UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A10-K

Amendment No. 1

For the fiscal year ended June 30, 20202023

For the transition period from _________________________________________________________ to ____________________________________

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes ☐ No ☒

The aggregate market value as of December 31, 20192022 of the registrant’s common stock, the only class of voting or non-voting common equity of the registrant, held by non-affiliates of the registrant was approximately $101,685,705,$122,066,311, based on the closing price of the registrant’s common stock on the NYSE American on that date.

The number of outstanding shares of the registrant’s common stock as of October 20, 2020September 22, 2023 was 11,934,514.12,586,178.

DOCUMENTS INCORPORATED BY REFERENCE

None.Portions of the registrant’s Proxy Statement relating to its 2023 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

EXPLANATORY NOTE

EVI Industries, Inc. (the “Company”) is filing this Amendment No. 1 (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended June 30, 2020 (the “Fiscal 2020 Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”) on September 14, 2020, solely to provide the remaining information required by Items 10-14 of Part III of Form 10-K. Except as it relates to the provision of such information, this Amendment does not reflect subsequent events occurring after the original filing date of the Fiscal 2020 Form 10-K or modify or update in any way disclosures made in the Fiscal 2020 Form 10-K.

Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains new certifications of the Company’s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Because no financial statements are included in this Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 or 308 of Regulation S-K promulgated by the SEC under the Exchange Act, paragraphs 3, 4 and 5 of the Section 302 certifications have been omitted. In addition, because no financial statements are included in this Amendment, new certifications of the Company’s principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are not required to be included with this Amendment.

TABLE OF CONTENTS

TABLE OF CONTENTS

(continued)

PART IIITERMS USED IN THIS REPORT

Item 10. Directors, Executive Officers and Corporate Governance.

Executive Officers and Directors

The following table listsUnless the names and agescontext otherwise requires, references to the “Company” or “EVI” in this Annual Report on Form 10-K (this “Report”) refer to EVI Industries, Inc., collectively with its subsidiaries. References in this Report to “fiscal 2023” or any period thereof refer to the Company’s fiscal year ended June 30, 2023 or the applicable period thereof, as the case may be. References in this Report to “fiscal 2022” or any period thereof refer to the Company’s fiscal year ended June 30, 2022 or the applicable period thereof, as the case may be.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this Report are “forward looking statements” within the meaning of the Company’s executive officersPrivate Securities Litigation Reform Act of 1995. When used in this Report, words such as “may,” “should,” “could,” “seek,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “strategy” and directors,similar expressions are intended to identify forward looking statements. Forward looking statements may relate to, among other things, events, conditions and their respective positions withtrends that may affect the Company.

Set forth below is certain additional information for each executive officerfuture plans, operations, business, strategies, operating results, financial position and directorprospects of the Company. Forward looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, including his principal occupation or employment for at leastindustry trends and results, to differ materially from the previous five yearsfuture results, trends, performance or achievements expressed or implied by such forward looking statements. These risks and with respect to each director, his specific experience, qualifications, attributes and/or skills which,uncertainties include, among others, those associated with: general economic and business conditions in the opinion ofUnited States and other countries where the Company operates or where the Company’s Boardcustomers and suppliers are located, including the potential of Directors (the “Board”), qualifies hima recession; industry conditions and trends; credit market volatility; risks related to serve as a directorsupply chain delays and are likely to enhance the Board’s ability to managedisruptions and directtheir impact on the Company’s business and affairs.

Henry Nahmad has served asresults, including the Company’s ability to deliver products and services to its customers on a directortimely basis; risks relating to inflation, including the current inflationary trend, and the impact of inflation on the Company’s costs and its ability to increase the price of its products and services to offset such costs, and on the market for the Company’s products and services; risks related to labor shortages and increases in the costs of labor, and the impact thereof on the Company, including its ability to deliver products, provide services or otherwise meet customers’ expectations; risks related to interest rate increases, including the impact thereof on the cost of the CompanyCompany’s indebtedness and as Chairman, Chief Executive Officerthe Company’s ability to raise capital if deemed necessary or advisable; risks associated with international relations and Presidentinternational hostilities, including actions of foreign governments and the impact thereof on economic conditions, including supply chain constraints and inflationary trends; the Company’s ability to implement its business and growth strategies and plans, including changes thereto; risks and uncertainties associated with the Company’s ”buy-and-build” growth strategy, including, without limitation, that the Company since March 2015. Priormay not be successful in identifying or consummating acquisitions or other strategic transactions, integration risks, risks related to joiningindebtedness incurred by the Company Mr. Nahmad served as Chief Executive Officerin connection with the financing of Chemstar Corp., a provider of food safety and sanitation solutions, from July 2009 to March 2014. From 2001 to 2004 and from 2007 to 2009, Mr. Nahmad worked in various capacities at Watsco, Inc., the largest distributor of HVAC/R products. The Board believes that Mr. Nahmad’s knowledge, leadership skills, business relationships, and experience, including with respect to growth from acquisitions and other strategic transactions, make Mr. Nahmaddilution experienced by the Company’s existing stockholders as a valuable memberresult of the Boardissuance of shares of the Company’s common stock in connection with acquisitions or other strategic transactions (or for other purposes), risks related to the business, operations and benefitprospects of acquired businesses, risks that suppliers of the acquired business may not consent to the transaction or otherwise continue its relationship with the acquired business following the transaction and the impact that the loss of any such supplier may have on the results of the Company and the acquired business, risks that the Company’s goals or expectations with respect to acquisitions and other strategic transactions may not be met, and risks related to the accounting for acquisitions; risks relating to the impact of pricing concessions and other measures which the Company may take from time to time in connection with its expansion efforts and pursuit of market share growth, including that they may not be successful and may adversely impact the Company’s gross margin and other financial results; technology changes; competition, including the Company’s ability to compete effectively and the impact that competition may have on the Company and its results, including the prices which the Company may charge for its products and services and on the

Company’s profit margins, and competition for qualified employees; to the extent applicable, risks relating to the Company’s ability to enter into and compete effectively in new industries, as well as risks and trends related to those industries; risks relating to the Company’s relationships with its principal suppliers and customers, including the impact of the loss of any such relationship; risks that equipment sales may not result in the ancillary benefits anticipated, including that they may not lead to increases in customers (or a stronger relationship with customers) or higher gross margin sales of parts, accessories, supplies, and technical services related to the equipment, and the risk that the benefit of lower gross margin equipment sales under longer-term contracts will not outweigh the possible short-term impact to gross margin; the risk that the Company’s service operations may not expand to the extent anticipated, or at all; risks related to the Company’s indebtedness; the availability, terms and deployment of debt and equity capital if needed for expansion or otherwise; risks related to potential audits of the loans received by the Company and certain of its subsidiaries under the Payroll Protection Program notwithstanding the previous forgiveness of the loans, and 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; changes in, or the failure to comply with, government regulation, including environmental regulations; litigation risks, including the costs of defending litigation and the impact of any adverse ruling; the availability and cost of inventory purchased by the Company; the relative value of the United States dollar to currencies in the countries in which the Company’s customers, suppliers and competitors are located; risks relating to the recognition of revenue, including the amount and timing thereof (including potential delays resulting from, among other circumstances, delays in installation (including due to delays in construction or the preparation of the customer’s facilities) or in receiving required supplies) and that orders in the Company’s backlog may not be fulfilled as or when expected; risks related to the adoption of new accounting standards and the impact it may have on the Company’s financial statements and results; risks that the Company’s decentralized operating model, and that product, end-user and geographic diversity, may not result in the benefits anticipated and may change over time; risks related to organic growth initiatives and market share and other growth strategies, including that they may not result in the benefits anticipated; risks that investments, initiatives and expenses, including, without limitation, investments in acquired businesses and modernization initiatives, expenses associated with the Company’s implementation of its enterprise resource planning system, and other investments, initiatives and expenses, may not result in the benefits anticipated; risks related to the soundness of financial institutions and the Company’s exposure with respect to its business, operationscash balances in depositary accounts in excess of the $250,000 in maximum Federal Deposit Insurance Corporation (“FDIC“) insurance coverage; the risk that the Company’s compensation policies and growth strategy.programs, including the Company’s equity compensation plan, may not have the desired effects; dividends may not be paid in the future; risks related to the material weakness in the Company’s internal control over financial reporting, the Company’s ability to remediate such weakness in the anticipated timeframe, and the costs incurred in connection therewith; and other economic, competitive, governmental, technological and other risks and factors discussed elsewhere in this Report, including, without limitation, in the “Risk Factors” section hereof, and in the Company’s other filings with the Securities and Exchange Commission (the “SEC”). Many of these risks and factors are beyond the Company’s control. Further, past performance and perceived trends may not be indicative of future results. The Company cautions that the foregoing factors are not exclusive. The reader should not place undue reliance on any forward-looking statement, which speaks only as of the date made. The Company does not undertake to, and specifically disclaims any obligation to, update, revise or supplement any forward-looking statement, whether as a result of changes in circumstances, new information, subsequent events or otherwise, except as may be required by law.

Dennis Mack has served as Executive Vice PresidentPART I

Item 1. Business.

General

The Company was incorporated under the laws of the State of Delaware on June 13, 1963. On December 21, 2018, the Company changed its name from EnviroStar, Inc. to EVI Industries, Inc.

The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. 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. The Company also provides its customers with the services described above.

Beginning in 2015, the Company implemented a “buy-and-build” growth strategy which includes (i) the consideration and pursuit of acquisitions and other strategic transactions which management believes may complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company and (ii) the implementation of a growth culture at acquired businesses based on the exchange of ideas and business concepts among the management teams of the Company and the acquired businesses as well as through certain additional initiatives, which may include investments in additional sales and service personnel, new product lines, enhanced service operations and capabilities, new and improved facilities, and advanced technologies. 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 October 2016 when he was appointedits implementation of the “buy-and-build” growth strategy.

The Company seeks to maintain a culture designed to reward performance through a variety of performance-based pay, commission programs, cash incentives, and stock-based equity programs. 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. 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 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 reports its results of operations through a single operating and reportable segment.

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. These reports and statements, as well as beneficial ownership reports filed by the Company’s officers and directors and beneficial owners of 10% or more of the Company’s common stock, may be accessed free of charge on the SEC’s website at http://www.sec.gov and, as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the SEC, on the Company’s website at http://www.evi-ind.com. The information contained on or connected to the Company’s website is not incorporated by reference into, or otherwise a part of, this Report. Further, references to the website URL of the Company in this Report are intended to be inactive textual references only.

Products and Services

The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

The commercial and industrial laundry equipment distributed by the Company includes washroom, finishing, material handling, and mechanical equipment such as washers and dryers, tunnel systems and vended machines, many of which are designed to reduce utility and water consumption. Finishing equipment distributed by the Company includes sheet feeders, flatwork ironers, automatic sheet folders, and stackers. Material handling equipment distributed by the Company includes conveyor and rail systems. Mechanical equipment distributed by the Company includes boilers, hot water/steam systems, power generation products, water purification, reuse and recycling systems and air compressors. Boiler products distributed by the Company include high efficiency, low emission steam boilers, steam systems and hot water systems that are used in the laundry and dry cleaning industry for temperature control, heating, pressing and de-wrinkling, and in the healthcare industry, food and beverage industry, and other industrial markets, for sterilization, product sealing and other purposes. The Company also sells replacement parts and accessories for the products it distributes.

The Company seeks to position and price its products to appeal to customers in each of the high-end, mid-range and value-priced markets, as the products are generally offered in a wide range of price points to address the needs of a diverse customer base. The Company believes that its portfolio of products affords the Company’s customers a “one-stop shop” for commercial, industrial and vended laundry and dry cleaning machines, boilers and accessories and that, as a result, the Company is able to attract and support potential customers who can choose from the Company’s broad product line.

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.

