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 ~~November~~February 3028, ~~2024~~2025, 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 ~~No.~~Number: 000-14311

EACO CORPORATION

(Exact name of registrant as specified in its charter)


Florida	59-2597349
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

5065 East Hunter Avenue

Anaheim, California 92807

(Address of Principal Executive Offices)

(714) 876-2490

(Registrant’s Telephone ~~No.~~Number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 Par Value

(Title of Class)

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 ☒

As of ~~January~~April 1311, 2025, 4,861,590 shares of the registrant’s common stock were outstanding.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Income

(in thousands, except for share and per share information)

(Unaudited)


	Three Months Ended				Six Months Ended
	~~November~~February 3028,		February 29,		February 28,		February 29,
	~~2024~~2025		~~2023~~2024		2025		2024
Net sales	$	93100,~~920~~132	$	8083,~~255~~335	$	194,052	$	163,590
Cost of sales		6670,~~139~~624		5658,~~683~~308		136,763		114,991
Gross margin		2729,~~781~~508		2325,~~572~~027		57,289		48,599
Operating expenses:
Selling, general and administrative expenses		1820,~~938~~414		17,~~217~~598		39,352		34,815
Impairment on termination of lease		—		~~3,906~~—		—		3,906
Income from operations		89,~~843~~094		27,~~449~~429		17,937		9,878

Other income (expense):
Net gain (loss) on trading securities		~~454~~30		~~(44)~~23		484		(21)
Interest and other expense, net		(48)		(9)
Interest and other (expense)		(49)		(75)		(97)		(84)
Other income (expense), net		406		(53)
Other (expense) income, net		(19)		(52)		387		(105)
Income before income taxes		9,~~249~~075		27,~~396~~377		18,324		9,773
Provision for income taxes		2,~~361~~312		~~617~~1,879		4,673		2,496
Net income		6,~~888~~763		15,~~779~~498		13,651		7,277
Cumulative preferred stock dividend		(19)		(19)		(38)		(38)
Net income attributable to common shareholders	$	6,~~869~~744	$	15,~~760~~479	$	13,613	$	7,239
Basic earnings per common share	$	1.41	$	0.36
Basic earnings per share:	$	1.39	$	1.13	$	2.80	$	1.49
Basicweighted average common shares outstanding		4,861,590		4,861,590
Basic weighted average common shares outstanding		4,861,590		4,861,590		4,861,590		4,861,590
Diluted earnings per common share:	$	1.41	$	0.36
Diluted earnings per share:	$	1.38	$	1.12	$	2.79	$	1.48
Diluted weighted average common shares outstanding		4,901,590		4,901,590		4,901,590		4,901,590

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(Unaudited)


	Three Months Ended				Six Months Ended
	~~November~~February 3028,		February 29,		February 28,		February 29,
	~~2024~~2025		~~2023~~2024		2025		2024
Net income	$	6,~~888~~763	$	15,~~779~~498	$	13,651	$	7,277
Other comprehensive (loss), net of tax:
Other comprehensive gain (loss), net of tax:
Foreign translation (loss)		(35)		(131)
Foreign translation gain (loss)		(104)		45		(139)		(86)
Total comprehensive income	$	6,~~853~~659	$	15,~~648~~543	$	13,512	$	7,191

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)


	~~November~~February 3028,		August 31,
	~~2024~~2025		2024*
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	~~591~~499	$	843
Restricted cash		10		10
Trade accounts receivable, net		5154,~~736~~743		53,272
Inventory, net		7579,~~683~~377		69,602
Marketable securities, trading		2015,~~521~~081		14,748
Prepaid expenses and other current assets		4,~~489~~325		3,526
Total current assets		~~153~~154,~~030~~035		142,001
Non-current Assets:
Property, equipment and leasehold improvements, net		34,~~759~~529		35,061
Operating lease right-of-use assets		67,~~930~~223		7,513
Other assets, net		43,~~043~~970		3,963
Total assets	$	~~198~~199,~~762~~757	$	188,538
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	3435,~~893~~453	$	28,054
Accrued expenses and other current liabilities		2215,~~070~~545		24,910
Current portion of long-term debt		131		129
Current portion of operating lease liabilities		2,~~596~~679		2,708
Total current liabilities		5953,~~690~~808		55,801
Non-current Liabilities:
Long-term debt		4,~~181~~149		4,214
Operating lease liabilities		4,~~426~~695		4,892
Total liabilities		6862,~~297~~652		64,907
Commitments and Contingencies Note 9
Commitments and Contingencies Note 8
Shareholders’ Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding (liquidation value $900)		1		1
Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding		49		49
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		38		73
Accumulated other comprehensive (loss) income		(66)		73
Retained earnings		~~117~~124,~~999~~743		111,130
Total shareholders’ equity		~~130~~137,~~465~~105		123,631
Total liabilities and shareholders’ equity	$	~~198~~199,~~762~~757	$	188,538

* Derived from the Company’s audited financial statements included in its Form 10-K for the year ended August 31, 2024 filed with the U.S. Securities and Exchange Commission on November 29, 2024.

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity

(in thousands, except share information)

(Unaudited)


	Convertible						Additional		Accumulated Other				Total
	Preferred Stock			Common Stock			Paid-in		Comprehensive		~~Accumulated~~Retained		Shareholders’
Three Months Ended November 30, 2024	Shares	Amount		Shares	Amount		Capital		Income (Loss)		Earnings		Equity
	Shares	Amount		Shares	Amount		Capital		Income		Earnings		Equity
For the three and six months ended February 28, 2025
Balance, August 31, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	73	$	111,130	$	123,631
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation (loss)	—		—	—		—		—		(35)		—		(35)
Foreign translation loss	—		—	—		—		—		(35)		—		(35)
Net income	—		—	—		—		—		—		6,888		6,888
Balance, November 30, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	38	$	117,999	$	130,465
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation (loss)	—		—	—		—		—		(104)		—		(104)
Net income	—		—	—		—		—		—		6,763		6,763
Balance, February 28, 2025	36,000	$	1	4,861,590	$	49	$	12,378	$	(66)	$	124,743	$	137,105

Three Months Ended November 30, 2023
For the three and six months ended February 29, 2024
Balance, August 31, 2023	36,000	$	1	4,861,590	$	49	$	12,378	$	38	$	96,255	$	108,721
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation (loss)	—		—	—		—		—		(131)		—		(131)
Foreign translation loss	—		—	—		—		—		(131)		—		(131)
Net income	—		—	—		—		—		—		1,779		1,779
Balance, November 30, 2023	36,000	$	1	4,861,590	$	49	$	12,378	$	(93)	$	98,015	$	110,350
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation gain	—		—	—		—		—		45		—		45
Net income	—		—	—		—		—		—		5,498		5,498
Balance, February 29, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	(48)	$	103,494	$	115,874

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	~~Three~~Six Months Ended
	~~November~~February 3028,		February 29,
	~~2024~~2025		~~2023~~2024
Operating activities:
Net income	$	613,~~888~~651	$	17,~~779~~277
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		~~433~~858		~~317~~806
Bad debt expense		66144		47135
Deferred tax provision		(4828)		~~(67)~~40
Net unrealized (gain) loss on trading securities		(~~213~~100)		~~210~~267
Impairment on termination of lease		—		3,906
Increase (decrease) in cash from changes in:
Increase (decrease) in cash flow from change in:
Trade accounts receivable		(1,~~470~~615)		~~556~~(468)
Inventory		(69,~~081~~775)		(37,~~986~~483)
Prepaid expenses and other assets		(~~995~~778)		~~(346)~~751
Operating lease right-of-use assets		~~583~~290		5,~~772~~296
Trade accounts payable		35,~~328~~881		~~190~~3,404
Accrued expenses and other current liabilities		(29,~~840~~365)		(28,~~257~~166)
Right of use liabilities		(578)		(5,820)
Operating lease liabilities		(226)		(5,305)
Net cash provided by operating activities		2,013		301
Net cash (used in) provided by operating activities		(1,063)		460
Investing activities:
Additions to property, equipment, and leasehold improvements		(131)		(31,701)
Purchase of property, equipment, and leasehold improvements		(326)		(32,208)
(Purchase) proceeds from sale of marketable securities, trading		(5,560)		22,791
Net (purchases) sales of marketable securities, trading		(233)		25,283
Net cash used in investing activities		(~~5,691~~559)		(86,~~910~~925)
Financing activities:
Borrowing on revolving credit facility		—		3,081
Repayments on long-term debt		(63)		(62)
Repayments of long-term debt		(31)		(31)
Preferred stock dividend		(38)		(38)
Preferred stock dividend		(19)		(19)
Bank overdraft		1,518		2,077
Bank overdraft		3,511		3,650
Net cash provided by financing activities		1,417		1,977
Net cash provided by financing activities		3,461		6,681
Effect of foreign currency exchange rate changes on cash and cash equivalents		(139)		(86)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(35)		(131)
Net decrease in cash, cash equivalents, and restricted cash		(344)		(4,574)
Net decrease in cash, cash equivalents, and restricted cash		(252)		(2,059)
Cash, cash equivalents, and restricted cash - beginning of period		853		8,568
Cash, cash equivalents, and restricted cash - end of period	$	~~601~~509	$	63,~~509~~994
Supplemental disclosures of cash flow information:
Cash paid for interest	$	4897	$	~~296~~145
Cash paid for income taxes	$	9,~~211~~213	$	~~674~~8,276

See accompanying notes to unaudited condensed consolidated financial statements.

