EACO CORP

Previous wording

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.

Current wording

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.

Previous wording

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 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. Revenue is recognized net of returns and any taxes collected from customers. We offer industry standard contractual terms in our purchase orders.

Current wording

The Company’s contract with the customer is executed with a customer purchase order and performance obligations consist solely of products 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.

Previous wording

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our DTAs in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of DTLs, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income.

Current wording

Deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our DTAs in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of DTLs, projected future taxable income, tax-planning strategies, and results of recent operations. In projecting future taxable income, we begin with historical results adjusted for the results of discontinued operations and incorporate assumptions about the amount of future state, federal, and foreign pretax operating income adjusted for items that do not have tax consequences. The assumptions about future taxable income require the use of significant judgment and are consistent with the plans and estimates we are using to manage the underlying businesses. In evaluating the objective evidence that historical results provide, we consider three years of cumulative operating income.

Previous wording

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

Current wording

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’s estimates and assumptions may be adjusted as deemed appropriate.

Previous wording

Revenues consist primarily of sales of component parts and fasteners and also include, to a lesser extent, kitting charges and order fees, as well as freight charged to customers. The increase in revenues in fiscal 2024 compared to fiscal 2023 was largely due to added sales employees during fiscal 2024, increasing by 33 sales employees when comparing to fiscal 2023. We believe that increasing sales headcount leads to the addition of new customers and the ability to sell more products to existing customers and creating better customer relationships. Additionally, revenues for fiscal 2024 have increased when compared to fiscal 2023 primarily due to higher inventory stock available and an increased demand for those products. Gross margin for fiscal 2024 have increased when compared to fiscal 2023 primarily due to developing better relationships with vendors and customers.

Current wording

Revenues consist primarily of sales of component parts and fasteners and also include, to a lesser extent, kitting charges and order fees, as well as freight charged to customers. The increase in revenues in fiscal 2025 compared to fiscal 2024 was largely due to an expanding sales force during fiscal 2025, which increased by 28 sales employees when comparing to fiscal 2024. We believe that increasing sales headcount led to the acquisition of new customers and the ability to sell more products to existing customers and creating better customer relationships. Additionally, revenues for fiscal 2025 have increased when compared to fiscal 2024 primarily due to higher inventory stock available and an increased demand for those products. Gross margin for fiscal 2025 has increased when compared to fiscal 2024 primarily due to developing better relationships with vendors and customers, which allowed us to negotiate better pricing from our vendors and quote more products to customers with higher margins.

Previous wording

Selling, general and administrative (“SG&A”) expense consists primarily of payroll and related expenses for the sales and administrative staff, professional fees (including accounting, legal and technology costs and expenses), and advertising costs. SG&A in fiscal 2024 increased from fiscal 2023 largely due to higher personnel costs related to an increase in the number of sales and administrative employees, from 561 employees in fiscal 2023 to 604 employees in fiscal 2024. Furthermore, the increase in SG&A expense in fiscal 2024 also included a legal expense accrual in the amount of approximately $7.6 million related to a pending class action lawsuit to which we have reached an agreement in principle to settle, but is subject to court approval. We expect the settlement to be paid in the fiscal year ended August 31, 2025. See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report for further explanation.

Current wording

Selling, general and administrative (“SG&A”) expense consists primarily of payroll and related expenses for the sales and administrative staff, professional fees (including accounting, legal and technology costs and expenses), and advertising costs. SG&A in fiscal 2025 increased from fiscal 2024 largely due to higher year end bonuses of $7,634,000 related to record sales in fiscal 2025 and to a lesser extent, due to higher personnel costs related to an increase in the number of sales and administrative employees, from 604 employees in fiscal 2024 to 644 employees in fiscal 2025.

Previous wording

During the first quarter of fiscal 2024, the Company also recognized an impairment loss of $3.9 million due to the purchase of the Hunter Property and the corresponding termination of the Hunter Lease. Operating expenses as a percent of revenue in the current period increased from the prior year period primarily due to the impairment loss, legal settlement accrual, and higher payroll expenses.

Current wording

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 that was recorded in fiscal 2024.