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. The “buy” component of the strategy includes the consideration and pursuit of acquisitions and other strategic transactions which management believes would complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company. The Company is disciplined and conservative in its consideration of acquisitions and generally seeks to identify opportunities that fit certain financial and strategic criteria. The “build” component of the strategy involves implementing a growth culture at acquired businesses based on the exchange of ideas and business concepts among the management teams of the Company and the acquired businesses as well as through certain initiatives, which may include investments in additional sales and service personnel, new product lines, enhanced service operations and capabilities, new and improved facilities, and advanced technologies. The Company generally seeks to structure acquisitions to include both cash and stock consideration. The Company believes the issuance of stock consideration aligns the interests of the sellers of the acquired businesses, who the Company generally seeks to maintain to continue to operate the acquired businesses, with the interests of the Company’s other stockholders. The sellers as well as other key individuals at the acquired businesses may also be provided with the opportunity to own shares of the Company’s common stock through equity-based plans of the Company.

The Company’s acquisitions under its “buy-and-build” growth strategy since its implementation in 2015 include, without limitation, those described below. The 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.

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.

Acquisitions are generally effected by the Company through a separate wholly-owned subsidiary formed for the purpose of effecting the transaction, whether by an asset purchase or merger, and operating the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned subsidiary, also assumed certain of the liabilities of the acquired business. 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 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.

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.

Historically, the Company has not noted any significant seasonality.

Sales, Marketing and Customer Support

The Company employs sales personnel to market its products in the United States, Canada, the Caribbean, and Latin America. The Company has exclusive and nonexclusive distribution rights to market its products. 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 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 seeks to establish customer satisfaction by offering:

The Company trains its employees to provide service and customer support. The Company uses in-person classroom training, instructional videos and vendor sponsored seminars to educate employees about product information. In addition, the Company’s technical staff has prepared training manuals, written in English and Spanish, relating to specific training procedures. The Company’s technical personnel are retrained as the Company believes to be necessary, including in connection with the Company’s acquisitiondevelopment of substantiallynew technology.

Foreign Sales

Substantially all of the assetsCompany’s revenues from foreign activities relate to the sale of Western State Design LLC (“WSD”) at that time. In December 2018, his corporate title was changedcommercial and industrial laundry and dry cleaning equipment and boilers to Executive Vice President, Corporate Strategy. Mr. Mack has also been a directorcustomers in Canada, the Caribbean, and Latin America.

All of the Company since November 2016. Mr. Mack founded WSDCompany’s foreign sales require the customer to make payment in 1974 and servedUnited States dollars. Foreign sales may be affected by the strength of the United States dollar relative to the currencies of the countries in which the Company’s customers are located, as its President. Since October 2016, he has servedwell as the Presidentstrength of Western State Design, Inc. (“Western State Design”),the economies of the countries in which the Company’s wholly owned subsidiary throughcustomers are located.

Sources of Supply

The Company purchases commercial and industrial laundry products, dry cleaning machines, boilers and other products for distribution from a number of manufacturers and suppliers. The major manufacturers of the products sold by the Company are American Dryer Corporation, Chicago Dryer Company, Cleaver Brooks Inc., Continental Girbau, Inc., Dexter Laundry, Inc., FMB Group, Fulton Thermal Corp., Kannegiesser ETECH, Maytag Corporation, Pellerin Milnor Corporation, Unipress Corporation and Whirlpool Corporation. 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 has contracts with several of the manufacturers and suppliers of the products which the Company acquired substantially allsells and has established, long-standing relationships with most of the assets of WSDits manufacturers and conducts its business.suppliers. The BoardCompany believes that such relationships provide the Company with certain competitive advantages, including exclusivity for certain products in certain areas and, in certain cases, favorable prices and terms. While the Company has generally not experienced difficulty in purchasing products it benefits from Mr. Mack’s knowledge of the commercial laundry industrydistributes, supply chain constraints in recent years have resulted in extended inventory lead times and resulting delays in fulfilling certain orders, as well as his understandingincreases in product costs.

In connection with certain business acquisitions, the business relationship between the acquired business and its principal supplier ceased. As a result, the businesses distributed other brands from one or more of the operations, prospects, products, customers,Company’s other suppliers. The Company does not believe that any such brand switches have had a material adverse impact on the Company as a whole. However, there is no assurance that the Company or any of its acquired businesses will maintain its relationships with any of its suppliers, and employeesthe loss of Western State Design.

Tom Marks has served as Executive Vice Presidentcertain 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 Company’s business and results. See also “The Company’s business and results may be adversely affected if the Company since October 2016 when he was appointeddoes not maintain its relationships with its significant suppliers or customers” under “Item 1A. Risk Factors” below.

Due to such positionspecial options and features on most of the larger and more expensive equipment ordered by customers, in most instances, the Company purchases the equipment distributed by it after its receipt of orders from its customers. 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. The Company also maintains an inventory of more standardized and smaller-sized equipment that often requires more rapid delivery to meet customer needs.

Competition

The commercial and industrial laundry and boiler distribution business is highly competitive and fragmented, with over 500 full-line or partial-line equipment distributors in the United States. The Company’s management believes that no one competitor has a major share of the market, substantially all competitors are independently owned, and, with the exception of several regional distributors, distributors operate primarily in local markets. In the United States, the Company’s primary competition is from a number of independently owned distributors and certain foreign manufacturers which own distribution businesses operating in North America. In foreign markets, the Company also competes with several independently owned distributors and manufacturer-owned distribution businesses. Competition is based primarily on a distributor’s ability to effectively plan and design optimal commercial and industrial laundry facilities, competitive pricing, representation of reliable and high-quality products, in-house installation, maintenance, and repair services, available and on-time delivery of equipment, parts, and accessories, and the ability to provide continuous support services to the customer. The Company seeks to compete in these areas by employing experienced and successful professionals, by offering a comprehensive product line, by employing a robust network of qualified installation and service technicians, by maintaining optimized inventories of equipment, parts, and accessories at well-located facilities and on service vehicles, by investing in advanced technologies designed to improve the customer experience, and by expansion of its suite of value-added services.

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. The Company intends to use and protect its service marks, tradenames and other intellectual property, as necessary.

Compliance with Environmental and Other Government Laws and Regulations

Over the past several decades, federal, state, local and foreign governments have enacted environmental protection laws in response to public concerns about the environment. 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. Among the United States federal laws that the Company believes are applicable to the industry are the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), which provides for the investigation and remediation of hazardous waste sites, the Resource Conservation and Recovery Act of 1976, as amended (“RCRA”), which regulates the generation and transportation of hazardous waste as well as its treatment, storage and disposal, and the Occupational Safety and Health Act of 1970 (“OSHA”), which regulates exposure to toxic substances and other health and safety hazards in the workplace. In addition, most states and a number of local jurisdictions have environmental protections which are at least as stringent as the federal laws. The Company is also subject to rules and regulations with respect to its contracts and dealings with government facilities.

While there is no assurance that this will be the case, including due to the fact that regulatory requirements or the interpretation or enforcement thereof are subject to change, the Company does not believe that compliance with federal, state, local and foreign environmental and other laws and regulations which have been adopted have had, or will have, a material effect on its capital expenditures, earnings or competitive position.

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 believes that, in order to compete and succeed in the highly competitive and fragmented commercial and industrial laundry industry, it is crucial to continue to attract and retain experienced employees. The Company strives to create a workplace that is diverse, innovative, and safe for its employees. The Company seeks to attract highly qualified and diverse talent and to provide its employees with growth opportunities, competitive compensation and benefits, and a variety of training and development programs.

As described above, the Company seeks to maintain a culture designed to reward performance through a variety of performance-based pay, commission programs, cash incentives, and stock-based equity programs. 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. 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 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).

In addition, as previously described, the Company uses in-person classroom training, instructional videos and vendor sponsored seminars to educate and train its sales personnel about product information. In addition, the Company’s technical staff has prepared training manuals, written in English and Spanish, relating to specific training procedures. The Company’s technical personnel are retrained as the Company believes to be necessary, including in connection with the development of new technology.

Item 1A. Risk Factors.

The Company is subject to various risks and uncertainties, including those described below, which could adversely affect the Company’s acquisitionbusiness, financial condition, results of substantially alloperations and cash flows, and the value of the Company’s common stock. The risks described below are not the only risks faced by the Company. Additional risks not presently known to the Company or other factors that the Company does not presently perceive to present significant risks to the Company at this time may also impair the Company’s business, financial condition, results of operations or cash flows, or the value of the Company’s common stock. The risks discussed below also include forward looking statements, and actual results and events may differ substantially from those expressed in, or implied by, the forward looking statements. See “Cautionary Note Regarding Forward Looking Statements” preceding Part I, Item 1 of this Report.

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. Acquisitions and the Company’s efforts with respect thereto involve a number of risks, including, but not limited to:

As a result of these or other problems and risks, acquired businesses may not produce the revenues, earnings, cash flows or business synergies anticipated, and the acquired businesses may not perform as expected. As a result, the Company may incur higher costs and realize lower revenues and earnings than anticipated. The Company may not be able to successfully address these problems, integrate any acquired businesses or generate sufficient revenue to offset the associated costs or other negative effects on its business.

In addition, acquisitions may result in dilutive issuances of the Company’s equity securities and the incurrence of debt. See “Risks Related to the Company’s Indebtedness - The Company’s indebtedness may impact its financial condition and results of operations, and the terms of the Company’s indebtedness may place restrictions on the Company” below. 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 WSDwhich 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.

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, management may not be able to manage the Company’s growth effectively or successfully, and the Company’s financial, accounting, information and other systems may not be able to successfully accommodate the Company’s growth. 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. Expenses related to the Company’s pursuit of acquisitions and other strategic transactions may be significant and will be incurred by the Company regardless of whether the underlying acquisition or other strategic transaction is ultimately consummated.

Conditions beyond the Company’s control can interrupt the Company’s supplies, increase its product costs and impair its ability to deliver products and services to its customers.

The Company obtains its products from third-party suppliers. Although purchasing volume can provide benefits when dealing with suppliers, suppliers may not be able to provide the products and supplies that the Company needs in the quantities and at that time. In December 2018, his corporate title was changedthe prices requested, including due to Executive Vice President, Business Development. Mr. Marksconditions outside of the supplier’s control. The Company is also Executive Vice Presidentsubject to delays caused by interruptions in production and increases in product costs based on conditions outside of Western State Design. He was employedthe Company’s control. These conditions include shortages of qualified labor for suppliers, work slowdowns, work interruptions, strikes or other job actions by WSD since 1987,employees of suppliers, weather conditions, transportation interruptions, unavailability of fuel or increases in fuel costs, product recalls, competitive demands, civil insurrection or social unrest, terrorist attacks, natural disasters, epidemics, pandemics (such as the COVID-19 pandemic) or other disease outbreaks or other catastrophic events. 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. 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. The inability to obtain adequate supplies of products and/or to timely provide products and services and fulfill the Company’s other obligations to its customers, whether as a result of any of the foregoing factors or otherwise, could have an adverse effect on the Company’s business, results of operations and financial condition, including, as Executive Vice President since 2007.without limitation, if the Company’s customers turn to other distributors.

-2-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.

Robert H. Lazar was appointed to serve asLabor shortages and increases in labor costs may have a material adverse impact on the Company’s Chief Financial Officerbusiness and results of operations.

The market for qualified employees is highly competitive, particularly in May 2017 after joininglight 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. If labor market disruptions and/or labor cost increases continue, the Company’s sales or service team could be short staffed and would be more costly to retain, and the Company’s ability to meet its customers’ demands or expectations could be adversely impacted, any of which could materially adversely affect the Company’s business and results of operations.

The Company’s business and results may be adversely affected if the Company asdoes not maintain its Chief Accounting Officerrelationships with its significant suppliers or customers.

