May 6, 2027.

Nahmad, the Company’s Chairman, Chief Executive Officer and President, and the Company’s Board of Directors through stockholders agreement granting it the right to direct the voting of certain shares, may be deemed to control the Company as a result 18 Table of Contents of their collective voting power over shares representing approximately 64.5% of the issued and outstanding shares of the Company’s common stock as of June 30, 2022.

Nahmad, the Company’s Chairman, Chief Executive Officer and President, and the Company’s Board of Directors through stockholders agreement granting it the right to direct the voting of certain shares issued as consideration in acquisitions, may be deemed to control the Company as a result of their collective voting power over shares representing approximately 60.0% of the issued and outstanding shares of the Company’s common stock as of June 30, 2023.

The Company’s level of indebtedness may have several important effects on the Company’s operations, including, without limitation, that the Company may be required to use a portion of its cash for the payment of principal and interest due on outstanding indebtedness, that outstanding indebtedness and the 17 Table of Contents Company’s leverage position will increase the impact on the Company of negative changes in general economic and industry conditions, as well as competitive pressures, and that the Company’s ability to obtain additional financing for acquisitions, working capital or other corporate purposes may be impacted.

The Company’s level of indebtedness may have several important effects on the Company’s operations, including, without limitation, that the Company uses cash to satisfy its debt service requirements, that outstanding indebtedness and the Company’s leverage position will increase the impact on the Company of negative changes in general economic and industry conditions, as well as competitive pressures, and that the Company’s ability to obtain additional financing for acquisitions, working capital or other corporate purposes may be impacted.

The Company had $28.0 million outstanding under the Credit Agreement as of June 30, 2022.

The Company had $35.0 million outstanding under the Credit Agreement as of June 30, 2023.

On November 2, 2018, the Company entered into a syndicated credit agreement (the “Credit Agreement”) for a five-year revolving credit facility in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million.

The Company is a party, as borrower, to a syndicated credit agreement (the “Credit Agreement”) in the maximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by up to $40 million for a total of $140 million.

The Credit Agreement contains covenants applicable to the Company, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios, as well as other covenants which may place restrictions on, among other things, liens, investments, indebtedness, fundamental changes, acquisitions, dispositions of property, making specified restricted payments (including cash dividends and stock repurchases that would result in the Company exceeding an agreed to Consolidated Leverage Ratio), and transactions with affiliates. 19 The Company may incur additional debt financing as determined to be appropriate by management, including in connection with the financing of acquisitions or other strategic transactions or otherwise, which would increase the Company’s vulnerability to the risk factors described above related to its level of indebtedness and may place restrictions on the Company similar or in addition to those contained in the Credit Agreement.

Acquisitions may also result in contingent liabilities, or amortization expenses, or impairment of goodwill and/or purchased long-lived assets, and restructuring charges, any of which could adversely impact the Company’s financial condition or results. Further, there are risks related to the accounting for acquisitions, including that preliminary valuations are subject to change and any such change may impact the Company’s results.

In addition, litigation and other legal proceedings are inherently uncertain, and adverse outcomes in litigation or other legal proceedings could adversely affect the Company’s financial condition, cash flows, and operating results.

Litigation and other legal proceedings may require the Company to incur significant expenses, including those relating to legal and other professional fees. In addition, litigation and other legal proceedings are inherently uncertain, and adverse outcomes in litigation or other legal proceedings could adversely affect the Company’s financial condition, cash flows, and operating results.

Specifically, beginning at the end of the quarter ended March 31, 2020, the COVID-19 pandemic and accompanying economic disruption caused delays and declines in the placement of customer orders, the completion of equipment and parts installations, and the fulfillment of parts orders.

As previously disclosed, the Company was adversely impacted by the COVID-19 pandemic beginning at the end of the quarter ended March 31, 2020; specifically, due to delays and declines in the placement of customer orders, the completion of equipment and parts installations, and the fulfillment of parts orders.

General Risks The Company is subject to risks relating to evaluations of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. The Company has incurred, and expects to continue to incur, a substantial amount of management time and resources to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002.

The Company has incurred, and expects to continue to incur, a substantial amount of management time and resources to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. In this Report, the Company’s management has provided an assessment as to the effectiveness of the Company’s internal control over financial reporting.

These provisions of the Certificate of Incorporation could also delay, defer or prevent a change in control of the Company or its management, and could limit the price that investors are willing to pay in the future for shares of the Company’s common stock. 21 General Risks Management has identified a material weakness in the Company’s internal control over financial reporting, and the Company may be unable to develop, implement and maintain appropriate controls in future periods.

In addition, efforts of the Company and its acquired businesses to mitigate any loss, including brand shifts, may not be successful. Further, the Company does not have contracts with all of its manufacturers, and certain contracts the Company does have are short term agreements and can be terminated on short notice.

Further, the Company does not have contracts with all of its manufacturers, and certain contracts the Company does have are short term agreements and can be terminated on short notice.

The Company believes it has good working relationships with the manufacturers or suppliers from which the Company purchases its products. However, if such relationships deteriorate or the Company is unable to maintain such relationships, including with any of its or its acquired businesses’ principal manufacturers or suppliers, the Company’s business and results could be materially and adversely impacted.

However, if such relationships deteriorate or the Company is unable to maintain such relationships, including with any of its or its acquired businesses’ principal manufacturers or suppliers, the Company’s business and results could be materially and adversely impacted. In addition, efforts of the Company and its acquired businesses to mitigate any loss, including brand shifts, may not be successful.

Many of these conditions are outside of the Company’s control and could also impair the Company’s ability to provide its products and services to its customers or increase the cost of doing so. The current operating environment is constantly shifting in response to the COVID-19 pandemic, placing significant pressure on the supply chain.

Many of these conditions are outside of the Company’s control and could also impair the Company’s ability to provide its products and services to its customers or increase the cost of doing so.

Growth of the Company’s business through acquisitions or otherwise may place significant demands on management, as well as on the Company’s accounting, financial, information and other systems and on the Company’s business.

Further, there are risks related to the accounting for acquisitions, including that preliminary valuations are subject to change and any such change may impact the Company’s results. 12 Growth of the Company’s business through acquisitions or otherwise may place significant demands on management, as well as on the Company’s accounting, financial, information and other systems and on the Company’s business.

The Company’s business and results may be adversely affected if the Company does not maintain its relationships with its significant suppliers or customers. 13 Table of Contents While the Company purchases the products it distributes from a number of manufacturers and suppliers, purchases from three manufacturers accounted for a total of approximately 56% and 62% of the Company’s product purchases for fiscal 2022 and fiscal 2021, respectively.

While the Company purchases the products it distributes from a number of manufacturers and suppliers, purchases from three manufacturers accounted for a total of approximately 61% and 56% of the Company’s product purchases for fiscal 2023 and fiscal 2022, respectively. The Company believes it has good working relationships with the manufacturers or suppliers from which the Company purchases its products.

Competition for such talent is intense, and the Company may not be successful in attracting and retaining such personnel. Litigation and legal proceedings, the costs of defending the same and the impact of any finding of liability or damages could adversely impact the Company and its financial condition and operating results.