Previous wording

Other income (expense), net includes income or losses on investments in marketable equity securities of other publicly-held domestic corporations, interest income (expense), and other nonoperating activities. The Company’s investment strategy consists of both long and short positions. The Company experienced net realized and unrealized gains from trading securities of approximately $128,000 and net realized and unrealized gains of approximately $1,284,000 in fiscal 2024 and fiscal 2023, respectively. The trading securities gains in fiscal 2024 and fiscal 2023 were primarily due to timing of sale of investments and general market climate of investment positions at year-end.

Current wording

Other income (expense), net includes income or losses on investments in marketable equity securities of other publicly-held domestic corporations, interest income (expense), and other nonoperating activities. The Company’s investment strategy consists of both long and short positions. The Company experienced net realized and unrealized gains from trading securities of approximately $1,273,000 and net realized and unrealized gains of approximately $128,000 in fiscal 2025 and fiscal 2024, respectively. The trading securities gains in fiscal 2025 and fiscal 2024 were primarily due to timing of sale of investments and general market climate of investment positions at year-end.

Previous wording

The provision for income taxes decreased by $1,185,000 in fiscal 2024 compared to fiscal 2023, which was primarily a result of lower book income in fiscal 2024 as compared to fiscal 2023. The income tax provision as a percentage of pre-tax income increased by 3.6% in fiscal 2024 compared to fiscal 2023, which was primarily due to our prior year tax payable reconciliations.

Current wording

The provision for income taxes increased by $4,283,000 in fiscal 2025 compared to fiscal 2024, which was primarily a result of higher book income in fiscal 2025 as compared to fiscal 2024. The income tax provision as a percentage of pre-tax income decreased by 5.1% in fiscal 2025 compared to fiscal 2024, which was primarily due to our prior year tax payable reconciliations and IRS refunds received in 2025.

Previous wording

As of August 31, 2024 and 2023, the Company held approximately $843,000 and $8,558,000 of unrestricted cash and cash equivalents, respectively. The Company also held $14,748,000 and $27,228,000 of marketable securities at August 31, 2024 and August 31, 2023, respectively, which could be liquidated, if necessary.

Current wording

As of August 31, 2025 and 2024, the Company held approximately $738,000 and $843,000 of unrestricted cash and cash equivalents, respectively. The Company also held $30,375,000 and $14,748,000 of marketable securities at August 31, 2025 and August 31, 2024, respectively, which could be liquidated, if necessary. The Company on a regular basis, uses its excess cash from operating activities to purchase short term investments. The Company also liquidates these investments time to time when cash is needed to cover operating or extraordinary expenses.

Previous wording

The Company currently has an available $20.0 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 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

Current wording

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 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 August 31, 2025 and August 31, 2024, the Company was in compliance with all such covenants. The Company expects to renew the line of credit in the coming months before the agreement expires. There was no outstanding balance on the line of credit as of each of August 31, 2025 and August 31, 2024.

Previous wording

On October 5, 2023, Bisco entered into the Purchase Agreement with the Trust, which is beneficially owned and controlled by Mr. Glen F. Ceiley, the Company’s Chief Executive Officer, Chairman of the Board and a major stockholder. Pursuant to the Purchase Agreement, the Trust agreed to sell the Hunter Property to Bisco for a purchase price of $31 million in cash. The transaction closed on October 20, 2023.

Current wording

On October 5, 2023, Bisco entered into the Purchase Agreement with the Trust, which is beneficially owned and controlled by Mr. Glen F. Ceiley, the Company’s Chief Executive Officer, Chairman of the Board and a major stockholder. Pursuant to the Purchase Agreement, the Trust agreed to sell the Hunter Property to Bisco for a purchase price of $31,000,000 in cash. The transaction closed on October 20, 2023.

Previous wording

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 is currently negotiating a settlement agreement and expects the aggregate settlement amount to be approximately $7.5 million, which settlement agreement, when finalized, will be subject to court approval. 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. See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report for further information.

Current wording

In April 2024, the Company engaged in a mediation concerning a pending class action lawsuit and settled with court approval for the aggregate amount of $7,795,000 during fiscal 2025. In September 2025, the Company used existing cash and cash equivalents generated from operations to fund and complete the payment of the settlement. See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report for further information.