While the Company purchases the products it distributes from a number of manufacturers and Vice Presidentsuppliers, purchases from three manufacturers accounted for a total of Finance in January 2017. Mr. Lazar previously served as Chief Accounting Officerapproximately 61% and Vice President56% of Financethe Company’s product purchases for Steiner Leisure Limited, a providerfiscal 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. However, if such relationships deteriorate or the Company is unable to maintain such relationships, including with any of spa servicesits or its acquired businesses’ principal manufacturers or suppliers, the Company’s business and manufacturerresults could be materially and distributor of cosmetics, where he was employed since 2000. Prior to joining Steiner Leisure Limited, Mr. Lazar worked in various capacities at Arthur Andersen LLP, including as Senior Manager from 1995 to 2000.

David Blyer has served as a directoradversely impacted. In addition, efforts of the Company since 1998. Since April 2017, Mr. Blyerand 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. In addition, suppliers may not comply with the terms of any agreements or may choose to terminate such agreements, allow such agreements to expire without renewal, or seek to revise the agreements on terms which are less favorable to the Company than the prevailing terms, any of which could materially and adversely impact the Company’s business and results.

In addition, while the Company distributes its products to various users, 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 operating results and financial condition could be materially adversely impacted if the Company loses a significant customer or fails to meet its customers’ expectations.

The products the Company distributes could fail to perform according to specifications or prove to be unreliable, which could damage the Company’s customer relationships and industry reputation and result in lawsuits and loss of sales.

The Company’s customers require demanding specifications for product performance and reliability. Product defects or other failures to perform to specifications or as expected could result in higher service costs and may damage the Company’s customer relationships and industry reputation and/or otherwise negatively impact the Company’s business, operations and results. 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.

The commercial and industrial laundry distribution and service business is highly competitive and fragmented, with over 500 full-line or partial-line equipment distributors and service providers in the United States. The Company’s management believes that no single competitor of the Company has serveda major share of the market, substantially all competitors are independently owned, and, with the exception of several regional distributors, distributors operate primarily in local markets. In the United States, the Company’s primary competition is from a number of independently owned distributors and certain manufacturers which own distribution businesses operating in North America. In foreign markets, the Company also competes with independently owned distributors and manufacturer-owned distribution businesses. Certain of the Company’s competitors may have greater financial and other resources than the Company. 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 compete effectively. 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. 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.

The Company’s business and operations are subject to federal, state, local and foreign environmental and other laws and regulations, including environmental laws governing the discharge of pollutants, the handling, generation, storage and disposal of hazardous materials, substances, and wastes and the cleanup of contaminated sites. 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. The Company may not remain in compliance with all applicable laws and regulations and could be required to incur significant costs as Presidenta result of violations of, liabilities under, or efforts to comply with, applicable laws and Chief Executive Officerregulations. In addition, violations may have other adverse implications for the Company, including negative public relations and potential litigation. Further, the Company may incur significant compliance costs in the event of Arreva LLCchanges 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.  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. 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. 

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. All of the Company’s foreign sales require the customer to make payment in United States dollars. Foreign sales may be affected by the strength of the United States dollar relative to the currencies of the countries in which customers and competitors are located, as well as the strength of the economies of the countries in which the Company’s customers are located.

Further, conducting an international business inherently involves a number of difficulties, risks and uncertainties, such as:

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.

Although the Company has certain limited protection afforded by insurance, the Company’s business, earnings and financial condition could be materially adversely affected if it suffers damages to, or disruptions at, its facilities. Without limiting the generality of the foregoing, the Company’s facilities in Florida, Georgia, North Carolina, Texas and the Northeast United States are subject to hurricane casualty and flood risk and its facilities in California are subject to earthquake casualty risk. 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. 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.

The Company’s assets may suffer uninsured losses.

The Company attempts to ensure that its assets, including the equipment and parts that it sells, are adequately insured to cover property and casualty losses as well as any other liabilities to which the Company is reasonably expected to be subject. However, insurance may be expensive or difficult to obtain, and there are certain types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, floods, hurricanes, earthquakes, pollution, fire or environmental disasters or other matters, which are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or co-payments. In addition, there may in certain cases be questions as to when the risk of loss related to products sold is transferred to the customer. If the equipment suffers a loss and risk of loss is deemed not to have transferred to the customer, the Company may be liable for the loss, which may not be insured. 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. See also “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” below.

The Company’s ability to manage its business and monitor results is highly dependent upon information and communication systems, and a failure of these systems or the Company’s ERP implementation could disrupt its business.

The Company is dependent upon a variety of internal computer and telecommunication systems to operate its business, including its enterprise resource planning (“Arreva”ERP”), systems. 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.

Any disruptions, delays or deficiencies in the design and/or implementation of the new ERP system, or in the performance of legacy systems, particularly any disruptions, delays or deficiencies that impact the Company’s operations, could adversely affect the Company’s ability to effectively run and manage its information. 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. Failure to properly or adequately address these issues could impact the Company’s ability to perform necessary business operations, which providescould adversely affect the Company’s reputation, competitive position, business, results of operations and financial condition.

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. Furthermore, the Company must attract and retain qualified people to operate its systems, expand and improve them, integrate new programs effectively with its existing programs, and convert to new systems efficiently when required. Any disruption to the Company’s business due to such issues, or an increase in costs to cover these issues that is greater than anticipated, could have an adverse effect on the Company’s financial results and operations.

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. 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. The regulatory environment as well as the requirements imposed on the Company by the payment card industry surrounding information, security and privacy is also increasingly demanding. The Company’s systems may be unable to satisfy changing regulatory and payment card industry requirements and employee and customer expectations, or may require significant additional investments or time in order to do so.

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

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. 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. 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 serveprovide security for processing, transmitting and storing sensitive information. As the fundraisingrisk of cyber-attacks increases, related insurance premiums and donor relationshipthe cost of defensive measures may also increase. In addition, the costs to remediate security incidents or breaches that may occur could be material. 

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. 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. 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.  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. 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. 

In addition, damage or disruption to the Company's systems could adversely impact the Company's ability to manage or operate its business. 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 nonprofit organizations. Arrevaoperations or cash flows may be adversely affected.

Risks Related to the Company’s Indebtedness

The Company’s indebtedness may impact its financial condition and results of operations, and the terms of the Company’s indebtedness may place restrictions on the Company.

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 is a party, as borrower, to a syndicated credit agreement (the “Credit Agreement”) in the successormaximum aggregate principal amount of up to $100 million, with an accordion feature to increase the revolving credit facility by mergerup to DonorCommunity Inc. (“DonorCommunity”),$40 million for a company founded by Mr. Blyer which providedtotal of $140 million. A portion of the revolving credit facility is available for swingline loans of up to a software platformsublimit of $5 million and for the issuance of standby letters of credit of up to non-profit organizations to assist in their operational and fundraising activities. Mr. Blyer serveda sublimit of $10 million. The maturity date of the Credit Agreement is May 6, 2027. The Company had $35.0 million outstanding under the Credit Agreement as President and Chief Executive Officer of DonorCommunity from August 2010 untilJune 30, 2023.

Borrowings (other than swingline loans) under the Credit Agreement bear interest at a rate, at the Company’s election at the time of its merger with Telosa Softwareborrowing, equal to form Arreva. Mr. Blyer was Co-Chairman(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 Stone Profiles LLC (formerly Profilesconsolidated 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. Swingline loans bear interest calculated at the Base Rate plus a margin that ranges from 0.25% to 0.75% depending on the Consolidated Leverage Ratio. A significant increase in Concrete, Inc.), a manufacturer and installer of architectural cast stone forinterest rates could materially impact the residential and commercial construction markets, from January 2005 until March 2010. From July 2002 until January 2005, Mr. Blyer was an independent consultant. Mr. Blyer was Chief Executive Officer and President of Vento Software, Inc. (“Vento”), a developer of software for specialized business applications, from 1994, when he co-founded Vento, until November 1999, when Vento was acquired by SPSS Inc. (“SPSS”), a computer software company that developed and distributed technology for the analysis of data in decision-making and which merged with a subsidiary of International Business Machines Corporation in 2010. From November 1999 until December 2000, Mr. Blyer served as Vice President of Vento and, from January 2001 until July 2002, he served as Presidentcost of the Enabling Technology Division of SPSS. Company’s indebtedness under the Credit Agreement and any other floating rate debt that the Company may incur in the future.

The Board believes that Mr. Blyer bringsCredit Agreement contains covenants applicable to the Board broad experience in developing salesCompany, including financial covenants requiring the Company to comply with maximum leverage ratios and marketing strategies, in addition to business operations skills gained through his founding and running of a number of diverse companiesminimum interest coverage ratios, as well as his leading of a division of SPSS,other covenants which at the time was a publicly-held company. Mr. Blyer has an MBA in finance.

Alan M. Grunspan has served as a director of the Company since 1999. Since December 2004, Mr. Grunspan has been a Shareholder of the law firm of Carlton Fields Jorden Burt, P.A. (“Carlton Fields”). From 1989 until he joined Carlton Fields, Mr. Grunspan was a member of the law firm of Kaufman Dickstein & Grunspan, P.A. The Board believes that it benefits from Mr. Grunspan’s service due to, among other things, his over 25 years of experience as a business lawyer with an understanding of the industry in which the Company operates and environmental matters, including those that particularly pertain to the dry cleaning and laundry industry. The Board also believes that Mr. Grunspan brings valuable financing expertise to the Board obtained from his Bachelor of Sciences degree in finance and his legal practice, and that he provides management experience to the Board obtained from his management of a law firm prior to joining Carlton Fields.

Glen Kruger has served as a director of the Company since December 2019. Since February 2017, Mr. Kruger has served a Director, Investment Banking at GCA Advisors, LLC, a global investment bank that provides strategic merger and acquisition, capital markets and private funds advisory services to growth companies and market leaders. From February 2012 until he joined GCA Advisors in February 2017, Mr. Kruger was a Director, Investment Banking at KeyBanc Capital Markets. He received a BSc in Mechanical Engineering from the University of Natal (South Africa) and an MBA from Babson College. The Board believes that Mr. Kruger is a valuable contributor to the Board basedmay place restrictions on, among other things, his experienceliens, investments, indebtedness, fundamental changes, acquisitions, dispositions of property, making specified restricted payments (including cash dividends and expertisestock repurchases that would result in the Company exceeding an agreed to Consolidated Leverage Ratio), and transactions with respectaffiliates.

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 capital marketsrisk factors described above related to its level of indebtedness and merger and acquisition transactions.

Timothy P. LaMacchia has served as a director ofmay place restrictions on the Company since December 2017. Mr. LaMacchia is a private investor. He was a Partner at Ernst & Young LLP from 2002 until his retirementsimilar or in June 2017. Prioraddition to joining Ernst & Young LLP, Mr. LaMacchia was a Partner at Arthur Andersen LLP, where he was employed since 1986. The Board believes that Mr. LaMacchia provides meaningful insight tothose contained in the Board and makes important contributions to the Audit Committee, including as a result of his finance and accounting background.

Hal M. Lucas has served as a director of the Company since 2015. Mr. Lucas is an attorney in private practice. He is a founding partner of the law firm of Lucas Savitz P.L. (and its predecessor), where Mr. Lucas has practiced since 2011. Prior to that time, Mr. Lucas was an attorney at the law firm of Astigarraga Davis Mullins & Grossman, P.A. from 2008 to 2011 and at the law firm of Bilzin Sumberg Baena Price & Axelrod LLP from 2004 to 2008. Mr. Lucas also served as Of Counsel to Astigarraga Davis Mullins & Grossman, P.A. from 2011 to 2013. Since 2019, Mr. Lucas has also served as a director and President of South Tip Holdings, LLC (“South Tip”), a Miami, Florida-based hemp and CBD producer. Mr. Lucas obtained his Juris Doctor degree from The University of Texas School of Law and a Bachelor’s degree in economics and international relations from The Johns Hopkins University. The Board believes that Mr. Lucas’ experience in legal and business matters gained from his career as a practicing attorney and his service as President and a director of South Tip benefits the Company and makes him a valuable asset to the Board.

