EVI INDUSTRIES, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 2020

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to

	Commission file number 001-14757

EVI Industries, Inc.

(Exact name of registrant as specified in its charter)

	Delaware	11-2014231
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4500 Biscayne Blvd., Suite 340, Miami, FL 33137
(Address of principal executive offices)

(305) 402-9300
(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.025 par value	EVI	NYSE American

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☒

Emerging growth company ☐

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

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

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: Common Stock, $.025 par value per share – 12,251,389 shares outstanding as of February 2, 2021.



PART I – FINANCIAL INFORMATION
Item 1.Financial Statements		3
Condensed Consolidated Statements of Operations (Unaudited) for the six and three months ended December 31, 2020 and 2019	3
Condensed Consolidated Balance Sheets at December 31, 2020 (Unaudited) and June 30, 2020	4
Condensed Consolidated Statements of Shareholders’ Equity (Unaudited) for the six and three months ended December 31, 2020 and 2019	6
Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended December 31, 2020 and 2019	8
Notes to Condensed Consolidated Financial Statements (Unaudited)	10
Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.Controls and Procedures	34
PART II – OTHER INFORMATION
Item 1.Legal Proceedings	35
Item 1A.Risk Factors	35
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6.Exhibits	36
Signatures	37

Index

PART I—FINANCIAL INFORMATION

Item 1.Financial Statements.

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data) (Unaudited)

	For the six months ended December 31,				For the three months ended December 31,
	2020		2019		2020			2019

Revenues	$	115,043	$	122,338	$	57,165		$	66,657
Cost of sales		87,330		94,429		42,785			52,582
Gross profit		27,713		27,909		14,380			14,075
Selling, general and administrative expenses		26,305		25,823		13,868			13,270
Operating income		1,408		2,086		512			805
Interest expense, net		319		855		150			433
Income before income taxes		1,089		1,231		362			372
Provision for (benefit from) income taxes		110		388		(99	)		109

Net income	$	979	$	843	$	461		$	263

Net earnings per share – basic	$	0.07	$	0.07	$	0.03		$	0.02

Net earnings per share – diluted	$	0.07	$	0.06	$	0.03		$	0.02

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands)

ASSETS
	December 31, 2020 (Unaudited)		June 30, 2020
Current assets
Cash	$	4,978	$	9,789
Accounts receivable, net of allowance for doubtful accounts of $931 and $820, respectively		21,440		23,042
Inventories, net		25,174		24,063
Vendor deposits		1,146		1,276
Contract assets		9,434		3,443
Other current assets		4,802		3,041
Total current assets		66,974		64,654

Equipment and improvements, net		10,538		7,992
Operating lease assets		7,542		5,311
Intangible assets, net		24,652		21,754
Goodwill		63,705		56,678
Other assets		6,682		4,329

Total assets	$	180,093	$	160,718

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share data)

LIABILITIES AND SHAREHOLDERS' EQUITY
	December 31, 2020 (Unaudited)			June 30, 2020
Current liabilities
Accounts payable and accrued expenses	$	25,566		$	24,292
Accrued employee expenses		5,052			4,764
Customer deposits		13,494			8,511
Contract liabilities		3,294			558
Current portion of long-term debt		1,837			2,680
Current portion of operating lease liabilities		2,053			1,672
Total current liabilities		51,296			42,477


Deferred tax liabilities, net		3,672			1,728
Long-term operating lease liabilities		6,113			3,657
Long-term debt, net		20,817			25,030

Total liabilities		81,898			72,892

Commitments and contingencies (Note 11)

Shareholders’ equity
Preferred stock, $1.00 par value; authorized shares – 200,000; none issued and outstanding		—			—
Common stock, $.025 par value; authorized shares – 20,000,000; 12,340,591 shares issued at December 31, 2020 and 12,029,910 shares issued at June 30, 2020, including shares held in treasury		309			301
Additional paid-in capital		88,855			79,127
Retained earnings		11,389			10,410
Treasury stock, 105,635 shares at December 31, 2020 and 95,396 shares at June 30, 2020, at cost		(2,358	)		(2,012	)
Total shareholders’ equity		98,195			87,826
Total liabilities and shareholders’ equity	$	180,093		$	160,718

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share data) (Unaudited)

	Six months ended December 31, 2020


						Additional
		Common Stock				Paid-in		Treasury Stock					Retained
		Shares		Amount		Capital		Shares		Cost			Earnings		Total
Balance at June 30, 2020			12,029,910	$	301	$	79,127		95,396	$	(2,012	)	$	10,410	$	87,826