EACO CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~November~~February 3028, ~~2024~~2025

Note 1. Organization and Basis of Presentation

EACO Corporation (“EACO”), incorporated in Florida in September 1985, is a holding company, primarily comprised of its wholly-owned subsidiary, Bisco Industries, Inc. (“Bisco”) and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited. Substantially all of EACO’s operations are conducted through Bisco and Bisco Industries Limited. Bisco was incorporated in Illinois in 1974 and is a distributor of electronic components and fasteners with 51 sales offices and seven distribution centers located throughout the United States and Canada and 1one additional sales office located in the Philippines. Bisco supplies parts used in the manufacture of products in a broad range of industries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marine industries.

Note 2. Significant Accounting Policies and Significant Recent Accounting Pronouncements

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include allowance for credit losses, provision for slow moving and obsolete inventory, recoverability of the carrying value and estimated useful lives of long-lived assets, and the valuation allowance against deferred tax assets, if any. Actual results could differ from those estimates.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in conformity with GAAP for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, all adjustments considered necessary in order to make the financial statements not misleading have been included.

Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the Company’s fiscal year ended August 31, 2024 (“fiscal 2024”). The condensed consolidated balance sheet as of August 31, 2024 and related disclosures were derived from the Company’s audited consolidated financial statements as of August 31, 2024. Operating results for the three and six months ended ~~November~~February 3028, ~~2024~~2025 are not necessarily indicative of the results that may be expected for future quarterly periods or the entire fiscal year.

Principles of Consolidation

The consolidated financial statements for all periods presented include the accounts of EACO, its wholly-owned subsidiary, Bisco, and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited (all of which are collectively referred to herein as the “Company”, “we”, “us” and “our”). All significant intercompany transactions and balances have been eliminated in consolidation.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Allowance for Credit Losses

We maintain an allowance for credit losses for estimated losses on our trade receivables, resulting from the inability of our customers to make payments for products sold. The allowance for credit losses is based on a variety of factors, including credit reviews, historical experience, length of time receivables are due, current economic trends and changes in customer payment behavior. We also record specific provisions for individual accounts when we become aware of a customer’s inability to meet its financial obligations to us, such

asAllowance ~~in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. The allowance~~ for ~~credit~~Credit ~~losses~~Losses ~~was $283,000 and $298,000 at November 30, 2024 and August 31, 2024, respectively.~~

~~Inventories~~We maintain an allowance for credit losses for estimated losses on our trade receivables, ~~Net~~resulting from the inability of our customers to make payments for products sold. The allowance for credit losses is based on a variety of factors, including credit reviews, historical experience, length of time receivables are due, current economic trends and changes in customer payment behavior. We also record specific provisions for individual accounts when we become aware of a customer’s inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. The allowance for credit losses was $294,000 and $298,000 at February 28, 2025 and August 31, 2024, respectively.

Inventories consist primarily of electronic fasteners and components and are stated at the lower of cost or estimated net realizable value. Cost is determined using the average cost method. Inventories are adjusted for slow moving or obsolete items, which was approximately $1,870,000 and $1,837,000 at November 30, 2024 and August 31, 2024, respectively. The adjustments to inventory costs are based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company.net

Inventories consist primarily of electronic fasteners and components and are stated at the lower of cost or estimated net realizable value. Cost is determined using the average cost method. Inventories are adjusted for slow moving or obsolete items, which was approximately $1,930,000 and $1,837,000 at February 28, 2025 and August 31, 2024, respectively. The adjustments to inventory costs are based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company.

Marketable Trading Securities

The Company invests in marketable trading securities, which include long and short positions in equity securities. Securities are stated at fair value, which is determined using the quoted closing prices at each reporting date. Realized gains and losses on investment transactions are recognized as incurred in the consolidated statements of operations. Net unrealized gains and losses are reported in the consolidated statements of operations and represent the change in the market value of investment holdings during the period.

Property, Equipment, and Leasehold Improvements

Property, equipment, and leasehold improvements are stated at cost net of accumulated depreciation and amortization. Depreciation and amortization expense is determined using the straight-line method over the estimated useful lives of the assets. The depreciable life for buildings is thirty-five years and five to seven years for furniture, fixtures and equipment. Leasehold improvements are amortized over the estimated useful life of the asset or the remaining lease term, whichever is less. Maintenance and repairs are charged to expense as incurred. Renewals and improvements of a major nature are capitalized. At the time of retirement or disposition of the asset, the cost and accumulated depreciation or amortization are removed from the accounts and any gains or losses are reflected in earnings.

Impairment of Long -Lived Assets

The Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measured by a comparison of the carrying value of each asset to the future net undiscounted cash flows expected to be generated by such assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value.

On October 20, 2023, the Company completed the purchase of its corporate headquarters located at 5065 East Hunter Avenue in Anaheim, California (the “Hunter Property”) from the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”) for $31,000,000 in cash. An appraisal, conducted in September 2023 by an independent third party, valued the Hunter Property at $31 ~~million~~,000,000, which was inclusive of tenant improvements previously purchased and recorded by the Company. Upon completion of the Hunter Property purchase and the termination of the Hunter Lease during the first quarter of fiscal 2024, the Company recorded an asset impairment of $3~~.9 million~~,900,000, which was the net book carrying value of the tenant improvements at the date the building was acquired.

Income Taxes

Deferred taxes on income result from temporary differences between the reporting of income for financial statement and tax reporting purposes. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or all of the deferred tax asset will not be realized. In making such determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance.

The Company provides for tax contingencies, if any, for federal, state, local and international exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s results of operations.

The Company provides for tax contingencies, if any, for federal, state, local and international exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of these tax audits is uncertain, in management’s opinion, adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations.

Revenue Recognition

The Company derives its revenue primarily from product sales. Revenue recognition is determined through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, performance obligations are satisfied.

The Company’s contract with the customer is executed with a customer purchase order and performance obligations consist solely of product shipped to customers. Revenue from product sales is recognized upon transfer of control of promised products, which the Company’s standard terms and conditions are shipping point, to customers at a point in time in an amount that reflects the consideration we expect to receive in exchange for these products as stated on the Company’s invoice to the customer. Revenue is recognized net of returns and any taxes collected from customers. The Company ~~offer~~generally offers industry standard contractual terms in its terms and conditions stated on its invoices and Company website.

Freight revenues associated with product sales are recognized at point of shipment and when the criteria discussed above have been met. Freight revenues have represented less than 1% of total revenues for the three and six months ended ~~November~~February 3028, ~~2024 (“Q1~~ 2025”) and ~~November~~February 3029, ~~2023 (“Q1~~ 2024”).

Operating Leases

The Company determines if a contractual arrangement contains a lease, for accounting purposes, at contract inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, the current portion of operating lease liabilities,and the operating lease liabilities in the accompanying consolidated balance sheets.

The ROU assets represent the Company’s right to control the use of a leased asset for the contractual term, and lease liabilities represent the related obligation to make lease payments arising from the contractual arrangement. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the contractual term. The operating lease ROU assets also include any prepaid lease payments made and exclude lease incentives. Lease expense is recognized on a straight-line basis over the contractual term.