Litigation and legal proceedings, the costs of defending the same and the impact of any finding of liability or damages could adversely impact the Company and its financial condition and operating results. 23 The Company may from time to time become subject to litigation and other legal proceedings.

The Company is in the process of implementing across a number of its subsidiaries an ERP software system and related processes to perform various functions and improve on the efficiency of the Company’s business.

The Company is consolidating across a number of its subsidiaries ERP software systems and related processes to perform various functions and improve on the efficiency of the Company’s business. This is a lengthy and expensive process that diverts resources from other operations, and may result in cost overruns, project delays or business interruptions.

The Company could be negatively affected by cyber or other security threats or other disruptions. The Company’s information systems and records may be subject to security breaches, cyber-attacks, system failures, viruses, operator error or inadvertent releases of data.

The Company's systems may also be disrupted or damaged, and/or sensitive information could be released, due to other system failures, viruses, operator error or inadvertent releases of data.

Further, the Company may incur significant compliance costs in the event of changes to applicable laws and regulations. The Company faces risks related to its foreign sales . The Company’s revenues from foreign sales relate principally to the Company’s sales of commercial and industrial laundry and dry cleaning equipment and boilers to Canada, the Caribbean, and Latin America.

The Company’s revenues from foreign sales relate principally to the Company’s sales of commercial and industrial laundry and dry cleaning equipment and boilers to Canada, the Caribbean, and Latin America. All of the Company’s foreign sales require the customer to make payment in United States dollars.

In addition, increases in labor costs have resulted in, and may continue to result in, increases in the Company’s operating expenses.

The market for qualified employees is highly competitive, particularly in light of recent labor shortages. The Company may be unable to continue to attract and retain qualified personnel. In addition, increases in labor costs have resulted in, and may continue to result in, increases in the Company’s operating expenses.

Labor Shortages and Increases in Labor Costs May Have a Material Adverse Impact on the Company’s Business and Results of Operations. As a result of ongoing labor market disruptions due to the COVID-19 pandemic or otherwise, the Company may be unable to continue to attract and retain qualified personnel.

See “Labor shortages and increases in labor costs may have a material adverse impact on the Company’s business and results of operations” above. The Company faces risks associated with environmental and other regulation.

Removed

Risks Related to the Company’s Business and Operations The COVID-19 pandemic has had, and may continue to have, negative impacts on the Company’s business, results and financial condition. The COVID-19 pandemic has negatively impacted, and may continue to negatively impact, the Company’s business and results.

Added

The Company’s business and results may be adversely affected if the Company does not maintain its relationships with its significant suppliers or customers.

Removed

In response to the economic and business disruption during 2020, the Company took actions to reduce costs and spending across the organization, including changes to inventory stock levels, renegotiating payment terms with suppliers, and reducing hiring activities.

Added

Further, the Company may incur significant compliance costs in the event of changes to applicable laws and regulations. The outbreak of a pandemic or public health crisis, including any resurgence of the COVID-19 pandemic (or any variant thereof), may adversely impact the Company.

Removed

Factors arising from the COVID-19 pandemic that have impacted, or may in the future negatively impact, the Company’s business and results, including sales and gross margin, include, but are not limited to: supply chain disruptions, which resulted in, and may continue to result in, delays in delivering products or services to the Company’s customers as well as increases in product costs; labor shortages and increases in the costs of labor; limitations on the ability of the Company’s employees to perform their work due to sickness or other impacts caused by the pandemic or local, state, federal or foreign orders that may restrict the Company’s operations or the operations of its customers, or require that employees be quarantined; limitations on the ability of carriers to deliver products to the Company’s facilities and customers; risks associated with vaccine mandates, including the potential loss of employees, fines for noncompliance and loss of, or future inability to secure, certain contracts, including with the federal government; adverse impacts of the pandemic on certain industries and customers of the Company which operate in those industries, including the hospitality industry; and potential decreased demand for products and services, including potential limitations on the ability of, or adverse changes in the desire of, the Company’s customers to conduct their business, purchase products and services, and pay for purchases on a timely basis or at all.

Added

Any future pandemic or public health crisis may have similar or worse effects than those experienced in connection with the COVID-19 pandemic and may exacerbate certain of the other risks set forth herein. 15 The Company faces risks related to its foreign sales .

Removed

Further, the Company may continue to experience adverse impacts to its business as a result of, among other things, any adverse impact that has occurred or may occur in the future in the economy or markets generally, and changes in customer or supplier behavior, in each case, in connection with the pandemic.

Added

Further, damages to the facility of a customer may adversely impact the business of the customer and its need for products or services from the Company or result in delays in the delivery of products or provision of services to the customer. Any of these events may materially and adversely impact the Company’s business, operating results and financial condition.

Removed

During May 2020, the Company and certain of its subsidiaries received a total of twelve loans (the “PPP Loans”) totaling approximately $6.9 million in principal amount from Fifth Third Bank, N.A. (the “Lender”) under the Paycheck Protection Program (the “PPP”) established under the CARES Act. The proceeds of the PPP Loans were used primarily for payroll costs.

Added

The Company could be negatively affected by cyber or other security threats or other disruptions.

Removed

During the fiscal 2021, the Company was notified by the Lender that all twelve of the PPP Loans were fully forgiven. The Company recognized a gain of $7.0 million during fiscal 2021 in connection with the forgiveness of the PPP Loans and the related 11 Table of Contents accrued interest.

Added

In the ordinary course of its business, the Company processes, transmits and stores sensitive Company information as well as sensitive information, including personal information, about its customers, employees and vendors, all of which require the appropriate and secure utilization of such information and subjects the Company to risks relating thereto, including risks relating to increased focus regarding the Company's data security compliance.

Removed

Notwithstanding the forgiveness of the loans, the Small Business Administration (the “SBA”) reserves the right to audit the PPP Loans. Any such audit may require significant management attention and the incurrence of significant costs, and an adverse determination could have a material adverse impact on the Company’s results and financial condition.

Added

Cyber-attacks, including ransomware, malware and phishing, designed to gain access to sensitive information by breaching systems are constantly evolving. Furthermore, there has been heightened legislative and regulatory focus on data security in the U.S. and abroad, including requirements for varying levels of customer notification in the event of a data breach. These laws are changing rapidly and vary among jurisdictions.

Removed

All of the Company’s foreign sales require the customer to make payment in United States dollars.

Added

The Company will continue its efforts to meet applicable privacy and data security obligations; however, it is possible that certain new obligations may be difficult to meet and could increase the Company's costs. The Company relies on commercially available systems, software and tools to provide security for processing, transmitting and storing sensitive information.

Removed

This is a lengthy and expensive process that will result in a diversion of resources from other operations, and may result in cost overruns, project delays or business interruptions.

Added

As the risk of cyber-attacks increases, related insurance premiums and the cost of defensive measures may also increase. In addition, the costs to remediate security incidents or breaches that may occur could be material.

Removed

A significant theft, loss, or fraudulent use of customer, employee or company data maintained could adversely impact the Company’s reputation and could result in remedial and other expenses, fines or litigation. A breach in the security of the Company’s information systems could lead to an interruption in the operation of the Company’s systems, resulting in operational inefficiencies and losses.