Previous wording

During fiscal 2024, the Company provided $14,077,000 in net cash from its operating activities. The current period cash provided by operating activities was primarily due to net income of $14,951,000 and an increase in accrued expenses and in trade accounts payable. This was partially offset by increases in trade accounts receivable and inventory. Increases in accrued expenses is primarily due to the accrual of the class action lawsuit approximately $7,600,000. Increases in trade accounts payable is primarily due to an increases in inventory.

Current wording

During fiscal 2025, the Company provided $17,169,000 in net cash from its operating activities. The current period cash provided by operating activities was primarily due to the increases in net income, and to a lesser extent, an increase in trade accounts payable and accrued expenses. Increases in net income in fiscal 2025 is primarily due to increased sales orders and higher gross margin. Increases in accrued expenses is primarily due increases in accrued payroll and accrued accounts payable related to inventory purchases. Increases in trade accounts payable is primarily due to an increase in inventory. The increase in cash provided by operating activities was partially offset by increases in inventory purchases and trade accounts receivable. Increases in trade accounts receivable increased due to increased sales orders during the period. Inventory increased due to increases in sales and inventory purchases for projected sales.

Previous wording

During fiscal 2023, the Company provided $13,422,000 in net cash from its operating activities. The fiscal 2023 period cash provided by operating activities was primarily due to net income of $21,185,000 and an increase in accrued expenses and in prepaid and other assets. This was partially offset by increases in trade accounts receivable and inventory. Increases in accrued expenses is primarily due to increases in inventory.

Current wording

During fiscal 2024, the Company provided $14,077,000 in net cash from its operating activities. The fiscal 2024 period cash provided by operating activities was primarily due to net income of $14,951,000 and an increase in accrued expenses and in prepaid and other assets. This was partially offset by increases in trade accounts receivable and inventory. Increases in accrued expenses is primarily due to increases in inventory.

Previous wording

Cash used in investing activities was $23,815,000 for fiscal 2023. This was primarily due to the purchase of marketable securities.

Current wording

Cash used in investing activities was $16,442,000 for fiscal 2025. This was primarily due to the purchase of marketable securities. with excess cash the Company accumulated through its business operations. Management expects to continue moving excess cash to investments though the following fiscal year.

Previous wording

Cash used in investing activities was $20,455,000 for fiscal 2024. This was primarily due to the purchase of the Hunter Property of $31,000,000 in fiscal 2024, which was partially offset by proceeds from the sale of marketable securities.

Current wording

Cash used in investing activities was $20,455,000 for fiscal 2024. This was primarily due to the purchase of the Hunter Property for $31,000,000 in October 2023, which was partially offset by proceeds from the sale of marketable securities.

Previous wording

Cash used in financing activities for fiscal 2024 was $1,372,000, which was primarily due to a decrease in bank overdraft when comparing fiscal 2024 to fiscal 2023. Bank overdraft represents outstanding checks in excess of cash held in our bank account. If the bank account is over drawn, the Company has a nightly sweep feature, which funds 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.

Current wording

Cash used in financing activities for fiscal 2025 was $843,000, which was primarily due to a decrease in bank overdraft when comparing fiscal 2025 to fiscal 2024. Bank overdraft represents outstanding checks in excess of cash held in our bank account. If the bank account is over drawn, the Company has a nightly sweep feature, which funds the outgoing cash account from the main deposit bank account. If the main deposit account does not have enough cash to cover the sweep, the deposit account is funded by the line of credit to cover the remaining sweep balance. The cash used in financing activities for the prior period is primarily due to a decrease in the bank overdraft balance.

Previous wording

In addition to using cash flow generated from operations, the Company finances its operations through borrowings from banks. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result that debt agreements are recorded as liabilities in the accompanying consolidated balance sheets while obligations under operating leases are disclosed in the notes to the accompanying consolidated financial statements.

Current wording

In addition to using cash flow generated from operations, the Company finances its operations through borrowings from banks. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result that debt agreements, including lease obligations, are recorded as liabilities in the accompanying consolidated balance sheets.