Many of the Company’s leases include both lease (such as fixed payment amounts including rent, taxes, and insurance costs) and non-lease components (such as common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases.

Many leases include one or more options to renew the contract. Therefore, renewals to extend the lease terms are not included in our ROU assets and lease liabilities as they are not reasonably certain to be exercised. The Company regularly evaluates the renewal options each reporting period and when they are reasonably certain to be exercised, management will include the lease renewal period in our contractual term when estimating the ROU assets and related liabilities.

Since most of the Company’s leases do not provide an implicit rate, as defined by GAAP, the Company uses an incremental borrowing rate based on our line of credit variable interest rate that is set at the bank prime index rate in order to determine the present value of the lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate. As of ~~November~~February 3028, ~~2024~~2025, the Company ~~has~~had right of use assets of approximately $~~6.9~~7,200,000 ~~million~~ and lease liabilities of approximately $7.0,400,000 ~~million~~ recorded in the consolidated balance sheet. As of August 31, 2024, the Company ~~has~~had right of use assets of approximately $7.5,500,000 ~~million~~ and lease liabilities of approximately $7.6,600,000 ~~million~~ recorded in the consolidated balance sheet.

Earnings Per Common Share

Basic earnings per common share for the three months ended November 30, 2024 and 2023 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all potentially dilutive common shares that were outstanding during the respective periods. Potentially dilutive common shares represent 40,000 common shares issuable upon conversion of 36,000 shares of Series A convertible preferred stock, which were outstanding at November 30, 2024 and 2023. Such securities are excluded from the weighted average shares outstanding used to calculate diluted earnings per common share for the quarters ended November 30, 2024 and 2023.

Earnings Per Common Share

Basic earnings per common share for each of the three and six months ended February 28, 2025 and February 29, 2024 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all potentially dilutive common shares that were outstanding during the respective periods. Potentially dilutive common shares represent 40,000 common shares issuable upon conversion of 36,000 shares of Series A convertible preferred stock, which were outstanding at each of February 28, 2025 and February 29, 2024. Such securities are excluded from the weighted average shares outstanding used to calculate diluted earnings per common share for the quarters ended February 28, 2025 and February 29, 2024 as the inclusion of such securities would be anti - dilutive since the conversion price was greater than the average market price of the Company’s common stock during these periods.

Foreign Currency Translation and Transactions

Assets and liabilities recorded in functional currencies other than the U.S. dollar (specifically, Canadian dollars used to record the assets and liabilities for Bisco’s ~~Canadian~~Industries ~~subsidiary~~limited) are translated into U.S. dollars at the period-end rate of exchange. The exchange rate for Canadian dollars to U.S. dollars on ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024 was $0.7170 and $0.74, respectively. The resulting balance sheet translation adjustments are charged or credited directly to accumulated other comprehensive income (loss). Revenue and expenses are transacted at the average exchange rates for each of the three and six months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024. The average exchange rates for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024 were $0.73. All foreign sales, excluding Canadian sales, are denominated in U.S. dollars and, therefore, are not subject to foreign currency risk exposure.

Concentrations

Net sales to customers outside the United States were approximately 11% and 10% of revenues for each of the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024, respectively, and related accounts receivable were approximately 11% and 1210% of total accounts receivable as of ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024, respectively. Sales to customers in Canada accounted for approximately 2827% and 2928% of such international sales for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024, respectively. Sales to customers located within Asia accounted for approximately 3942% and 4137% of such international sales for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024, respectively.

NoNet ~~single~~sales ~~customer~~to ~~accounted~~customers ~~for~~outside ~~more~~the ~~than~~United States were approximately 11% and 10% of revenues for the three months ended ~~November~~February 3028, ~~2024~~2025 and ~~2023.~~February In29, ~~addition~~2024, norespectively, ~~single~~and ~~customer’s~~related accounts receivable ~~balance~~were ~~accounted~~approximately ~~for~~11% ~~more~~and ~~than~~ 10% of total ~~customer~~accounts ~~receivables~~receivable as of ~~November~~February 3028, 2025 and February 29, 2024, respectively. Sales to customers in Canada accounted for approximately 26% and ~~August~~27% 31of such international sales for the three months ended February 28, 2025 and February 29, 2024, respectively. Sales to customers located within Asia accounted for approximately 44% and 32% of such international sales for the three months ended February 28, 2025 and February 29, 2024, respectively.

No single customer accounted for more than 10% of revenues for either of the three months and six months ended February 28, 2025 and February 29, 2024. In addition, no single customer’s receivable balance accounted for more than 10% of the Company’s customer receivables as of either February 28, 2025 or August 31, 2024.

Significant Recent Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”, which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective, as amended for smaller reporting companies for all periods beginning after December 15, 2022, including interim periods within those fiscal years. Management has evaluated and implemented this standard, effective September 1, 2023, which adoption had no material impact on its results of operations or financial position.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which is intended to enhance transparency into the nature and function of expenses. The amendments require that on an annual and interim basis, entities disclose disaggregated operating expense information about specific categories, including purchases of inventory, employee compensation, depreciation, amortization and depletion. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Upon adoption, ASU 2024-03 should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the impact ASU 2024-03 will have on our financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments require that on an annual basis, entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments require that entities disclose additional information about income taxes paid as well as additional disclosures of pretax income and income tax expense, and remove the requirement to disclose certain items that are no longer considered cost beneficial or relevant. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Upon adoption, ASU 2023-09 should be applied on a prospective basis while retrospective application is permitted.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The Company expects to adopt the new annual disclosures as required for fiscal year ending August 31, 2025 (“fiscal 2025”) and the interim disclosures as required beginning subsequent to fiscal 2025.

Other recently issued accounting pronouncements are not expected to have a material impact on the Company’s consolidated financial statements.

Note 3. Accrued Liabilities

The Company’s accrued liabilities as of ~~November~~February 3028, ~~2024~~2025 and August 31, 2024 are summarized as follows (in thousands):


	~~November~~February 3028,		August 31,
	~~2024~~2025		2024
Accrued expenses and other current liabilities:

Accrued accounts payable	$	98,~~163~~655	$	8,514
Accrued compensation and payroll		34,~~299~~404		9,097
Accrued taxes		92,~~608~~486		7,299
Total Accrued expenses and other current liabilities	$	22,070	$	24,910
Total accrued expenses and other current liabilities	$	15,545	$	24,910

Note 4. Debt

The Company has a $20,000,000 ~~million~~ line of credit agreement with Citizens Business Bank (“the “Bank”). On May 10, 2024, the Company executed a Change in Terms Agreement dated as of April 12, 2024 (the “Amendment”) with the Bank to modify terms of that certain Business Loan Agreement dated as of November 5, 2022 between Bisco and the Bank. The Amendment (i) extends the expiration date of the line of credit under the Loan Agreement to February 15, 2026; and (ii) increases the principal loan amount under the line of credit to $20 ~~million~~,000,000.

The line of credit has a variable interest rate set at the bank prime index rate, but provided that in no event would such interest rate be less than 3.5% per annum. Borrowings are secured by substantially all of the assets of the Company and its subsidiaries. The amount outstanding under this line of credit as of each of ~~November~~February 3028, ~~2024~~2025 and August 31, 2024 was zero. The line of credit agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of ~~November~~February 3028, ~~2024~~2025 and August 31, 2024, the Company was in compliance with all such covenants. The Company also entered into a loan agreement with the Bank on July 12, 2019 to borrow up to $5 million (the “Construction Loan”) for the primary purpose of financing tenant improvements at the Hunter Property. The Construction Loan was a line of credit evidenced by a Promissory Note in the principal amount of up to $5,000,000 with a maturity date of May 15, 2027. The terms of the Construction Loan provide that the Company may only request advances through July 15, 2020, and thereafter, the Construction Loan would convert to a term loan with a fixed rate of 4.6%, which is entitled to a .25% rate discount if a demand deposit account is held with the Bank. On July 15, 2020, the amount drawn on the Construction Loan and converted to a term loan was $4,807,000. Interest on the Construction Loan is payable monthly The interest rate was 4.35% at November 30, 2024 and August 31, 2024. Concurrent with the execution of this Construction Loan, Bisco entered into a commercial security agreement, dated July 12, 2019, with the Bank, pursuant to which Bisco granted the Bank a security interest in substantially all of Bisco’s personal property to secure Bisco’s obligations under the Construction Loan. The outstanding balance of the Construction Loan at November 30, 2024 and August 31, 2024 was $4,312,000 and $4,343,000, respectively.

