EACO Corporation
Annual Report 2016

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KEACO CORP - EACOFiled: November 23, 2016 (period: August 31, 2016)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, 2016 ¨ 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 2, 2016, 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 23, 2016Powered 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, and the impact of our plannedinitiatives. Forward-looking statements are based on our current expectations, estimates and forecasts of future events and results and involve a number ofrisks and uncertainties that could cause actual results to differ materially including, among other things, the following: failure of facts to conform tomanagement estimates and assumptions; economic conditions and uncertainties; competitive pressures; our ability to maintain an effective system of internalcontrols over financial reporting; potential losses from trading in securities; our ability to retain key personnel and relationships with suppliers; thewillingness of Community Bank or other lenders to extend financing commitments and the availability of capital resources; and other risks identified fromtime to time in our reports and other documents filed with the Securities and Exchange Commission (the “SEC”), and in public announcements. It is notpossible to foresee or identify all factors that could cause actual results to differ materially from those anticipated. As such, investors should not consider anyof such factors to be an exhaustive statement of all risks or uncertainties. 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. 2 Source: EACO CORP, 10-K, November 23, 2016Powered 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. PageNo. 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 11ITEM 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 3 Source: EACO CORP, 10-K, November 23, 2016Powered 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 48 sales offices and seven distribution centers located throughout 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 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 stocks thousands of items from hundreds of manufacturers. Bisco’s products include electronic components such as spacers and standoffs, card guidesand ejectors, component holders and fuses, circuit board connectors, and cable components, as well as a large variety of fasteners and hardware. The breadthof 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 solutions to meettheir specific needs. Divisions Bisco Industries Bisco sells the full spectrum of products that it offers to many markets, but primarily sells to original equipment manufacturers (“OEMs”). While historically,the substantial majority of Bisco’s revenues have been derived from the Bisco Industries division, Bisco has also established additional divisions thatspecialize in specific industries and products. Bisco believes that the focus by industry and/or product enhances Bisco’s ability to provide superior serviceand devise tailored 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. 4 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016, Biscohad more than 6,000 active customers; however, no single customer accounted for more than 10% of Bisco’s revenues for the fiscal year ended August 31,2016 (“fiscal 2016”). For each of the fiscal years ended August 31, 2016 and 2015, Bisco’s top 20 customers represented in the aggregate approximately 14%and 11% of Bisco’s distribution sales, respectively. Bisco generally sells its products through its sales representatives in its 48 sales offices located in the United States and Canada. Customers can also placeorders through Bisco’s website. Bisco currently maintains seven distribution centers located in Anaheim and San Jose, California; Dallas, Texas; Chicago,Illinois; Boston, Massachusetts, Atlanta, Georgia; and Toronto, Canada. Each of Bisco’s selling facilities and distribution centers are linked to Bisco’s centralcomputer system, which provides Bisco’s salespersons with online, real-time data regarding inventory levels throughout Bisco and facilitates control ofpurchasing, shipping and billing. Bisco generally ships products to customers from one of its seven distribution centers, based on the geographic proximityand the availability of the ordered products. Bisco sells its products primarily in the United States and Canada. Bisco’s international sales represented 8.8% and 8.6% of its sales fiscal years endedAugust 31, 2016 and 2015, respectively. Sales to customers in Canada accounted for approximately 41% and 46% of such international sales in the fiscalyears ended August 31, 2016 and 2015, respectively. Suppliers As of August 31, 2016, Bisco offered the products from 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 2016. Employees As of August 31, 2016, the Company had 414 full-time employees.. 278 of these employees were in sales and marketing and 136 were in management,administration and finance. 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. 5 Source: EACO CORP, 10-K, November 23, 2016Powered 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. 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 from time to time based on market conditions andtrends. We may incur losses 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. There was zero balance outstanding as of August 31, 2016 and August 31, 2015 under its agreement with CommunityBank, which loan is secured by substantially all of Bisco’s assets. The agreement contains covenants which require that, on a quarterly basis, Bisco’s lossesfrom trading in securities not exceed its pre-tax operating income. We cannot assure you that unanticipated losses from our trading activities will not cause usto violate our covenants in the future or that the bank will grant a waiver for any such default or that it will not exercise its remedies, which could include therefusal to allow additional borrowings on the line of credit, the acceleration of the obligation’s maturity date and foreclosure on Bisco’s assets, with respect toany such noncompliance, which could have a material adverse effect on our business and operations. 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 ifremedied, 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. 6 Source: EACO CORP, 10-K, November 23, 2016Powered 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 Chief Executive Officer and Chairman of the Board, and Don Wagner, Bisco’s President, as well as other executive officers and seniormanagement. The loss of service of one or more of our key management members could have a material adverse effect on our business. 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. 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. 