10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2013

OR

o 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 AVENUE

ANAHEIM, CALIFORNIA  92807

(Address of Principal Executive Offices)

(714) 876-2490

(Registrant’s Telephone No.)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o    Accelerated filer o    Non-accelerated filer o    Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o No x

As of July 12, 2013, 4,861,590 shares of the registrant’s common stock were outstanding.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Income

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

(Unaudited)

	Three Months Ended May 31,						Nine Months Ended May 31,
	2013			2012			2013			2012
Distribution sales	$	31,124		$	30,019		$	88,566		$	83,283
Cost of goods sold		22,273			21,417			63,719			60,197
Gross profit from distribution operations		8,851			8,602			24,847			23,086
Rental revenue		244			314			582			937
Cost of rental operations		132			188			319			481
Gross profit from rental operations		112			126			263			456
Operating expenses:
Selling, general and administrative expenses		7,708			6,826			22,318			20,150
Total operating expenses		7,708			6,826			22,318			20,150
Income from operations		1,255			1,902			2,792			3,392
Non-operating income (expense):
(Loss) gain on sale of trading securities		64			(17	)		(14	)		45
Unrealized gain (loss) on trading securities		21			68			(20	)		353
Gain on sale of asset		240			--			780			--
Interest expense, net		(158	)		(185	)		(491	)		(544	)
Total non-operating income (expense)		167			(134	)		255			(146	)
Net income before income taxes		1,422			1,768			3,047			3,246
Provision for income taxes		138			811			739			1,261
Net income		1,284			957			2,308			1,985
Cumulative preferred stock dividend		(19	)		(19	)		(57	)		(57	)
Net income attributable to common shareholders	$	1,265		$	938		$	2,251		$	1,928
Basic and diluted earnings per share	$	0.26		$	0.19		$	0.46		$	0.40
Basic and diluted weighted average common shares outstanding		4,861,590			4,861,590			4,861,590			4,861,590

See accompanying notes to condensed consolidated financial statements.

F-2

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income

(in thousands)

(unaudited)

	Three Months Ended May 31,					Nine Months Ended May 31,
	2013		2012			2013		2012
Net income	$	1,284	$	957		$	2,308	$	1,985
Other comprehensive income (loss), net of tax:
Foreign translation gain (loss)		68		(42	)		224		(72	)
Total comprehensive income	$	1,352	$	915		$	2,532	$	1,913

See accompanying notes to condensed consolidated financial statements.

F-3

EACO Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share information)

	May 31, 2013		August 31, 2012
ASSETS	(Unaudited)
Current Assets:
Cash and cash equivalents	$	2,481	$	2,568
Restricted cash, current		619		--
Trade accounts receivable, net		13,442		13,972
Inventory, net		13,686		12,189
Marketable securities, trading		126		197
Prepaid expenses and other current assets		433		464
Assets held for sale		339		2,016
Deferred tax asset, current		290		290
Total current assets		31,416		31,696
Non-current Assets:
Restricted cash, non-current		549		548
Real estate properties held for leasing, net		7,322		7,758
Equipment and leasehold improvements, net		1,369		1,106
Deferred tax asset		1,441		2,111
Other assets, principally deferred charges, net of accumulated amortization		1,025		1,110
Total assets	$	43,122	$	44,329
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Trade accounts payable	$	8,598	$	9,519
Accrued expenses and other current liabilities		1,921		2,482
Securities sold short, at fair value		619		--
Liabilities of discontinued operations – short-term		146		146
Liabilities of assets held for sale		394		1,568
Current portion of long-term debt		159		463
Total current liabilities		11,837		14,178
Non-current Liabilities:
Liabilities of discontinued operations – long-term		2,456		2,567
Deposit liability		87		147
Long-term debt		11,374		12,544
Total liabilities		25,754		29,436
Shareholders’ Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding (liquidation value $900)		1		1
Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding		49		49
Additional paid-in capital		12,378		12,378
Accumulated other comprehensive income		703		478
Retained earnings		4,237		1,987
Total shareholders’ equity		17,368		14,893
Total liabilities and shareholders’ equity	$	43,122	$	44,329

See accompanying notes to condensed consolidated financial statements.

F-4

EACO Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Nine Months Ended May 31,
	2013			2012
Operating activities:
Net income	$	2,308		$	1,985
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		464			638
Bad debt expense		58			111
Change in inventory reserve		(62	)		(66	)
Gain on sale of property		(780	)		--
Net loss (gain) on trading securities		34			(398	)
Decrease (increase) in:
Trade accounts receivable		472			(1,656	)
Inventory		(1,435	)		(751	)
Prepaid expenses and other assets		83			(3	)
Deferred tax asset		670			867
(Decrease) increase in:
Trade accounts payable		(829	)		759
Accrued expenses and other current liabilities		(561	)		(287	)
Deposit liability		(60	)		--
Liabilities of discontinued operations		(111	)		(120	)
Net cash provided by operating activities		251			1,079
Investing activities:
Purchase of property and equipment		(631	)		(347	)
Sale of marketable securities, trading		37			1,023
Proceeds from securities sold short		619			637
Proceeds from sale of property		2,830			--
Increase in restricted cash		(620	)		(553	)
Net cash provided by investing activities		2,235			760
Financing activities:
Net (payments) borrowings on revolving credit facility		(985	)		100
Change in bank overdraft		(92	)		1,261
Preferred dividend		(57	)		(57	)
Payments on long-term debt		(1,663	)		(583	)
Net cash (used in) provided by financing activities		(2,797	)		721
Effect of foreign currency exchange rate changes on cash and cash equivalents		224			(72	)
Net (decrease) increase in cash and cash equivalents		(87	)		2,488
Cash and cash equivalents - beginning of period		2,568			1,368
Cash and cash equivalents - end of period	$	2,481		$	3,856
Supplemental disclosures of cash flow information:
Cash paid for interest	$	512		$	564
Cash paid for taxes	$	196		$	451
Supplemental disclosures of noncash investing and financing activities:
Note receivable issued in connection with sale of real estate properties	$	350		$	--

See accompanying notes to condensed consolidated financial statements.

F-5

EACO CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

May 31, 2013

Note 1. Organization and Basis of Presentation

Organization and Merger with Bisco Industries, Inc.

