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 ~~May~~November 3130, 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 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 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 ~~July~~January 1013, ~~2025~~2026, 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				~~Nine Months Ended~~
	~~May~~November 3130,				~~May 31,~~
	2025		2024		~~2025~~		~~2024~~
Net sales	$	111,410	$	96,121	$	305,462	$	259,711
Revenues	$	110,953	$	93,920
Cost of sales		77,337		68,193		214,100		183,184
Cost of revenues		76,598		66,139
Gross margin		34,~~073~~355		27,~~928~~781		~~91,362~~		~~76,527~~
Operating expenses:
Selling, general and administrative expenses		21,~~627~~846		2618,~~314~~938		~~60,979~~		~~61,129~~
Impairment on termination of lease		—		—		—		3,906
Income from operations		12,509		8,843
Income from operations		12,446		1,614		30,383		11,492

Other income (expense):
Net gain on trading securities		43		454
Net gain (loss) on trading securities		277		(24)		761		(45)
Interest and other expense		(37)		(48)
Interest and other (expense)		(46)		(44)		(143)		(128)
Other income (expense), net		6		406
Other income (expense), net		231		(68)		618		(173)
Income before income taxes		12,515		9,249
Income before income taxes		12,677		1,546		31,001		11,319
Provision for income taxes		3,195		2,361
Provision for income taxes		3,162		362		7,835		2,858
Net income		9,320		6,888
Net income		9,515		1,184		23,166		8,461
Cumulative preferred stock dividend		(19)		(19)
Cumulative preferred stock dividend		(19)		(19)		(57)		(57)
Net income attributable to common shareholders	$	9,301	$	6,869
Net income attributable to common shareholders	$	9,496	$	1,165	$	23,109	$	8,404

Basic earnings per share	$	1.95	$	0.24	$	4.75	$	1.73
Basic earnings per common share	$	1.91	$	1.41
Diluted earnings per share	$	1.94	$	0.24	$	4.73	$	1.73
Diluted earnings per common share	$	1.90	$	1.41
Basic weighted average common shares outstanding		4,861,590		4,861,590		~~4,861,590~~		~~4,861,590~~
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				~~Nine Months Ended~~
	~~May~~November 3130,				~~May 31,~~
	2025		2024		~~2025~~		~~2024~~
Net income	$	9,~~515~~320	$	16,~~184~~888	$	~~23,166~~	$	~~8,461~~
Other comprehensive gain (loss), net of tax:
Other comprehensive income, net of tax
Foreign translation gain (loss)		132		18		(7)		(68)
Foreign currency translation loss		(8)		(35)
Total comprehensive income	$	9,~~647~~312	$	16,~~202~~853	$	~~23,159~~	$	~~8,393~~

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share information)

(Unaudited)


	~~May~~November 3130,		August 31,
	2025		~~2024~~2025*
ASSETS
Current Assets:
Cash and cash equivalents	$	~~7,270~~537	$	~~843~~728
Restricted cash		10		10
Trade accounts receivable, net		57,~~850~~511		5365,~~272~~863
Inventory, net		8288,~~780~~605		6983,~~602~~980
Marketable securities, trading		2229,~~063~~719		1430,~~748~~375
Prepaid expenses and other current assets		36,~~491~~091		35,~~526~~009
Total current assets		~~173~~182,~~464~~473		~~142~~185,~~001~~965
Non-current Assets:
Property, equipment and leasehold improvements, net		3435,~~368~~419		3534,~~061~~670
Operating lease right-of-use assets		68,~~739~~943		76,~~513~~814
Other assets, net		32,~~989~~743		32,~~963~~704
Total assets	$	~~218~~229,~~560~~578	$	~~188~~230,~~538~~153
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	3833,~~699~~478	$	2833,~~054~~179
Accrued expenses and other current liabilities		2117,~~494~~394		2429,~~910~~762
Current portion of long-term debt		~~131~~137		~~129~~135
Current portion of operating lease liabilities		23,~~674~~208		2,~~708~~843
Total current liabilities		6254,~~998~~217		5565,~~801~~919
Non-current Liabilities:
Line of credit		491		—
Long-term debt		4,045		4,079
Long-term debt		4,116		4,214
Operating lease liabilities		6,173		4,305
Operating lease liabilities		4,222		4,892
Total liabilities		64,435		74,303
Total liabilities		71,827		64,907
Commitments and Contingencies (Note 8)
Commitments and Contingencies Note 8
Shareholders’ Equity:
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
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
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
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		66		74
Accumulated other comprehensive income		66		73
Retained earnings		152,649		143,348
Retained earnings		134,239		111,130
Total shareholders’ equity		165,143		155,850
Total shareholders’ equity		146,733		123,631
Total liabilities and shareholders’ equity	$	229,578	$	230,153
Total liabilities and shareholders’ equity	$	218,560	$	188,538

* Derived from the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended August 31, ~~2024~~2025 filed with the U.S. Securities and Exchange Commission on November 2920, ~~2024~~2025.