Share repurchases			—		—		—		10,239		(346	)		—		(346	)

Vesting of restricted shares			31,603		1		(1)		—		—			—		0

Issuances of shares under employee stock purchase plan			693		—		21		—		—			—		21

Issuances of shares in connection with acquisitions			278,385		7		8,514		—		—			—		8,521

Stock compensation			—		—		1,194		—		—			—		1,194

Net income			—		—		—		—		—			979		979
Balance at December 31, 2020			12,340,591	$	309	$	88,855		105,635	$	(2,358	)	$	11,389	$	98,195

	Three months ended December 31, 2020


						Additional
		Common Stock				Paid-in		Treasury Stock					Retained
		Shares		Amount		Capital		Shares		Cost			Earnings		Total
Balance at September 30, 2020			12,029,910	$	301	$	79,705		95,396	$	(2,012	)	$	10,928	$	88,922

Share repurchases			—		—		—		10,239		(346	)		—		(346	)

Vesting of restricted shares			31,603		1		(1)		—		—			—		—

Issuances of shares under employee stock purchase plan			693		—		21		—		—			—		21

Issuances of shares in connection with acquisitions			278,385		7		8,514		—		—			—		8,521

Stock compensation			—		—		616		—		—			—		616

Net income			—		—		—		—		—			461		461
Balance at December 31, 2020			12,340,591	$	309	$	88,855		105,635	$	(2,358	)	$	11,389	$	98,195

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Shareholders’ Equity

(In thousands, except share data) (Unaudited)

	Six months ended December 31, 2019
															Common
															Stock
						Additional									Related to
		Common Stock				Paid-in		Treasury Stock					Retained		Acquiree’s
		Shares		Amount		Capital		Shares		Cost			Earnings		ESOP			Total
Balance at June 30, 2019			11,825,615	$	296	$	73,010		72,934	$	(1,439	)	$	9,635	$	(4,240	)	$	77,262

Share repurchases			—		—		—		10,110		(309	)		—		—			(309	)

Vesting of restricted shares			29,880		—		—		—		—			—		—			—

Issuances of shares under employee stock purchase plan			1,022		—		26		—		—			—		—			26

Issuances of shares in connection with acquisitions			37,050		1		1,293		—		—			—		4,240			5,534

Stock compensation			—		—		915		—		—			—		—			915

Net income			—		—		—		—		—			843		—			843
Balance at December 31, 2019			11,893,567	$	297	$	75,244		83,044	$	(1,748	)	$	10,478	$	—		$	84,271

	Three months ended December 31, 2019
															Common
															Stock
						Additional									Related to
		Common Stock				Paid-in		Treasury Stock					Retained		Acquiree’s
		Shares		Amount		Capital		Shares		Cost			Earnings		ESOP		Total
Balance at September 30, 2019			11,862,665	$	297	$	74,756		72,934	$	(1,439	)	$	10,215	$	—	$	83,829

Share repurchases			—		—		—		10,110		(309	)		—		—		(309	)

Vesting of restricted shares			29,880		—		—		—		—			—		—		—

Issuances of shares under employee stock purchase plan			1,022		—		26		—		—			—		—		26

Stock compensation			—		—		462		—		—			—		—		462

Net income			—		—		—		—		—			263		—		263
Balance at December 31, 2019			11,893,567	$	297	$	75,244		83,044	$	(1,748	)	$	10,478	$	—	$	84,271

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	For the six months ended
	December 31, 2020			December 31, 2019
Operating activities:
Net income	$	979		$	843
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,157			1,730
Amortization of debt discount		28			28
Provision for bad debt expense		165			101
Non-cash lease expense		41			30
Share-based compensation		1,194			915
Inventory reserve		(79	)		94
Provision for deferred income taxes		1,041			336
Other		84			—
(Increase) decrease in operating assets:
Accounts receivable		3,035			7,209
Inventories		508			(2,270	)
Vendor deposits		130			300
Contract assets		(5,991	)		1,004
Other assets		(2,262	)		(971	)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses		(593	)		(2,412	)
Accrued employee expenses		(246	)		(38	)
Customer deposits		4,498			1,808
Contract liabilities		2,736			901
Net cash provided by operating activities		7,425			9,608
Investing activities:
Capital expenditures		(1,436	)		(2,165	)
Cash paid for acquisitions, net of cash acquired		(4,475	)		(474	)
Net cash used by investing activities		(5,911	)		(2,639	)
Financing activities:
Proceeds from borrowings		25,500			4,000
Debt repayments		(31,500	)		(9,800	)
Repurchases of common stock in satisfaction of employee tax withholding obligations		(346	)		(309	)
Issuances of common stock under employee stock purchase plan		21			26
Net cash used by financing activities		(6,325	)		(6,083	)
Net (decrease) increase in cash		(4,811	)		886
Cash at beginning of period		9,789			5,038
Cash at end of period	$	4,978		$	5,924