EACO Corporation (“EACO”) was incorporated in the State of Florida in September 1985. From the inception of EACO through June 2005, EACO’s business consisted of operating restaurants in the State of Florida.  On June 29, 2005, EACO sold all of its operating restaurants (the “Asset Sale”) including sixteen restaurant businesses, premises, equipment and other assets used in restaurant operations.   The only remaining activity of the restaurant operations relates to the workers’ compensation claim liability, which is presented as liabilities of discontinued operations on the Company’s balance sheets. After the Asset Sale and prior to the acquisition of Bisco (described below), EACO’s operations principally consisted of managing real estate properties held for leasing located in Florida and California.

On March 24, 2010, EACO completed the acquisition of Bisco Industries, Inc. (“Bisco”), a company under the common control of EACO’s majority shareholder (Glen F. Ceiley). Bisco is a distributor of electronic components and fasteners with 44 sales offices and six 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.

Use of Estimates

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

Basis of Presentation

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended August 31, 2012. The condensed consolidated balance sheet as of August 31, 2012 and related disclosures in this report were derived from the audited consolidated financial statements as of August 31, 2012. Operating results for the three and nine months ended May 31, 2013 are not necessarily indicative of the results that may be expected for future quarterly periods or the entire fiscal year.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

F-6

Principles of Consolidation

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

Subsequent Events

Management has evaluated events subsequent to May 31, 2013 through the date that these condensed consolidated financial statements are being filed with the SEC for transactions and other events which may require adjustment of and/or disclosure in such financial statements.

Note 2. Significant Accounting Policies

Restricted Cash

The State of Florida Division of Workers’ Compensation (the “Division”) requires self-insured companies to pledge collateral in favor of the Division in an amount sufficient to cover the projected outstanding liability. In compliance with this requirement, the Company pledged two irrevocable letters of credit totaling $2,713,000 as of May 31, 2013 and $2,855,000 as of August 31, 2012. These letters were secured by certificates of deposits totaling approximately $549,000 and $548,000 at May 31, 2013 and August 31, 2012, respectively, and the Company’s two real estate properties in Sylmar, California (the “Sylmar Properties”).

The Company also has restricted cash of approximately $619,000 at May 31, 2013 on deposit with a securities brokerage firm, which relates to the potential liability for short sales of trading securities. There was no such restricted cash at August 31, 2012.

Trade Accounts Receivable

Trade accounts receivable are carried at original invoice amount, less an estimate for doubtful accounts. The allowance for doubtful accounts was approximately $197,000 and $273,000 at May 31, 2013 and August 31, 2012, respectively.

Inventories

Inventories consist of finished goods, primarily electronic fasteners and components stated at the lower of cost or estimated market value. Cost is determined using the average cost method. Inventories are reported net of a reserve for slow moving or obsolete items of approximately $910,000 and $972,000 at May 31, 2013 and August 31, 2012, respectively. The reserve is based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company.

Securities Sold Short

Securities sold short represent transactions in which the Company sells a security it does not own and is obligated to deliver such security at a future date. The short sale is recorded as a liability, and unrealized appreciation or depreciation is recorded for the difference between the proceeds received and the fair value of the open short position. The Company records a realized gain or loss when the short position is closed. By entering into short sales, the Company bears the market risk of an unfavorable increase in the price of the security sold short in excess of the proceeds received. Short sales are separately presented as a liability in the consolidated balance sheets.

The Company is required to establish a margin account with the brokers lending the securities sold short. While the short sale is outstanding, the short sale proceeds may be restricted to the extent of the fair value of the short position.

F-7

Revenue Recognition

For the Company’s distribution operations, the Company’s shipping terms are FOB shipping point. Revenue is considered to 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, the product has been shipped (and installed when applicable), the sales price is fixed or determinable, and collectability is reasonably assured. Therefore, the Company generally recognizes revenue at the time of product shipment.

The Company leases its real estate properties to tenants under operating leases with terms generally exceeding one year.  Some of these leases contain scheduled rent increases.  We record rent revenue for leases which contain scheduled rent increases on a straight-line basis over the term of the lease.

Earnings Per Common Share

Basic earnings per common share for the three and nine months ended May 31, 2013 and 2012 were computed based on the weighted average number of common shares outstanding during each respective period. Diluted earnings per common share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the respective periods. Potential common shares represent 40,000 shares of common stock issuable upon conversion of 36,000 shares of preferred stock.

Foreign Currency Translation and Transactions

Assets and liabilities recorded in functional currencies other than the U.S. dollar (i.e. Canadian dollars for the Company’s Canadian subsidiary) are translated into U.S. dollars at the quarter-end rate of exchange. Revenue and expenses are translated at the weighted-average exchange rates for the three and nine months ended May 31, 2013 and 2012. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income. The average exchange rate for the three months ended May 31, 2013 and 2012 was $1.02 and $1.00 Canadian dollars for one U.S. dollar, respectively. The average exchange rate for the nine months ended May 31, 2013 and 2012 was $1.03 and $1.01 Canadian dollars for one U.S. dollar, respectively.

Concentrations

Net sales to customers outside the United States were approximately 7% for the nine months ended May 31, 2013 and 2012, and related accounts receivable were approximately 4% at May 31, 2013 and August 31, 2012, respectively.

No single entity accounted for more than 10% of revenues for the three months ended May 31, 2013 or 2012.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Management has evaluated its approach for making operating decisions and assessing the performance of our business and determined that the Company has two reportable segments: Distribution Operations and Rental Real Estate Operations.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) . The objective of the amendments contained in ASU 2011-05 is to increase the prominence of other comprehensive income in the financial statements. The amendments require entities to report components of net income and the components of other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.  In December 2011, the FASB issued ASU No. 2011-12, which deferred the specific requirements related to the presentation of reclassification adjustments. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.   The adoption of this ASU has affected financial statement presentation only.

F-8

Note 3. Debt

The Company has a $10,000,000 line of credit agreement with Community Bank. Borrowings under this agreement bear interest at either (i) the 30, 60 or 90 day London Inter-Bank Offered Rate (“LIBOR”) (0.27% and 0.43% for the 90 day LIBOR at May 31, 2013 and August 31, 2012, respectively) plus 1.75% and/or (ii) the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). Borrowings are secured by substantially all assets of Bisco and are guaranteed by the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder, Glen F. Ceiley. The agreement expires on March 1, 2015. The amounts outstanding under this line of credit as of May 31, 2013 and August 31, 2012 were approximately $6,465,000 and $7,450,000, respectively. Availability under the line of credit was approximately $3,535,000 and $2,550,000 at May 31, 2013 and August 31, 2012, respectively. The line of credit agreement contains nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of May 31, 2013 and August 31, 2012, the Company was in compliance with all such covenants.