Added

Despite the security measures and processes the Company has in place, efforts to protect sensitive Company, customer, employee and vendor information may not be successful in preventing a breach in the Company's systems or detecting and responding to a breach on a timely basis.

Removed

On May 6, 2022, the Company entered into an amendment to the Credit Agreement which, among other things, (i) in connection with the phasing out of LIBOR, replaced LIBOR with the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”), and (ii) extended the maturity date from November 2, 2023 to May 6, 2027.

Added

The Company has experienced threats to, and incidents involving, its systems and information, and while none have been material to date, cyber-attacks are generally becoming more frequent, intense, and sophisticated. As a result of a security incident or breach in the Company's systems, the Company's systems could be interrupted or damaged, and/or sensitive information could be accessed by third parties.

Removed

The Company may incur additional debt financing as determined to be appropriate by management, including in connection with the financing of acquisitions or otherwise, which would increase the Company’s vulnerability to the risk factors described above related to its level of indebtedness and may place restrictions on the Company similar or in addition to those contained in the Credit Agreement.

Added

In the event of a data or security breach, the Company's customers, employees or vendors could lose confidence in the Company's ability to protect their information, which could result in the loss of key customers, employees or vendors, or the Company's reputation could otherwise be negatively impacted, any of which may have a material adverse impact on the Company's business or results.

Removed

While executive compensation matters are determined by a compensation committee comprised solely of independent directors and the Company’s Board of Directors is currently comprised of a majority of independent directors, the Company does not have a standing nominating/corporate governance committee and the Company has in the past from time to time maintained a Board of Directors not comprised of a majority of independent directors.

Added

In addition, as the regulatory environment relating to the protection of sensitive data becomes stricter, a failure to comply with applicable regulations could potentially subject the Company to fines, penalties, other regulatory sanctions, or lawsuits with the possibility of substantial damages. 18 In addition, damage or disruption to the Company's systems could adversely impact the Company's ability to manage or operate its business.

Removed

The Company may from time to time become subject to litigation and other legal proceedings. Litigation and other legal proceedings may require the Company to incur significant expenses, including those relating to legal and other professional fees.

Added

The Sarbanes-Oxley Act of 2002 and SEC rules require that management annually report on the effectiveness of the Company’s internal control over financial reporting and its disclosure controls and procedures. The Company has incurred, and expects to continue to incur, a substantial amount of management time and resources to comply with such requirements.

Added

As more fully described in Item 9A, “Controls and Procedures,” of this Annual Report on Form 10-K, in connection with its evaluation of the effectiveness of the Company’s internal control over financial reporting as of June 30, 2023, management identified a material weakness in the Company’s internal control over financial reporting related to the review and approval of manual journal entries made to the general ledger at certain of the Company’s subsidiaries.

Added

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

Added

As a result of the identification of the material weakness, management concluded that the Company’s internal control over financial reporting was not effective as of June 30, 2023. The Company is in the process of developing and implementing a remediation plan for the identified material weakness.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. The Company’s principal executive offices are located in Miami, Florida. The Company’s principal properties include warehousing and distribution facilities and administrative office space, all of which are leased (generally for terms of three to ten years). At June 30, 2022, the Company had 30 warehousing and distribution facilities and administrative facilities located across 18 U.S. states.

Biggest changeItem 2. Properties. The Company’s principal executive offices are located in Miami, Florida. The Company’s principal properties include warehousing and distribution facilities and administrative office space, all of which are leased (generally for terms of three to ten years). At June 30, 2023, the Company had 32 warehousing and distribution facilities and administrative facilities located across 19 U.S. states.

Senior management and support staff are located at the Company’s principal executive offices and other administrative offices mostly adjacent to the Company’s warehousing and distribution facilities. The facilities have an aggregate of approximately 365,000 square feet of space. The Company believes that its facilities are sufficient to meet the Company’s present operating needs.

Senior management and support staff are located at the Company’s principal executive offices and other administrative offices mostly adjacent to the Company’s warehousing and distribution facilities. The facilities have an aggregate of approximately 500,000 square feet of space. The Company believes that its facilities are sufficient to meet the Company’s present operating needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. In the ordinary course of business, the Company may from time to time be involved in, or subject to, legal and regulatory claims, proceedings, demands or actions. Litigation is inherently uncertain and the 21 Table of Contents outcome of litigation cannot be predicted or determined in advance.

Biggest changeItem 3. Legal Proceedings. In the ordinary course of business, the Company may from time to time be involved in, or subject to, legal and regulatory claims, proceedings, demands or actions. Litigation is inherently uncertain and the outcome of litigation cannot be predicted or determined in advance.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSee Part III, Item 12 of this Report for information regarding securities authorized for issuance under the Company’s equity-based compensation plans. The Company does not have in place any formal share repurchase plans or programs.

Biggest changeAs described above, future dividends will be considered in light of the Company’s financial position and liquidity needs, and other factors deemed relevant by the Company’s Board of Directors. See Part III, Item 12 of this Report for information regarding securities authorized for issuance under the Company’s equity-based compensation plans.

During the quarter ended June 30, 2022, the Company did not repurchase any shares of its common stock.

During the quarter ended June 30, 2023, the Company did not repurchase any shares of its common stock.

Upon request by a recipient of awards granted under the Company’s equity incentive plan, the Company may issue shares upon vesting of restricted stock awards or upon issuance of stock awards, net of the statutory withholding requirements that the Company pays on behalf of its employees.

The Company does not have in place any formal share repurchase plans or programs. Upon request by a recipient of awards granted under the Company’s equity incentive plan, the Company may issue shares upon vesting of restricted stock awards or upon issuance of stock awards, net of the statutory withholding requirements that the Company pays on behalf of its employees.

The Company’s management does not believe that the covenants contained in the Credit Agreement currently materially limit the Company’s ability to pay dividends or are reasonably likely to materially limit the Company’s ability to pay dividends in the future. There is no assurance that the Company will pay dividends on its common stock in the future.

The Company did not pay any dividends on its common stock during the fiscal years ended June 30, 2022 or 2021.

The Company’s common stock is traded on the NYSE American under the symbol “EVI.” As of September 22, 2023, there were approximately 171 holders of record of the Company’s common stock. 24 The Company did not pay any dividends on its common stock during the fiscal years ended June 30, 2023 or 2022.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. The Company’s common stock is traded on the NYSE American under the symbol “EVI.” As of September 1, 2022, there were approximately 215 holders of record of the Company’s common stock.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Added

On October 4, 2023, the Company’s Board of Directors declared a special cash dividend on the Company’s common stock of $0.28 per share to be paid on October 26, 2023 to stockholders of record at the close of business on October 16, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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2023 filing