7 Source: EACO CORP, 10-K, November 23, 2016Powered 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 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. 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. 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. 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. However, we may not be able to open or grow new offices at our projected or desired rates or hire the qualified sales personnel necessaryto make such new offices successful. Failure to do so could negatively impact 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. 8 Source: EACO CORP, 10-K, November 23, 2016Powered 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 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. 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 Chief Executive Officer holds almost all of our voting stock and can control the election of directors and significantcorporate actions. Glen Ceiley, our Chairman and Chief Executive Officer, owns approximately 98% of our outstanding voting stock. Mr. Ceiley is able to exert significantinfluence over the outcome of almost all corporate matters, including significant corporate transactions requiring a shareholder vote, such as a merger or asale of the Company or our assets. This concentration of ownership and influence in management and board decision-making could also harm the price of ourcommon stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our common stock (whether by making a tenderoffer or otherwise) or otherwise 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, 2016, the number of sharesheld by non-affiliates of Mr. Ceiley is approximately 120,000 shares. If Mr. Ceiley sells or seeks to sell a substantial number of his shares of our commonstock in the future, the market price of our common stock could decline. The perception among investors that these sales may occur could produce the sameeffect. 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. 9 Source: EACO CORP, 10-K, November 23, 2016Powered 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 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, which 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 48 sales offices and seven distribution centers located throughout the United States and in Canada. Our corporate headquarters and one of ourprimary distribution centers are located in Anaheim, California in approximately 40,000 square feet of office and warehouse space. We lease all of ourproperties, consisting of office and warehouse space, under leases generally having a term of three years. For additional information regarding our obligationsunder property leases, see Note 9 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. 10 Source: EACO CORP, 10-K, November 23, 2016Powered 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 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. The closing sale price of the Company’scommon stock on November 2, 2016, the most recent date on which a sale of our shares occurred, was $6.25 per share. The quarterly high and low bid 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, 2015 Quarter ended November 30, 2014 $18.49 $4.00 Quarter ended February 28, 2015 7.50 4.52 Quarter ended May 31, 2015 8.89 4.64 Quarter ended August 31, 2015 6.61 5.25 Year Ended August 31, 2016 Quarter ended November 30, 2015 5.75 5.10 Quarter ended February 28, 2016 6.00 4.70 Quarter ended May 31, 2016 5.05 4.60 Quarter ended August 31, 2016 6.03 4.82 As of August 31, 2016, the Company had no equity compensation plans. The Company did not grant or issue any unregistered shares of common stockduring the year ended August 31, 2016. The Company did not repurchase any of its own common stock during the year ended August 31, 2016. 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. 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 You should read the following discussion of our financial condition and results of operations in conjunction with our consolidated financialstatements and the related notes included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Inaddition to our historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans,estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause orcontribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in Part I, Item 1A, “RiskFactors.” 11 Source: EACO CORP, 10-K, November 23, 2016Powered 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. Overview EACO is a holding company primarily comprised of its wholly-owned subsidiary, Bisco. Bisco is a distributor of electronic components and fasteners with 48sales offices and seven distribution centers located throughout the United States and Canada. Bisco supplies parts used in the manufacture of products in abroad range of industries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marineindustries. 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. 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. 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 believe 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, 2016 and 2015 Revenues and Gross Margin (dollars in thousands) Fiscal Year Ended August 31, $ % 2016 2015 Change Change Revenues $148,544 $140,213 $8,331 5.9%Cost of revenues 104,981 99,105 5,876 5.9%Gross profit $43,563 41,108 $2,455 6.0%Gross margin 29.3% 29.3% 0.0% 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 2016 compared to fiscal 2015 was largely due to increased product sales and increasedefficiencies from the Company’s employees. Revenues have also increased due to the Company focusing on relationship building programs with current andpotential customers and vendors. The gross margins in fiscal 2016 remained consistent with fiscal 2015. 12 Source: EACO CORP, 10-K, November 23, 2016Powered 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 (dollars in thousands) Fiscal Year Ended August 31, $ % 2016 2015 Change Change Selling, general and administrative expenses $37,122 $35,394 $1,728 4.9%Percent of revenues 25.0% 25.2% (0.2)% 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 2016 increased from fiscal 2015 largelydue to annual raises in employee salaries, bonuses, and a full-year’s overhead from our new distribution center in Georgia, which became active in May 2015.The Company has also invested in expanding its supply chain department, increasing such department’s headcount by 12%, from 26 in fiscal 2015 to 29employees in fiscal 2016. Expanding the supply chain department is expected to develop and enhance vendor relationships to create favorable pricing forinventory purchases. Other Income (Expense), Net (dollars in thousands) Fiscal Year Ended August 31, $ % 2016 2015 Change Change Other income (expense): Realized profit (loss) on sales of marketable tradingsecurities $330 $(301) $631 209.6%Unrealized (loss) gain on marketable trading securities (226) 526 (752) (143.0)%Interest