On March 10, 2011, the Company entered into a $1,000,000 term loan agreement with Community Bank. The term loan required monthly payments of $43,083 for two years and accrued interest at the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). The outstanding balance on this loan was repaid in full in March 2013.

In October 2002, the Company refinanced and entered into a loan agreement with GE Capital for one restaurant property owned by the Company in Orange Park, Florida (the “Orange Park Property”).  The loan requires monthly principal and interest payments totaling $10,400 through December 2016. Interest is at the thirty-day LIBOR rate (.20% and .24% at May 31, 2013 and August 31, 2012, respectively) plus 3.75% (minimum interest rate of 7.34%). As of May 31, 2013, the outstanding balance due under the Company’s loan with GE Capital was approximately $394,000. Such loan was reclassified as liabilities of assets held for sale on the accompanying consolidated balance sheets as of May 31, 2013 and August 31, 2012 (See Note 7).

On November 9, 2007, the Company completed the refinance of the Sylmar Properties in exchange for a note in the amount of $5,875,000 from Community Bank.   The loan requires monthly principal and interest payments totaling $39,658 through December 2014. Interest is fixed at 6% per annum. As of May 31, 2013 and August 31, 2012, the outstanding balance due on the loan to Community Bank was approximately $5,068,000 and $5,252,000, respectively.

Note 4.   Earnings per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted computations for net income per share attributable to common shareholders:

	For the Three Months Ended May 31,						For the Nine Months Ended May 31,
	2013			2012			2013			2012
(In thousands, except share and per share information)
EPS:
Net income	$	1,284		$	957		$	2,308		$	1,985
Less:  accrued preferred stock dividends		(19	)		(19	)		(57	)		(57	)
Net income available for common shareholders	$	1,265		$	938		$	2,251		$	1,928
Earnings per common share  – basic and diluted	$	0.26		$	0.19		$	0.46		$	0.40

F-9

For the three and nine months ended May 31, 2013 and 2012, 40,000 potential common shares have been excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

Note 5. Related Party Transactions

The Company leases three buildings under operating lease agreements from its majority stockholder. During each of the three months ended May 31, 2013 and 2012, the Company incurred approximately $128,000 of expense related to these leases.

Note 6. Segment Reporting

The Company operates in two reportable business segments: Rental Real Estate Operations and Distribution Operations. The Distribution Operations are organized and operated as Bisco Industries, Inc., a wholly-owned subsidiary of the Company. Management evaluates performance based on gross margins, selling, general and administrative expenses. Management also reviews the returns on the rental real estate properties, inventory, accounts receivable and marketable securities (segment assets).

	For the Three Months Ended May 31, 2013						For the Three Months Ended May 31, 2012
	Rental Real Estate		Distribution		Total		Rental Real Estate		Distribution		Total
	(in thousands)
Revenues	$	244	$	31,124	$	31,368	$	314	$	30,019	$	30,333
Cost of revenues		132		22,273		22,405		188		21,417		21,605
Gross profit		112		8,851		8,963		126		8,602		8,728
Selling, general and administrative expenses		54		7,654		7,708		92		6,734		6,826

	For the Nine Months Ended May 31, 2013						For the Nine Months Ended May 31, 2012
	Rental Real Estate		Distribution		Total		Rental Real Estate		Distribution		Total
	(in thousands)
Revenues	$	582	$	88,566	$	89,148	$	937	$	83,283	$	84,220
Cost of revenues		319		63,719		64,038		481		60,197		60,678
Gross profit		263		24,847		25,110		456		23,086		23,542
Selling, general and administrative expenses		134		22,184		22,318		275		19,875		20,150

Note 7. Real Estate Properties

On January 10, 2013, the Company entered into an agreement to sell the restaurant property in Deland, Florida (“Deland Property”) for $1,100,000.  The Company received $750,000 in cash and issued a two year note receivable at 7% interest payable in 24 installments on the remaining $350,000.  This transaction closed on January 25, 2013.  The sale of this property resulted in a net gain of approximately $540,000. The outstanding balance of the note receivable has been included on the accompanying balance sheets as other current assets and other assets.

F-10

In August 2012, the Company entered into an agreement with the tenant of the Brooksville Property to sell the property for $1,825,000. The transaction closed in April 2013. The sale of this property resulted in a net gain of approximately $240,000.

The Company has received multiple offers to purchase the property located in Orange Park, Florida. The property is actively listed and management has committed to sell the property. The carrying value of the property consisting of land, building and improvements was approximately $339,000 and was reclassified as assets held for sale on the accompanying consolidated balance sheets as of May 31, 2013 and August 31, 2012. The associated mortgage to GE Capital was reclassified to liabilities of assets held for sale at May 31, 2013 and August 31, 2012.

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

Cautionary Statements

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

Overview

EACO Corporation was organized under the laws of the State of Florida in September 1985. From the inception of EACO through June 2005, EACO’s business consisted of operating restaurants in the State of Florida. On June 29, 2005, EACO sold all of its operating restaurants and other assets used in the restaurant operations. The restaurant operations are presented as discontinued operations in the accompanying condensed consolidated financial statements. Since June 2005 until the acquisition of Bisco in March 2010, our operations have principally consisted of managing rental properties held for leasing in Florida and California. As a result of our March 2010 acquisition of Bisco, we currently operate in two reportable segments: the Rental Real Estate Operations segment, which consists of managing rental properties in Florida and California, and the Distribution Operations segment, which consists of Bisco’s electronic components and fastener distribution business, and is alternatively referred to in this report as the Bisco segment. Bisco is a distributor of electronic components and fasteners with 44 sales offices and six 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. Revenues derived from the Bisco segment represented approximately 99% of the Company's total revenues for the three and nine months ended May 31, 2013 and the year ended August 31, 2012 and is expected to continue to represent the substantial majority of the Company’s total revenues for the foreseeable future.

F-11

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  These estimates include allowance for doubtful accounts receivable, slow moving and obsolete inventory reserves, recoverability of the carrying value and estimated useful lives of long-lived assets, workers’ compensation liability and the valuation allowance against deferred tax assets.  Actual results could differ from those estimates. For additional description of the Company’s critical accounting policies, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended August 31, 2012 as filed with the SEC on November 26, 2012.