Additional Information Regarding Directors and Executive Officers

Under the Company’s Bylaws, each director serves for a term expiring at the Company’s next annual meeting of stockholders. Executive officers serve until they resign or are replaced or removed by the Board of Directors.

Credit Agreement. There is no family relationship betweenassurance that the Company will receive any director and executive officer. Except forfinancing which the voting obligations underCompany may seek to obtain in the stockholders agreement described under “Certain Relationships and Related Transactions - Controlling Stockholder; Stockholders Agreement” below, no directorfuture on acceptable terms or executive officer has any arrangementat all, including in the event additional funds are necessary to consummate an acquisition or understanding between him and any other person(s) pursuant to which he is to be selected as a directorstrategic transaction or officer of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requiressupport the Company’s directors, executive officers and 10% stockholdersbusiness operations.

Risks Related to file initial reports of ownership and reports of changes in ownershipOwnership of the Company’s Common Stock and other equity securities, if any, with the SEC and the NYSE American.

The Company’s directors, executive officers and 10% stockholders are requiredmanagement may be deemed to furnishcontrol the Company with copies of all Section 16(a) reports they file. Based on a review of the copies of such reports furnished to the Company and written representations from the Company’s directors and executive officers that no other reports were required, the Company believes that its directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements applicable to them for the fiscal year ended June 30, 2020 (“fiscal 2020” or “fiscal year 2020”).

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers and employees. The Code of Business Conduct and Ethics is supplemented by a Senior Financial Officer Code of Ethics that applies to the Company’s Chief Executive Officer and any other senior financial officers. The Code of Business Conduct and Ethics and the Senior Financial Officer Code of Ethics are posted in the “Investors – Corporate Governance – Governance Documents” section of the Company’s website at www.evi-ind.com. Any amendments to, or waivers of, the Code of Business Conduct and Ethics or Senior Financial Officer Code of Ethics (in each case, to the extent applicable to the Company’s principal executive officer, principal financial officer or principal accounting officer) will be posted on the Company’s website or made available by other appropriate means as required or permitted under applicable rules and regulations of the SEC and the NYSE American.

Audit Committee

The Company’s Board of Directors has a standing Audit Committee. The Audit Committee consists of Timothy P. LaMacchia, Chairman, Alan M. Grunspan and Glen Kruger. The Board determined that each member of the Audit Committee is “financially literate” and “independent” within the meaning of rules of the NYSE American (including, with respect to their independence, the additional independence requirements applicable to audit committee members thereunder) and applicable SEC rules and regulations. The Board also determined that Mr. LaMacchia is qualified as an “audit committee financial expert,” as defined under Item 407 of Regulation S-K promulgated by the SEC.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth certain summary information concerning compensation which, for the fiscal years ended June 30, 2020 and 2019, the Company paid to, or accrued on behalf of,management, including Henry M. Nahmad, the Company’s Chairman, Chief Executive Officer and President, and Dennis Mack and Tom Marks, the Company’s next two highest paid executive officers during the fiscal year ended June 30, 2020. Messrs. Nahmad, Mack and Marks are sometimes hereinafter referred to individually as a “Named Executive Officer” and collectively as the “Named Executive Officers.”.

Chief Executive Officer Fiscal 2020 Bonus and Restricted Stock Grant

On February 24, 2020, the Company, upon the approval of the Compensation Committee, granted to Henry M. Nahmad, the Company’s Chairman, Chief Executive Officer and President, a $500,000 bonus, $200,000 of which was paid in cash and $300,000 of which was paid in the form of a stock award of 13,550 immediately vested shares of the Company’s Common Stock. Mr. Nahmad surrendered 5,262 of the these shares to the Company in order to satisfy the Company’s tax withholding obligation relating to the grant thereof. In addition to the cash and stock bonus, the Company, upon the approval of the Compensation Committee, also granted to Mr. Nahmad on February 24, 2020 a restricted stock award of 180,669 shares of the Company’s Common Stock. Subject to the terms and conditions of the Company’s Equity Incentive Plan and the related restricted stock award agreement, a total of 25% of the restricted shares are scheduled to vest ratably, in equal annual installments, from February 2021 through February 2024, with the remaining 75% of the restricted shares (the “Balance Shares”) scheduled to vest on November 5, 2040 (the “Cliff Vest Date”), which is the date on which Mr. Nahmad will reach the age of 62, subject to accelerated vesting with respect to 50% of the Balance Shares if the Company’s total consolidated revenues for four consecutive fiscal quarters, in the aggregate, equals or exceeds a certain specified amount (which would represent an approximately 50% increase in total revenues compared to the Company’s consolidated revenues for the fiscal year ended June 30, 2020). See also “Compensation Plans and Arrangements” below for information regarding the accelerated vesting of the restricted stock awards in the event of Mr. Nahmad’s death or Disability (as defined in his restricted stock award agreements) and the potential accelerated vesting in connection with any Change in Control of the Company (as defined in the Company’s Equity Incentive Plan).

In approving the bonus and restricted stock award grant to Mr. Nahmad, the Compensation Committee considered, among other things, the Company’s growth, including the success of the Corporation’s growth strategy and Mr. Nahmad’s role and performance with respect thereto, and the Corporation’s financial results and condition. In addition, with respect to the bonus, the Compensation Committee reviewed and considered the report of Pearl Meyer & Partners, LLC, a third party executive compensation consulting firm engaged by the Compensation Committee to assist the Compensation Committee with respect to its review and determination of the compensation of Mr. Nahmad, as the Company’s Chief Executive Officer. Further, in connection with the restricted stock award grant, the Compensation Committee considered the fact that Mr. Nahmad did not receive any equity-based compensation during the fiscal years ended June 30, 2018 or 2019.

Outstanding Equity Awards at June 30, 2020

The following table sets forth certain information regarding restricted stock awards of the Company’s Common Stock held by Henry M. Nahmad. Other than as set forth below, none of the Named Executive Officers held any restricted stock awards or other equity-based awards, including stock options, of the Company at June 30, 2020.

Compensation Plans and Arrangements

As described above, no Named Executive Officer is a party to an employment agreement with the Company. In addition, the Company has no plans or arrangements with any Named Executive Officer which provide for the payment of retirement benefits, or benefits that would be paid primarily following retirement, other than the Company’s participatory Section 401(k) Profit Sharing Plan, a deferred compensation plan under which the Company matches 50% of employee contributions up to 6% of an eligible employee’s yearly compensation on a discretionary basis. Such compensation is tax deferred under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). Further, the Company has no contracts, agreements, plans or arrangements that provide for the payment in the future to any Named Executive Officer following or in connection with his resignation, termination of employment, or a change in control of the Company. However, outstanding restricted stock awards of the Company’s Common Stock, including those granted to Mr. Nahmad, will accelerate and immediately vest, to the extent not previously vested or forfeited, in the event of the award holder’s death or Disability (as defined in the restricted stock award agreements). In addition, pursuant to the Company’s Equity Incentive Plan, such restricted stock awards may, in the discretion of the Compensation Committee, accelerate and immediately vest, to the extent not previously vested or forfeited, upon a Change in Control of the Company (as defined in the Company’s Equity Incentive Plan). In the event that vesting is accelerated, any unrecognized stock-based compensation expense would be immediately recognized. Had the restricted stock awards held by Mr. Nahmad as of June 30, 2020 vested upon his death or Disability or upon a Change in Control of the Company, in each case, occurring on June 30, 2020, the value of the accelerated vesting of the restricted shares would have been $18,554,603 (based on the closing price of the Company’s Common Stock on the NYSE American on June 30, 2020) and the Company would have recognized $13,579,214 of stock-based compensation.

Director Compensation

The Compensation Committee, with the input and assistance of the Company’s Chief Executive Officer, recommends director compensation to the full Board of Directors. The Board of Directors approves director compensation based on factors it considers to be appropriate, market conditions and trends, and the recommendation of the Compensation Committee.

The compensation program for the Company’s non-employee directors is intended to assist the Company in attracting and retaining qualified directors, reward non-employee directors for their service on the Board and its committees through both equity awards and cash fees, and align the interests of the non-employee directors with those of stockholders. Pursuant to the program, each non-employee director currently receives annually a grant of $50,000 of restricted stock units (based on the closing price of the Company’s Common Stock on the date of grant), which generally vest in four equal annual installments beginning on the first anniversary of the grant date. The restricted stock units are granted under, and subject to, the Company’s Equity Incentive Plan and related restricted stock unit agreements. In addition, the Company’s compensation program for its non-employee directors also includes a cash component, pursuant to which (i) each non-employee director currently receives an annual cash fee of $5,000, (ii) the Chairman of the Audit Committee currently receives an additional annual cash fee of $10,000, (iii) each other member of the Audit Committee currently receives an additional annual cash fee of $2,500, (iv) the Chairman of the Compensation Committee currently receives an additional annual cash fee of $5,000, and (v) each other member of the Compensation Committee currently receives an additional annual cash fee of $3,500.

The Company does not provide any tax gross-ups to its non-employee directors, all of whom are responsible for their respective tax obligations relating to their compensation for Board and committee service. Directors are also reimbursed for their reasonable out-of-pocket expenses incurred in connection with performing their duties. Directors of the Company who are also employees of the Company do not receive compensation for their service as directors, but are reimbursed for their reasonable out-of-pocket expenses incurred in connection with performing their duties as directors.

Director Compensation Table – Fiscal 2020

The following table sets forth certain information regarding the compensation paid to each individual who served as a non-employee director of the Company during fiscal 2020 in consideration for his service on the Board and its committees during the year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Security Ownership of Certain Beneficial Owners and Management

The following table indicates, as of October 20, 2020, information about the beneficial ownership of the Company’s Common Stock by (i) each director of the Company, (ii) each Named Executive Officer of the Company, (iii) all directors and executive officers of the Company as of October 20, 2020 as a group and (iv) each person who the Company knows beneficially owns more than 5% of the Company’s Common Stock outstanding, plus shares deemed outstanding pursuant to Rule 13d-3(d)(1) under the Exchange Act. All such shares were owned directly with sole voting and investment power unless otherwise indicated. Except as otherwise indicated, the information provided in the following table was obtained from filings with the SEC and the Company pursuant to the Exchange Act. For purposes of the following table, in accordance with Rule 13d-3 under the Exchange Act, a person is deemed to be the beneficial owner of any shares of the Company’s Common Stock which he or she has or shares, directly or indirectly, voting or investment power, or which he or she has the right to acquire beneficial ownership of at any time within 60 days after October 20, 2020. As used herein, “voting power” is the power to vote, or direct the voting of certain shares and “investment power” includes the power to dispose of, or direct the disposition of, shares. Exceptissued as otherwise indicated, the address of each beneficial owner namedconsideration in the table below is c/o EVI Industries, Inc., 4500 Biscayne Blvd., Suite 340, Miami, Florida 33137. 

* Less than one percent of class.

Equity Compensation Plan Information

Information required by Item 12 of Form 10-K with respect to the Company equity compensation plans is set forth under Item 12 of Part III of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as filed with the SEC on September 14, 2020.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Certain Relationships and Related Transactions

Controlling Stockholder; Stockholders Agreement

Henry M. Nahmad, the Company’s Chairman, Chief Executive Officer and President, directly holds 881,723 shares of the Company’s Common Stock, including 854,657 shares subject to restricted stock awards which Mr. Nahmad has the power to vote. In addition, as the Manager of Symmetric Capital LLC (“Symmetric Capital”) and Symmetric Capital II LLC (“Symmetric Capital II”), Mr. Nahmadacquisitions, may be deemed to have beneficial ownership of all ofcontrol the shares of the Company’s Common Stock beneficially owned directly or indirectly by Symmetric Capital and Symmetric Capital II. Symmetric Capital and Symmetric Capital II directly own 2,838,194 shares and 1,290,323 shares, respectively, of the Company’s Common Stock. In addition,Company as a result of the Symmetric Capital – WSD Stockholders Agreement Stockholders Agreement described below, Symmetric Capital and Mr. Nahmad, as its Manager, havetheir collective voting power over and therefore may be deemed to beneficially own, the 2,044,990 shares of the Company’s Common Stock owned by WSD, Dennis Mack and Tom Marks. In total, Mr. Nahmad may be deemed to beneficially own a total of 7,055,230 shares of the Company’s Common Stock, which representsrepresenting approximately 54.6%60.0% of the issued and outstanding shares of the Company’s Common Stockcommon stock as of October 20, 2020. Accordingly, Mr. Nahmad hasJune 30, 2023. Under the voting power to controlCompany’s Bylaws, the election of directors requires a plurality vote and all other matters put to a vote of the Company’s directors and any other matter requiringstockholders require the affirmative vote or consent of a majority of the outstanding shares of the Company’s Common Stock.