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands) (Unaudited)

	For the six months ended
	December 31, 2020		December 31, 2019
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	287	$	870
Cash paid during the period for income taxes	$	477	$	136

Supplemental disclosure of non-cash financing activities:
Common stock issued for acquisitions	$	8,521	$	1,294

See Notes to Condensed Consolidated Financial Statements

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

Note (1) - General: The accompanying unaudited condensed consolidated financial statements include the accounts of EVI Industries, Inc. and its subsidiaries (the “Company”). All material intercompany balances and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and the instructions to Form 10-Q and Article 10 of Regulation S-X related to interim period financial statements. Accordingly, the accompanying unaudited condensed consolidated financial statements do not include certain information and footnotes required by GAAP for complete financial statements. However, in management’s opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring accruals and adjustments) which are necessary in order to state fairly the Company’s results of operations, financial position, shareholders’ equity and cash flows as of and for the periods presented. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or any other future period, particularly in light of the COVID-19 pandemic and its effects and potential future effects (which are highly uncertain) on economic and market conditions and on the Company and its business, results and financial condition, as described below and elsewhere herein. The unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes, including the Summary of Significant Accounting Policies, included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. The June 30, 2020 balance sheet information contained herein was derived from the Company’s audited consolidated financial statements as of that date included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The estimates and assumptions made may not prove to be correct, and actual results could differ from the estimates.

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.

The Company’s growth strategy includes organic growth initiatives and business acquisitions pursuant to the Company’s “buy-and-build” growth strategy, which was implemented in 2015.

The COVID-19 pandemic has been, and continues to be, an unprecedented disruption in the economy and has negatively impacted, and may continue to negatively impact, the Company’s business and results. Specifically, beginning at the end of the quarter ended March 31, 2020, the COVID-19 pandemic and accompanying economic disruption caused delays and declines in the placement of customer orders, the completion of equipment and parts installations, and the fulfillment of parts orders. The adverse impact of the COVID-19 pandemic is expected to continue in the near-term and possibly longer, including, without limitation, if the pandemic increases in size and scope, its duration is prolonged, or, among other matters related thereto, additional governmental actions, including, without limitation, business restrictions, are imposed. In response to the economic and business disruption, the Company has taken actions to reduce costs and spending across the organization, including changes to inventory stock levels, renegotiating payment terms with suppliers, and reducing hiring activities. The Company continues to actively monitor the COVID-19 pandemic and may take further actions, including those that may alter business operations, if required by federal, state or local authorities or otherwise determined to be advisable by management.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

As a precautionary measure in order to increase its cash position and preserve financial flexibility in light of the uncertainties resulting from the COVID-19 pandemic, during May 2020, the Company and certain of its subsidiaries received loans (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the aggregate principal amount of approximately $6.9 million. Additionally, in connection with its acquisition of Yankee Equipment Systems during November 2020, the Company, indirectly through its wholly-owned subsidiary, assumed the approximately $916,000 loan previously received by Yankee Equipment Systems under the PPP. See Note 6 below for additional information regarding these loans as well as information regarding the Company’s credit facility.

As of the date of this Quarterly Report on Form 10-Q, significant uncertainty exists concerning the magnitude of the impact and duration of the COVID-19 pandemic. Factors arising from the COVID-19 pandemic that have impacted, or may negatively impact, the Company’s business and results, including sales and gross margin, in the future include, but are not limited to: potential limitations on the ability of suppliers to manufacture, or the Company’s ability to procure from manufacturers, the products the Company sells, or to meet delivery requirements and commitments; limitations on the ability of the Company’s employees to perform their work due to impacts caused by the pandemic or local, state, or federal orders that may restrict the Company’s operations or the operations of its customers, or require that employees be quarantined; limitations on the ability of carriers to deliver products to the Company’s facilities and customers; adverse impacts of the pandemic on certain industries and customers of the Company which operate in those industries, including the hospitality industry; and potential decreased demand for products and services, including potential limitations on the ability of, or adverse changes in the desire of, the Company’s customers to conduct their business, purchase products and services and pay for purchases on a timely basis or at all.