Long-Lived Assets

Long-lived assets (principally real estate, equipment and leasehold improvements) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  For purposes of the impairment review, real estate properties are reviewed on an asset-by-asset basis.  Recoverability of real estate property assets is measured by a comparison of the carrying amount of each operating property and related assets to future net cash flows expected to be generated by such assets.  For measuring recoverability of distribution operations assets, long-lived assets are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their estimated fair values. 

Revenue Recognition

For the Company’s distribution operations, the Company’s shipping terms are FOB shipping point. Revenue is considered to 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, the product has been shipped (and installed when applicable), the sales price is fixed or determinable, and collectability is reasonably assured. Therefore, the Company generally recognizes revenue at the time of product shipment.

The Company leases its real estate properties to tenants under operating leases with terms generally exceeding one year.  Some of these leases contain scheduled rent increases.  We record rent revenue for leases which contain scheduled rent increases on a straight-line basis over the term of the lease.

Liabilities of Discontinued Operations

When the Company was active in the restaurant business, the Company self-insured losses for workers’ compensation claims up to certain limits. The Company exited the restaurant business in 2005. The liability for workers’ compensation represents an estimate of the present value of the ultimate cost of uninsured losses which are unpaid as of the balance sheet dates. This liability is presented as liabilities of discontinued operations in the accompanying condensed consolidated balance sheets. The estimate is continually reviewed and adjustments to the Company’s estimated liability, if any, are reflected in discontinued operations. On a periodic basis, the Company obtains an actuarial report which estimates its overall exposure based on historical claims and an evaluation of future claims. An actuarial evaluation was last obtained by the Company as of August 31, 2012. No changes to the estimated liability were recorded during the three or nine months ended May 31, 2013 or 2012.

Deferred Tax Assets

A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefit or when future deductibility is uncertain. In accordance with Accounting Standards Codification (“ASC”) 740, Accounting for Income Taxes (“ASC 740”) the Company records net deferred tax assets to the extent management believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance. ASC 740 further states that forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses and/or significant decreases in operations. As a result of the Company’s disposal, in June 2005, of significant business operations, management concluded that a valuation allowance should be recorded against certain federal and state tax credits. The utilization of these credits requires sufficient taxable income after consideration of net operating loss utilization.

F-12

Results of Operations

Comparison of the Three Months Ended May 31, 2013 and 2012 (unaudited)

Distribution Sales and Gross Profit($ in thousands)

	Three Months Ended May 31,						$		%
	2013			2012			Change		Change
Distribution sales	$	31,124		$	30,019		$	1,105	3.7		%
Cost of goods sold		22,273			21,417			856		4.0
Gross profit	$	8,851		$	8,602		$	249
Gross profit %		28.4	%		28.7	%				0.3	%

Distribution sales related to the Distribution Operations segment consist primarily of sales of component parts and fasteners, but also include, to a lesser extent, kitting charges and special order fees, and freight charges by the Company to its customers. The increase in distribution sales in the three months ended May 31, 2013 (“Q3 2013”) as compared to the prior year period was largely due to increased unit sales, resulting from an increase in sales headcount, growing from 296 salespeople at May 31, 2012 to 323 salespeople at May 31, 2013, a 9% increase.

Rental Income and Gross Profit ($ in thousands)

	Three Months Ended May 31						$			%
	2013			2012			Change			Change
Rental revenue	$	244		$	314		$	(70	)		(22.3	)%
Cost of rental operations		132			188			(56	)		(29.8	)
Gross profit	$	112		$	126		$	(14	)
Gross profit %		45.9	%		40.1	%					(5.8	)%

During the first quarter of the fiscal year ending August 31, 2013, the tenant leasing one of the Company’s Sylmar Properties exercised an early exit clause of the lease and vacated the premises. On December 1, 2012, the Company obtained a replacement tenant for the property. The replacement tenant pays a lower monthly rent than the previous tenant. In addition, the Company completed the sale of the Deland Property in January 2013 and the Brooksville Property in April 2013 resulting in a decrease in rental revenue from those two properties.

Selling, General and Administrative Expenses ($ in thousands)

	Three Months Ended May 31,								%
	2013			2012			$ Change		Change
Selling, general and administrative expenses	$	7,708		$	6,826		$	882		12.9	%
Percent of distribution sales		24.8	%		22.7	%				2.1	%

Selling, general and administrative expense (“SG&A”) consists primarily of payroll and related expenses for the Company’s sales and administrative staff, professional fees including accounting, legal and technology costs and expenses, and sales and marketing costs for the Distribution Operations. SG&A in Q3 2013 increased from Q3 2012 largely due to increased salaries and salary related expenses as the Company increased sales headcount by 27 employees, or 9%, in Q3 2013 as compared to Q3 2012. The sale of the Orange Park Property would similarly reduce our rental revenues further.

F-13

Non-Operating Income (Expense) ($ in thousands)

	Three Months Ended May 31,						$			%
Other income (expense):	2013			2012			Change			Change
(Loss) gain on sale of trading securities	$	64		$	(17	)	$	81			476.5	%
Unrealized gain on trading securities		21			68			(47	)		(69.1	)
Gain on asset disposal		240			--			240			100.0
Interest expense, net		(158	)		(185	)		27			14.6
Other income (expense), net	$	167		$	(134	)	$	301
Other income (expense), net as a percent of distribution sales		0.5	%		(0.4	)%					0.9	%

Other income (expense), net primarily consists of income or losses on investments in short-term marketable equity securities of publicly-held corporations and interest related to the Company’s line of credit and other long-term debt. The Company’s investment strategy consists of both long and short positions, as well as utilizing options designed to improve returns. During Q3 2013, the Company recognized approximately $85,000 in net realized and unrealized gain. The Company experienced net realized and unrealized gains of approximately $51,000 during Q3 2012. Gains in the current period were due to increases in the value of the Company’s holdings. Gains in the prior year quarter were primarily due to an increase in the value of several of the positions the Company was holding at that time. The gain on asset disposal was the result of the sale of the Brooksville Property in April 2013.