Pursuant to a Stockholders Agreement dated October 10, 2016 between the Company, Mr. Nahmad, Symmetric Capital, Symmetric Capital II, WSD, Mr. Mack and Mr. Marks (the “Symmetric Capital – WSD Stockholders Agreement”), WSD, Mr. Mack and Mr. Marks have agreed to vote all of the shares of the Company’s Common Stock ownedcommon stock represented at a meeting, in person or by them at any time duringproxy, and entitled to vote on the termmatter unless a greater percentage is required by applicable law. Consequently, other than in very limited circumstances where a greater vote is required by applicable law, Mr. Nahmad and the other members of the Symmetric Capital – WSD Stockholders AgreementCompany’s management, without the consent or vote of any other stockholders of the Company, have the voting power to elect directors and approve other actions that require stockholder approval. The interests of the Company’s management may conflict with the interests of the Company’s other stockholders and also could have the effect of delaying or preventing a change in control or changes in management and/or adversely impact the market price of the Company’s common stock or the ability of the Company’s other stockholders to receive a premium for their shares in connection with any sale of the Company.

Further, as directeda result of management’s controlling voting position with respect to the Company’s common stock, the Company is a “controlled company” within the meaning of the listing standards of the NYSE American, on which the Company’s common stock is listed. As 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:

While executive compensation matters are determined by Mr. Nahmad,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. In addition, in the discretion of the Company’s Board of Directors, the Company may choose to utilize or continue to utilize any or all of the exceptions in the future. 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.

The concentration of ownership with respect to the Company’s common stock also results in there being a limited trading volume, which may make it more difficult for stockholders to sell their shares and increase the price volatility of the Company’s common stock.

As a “smaller reporting company,” the Company may avail itself of reduced disclosure requirements, which may make the Company’s common stock less attractive to investors.

Under applicable SEC rules and regulations, the Company is a “smaller reporting company” and will continue to be a “smaller reporting company” for so long as the Managermarket value of Symmetric Capital,the Company’s common stock held by non-affiliates as of the end of its most recently completed second fiscal quarter is less than $250 million. 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. The Company’s reliance on these exemptions may result in the public finding the Company’s common stock to be less attractive and adversely impact the market price of, or trading market for, the Company’s common stock.

The issuance of preferred stock and common stock, and the authority of the Company’s Board of Directors to approve issuances of preferred stock and common stock, could adversely affect the rights of the Company’s stockholders and have grantedan anti-takeover effect.

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 Mr. Nahmad, asapprove the Managerissuance by the Company of Symmetric Capital, an irrevocable proxyup to 200,000 shares of preferred stock, and powerto designate the relative rights, preferences and limitations of attorneyany preferred stock so issued, in furtherance thereof. The Symmetric Capital – WSD Stockholders Agreement also contains, among other things, an agreement by Mr. Nahmad, Symmetric Capital and Symmetric Capital IIeach case, without any action on the part of the Company’s stockholders. Currently, no shares of preferred stock are outstanding. In the event that the Company issues preferred stock in the future that has preference over the Company’s common stock with respect to until October 10, 2021 (subject to earlier terminationthe payment of such obligation under certain circumstances), vote alldividends or upon liquidation, dissolution or winding up of the Company, the rights of holders of shares of the Company’s Common Stock owned by them in favorcommon stock may be adversely affected. 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. Subject to applicable law and the rules and regulations of the election of Mr. Mack toNYSE American, the Company’s Board of Directors. 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. 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.

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.

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.

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. 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. 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. While there can be no assurance that these efforts will be successful, the Company expects to remediate the material weakness prior to the end of the fiscal year ending June 30, 2024. The remediation efforts are expected to result in the incurrence of additional expenses. If the remediation is not completed in a timely fashion, or at all, or if the remediation plan is inadequate, the Company may be unable to timely file future periodic reports with the SEC and/or its future financial statements could contain undetected errors.

In addition, under certain circumstances (nonethere is no assurance that additional material weaknesses in the Company’s internal control over financial reporting will not be identified in the future. Any failure to maintain or implement required new or improved controls, or any difficulties encountered in their implementation, could result in additional material weaknesses, or could result in material misstatements in the Company’s financial statements, which could cause the Company to fail to timely meet its reporting obligations or cause investors to lose confidence in the Company’s reported financial information, leading to a decline in the Company’s stock price. Any of which have occurredthese events may also, among other things, subject the Company to date),litigation or investigations requiring the devotion of management time and resources and/or the payment of significant legal and other expenses.

Further, while businesses acquired during the termfiscal 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 obligation describedbusinesses acquired by the Company in fiscal 2023 from the preceding sentence, Mr. Nahmad, Symmetric Capitalscope of management’s report on internal control over financial reporting and Symmetric Capital IIthe related auditor attestation for this Report), the Company will face challenges and be required to voteincur expenses in connection with, and devote significant management time to, elect Mr. Marks (in lieuthe internal control over financial reporting of Mr. Mack)acquired businesses. There is no assurance that any issues, deficiencies, significant deficiencies or material weaknesses in internal controls identified at acquired businesses will be remediated in a timely or cost-efficient manner or at all.

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. 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. However, there is no assurance that the Company will continue to timely comply with such requirements nor can there be assurance that significant deficiencies and/or material weaknesses will not be identified by management or the Company’s independent registered public accounting firm (or, if identified, remedied in a timely fashion or at all), any of which may adversely affect the market price of the Company’s common stock. 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. 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. There is no assurance that any issues, deficiencies, significant deficiencies or material weaknesses in internal controls identified at acquired businesses will be remedied in a timely or cost-efficient manner or at all.

The Company’s success depends on key personnel, the loss of whom could harm the Company’s business, operating results and financial condition.

The Company’s business is dependent on the active participation of its executive officers, including Henry M. Nahmad and Tom Marks. The loss of the services of any of these individuals could adversely affect the Company’s business and prospects. In addition, the Company’s success is dependent on its ability to retain and attract additional qualified management and other personnel. 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.

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. 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.

Item 1B. Unresolved Staff Comments.

None.

Item 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 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.

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. In addition, the Company’s costs of defending against litigation and other proceedings, demands and actions could be material and would generally be payable by the Company regardless of the merits of the claim. As of the date of filing of this Report, the Company is not aware of any pending legal proceedings to which the Company, including any of its subsidiaries, is a party which is expected to be material to the Company.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

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 22, 2023, there were approximately 171 holders of record of the Company’s common stock.

The Company did not pay any dividends on its common stock during the fiscal years ended June 30, 2023 or 2022. The declaration and payment of cash dividends with respect to the Company’s common stock is determined by the Company’s Board of Directors. The Symmetric Capital – WSD Stockholders Agreement has a termDirectors based on the Company’s financial condition and liquidity needs and other factors deemed relevant by the Company’s Board of five years,Directors, and may be subject to earlier terminationrestrictions contained in the Company’s debt instruments. As described elsewhere in this Report, including under “Liquidity and Capital Resources” in Item 7 of this Report, the Company’s Credit Agreement contains certain circumstances.covenants which may, among other things, restrict the Company’s ability to pay dividends, and any future facilities may contain similar or more stringent requirements. 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.

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. As 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.

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. For financial statement purposes, the shares withheld are treated as being repurchased by the Company and are reflected as repurchases in the Company’s condensed consolidated statements of cash flows and shareholders’ equity as they reduce the number of shares that would have been issued upon vesting.

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

Item 6. [Reserved].

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

-11-General

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and notes thereto contained in Item 8 of this Report. See also “Cautionary Note Regarding Forward Looking Statements” preceding Part I, Item 1 of this Report.

Overview

The Company, through its wholly-owned subsidiaries, is a value-added distributor, and provides advisory and technical services. Through its vast sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s robust network of commercial laundry technicians, the Company provides its customers with installation, maintenance, and repair services.

Table

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 Contentsequipment, to large complex systems. The Company also provides its customers with the services described above.

Beginning in 2015, the Company implemented a “buy-and-build” growth strategy which includes (i) the consideration and pursuit of acquisitions and other strategic transactions which management believes may complement the Company’s existing business or otherwise offer growth opportunities for, or benefit, the Company and (ii) the implementation of a growth culture at acquired businesses based on the exchange of ideas and business concepts among the management teams of the Company and the acquired businesses as well as through certain additional initiatives, which may include investments in additional sales and service personnel, new product lines, enhanced service operations and capabilities, new and improved facilities, and advanced technologies. 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 operating and reportable segment.

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 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. 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.

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.

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.

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. The 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.

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 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. (“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”). 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.

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.

Acquisitions are generally effected by the Company through a separate wholly-owned subsidiary formed by the Company for the purpose of effecting the transaction, whether by an asset purchase or merger, and operating the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned subsidiary, also assumed certain of the liabilities of the acquired business. 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.

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 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. 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. 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. 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 following table summarizes the Company’s Consolidated Statements of Cash Flows (in thousands):

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

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. 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.

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. 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. 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. 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.

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.

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. The Company may also seek to raise funds through the issuance of equity and/or debt securities or the incurrence of additional secured or unsecured indebtedness, including in connection with acquisitions or other transactions pursued by the Company as part of its “buy-and-build” growth strategy.

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 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. 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.

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. The Company believes that the increase in equipment sales provides a strong foundation for the Company to further strengthen its customer relationships, including that they may in the future result in higher gross margin opportunities from the sale of parts, accessories, supplies, and technical services related to the equipment. Despite the lower gross margin from such longer-term contracts, the Company believes that the long-term benefit from the increase in its installed equipment base will outweigh the possible short-term impact to gross margin.

Cost of Sales and Selling, General and Administrative Expenses

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

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. 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 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. 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. 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.

Transactions with Related Person TransactionsParties

Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals (or former principals) of the Company or its subsidiaries. These leases include the following:

TheOn October 10, 2016, the Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”),Western State Design, entered into a lease agreement pursuant to which it leases 28,00017,600 square feet of warehouse and office space from an affiliate of Michael S. Steiner, former President of Steiner-Atlantic andDennis Mack, a former director and officerExecutive Vice President, Corporate Strategy of the Company, pursuant to a lease agreement dated November 1, 2014, as amended.and Tom Marks, Executive Vice President, Business Development and President of the West Region of the Company. The lease had an initial term was extended during January 2020 to run through October 31, 2020.of five years and provides for two successive three-year renewal terms at the option of the Company. Monthly base rental payments underwere $12,000 during the initial term of the lease. The Company exercised its option to renew the lease are $12,000.for the first three-year renewal term, which commenced in October 2021. Base rent for the first renewal term is $19,000 per month. In addition to base rent, Steiner-AtlanticWestern State Design is responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under thethis lease totaled approximately $148,000$228,000 and $146,000$207,000 during fiscal 20202023 and fiscal 2022, respectively.

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. 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. 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. 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.

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. 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. 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.

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. 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. 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.