The situation surrounding the COVID-19 pandemic remains fluid and highly uncertain. The Company is unable to determine or predict the nature, duration, or scope of the overall impact that the COVID-19 pandemic will have on the Company’s business, results of operations, liquidity, or financial condition, as such impact will depend in large part on future developments, including the severity and duration of the pandemic and government and other actions taken in response thereto, all of which are highly uncertain. Further, even after the COVID-19 pandemic subsides, the Company may continue to experience adverse impacts to its business as a result of, among other things, any adverse impact that has occurred or may occur in the future in the economy or markets generally, and changes in customer or supplier behavior.

Note (2) – Summary of Significant Accounting Policies: There have been no changes to the Company’s significant accounting policies from those described in Note 1 to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

Note (3) – 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, 2020, and for interim periods within those fiscal years (the fiscal year ending June 30, 2022 for the Company), with early adoption permitted. The Company is currently evaluating the impact that adopting this guidance may have on its consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The new guidance provides (i) temporary optional guidance to ease the potential burden in accounting for reference rate reform and (ii) optional expedients and exceptions for applying generally accepted accounting principles to transactions affected by reference rate reform if certain criteria are met. These transactions include contract modifications, hedging relationships, and the sale or transfer of debt securities classified as held-to-maturity. Entities may apply the provisions of the new standard as of the beginning of the reporting period when the election is made. The provisions of this update are only available until December 31, 2022, when the reference rate replacement activity is expected to be completed. The Company is currently evaluating the potential adoption of this guidance and the impact, if any, that it may have on the Company’s consolidated financial statements.

Other than as described above, management does not believe that accounting standards and updates which have been issued but are not yet effective will have a material impact on the Company’s consolidated financial statements upon adoption.

Note (4) - Acquisitions:

On November 3, 2020, the Company acquired Yankee Equipment Systems, Inc. (“YES”), pursuant to a merger whereby YES merged with and into, and became, a wholly-owned subsidiary of the Company (the “YES Acquisition”). YES is a New Hampshire-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 merger consisted of $5.3 million in cash and 278,385 shares of the Company’s common stock. The Company funded the cash consideration with borrowings under its credit facility. The Company, indirectly through its wholly-owned subsidiary, also assumed YES’s obligations under the approximately $916,000 loan obtained by it under the PPP, as described in further detail under Note 6 below. Fees and expenses related to the YES Acquisition, consisting primarily of legal and other professional fees, totaled approximately $144,000 and are classified as selling, general and administrative expenses in the Company’s consolidated statement of operations for the three and six months ended December 31, 2020. The total purchase price for accounting purposes was $13.8 million, which included cash acquired of $792,000.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

The YES Acquisition was treated for accounting purposes as a purchase of YES using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Under the acquisition method of accounting, the aggregate consideration in the YES 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 preliminary allocation of the consideration to the net assets acquired are presented in the following tables (in thousands):

Purchase price consideration:
Cash consideration, net of cash acquired^(a)	$	4,475
Stock consideration^(b)		8,521
Total purchase price consideration, net of cash acquired	$	12,996

(a) Includes $5.3 million paid net of $792,000 of cash acquired.
(b) Calculated as 278,385 shares of the Company’s common stock, multiplied by $30.61, the closing price of the Company’s common stock on the closing date.

Allocation of purchase price consideration:
Accounts receivable	$	1,581
Inventory		1,554
Other assets		1,862
Property, plant and equipment		1,850
Intangible assets		3,800
Accounts payable and accrued expenses		(1,867)
Accrued employee expenses		(534)
Customer deposits		(485)
Deferred tax liabilities		(903)
Assumption of debt		(916)
Total identifiable net assets		5,942
Goodwill		7,054
Total	$	12,996

The Company is continuing its valuation of the net assets acquired, which is subject to adjustment in accordance with the merger agreement. Accordingly, the purchase price allocation set forth above reflects preliminary fair value estimates based on preliminary work and analyses performed by management and is subject to change as additional information to assist in determining the fair value of the net assets acquired as of the closing date is obtained during the post-closing measurement period of up to one year. The Company is also still assessing certain working capital items.

Intangible assets consist of $1.6 million allocated to the Yankee Equipment Systems trade name and $2.2 million allocated to customer-related intangible assets. The Yankee Equipment Systems trade name is indefinite-lived and therefore not subject to amortization. The Yankee Equipment Systems 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 will be amortized over 10 years.