Biggest changeThe acquired companies generally distribute commercial, industrial, and vended laundry products and provide installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. ● On October 10, 2016, the Company purchased substantially all of the assets of Western State Design, LLC, a California-based company, for a purchase price consisting of $18.5 million in cash and 2,044,990 shares of the Company’s common stock. ● On October 31, 2017, the Company purchased substantially all of the assets of Tri-State Technical Services, Inc., a Georgia-based company, for a purchase price consisting of approximately $7.95 million in cash and 338,115 shares of the Company’s common stock. ● On February 9, 2018, the Company purchased substantially all of the assets of Dallas-based companies, Zuf Acquisitions I LLC (d/b/a/ AAdvantage Laundry Systems) and Sky-Rent LP, for total consideration of approximately $20.4 million, consisting of approximately $8.1 million in cash and 348,360 shares of the Company’s common stock. ● On September 12, 2018, the Company purchased substantially all of the assets of Scott Equipment, Inc., a Houston-based company, for approximately $6.5 million in cash and 209,678 shares of the Company’s common stock. ● On February 5, 2019, the Company acquired PAC Industries Inc., a Pennsylvania-based company, for approximately $6.4 million in cash and 179,847 shares of the Company’s common stock. ● On November 3, 2020, the Company acquired Yankee Equipment Systems, LLC, a New Hampshire-based company, for approximately $4.6 million in cash and 278,385 shares of the Company’s common stock. ● On February 7, 2022, the Company acquired (the “CLK Acquisition”) Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), a North Carolina-based company, for approximately $3.3 million in cash, net of cash acquired, and 179,087 shares of the Company’s common stock. ● On June 1, 2022, the Company acquired (the “CDL Acquisition”) Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”), a Colorado-based company, for approximately $5.4 million in cash.

Costs associated with shipping and handling activities performed after the customer obtains control are accounted for as fulfillment costs. Revenue from products transferred to customers at a point in time is recognized when obligations under the terms of the contract with the Company’s customer are satisfied, which generally occurs with the transfer of control upon shipment.

Costs associated with shipping and handling activities performed after the customer obtains control are accounted for as fulfillment costs. 33 Revenue from products transferred to customers at a point in time is recognized when obligations under the terms of the contract with the Company’s customer are satisfied, which generally occurs with the transfer of control upon shipment.

Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services. The Company’s customers include government, institutional, industrial, commercial and retail customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems.

Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services. 25 The Company’s customers include government, institutional, industrial, commercial and retail customers. Product purchases made by customers range from parts and accessories, to single or multiple units of equipment, to large complex systems.

Other contracts contain a combination of equipment sales and services expected to be performed in the near-term, which services are distinct and accounted for as separate performance obligations. Significant judgment may be required by management to identify the distinct performance obligations within each contract.

Other contracts contain a combination of equipment sales and services expected to be performed in the near-term, which services are distinct and accounted for as separate performance obligations. Judgment may be required by management to identify the distinct performance obligations within each contract.

See “Buy-and-Build Growth Strategy” below for additional information regarding the Company’s “buy-and-build” growth strategy, including information regarding certain acquisitions consummated by the Company since its implementation of the “buy-and-build” growth strategy. The Company reports its results of operations through a single reportable segment.

Management evaluates the Company’s ability to realize its deferred tax assets on a quarterly basis and adjusts its valuation allowance when it believes that it is more likely than not that the asset will not be realized. See Note 13 to the Consolidated Financial Statements included in Item 8 of this Report for additional information regarding income taxes.

Management evaluates the Company’s ability to realize its deferred tax assets on a quarterly basis and adjusts its valuation allowance when it believes that it is more likely than not that the asset will not be realized. See Note 10 to the Consolidated Financial Statements included in Item 8 of this Report for additional information regarding income taxes.

The Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. As of June 30, 2022, the Company was in compliance with its covenants under the Credit Agreement.

The Credit Agreement also contains other provisions which may restrict the Company’s ability to, among other things, dispose of or acquire assets or businesses, incur additional indebtedness, make certain investments and capital expenditures, pay dividends, repurchase shares and enter into transactions with affiliates. As of June 30, 2023, the Company was in compliance with its covenants under the Credit Agreement.

In the event the expected future net cash flows become less than the carrying amount of the assets, an impairment loss would be recorded in the period the determination is made based on the fair value of the related assets. Income Taxes The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 740, “Income Taxes” (“ASC 740”).

In the event the expected future cash flows become less than the carrying amount of the assets, an impairment loss would be recorded in the period the determination is made based on the fair value of the related assets. 34 Income Taxes The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 740, “Income Taxes” (“ASC 740”).

From time to time the Company enters into longer-term contracts to fulfill large complex laundry projects for divisions of the federal government where the nature of, and competition for, such contracts may result in a lower gross margin as compared to other equipment sales. During fiscal 2022, the Company entered into a number of such lower-margin equipment sales.

From time to time the Company enters into longer-term contracts to fulfill large complex laundry projects for divisions of the federal government where the nature of, and competition for, such contracts may result in a lower gross margin as compared to other equipment sales. During fiscal 2023, the Company entered into a number of such lower-margin equipment sales.

Critical Accounting Policies Use of Estimates In connection with the preparation of its financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”), the Company makes estimates and assumptions, including those that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and the reported amounts of revenues and expenses during the reported periods.

Critical Accounting Estimates Use of Estimates In connection with the preparation of its financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company makes estimates and assumptions, including those that affect the reported amounts of assets and liabilities, contingent assets and liabilities, and the reported amounts of revenues and expenses during the reported periods.

The estimates of fair value of the Company’s indefinite-lived intangibles and long-lived assets are based on information available as of the date of the assessment and take into account management’s assumptions about expected future cash flows and other valuation techniques.

The estimates of fair value of the Company’s indefinite-lived intangibles are based on information available as of the date of the assessment and take into account management’s assumptions about expected future cash flows and other valuation techniques.

Total estimated costs to complete projects include various costs such as direct labor, material and subcontract costs. Changes in these estimates can have a significant impact on the revenue recognized each 32 Table of Contents period. From time to time, the Company also enters into maintenance and service contracts.

Total estimated costs to complete projects include various costs such as direct labor, material and subcontract costs. Changes in these estimates can have a significant impact on the revenue recognized each period. From time to time, the Company also enters into maintenance and service contracts.

Payments under this lease totaled approximately $207,000 and $144,000 during fiscal 2022 and 2021, respectively. 30 Table of Contents On October 31, 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, entered into lease agreements pursuant to which it leases a total of 81,000 square feet of warehouse and office space from an affiliate of Matt Stephenson, President of Tri-State.

Payments under this lease totaled approximately $228,000 and $207,000 during fiscal 2023 and fiscal 2022, respectively. 31 On October 31, 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, entered into lease agreements pursuant to which it leases a total of 81,000 square feet of warehouse and office space from an affiliate of Matt Stephenson, President of Tri-State.

The decrease in cost of sales, as a percentage of revenues, and increase in gross margin were primarily attributable to 29 Table of Contents favorable changes in product and customer mix. The increases are also attributable to the Company’s efforts to drive higher quality sales opportunities from promoting solution selling as a value-added distributor.

The decrease in cost of sales, as a percentage of revenues, and increase in gross margin were primarily attributable to favorable changes in product and customer mix. The increase in gross margin is also attributable to the Company’s efforts to drive higher quality sales opportunities from promoting solution selling as a value-added distributor.