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. Estimates and assumptions made may not prove to be correct, and actual results may differ from the estimates. The accounting policies that the Company has identified as critical to its business operations and to an understanding of the Company’s financial statements are set forth below. The critical accounting policies discussed below are not intended to be a comprehensive list of all of the Company’s accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

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 generates revenue primarily from the sale of equipment and parts to customers. Therefore, the majority of the Company’s contracts are short-term in nature and have a single performance obligation (to deliver products), and the Company’s performance obligation is satisfied when control of the product is transferred to the customer. 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. Revenue is recognized on these contracts when control transfers to the Company’s customers via shipment of products or provision of services and the Company has the right to receive consideration for these products and services. Additionally, from time to time, the Company enters into longer-termed contracts which provide for the sale of equipment by the Company and the provision by the Company of related installation and construction services. The installation on these types of contracts is usually completed within six to twelve months. The Company recognizes a portion of its revenue over time using the cost-to-cost measure of progress, which measures a contract’s progress toward completion based on the ratio of actual contract costs incurred to date to the Company’s estimated costs at completion adjusted for uninstalled materials, as necessary.  Significant judgment may be required by management in the cost estimation process for these contracts, which is based on the knowledge and experience of the Company’s project managers, subcontractors and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition. The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. 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. These longer-term contracts, maintenance and service contracts have a single performance obligation where revenue is recognized over time using the cost-to-cost measure of progress, which best depicts the continuous transfer of control of goods or services to the customer.

The Company measures revenue, including shipping and handling fees charged to customers, as the amount of consideration it expects to be entitled to receive in exchange for its products or services, net of any taxes collected from customers and subsequently remitted to governmental authorities. 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.

Revenues that are recognized over time include (i) longer-termed contracts that include an equipment purchase with installation and construction services, (ii) maintenance contracts, and (iii) service contracts.

Contract Assets and Liabilities

Contract assets and liabilities are presented in the Company’s condensed consolidated balance sheets. Contract assets consist of unbilled amounts resulting from sales under longer-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. As noted above, the cost estimation process for these contracts may require significant judgment by management. The Company typically receives progress payments on sales under longer-term contracts as work progresses, although for some contracts the Company may be entitled to receive an advance payment. Contract assets also include retainage. Retainage represents a portion of the contract amount that has been billed, but for which the contract allows the customer to retain a portion of the billed amount (generally, from 5% to 20% of contract billings) until final contract settlement. Retainage amounts are generally classified as current assets within the Company’s consolidated balance sheets. Retainage that has been billed, but is not due until completion of performance and acceptance by customers, is generally expected to be collected within one year. Contract liabilities consist of advanced payments, billings in excess of costs incurred and deferred revenue.

Goodwill

The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of impairment loss. This step compares the current implied goodwill in the reporting unit to its carrying amount. If the carrying amount of the goodwill exceeds the implied goodwill, an impairment is recorded for the excess. 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. The Company performed its annual impairment test on April 1, 2023 and determined there was no impairment.

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 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. The Company reviews the recoverability of intangible assets that are amortized based primarily upon an analysis of undiscounted cash flows from the intangible assets. 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.

Income Taxes

The Company follows Financial Accounting Standards Board (“FASB”) ASC Topic 740, “Income Taxes” (“ASC 740”). Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is determined that it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.

Significant judgment is required in developing the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowances that might be required against the deferred tax assets. 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.

Recently Issued Accounting Guidance

See Note 2 to the Consolidated Financial Statements included in Item 8 of this Report for a description of Recently Issued Accounting Guidance.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Market risk is defined as the risk of loss arising from adverse changes in market valuations resulting from interest rate risk, foreign currency exchange rate risk, commodity price risk and equity price risk. The Company’s primary market risk is interest rate risk.

The Company’s indebtedness subjects the Company to interest rate risk. Interest rates are subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The nature and timing of any changes in such policies or general economic conditions and the effect they may have on the Company are unpredictable. 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 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. As 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%. 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.

All of the Company’s export sales require the customer to make payment in United States dollars. Accordingly, foreign sales may be affected by the strength of the United States dollar relative to the currencies of the countries in which the Company’s customers are located, as well as the strength of the economies of the countries in which the Company’s customers are located. The Company has, at times in the past, paid certain suppliers in Euros. 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. 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.

Item 8. Financial Statements and Supplementary Data.

EVI Industries, Inc. and Subsidiaries

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

EVI Industries, Inc.

Miami, Florida

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of EVI Industries, Inc. (the “Company”) as of June 30, 2023 and 2022, the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at June 30, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of June 30, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated October 4, 2023 expressed an adverse opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Estimated Costs to Complete

As described in Note 2 to the consolidated financial statements, the Company recognizes a portion of its revenue over time using the cost-to-cost measure of progress, which measures a contract’s progress toward completion based on the ratio of actual contract costs incurred to date to the Company’s estimated costs at completion, adjusted for uninstalled materials, as necessary.  The cost estimation process for these contracts is based on the knowledge and experience of the Company’s project managers, subcontractors and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition.  

We identified the determination of the total estimated costs and progress toward completion of revenue contracts as a critical audit matter. These elements require management to make significant estimates and assumptions. 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. Auditing these elements involved auditor judgment in evaluating the reasonableness of management’s assumptions and estimates over the duration of these contracts.  

The primary procedures we performed to address this critical audit matter included: 

/s/ BDO USA, P.C.

We have served as the Company's auditor since 2018.

Miami, Florida

October 4, 2023

EVI Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

The accompanying notes are an integral part of these consolidated financial statements.

EVI Industries, Inc. and Subsidiaries

Consolidated Balance Sheets

(In thousands, except share and per share data)

The accompanying notes are an integral part of these consolidated financial statements.

EVI Industries, Inc. and Subsidiaries

Consolidated Statements of Operations

(in thousands, except per share data)

The accompanying notes are an integral part of these consolidated financial statements.

EVI Industries, Inc. and Subsidiaries

Consolidated Statements of Shareholders’ Equity

(In thousands, except share data)

The accompanying notes are an integral part of these consolidated financial statements.

EVI Industries, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In thousands)

The accompanying notes are an integral part of these consolidated financial statements.

EVI Industries, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1. General

Nature of Business

EVI Industries, Inc., indirectly through its subsidiaries (EVI Industries, Inc. and its subsidiaries, collectively, the “Company”), is a value-added distributor, and provides advisory and technical services to customers located primarily in the United States of America (“United States” or “US”), Canada, the Caribbean, and Latin America. Through its sales organization, the Company provides its customers with planning, designing, and consulting services related to their commercial laundry operations. The Company sells and/or leases its customers commercial laundry equipment, specializing in washing, drying, finishing, material handling, water heating, power generation, and water reuse applications. In support of the suite of products it offers, the Company sells related parts and accessories. Additionally, through the Company’s 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. The Company also provides its customers with the services described above.

The Company reports its results of operations through a single operating and reportable segment.

“Buy-and-Build” Growth Strategy

Beginning in 2015, the Company implemented a “buy-and-build” growth strategy. The Company’s acquisitions under its “buy-and-build” growth strategy since its implementation in 2015 include, without limitation, those described below.

See Note 3 for additional information about the acquisitions of CLK and CDL and the other acquisitions consummated by the Company during the fiscal year ended June 30, 2023 (“fiscal 2023”) and the fiscal year ended June 30, 2022 (“fiscal 2022”).

The 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. Acquisitions are generally effected by the Company through a separate wholly-owned subsidiary formed by the Company for the purpose of effecting the transaction, whether by an asset purchase or merger, and operating the acquired business following the transaction. In connection with each transaction, the Company, indirectly through its applicable wholly-owned subsidiary, also assumed certain of the liabilities of the acquired business.

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.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of EVI Industries, Inc. and its subsidiaries, all of which are wholly-owned. All significant intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition

The Company recognizes revenue, net of sales taxes, when a sales arrangement with a customer exists (sales contract, purchase or sales order, or other indication of an arrangement), the transaction price is fixed and determinable, and the Company has satisfied the performance obligation(s) per the sales arrangement.

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 generates revenue primarily from the sale of equipment and parts to customers. Therefore, the majority of the Company’s contracts are short-term in nature and have a single performance obligation (to deliver products), which is satisfied when control of the product is transferred to the customer. Other contracts contain a combination of equipment sales with a service such as connection of the equipment, which is expected to be performed in the near-term. Such services are distinct and accounted for as separate performance obligations. The Company allocates the transaction price to each performance obligation based on its relative standalone selling price out of the total consideration of the contract.Judgment may be required by management to identify the distinct

performance obligations within each contract. Revenue is recognized on these contracts when control transfers to the Company’s customers via shipment of products or provision of services and the Company has the right to receive consideration for these products and services. Additionally, from time to time, the Company enters into longer-termed contracts which provide for the sale of equipment by the Company and the provision by the Company of related installation and construction services. The installation on these types of contracts is usually completed within six to twelve months. The Company recognizes a portion of its revenue over time using the cost-to-cost measure of progress, which measures a contract’s progress toward completion based on the ratio of actual contract costs incurred to date to the Company’s estimated costs at completion adjusted for uninstalled materials, as necessary. Significant judgment may be required by management in the cost estimation process for these contracts, which is based on the knowledge and experience of the Company’s project managers, subcontractors and financial professionals. Changes in job performance and job conditions are factors that influence estimates of the total contract transaction price, total costs to complete those contracts and the Company’s revenue recognition. The determination of the total estimated cost and progress toward completion requires management to make significant estimates and assumptions. 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 contracts and ad hoc maintenance and installation service contracts. These longer-term contracts, and maintenance and service contracts have a single performance obligation where revenue is recognized over time using the cost-to-cost measure of progress, which best depicts the continuous transfer of control of goods or services to the customer.

The Company measures revenue, including shipping and handling fees charged to customers, as the amount of consideration it expects to be entitled to receive in exchange for its goods or services, net of any taxes collected from customers and subsequently remitted to governmental authorities. Costs associated with shipping and handling activities performed after the customer obtains control are accounted for as fulfillment costs and are not promised services that have to be further evaluated under revenue recognition standards.

Revenue from products transferred to customers at a point in time include commercial and vended laundry parts and equipment sales and accounted for approximately 85% and 82% of the Company’s revenue for fiscal 2023 and fiscal 2022, respectively. 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.

The Company’s products are typically sold with a manufacturer’s warranty. Accordingly, warranty expense and product returns have not been significant.

Revenues that are recognized over time include (i) longer-termed contracts that include equipment purchased with installation and construction services, (ii) maintenance contracts, and (iii) service contracts. Revenue from products and services that are recognized over time accounted for approximately 15% and 18% of the Company’s revenue for fiscal 2023 and fiscal 2022, respectively.

Contract Assets and Liabilities

Contract assets and liabilities are presented in the Company’s consolidated balance sheets. Contract assets consist of unbilled amounts resulting from sales under longer-term contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. As noted above, the cost estimation process for these contracts may require significant judgment by management. The Company typically receives progress payments on sales under longer-term contracts as work progresses, although for certain contracts, the Company may be entitled to receive an advance payment. Contract assets also include retainage. Retainage represents a portion of the contract amount that has been billed, but for which the contract allows the customer to retain a portion of the billed amount (generally, from 5% to 20% of contract billings) until final contract settlement. Retainage amounts are generally classified as current assets within the Company’s consolidated balance sheets. Retainage that has been billed, but is not due until completion of performance and acceptance by customers, is generally expected to be collected within one year. Contract liabilities consist of advanced payments, billings in excess of costs incurred and deferred revenue.

Costs, estimated earnings and billings on longer-term contracts when the cost-to-cost method of revenue recognition is utilized as of June 30, 2023 and 2022 consisted of the following (in thousands):

These amounts are included in the Company’s consolidated balance sheets under the following captions (in thousands):

Contract liabilities are generally associated with contracts with durations of less than one year. Accordingly, such amounts are expected to be realized during the subsequent year. During fiscal 2023, substantially all of the contract liabilities outstanding as of June 30, 2022 were realized.