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

See also Note 13, “Subsequent Events,” for information regarding the Company’s acquisition of Baystate Business Ventures d/b/a Eastern Laundry Systems, which was completed on January 15, 2021.

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 YES Acquisition as described above, as if the Company had completed each such transaction on July 1, 2019, 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.

	For the six months ended December 31,
(in thousands)	2020 (Unaudited)		2019 (Unaudited)
Revenues	$	125,831	$	138,520
Net income		1,391		1,579

The Company’s consolidated results of operations for six months ended December 31, 2020 include total revenue of approximately $3.5 million and total net income of approximately $138,000 attributable to the YES Acquisition, 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 related acquisitions.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

Note (5) - 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. Basic and diluted earnings per share for the six and three months ended December 31, 2020 and 2019 are computed as follows (in thousands, except per share data):

	For the six months ended December 31,				For the three months ended December 31,
	2020 (Unaudited)		2019 (Unaudited)		2020 (Unaudited)		2019 (Unaudited)

Net income	$	979	$	843	$	461	$	263

Less: distributed and undistributed income allocated to unvested restricted common stock		89		58		42		18
Net income allocated to EVI Industries, Inc. shareholders	$	890	$	785	$	419	$	245
Weighted average shares outstanding used in basic earnings per share		12,027		11,787		12,120		11,797
Dilutive common share equivalents		400		421		454		402
Weighted average shares outstanding used in diluted earnings per share		12,427		12,208		12,574		12,199
Basic earnings per share	$	0.07	$	0.07	$	0.03	$	0.02
Diluted earnings per share	$	0.07	$	0.06	$	0.03	$	0.02

At December 31, 2020 and 2019, other than 1,219,973 shares and 872,084 shares, respectively, of common stock subject to unvested restricted stock awards or restricted stock units, there were no potentially dilutive securities outstanding.

Note (6) - Debt: Long-term debt as of December 31, 2020 and June 30, 2020 are as follows (in thousands):

	December 31, 2020			June 30, 2020
Revolving Line of Credit	$	15,000		$	21,000
PPP Loans (including the YES PPP Loan)		7,808			6,892
Less: unamortized discount and deferred financing costs		(154	)		(182	)
Total debt, net		22,654			27,710
Less: current maturities of long-term debt		(1,837	)		(2,680	)
Total long-term debt	$	20,817		$	25,030

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

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

Borrowings (other than swingline loans) under the 2018 Credit Agreement bear interest at a rate, at the Company’s election at the time of borrowing, equal to (a) LIBOR plus a margin that ranges from 1.25% to 1.75% depending on the Company’s consolidated leverage ratio, which is a ratio of consolidated funded indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (the “Consolidated Leverage Ratio”) or (b) the highest of (i) prime, (ii) the federal funds rate plus 50 basis points, and (iii) the one month LIBOR 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. The 2018 Credit Agreement has a term of five years and matures on November 2, 2023.

The 2018 Credit Agreement contains certain covenants, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum interest coverage ratios. The 2018 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 December 31, 2020, the Company was in compliance with its covenants under the 2018 Credit Agreement and $24.5 million was available to borrow under the revolving credit facility.

The obligations of the Company under the 2018 Credit Agreement are secured 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.

On May 21, 2020, the Company and certain of its subsidiaries received PPP Loans totaling approximately $6.9 million in principal amount from Fifth Third Bank, N.A. (the “Lender”) under the PPP established under the CARES Act. Each PPP Loan is evidenced by a promissory note dated May 21, 2020 (each, a “Promissory Note”) issued by the applicable borrower to the Lender. The term of each PPP Loan is two years. The interest rate on each PPP Loan is 1.00%, which is deferred for the first six months of the term of the PPP Loan. The Promissory Note evidencing each PPP Loan is in the Lender’s standard form for loans made by it under the PPP and contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties or other provisions of the Promissory Note. The occurrence of an event of default may result in a claim for the immediate repayment of all amounts outstanding under the applicable PPP Loan, collection of all other amounts owing from the borrower, and filing suit and obtaining judgment against the borrower. Each PPP Loan may be prepaid in whole or in part at any time without penalty.

