EACO Corporation
Annual Report 2014

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KEACO CORP - EACOFiled: November 28, 2014 (period: August 31, 2014)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 2014 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 000-14311 EACO CORPORATION(Exact name of Registrant as specified in its charter) Florida 59-2597349(State of Incorporation) (I.R.S. Employer Identification No.) 1500 North Lakeview AvenueAnaheim, California 92807(Address of Principal Executive Offices) Registrant's telephone number, including area code: (714) 876-2490 Securities registered pursuant to Section 12(b) of the Act:None Securities registered pursuant to Section 12(g) of the Act:Common Stock, $.01 Par Value(Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO x 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 1934during 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 filingrequirements for the past 90 days. YES x NO ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). YES x NO ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. ¨ Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨Accelerated filer ¨Non-accelerated filer ¨Smaller reporting company xx Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x The aggregate market value of the registrant’s common stock as of the last business day of the registrant’s most recently completed second fiscal quarter(based upon the closing sale price of the common stock on that date) held by non-affiliates of the registrant was approximately $150,000. As of November 2014, 4,861,590 shares of the registrant’s common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE No documents required to be listed hereunder are incorporated by reference in this report on Form 10-K. Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Forward-Looking Information This report may contain forward-looking statements. 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-lookingstatements include, but are not limited to, statements regarding our anticipated revenue, expenses, profits and capital needs. Forward-looking statements arebased on our current expectations, estimates and forecasts of future events and results and involve a number of risks and uncertainties that could cause actualresults to differ materially including, among other things, the following: failure of facts to conform to management estimates and assumptions; economicconditions and uncertainties; competitive pressures; our ability to maintain an effective system of internal controls over financial reporting; potential lossesfrom trading in securities; our ability to retain key personnel and relationships with suppliers; the willingness of Community Bank or other lenders to extendfinancing commitments and the availability of capital resources; and other risks identified from time to time in our reports and other documents filed with theSecurities and Exchange Commission (the “SEC”), and in public announcements. It is not possible to foresee or identify all factors that could cause actualresults to differ materially from those anticipated. As such, investors should not consider any of such factors to be an exhaustive statement of all risks oruncertainties. No forward-looking statements can be guaranteed and actual results may vary materially. We undertake no obligation to update any forward-lookingstatement except as required by law, but investors are advised to consult any further disclosures by us in our filings with the SEC, especially on Forms 10-K,10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historical results. 2Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I ITEM 1 Business 4ITEM 1A. Risk Factors 5ITEM 1B. Unresolved Staff Comments 10ITEM 2. Properties 10ITEM 3. Legal Proceedings 10ITEM 4. Mine Safety Disclosures 10 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 10ITEM 6. Selected Financial Data 11ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 15ITEM 8. Financial Statements and Supplementary Data 15ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 15ITEM 9A. Controls and Procedures 15ITEM 9B. Other Information 16 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 16ITEM 11. Executive Compensation 18ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 19ITEM 13. Certain Relationships and Related Transactions and Director Independence 20ITEM 14. Principal Accounting Fees and Services 20 PART IV ITEM 15. Exhibits and Financial Statement Schedules 21 3Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I Item 1. Business EACO Corporation (“EACO”) is a holding company, primarily comprised of its wholly-owned subsidiary, Bisco Industries, Inc. (“Bisco”). Bisco is adistributor of electronic components and fasteners with 45 sales offices and six distribution centers located throughout the United States and Canada. Biscosupplies 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. EACO was incorporated in Florida in September 1985. Bisco commenced operations in Illinois in 1973 and was incorporated in 1974. Bisco’s principalexecutive offices are located at 1500 N. Lakeview Avenue, Anaheim, California 92807, which also serves as the principal executive offices of EACO.EACO’s website address is www.eacocorp.com and Bisco’s website address is www.biscoind.com. The inclusion of these website addresses in this annualreport does not include or incorporate by reference into this annual report any information on or accessible through the websites. EACO, Bisco and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited, are collectively referred to herein as the “Company”, “we”, “us” and“our.” Operations Products and Services Bisco currently stocks over 87,000 items from more than 260 manufacturers. Bisco’s products include electronic components such as spacers and standoffs,card guides and ejectors, component holders and fuses, circuit board connectors, and cable components, as well as a large variety of fasteners and hardware.The breadth of Bisco’s products and extensive inventory provide a one-stop shopping experience for many customers. Bisco also provides customized services and solutions for a wide range of production needs, including special packaging, bin stocking, kitting and assembly,bar coding, electronic requisitioning, and integrated supply programs, among others. Bisco works with its customers to design and develop systems to meettheir specific needs. Divisions Bisco Industries Bisco sells the full spectrum of products that it offers to all markets, but primarily sells to original equipment manufacturers (“OEMs”). While historically, thesubstantial majority of Bisco’s revenues have been derived from the Bisco Industries division, Bisco has also established additional divisions that specializein specific industries and products. Bisco believes that the focus by industry and/or product enhances Bisco’s ability to provide superior service and devisetailored solutions for its customers. National-Precision The National-Precision division primarily sells electronic hardware and commercial fasteners to OEMs in the aerospace, fabrication and industrial equipmentindustries. National-Precision seeks to be the leading global distributor of mil-spec and commercial fasteners, hardware and distribution services used inproduction. 4Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Fast-Cor The Fast-Cor division was established to be a distributor’s source for a broad range of components and fasteners. Fast-Cor has access to the entire inventory ofproducts that Bisco offers but primarily focuses on selling to other distributors, not manufacturers. Customers and Sales Bisco’s customers operate in a wide variety of industries and range from large, global companies to small local businesses. Bisco strives to provideexceptional service to all customers, including smaller businesses, and continues to focus on growing its share of that market. As of August 31, 2014, Biscohad more than 6000 active customers; however, no single customer accounted for more than 10% of Bisco’s revenues for the fiscal year ended August 31,2014 (“fiscal 2014”). For each of the fiscal years ended August 31, 2014 and 2013, Bisco’s top 20 customers represented in the aggregate approximately 11%of Bisco’s distribution sales. Bisco generally sells its products through its sales representatives in its 45 sales offices located in the United States and Canada. Customers can also placeorders through Bisco’s website. Bisco currently maintains six distribution centers located in Anaheim and San Jose, California; Dallas, Texas; Chicago,Illinois; Boston, Massachusetts and Toronto, Canada. Each of Bisco’s selling facilities and distribution centers are linked to Bisco’s central computer system,which provides Bisco’s salespersons with online, real-time data regarding inventory levels throughout Bisco and facilitates control of purchasing, shippingand billing. Bisco generally ships products to customers from one of its six distribution centers, based on the geographic proximity and the availability of theordered products. Bisco sells its products primarily in the United States and Canada. Bisco’s international sales represented 7% of its sales for each of the fiscal years endedAugust 31, 2014 and 2013. Sales to customers in Canada accounted for approximately 58% and 56% of such international sales in the fiscal years endedAugust 31 2014 and 2013, respectively. Suppliers As of August 31, 2014, Bisco offered the products of over 260 manufacturers. The authorized distributor agreements with most manufacturers are typicallycancelable by either party at any time or on short notice. While Bisco doesn’t manufacture its products, it does provide kitting and packaging services forcertain of its customers. Although Bisco sells more products of certain brands, Bisco believes that most of the products it sells are available from other sourcesat competitive prices. No single supplier accounted for more than 10% of Bisco’s purchases in fiscal 2014. Employees As of August 31, 2014, the Company had 426 full time employees, of which 329 were in sales and marketing and 97 were in management, administration andfinance. Item 1A. Risk Factors Our business is subject to a number of risks, some of which are discussed below. Other risks are presented elsewhere in this report and in our other filingswith the SEC, including our subsequent reports on Forms 10-Q and 8-K. If any of the risks actually occur, our business, financial condition, or results ofoperations could be seriously harmed. In that event, the market price for shares of our common stock may decline, and you could lose all or part of yourinvestment. 5Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Changes and uncertainties in the economy have harmed and could continue to harm our operating results. As a result of the continuing economic uncertainties, our operating results, and the economic strength of our customers and suppliers, are increasinglydifficult to predict. Sales of our products are affected by many factors, including, among others, general economic conditions, interest rates, inflation,liquidity in the credit markets, unemployment trends, geopolitical events, and other factors. Although we sell our products to customers in a broad range ofindustries, the significant weakening of economic conditions on a global scale has caused some of our customers to experience a slowdown that has hadadverse effects on our sales and operating results. Changes and uncertainties in the economy also increase the risk of uncollectible accounts receivable. Thepricing we receive from suppliers may also be impacted by general economic conditions. Continued and future changes and uncertainties in the economicclimate in the United States and elsewhere could have a similar negative impact on the rate and amounts of purchases by our current and potential customers,create price inflation for our products, or otherwise have a negative impact on our expenses, gross margins and revenues, and could hinder our growth. If we fail to maintain an effective system of internal controls over financial reporting or experience additional material weaknesses in our system ofinternal controls, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect onthe market price of our common stock and our business. We have from time to time had material weaknesses in our internal controls over financial reporting due to deficiencies in the process related to thepreparation of our financial statements, segregation of duties, sufficient control in the area of financial reporting oversight and review, and appropriatepersonnel to ensure the complete and proper application of accounting principles generally accepted in the United States of America (“GAAP”) as it relates tocertain routine accounting transactions. Although we believe we have addressed these material weaknesses, we may experience material weaknesses in thefuture and may fail to maintain a system of internal controls over financial reporting that complies with the reporting requirements applicable to publiccompanies in the United States. Our failure to address any deficiencies or weaknesses in our internal control over financial reporting or to properly maintainan effective system of internal control over financial reporting could impact our ability to prevent fraud or to issue our financial statements in a timelymanner that presents fairly ‘in accordance with GAAP’ our financial condition and results of operations. The existence of any such deficiencies and/orweaknesses, even if cured, may also lead to the loss of investor confidence in the reliability of our financial statements, could harm our business andnegatively impact the trading price of our common stock. Such deficiencies or material weaknesses may also subject us to lawsuits, investigations and otherpenalties. We have incurred significant losses in the past from trading in securities, and we may incur such losses in the future, which may also cause us to be inviolation of covenants under our loan agreement. Bisco has historically made investments in marketable domestic equity securities. Bisco’s investment strategy includes taking both long and short positions,as well as utilizing options to maximize return. This strategy can lead, and has led, to significant losses based on market conditions and trends. We may incurlosses in future periods from such trading activities, which could materially and adversely affect our liquidity and financial condition. In addition, unanticipated losses from our trading activities may cause Bisco to be in violation of certain covenants under its revolving line of creditagreement with Community Bank. As of August 31, 2014 and 2013, Bisco had outstanding $1,684,000 and $6,479,000, respectively, under its agreementwith Community Bank, which loan is secured by substantially all of Bisco’s assets and is guaranteed by Mr. Ceiley, our Chairman and CEO. The agreementcontains covenants which require that, on a quarterly basis, Bisco’s losses from trading in securities not exceed its pre-tax operating income. We cannotassure you that unanticipated losses from our trading activities will not cause us to violate our covenants in the future or that the bank will grant a waiver forany such default or that it will not exercise its remedies, which could include the refusal to allow additional borrowings on the line of credit, the accelerationof the obligation’s maturity date and foreclosure on Bisco’s assets, with respect to any such noncompliance, which could have a material adverse effect onour business and operations. 6Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We rely heavily on our internal information systems, which, if not properly functioning, could materially and adversely affect our business. Our information systems have been in place for many years, and are subject to system failures as well as problems caused by human error, which could have amaterial adverse effect on our business. Many of our systems consist of a number of legacy or internally developed applications, which can be more difficultto upgrade to commercially available software. It may be time consuming and costly for us to retrieve data that is necessary for management to evaluate oursystems of control and information flow. In the future, management may decide to convert our information systems to a single enterprise solution. Such aconversion, while it would enhance the accessibility and reliability of our data, could be expensive and would not be without risk of data loss, delay orbusiness interruption. Maintaining and operating these systems requires continuous investments. Failure of any of these internal information systems ormaterial difficulties in upgrading these information systems could have material adverse effects on our business and our timely compliance with our reportingobligations. We may not be able to attract and retain key personnel. Our future performance will depend to a significant extent upon the efforts and abilities of certain key management and other personnel, including GlenCeiley, our Chairman and CEO, as well as other executive officers and senior management. The loss of service of one or more of our key managementmembers could have a material adverse effect on our business. We do not have long-term supply agreements or guaranteed price or delivery arrangements with the majority of our suppliers. In most cases, we have no guaranteed price or delivery arrangements with our suppliers. Consequently, we may experience inventory shortages on certainproducts. Furthermore, our industry occasionally experiences significant product supply shortages and customer order backlogs due to the inability of certainmanufacturers to supply products as needed. We cannot assure you that suppliers will maintain an adequate supply of products to fulfill our orders on atimely basis, at a recoverable cost, or at all, or that we will be able to obtain particular products on favorable terms or at all. Additionally, we cannot assureyou that product lines currently offered by suppliers will continue to be available to us. A decline in the supply or continued availability of the products ofour suppliers, or a significant increase in the price of those products, could reduce our sales and negatively affect our operating results. Our supply agreements are generally terminable at the suppliers’ discretion. Substantially all of the agreements we have with our suppliers, including our authorized distributor agreements, are terminable with little or no notice andwithout any penalty. Suppliers that currently sell their products through us could decide to sell, or increase their sales of, their products directly or throughother distributors or channels. Any termination, interruption or adverse modification of our relationship with a key supplier or a significant number of othersuppliers would likely adversely affect our operating income, cash flow and future prospects. The competitive pressures we face could have a material adverse effect on our business. The market for our products and services is very competitive. We compete for customers with other distributors, as well as with many of our suppliers. Afailure to maintain and enhance our competitive position could adversely affect our business and prospects. Furthermore, our efforts to compete in themarketplace could cause deterioration of gross profit margins and, thus, overall profitability. Some of our competitors may have greater financial, personnel,capacity and other resources or a more extensive customer base than we do. 7Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Our strategy of expanding into new geographic areas could be costly. One of our primary growth strategies is to grow our business through the opening of sales offices in new geographic markets. Based on our analysis ofdemographics in the United States, Canada and Mexico, we currently estimate there is potential market opportunity in North America to support additionalsales offices. We cannot guarantee that our estimates are accurate or that we will open enough offices to capitalize on the full market opportunity or that anynew offices will be successful. In addition, a particular local market’s ability to support a sales office may change because of a change due to competition, orlocal economic conditions. We may be unable to meet our goals regarding new office openings. Our growth, in part, is primarily dependent on our ability to attract new customers. Historically, an effective way to attract new customers has been openingnew sales offices. One of our current business strategies focuses on opening and quickly growing new sales offices in markets or geographic regions withpotential for growth. During the year ended August 31, 2014, we did not open any new sales office locations and we may not be able to open or grow newoffices at desired or projected rates or hire the qualified sales personnel necessary to make such new offices successful. Failure to do so could negativelyimpact our long-term growth and market share. Opening sales offices in new markets presents increased risks that may prevent us from being profitable in these new locations, and/or may adverselyaffect our operating results. Our new sales offices do not typically achieve operating results comparable to our existing offices until after several years of operation. The added expensesrelating to payroll, occupancy and transportation costs can impact our ability to leverage earnings. In addition, offices in new geographic areas faceadditional challenges to achieving profitability. In new markets, we have less familiarity with local customer preferences and customers in these markets areless familiar with our name and capabilities. Entry into new markets may also bring us into competition with new, unfamiliar competitors. These challengesassociated with opening new offices in new markets may have an adverse effect on our business and operating results. We may not be able to identify new products and products lines, or obtain new product on favorable terms and prices or at all. Our success depends in part on our ability to develop product expertise and identify future products and product lines that complement existing products andproduct lines and that respond to our customers’ needs. We may not be able to compete effectively unless our product selection keeps up with trends in themarkets in which we compete. Our ability to successfully attract and retain qualified sales personnel is uncertain. Our success depends in large part on our ability to attract, motivate and retain a sufficient number of qualified sales employees, who understand andappreciate our strategy and culture and are able to adequately represent us to our customers. Qualified individuals of the requisite caliber and number neededto fill these positions may be in short supply in some areas, and the turnover rate in the industry is high. If we are unable to hire and retain personnel capableof consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and product knowledge, our sales could bematerially adversely affected. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number ofemployees. An inability to recruit and retain a sufficient number of qualified individuals in the future may also delay the planned openings of new offices.Any such delays, material increases in existing employee turnover rates, or increases in labor costs, could have a material adverse effect on our business,financial condition or operating results. 8Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We generally do not have long-term sales contracts with our customers. Most of our sales are made on a purchase order basis, rather than through long-term sales contracts. A variety of conditions, both specific to each customerand generally affecting each customer’s industry, may cause customers to reduce, cancel or delay orders that were either previously made or anticipated, gobankrupt or fail, or default on their payments. Significant or numerous cancellations, reductions, delays in orders by customers, losses of customers, and/orcustomer defaults on payment could materially adversely affect our business. Increases in the costs of energy, shipping and raw materials used in our products could impact our cost of goods and distribution and occupancyexpenses, which would result in lower operating margins. Costs of raw materials used in our products and energy costs have been rising during the last several years, which has resulted in increased production costsfor our suppliers. These suppliers typically look to pass their increased costs along to us through price increases. The shipping costs for our products haverisen as well and may continue to rise. While we typically try to pass increased supplier prices and shipping costs through to our customers or to modify ouractivities to mitigate the impact, we may not be successful. Failure to fully pass these increased prices and costs through to our customers or to modify ouractivities to mitigate the impact would have an adverse effect on our operating margins. The Company’s Chairman and CEO holds almost all of our voting stock and can control the election of directors and significant corporate actions. Glen Ceiley, our Chairman and CEO, owns approximately 98% of our outstanding voting stock. Mr. Ceiley is able to exert significant influence over theoutcome of almost all corporate matters, including significant corporate transactions requiring a shareholder vote, such as a merger or a sale of the Companyor our assets. This concentration of ownership and influence in management and board decision-making could also harm the price of our common stock by,among other things, discouraging a potential acquirer from seeking to acquire shares of our common stock (whether by making a tender offer or otherwise) orotherwise attempting to obtain control of the Company. Sales of our common stock by Glen Ceiley could cause the price of our common stock to decline. Historically there has been limited trading of our common stock, and the volume of any sales is generally low. As of August 31, 2014, the number of sharesheld by non-affiliates of Mr. Ceiley is less than 50,000 shares. If Mr. Ceiley sells or seeks to sell a substantial number of his shares of our common stock in thefuture, the market price of our common stock could decline. The perception among investors that these sales may occur could produce the same effect. Inclement weather and other disruptions to the transportation network could impact our distribution system. Our ability to provide efficient shipment of products to our customers is an integral component of our overall business strategy. Disruptions at distributioncenters or shipping ports may affect our ability to both maintain core products in inventory and deliver products to our customers on a timely basis, whichmay in turn adversely affect our results of operations. In addition, severe weather conditions could adversely impact demand for our products in particularlyhard hit regions. Our advertising and marketing efforts may be costly and may not achieve desired results. We incur substantial expense in connection with our advertising and marketing efforts. Postage represents a significant advertising expense for us because wegenerally mail fliers to current and potential customers through the U.S. Postal Service. Any future increases in postal rates will increase our mailing expensesand could have a material adverse effect on our business, financial condition and results of operations. 9Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We may not have adequate or cost-effective liquidity or capital resources. Our ability to satisfy our cash needs depends on our ability to generate cash from operations and to access our line of credit and the capital markets, all ofwhich are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may need to satisfyour cash needs through external financing. However, external financing may not be available on acceptable terms on a timely basis or at all. Item 1B. Unresolved Staff Comments None. Item 2. Properties We have 45 sales offices and six distribution centers located throughout the United States and in Canada. Our corporate headquarters and one of our primarydistribution centers are located in Anaheim, California in approximately 40,000 square feet of office and warehouse space. We lease all of our properties,consisting of office and warehouse space, under leases generally having a term of three years. For additional information regarding our obligations underproperty leases, see Note 3 of the Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this report. Item 3. Legal Proceedings From time to time, the Company may be named in claims arising in the ordinary course of business. Currently, we are not a party to any legal proceedingsthat, in the opinion of our management, would reasonably be expected to have a material adverse effect on our business or financial condition. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders The Company's common stock is quoted on the OTCQB operated by the OTC Markets Group Inc., and previously on the OTC Bulletin Board, under thetrading symbol "EACO"; however, there is no established public trading market for the Company’s common stock. As of November 1, 2014, there were 203shareholders of record of the Company’s common stock, which excludes individuals holding shares in street names. The closing sale price of the Company'scommon stock on November 10, 2014, the most recent date on which a sale of our shares occurred, was $7.24 per share. The quarterly high and low sales information of the Company's common stock as quoted on such over-the-counter markets are set forth below. High Low Year Ended August 31, 2013 Quarter ended November 30, 2012 2.95 2.35 Quarter ended February 28, 2013 2.56 2.34 Quarter ended May 31, 2013 2.89 2.50 Quarter ended August 31, 2013 3.56 2.89 Year Ended August 31, 2014 Quarter ended November 30, 2013 4.00 3.20 Quarter ended February 28, 2014 3.85 3.40 Quarter ended May 31, 2014 3.79 3.01 Quarter ended August 31, 2014 7.60 3.10 10Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. As of August 31, 2014, the Company had no equity compensation plans. The Company did not grant or issue any unregistered shares during the year endedAugust 31, 2014. The Company did not repurchase any of its own common stock during the year ended August 31, 2014. Dividend Policy The Company has never paid cash dividends on its common stock and does not expect to pay any cash dividends on its common stock in the foreseeablefuture. The Company presently intends to retain all available funds for operations and expansion of the business. Item 6. Selected Financial Data The Company is a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and is notrequired to provide the information required under this item. Item 7. Management’s Discussion and Analysis of Financial Condition and Results Of Operations Overview From the inception of the Company through June 2005, EACO’s business consisted of operating restaurants in the State of Florida. On June 29, 2005, EACOsold all of its operating restaurants and other assets used in the restaurant operations. All the remaining activity from the restaurant operations is presented asdiscontinued operations in the accompanying consolidated financial statements. From June 2005 until the acquisition of Bisco in March 2010, ouroperations principally consisted of managing five real estate properties held for leasing in Florida and California. After the acquisition of Bisco and prior tothe fiscal year ended August 31, 2013, the Company had two reportable business segments: the Distribution segment, which consisted of the operations ofBisco and its subsidiary, and the Real Estate Rental segment, which consisted of managing the rental properties in Florida and California. For fiscal 2013 andfiscal 2014, the Real Estate Rental segment represented less than 1% of the Company’s revenues. The Company sold its remaining two real estate propertiesduring fiscal year 2014, selling the Orange Park Property in October 2013 and the Sylmar Properties in June 2014. Accordingly, beginning in fiscal 2014, theCompany no longer reports its financial results under two separate segments. The applicable financial results of the former Real Estate Rental segment havebeen consolidated with the financial results of the Distribution segment for all periods presented in this report. Critical Accounting Policies Revenue Recognition The Company’s shipping terms are FOB shipping point. As such, management generally recognizes distribution operations revenue at the time of productshipment. Revenue is considered to be realized or realizable and earned when there is persuasive evidence of a sales arrangement in the form of an executedcontract or purchase order, the product has been shipped (and installed when applicable), the sales price is fixed or determinable, and collectability isreasonably assured. 11Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 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 anasset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measuredby 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 areconsidered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value. Liabilities of Discontinued Operations Prior to June 2005, EACO self-insured workers’ compensation claims losses up to certain limits. The liability for workers’ compensation represents anestimate of the present value of the ultimate cost of uninsured losses which are unpaid as of the balance sheet dates. The estimate is frequently reviewed andadjustments to the Company’s estimated claim liability, if any, are reflected in discontinued operations. At each fiscal year end, the Company obtains anactuarial report which estimates its overall exposure based on historical claims and an evaluation of future claims. The Company pursues recovery of certainclaims from an insurance carrier. Recoveries, if any, are recognized when realization is reasonably assured. Deferred Tax Assets A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realizetheir benefit, or when future deductibility is uncertain. The Company records net deferred tax assets to the extent management believes these assets will morelikely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduledreversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance. Results of Operations Comparison of the Fiscal Years Ended August 31, 2014 and 2013 Revenues and Gross Margin (dollars in thousands) Fiscal Year Ended August 31, $ % 2014 2013 Change Change Revenues $134,747 $120,432 $14,315 11.9%Cost of revenues 97,710 86,600 11,110 12.8%Gross profit $37,037 $33,832 $3,205 9.5%Gross margin 27.5% 28.1% (0.6)% Revenues consist primarily of sales of component parts and fasteners, but also include, to a lesser extent, kitting charges and special order fees, as well asfreight charged to customers. The increase in revenues in fiscal 2014 compared to the year ended August 31, 2013 (“fiscal 2013”) was largely due toincreased unit sales, resulting primarily from increased efficiencies from the Company’s employees. In the previous year, there were significant increases insales personnel hired and they are now becoming more efficient and selling towards the peak of their potential. Revenues have also increased due to theCompany focusing on relationship building programs with current and potential customers and by improving and expanding its website and online presence. Selling, General and Administrative Expense (dollars in thousands) Fiscal Year Ended August 31, % 2014 2013 $ Change Change Selling, general and administrative expense $32,178 $30,132 $2,046 6.8%Percent of sales 23.9% 25.0% (1.1)% 12Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Selling, general and administrative expense (“SG&A”) consists primarily of payroll and related expenses for the sales and administrative staff, professionalfees (including accounting, legal and technology costs and expenses), and sales and marketing costs. SG&A in fiscal 2014 increased from fiscal 2013 duelargely to an increase in payroll related expenses. Employee headcount increased incrementally from 400 to 424, but stayed consistent at approximately 425employees in fiscal 2014, resulting in an overall higher payroll expense in fiscal 2014. As a percentage of distribution sales, SG&A decreased due to sales employees hired in the previous year working and selling at a higher efficiency in fiscalyear 2014. It generally takes a year before new sales employees generate revenues comparable to existing sales employees as they must go through trainingand become accustomed to the company policies and procedures. The Company was able to increase its sales revenues while the Company minimized itsoverhead costs, which increased at a lower percentage. Other Income (Expense), Net (dollars in thousands) Fiscal Year Ended August 31, $ % Other income (expense): 2014 2013 Change Change Realized (loss)/gain on sales of marketable trading securities $(22) $10 $(32) (320.0)%Unrealized gain on marketable trading securities 3 5 (2) (40.0)Gain on sale of assets 1,495 730 765 104.8 Interest expense, net (307) (584) 277 47.4 Other income (expense), net $1,169 $161 $1,008 Other income (expense), net as a percent of sales 0.9% 0.1% 0.8% Other income (expense) includes income or losses on investments in short-term marketable equity securities of other publicly-held domestic corporations,gain on sale of real estate assets and interest expense. The Company’s investment strategy consists of both long and short positions, as well as utilizingoptions to improve return. The Company experienced net realized and unrealized loss from trading securities of $19,000 during fiscal year 2014 and netrealized and unrealized gains from trading securities of $15,000 during fiscal 2013, due mainly to holding short positions during the year at a time of ageneral market increase. For fiscal 2014, the Company sold the Orange Park Property and the Sylmar Properties in October 2013 and June 2014, respectively, realizing a total gain of$1,495,000. For fiscal 2013, the Company sold its real estate properties in Brooksville, Florida (the “Brooksville Property”) and in Deland, Florida (the“Deland Property) in January 2013 and April 2013, respectively, realizing a total gain of $730,000. In addition, interest expense decreased in fiscal 2014 compared to fiscal 2013 due to the payoff of the mortgages on the Orange Park and Sylmar Properties infiscal 2014 and a decrease in the amounts outstanding under the Company’s line of credit due to the cash generated from the Company’s operations and thesale of the real estate properties during fiscal 2014. Income Tax Provision (dollars in thousands) Fiscal Year Ended August 31, $ % 2014 2013 Change Change Income tax provision $1,009 $1,309 $(300) (22.9)%Effective tax rate 16.7% 33.9% (17.2)% The provision for income taxes decreased by $300,000 in fiscal 2014 as compared to fiscal 2013, which was partly due to utilizing the capital loss carryforwards to offset the gain from the sale of the Orange Park and Sylmar Properties. 13Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Liquidity and Capital Resources The Company has historically been funded from positive cash flow from its operations. In addition, the Company has a revolving line of credit agreementwith Community Bank, which currently provides for borrowings of up to $10.0 million and bears interest at either the 30, 60 or 90 day LIBOR (the 90 dayLIBOR at August 31, 2014 and 2013 was 0.23% and 0.26%, respectively) plus 1.75% or the bank’s reference rate (3.25% at August 31, 2014 and 2013).Borrowings are secured by substantially all assets of the Company and are guaranteed by the Company’s Chief Executive Officer and Chairman of the Board,Glen F. Ceiley. The agreement, as amended in April 2014, expires in March 2016. The amount outstanding under this line of credit as of August 31, 2014 and2013 was $1,684,000 and $6,479,000, respectively. Availability under the line of credit was $8,316,000 and $3,521,000 at August 31, 2014 and 2013,respectively. The agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of August 31,2014 and August 31, 2013, the Company was in compliance with all such covenants. In June 2014, the Company completed the sale of the Sylmar Properties and paid off the related mortgage of approximately $5,005,000 in full. The loan waspreviously classified as long-term debt on the consolidated balance sheet as of August 31, 2013. In July 2014, the Company settled the largest workers’ compensation claim related to the Company's discontinued restaurant operations for $1,250,000 incash. The reserve related to this claim was approximately $2,236,000 at the time of the settlement. Accordingly, a gain of $592,000 net of income tax of$394,000 was recorded in the consolidated statement of operations as a gain on settlement of liabilities of discontinued operations as of August 31, 2014. Cash Flows from Operating Activities During fiscal 2014, the Company generated $1,179,000 in net cash from its operating activities. This was due primarily to net income of $5,611,000 in fiscal2014 and an increase in trade accounts payable. This was offset in part by increases in accounts receivables and the non-cash gains related to the sale of realproperty and settlement of liabilities on discontinued operations. During fiscal 2013, the Company generated $680,000 in net cash from its operating activities. This was due primarily to income before depreciation in fiscal2013. This was offset in part by increases in inventory. Cash Flows from Investing Activities Net cash flow provided by investing activities was $10,266,000 for fiscal 2014. This was primarily due to the Company’s disposition of the Orange ParkProperty and Sylmar Property in fiscal 2014, resulting in net cash of $646,000 and $3,473,000, respectively. This increase was offset in part by theCompany’s purchase of property and equipment, which consisted primarily of equipment and leasehold improvements during fiscal 2014. Net cash flow provided by investing activities was $891,000 for fiscal 2013. This was primarily due to the Company’s disposition of the Brooksville Propertyand Deland Property in fiscal 2013, resulting in net cash of $579,000 and $650,000, respectively, plus $350,000 of the sale price of the Deland Property paidwith a promissory note. This increase was offset in part by the Company’s purchase of property and equipment, which consisted primarily of equipment andleasehold improvements during fiscal 2013, and the Company’s purchase of a number of securities at the end of fiscal 2013. Cash Flows from Financing Activities Cash used in financing activities fiscal 2014 was $9,717,000 mainly due to the Company’s net payments during the year on its revolving credit facility andthe repayment of the mortgages related to the Sylmar and Orange Park properties in connection with the sale of these properties in fiscal 2014. Cash used in financing activities for fiscal 2013 was $2,974,000 mainly due to the Company’s net payments during the year on its revolving credit facility.Additionally, the Company repaid the mortgage related to the Brooksville Property in connection with the sale of that property in fiscal 2013. 14Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future effect on the financial position, revenues, results ofoperations, liquidity or capital expenditures. Contractual Financial Obligations In addition to using cash flow from operations, the Company finances its operations through borrowings from banks and the leasing of certain equipment andfacilities. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result that debtagreements and obligations under capital leases are recorded as liabilities in the accompanying balance sheets while obligations under operating leases aredisclosed in the Notes to the accompanying consolidated financial statements. Item 7A. 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 underthis item. Item 8. Financial Statements And Supplementary Data The financial statements required by Regulation S-X are included in Part IV, Item 15 of this report. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures (a) Evaluation of disclosure controls and procedures. As required by Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the periodcovered by this report the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls andprocedures. This evaluation was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, who also serves asthe Company’s principal financial officer. Based upon that evaluation, the Company’s Chief Executive Officer has concluded that the Company’s controlsand procedures were effective as of August 31, 2014. (b) Management’s annual report on internal control over financial reporting. Management is responsible for establishing and maintaining adequateinternal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financialreporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of its Chief Executive Officer, assessed the effectiveness of the Company’s internal control over financialreporting as of August 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in its report entitled “Internal Control-Integrated Framework.” Based on that assessment under such criteria, managementconcluded that the Company’s internal control over financial reporting was effective as of August 31, 2014. Due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and/or that the degree ofcompliance 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. 15Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act. As such, this annual report does not include an attestationreport of our independent registered public accounting firm regarding internal control over financial reporting. (c) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during thefourth quarter of the year ended August 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting. Item 9B. Other Information None PART III Item 10. Directors, Executive Officers and Corporate Governance Set forth below is certain information, as of November 1, 2014, regarding our directors and executive officers, including information regarding theexperience, qualifications, attributes or skills of each director that led the Board of Directors to conclude that the person should serve on the Board. Directors and Executive Officers Glen F. Ceiley currently serves as Chairman of the Board and Chief Executive Officer of the Company. Stephen Catanzaro, Jay Conzen and William L.Means also currently serve as directors of the Company. Each director serves a one-year term, or until such director’s successor has been elected and qualified.Each officer holds office at the discretion of the Company’s Board, or until the officer’s successor has been elected and qualified. Glen F. Ceiley, 68, has served as EACO’s Chief Executive Officer and Chairman of the Board since 1999. Mr. Ceiley is also the Chief Executive Officer andChairman of the Board of Bisco, and has held those positions since he founded Bisco in 1973. He also served as President of Bisco prior to June 2010. Inaddition, Mr. Ceiley is a former director of Data I/O Corporation, a publicly-held company that provides programming systems for electronic devicemanufacturers. Mr. Ceiley has served as a director of the Company since 1998. As the founder of Bisco with over 40 years of experience in that industry, Mr.Ceiley is uniquely qualified to provide insights into and guidance on the industry and growth and development of the Company. Stephen Catanzaro, 61, has served as the Chief Financial Officer of Allied Business Schools, Inc., a company that provides home study courses and distanceeducation, since April 2004. Prior to that, Mr. Catanzaro was the Chief Financial Officer of V&M Restoration, Inc., a building restoration company, fromSeptember 2002 to February 2004, and the Chief Financial Officer of Bisco. Mr. Catanzaro has served as a director of the Company since 1999. Mr. Catanzarooffers to the Board valuable business and strategic insights obtained through his work in a variety of industries, as well as experience as a certified publicaccountant which is invaluable to his service in the Audit Committee. Jay Conzen, 68, has served as the President of Old Fashioned Kitchen, Inc., a national food distributor, since April 2003 and as a Director since 2011. Prior tothat, from October 1992 to April 2003, Mr. Conzen was the principal of Jay Conzen Investments, an investment advisor. Mr. Conzen also served as aconsultant to EACO from August 1999 until January 2001 and from October 2001 to April 2003. Mr. Conzen has served as a director of the Company since1998. Having served as an executive officer of several companies, Mr. Conzen offers to the Board a wealth of management and leadership experience as wellas an understanding of issues faced by businesses. He also served as a certified public accountant for a number of years. 16Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. William L. Means, 71, served as the Vice President of Information Technology of Bisco from 2001 until his retirement in June 2010. Prior to that, from 1997to 2001, Mr. Means was Vice President of Corporate Development of Bisco. Mr. Means has served as a director of the Company since July 1999. He holds anM.B.A. degree from San Jose State University. Mr. Means provides extensive industry expertise to the Board, as well as a deep and broad understanding ofthe Company and its operations resulting from his years of service as an officer of Bisco. Donald S. Wagner, 52, has served as the President of Bisco since June 2010 and as its Chief Operating Officer since November 2007. Prior to his promotionto President, Mr. Wagner also held the title of Executive Vice President of Bisco from November 2007. Mr. Wagner has worked at Bisco since 1994 in anumber of other capacities, including as Vice President of Product Management. Prior to joining Bisco, Mr. Wagner worked in the Defense division atRockwell International. He holds a B.A. degree in Communications from California State University, Fullerton. Michael Narikawa, 33, has served as the Controller of EACO and Bisco since May 2014. Prior to his promotion as Controller, Mr. Narikawa served as Bisco’sAccounting Supervisor from February 2009 to April 2014. Prior to joining Bisco, he was a Senior Auditor at KPMG, LLP from June 2005 to December 2008.Mr. Narikawa has a B.S. degree in Business Administration with a concentration in Accountancy from California Polytechnic State University, San LuisObispo. Zach Ceiley, 34, has served as the Vice President of Sales and Marketing of Bisco since September 2012. Prior to such promotion, Mr. Ceiley was theNorthern Regional Manager of Bisco from September 2010. Since he joined Bisco in February 2003, Mr. Ceiley has served the Company in a number of othercapacities in the sales department, including as Cell Manager and Area Manager. Mr. Ceiley has a B.S. degree in Communication from the University ofColorado. Zach Ceiley is the son of Glen Ceiley, EACO’s Chairman of the Board, Chief Executive Officer and majority shareholder and Bisco’s ChiefExecutive Officer and Chairman of the Board. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires certain officers of the Company and its directors, and persons who beneficially own more than ten percent of anyregistered class of the Company’s equity securities, to file reports of ownership in such securities and changes in ownership in such securities with the SEC.Specific due dates for these reports have been established, and we are required to report any failure to file by such dates. For fiscal 2014, the following Form 4filings were not made within two business days of the applicable transaction: (i) filing by Mr. Glen Ceiley for the sale on November 11, 2013 of 100 shares ofcommon stock held in the Bisco Industries, Inc. Profit Sharing and Savings Plan and (ii) filing by Mr. Stephen Catanzaro for the sale on April 17, 2014 of 690shares of common stock. Based solely on our review of copies of the reports on Forms 3, 4 and 5 received by us during or with respect to the fiscal year endedMarch 31, 2013 and written representations received from the reporting persons that no other reports were required, except as indicated in the foregoingsentence, we believe that all directors, executive officers and persons who own more than 10% of our common stock have complied with the reportingrequirements of Section 16(a) and have filed all reports required by such section. Based solely on a review of the reports and written representations providedto the Company by the above referenced persons, the Company believes that, with respect to fiscal year 2014, except as indicated above, all filingrequirements applicable to its reporting officers, directors and greater than ten percent beneficial owners were timely satisfied. Code of Ethical Conduct The Company has adopted a code of ethics applicable to the Company’s senior executive and financial officers. You may receive, without charge, a copy ofthe Financial Code of Ethical Conduct by contacting our Corporate Secretary at 1500 N. Lakeview Avenue, Anaheim, California 92807. 17Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Audit Committee The Audit Committee’s basic functions are to assist the Board in discharging its fiduciary responsibilities to the shareholders and the investment communityin the preservation of the integrity of the financial information published by the Company, to maintain free and open means of communication between theCompany’s directors, independent auditors and financial management, and to ensure the independence of the independent auditors. The Board has adopteda written charter for the Audit Committee which is attached as Annex A to the Company’s Proxy Statement for the 2013 Annual Meeting of Shareholders, asfiled with the SEC on April 8, 2013. The Audit Committee charter is not available on the Company’s website. Currently, the members of the AuditCommittee are Messrs. Catanzaro, Conzen (Chairman) and Means. As indicated in Item 13 below, the Board has determined that Messrs. Catanzaro, Conzen,and Means are independent as defined by the NASDAQ Stock Market’s Marketplace Rules. The Board has identified Mr. Conzen as the member of the AuditCommittee who qualifies as an “audit committee financial expert” under applicable SEC rules and regulations governing the composition of the AuditCommittee. Item 11. Executive Compensation The Executive Compensation Committee (the “Committee”) is responsible for establishing the salary and annual bonuses paid to executive officers of EACOand administering EACO’s equity incentive plans, if any, including granting stock options to officers and employees of EACO. The Committee has notadopted a formal charter. The current members of the Committee are Messrs. Glen Ceiley and William Means. The officers of EACO are Mr. Ceiley, the Chief Executive Officer, and Mr. Michael Narikawa, the Controller. Due to the nature of EACO’s operations andrelated financial results, no additional salary or other compensation for their service as officers of EACO was determined to be necessary and no suchcompensation was provided to Mr. Ceiley or Mr. Narikawa during fiscal 2014 and fiscal 2013. However, both of them receive compensation from Bisco fortheir services to Bisco. All compensation for the named executive officers for fiscal 2014 and fiscal 2013 were paid by Bisco. The compensation of named executive officers whoserve as officers of Bisco are determined by Bisco’s Chairman of the Board, Glen Ceiley. Bisco currently does not pay bonuses or other incentivecompensation to the named executive officers. Summary Compensation The following table sets forth information regarding compensation earned from the Company (including from Bisco, our wholly-owned subsidiary) duringfiscal 2014 and fiscal 2013 by (i) our Chief Executive Officer, (ii) two other most highly compensated executive officers who were employed by theCompany (including Bisco) as of August 31, 2014 and whose total compensation exceeded $100,000 during that year. The officers listed below arecollectively referred to as the “named