EVI INDUSTRIES, INC. (EVI) Risk Factors

Item 1A. Risk Factors.

The Company is subject to various
risks and uncertainties, including those described below, which could adversely affect the Company’s business, financial condition,
results of operations 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 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. Accordingly, the Company may, among other things, 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 which could adversely impact
the Company’s financial condition or results. Further, there are risks related to the accounting for acquisitions, including that
preliminary valuations are subject to change and any such change may impact the Company’s results.

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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 the prices requested, including due to conditions outside
of the supplier’s control. The Company is also subject to delays caused by interruptions in production and increases in product
costs based on conditions outside of the Company’s control. These conditions include shortages of qualified labor for suppliers,
governmental regulations and measures, including the imposition of tariffs and effects thereof, work slowdowns, work interruptions, strikes
or other job actions by 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 or other disease outbreaks or 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, without limitation, if the Company’s customers turn to other distributors.

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.

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Labor shortages and increases in labor costs may
have a material adverse impact on the Company’s business and results of operations.

The market for qualified employees
is highly competitive, particularly in light of recent labor shortages. The Company may be unable to continue to attract and retain qualified
personnel. In addition, increases in labor costs have resulted in, and may continue to result in, increases in the Company’s operating
expenses. 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 does not maintain its relationships with its significant suppliers or customers.

While the Company purchases
the products it distributes from a number of manufacturers and suppliers, purchases from four manufacturers accounted for a total of
approximately 72% and 73% of the Company’s product purchases for fiscal 2025 and 2024, 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 its or its acquired
businesses’ principal manufacturers or suppliers, the Company’s business and results could be materially and adversely
impacted. In addition, efforts of the Company and its acquired businesses to mitigate any loss, including brand shifts, may not be
successful. 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.

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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 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 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 regulations 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 a result of
violations of, liabilities under, or efforts to comply with, applicable laws and regulations. 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 changes to applicable laws and regulations.

The Company’s business and results may be
impacted by international trade policies, including the imposition of tariffs.

During the first half of 2025,
the U.S. government announced numerous changes to its trade policy, including changes to existing trade agreements and the use of tariffs
to enforce trade policy. The tariffs impact various jurisdictions from where the Company sources its products. While the tariffs
have not to date had a significant impact on the Company’s results, the trade policies are subject to change with limited or no
advance notice and it is uncertain what, if any, impact tariffs or other trade policies may have on the Company in the future, including
on its ability to purchase products sourced internationally or the prices

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thereof. The tariffs could significantly increase the cost of
the Company’s products and/or limit the availability of those products. The Company plans to address the risk through supplier negotiations
and increasing selling prices. However, there is no assurance that any such efforts will be successful. If the Company’s efforts
are unsuccessful, its gross profit and other results could be negatively impacted. Without limiting the generality of the foregoing, there
is no assurance that the Company will be able to successfully increase its sales prices in order to offset any increase in the prices
of the products it purchases, and price increases may result in reduced customer demand. The actual impact of tariffs is subject to a
number of factors, including the duration of such tariffs, changes to the countries included in the scope of tariffs, changes to amounts,
potential retaliatory tariffs imposed by other countries, and other variables, as well as the success of any actions taken by the Company
in connection therewith.

Unexpected events, such as public health issues,
natural disasters, geopolitical conflicts, civil unrest, severe weather and terrorist activities, may disrupt the Company’s operations
and increase its costs.

The outbreak of a pandemic or
public health crisis may adversely impact the Company. In addition, the occurrence of other unexpected events, including natural
disasters, civil unrest, geopolitical conflicts (including the current conflict between Ukraine and Russia as well as the conflict in
the Middle East) and/or terrorist activities could adversely affect the Company’s operations and financial performance, including
that the escalation of any conflicts or the expansion of any conflicts to impact additional regions could heighten many of the other risk
factors included in this Item 1A.

The Company faces risks related to its foreign
purchases and 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. The Company also purchases products from a number of foreign suppliers. The Company’s
purchases from foreign suppliers and sales to foreign buyers may be affected by the strength of the United States economy and dollar
relative to the economies and currencies of the countries where its customers and suppliers are located. Particularly, a weaker U.S.
dollar would result in increased costs, which in turn would negatively affect the Company’s operating results. Foreign sales
and purchases may also be affected by governmental measures, including trade policies, barriers and tariffs (as discussed under
“The Company’s business and results may be impacted by international trade policies, including the imposition of
tariffs” above).

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

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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, including those located in Florida, Georgia, North Carolina, Texas and the Northeast United States, are subject to hurricane
casualty and flood risk, and facilities in California are subject to earthquake and wildfire 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 “The Company could be negatively affected
by cyber or other security threats or other disruptions or failures to maintain the integrity of internal or customer, employee or vendor
data” 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 (“ERP”) systems. Any disruptions, delays or deficiencies in the design and/or
implementation of the 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 systems. Further, as

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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 could 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 personnel 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.

The Company could be negatively affected by cyber
or other security threats or other disruptions or failures to maintain the integrity of internal or customer, employee or vendor data.

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. The Company’s customers, employees and vendors have a high expectation
that their personal information will be adequately protected and, accordingly, the integrity and protection of such information is critical
to the Company.