The proceeds of the PPP Loans have been used primarily for payroll costs and, to a limited extent, other permitted purposes under the CARES Act, including rent and utility costs. Under the terms of the CARES Act, each borrower can apply for forgiveness for all or a portion of the PPP Loan and, as described below, the Company has agreed to apply, and for each of its subsidiaries that received PPP Loans to apply, for forgiveness. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds in accordance with the terms of the CARES Act, as described above, during the 24-week period after loan origination and the maintenance or achievement of certain employee levels. While the Company believes that the proceeds of the PPP Loans have been used only for qualifying expenses in accordance with the terms of the CARES Act, any forgiveness of a PPP Loan will be subject to approval by the Lender and the U.S. Small Business Administration, which is administering the PPP under the CARES Act, and there can be no assurance that any or all of the PPP Loans will be forgiven in whole or in part.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

The Company received the consent (the “Consent”) of Bank of America, N.A., U.S. Bank National Association, and Fifth Third Bank under the Company’s 2018 Credit Agreement in connection with its and its subsidiaries’ receipt of the PPP Loans. The Consent, among other things, contains certain representations, warranties and agreements of the Company, including, without limitation, agreements to use the proceeds of the PPP Loan only for permitted expenses under the CARES Act, to timely apply for forgiveness of the PPP Loans, and to maintain all records required to be submitted in connection with the forgiveness of the PPP Loans. The breach of any such representations, warranties or agreements will constitute a default under the 2018 Credit Agreement, subject to any applicable cure periods or provisions thereof.

As previously described, in addition to the PPP Loans obtained by the Company and certain of its subsidiaries during May 2020, in connection with the YES Acquisition during November 2020, the Company, indirectly through its wholly-owned subsidiary, also assumed the approximately $916,000 loan previously obtained by YES under the PPP. The terms and conditions of such PPP loan are substantially similar to those of the PPP Loans obtained by the Company and its other subsidiaries, as described above.

Note (7) – Leases:

Company as Lessee

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

Effective July 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842” or “Topic 842”). which, among other things, requires lessees to recognize substantially all leases on their balance sheets and disclose certain additional key information about leasing arrangements. The new standard established a right-of-use model that requires a lessee to recognize a right-of-use asset and liability on the balance sheet for all leases with a term longer than 12 months. Leases are required to be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of operations. The Company adopted this standard using the modified retrospective transition approach, which requires a cumulative-effect adjustment, if any, to the opening balance of retained earnings to be recognized on the date of adoption without restatement of prior periods.

The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, the Company, as permitted by Topic 842, recognizes the lease payments under its short-term leases in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. In addition, in accordance with Topic 842, 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 right-of-use 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.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

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 its contractual expiration, 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 it is 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.

As of December 31, 2020, the Company had 24 facilities, consisting of warehouse facilities and administrative offices, financed under operating leases with lease term expirations between 2021 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 provides details of the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s condensed consolidated balance sheet as of December 31, 2020. The table below does not include commitments that are contingent on events or other factors that are currently uncertain or unknown.

Fiscal years ending June 30,	Total Operating Lease Obligations (in thousands)
2021 (remainder of)	$	1,131
2022		2,178
2023		1,783
2024		903
2025		629
Thereafter		2,248
Total minimum lease payments	$	8,872
Less: amounts representing interest		706
Present value of minimum lease payments	$	8,166
Less: current portion		2,053
Long-term portion	$	6,113

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

	Six months ended December 31,				Three months ended December 31,
	2020		2019		2020		2019
Operating lease cost
Operating lease cost (1)	$	993	$	905	$	519	$	470
Short-term lease cost (1)		12		114		—		55
Variable lease cost (1)		165		49		49		(12	)
Total lease cost	$	1,170	$	1,068	$	568	$	513

(1) Expenses are classified within selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

The table below presents lease-related terms and discount rates as of December 31, 2020:

		December 31, 2020
Weighted average remaining lease terms
Operating leases		5.6 years
Weighted average discount rate
Operating leases		3.0%

The table below presents supplemental cash flow information related to the Company’s long-term operating lease liabilities as of December 31, 2020 (in thousands):

	Six months ended December 31,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:	$	993	$	905
Operating lease right-of-use assets obtained in exchange for operating lease liabilities:	$	3,557	$	864

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 from 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):

Fiscal years ending June 30,	Total Minimum Lease Payments Receivable		Amortization of Unearned Income		Net Investment in Sales Type Leases
2021 (remainder of)	$	1,117	$	641	$	476
2022		1,793		1,082		711
2023		1,463		809		654
2024		1,029		541		488
2025		587		310		277
Thereafter		652		320		332
					$	2,938	*
* Excludes residual values of $2.3 million.