executive officers” in this report. Name and Principal All Other Position Fiscal Year Salary Compensation Total Glen F. Ceiley, 2014 $350,000 $— $350,000 Chief Executive Officer and 2013 335,000 — 335,000 Chairman of the Board of EACO and Bisco Donald Wagner, 2014 222,000 — 222,000 President of Bisco 2013 216,000 — 216,000 Zachary Ceiley, Vice President 2014 138,000 — 138,000 of Sales and Marketing of Bisco 2013 142,000 — 142,000 18Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Outstanding Equity Awards at Fiscal Year-End The Company did not grant any equity awards during fiscal 2014 to any named executive officer and no outstanding equity awards were held by the namedexecutive officers at August 31, 2014. Director Compensation The Company pays $10,000 per year in cash to each director not employed by EACO or its subsidiary as compensation for their services. In addition,directors who do not receive a salary from EACO or its subsidiary receive a fee of $500 for each Board meeting attended. No fees are awarded to directors forattendance at meetings of the Audit Committee or the Executive Compensation Committee of the Board. The following table sets forth the compensation of certain Company directors for the year ended August 31, 2014. (See the above “Summary Compensation”for information regarding Mr. Ceiley). Director Fees Earned or Paid in Cash All Other Compensation Total Stephen Catanzaro $12,000 $– $12,000 Jay Conzen 12,000 – 12,000 William Means 12,000 – 12,000 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security Ownership of Certain Beneficial Owners and Management The table below presents certain information regarding beneficial ownership of the Company’s common stock (the Company’s only voting security) as ofNovember 15, 2014 (i) by each shareholder known to the Company to own more than five percent (5%) of the outstanding common stock, (ii) by each namedexecutive officer and director of the Company, and (iii) by all directors and executive officers of the Company as a group. Under the rules of the SEC, thedeterminations of “beneficial ownership” of the Company’s common stock are based upon Rule 13d-3 under the Exchange Act. Under Rule 13d-3, shareswill be deemed to be “beneficially owned” when a person has, either solely or with others, the power to vote or to direct the voting of shares and/or the powerto dispose, or to direct the disposition of shares, or where a person has the right to acquire any such power within 60 days after the date such beneficialownership is determined. Shares of the Company’s common stock that a beneficial owner has the right to acquire within 60 days are deemed to beoutstanding for the purpose of computing the percentage ownership of such owner but are not deemed outstanding for the purpose of computing thepercentage ownership of any other person. Shares of Name and Address of Common Stock Percent of Beneficial Owner (1) Beneficially Owned Class(2) Stephen Catanzaro — — Glen F. Ceiley(3) 4,821,734 98.4%Jay Conzen — — William L. Means 322 * Donald Wagner — — Zachary Ceiley 140 * Michael Narikawa — — All executive officers and directors as a group (7 persons)(3) 4,822,196 98.4%*Less than 1%(1)The address for each person named in the table is c/o Bisco Industries, Inc., 1500 North Lakeview Avenue, Anaheim, CA 92807. 19Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (2)Based on 4,861,590 shares outstanding as of November 1, 2014.(3)Includes (i) 4,705,313 shares held directly by Mr. Ceiley; (ii) 6,000 shares held by Mr. Ceiley’s wife; (iii) 839 shares held in his IRA; and(iv) 40,000 shares issuable upon conversion of the 36,000 shares of Series A Cumulative Convertible Preferred Stock (not including any dividends accruedbut not yet paid) held by Mr. Ceiley. Mr. Ceiley has the sole power to vote and dispose of the shares of common stock he owns individually. Item 13. Certain Relationships and Related Transactions and Director Independence Certain Relationships and Related Transactions Since September 1, 2012, except as described below or under Item 11 (Executive Compensation), there has not been, nor is there any proposed transaction,where we (or any of our subsidiaries) were or will be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent ofthe average of the Company’s total assets at year end for the last two fiscal years and in which any director, director nominee, executive officer, holder ofmore than 5% of any class of our voting securities, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirectmaterial interest. The Company leases three buildings under operating lease agreements from its CEO and majority shareholder, Glen Ceiley. During the years ended August31, 2014 and 2013, the Company paid approximately $625,000 and $592,000, respectively, in rent with respect to these leases. Director Independence The Company’s Board consists of the following directors: Stephen Catanzaro, Glen Ceiley, Jay Conzen and William L. Means. The Board has determinedthat three of its four directors, Stephen Catanzaro, Jay Conzen and William L. Means, are independent as defined by the NASDAQ Stock Market’sMarketplace Rules. In addition to such rules, the Board considered transactions and relationships between each director (and his immediate family) and theCompany to determine whether any such relationships or transactions were inconsistent with a determination that the director is independent. As a result, theBoard determined that Mr. Ceiley is not independent, as he is an employee of Bisco and member of Bisco’s steering committee. Bisco’s steering committeehandles the day to day operations of the Company, and Mr. Ceiley has been intimately involved with decision-making that directly affects the financialstatements of the Company. Currently, the members of the Audit Committee are Messrs. Catanzaro, Conzen (Chairman) and Means. Item 14. Principal Accounting Fees and Services Audit Committee Pre-Approval Policies and Procedures The Audit Committee is required to pre-approve all auditing services and permissible non-audit services, including related fees and terms, to be performed forthe Company by its independent auditor, subject to the de minimus exceptions for non-audit services described under the Exchange Act, which are approvedby the Audit Committee prior to the completion of the audit. The Audit Committee also considers whether the provision by its independent accounting firmof any non-audit related services is compatible with maintaining the independence of such firm. For fiscal 2014 and fiscal 2013, the Audit Committee pre-approved all services performed for the Company by the auditor. 20Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Audit Fees The aggregate fees billed by Squar, Milner, Peterson, Miranda & Williamson, LLP (“Squar Milner”), the Company’s independent accounting firm for theyears ended August 31, 2014 and 2013 for professional services rendered for the audit of the financial statements included in the Company’s annual report onform 10-K and for the reviews of the unaudited financial statements included in the Company’s quarterly reports on Form 10-Q for the quarters ended duringthe years ended August 31, 2014 and 2013 were $170,000 for each year. Audit-Related Fees The Company was not billed any audit-related fees by Squar Milner for the years ended August 31, 2014 and 2013. Tax Fees The Company was not billed any fees by Squar Milner for the years ended August 31, 2014 and 2013 for professional services rendered for tax compliance,tax advice or tax planning. All Other Fees The Company was not billed any fees by Squar Milner for the years ended August 31, 2014 and 2013 for products and services provided to the Company,other than for the services described above. PART IV Item 15. Exhibits, Financial Statement Schedules (a) The financial statements listed below and commencing on the pages indicated are incorporated herein by reference and filed as part of this report on Form10-K. Report of Independent Registered Public Accounting FirmF-1Consolidated Balance Sheets as of August 31, 2014 and 2013F-2Consolidated Statements of Operations for the years ended August 31, 2014 and 2013F-3Consolidated Statements of Comprehensive Income for the years ended August 31, 2014 and 2013F-4Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2014 and 2013F-5Consolidated Statements of Cash Flows for the years ended August 31, 2014 and 2013F-6Notes to the Consolidated Financial StatementsF-7Schedule II – Valuation and Qualifying Accounts (b) The exhibits listed in the accompanying “Exhibit Index” immediately following the financial statements are filed herewith or incorporated by referenceas indicated. 21Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. EACO Corporation November 28, 2014 /s/ Glen Ceiley By: Glen Ceiley Its: Chairman of the Board and Chief Executive Officer (principal executive officer and principal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in thecapacities and on the date indicated. Signature Title Date /s/ Glen F. Ceiley Chairman of the Board and Chief Executive Officer 11/28/14Glen F. Ceiley (principal executive officer and principal financial officer) /s/ Michael Narikawa Controller (principal accounting officer) 11/28/14Michael Narikawa /s/ Steve Catanzaro Director 11/28/14Steve Catanzaro /s/ Jay Conzen Director 11/28/14Jay Conzen /s/ William Means Director 11/28/14William Means 22Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting FirmF-1 Consolidated Balance Sheets as of August 31, 2014 and 2013F-2 Consolidated Statements of Operations for the years ended August 31, 2014 and 2013F-3 Consolidated Statement of Comprehensive Income for the years ended August 31, 2014 and 2013F-4 Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2014 and 2013F-5 Consolidated Statements of Cash Flows for the years ended August 31, 2014 and 2013F-6 Notes to the Consolidated Financial StatementsF-7 Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and ShareholdersEACO CorporationAnaheim, California We have audited the accompanying consolidated balance sheets of EACO Corporation and Subsidiaries (the “Company”) as of August 31, 2014 and 2013and the related consolidated statements of operations, comprehensive income, shareholders' equity, and cash flows for the years then ended. These financialstatements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on ouraudits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures that were appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EACO Corporation andSubsidiaries as of August 31, 2014 and 2013 and the results of their operations and their cash flows for the years then ended, in conformity with U.S.generally accepted accounting principles. /s/ Squar, Milner, Peterson, Miranda and Williamson, LLP Newport Beach, CaliforniaNovember 28, 2014 F-1Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Balance Sheets(in thousands, except share and per share information) August 31, August 31, 2014 2013 ASSETS Current Assets: Cash and cash equivalents $3,480 $1,507 Restricted cash, current portion 642 – Trade accounts receivable, net 17,795 14,438 Inventory, net 14,863 14,272 Marketable securities, trading 73 1,395 Assets held for sale – 7,988 Prepaid expenses and other current assets 1,104 619 Total current assets 37,957 40,219 Non-current Assets: Restricted cash, non-current 322 548 Equipment and leasehold improvements, net 1,603 1,396 Other assets 1,001 2,317 Total assets $40,883 $44,480 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Trade accounts payable $11,192 $9,315 Accrued expenses and other current liabilities 3,508 2,880 Liabilities of discontinued operations – short-term 48 146 Liability for short sales of trading securities 642 – Liabilities of assets held for sale – 5,397 Total current liabilities 15,390 17,738 Non-current Liabilities: Liabilities of discontinued operations – long-term 274 2,410 Deposit liability – 87 Long-term debt 1,728 6,534 Total liabilities 17,392 26,769 Shareholders’ Equity: Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding(liquidation value $900) 1 1 Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding 49 49 Additional paid-in capital 12,378 12,378 Accumulated other comprehensive income 1,065 820 Retained earnings 9,998 4,463 Total shareholders’ equity 23,491 17,711 Total liabilities and shareholders’ equity $40,883 $44,480 See accompanying notes to consolidated financial statements. F-2Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Operations(in thousands, except per share amounts) Year Ended August 31, 2014 2013 Revenues $134,747 $120,432 Cost of revenues 97,710 86,600 Gross margin 37,037 33,832 Operating expenses: Selling, general and administrative expenses 32,178 30,132 Income from operations 4,859 3,700 Other income (expense): Net (loss) gain on trading securities (19) 15 Gain on sale of property 1,495 730 Interest and other expense, net (307) (584)Total other income (expense) 1,169 161 Income from continuing operations before income taxes 6,028 3,861 Provision for income taxes 1,009 1,309 Net income from continuing operations 5,019 2,552 Discontinued operations: Gain on settlement of liabilities of discontinued operations, net of tax $394 592 – Net Income 5,611 2,552 Cumulative preferred stock dividend (76) (76)Net income attributable to common shareholders $5,535 $2,476 Basic and diluted earnings per share Net Income from continuing operations $1.02 $0.51 Net Income from discontinued operations 0.12 – Net income attributable to common shareholders 1.14 0.51 Basic and diluted weighted average common shares outstanding 4,861,590 4,861,590 See accompanying notes to consolidated financial statements. F-3Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Comprehensive Income(in thousands) For the Year Ended August 31, 2014 August 31, 2013 Net income $5,611 $2,552 Other comprehensive income, net of tax: Foreign translation gain 245 342 Total comprehensive income $5,856 $2,894 See accompanying notes to consolidated financial statements. F-4Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Shareholders’ EquityFor the Years Ended August 31, 2014 and 2013(in thousands, except share information) ConvertiblePreferred Stock Common Stock AdditionalPaid-in AccumulatedOtherComprehensive Accumulated TotalShareholder Shares Amount Shares Amount Capital Income Earnings Equity Balance, August 31, 2012 36,000 $1 4,861,590 $49 $12,378 $478 $1,987 $14,893 Preferred dividends (76) (76)Net income 2,552 2,552 Comprehensive income: Foreign translation gain 342 342 Comprehensive income 2,894 Balance, August 31, 2013 36,000 1 4,861,590 49 12,378 $820 4,463 17,711 Preferred dividends (76) (76)Net income 5,611 5,611 Comprehensive income: Foreign translation gain 245 245 Comprehensive income 5,856 Balance, August 31, 2014 36,000 $1 4,861,590 $49 $12,378 $1,065 $9,998 $23,491 See accompanying notes to consolidated financial statements. F-5Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Cash Flows(in thousands) Year Ended August 31, 2014 2013 Operating activities: Net income $5,611 $2,552 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 539 616 Bad debt expense 12 137 Inventory reserve 100 (48)Gain on sale of property (1,495) (730)Gain on settlement of liabilities on discontinued operations (986) - Net loss (gain) on investments 19 (15)(Increase) decrease in: Trade accounts receivable (3,369) (602)Inventory (691) (2,035)Prepaid expenses and other assets 831 574 Increase (decrease) in: Trade accounts payable 1,332 50 Accrued expenses and other current liabilities 610 398 Deposit liability (87) (60)Liabilities of discontinued operations (1,247) (157)Net cash provided by operating activities 1,179 680 Investing activities: Purchase of property and equipment (746) (756)Sale of marketable securities, trading 1,303 0 Proceeds from securities sold short 642 (1,183)Proceeds from sale of property 9,483 2,830 Change in restricted cash (416) - Net cash provided by investing activities 10,266 891 Financing activities: Payments on revolving credit facility (4,797) (971)Payment of preferred dividend (57) (76)Bank overdraft 545 (254)Payments on long-term debt - real estate held for sale (5,397) - Payments on long-term debt (11) (1,673)Net cash (used in) financing activities (9,717) (2,974)Effect of foreign currency exchange rate changes on cash and cash equivalents 245 342 Net increase (decrease) in cash and cash equivalents 1,973 (1,061) Cash and cash equivalents - beginning of period 1,507 2,568 Cash and cash equivalents - end of period $3,480 $1,507 Supplemental disclosures of cash flow information: Cash paid for interest $296 $815 Cash paid for taxes $666 $276 See accompanying notes to consolidated financial statements. F-6Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAugust 31, 2014 and 2013 Note 1.Organization and Basis of Presentation EACO Corporation (“EACO”) is a holding company, primary comprised of is its wholly-owned subsidiary, Bisco Industries, Inc. (“Bisco”). Bisco wasincorporated in Illinois in 1974 and is a distributor of electronic components and fasteners with 45 sales offices and six distribution centers locatedthroughout the United States and Canada. 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. EACO was incorporated in the State of Florida in September 1985. From the inception of EACO through June 2005, EACO’s business consisted of operatingrestaurants in the State of Florida. On June 29, 2005, EACO sold all of its operating restaurants. As of August 31, 2014, the only remaining activity of EACOrelates to its self-insured workers’ compensation claim liability, which is presented as liabilities of discontinued operations on the Company’s balance sheets. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include allowance fordoubtful trade accounts receivable, slow moving and obsolete inventory reserves, recoverability of the carrying value and estimated useful lives of long-lived assets, workers’ compensation liability and the valuation allowance against deferred tax assets. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements for all periods presented include the accounts of EACO, its wholly-owned subsidiary, Bisco Industries, Inc., andBisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited (which are collectively referred to herein as the “Company”, “we”, “us” and “our”). Allsignificant intercompany transactions and balances have been eliminated in consolidation. Note 2.Significant Accounting Policies 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. Restricted Cash The State of Florida Division of Workers’ Compensation (the “Division”) requires self-insured companies to pledge collateral in favor of the Division in anamount sufficient to cover the projected outstanding liability. In compliance with this requirement, the Company pledged a certificate of deposit of $322,000at August 31, 2014. The collateral amount was reduced during the year ended August 31, 2014 due to a settlement of the largest workers compensation claimin July 2014. See Note 9 for further discussion. Trade Accounts Receivable Trade accounts receivable are carried at original invoice amount, less an estimate for an allowance for doubtful accounts. Management determines theallowance for doubtful accounts by identifying probable credit losses in the Company’s accounts receivable and reviewing historical data to estimate thecollectability on items not yet specifically identified as problem accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveriesof trade accounts receivable previously written off are recorded when received. A trade account receivable is considered past due if any portion of thereceivable balance is outstanding for more than 30 days. The Company does not charge interest on past due balances. The allowance for doubtful accountswas $111,000 and $183,000 at August 31, 2014 and 2013, respectively. F-7Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Inventories Inventories consist primarily of electronic fasteners and components, and are stated at the lower of cost or estimated market value. Cost is determined usingthe average cost method. Inventories are presented net of a reserve for slow moving or obsolete items of $1,024,000 and $924,000 at August 31, 2014 and2013, respectively. The reserve is based upon management’s review of inventories on-hand over their expected future utilization and length of time held bythe Company. Real Estate Properties Held for Leasing During fiscal 2014, the Company sold its remaining real estate properties, comprised of the Orange Park Property and the Sylmar Properties, in October 2013and June 2014, respectively. Equipment and Leasehold Improvements Equipment and leasehold improvements are stated at cost net of accumulated amortization. Depreciation on equipment is calculated on the straight-linemethod over the estimated useful lives of the assets, ranging from five to seven years. Leasehold improvements are amortized over the estimated useful life ofthe asset or the remaining lease term, whichever is less. Maintenance and repairs are charged to expense as incurred. Renewals and improvements of a majornature are capitalized. At the time of retirement or disposition of property and equipment, the cost and accumulated depreciation or amortization are removedfrom the accounts and any gains or losses are reflected in earnings. Impairment of Long Lived Assets The Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measuredby 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 areconsidered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value. Marketable Securities, Trading The Company invests in marketable trading securities which include long and short positions in equity securities. Short positions represent securities sold,not yet purchased. Short sales result in obligations to purchase securities at a later date. These securities are stated at fair value, which is determined using the quoted closing or latest bid prices at each reporting date. Realized gains and losses oninvestment transactions are determined by the average cost method and are recognized as incurred in the consolidated statements of operations. Netunrealized gains and losses are reported in the statements of operations and represent the change in the market value of investment holdings during theperiod. At August 31, 2014 and 2013, marketable securities consisted of equity securities (including equity options) of publicly-held domestic companies. Revenue Recognition Management generally recognizes revenue at the time of product shipment, as the Company’s shipping terms are FOB shipping point. Revenue is consideredto be realized or realizable and earned when there is persuasive evidence of a sales arrangement in the form of an executed contract or purchase order, theproduct has been shipped, the sales price is fixed or determinable, and collectability is reasonably assured. F-8Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Income Taxes Deferred taxes on income result from temporary differences between the reporting of income for financial statement and tax reporting purposes. A valuationallowance 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 makingsuch determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projectedfuture taxable income (if any), tax planning strategies and recent financial performance. We provide tax contingencies, if any, for federal, state, local and international exposures relating to audit results, tax planning initiatives and complianceresponsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of these taxaudits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. Ifactual outcomes differ materially from these estimates, they could have a material impact on our results of operations. Freight and Shipping/Handling Shipping and handling expenses are included in cost of goods sold, and were approximately $2,407,000 and $2,257,000 for the years ended August 31, 2014and 2013, respectively. Liabilities of Discontinued Operations Prior to June 2005, EACO self-insured workers’ compensation claims losses up to certain limits. The liability for workers’ compensation represents anestimate of the present value of the ultimate cost of uninsured losses which are unpaid as of the balance sheet dates. The estimate is frequently reviewed andadjustments to the Company’s estimated claim liability, if any, are reflected in discontinued operations. At each fiscal year end, the Company obtains anactuarial report which estimates its overall exposure based on historical claims and an evaluation of future claims. The Company pursues recovery of certainclaims from an insurance carrier. Recoveries, if any, are recognized when realization is reasonably assured. Leases Certain Company leases for its sales offices and distribution centers provide for minimum annual payments that adjust over the life of the lease. Theaggregate minimum annual payments are expensed on the straight-line basis over the minimum lease term. The Company recognizes a deferred rent liabilityfor rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceedthe straight-line rent expense. Earnings Per Common Share Basic earnings per common share for the years ended August 31, 2014 and 2013 were computed based on the weighted average number of common sharesoutstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, givingeffect to all potentially dilutive common shares that were outstanding during the respective periods. Potentially dilutive common shares represent 40,000common shares issuable upon conversion of 36,000 shares of convertible preferred stock, which were outstanding at August 31, 2014 and 2013. Suchsecurities are excluded from the weighted average shares outstanding used to calculate diluted earnings per common share for the years ended August 31,2014 and 2013 as their inclusion would be anti-dilutive since the conversion price was greater than the average market price of the Company’s commonstock during these periods. F-9Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Foreign Currency Translation and Transactions Assets and liabilities recorded in functional currencies other than the U.S. dollar (Canadian dollars for the Bisco’s Canadian subsidiary) are translated intoU.S. dollars at the period-end rate of exchange. Revenue and expenses are translated at the weighted-average exchange rates for the years ended August 31,2014 and 2013. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income or loss. The averageexchange rates for the years ended August 31, 2014 and August 31, 2013 were $0.93 and $0.95 respectively. Concentrations Financial instruments that subject the Company to credit risk include cash balances in excess of federal depository insurance limits and accounts receivable.Cash accounts maintained by the Company at U.S. and Canadian financial institutions are insured by the Federal Deposit Insurance Corporation andCanadian Deposit Insurance Corporation, respectively. A significant portion of the Company’s cash was held by its Canadian subsidiary. The Company hasnot experienced any losses in such accounts. Net sales to customers outside the United States and related trade accounts receivable were approximately 7% and 10% of total sales and trade accountsreceivable, respectively, at August 31, 2014, and 7% and 5%, respectively, at August 31, 2013. No single customer accounted for more than 10% of totalrevenues for either of the years ended August 31, 2014 or 2013. Total assets held outside the United States comprised 6% as of August 31, 2014 and 2013. Estimated Fair Value of Financial Instruments and Certain Nonfinancial Assets and Liabilities The Company’s financial instruments other than its marketable securities include cash and cash equivalents, trade accounts receivable, prepaid expenses,security deposits, trade accounts payable, line of credit, accrued expenses and long-term debt. Management believes that the fair value of these financialinstruments approximate their carrying amounts based on current market indicators, such as prevailing interest rates. The Company’s marketable securitiesare measured at fair value on a recurring basis (see Note 13). During the years ended August 31, 2014 and 2013, the Company did not have any nonfinancial assets or liabilities that were measured at estimated fair valueon a recurring or nonrecurring basis. Reclassifications The Company reclassified the prior year presentation of its real estate assets and liabilities to conform to the current year presentation. Specifically, we notedthe following significant reclassifications: (In thousands) As presented in August 31, 2013 10-K As presented in August 31, 2014 10-K Assets: Assets held for sale 460 7,988 Real estate properties held for leasing, net 7,283 - Deferred tax asset, current 1,712 - Other assets 850 2,317 Total Assets: 10,305 10,305 Liabilities: Liabilities of assets held for sale 362 5,397 Current portion of long-term debt 172 - Long-term debt 11,397 6,534 11,931 11,931 F-10Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 3.Real Estate Properties As of August 31, 2013, the Company’s real estate comprised properties located in Sylmar, California (the “Sylmar Properties”) and Orange Park, Florida (the“Orange Park Property”). In October 2013, the Company sold the Orange Park Property for $1,138,500 in cash and paid off the related mortgage. The sale ofthis property resulted in a net gain of approximately $535,000. In June 2014, the Company completed the sale of the Sylmar Properties for $9,125,000 incash and paid off the related mortgage off in full, resulting in a net gain of approximately $960,000. The associated land, buildings and improvements andrelated liabilities classified as real estate properties held for leasing on the accompanying consolidated balance sheets as of August 31, 2013. Additionally, the gross profit from rental operations relating to the Orange Park and Sylmar Properties were netted against selling, general and administrativeexpenses in the accompanying consolidated statements of operations, as such amounts were considered immaterial for the years ended August 31, 204 and2013 for separate presentation as discontinued operations. Note 4.Equipment and Leasehold Improvements Equipment and leasehold improvements are summarized as follows: August 31, 2014 August 31, 2013 Machinery and equipment $5,170,000 $4,584,000 Furniture and fixtures 807,000 793,000 Vehicles 138,000 138,000 Leasehold improvements 1,528,000 1,463,000 7,643,000 6,978,000 Less accumulated depreciation and amortization (6,040,000) (5,582,000) $1,603,000 $1,396,000 For the years ended August 31, 2014 and 2013, depreciation expense was $446,000 and $443,000 respectively. Note 5.Long-Term Debt Long-term debt is summarized as follows: August 31, August 31, 2014 2013 Line of credit to Community Bank 1,684,000 6,479,000 Note payable to BMW Bank of North America, secured by automobile, monthly principal and interestpayments totaling $901, interest at 0.9%, due June 2018 44,000 55,000 $1,728,000 $6,534,000 The Company has a revolving credit agreement with Community Bank, which currently provides for borrowings of up to $10.0 million and bears interest ateither the 30, 60 or 90 day LIBOR (the 90 day LIBOR at August 31, 2014 and 2013 was 0.23% and 0.26%, respectively) plus 1.75% or the bank’s referencerate (3.25% at August 31, 2014 and 2013). Borrowings are secured by substantially all assets of the Company and are guaranteed by the Company’s ChiefExecutive Officer and Chairman of the Board, Glen F. Ceiley. The agreement, as amended in April 2014, expires in March 2016. The amount outstandingunder this line of credit as of August 31, 2014 and 2013 was $1,684,000 and $6,479,000, respectively. Availability under the line of credit was $8,316,000and $3,521,000 at August 31, 2014 and 2013, respectively. The agreement contains certain nonfinancial and financial covenants, including the maintenanceof certain financial ratios. As of August 31, 2014 and August 31, 2013, the Company was in compliance with all such covenants. F-11Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The scheduled payments for the above loans are as follows: Years Ending August 31, 2015 $11,000 2016 1,695,000 2017 11,000 2018 11,000 $1,728,000 Note 6.Liabilities of Assets Held for Sale Liabilities of Assets Held for Sale is summarized as follows at August 31, 2013: Note payable to Community Bank, secured by the Sylmar properties, monthly principal and interest payment totaling$39,700, interest at 6.0%. This note payable was paid in full in connection with the sale of the Sylmar properties. 5,035,000 Note payable to GE Capital Franchise Finance Corporation, secured by the Orange Park property, monthly principal andinterest payments totaling $10,400, interest at thirty-day LIBOR rate +3.75% (minimum interest rate of 7.3%). Thisnote payable was paid in full in connection with the sale of the Orange Park propertu. 362,000 $5,397,000 Note 7.Shareholders’ Equity Earnings Per Common Share (EPS) The following is a reconciliation of the numerators and denominators used in the basic and diluted computations of earnings per common share: For the year ended August 31, (In thousands, except per share information) 2014 2013 EPS– basic and diluted: Net income $5,611 $2,552 Less: undeclared cumulative preferred stock dividends (76) (76)Net income available to common shareholders for basic and diluted EPS computation 5,535 2,476 Weighted average common shares outstanding for basic and diluted EPS computation 4,861,590 4,861,590 Earnings per common share – basic and diluted $1.14 $0.51 Preferred Stock The Company's Board of Directors is authorized to establish the various rights and preferences for the Company's preferred stock, including voting,conversion, dividend and liquidation rights and preferences, at the time shares of preferred stock are issued. In September 2004, the Company sold 36,000shares of its Series A Cumulative Convertible Non-Voting Preferred Stock (the “Preferred Stock”) to the Company’s CEO, with an 8.5% dividend rate at aprice of $25 per share for a total cash purchase price of $900,000. Holders of the Preferred Stock have the right at any time to convert the Preferred Stock andaccrued but unpaid dividends into shares of the Company’s common stock at the conversion price of $22.50 per share. In the event of a liquidation ordissolution of the Company, holders of the Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to shareholders$25 per share plus all unpaid dividends before any payments are made to the holders of common stock. F-12Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 8.Profit Sharing Plan The Company has a defined contribution 401(k) profit sharing plan for all eligible employees. Employees are eligible to contribute to the 401(k) plan aftersix months of employment. Under this plan, employees may contribute up to 15% of their compensation. The Company has the discretion to match 50% ofthe employee contributions up to 4% of employees’ compensation. The Company’s contributions are subject to a five-year vesting period beginning thesecond year of service. The Company’s contribution expense was approximately $206,000 and $184,000 for the years ended August 31, 2014 and 2013,respectively. Note 9.Discontinued Operations In July 2014, the Company completed a cash settlement of its largest workers’ compensation claim for $1,250,000. The reserve related to this claim wasapproximately $2,236,000 at the time of the settlement. Accordingly, a gain of $592,000 net of income tax of $394,000 was recorded in the consolidatedstatement of operations as a gain on settlement of liabilities of discontinued operations as of August 31, 2014. As of August 31, 2014 and 2013, the estimatedclaim liability was $322,000 and $2,556,000, respectively. Note 10.Income Taxes The following summarizes the Company’s provision for income taxes on income from continuing and discontinued operations: For the Year Ended August 31, 2014 2013 Current: Federal $751,000 $467,000 State 214,000 269,000 Foreign 9,000 (94,000) 974,000 642,000 Deferred: Federal (343,000) 1,113,000 State 378,000 (446,000)Foreign - - 35,000 667,000 Total $1,009,000 $1,309,000 Income taxes for the years ended August 31, 2014 and August 31, 2013 differ from the amounts computed by applying the federal statutory corporate rates of34% to the pre-tax income from continuing operations.The differences are reconciled as follows: F-13Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For the Year Ended August 31, 2014 2013 Current: Expected income tax benefit at statutory rate $2,085,000 $1,335,000 Increase (decrease) in taxes due to: - State tax, net of federal benefit 287,000 197,000 Permanent differences 29,000 24,000 Change in deferred tax asset valuation allowance (919,000) (2,392,000)Other, net (473,000) 2,145,000 Income tax expense (benefit) $1,009,000 $1,309,000 The components of deferred taxes at August 31, 2014 and 2013 are summarized below: August 31, 2014 2013 Deferred tax assets: Net operating loss $527,000 $432,000 Capital losses 99,000 1,344,000 Allowance for doubtful accounts 4,000 49,000 Accrued expenses 333,000 186,000 Accrued worker's compensation 125,000 987,000 Inventory reserve 644,000 618,000 Unrealized losses on investment (51,000) (37,000)Excess of tax over book depreciation (131,000) 562,000 Other 331,000 267,000 Total deferred tax assets 1,881,000 4,368,000 Valuation allowance (576,000) (1,495,000) 1,305,000 2,873,000 Deferred tax liabilities: Deferred gains – (1,140,000)Total deferred tax liabilities – (1,140,000) Total deferred tax assets $1,305,000 $1,733,000 At August 31, 2014, the Company has state net operating losses (NOLs) of approximately $11,000,000, which will begin to expire in fiscal year 2017. TheCompany did not have any federal NOLs at August 31, 2014. The Company also had capital loss carryforwards of approximately $258,000 which aredeductible only to the extent the Company has future capital gains. Deferred taxes on income result from temporary differences between the reporting of income for financial statement and tax reporting purposes. A valuationallowance 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 makingsuch determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projectedfuture taxable income (if any), tax planning strategies and recent financial performance. F-14Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. On January 1, 2007, we adopted ASC 740 “Income Taxes”, formerly the Financial Accounting Standards Board FASB Interpretation No. 48 an interpretationof FASB Statement No. 109 (ASC 740). ASC 740 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements.ASC 740 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken orexpected to be taken in the tax return. The Company did not recognize any additional liability for unrecognized tax benefit as a result of the implementation.The Company has no liability for unrecognized tax benefit related to tax positions for either the August 31, 2013 year end or the August 31, 2014 year end. The Company will recognize interest and penalty related to unrecognized tax benefits and penalties as income tax expense. As of August 31, 2014, theCompany has not recognized liabilities for penalty and interest as the Company does not have any liability for unrecognized tax benefits. The Company is subject to taxation in the U.S., Canada and various states. The Company’s tax years for 2010, 2011, 2012 and 2013 are subject toexamination by the taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxingauthorities for years before 2010. Note 11.Commitments and Contingencies Legal Matters 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 couldbe costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations. Wecurrently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have amaterial adverse effect on our consolidated results of operations, financial position or cash flows Lease Obligations The Company leases its facilities under operating lease agreements (three of which are with its majority shareholder – see Note 12), which expire on variousdates through September 2019 and require minimum rental payments ranging from $1,000 to $32,000 per month. Certain of the leases contain options forrenewal under varying terms. Minimum future rental payments under operating leases are as follows: Years ending August 31: 2015 $ 1,484,000 2016 891,000 2017 297,000 2018 256,000 Thereafter 22,000 $2,950,000 F-15Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Rental expense for all operating leases for the years ended August 31, 2014 and 2013 was approximately $1,975,000 and $1,758,000, respectively. Note 12.Related Party Transactions The Company leases three buildings under operating lease agreements from its CEO and majority stockholder. During the years ended August 31, 2014 and2013, the Company incurred approximately $625,000 and $592,000, respectively, of rent expense related to these leases. Note 13.Fair Value of Financial Instruments Management estimates the fair value of its assets or liabilities measured at fair value based on the three levels of the fair-value hierarchy are described asfollows: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the Company, Level 1 inputs include marketable securities thatare actively traded. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. The Company does not hold any Level 2 financial instruments. Level 3: Unobservable inputs. The Company does not hold any Level 3 financial instruments. The following table sets forth by level, within the fair value hierarchy, certain assets at estimated fair value as of August 31, 2014 and 2013: Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Total August 31, 2014 Marketable securities $73,000 - - $73,000 August 31, 2013 Marketable securities $1,395,000 - - $1,395,000 Note 14.Subsequent Events Management has evaluated events subsequent to August 31, 2014, through the date that these consolidated financial statements are being filed with theSecurities and Exchange Commission, for transactions and other events which may require adjustment of and/or disclosure in such financial statements. F-16Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT INDEXNumber Exhibit2.1 Agreements effective March 27, 2014 by and between EACO Corporation and Selective Real Estate Investments for the sale and purchase ofEACO’s real properties in Sylmar, CA (Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on April 14, 2014,is incorporated herein by reference)2.2 First Amendment to Standard Offer, Agreement and Escrow Instructions effective May 27, 2014 by and between EACO Corporation, Brisa,Inc., dba Selective Real Estate Investments, and 12458 Gladstone Land, LLC (Exhibit 2.2 to the Company’s Current Report on Form 8-K,filed with the SEC on June 23, 2014, is incorporated herein by reference.)2.3 First Amendment to Standard Offer, Agreement and Escrow Instructions effective May 27, 2014 by and between EACO Corporation, Brisa,Inc., dba Selective Real Estate Investments, and Selective 12460 Gladstone, LLC (Exhibit 2.3 to the Company’s Current Report on Form 8-K, filed with the SEC on June 23, 2014, is incorporated herein by reference.)3.1 Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.01 to the Company's Registration Statement on Form S-1,Registration No. 33-1887, is incorporated herein by reference.)3.2 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the Company's RegistrationStatement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.)3.3 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the Company's RegistrationStatement on Form S-1, Registration No. 33-17620, is incorporated herein by reference.)3.4 Amended and Restated Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 4 to the Company's registration statement on Form 8-A,filed with the SEC on March 19, 1997, is incorporated herein by reference.)3.5 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.08 to the Company's AnnualReport on Form 10-K filed with the SEC on March 31, 1998, is incorporated herein by reference.)3.6 Amendment to Amended and Restated Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.08 to the Company's Annual Report onForm 10-K filed with the SEC on March 15, 2000, is incorporated herein by reference.)3.7 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.09 to the Company’s AnnualReport on Form 10-K filed with the SEC on March 29, 2004 is incorporated herein by reference.)3.8 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc., changing the name of the corporation toEACO Corporation. (Exhibit 3.10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 3, 2004, isincorporated herein by reference.)3.9 Articles of Amendment Designating the Preferences of Series A Cumulative Convertible Preferred Stock $0.10 Par Value of EACOCorporation (Exhibit 3.1 to the Company's current report on Form 8-K filed with the SEC on September 8, 2004, is incorporated herein byreference.)3.10 Certificate of Amendment to Amended and Restated Bylaws effective December 21, 2009 (Exhibit 3.10 to the Company’s transition reporton Form 10-K filed with the SEC on December 23, 2009 is incorporated herein by reference.)3.11 Articles of Amendment to Articles of Amendment Designating the Preferences of Series A Cumulative Convertible Preferred Stock, as filedwith the Secretary of State of the State of Florida on December 22, 2009 (Exhibit 3.11 to the Company’s transition report on Form 10-K filedwith the SEC on December 23, 2009 is incorporated herein by reference.)10.1 Amended and Restated Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated October 9, 2002 betweenthe Company and GE Capital Franchise Corporation (Exhibit 10.1 to the Company’s Annual Report on Form 10-K, filed with the SEC onNovember 26, 2012, is incorporated herein by reference.)10.2 Form of Consolidated, Amended and Restated Promissory Note between the Company and GE Capital Franchise Finance Corporation.(Exhibit 10.02 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2002, Registration No. 33-1887, isincorporated herein by reference.) Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Number Exhibit10.3 Loan Agreement dated October 9, 2002 between the Company and GE Capital Franchise Finance Corporation (Exhibit 10.3 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.4 Environmental Indemnity Agreement dated October 9, 2002 between the Company and GE Capital Franchise Finance Corporation (Exhibit10.4 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.5 Administrative Services Agreement dated March 3, 2006 by and between EACO Corporation and Bisco Industries, Inc. (Exhibit 10.9 to theCompany’s Transition Report on Form 10-K, filed with the SEC on December 23, 2009, is incorporated herein by reference.)10.6 Business Loan Agreement dated March 28, 2008 by and between EACO Corporation and Zions First National Bank (Exhibit 10.7 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.7 Promissory Note dated March 28, 2008 in the principal amount of $1,216,354 executed by EACO in favor of Zions First National Bank(Exhibit 10.8 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein byreference.)10.8 Commercial Guaranty dated March 28, 2008 executed by Glen Ceiley in favor of Zions First National Bank (Exhibit 10.9 to the Company’sAnnual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.9 Business Loan Agreement dated November 9, 2007 by and between EACO Corporation and Community Bank (Exhibit 10.10 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.10 Promissory Note dated November 9, 2007 in the principal amount of $5,875,000 executed by EACO in favor of Community Bank (Exhibit10.11 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.11 Commercial Guaranties dated November 9, 2007 executed in favor of Community Bank by each of Glen F. Ceiley, Bisco Industries, Inc. andthe Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with theSEC on November 29, 2011, is incorporated herein by reference.)10.12 Commercial Contract effective September 26, 2012, as amended through October 2, 2012, by and between EACO Corporation and Ka BunChan, relating to the sale of the real property located in Brooksville, Florida (Exhibit 10.12 to the Company’s Annual Report on Form 10-K,filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.13 Business Loan Agreement dated June 1, 2007 by and between Bisco Industries, Inc. and Community Bank (Exhibit 10.13 to the Company’sAnnual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.14 Promissory Note dated November 15, 2000 executed by Bisco Industries, Inc. in favor of Community Bank (Exhibit 10.14 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.15 Change in Terms Agreements by and between Bisco Industries, Inc. and Community Bank dated May 1, 2001; July 1, 2001; September 1,2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003; March27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1,2005; April 1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008; May 15, 2008; March 3, 2009; March23, 2010; April 16, 2010; October 1, 2010; January 3, 2011; March 1, 2011; May 10, 2012; and September 18, 2012 (Exhibit 10.15 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.16 Commercial Security Agreement dated August 1, 2004 by Bisco Industries, Inc. in favor of Community Bank (Exhibit 10.16 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.17 Commercial Security Agreement dated March 23, 2010 by Bisco Industries, Inc. in favor of Community Bank (Exhibit 10.17 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.) Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Number Exhibit10.18 Commercial Security Agreement dated March 23, 2010 by Bisco Industries, Inc. in favor of Community Bank. (Exhibit 10.18 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.19 Promissory Note dated March 10, 2011 in the principal amount of $1,000,000 executed by Bisco Industries, Inc. in favor of CommunityBank (Exhibit 10.18 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein byreference.)10.20 Commercial Guaranty dated May 1, 2004 executed by Glen F. Ceiley in favor of Community Bank (Exhibit 10.19 to the Company’sAnnual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.21 Commercial Guaranty dated May 15, 2008 executed by the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust in favor of CommunityBank (Exhibit 10.20 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein byreference.)10.22 Commercial Guaranty dated March 23, 2010 executed by EACO Corporation in favor of Community Bank (Exhibit 10.21 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.23 Commercial Lease dated May 1, 2001, as amended through August 30, 2011, by and between Glen Ceiley and Bisco Industries (Exhibit10.22 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 26, 2012, is incorporated herein by reference.)10.24 Purchase Agreement effective January 10, 2013 by and between EACO Corporation and Chens Family Investments, LLC or assigns, relatingto the sale of the real property located in Deland, Florida (Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SECon April 15, 2013, is incorporated herein by reference.)10.25 Promissory Note dated January 25, 2013 executed by Hao & Han, LLC in favor of EACO Corporation and the related Personal GuarantyAgreements by Rui Zhu Zheng and Min Chen, relating to the real property located in Deland, Florida (Exhibit 10.2 to the Company’sQuarterly Report on Form 10-Q, filed with the SEC on April 15, 2013, is incorporated herein by reference.)10.26 Mortgage and Security Agreement dated January 25, 2013 executed by Hao & Han, LLC in favor of EACO Corporation, relating to te realproperty located in Deland Florida (Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on April 15, 2013, isincorporated herein by reference.)10.27 Change in Terms Agreement by and between Bisco Industries, Inc. and Community Bank dated March 26, 2013, relating to the line ofcredit (Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on July 15, 2013, is incorporated herein byreference.)10.28 Amendments, effective January 8, 2013, March 7, 2013 and March 12, 2013, to Commercial Contract dated September 26, 2012 by andbetween EACO Corporation and Ka Bun Chan relating to the sale of the real property located in Brooksville, Florida (Exhibit 10.28 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.29 Purchase Agreement effective August 5, 2013, as amended through September 9, 2013, by and between EACO Corporation and WINLEEProperty, Inc., relating to the sale of the real property located in Orange Park, Florida (Exhibit 10.29 to the Company’s Annual Report onForm 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.30 Change in Terms Agreement by and between EACO Corporation and Community Bank dated November 12, 2013, modifying thePromissory Note dated November 9, 2007 relating to the real property in Sylmar, California.(Exhibit 10.30 to the Company’s Annual Reporton Form 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.31 Commercial Guaranty dated November 12, 2013 executed by Glen F. Ceiley in favor of Community Bank (Exhibit 10.31 to the Company’sAnnual Report on Form 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.32 Commercial Guaranty dated November 12, 2013 executed by the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust in favor ofCommunity Bank in favor of Community Bank (Exhibit 10.32 to the Company’s Annual Report on Form 10-K, filed with the SEC onNovember 29, 2013, is incorporated herein by reference) Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Number Exhibit10.33 Commercial Guaranty dated November 12, 2013 executed by Bisco Industries, Inc. in favor of Community Bank (Exhibit 10.33 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2013, is incorporated herein by reference)10.34 Agreement effective February 26, 2014 by and between EACO Corporation and Ratner Property Management for the sale and purchase ofEACO’s real properties in Sylmar, CA (which agreement was terminated on March 10, 2014) (Exhibit 10.1 to the Company’s QuarterlyReport on Form 10-Q, filed with the SEC on April 14, 2014, is incorporated herein by reference)10.35 Agreements effective March 27, 2014 by and between EACO Corporation and Selective Real Estate Investments for the sale and purchase ofEACO’s real properties in Sylmar, CA (Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on April 14, 2014,is incorporated herein by reference)10.36 Change in Terms Agreement dated April 25, 2014 by and between Bisco Industries, Inc. and Community Bank (Exhibit 10.1 to theCompany’s Quarterly Report on Form 10-Q, filed with the SEC on July 15, 2014, is incorporated herein by reference)21.1 Subsidiaries of the Company (Exhibit 21.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, isincorporated herein by reference.)31.1 Certification of Chief Executive Officer (principal executive officer and principal financial officer) pursuant to Securities and Exchange ActRules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 Certification of Chief Executive Officer (principal executive officer and principal financial officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.1 CERTIFICATION PURSUANT TO EXCHANGE ACTRULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Glen Ceiley, certify that: 1. I have reviewed this annual report on Form 10-K of EACO Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under mysupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within thoseentities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed undermy supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the auditcommittee of the registrant’s Board of Directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: November 28, 2014 /S/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. §1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of EACO Corporation (the “Company”) on Form 10-K for the fiscal year ended August 31, 2014, as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Glen Ceiley, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations ofthe Company. Date: November 28, 2014 /S/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: EACO CORP, 10-K, November 28, 2014Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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