The processing, transmission and
storage of customer, employee and vendor information requires 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.
Requirements imposed on the Company by the payment card industry surrounding information, security and privacy are also increasingly demanding.
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. In addition, the Company’s systems may be unable to
satisfy changing requirements and employee and customer expectations, or may require significant additional investments or time in order
to do so. Further, as the risk of cyber-attacks increases, related insurance premiums and the cost of defensive measures may also increase.
In addition, the costs to remediate security incidents or breaches that may occur could be material.

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

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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 operations or cash flows may
be adversely affected.

The Company could also make faulty
decisions if the data it maintains regarding its customers, employees or vendors is inaccurate or incomplete.

Climate change, or legal, regulatory or market
measures to address climate change, could have an adverse impact on the Company’s business and results of operations.

There is growing concern that
carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns, and the
frequency and severity of extreme weather and natural disasters. If such climate change has a negative impact on the economy, the Company’s
business and results may be adversely impacted, including due to a potential decrease in the availability of, or less favorable pricing
for, water or other materials which may adversely impact the supply chain. In addition, natural disasters and extreme weather, including
those caused by climate change, could cause disruptions in the Company’s operations and supply chains. Furthermore, the increasing
concern over climate change may also result in greater local, state, federal, and foreign legal requirements, including requirements to
limit greenhouse gas emissions or conserve resources, which may result in cost increases or adverse impacts to the supply chain.

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.

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The Company is party, as borrower,
to a syndicated credit agreement (the “Credit Agreement”) in the maximum aggregate principal amount of up to $150 million,
with an accordion feature to increase the revolving credit facility by up to $50 million for a total of $200 million. A portion of the
revolving credit facility is available for swingline loans of up to a sublimit of $7.5 million and for the issuance of standby letters
of credit of up to a sublimit of $15 million. The maturity date of the Credit Agreement is March 26, 2030. The Company had $53.0 million
outstanding borrowings under the Credit Agreement as of June 30, 2025.

Borrowings (other than swingline
loans) under the Credit Agreement bear interest, at a rate, at the Company’s election at the time of borrowing, equal to (a) the
Secured Overnight Financing Rate (“SOFR”) plus 0.11% to 0.43%, plus an additional adjustment 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) SOFR 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 at the Base Rate plus a margin that ranges between 0.25% and 0.75% depending on the Consolidated Leverage Ratio.

The Credit Agreement contains
covenants applicable to the Company, including financial covenants requiring the Company to comply with maximum leverage ratios and minimum
interest coverage ratios, as well as other covenants which may place restrictions on, among other things, liens, investments, indebtedness,
fundamental changes, acquisitions, dispositions of property, making specified restricted payments (including cash dividends and stock
repurchases that would result in the Company exceeding an agreed to Consolidated Leverage Ratio), and transactions with affiliates.

The Company may incur additional
debt financing as determined to be appropriate by management, including in connection with the financing of acquisitions or other strategic
transactions or otherwise, which would increase the Company’s vulnerability to the risk factors described above related to its level
of indebtedness and may place restrictions on the Company similar or in addition to those contained in the Credit Agreement. There is
no assurance that the Company will receive any financing which the Company may seek to obtain in the future on acceptable terms or at
all, including in the event additional funds are necessary to consummate an acquisition or other strategic transaction or support the
Company’s business operations.

Risks Related to Ownership of the Company’s
Common Stock

The Company’s management may be deemed to
control the Company.

The Company’s management,
including Henry M. Nahmad, the Company’s Chairman, Chief Executive Officer and President, and the Company’s Board of Directors
through stockholders agreement granting it the right to direct the voting of certain shares issued as consideration in acquisitions, may
be deemed to control the Company as a result of their collective voting power over shares representing approximately 57.4% of the issued
and outstanding shares of the Company’s common stock as of June 30, 2025. Under the Company’s Bylaws, directors are elected
by a plurality vote and all other matters put to a vote of the Company’s stockholders require the affirmative vote of a majority
of the shares of the

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Company’s common stock represented at a meeting, in person or by proxy, and entitled to vote on the matter
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 Company’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 of the Company or its 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 a 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 a compensation committee comprised solely of independent directors and the Company’s Board of Directors is currently
comprised of, and has historically generally been 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 market value of 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

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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 an 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 approve the issuance by the Company of up to 200,000 shares of preferred stock, and to designate the relative
rights, preferences and limitations of any preferred stock so issued, in each case, without any action on the part of the Company’s
stockholders. 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 the payment of dividends or upon liquidation, dissolution or
winding up of the Company, the rights of holders of shares of the Company’s common 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. Inclusive of unvested
restricted stock awards, there are currently approximately 14.2 million shares of common stock outstanding. Subject to applicable law
and the rules and regulations of the NYSE American, the Company’s Board of Directors (or a committee thereof, in the case of shares
issued under the Company’s equity-based compensation plan) has the power to approve the issuance of any authorized but unissued
shares of the Company’s common stock, and any such issuances, including, without limitation, those under the Company’s equity-based
compensation plan or pursuant to any acquisitions or other strategic transactions consummated by the Company or in connection with the
financing thereof, would result in dilution to the Company’s stockholders. These provisions of the Certificate of Incorporation
could also delay 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

The Company is subject to risks relating to evaluations
of internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002

The Company has incurred, and
expects to continue to incur, a substantial amount of management time and resources to comply with the requirements of Section 404 of
the Sarbanes-Oxley Act of 2002. 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

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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 2025 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.

Internal control over financial
reporting may not prevent or detect misstatements due to inherent limitations in internal control systems. An internal control system,
no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met, and the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. See Item 9A (“Controls and Procedures”) of this Report for related discussion.

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