The Company also entered into a loan agreement with the Bank on July 12, 2019 to borrow up to $5,000,000 (the “Construction Loan”) for the primary purpose of financing tenant improvements at the Hunter Property. The Construction Loan was a line of credit evidenced by a Promissory Note in the principal amount of up to $5,000,000 with a maturity date of May 15, 2027. The terms of the Construction Loan provide that the Company may only request advances through July 15, 2020, and thereafter, the Construction Loan would convert to a term loan with a fixed rate of 4.6%, which is entitled to a .25% rate discount if a demand deposit account is held with the Bank. On July 15, 2020, the amount drawn on the Construction Loan and converted to a term loan was $4,807,000. Interest on the Construction Loan is payable monthly. The interest rate was 4.35% at February 28, 2025 and August 31, 2024. Concurrent with the execution of this Construction Loan, Bisco entered into a commercial security agreement, dated July 12, 2019, with the Bank, pursuant to which Bisco granted the Bank a security interest in substantially all of Bisco’s personal property to secure Bisco’s obligations under the Construction Loan. The outstanding balance of the Construction Loan at February 28, 2025 and August 31, 2024 was $4,280,000 and $4,343,000, respectively. The Construction Loan’s future principal due until maturity by fiscal year is as follows:


Fiscal Year	Principal Amount Due
2025	$	9866,000
2026		135,000
2027		4,079,000
Total	$	4,~~312~~280,000

The Company has also entered into a business loan agreement (and related $100,000 promissory note) with the Bank in order to obtain a $100,000 letter of credit as security for the Company’s worker’s compensation requirements.

Note 5. Leases

The Company leases its facilities and automobiles under operating lease agreements (one distribution facility, located in Glendale Heights, IL, is leased from the Trust, which is beneficially owned and controlled by Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder),. ~~which~~Our operating lease agreements expire on various dates through September 2027 and require minimum rental payments ranging from $1,000 to $22,600 per month. Certain of the leases contain options for renewal under varying terms.

On October 20, 2023, the Company closed escrow on the purchase of the Hunter Property, which was leased by the Company, from the Trust for a purchase price of $31,000,000. See Note 6 of the Notes to Consolidated Financial Statements of this report for further explanation.

On October 20, 2023, The Company purchased the Hunter Property from the Trust for a purchase price of $31,000,000. See Note 7 of the Notes to Consolidated Financial Statements of this report for further explanation.

Minimum future rental payments under operating leases are as follows:


Years Ending :
Years Ending:
2025 (remaining nine months)	$	2,374,000
2025 (remaining six months)	$	1,666,000
2026		2,~~552~~809,000
2027		1,~~657~~945,000
2028		~~728~~989,000
2029		~~517~~674,000
Thereafter		36135,000
Future minimum lease payments	$	78,~~864~~218,000
Less interest		(~~842~~844,000)
Present value of minimum lease payments	$	7,~~022~~374,000

Operating lease ~~cost~~costs under these leases ~~was~~were approximately $~~804~~1,647,000 and $~~832~~1,370,000 for the ~~three~~six months ended ~~November~~February 3028, 2025 and February 29, 2024, respectively. Operating lease costs under these leases were approximately $844,000 and ~~2023~~$705,000 for the three months ended February 28, 2025 and February 29, 2024, respectively.

Other information related to operating leases is as follows:


	~~November~~February 3028,		August 31,
	~~2024~~2025		2024
Weighted average remaining lease term	3.0 years		3.1 years
Weighted average remaining lease terms	3.0 years		3.1 years
Weighted average discount rate	7.53	%	7.47	%
Incremental borrowing rate	7.16	%	7.47	%

The discount rate used on the operating ~~right-of-use~~ROU assets represented the Company’s incremental borrowing rate at lease inception.

Note 6. Earnings per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted computations for earnings per common share (in thousands, except per share data):


	Three Months Ended
	November 30,
(In thousands, except per share information)	2024		2023
EPS – basic and diluted:
Net income	$	6,888	$	1,779
Less: cumulative preferred stock dividend		(19)		(19)
Net income attributable to common shareholders for basic and diluted EPS computation	$	6,869	$	1,760
Weighted average common shares outstanding for basic EPS computation		4,861,590		4,861,590
Earnings per common share – basic	$	1.41	$	0.36
Weighted average common shares outstanding for diluted EPS computation		4,901,590		4,901,590
Earnings per common share – diluted	$	1.41	$	0.36

Note 6. Related Party Transactions

The Company leases its Chicago area sales office and distribution center located in Glendale Heights, Illinois under an operating lease agreement (the “Glendale Lease”) from the Trust, which is the grantor trust of Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board, and majority shareholder. The Glendale Lease is a ten-year triple net lease with an initial monthly rental rate of $22,600, which is subject to annual rent increases of approximately 2.5% as set forth in the Glendale Lease. During the six months ended February 28, 2025 and February 29, 2024, the Company incurred expense related to the Glendale Lease of approximately $160,000 and $156,000, respectively.

On July 26, 2019, the Company entered into a Commercial Lease Agreement with the Trust (the “Hunter Lease”), for the lease of the Hunter Property, which houses the Company’s corporate headquarters. The Company completed its move to the headquarters located at the Hunter Property in March 2020. The term of the Hunter Lease commenced on September 2, 2019 and ended on October 20, 2023, and had an initial monthly rental rate of $66,300, which was subject to annual rent increases of approximately 2.5% as was set forth in the Hunter Lease. During the six months ended February 28, 2025 and February 29, 2024, the Company incurred expense related to the Hunter Lease of approximately zero and $123,000, respectively.

On October 5, 2023, the Company entered into a Standard, Purchase Agreement and Escrow Instructions (the “Purchase Agreement”) to purchase the Hunter Property for a purchase price of $31,000,000 in cash, which closed on October 20, 2023. The Hunter Property is expected to continue to house the Company’s corporate headquarters and Anaheim distribution center for the foreseeable future. The Hunter Property was purchased with cash, funded by the Company’s available cash accounts and liquidated securities.

For the three months ended November 30, 2024 and 2023, 40,000 potential common shares (issuable upon conversion of 36,000 shares of the Company’s Series A Cumulative Convertible Preferred Stock) are included in the computation of diluted earnings per shareNote 7. Income Taxes

During the six months ended February 28, 2025 and February 29, 2024, the Company recorded an income tax provision of $4,673,000 and $2,496,000, respectively, resulting in an effective tax rate of 25.5% for both periods. The provision for income taxes increased by $2,177,000 in the six months period ended February 28, 2025 over the prior year period due to lower pre-tax income in the current period over the prior year period.

~~Note 7~~During the three months ended February 28, 2025 and February 29, 2024, the Company recorded an income tax provision of $2,312,000 and $1,879,000, respectively, resulting in an effective tax rate of 25. ~~Related~~5% ~~Party~~for ~~Transactions~~both periods. The provision for income taxes increased by $433,000 in the three months period ended February 28, 2025 over the prior year period due to lower pre - tax income in the current period over the prior year period.

The Company leases its Chicago area sales office and distribution center located in Glendale Heights, Illinois under an operating lease agreement (the “Glendale Lease”) from the Trust, which is the grantor trust of Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board, and majority shareholder. The Glendale Lease is a ten-year lease with an initial monthly rental rate of $22,600, which is subject to annual rent increases of approximately 2.5% as set forth in the Glendale Lease. During the three months ended November 30, 2024 and 2023, the Company incurred expense related to the Glendale Lease of approximately $80,000 and $78,000, respectively.

On July 26, 2019, the Company entered into a Commercial Lease Agreement with the Trust (the “Hunter Lease”), for the lease of the Hunter Property, which houses the Company’s corporate headquarters. The ~~Company~~current ~~completed~~period ~~its~~effective ~~move~~tax torate ~~the~~differs ~~headquarters~~from ~~located at~~ the ~~Hunter~~statutory Property in March 2020. The term of the Hunter Lease commenced on September 2, 2019 and ended on October 20, 2023, when the Company purchased the Hunter Property. The Hunter Lease had an initial monthly rental rate of ~~$66,300,~~21% ~~which~~primarily ~~was~~due ~~subject~~ to ~~annual rent increases of approximately 2.5% as was set forth in~~ the ~~Hunter~~state ~~Lease.~~tax ~~During~~rates ~~the three months ended November 30, 2024~~ and ~~2023,~~permanent ~~the~~book ~~Company~~tax ~~incurred expense related to the Hunter Lease of approximately zero and $123,000, respectively~~differences.