Income Tax Provision ($ in thousands)

	Three Months Ended May 31,						$			%
	2013			2012			Change			Change
Income tax provision	$	138		$	811		$	(673	)		(83.0	)%
Percent of pre-tax net income		9.7	%		45.9	%					(36.2	)%

The provision for income taxes decreased by approximately $673,000 in the three months ended May 31, 2013 over the prior year period. This was a result of the release of the Company’s reserves with regards to its California net operating losses. Prior to 2013, the State of California had suspended the use of carryover net operating losses being deducted from current year income. This has been reinstated in 2013 allowing the Company to recognize its California net operating loss assets.

The Company has used nearly all of its Federal net operating losses and anticipates those losses to be exhausted in the fiscal year ending August 31, 2014.

Comparison of the Nine Months Ended May 31, 2013 and 2012 (unaudited)

Distribution Sales and Gross Profit($ in thousands)

	Nine Months Ended May 31,						$		%
	2013			2012			Change		Change
Distribution sales	$	88,566		$	83,283		$	5,283		6.3	%
Cost of goods sold		63,719			60,197			3,522		5.6
Gross profit	$	24,847		$	23,086		$	1,761
Gross profit %		28.1	%		27.7	%				0.4	%

Distribution sales related to the Distribution Operations segment increased in the nine months ended May 31, 2013 as compared to the prior year period largely due to increased unit sales, resulting from an increase in sales headcount of 9% in the nine months ended May 31, 2013 as compared to the nine months ended May 31, 2012. The Company added one sales office in the latter half of the fiscal year ended August 31, 2012 (“fiscal 2012”). This office contributed to sales in the first nine months of the current fiscal year ending August 31, 2013 (“fiscal 2013”), but not in the first nine months of fiscal 2012.

F-14

Rental Income and Gross Profit ($ in thousands)

	Nine Months Ended May 31,						$			%
	2013			2012			Change			Change
Rental revenue	$	582		$	937		$	(355	)		(37.9	)%
Cost of rental operations		319			481			(162	)		(33.7	)
Gross profit	$	263		$	456		$	(193	)
Gross profit %		45.2	%		48.7	%					(3.5	)%

Rental revenue and the related cost of rental operations decreased from the nine months ended May 31, 2012 to the nine months ended May 31, 2013 due primarily to the vacancy in one of the Company’s buildings at its Sylmar Properties. The departing tenant was replaced in the second quarter at a lower monthly rent than the previous tenant. In addition, the Company sold the Deland Property in January 2013 and the Brooksville Property in April 2013 resulting in a decrease in rental revenue from those two properties for the current year period.

Selling, General and Administrative Expenses ($ in thousands)

	Nine Months Ended May 31,								%
	2013			2012			$ Change		Change
Selling, general and administrative expenses	$	22,318		$	20,150		$	2,168		10.8	%
Percent of distribution sales		25.2	%		24.2	%				1.0	%

SG&A in the nine months ended May 31, 2013 increased from the nine months ended May 31, 2012 largely due to increased salaries and salary related expenses as the Company increased sales headcount by 9% in the first nine months of fiscal 2013 as compared to the first nine months of fiscal 2012.

Non-Operating Income (Expense) ($ in thousands)

	Nine Months Ended May 31,						$			%
Other income (expense):	2013			2012			Change			Change
(Loss) gain on sale of trading securities	$	(14	)	$	45		$	(59	)		(131.1	)%
Unrealized (loss) gain on trading securities		(20	)		353			(373	)		(105.7	)
Gain on asset disposal		780			--			780			100.0
Interest expense, net		(491	)		(544	)		(53	)		(9.7	)
Other income (expense), net	$	255		$	(146	)	$	401
Other income (expense), net as a percent of distribution sales		0.3	%		(0.2	)%					0.5	%

During the nine months ended May 31, 2013, the Company recognized approximately $34,000 in net realized and unrealized losses on trading securities. The Company experienced net realized and unrealized gains on trading securities of approximately $398,000 during the nine months ended May 31, 2012. Losses in the current period were due to decreases in the value of the Company’s holdings, primarily as a result of short positions. Gains in the prior year period were due to increases in the value of the Company’s holdings and its investment strategy throughout that period. The gain on asset disposal was a result of the sale of the Deland and Brooksville Properties.

F-15

Income Tax Provision ($ in thousands)

	Nine Months Ended May 31,						$			%
	2013			2012			Change			Change
Income tax provision	$	739		$	1,261		$	(522	)		(41.4	)%
Percent of pre-tax net income		24.3	%		38.8	%					(14.5	)%

The provision for income taxes decreased by approximately $522,000 in the nine months ended May 31, 2013 over the prior year period. This was a result of the release of the Company’s reserves with regards to its California net operating losses. Prior to 2013, the State of California had suspended the use of carryover net operating losses being deducted from current year income. This has been reinstated in 2013 allowing the Company to recognize the California net operating loss assets.

Liquidity and Capital Resources

The Company has a $10,000,000 line of credit agreement with Community Bank. Borrowings under this agreement bear interest at either (i) the 30, 60 or 90 day LIBOR (0.27% and 0.43% for the 90 day LIBOR at May 31, 2013 and August 31, 2012, respectively) plus 1.75% and/or (ii) the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). Borrowings are secured by substantially all assets of Bisco and are guaranteed by the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder, Glen F. Ceiley. The agreement expires on March 1, 2015. The amounts outstanding under this line of credit as of May 31, 2013 and August 31, 2012 were approximately $6,465,000 and $7,450,000, respectively. Availability under the line of credit was approximately $3,535,000 and $2,550,000 at May 31, 2013 and August 31, 2012, respectively. The line of credit agreement contains nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of May 31, 2013 and August 31, 2012, the Company was in compliance with all such covenants.

On March 10, 2011, the Company entered into a $1,000,000 term loan agreement with Community Bank. The term loan required monthly payments of $43,083 for two years and accrued interest at the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). The outstanding balance on this loan was repaid in full in March 2013.

In October 2002, the Company refinanced and entered into a loan agreement with GE Capital for the Orange Park Property.  The loan requires monthly principal and interest payments totaling $10,400 through December 2016. Interest is at the thirty-day LIBOR rate plus 3.75% (minimum interest rate of 7.34%). As of May 31, 2013, the outstanding balance due under the Company’s loan with GE Capital was approximately $394,000. Such loan was reclassified as liabilities of assets held for sale on the accompanying consolidated balance sheets as of May 31, 2013 and August 31, 2012 (See Note 7).