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)


									Accumulated
	Convertible						Additional		Other				Total
	Preferred Stock			Common Stock			Paid-in		Comprehensive		Accumulated		Shareholders’
	Shares	Amount		Shares	Amount		Capital		Income		Earnings		Equity
For the three and nine months ended May 31, 2025

Balance, August 31, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	73	$	111,130	$	123,631
For the Three Months Ended November 30, 2025
Balance, August 31, 2025	36,000	$	1	4,861,590	$	49	$	12,378	$	74	$	143,348	$	155,850
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation loss	—		—	—		—		—		(358)		—		(358)
Net income	—		—	—		—		—		—		69,~~888~~320		69,~~888~~320
Balance, November 30, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	38	$	117,999	$	130,465
Balance, November 30, 2025	36,000	$	1	4,861,590	$	49	$	12,378	$	66	$	152,649	$	165,143
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
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation gain	—		—	—		—		—		132		—		132
Net income	—		—	—		—		—		—		9,515		9,515
Balance, May 31, 2025	36,000	$	1	4,861,590	$	49	$	12,378	$	66	$	134,239	$	146,733

For the three and nine months ended May 31, 2024
For the Three Months Ended November 30, 2024
Balance, August 31, 2023	36,000	$	1	4,861,590	$	49	$	12,378	$	38	$	96,255	$	108,721
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	—		—	—		—		—		(~~131~~35)		—		(~~131~~35)
Net income	—		—	—		—		—		—		16,~~779~~888		16,~~779~~888
Balance, November 30, 2023	36,000	$	1	4,861,590	$	49	$	12,378	$	(93)	$	98,015	$	110,350
Balance, November 30, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	38	$	117,999	$	130,465
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
Preferred dividends	—		—	—		—		—		—		(19)		(19)
Foreign translation gain	—		—	—		—		—		18		—		18
Net income	—		—	—		—		—		—		1,184		1,184
Balance, May 31, 2024	36,000	$	1	4,861,590	$	49	$	12,378	$	(30)	$	104,659	$	117,057

See accompanying notes to unaudited condensed consolidated financial statements.

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	~~Nine~~Three Months Ended
	~~May~~November 3130,
	2025		2024
Operating activities:
Net income	$	239,~~166~~320	$	86,~~461~~888
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		~~1,268~~428		~~1,247~~433
Bad debt expense		203		359
Increase in allowance for credit losses		29		66
Deferred tax provision		(185)		51(48)
Net unrealized (gain) loss on trading securities		(205)		357
Unrealized (gain) loss on trading securities		241		(213)
Impairment on termination of lease		—		3,906
Increase (decrease) in cash flow from change in:
Increase (decrease) in cash flow from change in:
Trade accounts receivable		8,323		1,470
Trade accounts receivable		(4,781)		(7,764)
Inventory		(4,625)		(6,081)
Inventory		(13,178)		(11,139)
Prepaid expenses and other assets		(1,116)		(995)
Prepaid expenses and other assets		27		98
Operating lease right-of-use assets		(2,129)		583
Operating lease right-of-use assets		774		5,490
Trade accounts payable		(914)		3,328
Trade accounts payable		6,268		8,043
Accrued expenses and other current liabilities		(12,368)		(2,840)
Accrued expenses and other current liabilities		(3,416)		785
Operating lease liabilities		2,233		(578)
Operating lease liabilities		(704)		(5,501)
Net cash provided by operating activities		(584)		2,013
Net cash provided by operating activities		9,404		4,393
Investing activities:
Investing activities:
Additions to property, equipment, and leasehold improvements		(1,177)		(131)
Purchase of property, equipment, and leasehold improvements		(575)		(32,527)
(Purchase) sale of marketable securities, trading		415		(5,560)
Net (purchases) sales of marketable securities, trading		(7,110)		17,466
Net cash (used in) investing activities		(762)		(5,691)
Net cash used in investing activities		(7,685)		(15,061)
Financing activities:
Financing activities:
Borrowing on revolving credit facility		3		—
Borrowings on revolving credit facility		491		—
Preferred stock dividend		(19)		(19)
Repayments on long-term debt		(9635)		(9431)
Preferred stock dividend		(57)		(57)
Bank overdraft		1,213		3,511
Bank overdraft		4,377		3,066
Net cash (used in) financing activities		1,162		3,461
Net cash provided by financing activities		4,715		2,915
Effect of foreign currency exchange rate changes on cash and cash equivalents		(8)		(35)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(7)		(68)
Net (decrease) in cash, cash equivalents, and restricted cash		(191)		(252)
Net increase (decrease) in cash, cash equivalents, and restricted cash		6,427		(7,821)
Cash, cash equivalents, and restricted cash - beginning of period		738		853
Cash, cash equivalents, and restricted cash - beginning of period		853		8,568
Cash, cash equivalents, and restricted cash - end of period	$	547	$	601
Cash, cash equivalents, and restricted cash - end of period	$	7,280	$	747
Supplemental disclosures of cash flow information:
Supplemental disclosures of cash flow information:
Cash paid for interest	$	37	$	48
Cash paid for interest	$	143	$	145
Cash paid for income taxes	$	6,982	$	9,211
Cash paid for income taxes	$	9,213	$	8,276
Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	537	$	591
Restricted cash	$	10	$	10
Total cash, cash equivalents, and restricted cash	$	547	$	601

See accompanying notes to unaudited condensed consolidated financial statements.