The Company does not account for significant financing components if the period between the time when the transfer of the product or service to the customer occurs and when the customer pays for that service or product will be one year or less. The Company does not disclose the value of remaining performance obligations for contracts with an original expected period of one year or less or performance obligations for which the Company recognizes revenue at the amount that it has the right to invoice for services performed.

Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net assets acquired in a business combination. The Company evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate that the carrying value may not be recoverable. Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. If the fair value is determined to be less than the carrying value, a second step is performed to measure the amount of impairment loss. This step compares the current implied goodwill in the reporting unit to its carrying amount. If the carrying amount of the goodwill exceeds the implied goodwill, an impairment is recorded for the excess. 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. The Company performed its annual impairment test on April 1, 2023 using the qualitative assessment to evaluate relevant events and circumstances such as macroeconomic conditions, cost factors, financial performance, and others. Based on the assessment, the Company determined there was no impairment.

Accounts Receivable

Accounts receivable are customer obligations due under what management believes to be customary trade terms. Invoices are typically due upon receipt, however, the Company may grant extended payment terms, typically 30 days, for certain customers. The Company sells its products primarily to hospitals, nursing homes, government institutions, laundry plants, hotels, motels, vended laundry facilities and distributors and dry cleaning stores and chains. The Company performs continuing credit evaluations of its customers’ financial condition and depending on the terms of credit, the amount of the credit granted and management’s history with a customer, the Company may require the customer to grant a security interest in the purchased equipment as collateral for the receivable. Management reviews accounts receivable on a regular basis to determine whether it is probable that any amounts are impaired. The Company includes any balances that are deemed probable to be impaired in its overall allowance for doubtful accounts. The provision for doubtful accounts is recorded in selling, general and administrative expenses in the consolidated statements of operations. If customary attempts to collect a receivable are not successful, the receivable is then written off against the allowance for doubtful accounts. The Company’s allowance for doubtful accounts was $2.1 million at June 30, 2023 and $1.6 million at June 30, 2022. Actual write-offs may vary from the recorded allowance.

Cash and Cash Equivalents

The Company classifies as cash equivalents all highly liquid investments with an original maturity of three months or less.

The Company’s cash is maintained in bank accounts which bear interest at prevailing interest rates and are covered by Federal Deposit Insurance Corporation (“FDIC“) insurance. The Company has not historically experienced any losses in its cash accounts and 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. The Company monitors the strength and credit worthiness of financial institutions in which it holds its cash. However, 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.

Inventories

Inventories consist principally of equipment inventories and spare part inventories. Equipment inventories are valued at the lower of cost, determined on the specific identification method or average cost, or net realizable value. Spare part inventories are valued at the lower of cost, determined on average cost or first-in first-out method, or net realizable value. Lower of cost or net realizable value adjustments are recorded in cost of goods sold in the consolidated statement of operations. The Company records a reserve for aging or slow-moving inventory.

The Company established reserves of approximately $994,000 and $703,000 as of June 30, 2023 and 2022, respectively, against slow moving inventory.

Vendor Deposits

Vendor deposits represent advances made to the Company’s vendors for specialized inventory on order.

Equipment, Improvements and Depreciation

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated on straight-line methods over useful lives of five to seven years for furniture and equipment, five years for vehicles, and the shorter of ten years or the remaining lease term (including renewal periods that are deemed reasonably assured) for leasehold improvements. Depreciation and amortization of property and equipment is included in selling, general and administrative expenses in the consolidated statements of operations. Repairs and maintenance costs are expensed as incurred.

Software Capitalization

The Company capitalizes certain costs related to the acquisition and development of internal use software, including implementation costs incurred in a cloud computing arrangement, during the application development stages of projects. The Company amortizes these costs using the straight-line method over the estimated useful life of the software, typically seven years. Costs incurred during the preliminary project or the post-implementation/operation stages of the project are expensed as incurred. Capitalized computer software, included as a component of equipment and improvements, net in the accompanying consolidated balance sheets, net of accumulated amortization, was $576,000 and $671,000 at June 30, 2023 and 2022, respectively. Computer software amortization expense was $112,000 and $89,000 in fiscal 2023 and fiscal 2022, respectively. Amortization of capitalized software is included in selling, general and administrative expenses in the consolidated statements of operations.

Customer-Related Intangibles, Tradenames and Other Intangible Assets

Finite-lived intangibles are amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. Customer-related intangibles, non-compete, and other finite-lived intangible assets are stated at cost less accumulated amortization, and are amortized on a straight-line basis over the estimated future periods to be benefited (5-10 years). 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 takes into account management’s assumptions about expected future cash flows and other valuation techniques. Amortization of finite-lived intangibles is included in selling, general and administrative expenses in the consolidated statements of operations. The Company also evaluates indefinite-lived intangible assets each reporting period to determine whether events and circumstances continue to support an indefinite useful life. The Company performed its annual impairment test on April 1, 2023 using the qualitative assessment to evaluate relevant events and circumstances such as macroeconomic conditions, cost factors, financial performance, and others. Based on the assessment, the Company determined there was no impairment.

Asset Impairments

The Company periodically reviews the carrying amounts of its long-lived assets, including property, plant and equipment and finite-lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of their carrying amount or fair value less estimated costs to sell. The Company has concluded that there was no impairment of long-lived assets in fiscal 2023 or fiscal 2022.

Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Management evaluates these estimates on an ongoing basis. Estimates which may be particularly significant to the Company’s consolidated financial statements include those relating to the determination of impairment of assets (including goodwill and intangible assets), the useful life of property and equipment, the recoverability of deferred income tax assets, allowances for doubtful accounts, intangible assets, estimates to complete on contracts where revenue is recognized over time, the carrying value of inventories and long-lived assets, and the timing of revenue recognition. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the recognition of revenues and expenses and the carrying value of assets and liabilities that are not readily apparent from other sources. Assumptions and estimates may, however, prove to have been incorrect, and actual results may differ from these estimates.

Earnings Per Share

The Company computes earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of the Company’s common stock subject to unvested restricted stock awards and restricted stock units are considered participating securities because they contain a non-forfeitable right to cash dividends (in the case of restricted stock awards) or dividend equivalents (in the case of restricted stock units) paid prior to vesting or forfeiture, if any, irrespective of whether the awards or units ultimately vest. During fiscal 2023 and fiscal 2022, the Company granted restricted stock awards of 222,672 and 134,612 shares, respectively, and 128,985 and 178,719 restricted stock units, respectively, under the EVI Industries, Inc. 2015 Equity Incentive Plan, as amended (see Note 17). During fiscal 2022, the Company also granted stock awards (not subject to forfeiture) of 8,287 shares of the Company’s common stock (3,261 of which shares were withheld to satisfy tax withholding obligations). Shares of restricted stock are deemed to constitute a second class of stock for accounting purposes. Basic and diluted earnings per share for fiscal 2023 and fiscal 2022 are computed as follows (in thousands, except per share data):

At June 30, 2023, other than 1,028,963 unvested shares subject to restricted stock awards or restricted stock units, there were no potentially dilutive securities outstanding. The remaining 732,119 shares of restricted common stock were not included in the calculation of diluted earnings per share because their impact was anti-dilutive. At June 30, 2022, other than 42,903 shares subject to restricted stock awards or restricted stock units, there were no potentially dilutive securities outstanding. The remaining 1,399,745 shares of restricted common stock were not included in the calculation of diluted earnings per share because their impact was anti-dilutive.

Supplier Concentration

The Company purchases laundry, dry cleaning equipment, boilers and other products from a number of manufacturers and suppliers. Purchases from three manufacturers accounted for a total of approximately 61% of the Company’s purchases for fiscal 2023 and 56% of the Company’s purchases for fiscal 2022.

Advertising Costs

The Company expenses the cost of advertising as of the first date an advertisement is run. The Company incurred approximately $778,000 and $632,000 of advertising costs in fiscal 2023 and fiscal 2022, respectively, which are included in selling, general and administrative expenses in the consolidated statements of operations.

Shipping and Handling

Shipping and handling costs associated with inbound freight are capitalized to inventories and relieved through cost of sales as inventories are sold. Shipping and handling costs associated with the delivery of products are included in selling, general and administrative expenses.

Fair Value of Certain Current Assets and Current Liabilities

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The inputs used to measure fair value are prioritized based on a three-level hierarchy. The three levels of inputs used to measure fair value are as follows:

The Company has no assets or liabilities that are adjusted to fair value on a recurring basis. The Company did not have any assets or liabilities measured at fair value on a nonrecurring basis, other than assets and liabilities from acquisitions, during fiscal 2023 or fiscal 2022.

The Company’s cash, accounts receivable and accounts payable are reflected in the accompanying consolidated financial statements at cost, which approximated estimated fair value, using Level 1 inputs. Cash is maintained with various high-quality financial institutions and have original maturities of three months or less. Accounts receivable and accounts payable approximate their fair value due to the short term nature of such accounts. The fair value of the Company’s indebtedness was estimated using Level 2 inputs based on quoted prices for those or similar debt instruments using applicable interest rates as of June 30, 2023 and approximated the carrying value of such debt because it accrues interest at variable rates that are repriced frequently. This approximates fair value based on the variable interest rate.

Customer Deposits

Customer deposits represent advances paid by customers when placing orders for equipment with the Company.

Net Investment in Sales Type Leases

The Company derives a portion of its revenue from leasing arrangements. Such arrangements provide for monthly payments covering the equipment sales, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, the equipment sale is recognized upon delivery of the system and acceptance by the customer. Upon the recognition of revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.

Income Taxes

The Company recognizes income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is determined that it is more likely than not that some portion of a deferred tax asset will not be realized, a valuation allowance is recognized.

Judgment is required in developing the Company’s provision for income taxes, deferred tax assets and liabilities, and any valuation allowances that might be required against the deferred tax assets. Management evaluates the Company’s ability to realize its deferred tax assets on a quarterly basis and adjusts the valuation allowance when it believes that it is more likely than not that the asset will not be realized. There were no valuation allowance adjustments during fiscal 2023 or fiscal 2022.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately reflect actual outcomes. The Company does not believe that there are any material unrecognized tax benefits as of June 30, 2023 or 2022 related to tax positions taken on its income tax returns. The Company’s policy is to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of interest expense and general and administrative expense, respectively, in the consolidated statements of operations.

The CARES Act, among its other provisions, includes tax provisions relating to refundable payroll tax credits, deferral of employer’s social security payments, net operating loss (“NOL”) utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP), and financing options. The Company’s income tax provision for fiscal 2023 and fiscal 2022 was not materially impacted by the provisions of the CARES Act.

Leases

Company as Lessee

The Company leases warehouse and distribution facilities and administrative office space, generally for terms of three to ten years. 

The Company recognizes the lease payments under its short-term leases (which are defined as leases with a term of twelve months or less) in profit or loss on a straight-line basis over the lease term. The Company follows this accounting policy for all classes of underlying assets. In addition, variable lease payments in the period in which the obligation for those payments is incurred are not included in the recognition of a lease liability or right-of-use asset.

Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. When available, the Company uses the rate implicit in the lease to discount lease payments to present value. However, certain of the Company’s leases do not provide a readily determinable implicit rate. For such leases, the Company estimates the incremental borrowing rate to discount lease payments based on information available at lease commencement. The Company uses instruments with similar characteristics when calculating its incremental borrowing rates.

The Company has options to extend certain of its operating leases for additional periods of time and the right to terminate several of its operating leases prior to their contractual expirations, in each case, subject to the terms and conditions of the lease. The lease term consists of the non-cancellable period of the lease and the periods covered by Company options to extend the lease when management considers it reasonably certain that the Company will exercise such options. The Company's lease agreements do not contain residual value guarantees. The Company has elected to not separate non-lease components from the associated lease component for all underlying classes of assets with lease and non-lease components.