OnAccounting ~~October~~for 5,uncertainty ~~2023,~~in income taxes prescribes a recognition threshold and measurement attribute for the ~~Company~~financial ~~entered~~statement ~~into~~recognition and measurement of a ~~Standard~~tax ~~Purchase~~position ~~Agreement~~taken or expected to be taken in a tax return and ~~Escrow~~provides ~~Instructions~~guidance ~~(the~~on ~~“Purchase~~de-recognition, ~~Agreement”)~~classification, tointerest ~~purchase~~and ~~the~~penalties, ~~Hunter~~accounting ~~Property~~in ~~for~~interim aperiods, ~~purchase~~disclosure, ~~price~~and transition. For each of ~~$31~~the ~~million~~three inand ~~cash~~six months ended February 28, ~~which~~2025 ~~closed~~and onFebruary ~~October~~29, 202024, ~~2023~~the Company did not have a liability for any unrecognized tax benefit. The ~~Hunter~~Company ~~Property~~has iselected ~~expected~~ to ~~continue~~classify tointerest ~~house~~and penalties as a component of its income tax provision. For each of the ~~Company’s~~three ~~corporate~~and ~~headquarters~~six months ended February 28, 2025 and ~~Anaheim~~February ~~distribution~~29, ~~center~~2024, the Company did not have a liability for ~~the~~penalties ~~foreseeable~~or ~~future~~interest. The ~~Hunter~~Company ~~Property~~does ~~was~~not ~~purchased~~expect ~~with~~any ~~cash,~~changes ~~funded~~to byits unrecognized tax benefit for the ~~Company’s~~next ~~available~~six ~~cash~~months ~~accounts~~that ~~and~~would ~~liquidated~~materially ~~securities~~impact its consolidated financial statements.

Note 8. ~~Income~~Commitments ~~Taxes~~and Contingencies

During the three months ended November 30, 2024 and 2023, the Company recorded an income tax provision of $2,361,000 and $617,000, respectively, resulting in an effective tax rate of 25.5% and 25.8%, respectively. The provision for income taxes increased by $1,744,000 in the three months period ended November 30, 2024 over the prior year period due to higher pre-tax income in the current period over the prior year period. The current period effective tax rate differs from the statutory rate of 21% primarily due to the state tax rates and permanent book tax differences.

Accounting for uncertainty in income taxes 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 and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. For the three months ended November 30, 2024 and 2023, the Company did not have a liability for any unrecognized tax benefit. Management has elected to classify interest and penalties as a component of its income tax provision. For the three months ended November 30, 2024 and 2023, the Company did not have a liability for penalties or interest. Management does not expect any changes to its unrecognized tax benefit for the next nine months that would materially impact its consolidated financial statements.

The Company’s tax years for 2021, 2022, and 2023 are subject to examination by the taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxing authorities for years before 2020.

Note 9. Commitments and Contingencies

From time to time, the Company may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes could be costly and time consuming, subject the Company to damages or equitable remedies, and divert management and key personnel from core business operations.

In January 2023, a class action lawsuit was filed with the Los Angeles County Superior Court against Bisco, alleging wage and hour violations and related claims. The class action covers a class of former and current employees of Bisco who were employed between January 13, 2019 and the present time. In March 2023, Plaintiff filed a First Amended Complaint that added claims under the California Private Attorneys General Act (“PAGA”). Both parties requested to stay the litigation pending mediation, which mediation commenced in April 2024. As a result of the mediation, the parties agreed in principle to settle this matter for approximately $7,500,000.5 ~~million.~~In ~~The~~[April] 2025, the court approved the settlement agreement, which is ~~subject~~currently topending ~~court~~class ~~approval~~notification and acceptance. The Company accrued $7.6,600,000 ~~million~~ in fiscal 2024 in anticipation of this settlement and the related legal fees.

Note 109. Subsequent Events

Management has evaluated events subsequent to ~~November~~February 3028, ~~2024~~2025, through the date that these unaudited condensed consolidated financial statements are filed with the SEC, for transactions and other events which may require adjustment of and/or disclosure in such financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” “will” and similar words or expressions. These forward-looking statements include, but are not limited to, statements regarding our anticipated revenue, expenses, profits and capital needs. These statements are based on our current expectations, estimates, projections, and the impact of certain accounting pronouncements, and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those projected or estimated, including, but not limited to the impact of adverse economic conditions, competitive pressures, unexpected costs and losses from operations or investments, increases in costs and overhead, impact of tariffs and international trade conflicts, our ability to maintain an effective system of internal controls over financial reporting, potential losses from trading in securities, our ability to retain key personnel and good relationships with suppliers, the willingness of lenders to extend financing commitments and the availability of capital resources, ~~a potential health pandemic~~ and the other risks set forth in “Risk Factors” in Part II, Item 1A of ~~our~~this ~~Annual~~report ~~Report on Form 10-K filed with the SEC on November 29, 2024~~ or identified from time to time in our other filings with the SEC and in public announcements. You should not place undue reliance on these forward-looking statements that speak only as of the date hereof or the date of any other filing with the SEC, as applicable. Except as required by law, we undertake no obligation to revise or update publicly any forward-looking statement for any reason, including to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by management or any other person that the objectives or plans of the Company will be achieved.

Overview

The condensed consolidated financial statements comprise the accounts of EACO and its wholly-owned subsidiary, Bisco, and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited.

EACO is a holding company primarily comprised of its wholly-owned subsidiary, Bisco. Bisco is a distributor of electronic components and fasteners with 51 sales offices and seven distribution centers located throughout the United States and Canada and 1one sales office located in the Philippines. Bisco supplies parts used in the manufacture of products in a broad range of industries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marine industries.

Critical Accounting Policies and Estimates

~~The Company~~Management’s discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with ~~U.S.~~ GAAP. The preparation of these condensed consolidated financial statements requires ~~Management~~the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.

Within the context of these critical accounting policies, ~~Management~~management is not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. There have been no changes to the Company’s critical accounting policies for the three months ended ~~November~~February 3028, ~~2024~~2025.

Revenue Recognition

We derive our revenue primarily from product sales. We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.

The Company’s performance obligations consist solely of product shipped to customers. Revenue from product sales is recognized upon transfer of control of promised products, which ~~the Company’s~~ are at shipping point pursuant to the Company’s standard terms and conditions, to customers at a point in time in an amount that reflects the consideration we expect to receive in exchange for these products. Revenue is recognized net of returns and any taxes collected from customers. We offer industry standard contractual terms in our purchase orders.

Impairment of Long Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measured by a comparison of the carrying value of each asset to the future net undiscounted cash flows expected to be generated by such assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value.

On October 20, 2023, the Company completed the purchase of its corporate headquarters located at 5065 East Hunter Avenue in Anaheim, California (the “Hunter Property”) from the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”) for $31,000,000 in cash. An appraisal, conducted in September 2023 by an independent third party, valued the Hunter Property at $31 million, which was inclusive of tenant improvements previously purchased and recorded by the Company. Upon completion of the Hunter Property purchase and the termination of the Hunter Lease during the first quarter of fiscal 2024, the Company recorded an asset impairment of $3.9 million, which was the net book carrying value of the tenant improvements at the date the building was acquired.

Deferred Tax Assets

A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefit, or when future deductibility is uncertain. The Company records net deferred tax assets to the extent management believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance.

Inventory

The Company’s inventory provisions are based upon management’s review of inventories on-hand over ~~their~~the inventory’s expected future utilization and length of time held by the Company. The Company’s methodology for estimating these adjustments to the cost basis is evaluated for factors that could require changes to the cost basis including significant changes in product demand, market conditions, condition of the inventory or net realizable value. If business or economic conditions change, ~~the Company~~management’s estimates and assumptions may be adjusted as deemed appropriate.

Impairment of Long-Lived Assets

On October 20, 2023, the Company completed the purchase of the Hunter Property from the Trust for $31,000,000 in cash. An appraisal, conducted in September 2023 by an independent third party, valued the Hunter Property at $31,000,000, which was inclusive of tenant improvements previously purchased and recorded by the Company. Upon completion of the Hunter Property purchase and the termination of the Hunter Lease during the first quarter of fiscal 2024, the Company recorded an asset impairment of $3,900,000, which was the net book carrying value of the tenant improvements on the date the building was acquired.