EACO CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~May~~November 3130, 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 one 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 and defense, 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~~2025 (“fiscal ~~2024~~2025”). The condensed consolidated balance sheet as of August 31, ~~2024~~2025 and related disclosures were derived from the Company’s audited consolidated financial statements as of August 31, ~~2024~~2025. Operating results for the three ~~and nine~~ months ended ~~May~~November 3130, 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. The Company regularly uses its excess cash from operating activities to purchase short- term investments. The Company may liquidates these investments time to time when cash is needed to cover operating or extraordinary expenses.

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 as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. The allowance for credit losses was $~~324~~348,000 and $~~298~~366,000 at ~~May~~November 3130, 2025 and August 31, ~~2024~~2025, respectively.

Inventories, 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 $2,~~037~~016,000 and $1,~~837~~975,000 at ~~May~~November 3130, 2025 and August 31, ~~2024~~2025, 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 Securities, Trading

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. Accumulated depreciation and amortization was $17,335,000 and $16,905,000 as of November 30, 2025 and August 31, 2025, respectively. For the three months ended November 30, 2025 and 2024, depreciation and amortization expense was $428,000 and $433,000, respectively.

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 $31,000,000, 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 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 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 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 nine~~ months ended ~~May~~November 3130, 2025 and 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 ~~May~~November 3130, 2025, the Company had right of use assets of approximately $68,~~739~~943,000 and lease liabilities of approximately $69,~~896~~381,000 recorded in the consolidated balance sheet. As of August 31, ~~2024~~2025, the Company had right of use assets of approximately $76,~~500~~814,000 and lease liabilities of approximately $7,~~600~~148,000 recorded in the consolidated balance sheet.

Earnings Per Common Share

Basic earnings per common share for each of the three ~~and~~month ~~nine months~~ ended ~~May~~November 3130, 2025 and 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 ~~May~~November 3130, 2025 and 2024.

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 Industries 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 ~~May~~November 3130, 2025 and 2024 was $0.7372 ~~in each period. 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 nine months ended May 31, 2025 and 2024. The average exchange rates for the nine months ended May 31, 2025 and 2024 were~~ $0.71 ~~and $0.74~~, respectively. ~~All~~The ~~foreign~~resulting ~~sales,~~balance ~~excluding~~sheet ~~Canadian sales, are denominated in U.S. dollars and, therefore, are not subject to foreign currency risk exposure.~~

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 months ended November 30, 2025 and 2024. The average exchange rates for the three months ended, 2025 and 2024 were $0.72 and $0.73, respectively. All foreign sales, excluding Canadian sales, are denominated in U.S. dollars and, therefore, are not subject to foreign currency risk exposure.

Segment Reporting

The Company adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures as of the fiscal year ended August 31, 2025 and a retroactive implementation to fiscal 2024. This ASU enhances entities’ disclosures about operating segments, products and services, geographic areas and major customers. The Company’s sole reportable segment is the industrial distribution business conducted through Bisco Industries and its Canadian subsidiary. The Company’s revenues are primarily comprised of product sales of electronic components, cable components, and a large variety of fasteners and hardware.

The Company’s Chief Operating Decision Maker (“CODM”), Don Wagner, President and Chief Operating Officer of Bisco Industries, Inc., reviews the Company’s consolidated results and allocates resources at the enterprise level. The Company’s operations are conducted through its wholly-owned industrial distribution business, which operates across 51 sales offices and seven distribution centers and one sales office in the Philippines. Although the business is conducted across multiple sales offices and distribution centers, management concluded that the nature of the operations, the economic environment, and the way resources are managed and how performance is evaluated, support a single-segment determination. The CODM reviews consolidated results to assess performance and allocate resources. Accordingly, the accompanying consolidated financial statements reflect the results of the single operating segment. Management considered the guidance in ASC 280-10-50-4 and determined that the single reportable segment is managed on a consolidated basis. Because the CODM manages the business as a single integrated unit, management has identified one operating segment and one reportable segment in accordance with ASC 280.

Concentrations

Net sales to customers outside the United States were approximately 13.6% and 11.1% of revenues for ~~each of~~ the ~~nine~~three months ended ~~May~~November 3130, 2025 and 2024, ~~and~~respectively. The ~~related~~ accounts receivable for international customers were approximately 1011.7% and 11.0% of total accounts receivable as of ~~May~~November 3130, 2025 and 2024, respectively. Sales to customers in Canada accounted for approximately 2532.5% and 27.7% of such international sales for the ~~nine~~three months ended ~~May~~November 31, 2025 and 2024, respectively. Sales to customers located within Asia accounted for approximately 4133.0% and 3739.1% of such international sales for the ~~nine~~three months ended ~~May~~November 3130, 2025 and 2024, respectively.

~~Net~~No ~~sales~~single tocustomer ~~customers~~accounted ~~outside~~for ~~the~~more ~~United~~than ~~States were approximately 11~~10% of revenues for ~~each~~either of the three months ended ~~May~~November 3130, 2025 and 2024,. ~~and~~In ~~related~~addition, ~~accounts~~no ~~receivable~~single ~~were~~customer’s ~~approximately 10% of total accounts~~ receivable asbalance ~~of May 31, 2025 and 2024. Sales to customers in Canada~~ accounted for ~~approximately~~more ~~23%~~than ~~and 26~~10% of ~~such international sales for~~ the ~~three~~Company’s ~~months~~customer ~~ended~~receivables ~~May~~as ~~31, 2025 and 2024, respectively. Sales to customers located within Asia accounted for approximately 41% and 37%~~ of ~~such~~either ~~international~~November ~~sales for the three months ended May 31~~30, 2025 ~~and~~or 2024~~, respectively~~.