Cost of Sales and Operating Expenses Fiscal Year Ended June 30, 2022 2021 As a percentage of revenues: Cost of sales, net 72.4 % 75.3 % As a percentage of revenues: Selling, general and administrative expenses 25.2 % 23.4 % Cost of sales, expressed as a percentage of revenues, decreased to 72.4% in fiscal 2022 from 75.3% in fiscal 2021, representing gross margins of 27.6% in fiscal 2022 and 24.7% in fiscal 2021.

Cost of Sales and Selling, General and Administrative Expenses Fiscal Year Ended June 30, 2023 2022 As a percentage of revenues: Cost of sales, net 70.7 % 72.4 % As a percentage of revenues: Selling, general and administrative expenses 24.6 % 25.2 % 30 Cost of sales, expressed as a percentage of revenues, decreased to 70.7% in fiscal 2023 from 72.4% in fiscal 2022, representing gross margins of 29.3% in fiscal 2023 and 27.6% in fiscal 2022.

A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. As of June 30, 2022, $34.1 million was available to borrow under the revolving credit facility.

A portion of the revolving credit facility is available for swingline loans of up to a sublimit of $5 million and for the issuance of standby letters of credit of up to a sublimit of $10 million. As of June 30, 2023, $57.3 million was available to borrow under the revolving credit facility.

Off-Balance Sheet Financing As of June 30, 2022, the Company had no off-balance sheet financing arrangements within the meaning of Item 303(a)(4) of Regulation S-K. Results of Operations Revenues Revenues for fiscal 2022 increased by approximately $25.3 million (10%) from fiscal 2021.

Off-Balance Sheet Financing As of June 30, 2023, the Company had no off-balance sheet financing arrangements within the meaning of Item 303(a)(4) of Regulation S-K. Results of Operations Revenues Revenues for fiscal 2023 increased by approximately $86.9 million (32%) from fiscal 2022.

The Company’s operating expenses consist primarily of (a) selling, general and administrative expenses, primarily salaries, and commissions and marketing expenses that are variable and correlate to changes in sales, (b) expenses related to the operation of warehouse facilities, including a fleet of installation and service vehicles, and facility rent, which are payable mostly under non-cancelable operating leases, and (c) operating expenses at the parent company, including compensation expenses, fees for professional services, expenses associated with being a public company, including increased expenses attributable to the Company’s growth, and expenses in furtherance of the Company’s “buy-and-build” growth strategy.

Consolidated Financial Condition The Company’s total assets increased from $177.9 million at June 30, 2021 to $230.8 million at June 30, 2022.

Consolidated Financial Condition The Company’s total assets increased from $230.8 million at June 30, 2022 to $253.8 million at June 30, 2023.

The Company’s primary sources of cash are sales and borrowings under its credit facility. The Company’s primary uses of cash are purchases of the products sold by the Company, employee related costs, and the cash consideration paid in connection with business acquisitions.

The Company’s primary uses of cash are purchases of the products sold by the Company, employee related costs, and the cash consideration paid in connection with business acquisitions.

The increase in revenues was also attributable to the revenues of businesses acquired by the Company during fiscal 2021 whose results were consolidated in the Company’s financial statements for all of fiscal 2022 as compared to just the period of 23 Table of Contents fiscal 2021 from the respective closing date of the acquisition through the end of fiscal 2021, including primarily Yankee Equipment Systems, Inc.

The increase in revenues was also attributable to the revenues of businesses acquired by the Company during fiscal 2022 whose results were consolidated in the Company’s financial statements for all of fiscal 2023 as compared to just the period of fiscal 2022 from the respective closing date of the acquisition through the end of fiscal 2022.

The increase in revenues during fiscal 2022 is attributable to increases in revenues at certain of the Company’s legacy businesses due to improved conditions in connection with the recovery from the COVID-19 pandemic, the completion during fiscal 2022 of projects previously delayed by the COVID-19 pandemic, price increases established throughout the Company’s product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating costs, and revenues generated by businesses acquired by the Company during fiscal 2022, primarily Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), which was acquired during February 2022.

The increase in revenues during fiscal 2023 is attributable to increases in revenues at certain of the Company’s legacy businesses due to improved conditions in connection with the continued recovery from the COVID-19 pandemic, the completion during fiscal 2023 of projects previously delayed by the COVID-19 pandemic, price increases established throughout the Company’s product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating cost increases, and revenues generated by businesses acquired by the Company during fiscal 2023.

Total revenues for the fiscal year ended June 30, 2022 (“fiscal 2022”) increased by 10% compared to the fiscal year ended June 30, 2021 (“fiscal 2021”).

Total revenues for the fiscal year ended June 30, 2023 (“fiscal 2023”) increased by 32% compared to the fiscal year ended June 30, 2022 (“fiscal 2022”).

The lease has an initial term of three years and provides for three successive three-year renewal terms at the option of the Company. Payments under this lease totaled approximately $80,000 during fiscal 2022.

The lease has an initial term of three years and provides for three successive three-year renewal terms at the option of the Company, and the Company currently expects to exercise its option to renew this lease for the first three-year renewal term. Payments under this lease totaled approximately $146,000 and $142,000 during fiscal 2023 and fiscal 2022, respectively.

As a result, borrowings (other than swingline loans) under the Credit Agreement will now bear interest, at a rate based on (a) the BSBY rate plus a margin that ranges between 1.25% and 1.75% depending on the Company’s Consolidated Leverage Ratio or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio.

As a result, borrowings (other than swingline loans) under the Credit Agreement bear interest, at a rate based on (a) the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”) plus a margin that ranges between 1.25% and 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio.

The following table summarizes the Company’s Consolidated Statements of Cash Flows (in thousands): Fiscal Years Ended June 30, Net cash provided (used) by: 2022 2021 Operating activities $ (1,898 ) $ 13,694 Investing activities $ (15,934 ) $ (7,642 ) Financing activities $ 15,749 $ (9,784 ) For fiscal 2022, operating activities used cash of approximately $1.9 million compared to cash provided by operating activities of approximately $13.7 million in fiscal 2021.

The following table summarizes the Company’s Consolidated Statements of Cash Flows (in thousands): Fiscal Year Ended June 30, Net cash provided (used) by: 2023 2022 Operating activities $ 940 $ (1,898 ) Investing activities $ (5,986 ) $ (15,934 ) Financing activities $ 6,993 $ 15,749 28 For fiscal 2023, operating activities provided cash of approximately $0.9 million compared to cash used by operating activities of approximately $1.9 million in fiscal 2022.

The Company believes that its existing cash, anticipated cash from operations and funds available under the Company’s Credit Agreement will be sufficient to fund its operations and anticipated capital 28 Table of Contents expenditures for at least the next twelve months from the filing of this Report, and thereafter.

The obligations of the Company under the Credit Agreement are collateralized by substantially all of the assets of the Company and certain of its subsidiaries, and are guaranteed, jointly and severally, by certain of the Company’s subsidiaries. 29 The Company believes that its existing cash, anticipated cash from operations and funds available under the Company’s Credit Agreement will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months from the filing of this Report, and thereafter.