Results of Operations

Comparison of the Three Months Ended ~~November~~February 3028, ~~2024~~2025 and ~~2023~~February 29, 2024

Net Sales and Gross Profit ($ in thousands)


	Three Months Ended
	~~November~~February 3028,			February 29,			$		%
	~~2024~~2025			~~2023~~2024			Change		Change
Net sales	$	93100,~~920~~132		$	8083,~~255~~335		$	1316,~~665~~797	1720.02	%
Cost of sales		6670,~~139~~624			5658,~~683~~308			912,~~456~~316	1621.71	%
Gross margin	$	27,781		$	23,572		$	4,209	17.9	%
Gross profit	$	29,508		$	25,027		$	4,481	17.9	%
Gross margin as a percent of revenues		29.6	%		29.4	%			0.2	%
Gross profit as a percent of net sales		29.5	%		30.0	%			(0.5)	%

Net sales consist primarily of sales of component parts and fasteners, but also include, to a lesser extent, kitting charges and special-order fees, as well as freight charged to customers.

The increase in revenues in the three months ended ~~November~~February 3028, ~~2024~~2025 (“Q1Q2 2025”) as compared to the three months ended ~~November~~February 3029, ~~2023~~2024 (“Q1Q2 2024”) ~~increase in revenues~~ was largely due to ~~added~~an ~~sales~~increase ~~employees~~of ~~during~~headcount Q1in ~~2025,~~sales ~~increasing~~ by 1331 ~~sales~~ employees, ~~when~~from ~~comparing~~414 ~~to Q1 2024. We believe that this increased~~ sales ~~headcount~~employees ~~led~~ to ~~the~~445 ~~addition~~sales ofemployees ~~new~~for ~~customers~~Q2 ~~and~~2024 ~~the ability to sell more products to existing customers~~ and ~~creating~~Q2 ~~better~~2025 ~~customer relationships~~respectively. ~~Additionally,~~Revenues ~~revenues~~ for Q1Q2 2025 have increased when compared to Q1Q2 2024 due to higher inventory stock available and ansales ~~increased~~activity filling the demand for those products. ~~Gross~~The ~~margin~~Company ~~for~~sales Q1were ~~2025~~also ~~and~~successful Q1in ~~2024~~capturing ~~have~~larger ~~stayed~~dollar ~~consistent~~customer atorders ~~approximately~~during ~~29.6%~~the ~~and~~quarter, ~~29.4%~~which increased sales, ~~respectively~~but slightly lowered margins when comparing Q2 2025 to Q2 2024.

Selling, General and Administrative Expenses ($ in thousands)


	Three Months Ended
	February 28,			February 29,			$		%
	2025			2024			Change		Change
Selling, general and administrative expenses	$	20,414		$	17,598		$	2,816	16.0	%
Percent of net sales		20.4	%		21.1	%			(0.7)	%

Selling, general and administrative expense (“SG&A”) consists primarily of payroll and related expenses for the Company’s sales and administrative staff, professional fees including accounting, legal and technology costs and expenses, and sales and marketing costs. SG&A in Q2 2025 increased from Q2 2024 largely due to increased employee headcount, from 584 employees at Q2 2024 to 627 employees at Q2 2025.

~~Operating~~Other ~~Expenses~~Income (Expense), Net ($ in thousands)


	Three Months Ended
	~~November~~February 3028,				February 29,		$		%	$		%
	~~2024~~2025			~~2023~~	2024		~~Change~~		~~Change~~	Change		Change
Operating expenses:
Other income (expense):
Selling, general and administrative expense	$	18,938		$	17,217		$	1,721	10.0	%
Net gain on trading securities	$	30			$		23			$	7	30.4	%
Impairment on termination of lease		—			3,906			(3,906)	(100.0)	%
Interest and other income (expense), net		(49)					(75)				26	34.7	%
Total operating expenses	$	18,938			21,123			(2,185)	(10.3)	%
Other income (expense), net	$	(19)			$		(52)			$	33	63.5	%
Percent of net sales		200.20	%		~~26.3~~	%	0.0	%	~~(6.1)~~	%		0.0	%

~~Selling,~~Other ~~general~~income ~~and administrative expense~~ (~~“SG&A”~~expense), ~~consists~~net, primarily consists of ~~payroll~~income ~~and~~or ~~related~~loss ~~expenses~~on ~~for~~trading ~~the~~in ~~Company’s~~short-term ~~sales~~marketable ~~and~~equity ~~administrative~~securities ~~staff,~~of ~~professional~~publicly-held ~~fees~~corporations ~~including~~and ~~accounting,~~interest ~~legal~~related ~~and~~to ~~technology~~the ~~costs~~Company’s ~~and~~debt ~~expenses~~obligations. The ~~increase~~Company’s ininvestment ~~SG&A~~strategy isconsists ~~primarily~~of ~~due~~both tolong ~~higher~~and ~~personnel~~short ~~costs~~positions, ~~related~~as towell anas ~~increase~~utilizing inoptions ~~the~~designed ~~number~~to ofimprove ~~sales~~returns. ~~and~~During ~~administrative~~Q2 ~~employees~~2025, ~~from~~the ~~577~~Company ~~employees~~recognized ina Q1net ~~2024~~gain toon ~~605~~trading ~~employees~~securities inof ~~Q1 2025~~$30,000 as ~~well~~compared asto ~~higher~~a ~~bonuses~~net ~~and~~gain ~~commissions~~of ~~related~~$23,000 toin ~~the~~Q2 ~~higher~~2024. ~~sales in~~ The ~~Company~~net ~~recognized~~trading ansecurities ~~impairment~~gains ~~charge~~in ofQ2 ~~$3.9~~2025 ~~million~~and inQ2 Q1 2024 ~~related~~was primarily due to ~~the~~timing ~~Hunter~~of ~~Property~~sales and ~~termination~~purchases ofand ~~the~~general ~~Hunter~~market ~~Lease,~~climate ~~which~~for ~~charge~~short ~~was~~and ~~not~~long ~~present~~positions induring Q1the ~~2025~~applicable period.

~~Other~~Interest and other income (~~Expense~~expense), ~~Net~~net, ($decreased in ~~thousands)~~Q2 2025 compared to Q2 2024, which was primarily due to interest expense from carrying a balance on the line of credit during portion of Q2 2024 compared to a zero-balance carried during Q2 2025.


	Three Months Ended
	November 30,						$		%
	2024			2023			Change		Change
Other income (expense):
Net gain (loss) on trading securities	$	454		$	(44)		$	498	1,131.8	%
Interest and other expense, net		(48)			(9)			(39)	(433.3)	%
Other Income (expense), net	$	406		$	(53)		$	459	866.0	%
Percent of net sales		0.4	%		(0.1)	%			0.5	%

Income Tax Provision ($ in thousands)


	Three Months Ended
	February 28,			February 29,			$		%
	2025			2024			Change		Change
Income tax provision	$	2,312		$	1,879		$	433	23.0	%
Percent of pre-tax income		25.5	%		25.5	%			0.0	%

~~Other~~The ~~income~~provision ~~(expense),~~for ~~net, primarily consists of~~ income ortaxes ~~loss~~increased onby ~~trading~~$433,000 in ~~short-term~~Q2 ~~marketable~~2025 ~~equity~~over ~~securities of publicly-held corporations and interest related to~~ the ~~Company’s~~same ~~debt~~prior ~~obligations~~year period. ~~The~~This ~~Company’s~~increase ~~investment~~was ~~strategy~~due ~~consists of both long and short positions, as well as utilizing options designed~~ to ~~improve~~higher ~~returns.~~income ~~During~~in ~~Q1 2025,~~ the ~~Company~~current ~~recognized~~quarter ~~a net gain on trading securities of $454,000~~ as compared to athe ~~net~~prior ~~loss~~year ~~of $44,000 in Q1 2024~~period. The ~~change~~income intax ~~net~~provision ~~trading~~as ~~securities~~a inpercent ~~Q1 2024 was primarily due to timing~~ of ~~sales~~pre-tax ~~and~~income ~~purchases~~remained ~~and~~consistent ~~general~~at ~~market~~25.5% ~~climate~~at ~~for~~Q2 ~~short~~2024 and ~~long~~Q2 ~~positions during the period~~2025.