On November 9, 2007, the Company completed the refinance of the Sylmar Properties in exchange for a note in the amount of $5,875,000 from Community Bank.   The loan requires monthly principal and interest payments totaling $39,658 through December 2014. Interest is fixed at 6% per annum. As of May 31, 2013, the outstanding balance due on the loan to Community Bank was approximately $5,066,000.

The Company’s Rental Real Estate Operations are funded primarily by rents received from the tenants of its rental properties. Any cash requirements in excess of the rental income required by the Rental Real Estate Operations have historically been funded by borrowings from Bisco. These borrowings and related interest have been eliminated in the accompanying condensed consolidated financial statements.

Cash Flows from Operating Activities

Cash provided by operating activities was approximately $251,000 for the nine months ended May 31, 2013 as compared with cash provided of approximately $1,079,000 for the nine months ended May 31, 2012. The current period provision of cash was mainly due to current period net income and an increase in the Company’s inventory and a decrease in the Company’s trade accounts payable. The prior year provision was due to the Company’s net income along with a decrease in the deferred tax asset and an increase in trade accounts payable. These amounts were offset by an increase in trade accounts receivable and inventory.

F-16

Cash Flows from Investing Activities

Cash provided by investing activities was approximately $2,235,000 for the nine months ended May 31, 2013 as compared with cash provided by investing activities of approximately $760,000 for the nine months ended May 31, 2012. The current period provision was due primarily to the sale of the Deland and Brooksville Properties. This was offset by the purchase of property and equipment by the Company, primarily for newly renovated office space at the Company’s corporate headquarters in Anaheim, CA. The cash provided by investing activities during the nine months ended May 31, 2012 was primarily due to the sale of the Company’s marketable securities including cash proceeds from the Company’s short positions.

Cash Flows from Financing Activities

Cash used in financing activities for the nine months ended May 31, 2013 was approximately $2,797,000 as compared with cash provided by financing activities of approximately $721,000 for the nine months ended May 31, 2012. Cash used in financing activities in the current period consisted mainly of paying down the Company’s long-term debt. The cash provided by financing activities for the nine months ended May 31, 2012 was due mainly to an increase in the Company’s bank overdraft due to a higher amount of outstanding checks at the period end.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on the Company’s financial position, revenues, results of operations, liquidity or capital expenditures.

Contractual Financial Obligations

In addition to using cash flow from operations, the Company finances its operations through borrowings.  These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result that amounts owed under debt agreements and capital leases are recorded as liabilities on the balance sheet while lease obligations recorded as operating leases are disclosed in the Notes to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the year ended August 31, 2012 as filed with the SEC on November 26, 2012.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.  Controls and Procedures

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 period covered by this report the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, who also serves as the Company’s principal financial officer.  Based upon that evaluation, the Company’s Chief Executive Officer has concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered in this report.

Changes in internal control over financial reporting.  There have been no changes in internal control over financial reporting during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

F-17

PART II

OTHER INFORMATION

Item 1.  Legal Proceedings

From time to time, we may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes could be costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial position or cash flows.

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 filings with the SEC, including our Annual Report on Form 10-K and subsequent reports on Forms 10-Q and 8-K . If any of the risks actually occur, our business, financial condition, or results of operations 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 your investment.

Changes and uncertainties in the economy have harmed and could continue to harm our operating results.

As a result of the recent economic downturn and continuing economic uncertainties, our operating results, and the economic strength of our customers and suppliers, are increasingly difficult to predict. Our Distribution Operations sales 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 of industries, the significant weakening of economic conditions on a global scale has caused some of our customers to experience a slowdown that has had adverse effects on our sales and operating results and may continue to impact future revenues. Changes and uncertainties in the economy also increase the risk of uncollectible accounts receivable. The pricing we receive from suppliers may also be impacted by general economic conditions. Continued and future changes and uncertainties in the economic climate in the United States and elsewhere could have a similar negative impact on the rate and amounts of purchases by our current and potential customers, create price inflation for our products, or otherwise have a negative impact on our expenses, gross margins and revenues, and could hinder our growth.

If we fail to maintain an effective system of internal controls over financial reporting or experience material weaknesses in our system of internal controls, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverse effect on the 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 the preparation of our financial statements, segregation of duties, sufficient control in the area of financial reporting oversight and review, and appropriate personnel to ensure the complete and proper application of GAAP as it relates to certain routine accounting transactions. Although we believe we have addressed these material weaknesses, we may experience material weaknesses or significant deficiencies in the future and may fail to maintain a system of internal control over financial reporting that complies with the reporting requirements applicable to public companies in the United States. Our failure to address any deficiencies or weaknesses in our internal control over financial reporting or to properly maintain an effective system of internal control over financial reporting could impact our ability to prevent fraud or to issue our financial statements in a timely manner that presents fairly, in accordance with GAAP, our financial condition and results of operations. The existence of any such deficiencies and/or weaknesses, even if cured, may also lead to the loss of investor confidence in the reliability of our financial statements, could harm our business and negatively impact the trading price of our common stock. Such deficiencies or material weaknesses may also subject us to lawsuits, investigations and other penalties.

Furthermore, Section 404 of the Sarbanes-Oxley Act of 2002 currently requires us to evaluate the effectiveness of our internal control over financial reporting at the end of each fiscal year and to include a management report assessing the effectiveness of our internal control over financial reporting in our annual reports on Form 10-K. As a smaller reporting company, we were exempt from the annual auditor attestation requirement regarding our internal control over financial reporting for our most recently completed fiscal year; however, to the extent we do not qualify as a non-accelerated filer or smaller reporting company in subsequent fiscal years, we will be subject to the auditor attestation requirement under Section 404(b) of the Sarbanes-Oxley Act. In such an event, we may not be able to complete the work required for such attestation on a timely basis and, even if we timely complete such requirements, we cannot assure you that our independent registered public accounting firm will conclude that our internal control over financial reporting is effective.

F-18

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 in violation of covenants under our loan agreements.

Bisco has historically funded its operations from cash generated from its operations and/or by trading in marketable domestic equity securities. Bisco’s investment strategy includes taking both long and short positions, as well as utilizing options to maximize return. This strategy can lead, and has led, to significant losses based on market conditions and trends. We may 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 line of credit and term loan agreements with Community Bank. The agreements are secured by substantially all of Bisco’s assets and are guaranteed by Mr. Ceiley, our Chairman, CEO and majority shareholder. The loan agreements contain covenants which require that, on a quarterly basis, Bisco’s losses from trading in securities not exceed its pre-tax operating income. We cannot assure you that unanticipated losses from our trading activities will not occur in the future, and any such losses could cause us to 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 the acceleration of the obligation’s maturity date and foreclosure on Bisco’s assets, with respect to any such noncompliance, which could have a material adverse effect on our business and operations.