In addition, the increase in revenues during fiscal 2022 was attributable to the revenues generated by (i) the businesses acquired by the Company during fiscal 2022, primarily CLK, which was acquired during February 2022, and (ii) businesses acquired by the Company during fiscal 2021 whose results were consolidated in the Company’s financial statements for all of fiscal 2022 as compared to just the period of fiscal 2021 from the respective closing date of the acquisition through the end of fiscal 2021, including primarily YES, the business of which was acquired during November 2020.

The identification and measurement of goodwill impairment involves the estimation of the fair value of the reporting unit and involves uncertainty because management must use judgment in determining appropriate assumptions to be used in the measurement of fair value.

Payments under these leases totaled approximately $184,000 and $180,000 during fiscal 2022 and 2021, respectively. On November 3, 2020, the Company’s wholly-owned subsidiary, YES, entered into a lease agreement pursuant to which it leases a total of 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli, President of YES.

On November 3, 2020, the Company’s wholly-owned subsidiary, Yankee Equipment Systems, entered into a lease agreement pursuant to which it leases a total of 12,500 square feet of warehouse and office space from an affiliate of Peter Limoncelli, President of Yankee Equipment Systems. Monthly base rental payments total $11,000 during the initial term of the lease.

Revenue Recognition Performance Obligations and Revenue Over Time Revenue primarily consists of revenues from the sale or leasing of commercial and industrial laundry and dry cleaning equipment and steam and hot water boilers manufactured by others; the sale of related replacement parts and accessories; and the provision of installation and maintenance services.

There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. 32 Revenue Recognition Performance Obligations and Revenue Over Time Revenue primarily consists of revenues from the sale or leasing of commercial and industrial laundry and dry cleaning equipment and steam and hot water boilers manufactured by others; the sale of related replacement parts and accessories; and the provision of installation and maintenance services.

The Company’s total liabilities increased from $71.1 million at June 30, 2021 to $113.1 million at June 30, 2022, primarily due to increases in accounts payable and accrued expenses, customer deposits and long-term debt, partially offset by a decrease in contract liabilities.

The increase in total assets was primarily attributable to an increase in current assets, as described below under “Liquidity and Capital Resources.” The Company’s total liabilities increased from $113.1 million at June 30, 2022 to $122.9 million at June 30, 2023, primarily due to increases in accrued employee expenses, customer deposits and long-term debt, partially offset by a decrease in accounts payable and accrued expenses.

Payments under these leases totaled approximately $252,000 during each of fiscal 2022 and 2021. On February 9, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, entered into a lease agreement pursuant to which it leases a total of 5,000 square feet of warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage.

On November 1, 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage. Monthly base rental payments under this lease were $26,000 initially.

Swingline loans generally bear interest calculated at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. In addition, the amendment also extended the maturity date of the Credit Agreement from November 2, 2023 to May 6, 2027.

Swingline loans generally bear interest calculated at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio. The maturity date of the Credit Agreement is May 6, 2027. The Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios.

Investing activities used cash of approximately $15.9 million during fiscal 2022 compared to approximately $7.6 million in fiscal 2021. The $8.3 million increase in cash used by investing activities is due primarily to an increase in cash consideration paid in connection with acquisitions and an increase in capital expenditures.

The $9.9 million decrease in cash used by investing activities is due primarily to a greater amount of cash consideration paid in connection with acquisitions during fiscal 2022 as compared to fiscal 2023. Financing activities provided cash of approximately $7.0 million in fiscal 2023 compared to cash provided by financing activities of approximately $15.7 million in fiscal 2022.

In addition to the CLK Acquisition and CDL Acquisition, during fiscal 2022, the Company acquired (the “LSS Acquisition”) Mississippi-based LS Acquisition, LLC d/b/a Laundry South Systems and Repair (“LSS”), and the Company also acquired (the “SPR Acquisition”) Spynr, Inc.

In addition to the CLK Acquisition and the CDL Acquisition, during fiscal 2022, the Company acquired Mississippi-based LS Acquisition, LLC d/b/a Laundry South Systems and Repair (“LSS”), and Spynr, Inc. (“SPR”), a Delaware-based digital marketing and technology company which provides digital marketing services to customers and vendors within the commercial, industrial and vended laundry industries.

The increase is primarily attributable to (a) operating expenses of acquired businesses, including additional operating expenses at the acquired businesses in pursuit of future growth and in connection with the Company’s optimization initiatives, (b) increases in selling costs, including commissions, from increases in revenues during the period, (c) increases in operating expenses and investments at the parent company level in connection with the Company’s optimization initiatives, including expenses related to the consolidation of the Company’s operations and the modernization of the Company’s operations through the implementation of advanced technologies, including a new ERP software system, a new customer relations management system, and a completely digital sales and service operating platform, and (d) increased operating expenses in support of the Company’s “buy-and-build” growth strategy.

Selling, general and administrative expenses increased by approximately $19.9 million (30%) in fiscal 2023 compared to fiscal 2022, primarily due to (a) operating expenses of acquired businesses, including additional operating expenses at the acquired businesses in pursuit of future growth and in connection with the Company’s optimization initiatives, (b) increases in selling costs, including commissions, from increases in revenues during fiscal 2023, and (c) increases in operating expenses and investments at the parent company level in connection with the Company’s optimization initiatives, including expenses related to the consolidation of the Company’s operations and the modernization of the Company’s operations through the implementation of advanced technologies.

Monthly base rental payments total $20,000 during the initial term of the lease. In addition to base rent, CLK is responsible under the lease for costs related to real 31 Table of Contents estate taxes, utilities, maintenance, repairs and insurance.

In addition to base rent, Yankee Equipment Systems is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance.

Monthly base rental payments total $21,000 during the initial terms of the leases. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company.

Monthly base rental payments total $21,000 during the initial terms of the leases. Each lease had an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. The Company exercised its option to renew the leases for the first three-year renewal term, which commenced in October 2022.

These assets, except for tradenames, are amortized on a straight-line basis over the estimated future periods to be benefited (5-10 years).

Customer Relationships, Tradenames and Other Intangible Assets Customer relationships, tradenames, non-competes, and other intangible assets are stated at cost less accumulated amortization. These assets with a finite-life are amortized on a straight-line basis over the estimated future periods to be benefited (5-10 years).

The amendment amended the Credit Agreement to, among other things, replace LIBOR with the Bloomberg Short-Term Bank Yield Index rate (the “BSBY rate”) in connection with the phasing out of LIBOR.

On May 6, 2022, the Company entered into an amendment to the Credit Agreement. The amendment amended the Credit Agreement to, among other things, replace LIBOR with in connection with the phasing out of LIBOR.

The decrease in cash was primarily due to cash used for optional debt repayments under the Company’s credit facility, capital expenditures, and cash used to fund the cash consideration paid 26 Table of Contents in connection with the Company’s business acquisitions during fiscal 2022, partially offset by earnings from operations and proceeds from changes in operating assets and liabilities.

The increase in cash was primarily due to cash borrowed in excess of optional debt repayments under the Company’s credit facility used to fund the cash consideration paid in connection with the Company’s business acquisitions during fiscal 2023 and capital expenditures. The Company’s primary sources of cash are sales of products and services, and borrowings under its credit facility.

Liquidity and Capital Resources The Company had approximately $4.0 million of cash at June 30, 2022 compared to $6.1 million of cash at June 30, 2021.