~~Interest~~Comparison ~~and~~of ~~other~~the ~~(expense),~~Six ~~net,~~Months ~~increased~~Ended inFebruary Q128, 2025 ~~compared~~and toFebruary ~~Q1 2024~~29, ~~which was primarily due to larger amount of interest income earned from US treasury bonds held during Q1~~ 2024.

Net Sales and Gross Profit ($ in thousands)


	Six Months Ended
	February 28,			February 29,
	2025			2024			$ Change		% Change
Net sales	$	194,052		$	163,590		$	30,462	18.6	%
Cost of sales		136,763			114,991			21,772	18.9	%
Gross profit	$	57,289		$	48,599		$	8,690	17.9	%
Percent of net sales		29.5	%		29.7	%			(0.2)	%

The increase in revenues and gross margins as a percent of revenues in the six months ended February 28, 2025 as compared to the six months ended February 29, 2024 was largely due to a larger amount of inventory available and increased sales employee headcount in the current period.

Selling, General and Administrative Expenses ($ in thousands)


	Six Months Ended
	February 28,			February 29,
	2025			2024			$ Change		% Change
Selling, general and administrative expenses	$	39,352		$	34,815		$	4,537	13.0	%
Percent of net sales		20.3	%		21.3	%			(1.0)	%

SG&A in the six months ended February 28, 2025 increased from the same period in the prior year primarily due to an increase in the number of sales and administrative employees and an increase in employee bonuses in the period. The decrease in the percent of sales when comparing the six months ended February 28, 2025 to February 29, 2024, was primarily due to the efficiencies in economies of scale within our business model as we grew our sales employee headcount.

Other Operating Expenses ($ in thousands)


	Six Months Ended
	February 28,		February 29,
	2025		2024			$ Change		% Change
Impairment on termination of lease	$	—	$	3,906		$	(3,906)	(100.0)	%
Percent of net sales		—		2.4	%			(2.4)	%

During the first quarter of fiscal 2024, the Company recognized an impairment loss of $3,900,000 due to the purchase of the Hunter Property and termination of the Hunter Lease.

Other Income (Expense), Net ($ in thousands)


	Six Months Ended
	February 28,			February 29,
	2025			2024			$ Change		% Change
Other income (expense):
Net gain (loss)on trading securities	$	484		$	(21)		$	505	2,405.8	%
Interest and other expense, net		(97)			(84)			(13)	(15.5)	%
Other income (expense), net	$	387		$	(105)		$	492	468.6	%
Percent of net sales		0.2	%		(0.1)	%			0.3	%

During the six months ended February 28, 2025, the Company recognized a net gain on trading securities of $484,000 as compared to a net loss of $21,000 in the same period in the prior year. The net trading securities losses and gains, as applicable, in the six months ended February 28, 2025 and February 29, 2024 were primarily due to timing of sales and purchases of investment securities and general market climate for long positions during the applicable period.

Interest and other income (expense), net, increased during the six months ended February 28, 2025 compared to the same period in the prior year, which was primarily due to interest expense from carrying a higher balance on the line of credit during a portion of the current period compared to the same period in the prior year.

Income Tax Provision ($ in thousands)


	~~Three~~Six Months Ended
	~~November~~February 3028,				February 29,		$		%
	~~2024~~2025			~~2023~~	2024		~~Change~~		$ Change			% Change
Income tax provision	$	24,~~361~~673		$	~~617~~$		$2,496	~~1,744~~	~~282.7~~$	%	2,177	87.2	%
Percent of pre-tax income		25.5	%		~~25.8~~	%	25.5	%	~~(0.3)~~	%		0.0	%

The provision for income taxes increased by $12,~~744~~177,000 infor Q1the six months ended February 28, 2025 ~~over~~when compared to the prior year period. This ~~decrease~~increase was due to higher ~~taxable~~ income in the current ~~quarter~~six month period as compared to the prior year period. ~~The income tax provision as a percent of pre-tax income decreased from 25.8% at Q1 2024 to 25.5% at Q1 2025.~~

Liquidity and Capital Resources

As of ~~November~~February 3028, ~~2024~~2025 and August 31, 2024, the Company held approximately $~~591~~499,000 and $843,000 of unrestricted cash and cash equivalents, respectively. The Company also held $2015,~~521~~081,000 and $14,748,000 of marketable securities at ~~November~~February 3028, ~~2024~~2025 and August 31, 2024, respectively, which could be liquidated, if necessary.

The Company currently has an available $20.0,000,000 ~~million~~ line of credit with the Bank. The Company entered into a Change in Terms Agreement dated April 12, 2024 with the Bank, which increased the principal loan amount under the line of credit to $20.0,000,000 ~~million~~ and extended the maturity date of the line of credit from July 5, 2024 to February 15, 2026. The line of credit has a variable interest rate set at the bank prime index rate, provided that in no event would such interest rate be less than 3.5% per annum. Borrowings are secured by substantially all of the assets of the Company and its subsidiaries. The line of credit agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of February 28, 2025 and August 31, 2024, the Company was in compliance with all such covenants. There was no outstanding balance on the line of credit as of each of February 28, 2025 and August 31, 2024.

1617

~~substantially~~In ~~all~~April of2024, the ~~assets~~Company ofengaged ~~the~~in ~~Company~~a mediation concerning a pending class action lawsuit and ~~its~~reached ~~subsidiaries~~an agreement in principle to settle the lawsuit. The ~~line~~Company ofentered ~~credit~~into a settlement agreement ~~contains~~in ~~certain~~this ~~nonfinancial~~litigation, which agreement is subject to court approval and ~~financial~~will ~~covenants,~~not ~~including~~be ~~the~~payable ~~maintenance~~until oflate ~~certain~~in ~~financial~~fiscal ~~ratios~~2025. AsThe ofCompany ~~each~~expects ofthe ~~November~~aggregate ~~30,~~settlement ~~2024~~amount ~~and~~to ~~August~~be ~~31,~~approximately ~~2024~~$7,500,000. ~~the~~The Company ~~was~~has accrued $7,600,000 in ~~compliance~~fiscal ~~with~~2024 ~~all~~in ~~such~~anticipation ~~covenants~~of this settlement and related legal fees. ~~There~~The ~~was~~Company noexpects ~~outstanding~~to ~~balance~~use onexisting cash and cash equivalents, and cash generated from operations to fund this settlement payment after the ~~line~~legal ofproceedings ~~credit~~are ascompleted ofin ~~each~~fiscal of2025. ~~November~~The ~~30,~~court ~~2024~~has approved the settlement agreement and ~~August~~is ~~31,~~currently ~~2024~~pending class notification and acceptance to pay out the settlement.

In April 2024, the Company engaged in a mediation concerning a pending class action lawsuit and reached an agreement in principle to settle the lawsuit. The Company entered into a settlement agreement in this litigation, which agreement is subject to court approval and won’t be payable until late in fiscal 2025. The Company expects the aggregate settlement amount to be approximately $7.5 million. The Company has accrued $7.6 million in fiscal 2024 in anticipation of this settlement and related lawyer fees. The Company expects to use existing cash and cash equivalents, and cash generated from operations to fund this settlement after the legal proceedings are completed in fiscal 2025.

Cash Flows from Operating Activities

Cash provided byused in operating activities was $21,~~012~~063,000 for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 as compared with cash provided by ~~operations~~operating activities of $~~301~~460,000 for the ~~three~~six months ended ~~November~~February 3029, ~~2023~~2024. Cash provided by operating activities in the current period was primarily due to net income earned in the period and an increase in trade accounts payable. ~~This~~Cash provided by operating activities was adversely impacted to some extent by an increase in inventory ~~purchases~~ and a decrease in accrued expenses ~~and~~at ~~other liabilities for~~ the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 when compared to the prior year period. The prior period cash provided by operating activities was primarily due to net income earned in the period, impairment on termination of lease, and a reduction in operating lease right of use assets. Changes related to the impairment and operating lease right of use assets is primarily due to the termination of the Hunter Lease and the purchase of the Hunter Property.