NoSignificant ~~single~~Recent ~~customer~~Accounting accounted for more than 10% of revenues for either of the three months and nine months ended May 31, 2025 and 2024. In addition, no single customer’s receivable balance accounted for more than 10% of the Company’s customer receivables as of either May 31, 2025 or August 31, 2024.Pronouncements

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board (“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. This ASU requires 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, this ASU requires entities to 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.

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 ~~May~~November 3130, 2025 and August 31, ~~2024~~2025 are summarized as follows (in thousands):


	May 31,		August 31,
	2025		2024
Accrued expenses and other current liabilities:

Accrued accounts payable	$	9,319	$	8,514
Accrued compensation and payroll		6,610		9,097
Accrued taxes		5,565		7,299
Total Accrued expenses and other current liabilities	$	21,494	$	24,910


		November 30,			August 31,
		2025			2025
Accrued expenses and other current liabilities:

Accrued accounts payable		$	3,081		$	11,011
Accrued compensation and payroll			3,313			10,938
Accrued taxes			10,997			7,813
Borrowings on line of credit			3			—
Total Accrued expenses and other current liabilities		$	17,394		$	29,762

Note 4. Debt

The Company has a $20,000,000 line of credit ~~agreement~~ with Citizens Business Bank (the “Bank”) under a Business Loan Agreement. 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~~extended the expiration date of the line of credit under the Business Loan Agreement to February 15, 2026; and (ii) ~~increases~~increased the principal loan amount under the line of credit to $20,000,000.

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 ~~May~~November 3130, 2025 and August 31, ~~2024~~2025 was $~~491~~3,000 and zero, respectively. The line of credit ~~agreement~~ contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of ~~May~~November 3130, 2025 and August 31, ~~2024~~2025, the Company was in compliance with all such covenants. The line of credit is primarily utilized for vendor payments if sufficient cash is unavailable. When balances are present on the line of credit, it is paid down daily with excess cash in our main deposit bank account.

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 ~~May~~November 3130, 2025 and August 31, ~~2024~~2025. 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 ~~May~~November 3130, 2025 and August 31, ~~2024~~2025 was $4,~~246~~181,000 and $4,~~343~~214,000, respectively. The Construction Loan’s future principal due until maturity by fiscal year is as follows:


Fiscal Year	Principal Amount Due
2025	$	32,000
2026	$	137,000
2026		135,000
2027		4,045,000
2027		4,080,000
Total	$	4,182,000
Total	$	4,247,000

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 Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”), which is ~~beneficially~~the ~~owned~~grantor ~~and~~trust ~~controlled~~of by Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder). Our operating lease agreements expire on various dates through September 2027 and require minimum rental payments ranging from $1,000 to $27,000 per month. Certain of the leases contain options for renewal under varying terms.

On October 20, 2023, the Company completed 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.11


	~~May~~November 3130,			August 31,
	2025			~~2024~~2025
Operating lease assets:
Right-of-use assets	$	68,~~739~~943,000		$	76,~~513~~814,000

Operating lease liabilities:
Current lease liabilities	$	23,~~674~~208,000		$	2,~~708~~843,000
Long-term lease liabilities	$	46,~~222~~173,000		$	4,~~892~~305,000

Weighted average remaining lease terms		23.93 years			32.18 years
Incremental borrowing rate		7.503	%		7.472	%

The discount rate used on the operating ROU assets represented the Company’s incremental borrowing rate at lease inception.

Minimum future rental payments under operating leases are as follows:


Years Ending:
Years Ending August 31:
2025 (remaining three months)	$	846,000
2026 (remaining three months)	$	2,923,000
2026		2,942,000
2027		3,300,000
2027		2,078,000
2028		2,238,000
2028		1,085,000
2029		1,543,000
2029		674,000
2030		841,000
Thereafter		~~135~~495,000
Future minimum lease payments	$	711,~~760~~340,000
Less interest		(~~864~~1,959,000)
Present value of minimum lease payments	$	69,~~896~~381,000

Operating lease costs under these leases were approximately $995,000 and $804,000 for the three months ended November 30, 2025 and 2024, respectively.

Operating lease costs under these leases were approximately $2,508,000 and $2,118,000 for the nine months ended May 31, 2025 and 2024, respectively.

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 ~~nine~~three months ended ~~May~~November 3130, 2025 and 2024, the Company incurred expense related to the Glendale Lease of approximately $~~241~~82,000 and $~~235~~80,000, 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 nine months ended May 31, 2025 and 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.

Note 7. Income Taxes

During the ~~nine~~three months ended ~~May~~November 3130, 2025 and 2024, the Company recorded an income tax provision of $73,~~800~~195,000 and $2,~~900~~361,000, respectively, resulting in an effective tax rate of 25.35% ~~and~~in ~~25.2%,~~both ~~respectively~~periods. The provision for income taxes increased by $4834,~~900,~~000 in the ~~nine~~three months period ended ~~May~~November 3130, 2025 over the prior year period due to higher pre-tax income in the current period ~~over the prior year period~~.