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 a material adverse effect on our business. Many of our systems consist of a number of legacy or internally developed applications, which can be more difficult to upgrade to commercially available software. It may be time consuming and costly for us to retrieve data that is necessary for management to evaluate our systems of control and information flow. In the future, management may decide to convert our information systems to a single enterprise solution. Such a conversion, while it would enhance the accessibility and reliability of our data, could be expensive and would not be without risk of data loss, delay or business interruption. Maintaining and operating these systems requires continuous investments. Failure of any of these internal information systems or material difficulties in upgrading these information systems could have material adverse effects on our business and our timely compliance with our reporting obligations.

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 Glen Ceiley, our Chairman of the Board and Chief Executive Officer, as well as other executive officers and senior management of Bisco. The loss of service of one or more of our key management members could have a material adverse effect on our business.

We do not have long-term supply agreements or guaranteed price or delivery arrangements with the majority of our suppliers.

In most cases, we have no guaranteed price or delivery arrangements with our suppliers. Consequently we may experience inventory shortages on certain products. Furthermore, our industry occasionally experiences significant product supply shortages and customer order backlogs due to the inability of certain manufacturers to supply products as needed. We cannot assure you that suppliers will maintain an adequate supply of products to fulfill our orders on a timely 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 assure you 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 of our suppliers, or a significant increase in the price of those products, could reduce our sales and negatively affect our operating results.

F-19

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 to us and without any penalty. Suppliers that currently sell their products through us could decide to sell, or increase their sales of, their products directly or through other distributors or channels. Any termination, interruption or adverse modification of our relationship with a key supplier or a significant number of other suppliers would likely adversely affect our operating income, cash flow and future prospects.

The competitive pressures we face could have a material adverse effect on our business.

The market for our products and services is very competitive. We compete for customers with other distributors, as well as with many of our suppliers. A failure to maintain and enhance our competitive position could adversely affect our business and prospects. Furthermore, our efforts to compete in the marketplace could cause deterioration of gross profit margins and thus adversely impact our 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 is risky and could be costly.

One of our primary growth strategies for our Distribution Operations segment is to grow our business through the opening of sales offices in new geographic markets. Based on our analysis of demographics in the United States, Canada and Mexico, we currently estimate there is potential market opportunity in North America to support additional sales 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 any new 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, or local 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, the most effective way to attract new customers has been opening new sales offices. Our current business strategy focuses on opening a specified number of new sales offices each year, and quickly growing each new sales office. Given the recent economic slowdown, we may not be able to open or grow new offices at our projected rates or hire the qualified sales personnel necessary to 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 adversely affect our operating results.

Our new sales offices may not achieve operating results comparable to our existing offices until after several quarters or even years of operation. The added expenses relating to payroll, occupancy, and transportation costs can impact our ability to leverage earnings. In addition, offices in new geographic areas face additional challenges to achieving profitability. In new markets, we have less familiarity with local customer preferences and customers in these markets are less familiar with our name and capabilities. Entry into new markets may also bring us into competition with new, unfamiliar competitors. These challenges associated with opening new offices in new markets may have an adverse effect on our business and future operating results.

We may not be able to identify new products and products lines, or obtain new product on favorable terms and prices or at all.

Our success depends in part on our ability to develop product expertise and identify future products and product lines that complement existing products and product 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 the markets in which we compete.

F-20

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 and appreciate our strategy and culture and are able to adequately represent us to our customers. Qualified individuals of the requisite caliber and number needed to 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 capable of consistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and product knowledge, our sales could be materially adversely affected. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees. 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 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 customer and generally affecting each customer’s industry, may cause customers to reduce, cancel or delay orders that were either previously made or anticipated, go bankrupt or fail, or default on their payments. Significant or numerous cancellations, reductions, delays in orders by customers, losses of customers, and/or customer defaults on payment could materially adversely affect our business.

Increases in the costs of energy, shipping and raw materials used in our products could impact our cost of goods and distribution and occupancy expenses, 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 costs for our suppliers. These suppliers typically look to pass their increased costs along to us through price increases. The shipping costs for our distribution operation have risen as well. While we typically try to pass increased supplier prices and shipping costs through to our customers or to modify our activities 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 our activities to mitigate the impact would have an adverse effect on our operating margins.

The Company’s Chairman and CEO holds almost all of our voting stock and can control the election of directors and significant corporate actions.

Glen Ceiley, our Chairman and CEO, owns approximately 99% of our outstanding voting stock. As such, Mr. Ceiley is able to exert significant influence over the outcome of almost all corporate matters, including significant corporate transactions requiring a stockholder vote, such as a merger or a sale of the Company or our assets. This concentration of ownership and influence in management and board decision-making could also harm the price of our common stock by, among other things, discouraging a potential acquirer from seeking to acquire shares of our common stock (whether by making a tender offer or otherwise) 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.

There is currently no established trading market for our common stock, and the volume of any sales is generally low. As of May 31, 2013, the number of shares held by non-affiliates of Mr. Ceiley or Bisco is less than 65,000 shares. If Mr. Ceiley sells or seeks to sell a substantial number of his shares of our common stock in the future, the market price of our common stock could decline. The perception among investors that these sales may occur could produce the same effect. In addition, the low volume of sales of our common stock could make it difficult for investors to sell their shares in the future.

F-21

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 distribution centers or shipping ports may affect our ability to both maintain core products in inventory and deliver products to our customers on a timely basis, which may in turn adversely affect our results of operations. In addition, severe weather conditions could adversely impact demand for our products in particularly hard 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 we generally mail fliers to current and potential customers through the U.S. Postal Service. Any future increases in postal rates will increase our mailing expenses and could have a material adverse effect on our business, financial condition and results of operations.

We may not have adequate or cost-effective liquidity or capital resources.

Our ability to satisfy our cash needs depends on our ability to generate cash from operations and to access our line of credit and the capital markets, which are subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may need to satisfy our cash needs through external financing. However, external financing may not be available on acceptable terms or at all.

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

None.