and other income(expense), net (17) 56 (73) (130.3)%Other income (expense), net $87 $281 $(194) (69.0)%Other income (expense), net as a percent of sales 0% 0.2% Other income (expense) includes income or losses on investments in short-term marketable equity securities of other publicly-held domestic corporations,and interest expense. The Company’s investment strategy consists of both long and short positions, as well as utilizing options to improve return. TheCompany experienced net realized and unrealized gain from trading securities of $104,000 during fiscal 2016 and $225,000 during fiscal 2015. The decreasein trading securities in fiscal 2016 is due mainly to timing and general market climate short positions at year end, causing an unrealized loss of $226,000. Interest and other expense increased in fiscal 2016 compared to fiscal 2015 due to the disposal of fixed assets of $7,000 in fiscal 2016. As of August 31, 2016and 2015, there were no amounts outstanding on the Company’s line of credit. Income Tax Provision (dollars in thousands) Fiscal Year Ended August 31, $ % 2016 2015 Change Change Income tax provision $2,433 $2,254 $179 7.9%Percent of pre-tax income 37.3% 37.6% (0.3)% The provision for income taxes increased by $179,000 in fiscal 2016 compared to fiscal 2015. This was primarily a result of higher estimated taxable incomein fiscal 2016 as compared to the prior year period. The percent of pre-tax net income was relatively consistent, decreasing by 0.3% from fiscal 2016compared to fiscal 2015. 13 Source: EACO CORP, 10-K, November 23, 2016Powered 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 Bisco currently has a $10,000,000 line of credit agreement with Community Bank, N.A (“Community Bank”). Borrowings under this agreement bear interestat either the 30, 60 or 90 day LIBOR (0.81% and 0.31% for the 90 day LIBOR at August 31, 2016 and 2015, respectively) plus 1.75% and/or the bank’sreference rate (3.25% at August 31, 2016 and 2015). Borrowings under this line are secured by substantially all assets of Bisco. The line of credit agreementexpires in March 2017. No amounts were outstanding under this line of credit as of August 31, 2016 and 2015. The line of credit agreement contains certainnonfinancial and financial covenants, including the maintenance of certain financial ratios. As of August 31, 2016, the Company was in compliance with allsuch covenants. Cash Flows from Operating Activities During fiscal 2016, the Company used $1,100,000 in net cash from its operating activities. This was due primarily to an increase in inventory of $5,001,000and an increase in trade accounts receivable of $3,385,000 primarily due to higher revenues in 2016. This was partially offset by net income in fiscal 2016 of$4,095,000. During fiscal 2015, the Company generated $5,574,000 in net cash from its operating activities. This was due primarily to net income of $3,741,000 in fiscal2015 and a decrease in trade accounts receivable of $2,219,000. This was partially offset by an increase in inventory of $1,951,000. Cash Flows from Investing Activities Net cash flow used in investing activities was $820,000 for fiscal 2016. This was primarily due to the purchase of marketable securities of $436,000 andpurchase of equipment of $403,000 related to technology upgrades to increase employee efficiency in fiscal 2016. Net cash flow provided by investing activities was $18,000 for fiscal 2015. This was primarily due to the net change in securities sold short of $1,139,000.This increase was offset in part by the Company’s purchase of property and equipment of $519,000 and an increase in restricted cash of $900,000. Therestricted cash increased in fiscal 2016 due to cash reserves against securities sold short. Cash Flows from Financing Activities Cash generated from financing activities fiscal 2016 was $1,659,000, which was primarily due to the increase in its bank overdraft liability of $1,768,000.The increase in bank overdraft is due to timing of payments of invoices at year end. Cash used in financing activities in fiscal 2015 was $3,598,000 and was primarily due to the Company’s net payments during 2015 on its revolving creditfacility and a decrease in its bank overdraft liability of $1,684,000 and $1,827,000, respectively. At the end of fiscal 2015, the Company paid down its line ofcredit balance to zero. 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 consolidated balance sheets while obligations underoperating leases are disclosed in the Notes to the accompanying consolidated financial statements. 14 Source: EACO CORP, 10-K, November 23, 2016Powered 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. 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, 2016. (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, 2016. 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 (2013).” Based on that assessment under such criteria,management concluded that the Company’s internal control over financial reporting was effective as of August 31, 2016. 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. 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, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting. 15 Source: EACO CORP, 10-K, November 23, 2016Powered 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. 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, 2016, 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 Directors 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.Glen F. Ceiley, age 70, has served as EACO’s Chief Executive Officer and Chairman of the Board since 1999. Mr. Ceiley is also the Chief Executive Officerand Chairman 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 45 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, age 63, has served as the Chief Financial Officer of Allied Business Schools, Inc., a company that provides home study courses anddistance education, since April 2004. Prior to that, Mr. Catanzaro was the Chief Financial Officer of V&M Restoration, Inc., a building restoration company,from September 2002 to February 2004, and the Chief Financial Officer of Bisco. Mr. Catanzaro has served as a director of the Company since 1999. Mr.Catanzaro offers to the Board valuable business and strategic insights obtained through his work in a variety of industries, as well as experience as a certifiedpublic accountant which is invaluable to his service in the Audit Committee. Jay Conzen, age 70, has served as the President of Old Fashioned Kitchen, Inc., a national food distributor, since April 2003 and as a Director since 2011.Prior to that, 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. William L. Means, age 73, served as the Vice President of Information Technology of Bisco from 2001 until his retirement in June 2010. Prior to that, from1997 to 2001, Mr. Means was Vice President of Corporate Development of Bisco. Mr. Means has served as a director of the Company since July 1999. Heholds an M.B.A. degree from San Jose State University. Mr. Means provides extensive industry expertise to the Board, as well as a deep and broadunderstanding of the Company and its operations resulting from his years of service as an officer of Bisco. 