During the three months ended May 31, 2025 and 2024, the Company recorded an income tax provision of $3,200,000 and $362,000 respectively, resulting in an effective tax rate of 24.9% and 23.4%, respectively. The provision for income taxes increased by $2,800,000 in the three months period ended May 31, 2025 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, 2025 and 2024, the Company did not have a liability for any unrecognized tax benefit. The Company has elected to classify interest and penalties as a component of its income tax provision. For the three months ended November 30, 2025 and 2024, the Company did not have a liability for penalties or interest. The Company does not expect any changes to its unrecognized tax benefit for the next nine months that would materially impact its consolidated financial statements.

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 each of the three and nine months ended May 31, 2025 and 2024, the Company did not have a liability for any unrecognized tax benefit. The Company has elected to classify interest and penalties as a component of its income tax provision. For each of the three and nine months ended May 31, 2025 and 2024, the Company did not have a liability for penalties or interest. The Company does not expect any changes to its unrecognized tax benefit for the next three months that would materially impact its consolidated financial statements.

Note 8. 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, which settlement amount, inclusive of payroll taxes, was increased to $7,~~683~~795,000 in May 2025. In July 2025, the court approved the settlement. In ~~Pursuant~~anticipation toof ~~the~~this settlement ~~agreement~~, ~~as amended,~~ the ~~aggregate~~Company ~~settlement~~accrued ~~payment~~$7,390,000 ~~(less~~and ~~the~~ $~~154~~285,000 ~~that has already been paid) is expected to be paid by the Company within the next few months after the final order is issued~~ in ~~the~~fiscal ~~litigation.~~2024 Atand ~~that~~fiscal ~~time~~2023, ~~the~~respectively, ~~Company~~and ~~will~~an ~~also~~additional ~~pay~~$120,000 ~~the~~was ~~Company’s~~accrued ~~share~~in offiscal ~~the~~2025 ~~employment taxes related~~ to ~~the~~cover ~~portion of~~ the remaining settlement ~~amount that is payable to the Company’s employees~~expense. The Company ~~accrued~~made ~~$7,390,000~~the ~~and~~full ~~$285,000~~settlement inpayment ~~fiscal 2024 and fiscal 2023, respectively,~~ in ~~anticipation~~September ~~of this settlement~~2025.

Note 9. Subsequent Events

Management has evaluated events subsequent to ~~May~~November 3130, 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, and the other risks set forth in “Risk Factors” in Part II, Item 1A of this report 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 one 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

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 GAAP. The preparation of these condensed consolidated financial statements requires 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 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 ~~May~~November 3130, 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 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 sales orders.

Inventory

The Company’s inventory provisions are based upon management’s review of inventories on-hand over 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, management’s estimates and assumptions may be adjusted as deemed appropriate.

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 such asset’s estimated fair value.

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 ~~May~~November 3130, 2025 and 2024

Net Sales and Gross Profit ($ in thousands)


	Three Months Ended
	~~May~~November 3130,						$		%
	2025			2024			Change		Change
Net sales	$	~~111~~110,~~410~~953		$	9693,~~121~~920		$	1517,~~289~~033	1518.91	%
Cost of sales		7776,~~337~~598			6866,~~193~~139			910,~~144~~459	1315.48	%
Gross profit	$	34,~~073~~355		$	27,~~928~~781		$	6,~~145~~574	2223.07	%
Gross profit as a percent of net sales		3031.60	%		29.16	%			1.54	%

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 ~~May~~November 3130, 2025 (“Q3Q1 ~~2025~~2026”) as compared to the three months ended ~~May~~November 3130, 2024 (“Q3Q1 ~~2024~~2025”) was largely due to increased sales of our products as a result of the expansion of our sales force and increasing demand from customers. We increased the number of sales personnel and sales management by 3645 employees in the current period, from ~~399~~326 sales employees in Q3Q1 ~~2024~~2025 to ~~435~~471 sales employees in Q3Q1 ~~2025~~2026. We believe that increasing sales headcount leads to the addition of new customers and enables us to sell more products to existing customers. Revenues and gross profit for Q3Q1 ~~2025~~2026 also increased as compared to Q3Q1 ~~2024~~2025 due to ~~developing~~the development of better relationships with vendors and customers, and ~~the Company having~~ higher inventory stock readily available to meet customer demand in the current period, particularly in the aerospace and defense industries. Gross profit as a percent of net sales has increased 1.4%, primarily due to the development of better relationships with our customers and vendors.

Selling, General and Administrative Expenses ($ in thousands)


	Three Months Ended
	~~May~~November 3130,						$		%
	2025			2024			Change		Change
Selling, general and administrative expenses	$	21,~~627~~846		$	2618,~~314~~938		$	(42,~~687)~~908	~~(17~~15.8)4	%
Percent of net sales		19.47	%		2720.42	%			(8.0.5)	%

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 Q3Q1 ~~2025~~2026 ~~decreased~~increased from Q3Q1 ~~2024~~2025 primarily due to ahigher ~~legal~~employee ~~expense~~payroll ~~accrual~~expenses inand ~~the~~benefit amount of approximately $7,150,000 related to a pending class action lawsuit that the Company expects to settle. See Note 8 of the Notes to Consolidated Financial Statements of this Report for further explanation. SG&A in Q3 2025 also had higher employee salary expenses due to increased total employee headcount, which increased from ~~584~~605 employees in Q3Q1 ~~2024~~2025 to ~~632~~658 employees in Q3Q1 ~~2025~~2026.