The increase in long-term debt was attributable to borrowings under the Company’s credit facility in excess of optional repayments. Liquidity and Capital Resources The Company had approximately $5.9 million of cash at June 30, 2023 compared to $4.0 million of cash at June 30, 2022.

Financing activities provided cash of approximately $15.7 million in fiscal 2022 compared to cash used by financing activities of approximately $9.8 million in fiscal 2021. The cash provided by financing activities was attributable primarily to an increase in proceeds from borrowings during fiscal 2022 in excess of optional debt payments to fund changes in working capital.

The $2.8 million increase in cash provided by operating activities was primarily attributable to increases in net income, partially offset by increases in the cash used by operating activities from changes in operating assets and liabilities. Investing activities used cash of approximately $6.0 million during fiscal 2023 compared to approximately $15.9 million in fiscal 2022.

Monthly base rental payments total $11,000 during the initial terms of the leases. In addition to base rent, Scott Equipment is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company.

The lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company, and the Company currently expects to exercise its option to renew this lease for the first three-year renewal term. Payments under the leases described in this paragraph totaled approximately $432,000 during fiscal 2023 and fiscal 2022.

The purchase price allocations are considered preliminary, as the Company is still assessing certain working capital and valuation-related items. See Note 3 to the Consolidated Financial Statements included in Item 8 of this Report for additional information about the acquisitions completed by the Company during fiscal 2022 and fiscal 2021.

The total consideration for these transactions consisted of $2.4 million in cash and the issuance of 24,243 shares of the Company’s common stock. 27 See Note 3 to the Consolidated Financial Statements included in Item 8 of this Report for additional information about the acquisitions completed by the Company during fiscal 2023 and fiscal 2022.

(“SPR”), a Delaware-based digital marketing and technology company which provides digital marketing services to customers and vendors within the commercial, industrial and vended laundry industries. The total consideration for the transactions consisted of $3.2 million in cash and the issuance of 34,391 shares of the Company’s common stock.

The total consideration for these transactions consisted of $3.2 million in cash and the issuance of 34,391 shares of the Company’s common stock. During fiscal 2023, the Company acquired Massachusetts-based Aldrich Clean-Tech Equipment Corp.

In addition to base rent, AAdvantage is responsible under each of these leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company.

Pursuant to the lease agreement, on January 1, 2019, the lease expanded to cover additional warehouse space and, in connection therewith, monthly base rental payments under this lease increased to $36,000. In addition to base rent, AAdvantage is responsible under each of these leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance.

Longer-term federal government contracts entered into during fiscal 2022 lowered gross margins by 30 basis points. Selling, general and administrative expenses increased by approximately $10.7 million (19%) in fiscal 2022 compared to fiscal 2021. As a percentage of revenues, selling, general and administrative expenses increased to 25.2% in fiscal 2022 from 23.4% in fiscal 2021.

As a percentage of revenues, selling, general and administrative expenses decreased to 24.6% in fiscal 2023 from 25.2% in fiscal 2022. Interest Expense Interest and other expense, net increased by approximately $1.8 million (269%) in fiscal 2023 compared to fiscal 2022.

The Company’s effective income tax rate was 28.3% for fiscal 2022 compared to 15.2% in fiscal 2021.

The increase is due primarily to increases in the average outstanding debt balance and average effective interest rate incurred on outstanding borrowings. Provision for Income Taxes The Company’s effective income tax rate was 30.6% for fiscal 2023 compared to 28.3% in fiscal 2022.

Monthly base rental payments total $11,000 during the initial term of the lease. In addition to base rent, YES is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. The lease has an initial term of three years and provides for three successive three-year renewal terms at the option of the Company.

Stephenson described above. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under these leases totaled approximately $306,000 and $252,000 during fiscal 2023 and fiscal 2022, respectively.

Removed

The Company also provides its customers with the services described above. Prior to the completion of the Company’s first acquisition pursuant to its “buy-and-build” growth strategy in October 2016, the Company’s operations related to the activities described above consisted solely of the business and operations of Steiner-Atlantic Corp. (“Steiner-Atlantic”), a wholly-owned subsidiary of the Company.

Added

The Company also provides its customers with the services described above.

Removed

(“YES”), which was acquired during November 2020. Net income for fiscal 2022 decreased by 51% from fiscal 2021.

Added

The increase in revenues during fiscal 2023 is attributable to increases in revenues at certain of the Company’s legacy businesses due to improved conditions in connection with the continued recovery from the COVID-19 pandemic (which negatively impacted the Company’s business and results beginning at the end of the quarter ended March 31, 2020; specifically, due to delays and declines in the placement of customer orders, the completion of equipment and parts installations, and the fulfillment of parts orders), the completion during fiscal 2023 of projects previously delayed by the COVID-19 pandemic, price increases established throughout the Company’s product lines and service offerings aimed at maintaining or increasing margins to cover incremental product and operating cost increases, and revenues generated by businesses acquired by the Company during fiscal 2023.

Removed

While the Company experienced an increase in the Company’s revenues (as described above) and an increase in the gross margin realized on the Company’s sales during fiscal 2022, there was an overall decrease to net income that was primarily attributable to the approximately $7.0 million one-time gain recognized in fiscal 2021 in connection with the forgiveness of the loans (the “PPP Loans”) previously obtained by the Company and certain of its subsidiaries under the Paycheck Protection Program (the “PPP”) (as described in further detail below under “Impact of COVID-19 on the Company’s Business).

Added

Net income for fiscal 2023 increased by 137% from fiscal 2022. The increase in net income was attributable primarily to the increases in revenue and the resulting gross profit, partially offset by the increases in selling, general and administrative expenses and interest expense.

Removed

Additionally, the decrease to net income is due in part to an increase in operating expenses.

Added

(“ACT”), North Carolina-based K&B Laundry Service, LLC (“K&B”), Alabama-based Wholesale Commercial Laundry Equipment Company SE, LLC (“WCL”), and Maryland-based Gluno, Inc. d/b/a Express Parts and Services (“EXP”).

Removed

Impact of COVID-19 on the Company’s Business The COVID-19 pandemic has negatively impacted, and may continue to negatively impact, the Company’s business and results.

Added

The decrease in cash provided by financing activities was attributable primarily to a decrease in net borrowings to fund acquisitions during fiscal 2023.

Removed

Added

Longer-term federal government contracts entered into during fiscal 2023 lowered gross margins by 30 basis points.

Removed

Added

The increase in the effective income tax rate in fiscal 2023 reflects an increase in the total state tax expense in higher rate jurisdictions. Inflation Inflation did not have a significant effect on the Company’s results during fiscal 2023 or fiscal 2022.