16 Source: EACO CORP, 10-K, November 23, 2016Powered 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. Executive Officers Each executive officer holds office at the discretion of the Company’s Board, or until the officer’s successor has been elected and qualified. See above forbiographical information for Mr. Ceiley, our Chief Executive Officer and Chairman of the Board. Donald S. Wagner, age 54, has served as the President of Bisco since June 2010 and as its Chief Operating Officer since November 2007. Prior to hispromotion to President, Mr. Wagner also held the title of Executive Vice President of Bisco from November 2007. Mr. Wagner has worked at Bisco since1994 in a number of other capacities, including as Vice President of Product Management. Prior to joining Bisco, Mr. Wagner worked in the Defense divisionat Rockwell International. He holds a B.A. degree in Communications from California State University, Fullerton. Michael Narikawa, age 35, has served as the Controller and the Principal Accounting Officer of EACO and Bisco since May 2014. Prior to his promotion asController, Mr. Narikawa served as Bisco’s Accounting Supervisor from February 2009 to April 2014. Prior to joining Bisco, he was a Senior Auditor atKPMG, LLP from June 2005 to December 2008. Mr. Narikawa has a B.S. degree in Business Administration with a concentration in Accountancy fromCalifornia Polytechnic State University, San Luis Obispo. Zach Ceiley, age 36, 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 Communications from the University ofColorado. Zach Ceiley is the son of Glen Ceiley, who is EACO’s Chairman of the Board, Chief Executive Officer and majority shareholder and Bisco’s ChiefExecutive Officer and Chairman of the Board. 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. 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, Conzenand 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. 17 Source: EACO CORP, 10-K, November 23, 2016Powered 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. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act requires our directors and executive officers and persons who own more than ten percent of a registered class ofour equity securities to file with the SEC reports of ownership and reports of changes in ownership of our common stock and our other equity securities.These persons are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. For fiscal 2016, the following Form 4 filing was filed with the SEC but was not within two business days of the applicable transaction: filing by Mr. GlenCeiley for the sale on November 13, 20155 of 1,398 shares of common stock. Based solely on our review of copies of the reports on Forms 3, 4 and 5 receivedby us during or with respect to the fiscal year ended August 31, 2016 and written representations received from the reporting persons that no other reportswere required, except as indicated in the foregoing sentence, we believe that all directors, executive officers and persons who own more than 10% of ourcommon stock have complied with the reporting requirements of Section 16(a) and have filed all reports required by such section on a timely basis. 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 Company’s Chief Executive Officer and Chairman of the Board, and Mr. Michael Narikawa, the Company’sController and principal accounting officer. Due to the nature of EACO’s operations and related financial results, no additional salary or other compensationfor their service as officers of EACO was determined to be necessary and no such compensation was provided to Mr. Ceiley or Mr. Narikawa during fiscal2016 and fiscal 2015. However, both of them receive compensation from Bisco for their services provided to Bisco. All compensation for the named executive officers for fiscal 2016 and fiscal 2015 was 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, although Mr. Ceiley has received quarterly dividends on his shares of Preferred Stock of EACO. Summary Compensation The following table sets forth information regarding compensation earned from the Company (including from Bisco, our wholly-owned subsidiary) duringfiscal 2016 and fiscal 2015 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, 2016 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. All Other Name and Principal Position Fiscal Year Salary Compensation Total Glen F. Ceiley, 2016 $354,000 $8,000 $362,000 Chief Executive Officer and 2015 333,000 8,000 341,000 Chairman of the Board of EACO and Bisco Donald Wagner, 2016 213,000 23,000 236,000 President of Bisco 2015 203,000 33,000 236,000 Zachary Ceiley, Vice President 2016 126,000 24,000 150,000 of Sales and Marketing of Bisco 2015 124,000 29,000 153,000 18 Source: EACO CORP, 10-K, November 23, 2016Powered 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 2016 to any named executive officer and no outstanding equity awards were held by the namedexecutive officers at August 31, 2016. Director Compensation The Company pays $10,000 per year in cash to each director who is not employed by EACO or its subsidiary as compensation for their Board services. Inaddition, directors who do not receive a salary from EACO or its subsidiary receive a fee of $500 for each Board meeting attended. No additional fees are paidto directors for attendance 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, 2016. (See the above “Summary Compensation”for information regarding Mr. Ceiley). Director Fees Earned orPaid 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 4, 2016 (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. Name and Address of Shares of Common Stock Percent of Beneficial Owner (1) Beneficially Owned Class(2) Stephen Catanzaro — — Glen F. Ceiley(3) 4,785,110 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) 4,785,572 98.4%* Less than 1%(footnotes on following page) 19 Source: EACO CORP, 10-K, November 23, 2016Powered 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. (footnotes from prior page) (1)The address for each person named in the table is c/o Bisco Industries, Inc., 1500 North Lakeview Avenue, Anaheim, CA 92807. (2)Based on 4,861,590 shares of common stock outstanding as of November 4, 2016. (3)Includes (i) 4,738,271 shares of common stock 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 (excluding any dividendsaccrued but 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 Chief Executive Officer and majority shareholder, Glen Ceiley. During theyears ended August 31, 2016 and 2015, the Company paid approximately $652,000 and $635,000, 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. The Board has determined that all of the foregoingcommittee members are independent pursuant to the Nasdaq Marketplace Rules and SEC Rule 10A-3. Item 14. Principal Accounting 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 2016 and fiscal 2015, the Audit Committee pre-approved all services performed for the Company by the auditor. 