The total net investments in sales type leases, including stated residual values, as of December 31, 2020 and June 30, 2020 was $5.3 million and $3.9 million, respectively. The current portion of $0.8 million and $0.7 million is included in other current assets in the consolidated balance sheets as of December 31, 2020 and June 30, 2020, respectively, and the long term portion of $4.5 million and $3.2 million is included in other assets in the consolidated balance sheets as of December 31, 2020 and June 30, 2020, respectively.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

Note (8) - Income Taxes: Income taxes are recorded in the Company’s quarterly financial statements based on the Company’s estimated annual effective income tax rate, subject to adjustment for discrete events, should they occur.

As of December 31, 2020 and June 30, 2020, the Company had net deferred tax liabilities of approximately $3.7 million and $1.7 million, respectively. Consistent with the guidance of the FASB regarding accounting for income taxes, the Company regularly estimates its ability to recover deferred tax assets and establishes a valuation allowance against deferred tax assets to reduce the balance to amounts expected to be recoverable. This evaluation includes the consideration of several factors, including an estimate of the likelihood of generating sufficient taxable income in future periods over which temporary differences reverse, the expected reversal of deferred tax liabilities, past and projected taxable income, and available tax planning strategies. As of December 31, 2020, management believed that it was more-likely-than-not that the results of future operations will generate sufficient taxable income to realize the net amount of the Company’s deferred tax assets over the periods during which temporary differences reverse.

The Company follows ASC Topic 740-10-25, “Accounting for Uncertainty in Income Taxes” (“ASC 740”). ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. During the six and three months ended December 31, 2020 and 2019, the Company’s accounting for income taxes in accordance with this standard did not result in any adjustment to the Company’s provision for income taxes.

As of December 31, 2020, the Company was subject to potential federal and state tax examinations for the tax years 2017 through 2020.

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. During the six and three months ended December 31, 2020, the Company recognized an income tax benefit of $379,000 from a NOL carryback under the CARES Act. Other than with respect to the NOL carryback, the Company’s income tax provision for fiscal 2020 or the first or second quarter of fiscal 2021 was not materially impacted by the provisions of the CARES Act.

Note (9) – Equity Plans:

Equity Incentive Plan

In November 2015, the Company’s stockholders approved the Company’s 2015 Equity Incentive Plan (the “Plan”). During December 2020, the Company’s stockholders approved an amendment to the Plan to increase the number of shares of the Company’s common stock authorized for issuance pursuant to awards granted under the Plan to 3,000,000 shares. The fair value of awards granted under the Plan is expensed on straight-line basis over the vesting period of the awards. Share-based compensation expense is included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.

During the six and three months ended December 31, 2020, restricted stock awards of a total of 8,624 shares and 201,614 restricted stock units were granted under the Plan. During the six and three months ended December 31, 2020, restricted stock awards of a total of 1,492 shares were forfeited and returned to the Plan. During the six and three months ended December 31, 2019, restricted stock awards of a total of 12,110 shares and 6,500 restricted stock units were granted under the Plan. There were no shares forfeited during the six or three months ended December 31, 2019.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

For the six months ended December 31, 2020 and 2019, non-cash share-based compensation expense under the Plan totaled $1.2 million and $915,000, respectively. For the three months ended December 31, 2020 and 2019, non-cash share-based compensation expense under the Plan totaled $616,000 and $462,000, respectively.

As of December 31, 2020, the Company had $15.7 million and $7.6 million of total unrecognized compensation expense related to restricted stock awards and restricted stock units, respectively, granted under the Plan, which is expected to be recognized over the weighted-average period of 17.2 years and 11.5 years, respectively.

The following is a summary of non-vested restricted stock activity as of and for the six months ended December 31, 2020:

	Restricted Stock Awards				Restricted Stock Units
	Shares		Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Non-vested awards or units outstanding at June 30, 2020		987,220	$	19.40		55,610	$	30.31
Granted		8,624		30.61		201,614		31.01
Vested		(29,072)		16.19		(2,531)		26.40
Forfeited		(1,492)		33.53		—		—
Non-vested awards or units outstanding at December 31, 2020		965,280	$	19.57		254,693	$	30.90

Employee Stock Purchase Plan

The Company’s employee stock purchase plan provides for six-month offering periods ending on December 31 and June 30 of each year. During the six and three months ended December 31, 2020, 693 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $21,000. During the six and three months ended December 31, 2019, 1,022 shares of common stock were issued under the Company’s employee stock purchase plan for which the Company received net proceeds of $26,000.