Recently Issued Accounting Guidance

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which will change the way companies evaluate credit losses for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other specified instruments, entities will be required to use a new forward-looking “expected loss” model to evaluate impairment, potentially resulting in earlier recognition of allowances for losses. The new standard will also require enhanced disclosures, including the requirement to disclose the information used to track credit quality by year of origination for most financing receivables. The guidance must be applied using a cumulative-effect transition method. ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, and for interim periods within those fiscal years (the fiscal year ending June 30, 2024 for the Company), with early adoption permitted. The Company will adopt this ASU using a modified-retrospective approach, and is continuing to quantify the impact of the standard on its consolidated financial statements and evaluating the disclosures required under the standard. The Company does not currently anticipate the adoption of this ASU will have a material impact on its financial position, results of operations and cash flows; however, the Company’s assessment will be finalized during the first quarter fiscal 2024.

Management does not believe that other issued accounting standards and updates which are not yet effective will have a material impact on the Company’s consolidated financial position, results of operations or cash flows upon adoption.

3. Acquisitions

Fiscal 2023 Acquisitions

On September 1, 2022, the Company completed the acquisitions of Aldrich Clean-Tech Equipment Corp. (“ACT”), a Massachusetts-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry, and K&B Laundry Service, LLC (“K&B”), a North Carolina-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. The total consideration for these two acquisitions consisted of approximately $1.2 million in cash, net of cash acquired, which the Company funded through borrowings under its credit facility. Fees and expenses related to these acquisitions, consisting primarily of legal and other professional fees, totaled approximately $102,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statements of operations for fiscal 2023. Each acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”), pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The Company allocated a total of $793,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforces, as well as the expected benefits from the increased scale of the Company as a result of these acquisitions. The financial position, including assets and liabilities, of ACT and K&B is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of the businesses since the September 1, 2022 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

On November 1, 2022, the Company acquired substantially all of the assets of Wholesale Commercial Laundry Equipment Company SE, LLC (“WCL”), an Alabama-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. The consideration paid by the Company in connection with the acquisition consisted of $650,000 in cash and 24,243 shares of the Company’s common stock, with an acquisition date fair value of approximately $503,000. Fees and expenses related to the acquisition, consisting primarily of legal and other professional fees, totaled approximately $31,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2023. The acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with ASC 805, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to goodwill. The Company allocated $1,062,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce, as well as the expected benefits from the increased scale of the Company as a result of the acquisition. The financial position, including assets and liabilities, of WCL is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of WCL since the November 1, 2022 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

On June 5, 2023, the Company acquired substantially all of the assets of Gluno, Inc. d/b/a Express Parts and Services (“EXP”), a Maryland-based distributor of commercial laundry products and a provider of related technical installation and maintenance services. The consideration paid by the Company in connection with the acquisition consisted of $550,000 in cash. Fees and expenses related to the acquisition, consisting primarily of legal and other professional fees, were not material and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2023. The acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with ASC 805, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to goodwill. The Company allocated $392,000 to goodwill, which is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce, as well as the expected benefits from the increased scale of the Company as a result of the acquisition. The financial position, including assets and liabilities, of EXP is included in the Company’s consolidated balance sheet as of June 30, 2023 and the results of operations of EXP since the June 5, 2023 closing date are included in the Company’s consolidated financial statements for fiscal 2023.

Fiscal 2022 Acquisitions

CLK Acquisition

On February 7, 2022, the Company acquired Consolidated Laundry Equipment, Inc. and Central Equipment Company, LLC (collectively “CLK”), pursuant to a merger whereby CLK merged with and into, and became, a wholly-owned subsidiary of the Company (the “CLK Acquisition”). CLK is a North Carolina-based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. This acquisition expanded the Company’s footprint in the Southeast region of the United States. The consideration paid by the Company in connection with the merger consisted of $4.5 million in cash and 179,087 shares of the Company’s common stock. The Company funded the cash consideration with borrowings under its credit facility. Fees and expenses related to the CLK Acquisition, consisting primarily of legal and other professional fees, totaled approximately $45,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. The total purchase price for accounting purposes was $7.2 million, net of cash acquired of $1.2 million.

The CLK Acquisition was treated for accounting purposes as a purchase of CLK using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method of accounting, the aggregate consideration paid in the CLK Acquisition was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The computation of the purchase price consideration and the allocation of the consideration to the net assets acquired are presented in the following tables (in thousands):

Intangible assets consist of $800,000 allocated to the Consolidated Laundry Equipment trade name and $900,000 allocated to customer-related intangible assets. The Consolidated Laundry Equipment trade name is indefinite-lived and therefore not subject to amortization. The Consolidated Laundry Equipment trade name will be evaluated for impairment annually or more frequently if an event occurs or circumstances change that indicate it may be impaired, by comparing its fair value to its carrying amount to determine if a write-down to fair value is required. Customer-related intangible assets are being amortized over 10 years.

Goodwill is attributable primarily to the assembled workforce acquired, as well as expected benefits from the increased scale of the Company as a result of the CLK Acquisition. The goodwill from the CLK Acquisition is not deductible for income tax purposes.

CDL Acquisition

On June 1, 2022, the Company acquired Clean Designs, Inc. and Clean Route, LLC (collectively “CDL”). The acquisition (the “CDL Acquisition”) was effected by the Company, indirectly through a wholly-owned subsidiary, which purchased substantially all of the assets and assumed certain of the liabilities of CDL. CDL is a Colorado -based distributor of commercial, industrial, and vended laundry products and provider of installation and maintenance services to the new and replacement segments of the commercial, industrial and vended laundry industry. This acquisition expanded the Company’s footprint in the West region of the United States. The consideration paid by the Company in connection with the acquisition consisted of $5.4 million in cash. The Company funded the cash consideration with borrowings under its credit facility. Fees and expenses related to the CDL Acquisition, consisting primarily of legal and other professional fees, totaled approximately $65,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. The total purchase price for accounting purposes was $5.4 million.

The CDL Acquisition was treated for accounting purposes as a purchase of CDL using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method of accounting, the aggregate consideration paid in the CDL Acquisition was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the identifiable net assets acquired being allocated to goodwill. The computation of the purchase price consideration and the allocation of the consideration to the net assets acquired are presented in the following tables (in thousands):

Intangible assets consist of $590,000 allocated to the Clean Designs trade name and $990,000 allocated to customer-related intangible assets. The Clean Designs trade name is indefinite-lived and therefore not subject to amortization. The Clean Designs trade name will be evaluated for impairment annually or more frequently if an event occurs or circumstances change that indicate it may be impaired, by comparing its fair value to its carrying amount to determine if a write-down to fair value is required. Customer-related intangible assets are being amortized over 10 years.

Goodwill is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforce acquired, as well as expected benefits from the increased scale of the Company as a result of the CDL Acquisition.

Other Fiscal 2022 Acquisitions

In addition to the CLK Acquisition and the CDL Acquisition, during fiscal 2022, the Company completed the acquisition of the following two companies: (i) LS Acquisition, LLC d/b/a Laundry South Systems and Repair (“LSS”), which was acquired on April 29, 2022; and (ii) Spynr, Inc. (“SPR”), which was acquired on May 5, 2022. The total consideration for these two transactions consisted of $3.2 million in cash and 34,391 shares of the Company’s common stock. The Company funded the cash consideration for each acquisition with credit facility borrowings. Fees and expenses related to these acquisitions, consisting primarily of legal and other professional fees, totaled approximately $46,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for fiscal 2022. Each acquisition was treated for accounting purposes as a purchase of the acquired business using the acquisition method of accounting in accordance with ASC 805, pursuant to which the consideration paid by the Company was allocated to the acquired assets and assumed liabilities, in each case, based on their respective fair values as of the closing date, with the excess of the consideration transferred over the fair value of the net assets acquired being allocated to intangible assets and goodwill. The Company allocated a total of $2.2 million to goodwill, $760,000 to customer-related intangibles, and $460,000 to the respective trade names. Goodwill totaling $2.2 million from these acquisitions is expected to be amortized and deductible for tax purposes over 15 years. Goodwill is attributable primarily to the assembled workforces, as well as expected benefits from the increased scale of the Company as a result of these acquisitions.

Supplemental Pro Forma Results of Operations

The following unaudited supplemental pro forma information presents the results of operations of the Company, after giving effect to the acquisitions completed by the Company during fiscal 2023 and 2022 as described above, as if the Company had completed each such transaction on July 1, 2021, using the estimated fair values of the assets acquired and liabilities assumed. These unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the Company would have been if the transactions had occurred on the date assumed, nor are they indicative of future results of operations.

The Company’s consolidated results of operations for fiscal 2023 include total revenue of approximately $37.8 million and total net income of approximately $931,000 attributable to businesses acquired during fiscal 2023 and fiscal 2022, based on the consolidated effective tax rate. The Company’s consolidated results of operations for fiscal 2022 include total revenue of approximately $9.3 million and total net income of approximately $134,000 attributable to businesses acquired during fiscal 2022, based on the consolidated effective tax rate. These results of acquired businesses do not include the effects of acquisition costs or interest expense associated with consideration paid for the acquisitions.

4. Accounts Receivable

Accounts receivable as of June 30, 2023 and 2022 consisted of the following (in thousands):

5. Other Current Assets

Other current assets as of June 30, 2023 and 2022 were comprised of the following (in thousands):

6. Leases

Company as Lessee

As of June 30, 2023, the Company had 32 facilities, consisting of warehouse facilities and administrative offices, financed under operating leases with lease term expirations between 2023 and 2030. Rent expense consists of monthly rental payments under the terms of the Company’s lease agreements recognized on a straight-line basis.

The following table sets forth the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of June 30, 2023. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

The table below presents additional information related to the Company’s operating leases (in thousands):

The table below presents lease-related terms and discount rates as of June 30, 2023 and 2022:

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities for the fiscal years ended June 30, 2023 and 2022 (in thousands):

Company as Lessor

The Company derives a portion of its revenue from equipment leasing arrangements. Such arrangements provide for monthly payments covering the equipment provided, maintenance, and interest. These arrangements meet the criteria to be accounted for as sales type leases. Accordingly, revenue related to the provision of the equipment is recognized upon delivery of the equipment and its acceptance by the customer. Upon the recognition of such revenue, an asset is established for the investment in sales type leases. Maintenance revenue and interest are recognized monthly over the lease term.

The future minimum lease payments receivable for sales type leases are as follows (in thousands):

* Excludes non-guaranteed residual values of $3.0 million.

The total net investments in sales type leases, including stated residual values, as of June 30, 2023 and June 30, 2022 was $9.0 million and $7.7 million, respectively. The current portion of $1.6 million and $2.0 million is included in other current assets in the consolidated balance sheets as of June 30, 2023 and June 30, 2022, respectively, and the long term portion of $7.4 million and $5.7 million is included in other assets in the consolidated balance sheets as of June 30, 2023 and June 30, 2022, respectively.

7. Equipment and Improvements

Major classes of equipment and improvements as of June 30, 2023 and 2022 consisted of the following (in thousands):

Depreciation and amortization of equipment and improvements totaled approximately $3.9 million in fiscal 2023 and $3.3 million in fiscal 2022.

8. Goodwill and Intangible Assets

The changes in the carrying amount of goodwill are as follows (in thousands):

Customer-related intangibles, tradenames and other intangible assets as of June 30, 2023 and 2022 consisted of the following (dollars in thousands):

Amortization expense was approximately $2.1 million and $1.9 million in fiscal 2023 and fiscal 2022, respectively, and is included in selling, general and administrative expenses in the consolidated statements of operations. The weighted average remaining estimated useful lives for customer-related intangibles, covenants not to compete, license agreements, and trademarks and patents were 5.9 years, 0 years, 0 years and 0 years, respectively.

Based on the carrying amount of intangible assets as of June 30, 2023, and assuming no future impairment of the underlying assets, the estimated future amortization at the end of each fiscal year in the five-year period ending June 30, 2028 and thereafter is as follows (in thousands):

9. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of June 30, 2023 and 2022 were comprised of the following (in thousands):