20 Source: EACO CORP, 10-K, November 23, 2016Powered 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 Services Squar Milner LLP (“Squar Milner”), the Company’s independent accounting firm for the years ended August 31, 2016 and 2015 performed professionalservices for the audit of the financial statements included in the Company’s annual report on form 10-K and for the reviews of the unaudited financialstatements included in the Company’s quarterly reports on Form 10-Q for the quarters ended during the years ended August 31, 2016 and 2015 were$172,443 and $176,941, respectively. Audit-Related Fees The Company was not billed any audit-related fees by Squar Milner for the years ended August 31, 2016 and 2015. 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, 2016 and 2015F-2Consolidated Statements of Operations for the years ended August 31, 2016 and 2015F-4Consolidated Statements of Comprehensive Income for the years ended August 31, 2016 and 2015F-5Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2016 and 2015F-6Consolidated Statements of Cash Flows for the years ended August 31, 2016 and 2015F-7Notes to the Consolidated Financial StatementsF-9 (b) The exhibits listed in the accompanying “Exhibit Index” immediately following the financial statements are filed herewith or incorporated by referenceas indicated. 21 Source: EACO CORP, 10-K, November 23, 2016Powered 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 23, 2016 /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 11/23/16Glen F. Ceiley (principal executive officer and principal financial officer) /s/ Michael Narikawa Controller (principal accounting officer) 11/23/16Michael Narikawa /s/ Steve Catanzaro Director 11/23/16Steve Catanzaro /s/ Jay Conzen Director 11/23/16Jay Conzen /s/ William Means Director 11/23/16William Means 22 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 and 2015F-2 Consolidated Statements of Operations for the years ended August 31, 2016 and 2015F-3 Consolidated Statement of Comprehensive Income for the years ended August 31, 2016 and 2015F-4 Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2016 and 2015F-5 Consolidated Statements of Cash Flows for the years ended August 31, 2016 and 2015F-6 Notes to Consolidated Financial StatementsF-7 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 and 2015and 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of EACO Corporation andSubsidiaries as of August 31, 2016 and 2015 and the consolidated results of their operations and their cash flows for the years then ended, in conformity withU.S. generally accepted accounting principles. /s/ Squar Milner LLP (formerly Squar, Milner, Peterson, Miranda & Williamson, LLP) Newport Beach, CaliforniaNovember 23, 2016 F-1 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 2015 ASSETS Current Assets: Cash and cash equivalents $4,878 $5,269 Restricted cash, current 1,425 1,781 Trade accounts receivable, net 18,797 15,485 Inventory, net 21,532 16,733 Marketable securities, trading 540 - Prepaid expenses and other current assets 1,135 591 Total current assets 48,307 39,859 Non-current Assets: Equipment and leasehold improvements, net 1,395 1,569 Other assets 890 1,088 Total assets $50,592 $42,516 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Trade accounts payable $12,727 $9,318 Accrued expenses and other current liabilities 5,600 4,433 Liability for short sales of trading securities 1,425 1,781 Total current liabilities 19,752 15,532 Non-current Liabilities: Long-term debt - 33 Total liabilities 19,752 15,565 Shareholders’ Equity: Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 sharesoutstanding (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 730 860 Retained earnings 17,682 13,663 Total shareholders’ equity 30,840 26,951 Total liabilities and shareholders’ equity $50,592 $42,516 See accompanying notes to consolidated financial statements. F-2 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 2015 Revenues $148,544 $140,213 Cost of revenues 104,981 99,105 Gross margin 43,563 41,108 Operating expenses: Selling, general and administrative expenses 37,122 35,394 Income from operations 6,441 5,714 Other income (expense): Net gain on trading securities 104 225 Interest and other (expense) income (17) 56 Total other (expense) income 87 281 Income before income taxes 6,528 5,995 Provision for income taxes 2,433 2,254 Net income 4,095 3,741 Cumulative preferred stock dividend (76) (76)Net income attributable to common shareholders $4,019 $3,665 Basic and diluted earnings per share: $0.83 $0.75 Basic and diluted weighted average common shares outstanding 4,861,590 4,861,590 See accompanying notes to consolidated financial statements. F-3 Source: EACO CORP, 10-K, November 23, 2016Powered 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) Year Ended August 31, 2016 2015 Net income $4,095 $3,741 Other comprehensive income, net of tax Foreign translation loss (130) (205)Total comprehensive income $3,965 $3,536 See accompanying notes to consolidated financial statements. F-4 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 and 2015(in thousands, except share information) Convertible Additional Accumulated Other Total Preferred Stock Common Stock Paid-in Comprehensive Accumulated Shareholders’ Shares Amount Shares Amount Capital Income Earnings Equity Balance, August 31, 2014 36,000 $1 4,861,590 $49 $12,378 $1,065 $9,998 $23,491 Preferred Dividends (76) (76)Foreign Translation loss — — — — — (205) — (205)Net income — — — — — — 3,741 3,741 Balance, August 31, 2015 36,000 $1 4,861,590 $49 $12,378 $860 $13,663 $26,951 Preferred Dividends (76) (76)Foreign translation loss — — — — — (130) — (130)Net Income — — — — — — 4,095 4,095 Balance, August 31, 2016 36,000 $1 4,861,590 $49 $12,378 $730 $17,682 $30,840 See accompanying notes to consolidated financial statements. F-5 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 2015 Operating activities: Net income $4,095 $3,741 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 577 553 Bad debt expense 73 91 Change in inventory reserve 202 81 Net (gain) on investments (104) (225)(Increase) decrease in: Trade accounts receivable (3,385) 2,219 Inventory (5,001) (1,951)Prepaid expenses and other assets (365) 509 Increase (decrease) in: Trade accounts payable 1,641 (47)Accrued expenses and other current liabilities 1,167 603 Net cash (used in) provided by operating activities (1,100) 5,574 Investing activities: Purchase of property and equipment (403) (519)Purchase of marketable securities, trading (436) 298 Net change in securities sold short (356) 1,139 Change in restricted cash 375 (900)Net cash (used in) provided by investing activities (820) 18 Financing activities: Payments on revolving credit facility (33) (1,684)Payment of preferred stock dividend (76) (76)Bank overdraft 1,768 (1,827)Payments on long-term debt ‒ (11)Net cash provided by (used in) financing activities 1,659 (3,598)Effect of foreign currency exchange rate changes on cash and cash equivalents (130) (205)Net (decrease) increase in cash and cash equivalents (391) 1,789 Cash and cash equivalents - beginning of period 5,269 3,480 Cash and cash equivalents - end of period $4,878 $5,269 Supplemental disclosures of cash flow information: Cash paid for income taxes $2,227 $1,342 See accompanying notes to consolidated financial statements. F-6 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 and 2015 Note 1.Organization and Basis of Presentation EACO Corporation (“EACO”), incorporated in Florida in September 1985, is a holding company, primarily comprised of is its wholly-owned subsidiary,Bisco Industries, Inc. (“Bisco”). Bisco was incorporated in Illinois in 1974 and is a distributor of electronic components and fasteners with 48 sales officesand seven distribution centers located throughout the United States and Canada. Bisco supplies parts used in the manufacture of products in a broad range ofindustries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marine industries. 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, 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. 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 at August 31, 2016 and 2015. 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 $1,307,000 and $1,105,000 at August 31, 2016 and2015, 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. F-7 Source: EACO CORP, 10-K, November 23, 2016Powered 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. 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. Trading Securities The Company invests in marketable trading securities, which include long and short positions in equity securities. Short positions represent securities sold,but not yet purchased. Short sales result in obligations to purchase securities at a later date and are separately presented as a liability in the Company’sconsolidated balance sheet. As of August 31, 2016 and 2015, the Company’s total obligation for securities sold, but not yet purchased was $1,425,000 and$1,781,000, respectively. Restricted cash to collateralize the Company’s obligation for short sales was $1,425,000 and $1,781,000 at August 31, 2016 and2015, respectively. These securities are stated at fair value, which is determined using the quoted closing prices at each reporting date. Realized gains and losses on investmenttransactions are recognized as incurred in the consolidated statements of operations. Net unrealized gains and losses are reported in the statements ofoperations and represent the change in the market value of investment holdings during the period. See Note 11. 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. 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. F-8 Source: EACO CORP, 10-K, November 23, 2016Powered 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. Freight and Shipping/Handling Shipping and handling expenses are included in cost of goods sold, and were approximately $2,653,000 and $2,557,000 for the years ended August 31, 2016and 2015, 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. At each fiscal year end, the Companyobtains an actuarial report which estimates its overall exposure based on historical claims and an evaluation of future claims, and adjustments to theCompany’s estimated claim liability, if any, are reflected in operations. The Company pursues recovery of certain claims from an insurancecarrier. Recoveries, if any, are recognized when realization is reasonably assured. The outstanding liability for worker’s compensation at year end is notsignificant and is recorded in accrued liabilities at August 31, 2016 and 2015. Operating 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, 2016 and 2015 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 Series A convertible preferred stock, which were outstanding at August 31, 2016 and 2015.Such securities are excluded from the weighted average shares outstanding used to calculate diluted earnings per common share for the years ended August31, 2016 and 2015 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. 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 average exchange rates for the years ended August 31, 2016 and2015. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income or loss. The average exchange ratesfor the years ended August 31, 2016 and 2015 were $0.76 and $0.83, 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 9% and 14%, respectively, at August 31, 2016, and9% and 11%, respectively, at August 31, 2015. No single customer accounted for more than 10% of total revenues for either of the years ended August 31,2016 or 2015. F-9 Source: EACO CORP, 10-K, November 23, 2016Powered 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. Total assets held outside the United States comprised 5% and 6% as of August 31, 2016 and 2015, respectively. 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 11). During the years ended August 31, 2016 and 2015, the Company did not have any nonfinancial assets or liabilities that were measured at estimated fair valueon a recurring or nonrecurring basis. Significant Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts withCustomers” to supersede previous revenue recognition guidance under current GAAP. The guidance presents steps for comprehensive revenue recognitionthat requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration towhich the entity expects to be entitled in exchange for those goods or services. The guidance becomes effective for annual reporting periods beginning afterDecember 15, 2017, including interim periods within that reporting period. The Company is currently evaluating this statement and its impact on its resultsof operations or financial position. In July 2015, the FASB issued ASU 2015-11 “Simplifying the Measurement of Inventory”. The guidance is part of the “Simplification Initiative” to identifyand re-evaluate areas where the generally accepted accounting principles may be complex and cumbersome to apply. The guidance will require thatinventory be stated at the lower of cost and net realizable value as opposed to the lower of cost or market. Net realizable value is the estimated selling pricefor the inventory less completion, disposal and transportation costs. The guidance becomes effective for fiscal years beginning after December 15, 