Cash Flows from Investing Activities

Cash used in investing activities was $5559,~~691,~~000 for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 as compared with cash used in investing activities ofwas $86,~~910~~925,000 for the ~~three~~six months ended ~~November~~February 3029, ~~2023~~2024. Cash used in investing activities in the ~~three~~current ~~months~~period ~~ended~~is ~~November 30, 2024 was~~ primarily due to the purchase of ~~marketable~~office ~~securities~~equipment and furniture. ~~Cash~~Prior period cash used in investing activities inwas ~~the~~primarily ~~three months ended November 30,2023~~ was due to the purchase of the Hunter Property in the period, partially offset by sale of marketable securities.

Cash Flows from Financing Activities

Cash provided by financing activities for the ~~three~~six months ended ~~November~~February 3028, ~~2024~~2025 was $31,~~461~~417,000 as compared with cash provided by financing activities of $61,~~681~~977,000 for the ~~three~~six months ended ~~November~~February 3029, ~~2023~~2024. The cash provided inby financing activities for the current period is primarily due to the ~~change~~net increase in bank overdraft in the current period, which represents outstanding checks in excess of cash due to the nightly sweep feature of the cash account to the line of credit with the Bank. The cash ~~provided~~used byin financing activities for the prior period is primarily due to ~~borrowing~~a ondecrease ~~revolving~~in ~~credit facility and~~ the ~~change in~~ bank overdraft balance.

Contractual Financial Obligations

In addition to using cash flow generated from operations, the Company finances its operations through borrowings under its line of credit. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result being that amounts owed under debt agreements and finance leases are recorded as liabilities on the consolidated balance sheets while lease obligations recorded as operating leases are disclosed in the notes to the consolidated financial statements and management’s discussion and analysis of financial condition and results of operations in the Company’s annual report on Form 10-K for the year ended August 31, 2024 as filed with the SEC on November 29, 2024.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e)) as of February 28, 2025, pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of February 28, 2025 because of the material weakness in internal control over financial reporting discussed below.

17Notwithstanding the material weakness in internal control over financial reporting described below, our management has concluded that our consolidated financial statements included in the Quarterly Report on Form 10-Q were fairly stated in all material respects in accordance with GAAP.

as of November 30, 2024, pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of November 30, 2024 because of the material weakness in internal control over financial reporting discussed below.

Notwithstanding the material weakness in internal control over financial reporting described below, our management has concluded that our consolidated financial statements included in the Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP.

Material Weakness

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

Management concluded that there was a material weakness in the Company’s internal control over financial reporting as of August 31, 2024, related to the Company’s internal controls over the financial statement closing process, including manual journal entries recorded in the preparation of the financial statements related to the Company’s lease accounts, and certain inventory and accrued liability accounts.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and/or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Remediation Plan

We are in the process of developing and implementing a detailed plan for remediation of the material weakness, including ~~developing~~establishing ~~and maintaining~~ additional levels of review and approval. The Company has hired a third-party accounting consultant and has recently hired an ~~Assistant~~assistant ~~Controller~~controller to aid inthe ~~implementing~~implementation of additional levels of review and approval. We will continue to assess the effectiveness of our remediation efforts in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures.

We are committed to maintaining a strong control environment throughout the Company. Although we believe that the above efforts have improved our internal control over financial reporting, we will continue to assess, implement and enhance our remediation efforts until the material weakness identified above is remediated.

Changes in Internal Control over Financial Reporting

Except as disclosed above, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the period ended ~~November~~February 3028, ~~2024~~2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

1819

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes could be costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial position or cash flows. Please see Note 98 of the Notes to Consolidated Financial Statements of this Report for disclosure regarding a lawsuit to for which we have ~~reached~~entered aninto ~~agreement~~a insettlement ~~principle to settle~~agreement, which agreement ishas ~~subject~~obtained to court approval and is pending class notification and acceptance.

Item 1A. Risk Factors

Item 1A of Part I of our Annual Report on Form 10-K for the year ended August 31, 2024, filed with the SEC on November 29, 2024, ~~contains~~and the Quarterly Report on Form 10-Q for the quarter ended November 30, 2024, contain risk factors identified by the Company. Except as noted below, there have been no material changes to the risk factors we previously disclosed in our filings with the SEC. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

WeOur ~~generally~~business domay ~~not~~be ~~have~~adversely ~~long-term~~affected ~~sales~~by ~~contracts~~tariffs, ~~with~~trade ~~our~~sanctions ~~customers~~or similar government actions.

~~Most~~The recent imposition by the United States of ~~our~~tariffs, ~~sales~~sanctions ~~are~~or ~~made~~other restrictions on agoods ~~purchase~~exported ~~order~~from ~~basis,~~the ~~rather~~United ~~than~~States ~~through~~or ~~long-term~~imported ~~sales~~into ~~contracts.~~the AsUnited ~~such~~States, ~~our~~or ~~customers~~countermeasures ~~typically~~imposed doin ~~not~~response ~~have~~to ~~any~~such ~~obligation~~government toactions, ~~purchase~~could ~~any~~increase the cost of goods for our products ~~from~~or ~~us.~~reduce Aour ~~variety~~ability ofto ~~conditions~~sell products globally, ~~both~~which ~~specific~~may toadversely ~~each~~affect ~~customer~~our operating results and ~~generally~~financial ~~affecting~~condition. ~~each~~In ~~customer’s~~March ~~industry~~2025, ~~for~~U.S. ~~which~~government weimposed doadditional ~~not~~tariffs ~~have~~on ~~control,~~a ~~may~~significant ~~cause~~number ~~customers~~of countries and threatened to ~~reduce,~~further ~~cancel~~increase orin ~~delay~~the ~~orders~~scope ~~that~~and ~~were~~amount ~~either~~of ~~previously~~tariffs ~~made~~in orthe ~~anticipated.~~event Inof ~~addition~~retaliatory countermeasures, ~~customers~~and ~~may~~the gofuture ~~bankrupt~~of orexisting ~~fail~~tariffs, ~~default~~and onthe ~~their~~possibility ~~payments~~for ornew ~~encounter~~tariffs, ~~difficulties~~remains uncertain. So far, these new tariffs and ~~changes~~trade inpolicies ~~their~~have not had a significant impact on our business operations ~~that~~and ~~may~~financial ~~cause~~results, ~~them~~[primarily due to ~~reduce~~our orprior ~~cancel~~efforts ~~orders~~to ~~for~~accumulate ~~our~~and ~~products.~~maintain ~~Significant~~inventories orat ~~numerous~~favorable ~~cancellations,~~cost ~~reductions~~levels]. However, ~~delays~~there inis ~~orders~~no byguarantee ~~customers,~~that ~~losses~~we can avoid the impact of ~~customers,~~tariff and~~/or~~ ~~customer~~related ~~defaults~~economic oneffects ~~payment,~~in ~~particularly~~the ~~those~~future, byand ~~our~~these ~~major~~trade ~~customers,~~measures ~~could~~and ~~materially~~retaliations ~~adversely~~may ~~affect~~directly impair our business ~~and~~by ~~revenues~~increasing trade-related costs or disrupting established supply chains.

The materials subject to these tariffs may impact the cost or availability of raw materials used by our suppliers or in our customers’ products. The imposition of further tariffs by the United States on a broader range of imports, or further retaliatory trade measures taken in response to additional tariffs, could increase costs in our supply chain or reduce demand of our customers’ products, either of which could adversely affect our results of operations. Any increase in trade-related costs associated with such measures may impair the profitability of such international production, may strain our suppliers’ ability to reliably provide inputs necessary to produce these items, and may otherwise affect our partners’ abilities to provide our products at previously contracted prices. Tariffs may also indirectly impair our business by causing a negative effect on global economic conditions and financial markets. The ultimate impact of these trade measures on our business operations and financial results is uncertain and may be affected by various factors, including whether and when such trade measures are implemented, the timing when such measures may become effective, and the amount, scope, or nature of such trade measures, and our ability to execute strategies to mitigate the negative impacts.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

1920

Item 6. Exhibits

No.		Exhibit

31.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

2021

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EACO CORPORATION
	(Registrant)

Date: January 13, 2025	/s/ Glen Ceiley
Date: April 11, 2025	/s/ Glen Ceiley
	Glen Ceiley
	Chief Executive Officer
	(Principal Executive Officer & Principal Financial Officer)

	/s/ Michael Narikawa
	Michael Narikawa
	Controller and Chief Financial Executive
	(Principal Accounting Officer)

Filing Compare · EACO CORP