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


	Three Months Ended
	~~May~~November 3130,						$		%
	2025			2024			Change		Change
Other income (expense):	2025			2024			Change		Change
Other income (expense):
Realized gain on sales of marketable trading securities	$	284		$	241		$	43	17.8	%
Net gain (loss) on trading securities	$	277		$	(24)		$	301	1,254.2	%
Unrealized (loss) gain on marketable trading securities		(241)			213			(454)	(213.1)	%
Interest and other expense, net		(46)			(44)			(2)	(4.5)	%
Interest and other (expense)		(37)			(48)			11	(22.9)
Other income (expense), net	$	~~231~~6		$	~~(68)~~406		$	~~299~~(400)	~~439~~(98.75)	%
Percent of net sales		0.2	%		0.1	%			0.1	%
Other income (expense), net as a percent of revenues		0.0	%		0.4	%			(0.4)	%

Other income (expense), net, primarily consists of income or loss on trading in short-term marketable equity securities of publicly-held corporations and interest related to the Company’s debt obligations. The Company’s investment strategy consists of both long and short positions, as well as utilizing options designed to improve returns. During Q3Q1 ~~2025~~2026, the Company recognized a net gain on trading securities of $~~277~~43,000 as compared to a net ~~loss~~gain of $24454,000 in Q3Q1 ~~2024~~2025. The net trading securities gain in Q3Q1 ~~2025~~2026 and ~~loss~~Q1 in2025 ~~Q3 2024~~ was primarily due to timing of sales and purchases and general market climate for short and long positions during the applicable period.

Interest and other expense, net, ~~increased~~decreased in Q3Q1 ~~2025~~2026 compared to Q3Q1 ~~2024~~2025, which was primarily due to interest expense from borrowings on the line of credit being slightly higher during Q3Q1 2025 as compared to Q3Q1 ~~2024~~2026.

Income Tax Provision ($ in thousands)


	Three Months Ended
	~~May~~November 3130,						$		%
	2025			2024			Change		Change
Income tax provision	$	3,~~162~~195		$	~~362~~2,361		$	~~2,800~~834	~~773~~35.53	%
Percent of pre-tax income		2425.95	%		2325.45	%			~~1.5~~—	%

The provision for income taxes increased by $2834,~~800,~~000 in Q3Q1 ~~2025~~2026 over the same prior year period. This increase was primarily due to higher income in the current quarter as compared to the prior year period. The income tax provision as a percent of pre-tax income ~~increased~~remained ~~from~~consistent ~~23.4%~~ at ~~Q3 2024 to 24~~25.95% at Q3Q1 2025, ~~which was primarily due to the state tax rate mix~~ and ~~permanent~~Q1 ~~book tax differences~~2026.

Comparison of the Nine Months Ended May 31, 2025 and 2024

Net Sales and Gross Profit ($ in thousands)


	Nine Months Ended
	May 31,
	2025			2024			$ Change		% Change
Net sales	$	305,462		$	259,711		$	45,751	17.6	%
Cost of sales		214,100			183,184			30,916	16.9	%
Gross profit	$	91,362		$	76,527		$	14,835	19.4	%
Percent of net sales		29.9	%		29.5	%			0.4	%

The increase in revenues and gross margins as a percent of revenues in the nine months ended May 31, 2025 as compared to the nine months ended May 31, 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)


	Nine Months Ended
	2025			2024			$ Change		% Change
Operating expense:
Selling, general and administrative expenses	$	60,979		$	61,129		$	(150)	(0.2)	%
Impairment on termination of lease		—			3,906			(3,906)	(100.0)	%
Operating expenses	$	60,979		$	65,035			(4,056)	(6.2)	%
Percent of net sales		20.0	%		25.0	%			(5.0)	%

SG&A in the nine months ended May 31, 2025 decreased from the same period in the prior year primarily due to a legal expense accrual of approximately $7,390,000 in legal expenses accrued in the period related to a pending class action lawsuit that the Company expects to settle. See Note 8 of the Notes to Consolidated Financial Statements of this Report for further explanation. Further, during the first quarter of fiscal year 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. The losses in the previously year were partially offset by an increase of employee headcount in the current period compared to the same period in the prior year. Operating expenses as a percent of revenue in the current period decreased from the prior year period primarily due to the impairment loss and legal settlement accrual in the prior year.

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


	Nine Months Ended
	May 31,
	2025			2024			$ Change		% Change
Other income (expense):
Net gain (loss)on trading securities	$	761		$	(45)		$	806	1,791.1	%
Interest and other expense, net		(143)			(128)			(15)	(11.7)	%
Other income (expense), net	$	618		$	(173)		$	791	457.2	%
Percent of net sales		0.2	%		(0.1)	%			0.3	%

During the nine months ended May 31, 2025, the Company recognized a net gain on trading securities of $761,000 as compared to a net loss of $45,000 in the same period in the prior year. The net trading securities losses and gains, as applicable, in the nine months ended May 31, 2025 and 2024 were primarily due to timing of sales and purchases of investment securities and general market climate for long positions during the applicable period. Further, current year period, there was a higher amount of cash invested than in the prior period, which produced higher dividends in the current period.

Interest and other expense, net, increased during the nine months ended May 31, 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 in the current period compared to the same period in the prior year.