Note (10) – Transactions with Related Parties: Certain of the Company’s subsidiaries lease warehouse and office space from one or more of the principals of those subsidiaries. These leases include the following:

The Company’s wholly-owned subsidiary, Steiner-Atlantic Corp. (“Steiner-Atlantic”), leased 28,000 square feet of warehouse and office space from an affiliate of Michael S. Steiner, former President of Steiner-Atlantic and a former director and officer of the Company, pursuant to a lease agreement dated November 1, 2014, as amended. The lease term was extended during January 2020 to run through October 31, 2020. Monthly base rental payments under the lease were $12,000; provided, however, that the monthly base rent for September and October 2020 was $1. In addition to base rent, Steiner-Atlantic was responsible under the lease for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Payments under this lease totaled approximately $25,000 and $74,000 during the six months ended December 31, 2020 and 2019, respectively, and $1 and $37,000 during the three months ended December 31, 2020 and 2019, respectively. The lease expired in accordance with its terms on October 31, 2020, and was not renewed.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

During October 2016, the Company’s wholly-owned subsidiary, Western State Design, Inc. (“Western State Design”), entered into a lease agreement pursuant to which it leases 17,600 square feet of warehouse and office space from an affiliate of Dennis Mack, a director and Executive Vice President, Corporate Strategy of the Company, and Tom Marks, Executive Vice President, Business Development of the Company. Monthly base rental payments are $12,000 during the initial term of the lease. In addition to base rent, Western State Design is responsible under the lease 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. Payments under this lease totaled approximately $72,000 during each of the six months ended December 31, 2020 and 2019 and $36,000 during each of the three months ended December 31, 2020 and 2019.

During October 2017, the Company’s wholly-owned subsidiary, Tri-State Technical Services, LLC (“Tri-State”), 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. In addition to base rent, Tri-State is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $126,000 during each of the six months ended December 31, 2020 and 2019 and $63,000 during each of the three months ended December 31, 2020 and 2019.

During February 2018, the Company’s wholly-owned subsidiary, AAdvantage Laundry Systems, LLC (“AAdvantage”), entered into a lease agreement pursuant to which it leases a total of 5,000 square feet of warehouse and office space from an affiliate of Mike Zuffinetti, former Chief Executive Officer of AAdvantage. Monthly base rental payments are $4,000 during the initial term of the lease. In addition to base rent, AAdvantage is responsible under the lease 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. In addition, during November 2018, AAdvantage entered into a lease agreement pursuant to which it leases warehouse and office space from an affiliate of Mike Zuffinetti. Monthly base rental payments 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 increased to $36,000. In addition to base rent, AAdvantage is responsible under the lease 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. Payments under the leases described in this paragraph totaled approximately $240,000 during each of the six months ended December 31, 2020 and 2019 and $120,000 during each of the three months ended December 31, 2020 and 2019.

During September 2018, the Company’s wholly-owned subsidiary, Scott Equipment, LLC (“Scott Equipment”), entered into lease agreements pursuant to which it leases a total of 18,000 square feet of warehouse and office space from an affiliate of Scott Martin, former President of Scott Equipment. Monthly base rental payments total $11,000 during the initial terms of the leases. In addition to base rent, Scott Equipment is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of five years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $69,000 during each of the six months ended December 31, 2020 and 2019 and $35,000 during each of the three months ended December 31, 2020 and 2019.

During February 2019, the Company’s wholly-owned subsidiary, PAC Industries, LLC (“PAC Industries”), entered into two lease agreements pursuant to which it leases a total of 29,500 square feet of warehouse and office space from an affiliate of Frank Costabile, President of PAC Industries, and Rocco Costabile, former Director of Finance of PAC Industries. Monthly base rental payments total $15,000 during the initial terms of the leases. In addition to base rent, PAC Industries is responsible under the leases for costs related to real estate taxes, utilities, maintenance, repairs and insurance. Each lease has an initial term of four years and provides for two successive three-year renewal terms at the option of the Company. Payments under these leases totaled approximately $90,000 and $88,000 during the six months ended December 31, 2020 and 2019, respectively, and $45,000 and $44,000 during the three months ended December 31, 2020 and 2019, respectively.

Index

EVI Industries, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2020

(Unaudited)

During November 2020, the Company’s wholly-owned subsidiary, Yankee Equipment Systems, LLC (“Yankee Equipment Systems”), entered into a lease agreement pursuant to which it leases a total of