Removed

Factors arising from the COVID-19 pandemic that have impacted, or may in the future negatively impact, the Company’s business and results, including sales and gross margin, include, but are not limited to: supply chain disruptions, which resulted in, and may continue to result in, delays in delivering products or services to the Company’s customers as well as increases in product costs; labor shortages and increases in labor costs; limitations on the ability of the Company’s employees to perform their work due to sickness or other impacts caused by the pandemic or local, state, federal or foreign orders that may restrict the Company’s operations or the operations of its customers, or require that employees be quarantined; limitations on the ability of carriers to deliver products to the Company’s facilities and customers; risks associated with vaccine mandates, including the potential loss of employees, fines for noncompliance and loss of, or future inability to secure, certain contracts, including with the federal government; adverse impacts of the pandemic on certain industries and customers of the Company which operate in those industries, including the hospitality industry; and potential decreased demand for products and services, including potential limitations on the ability of, or adverse changes in the desire of, the Company’s customers to conduct their business, purchase products and services, and pay for purchases on a timely basis or at all.

Added

However, the Company faces risks relating to inflation, including the current inflationary trend, which may have an adverse impact on the market for the Company’s products and services, including that there is no assurance that the Company will be able to effectively increase the price of its products and services to offset increased costs.

Removed

Added

Base rent for the first renewal term is $25,000. In addition to such leases, since May 1, 2023, Tri-State Technical Services has also leased an additional 50,000 square feet of space from Mr. Stephenson. Monthly base rental payments for the additional space total $15,000. The term of this lease will expire upon the expiration of the other leases with Mr.

Removed

As a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the uncertainties resulting from the COVID-19 pandemic, during May 2020, the Company and certain of its subsidiaries received a total of twelve PPP Loans in the aggregate principal amount of 24 Table of Contents approximately $6.9 million.

Removed

During fiscal 2021, the Company was notified by Fifth Third Bank, N.A., the lender with respect to the PPP Loans, that all twelve of the PPP Loans were fully forgiven. The Company recognized a gain of $7.0 million during fiscal 2021 in connection with the forgiveness of the PPP Loans and the related accrued interest.

Removed

Additionally, in connection with its acquisition of YES during November 2020, the Company, indirectly through its wholly-owned subsidiary, assumed the approximately $916,000 loan previously received by YES under the PPP. During fiscal 2021, the loan to YES under the PPP was forgiven.

Removed

The Company did not recognize any gain on extinguishment of this debt, as the seller of YES had agreed to indemnify the Company with respect to any portion of this loan which was not forgiven.

Removed

Buy-and Build Growth Strategy The Company’s acquisitions under its “buy-and-build” growth strategy described above since its implementation in 2015 include, without limitation, those set forth below.

Removed

(“PAC”), a Pennsylvania-based company, for approximately $6.4 million in cash and 179,847 shares of the Company’s common stock. · On November 3, 2020, the Company acquired (the “YES Acquisition”) Yankee Equipment Systems, LLC (“YES”), a New Hampshire-based company, for approximately $4.5 million in cash and 278,385 shares of the Company’s common stock. · On February 7, 2022, the Company acquired (the “CLK Acquisition”) Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), a North Carolina-based company, for approximately $3.3 million in cash, net of cash acquired, and 179,087 shares of the Company’s common stock. · On June 1, 2022, the Company acquired (the “CDL Acquisition”) Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”), a Colorado-based company, for approximately $5.4 million in cash. 25 Table of Contents In addition to the YES Acquisition, during fiscal 2021, the Company acquired (the “ELS Acquisition”) Massachusetts-based Baystate Business Ventures d/b/a Eastern Laundry Systems (“ELS”).

Removed

The acquisition was completed by the Company, indirectly through a wholly-owned subsidiary, which purchased substantially all of the assets and assumed certain of the liabilities of ELS. The total consideration for the transaction consisted of $400,000 in cash, net of $57,000 of cash acquired, and the issuance of 10,726 shares of the Company’s common stock.

Removed

Based on the Company’s preliminary analysis of working capital and valuation-related items, the Company recognized a bargain purchase gain of $314,000 in connection with the ELS Acquisition during fiscal 2021.

Removed

The increase in total assets was primarily attributable to an increase in current assets, as described below under “Liquidity and Capital Resources,” and from the assets of the businesses acquired by the Company during fiscal 2022 as described above.

Removed

The increase in long-term debt was attributable to borrowings under the Company’s credit facility in excess of optional repayments. The changes in current liabilities, including the increases in accounts payable and accrued expenses and customer deposits and decrease in contract liabilities, are described under “Liquidity and Capital Resources” below.

… 27 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−1 removed4 unchanged

2022 filing

2023 filing

Biggest changeAs of June 30, 2022, the Company had approximately $28.0 million of outstanding borrowings under the Credit Agreement. Interest on such borrowings accrued at a weighted average rate of 2.26%. Based on the amounts outstanding at June 30, 2022, a hypothetical 1% increase in daily interest rates would increase the Company’s annual interest expense by approximately $280,000.

Biggest changeAs of June 30, 2023, the Company had approximately $35.0 million of outstanding borrowings under the Credit Agreement, which accrued interest at a weighted average rate of 5.81%.

The Company’s indebtedness may also have other important impacts on the 34 Table of Contents Company, including that the Company will be required to utilize cash flow to service the debt, indebtedness may make the Company more vulnerable to economic downturns, and the Company’s indebtedness subjects the Company to covenants, which may place restrictions on its operations and activities, including its ability to pay dividends and take certain other actions.

The Company’s indebtedness may also have other important impacts on the Company, including that the Company will be required to utilize cash flow to service the debt, indebtedness may make the Company more vulnerable to economic downturns, and the Company’s indebtedness subjects the Company to covenants, which may place restrictions on its operations and activities, including its ability to pay dividends and take certain other actions.

Interest on borrowings under the Company’s Credit Agreement accrue at a rate, at the Company’s election at the time of borrowing, equal to (a) the BSBY rate plus a margin that ranges from 1.25% to 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.

Interest on borrowings under the Company’s Credit Agreement accrue at a rate, at the Company’s election at the time of borrowing, equal to (a) the BSBY rate plus a margin that ranges from 1.25% to 1.75% depending on the Company’s Consolidated Leverage Ratio or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the BSBY rate plus 100 basis points (such highest rate, the “Base Rate”), plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio.

The Company had no foreign exchange contracts outstanding at June 30, 2022 or 2021. The Company’s cash is maintained in bank accounts which bear interest at prevailing interest rates. At June 30, 2022, bank deposits exceeded Federal Deposit Insurance Corporation insured limits.

The Company had no foreign exchange contracts outstanding at June 30, 2023 or 2022. The Company’s cash is maintained in bank accounts which bear interest at prevailing interest rates.

All of the Company’s export sales require the customer to make payment in United States dollars.

Based on the amounts outstanding at June 30, 2023, a hypothetical 1% increase in daily interest rates would increase the Company’s annual interest expense by approximately $350,000. 35 All of the Company’s export sales require the customer to make payment in United States dollars.

Removed

The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. 35 Table of Contents PART II

Added

While depositary accounts are covered by Federal Deposit Insurance Corporation (“FDIC“) insurance and the Company does not currently believe that it is exposed to significant credit risk due to the financial position of the banks in which the Company’s cash is held, there recently have been adverse events related to the soundness of financial institutions, including a number of smaller bank failures, and the Company has exposure to the extent its cash balances exceed the current $250,000 in maximum FDIC coverage. 36

Top changes in EVI INDUSTRIES, INC.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 3. Legal Proceedings

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Other EVI 10-K year-over-year comparisons