Income Tax Provision ($ in thousands)


	Nine Months Ended
	May 31,
	2025			2024			$ Change		% Change
Income tax provision	$	7,835		$	2,858		$	4,977	174.1	%
Percent of pre-tax income		25.3	%		25.2	%			0.1	%

The provision for income taxes increased by $4,977,000 for the nine months ended May 31, 2025 when compared to the prior year period. This increase was primarily due to higher taxable income in the current nine months period as compared to the prior year period.

Liquidity and Capital Resources

As of ~~May~~November 3130, 2025 and August 31, ~~2024~~2025, the Company held approximately $7537,~~270,~~000 and $~~843~~728,000 of unrestricted cash and cash equivalents, respectively. The Company also held $2229,~~100~~719,000 and $1430,~~700~~375,000 of marketable securities at ~~May~~November 3130, 2025 and August 31, ~~2024~~2025, respectively, which could be liquidated, if necessary.

The Company currently has an available $20,000,000 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 $20,000,000 and extended the maturity date of the line of credit from July 5, 2024 to February 15, 2026. The Company is currently in process of extending the line of credit with the Bank and expects it to be extended during the Company’s second quarter of fiscal year 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 November 30, 2025 and August 31, 2025, the Company was in compliance with all such covenants. The outstanding balance of the line of credit as of each of November 30, 2025 and August 31, 2024 was $3,000 and zero, respectively.

1716

~~substantially~~In ~~all~~April of2024, the ~~assets~~Company ofengaged ~~the~~in ~~Company~~a ~~and~~mediation ~~its~~concerning ~~subsidiaries.~~a ~~The~~pending ~~line~~class ofaction ~~credit~~lawsuit ~~agreement~~alleging ~~contains~~wage ~~certain~~and ~~nonfinancial~~hour violations and ~~financial~~related ~~covenants,~~claims. The ~~including~~Company ~~the~~settled ~~maintenance~~this oflawsuit ~~certain~~with ~~financial~~court ~~ratios.~~approval Asfor ofthe ~~each~~aggregate ofsettlement ~~May~~amount 31of $7,795,000 during fiscal 2025. ~~and~~In ~~August~~September 312025, ~~2024,~~ the Company ~~was~~used inits ~~compliance~~existing ~~with~~cash ~~all~~and ~~such~~cash ~~covenants.~~equivalents ~~The~~generated ~~outstanding~~from ~~balance~~operations ofto fund and complete the ~~line~~payment of ~~credit~~the assettlement. ofSee ~~each~~Note 8 of ~~May~~the ~~31,~~Notes ~~2025~~to ~~and~~Consolidated ~~August~~Financial ~~31,~~Statements ~~2024~~of ~~was~~this ~~$491,000~~Quarterly ~~and~~Report ~~zero,~~for ~~respectively~~further information.

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 for approximately $7,500,000, which settlement amount was increased to $7,683,000 in May 2025. In July 2025, the court approved the settlement. Pursuant to the settlement agreement, as amended, the aggregate settlement payment (less the $154,000 that has already been paid) is expected to be paid by the Company within the next few months after the final order is issued in the litigation. At that time, the Company will also pay the Company’s share of the employment taxes related to the portion of the settlement amount that is payable to the Company’s employees. The Company accrued $7,390,000 and $285,000 in fiscal 2024 and fiscal 2023, respectively, in anticipation of this settlement. The Company expects to use existing cash and cash equivalents, and cash generated from operations to fund this settlement payment.

Cash Flows from Operating Activities

Cash ~~provided~~used byin operating activities was $9583,~~404,~~000 for the ~~nine~~three months ended ~~May~~November 31, 2025 as compared with cash provided by operating activities of $42,~~393~~013,000 for the ~~nine~~three months ended ~~May~~November 3130, 2024. Cash ~~provided~~used byin operating activities in the current period was primarily due to ~~net~~a ~~income~~decrease ~~earned~~ in ~~the~~accrued ~~period~~expenses and other current liabilities. The ~~Cash~~accrued ~~provided~~expense bydecreases ~~operating~~in ~~activities~~the current period was ~~adversely~~primarily ~~impacted~~due to ~~some~~the ~~extent~~payment byof ~~increases~~the inclass ~~inventory~~action ~~purchases~~lawsuit ~~and~~settlement ~~trade~~in ~~accounts~~September ~~receivables~~2025. ~~Increases~~See inNote ~~accounts~~8 ~~receivables~~of ~~were~~the ~~primarily~~Notes ~~due~~ to ~~our~~Consolidated ~~sales~~Financial ~~growth~~Statements ~~within~~of ~~the~~this ~~current~~Quarterly ~~period.~~Report for further information. The ~~primary~~accrued ~~driver~~expense ofdecrease ~~increased~~was also in part due to timing of inventory ~~purchases~~purchased in the ~~current~~ period ~~was~~and ~~due~~payment toof ~~growth~~accrued inbonuses ~~our~~from ~~sales~~fiscal ~~backorders~~year ~~and~~2025 ~~restocking~~paid ~~authorized~~in ~~lines~~Q1 to2026. Cash ~~meet~~used ~~projected~~in ~~customer~~operating ~~demand.~~activities ~~The~~was ~~Company~~adversely ~~expects~~impacted to ~~see~~some ~~increases~~extent by decreases in ~~our~~trade accounts receivables and ~~inventory~~increases ~~for~~in ~~the~~net ~~remainder~~income. ofDecreases ~~the fiscal year and~~ in ~~the~~accounts ~~following~~receivables ~~fiscal~~were ~~year~~primarily due to ~~our~~cyclical ~~budgeted~~sales ~~revenue~~decreases ~~growth.~~typically ~~The~~observed ~~prior~~in ~~period~~the ~~cash~~first ~~provided~~quarter byof ~~operating~~the ~~activities~~Company’s ~~was~~fiscal ~~primarily~~year. ~~due~~The toCompany ~~the~~expects ~~net~~to ~~income~~see increases in ~~that~~our ~~period~~accounts ~~and~~receivables anfor ~~increase~~the inremainder ~~trade~~of ~~accounts~~the ~~payable~~fiscal ~~and~~year adue ~~decrease~~to inour ~~operating~~expected ~~lease~~revenue ~~right-of-use assets~~growth.