2016. TheCompany is currently evaluating this statement and its impact on its results of operations or financial position. In November 2015, the FASB issued ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”. The guidance requires that all deferred tax assets andliabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The guidance becomes effective for annual reportingperiods beginning after December 6, 2016 with early adoption permitted. The Company is currently evaluating this statement and its impact on its results ofoperations or financial position. In February 2016, the FASB issued ASU 2016-02, “Leases”, which will require a lessee to recognize assets and liabilities with lease terms of more than 12months. Both capital and operating leases will need to be recognized on the balance sheet. The guidance is effective for annual reporting periods beginningafter December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. The Company is currently evaluating this statement andits impact on its results of operations or financial position. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses”, which will require the measurement of all expected credit losses forfinancial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance iseffective for annual reporting periods beginning after December 15, 2019 and interim periods within those fiscal years. The Company is currently evaluatingthis statement and its impact on its results of operations or financial position. F-10 Source: EACO CORP, 10-K, November 23, 2016Powered 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.Equipment and Leasehold Improvements Equipment and leasehold improvements are summarized as follows: August 31, 2016 2015 Machinery and equipment $5,960,000 $5,658,000 Furniture and fixtures 829,000 810,000 Vehicles 155,000 138,000 Leasehold improvements 1,576,000 1,556,000 8,520,000 8,162,000 Less accumulated depreciation and amortization (7,125,000) (6,593,000) $1,395,000 $1,569,000 For the years ended August 31, 2016 and 2015, depreciation and amortization expense was $577,000 and $553,000, respectively. Note 4.Long-Term Debt The Company has a note payable with BMW Bank of North America, secured by an automobile, with a monthly principal and interest payment of $901. Thenote accrues interest at a rate of 0.9% per annum and matures in June 2018 but was repaid in full in February 2016. The outstanding balance at August 31,2016 and 2015 was $0 and $33,000, respectively. The Company has a revolving credit agreement with Community Bank, N.A., which currently provides for borrowings of up to $10,000,000 and bears interestat either the 30, 60 or 90 day LIBOR (the 90 day LIBOR at August 31, 2016 and 2015 was 0.81% and 0.31%, respectively) plus 1.75% or the bank’s referencerate (3.25% at August 31, 2016 and 2015). Borrowings are secured by substantially all assets of the Company. The credit agreement, as amended in March2015, expires in March 2017. There was a zero balance outstanding as of August 31, 2016 and 2015. The agreement contains certain nonfinancial andfinancial covenants, including the maintenance of certain financial ratios. As of August 31, 2016 and 2015, the Company was in compliance with all suchcovenants. Note 5.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: Year Ended August 31, (In thousands, except per share information) 2016 2015 EPS– basic and diluted: Net income $4,095 $3,741 Less: undeclared cumulative preferred stock dividends (76) (76)Net income available to common shareholders for basic and diluted EPS computation 4,019 3,665 Weighted average common shares outstanding for basic and diluted EPS computation 4,861,590 4,861,590 Earnings per common share – basic and diluted $0.83 $0.75 F-11 Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016 and 2015, 40,000 potential common shares (issuable upon conversion of 36,000 shares of the Company’s Series ACumulative Convertible Preferred Stock) have been excluded from the computation of diluted earnings per share because their inclusion would be anti-dilutive since the conversion price was greater than the average market price of the common stock. 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 preferred stock (the “Preferred Stock”) to the Company’s CEO, with an 8.5% dividend rate at a price of $25 pershare 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 and accrued butunpaid dividends into shares of the Company’s common stock at the conversion price of $22.50 per share. In the event of a liquidation or dissolution of theCompany, holders of the Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to shareholders at $25.00 per shareplus all unpaid dividends before any payments are made to the holders of common stock. Note 6.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 $223,000 and $212,000 for the years ended August 31, 2016 and 2015,respectively. Note 7.Income Taxes The following summarizes the Company’s provision for income taxes on income from operations: Year Ended August 31, 2016 2015 Current: Federal $2,226,000 $1,568,000 State 362,000 325,000 Foreign 28,000 (5,000) 2,616,000 1,888,000 Deferred: Federal (273,000) 560,000 State 90,000 (194,000)Foreign - - (183,000) 366,000 Total $2,433,000 $2,254,000 Income taxes for the years ended August 31, 2016 and 2015 differ from the amounts computed by applying the federal statutory corporate rates of 34% to thepre-tax income from operations. F-12 Source: EACO CORP, 10-K, November 23, 2016Powered 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 differences are reconciled as follows: Year Ended August 31, 2016 2015 Current: Expected income tax benefit at statutory rate $2,234,000 $2,008,000 Increase (decrease) in taxes due to: State tax, net of federal benefit 303,000 284,000 Permanent differences 29,000 32,000 Change in deferred tax asset valuation allowance (121,000) 62,000 Other, net (12,000) (132,000)Income tax expense $2,433,000 $2,254,000 The components of deferred taxes at August 31, 2016 and 2015 are summarized below: August 31, 2016 2015 Deferred tax assets: Net operating loss $518,000 $522,000 Capital losses - 116,000 Allowance for doubtful accounts 8,000 14,000 Accrued expenses 381,000 146,000 Accrued workers’ compensation 25,000 32,000 Inventory reserve 852,000 775,000 Unrealized losses on investment (167,000) (254,000)Excess of tax over book depreciation (147,000) (78,000)Other 198,000 305,000 Total deferred tax assets 1,668,000 1,578,000 Valuation allowance (518,000) (639,000)Total deferred tax assets $1,150,000 $939,000 The Company records net deferred tax assets to the extent management believes these assets will more likely than not be realized. In making suchdetermination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected futuretaxable income (if any), tax planning strategies and recent financial performance. Based on the Company’s profitability and future forecast, management believes it is more-likely-than not that a portion of its net deferred tax assets will notbe utilized in the future. Therefore, as of August 31, 2016 and 2015, a partial valuation allowance has been recorded based on management’s estimate of theamount of its net deferred tax assets that will be able to be utilized in future periods. The guidance in the “Transactions Between Entities Under Common Control Subsections” of ASC 805-50, does not specifically address the accounting forthe deferred tax consequences that may result from a transfer of net assets or the exchange of equity interest between enterprises under common control.Although such a transaction is not a pooling of interests, it appears as if the guidance of the FASB Statement No. 109 (ASC 740), paragraphs 270-272, whichaddresses the income tax accounting effects of a pooling-of-interests transaction should be applied by analogy. F-13 Source: EACO CORP, 10-K, November 23, 2016Powered 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 FASB Interpretation No. 48 an interpretation of 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 thresholdand measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return. TheCompany did not recognize any additional liability for unrecognized tax benefit as a result of the implementation. The Company has no liability forunrecognized tax benefit related to tax positions for either the August 31, 2015 year end or the August 31, 2016 year end. The Company’s policy is to recognize interest and penalty related to unrecognized tax benefits as income tax expense. As of August 31, 2016, the Companyhas not recognized liabilities for penalty and interest as the Company does not have any liability for unrecognized tax benefits. Note 8.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. Operating Lease Obligations The Company leases its facilities and automobiles under operating lease agreements (three leased facilities are leased from its majority shareholder – see Note10), which expire on various dates through September 2021 and require minimum rental payments ranging from $1,000 to $32,000 per month. Certain of theleases contain options for renewal under varying terms. Minimum future rental payments under operating leases are as follows: Years Ending August 31: 2017 $1,758,000 2018 1,222,000 2019 533,000 2020 208,000 2021 183,000 Thereafter 110,000 $4,014,000 Rental expense for all operating leases for the years ended August 31, 2016 and 2015 was approximately $2,142,000 and $1,832,000, respectively. Note 9.Related Party Transactions The Company leases three buildings under operating lease agreements from its CEO, Chairman of the Board and majority stockholder. During the yearsended August 31, 2016 and 2015, the Company incurred approximately $652,000 and $635,000, respectively, of rent expense related to these leases. F-14 Source: EACO CORP, 10-K, November 23, 2016Powered 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 10.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 andliabilities for short sales of trading securities that are actively traded. Level 2: Inputs other than Level 1 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, 2016 and 2015: Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) Total August 31, 2016 Marketable securities $540,000 — — $540,000 Liability for short sales of trading securities (1,425,000) — — (1,425,000) August 31, 2015 Marketable securities — — — ‒ Liability for short sales of trading securities (1,781,000) — — (1,781,000) Note 11.Subsequent Events Management has evaluated events subsequent to August 31, 2016, 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-15 Source: EACO CORP, 10-K, November 23, 2016Powered 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 INDEX Number Exhibit3.1 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 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.)3.5 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.)3.6 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.)3.7 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.)3.8 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.)3.9 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.)3.10 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.)3.11 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.)10.4 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.)10.5 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.)10.6 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.)10.7 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.)10.8 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.) 23 Source: EACO CORP, 10-K, November 23, 2016Powered 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 Exhibit10.9 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.)10.10 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.)10.11 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.)10.12 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)10.13 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.)10.14 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.)10.15 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.)10.16 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.)10.17 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.)10.18 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.)10.21 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)10.22 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)10.23 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)10.26 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.) 24 Source: EACO CORP, 10-K, November 23, 2016Powered 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 Exhibit31.1* 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 * Filed herewith. 25 Source: EACO CORP, 10-K, November 23, 2016Powered 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 my supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities,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 under mysupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin 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 most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’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 audit committeeof 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 are reasonablylikely 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 23, 2016 /s/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 23, 2016Powered 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, 2016, 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 23, 2016 /s/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 23, 2016Powered 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 23, 2016Powered 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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