The prior period cash provided by operating activities was primarily due to the net income in that period and an increase in trade accounts payable.

Cash Flows from Investing Activities

Cash used in investing activities was $7762,~~685,~~000 for the ~~nine~~three months ended ~~May~~November 3130, 2025 as compared with cash used in investing activities of $155,~~061~~691,000 for the ~~nine~~three months ended ~~May~~November 3130, 2024. Cash used in investing activities in the current period was primarily due to ~~the~~increases ~~purchase~~in ofconstruction ~~marketable~~in ~~securities~~progress ~~that~~related isto ~~funded~~the bybuilding ~~the~~expansion ~~Company’s~~of ~~excess~~our ~~cash~~Company headquarters in ~~the~~Anaheim, ~~period.~~California ~~The~~and ~~Company~~also ~~expects~~reflects tothe ~~see~~purchase aof ~~decrease~~additional inIT ~~marketable~~and ~~securities~~office equipment in the ~~next~~current ~~few~~period. ~~months~~Cash ~~for~~used ~~the~~in ~~cash~~investing ~~payout~~activities ofin the ~~class~~prior ~~action~~year ~~settlement~~was ~~for~~primarily ~~approximately~~due ~~$7,683,000,~~to ~~see~~purchases ~~Note~~of 8marketable securities. The ~~Prior~~Company ~~period~~expects ~~cash~~to ~~used~~continue to use cash in investing activities ~~was primarily~~ due to ~~the~~expected ~~purchase~~purchases of ~~the~~marketable ~~Hunter~~securities ~~Property~~with inthe ~~October~~Company’s ~~2023,~~excess ~~partially offset by net sales of marketable securities~~cash.

Cash Flows from Financing Activities

Cash provided by financing activities for the ~~nine~~three months ended ~~May~~November 3130, 2025 was $41,~~715~~162,000 as compared with cash provided by financing activities of $23,~~915~~461,000 for the ~~nine~~three months ended ~~May~~November 3130, 2024. The cash provided by financing activities for the current period is primarily due to the 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 used in financing activities for the prior period is primarily due to an increase in the bank overdraft balance. The Company expects to continue to see increases in the bank overdraft due to increased ~~purchasing~~purchases of inventory ~~and~~due to projected sales growth as well as higher professional services ~~due~~in the current period related to ~~projected~~development ~~sales~~of ~~growth~~system upgrades.

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~~2025 as filed with the SEC on November 2920, ~~2024~~2025.

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.

1817

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 ~~May~~November 3130, 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 ~~May~~November 3130, 2025 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 this Quarterly Report on Form 10-Q were 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~~2025, 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~~in to the ~~Company’s~~closing process,, including lease ~~accounts~~accounting and reconciliations, and ~~certain~~accumulation ~~inventory~~of ~~and~~information ~~accrued~~for ~~liability~~disclosure ~~accounts~~in the preparation of the consolidated financial statements.

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 ~~establishing~~improving ~~additional~~the ~~levels~~capture, ofaccounting ~~review~~for, and ~~approval~~reporting of leases. ~~The~~We ~~Company~~plan ~~has~~to ~~hired~~continue ato ~~third-party~~enhance ~~accounting~~controls ~~consultant~~over ~~and~~reconciliations ~~has~~by ~~recently~~implementing ~~hired~~improved anaccounting ~~assistant~~software ~~controller~~that toshould aid ~~the~~in ~~implementation~~reconciliations ofand ~~additional~~monitoring ~~levels~~ of ~~review~~general ~~and~~ledger ~~approval~~accounts. ~~Further,~~We ~~the~~plan ~~Company~~to iscontinue ~~developing~~to ~~and~~assess ~~implementing~~the ~~system~~effectiveness ~~enhancements~~of ~~that~~our ~~should~~remediation ~~aid~~efforts in ~~the~~connection ~~remediation~~with our future assessments of the ~~material~~effectiveness ~~weakness~~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~~plan to 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 ~~May~~November 3130, 2025 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

1918

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 8 of the Notes to Consolidated Financial Statements of this Report for disclosure regarding a lawsuit to for which we have entered into a settlement agreement, which agreement has obtained 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~~2025, filed with the SEC on November 2920, ~~2024~~2025, ~~and the Quarterly Report on Form 10-Q for the quarter ended November 30, 2024,~~ contain risk factors identified by the Company. ~~Except~~There ~~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.

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.

2019

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.

2120

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: July 11, 2025	/s/ Glen Ceiley
Date: January 13, 2026	/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