Item 3.     Defaults Upon Senior Securities

None.

Item 4.     Mine Safety Disclosures

Not applicable.

Item 5.    Other Information

None.

Item 6.    Exhibits

The following exhibits are filed as part of this report on Form 10-Q.

No.	Exhibit
10.1	Change in Terms Agreement dated May 2, 2013 by and between Bisco Industries, Inc. and Community Bank.
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

F-22

SIGNATURES

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

	EACO CORPORATION
	(Registrant)
Date: July 15, 2013	/s/ Glen Ceiley
	Glen Ceiley
	Chief Executive Officer
	(Principal Executive Officer & Principal Financial Officer)
	/s/  Michael Bains
	Michael Bains
	Controller and Assistant Secretary
	(Principal Accounting Officer)

F-23

EXHIBIT INDEX

No.	Exhibit
10.1	Change in Terms Agreement dated May 2, 2013 by and between Bisco Industries, Inc. and Community Bank.
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

F-24

EX-10.1

CHANGE IN TERMS AGREEMENT

Principal $10,000,000.00	Loan Date 03-01-2013	Maturity 03-01-2015	Loan No  155354101	Call / Coll  CLS 07 / 240	Account 600714	Officer 765	Initials
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

Borrower:	BISCO INDUSTRIES, INC.	Lender:	COMMUNITY BANK
	1500 NORTH LAKEVIEW AVENUE		ANAHEIM BRANCH
	ANAHEIM, CA 92807		1750 S. STATE COLLEGE BLVD.
			ANAHEIM, CA 92806
			(800) 788-9999

Principal Amount: $10,000,000.00 Date of Agreement: March 26, 2013

DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements 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; March 27, 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; March 23, 2010; April 16, 2010; October 1, 2010; January 3, 2011; March 1, 2011; May 10, 2012 and September 18, 2012 (“Note”).

DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in two (2) Commercial Security Agreements each dated March 23, 2010 and a security interest in personal property assets as described in a Commercial Security Agreement dated August 1, 2004 (“Security Agreement”).

DESCRIPTION OF CHANGE IN TERMS.

EFFECTIVE AS OF MARCH 20, 2013:

MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified and amended as follows:

1) The paragraph entitled “Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following:

Effective Tangible Net Worth. Maintain an Effective Tangible Net Worth of not less than $9,000,000.00 to be measured at the end of each fiscal quarter. The term "Effective Tangible Net Worth" means Borrower's total assets, less intangibles [i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements], less amounts due from officers, partners, stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, if any. The first measurement will be as of May 31, 2013.

2) The paragraph entitled “Debt to Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following:

Debt to Effective Tangible Net Worth. Maintain a maximum Debt to Effective Tangible Net Worth Ratio of 2.25 to 1.00 to be measured at the end of each fiscal quarter. The term "Debt to Effective Tangible Net Worth" means Borrower's total liabilities, less amounts subordinated to Lender, as evidenced by a subordination agreement, if any divided by Borrower's Effective Tangible Net Worth. The term "Effective Tangible Net Worth" means Borrower’s total assets, less intangibles [i.e. goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements], less amounts due from officers, partners, stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, if any. The first measurement will be as of May 31, 2013.

3) The paragraph entitled “Current Ratio” is hereby deleted in its entirety and replaced with the following:

Current Ratio. Maintain a Current Ratio of not less than 1.25 to 1.00 to be measured at the end of each fiscal quarter. The term “Current Ratio” means Borrower's total Current Assets divided by Borrower’s total Current Liabilities. The first measurement will be as of May 31, 2013.

4) The paragraph entitled “Quick Ratio” is hereby deleted in its entirety and replaced with the following:

Quick Ratio. Maintain a Quick Ratio of not less than 0.75 to 1.00 to be measured at the end of each fiscal quarter. The term “Quick Ratio” means Borrower's Cash & Equivalent plus Borrower's net Trade Receivables divided by Borrower's total Current Liabilities. The first measurement will be as of May 31, 2013.

5) The paragraph entitled “Current Assets” is hereby deleted in its entirety and replaced with the following:

Current Assets. Borrower shall maintain a minimum current assets of $17,000,000.00 on a consolidated basis measured quarterly, per GAAP, Investments in Data I/O are to continue to be shown as non-current assets. The first measurement will be as of May 31, 2013.

6) The paragraph entitled “Additional Provision” is hereby deleted in its entirety and replaced with the following:

Additional Provision. Bisco industries. Inc. has advanced funds to EACO Corporation for which it expects repayment in the future. Bisco Industries, Inc. will require EACO Corporation to pay down advances from any proceeds received from the sale of real estate in Florida. Bisco Industries, inc. agrees to pay the line of credit at Community Bank from any proceeds received from EACO Corporation from the sale of the real estate in Florida.

7) The paragraph entitled “Additional Information” is hereby deleted in its entirety.

MODIFICATION OF NOTE. The Note is hereby modified and amended as follows:

The maturity date of the Note is hereby extended from March 1, 2014 to March 1, 2015.

PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand. If no demand is made, Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on March 1, 2015. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning May 1, 2013, with all subsequent interest payments to be due on the same day of each month after that.

	CHANGE IN TERMS AGREEMENT
Loan No: 155354101	(Continued)	Page 2

CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions.

PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT, BORROWER AGREES TO THE TERMS OF THE AGREEMENT.

BORROWER:

BISCO INDUSTRIES, INC.

By:	/s/ GLEN F. CEILEY
	GLEN F. CEILEY, CHAIRMAN and CEO of BISCO
	INDUSTRIES, INC.

LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2013.    All Rights Reserved.   - CA G:\CFI50\CFI\LPL\120.FC  TR - 18064 PR-38

NOTICE TO GUARANTOR(S)

Principal $10,000,000.00	Loan Date  03-01-2013	Maturity 03-01-2015	Loan No  155354101	Call / Coll  CLS 07 / 240	Account 600714	Officer 765	Initials
References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations.

Borrower:	BISCO INDUSTRIES, INC.	Lender:	COMMUNITY BANK
	1500 NORTH LAKEVIEW AVENUE		ANAHEIM BRANCH
	ANAHEIM, CA 92807		1750 S. STATE COLLEGE BLVD.
			ANAHEIM, CA 92806
			(800) 788-9999

This NOTICE TO GUARANTOR(S) is attached to and by this reference is made a part of the Disbursement Request and Authorization, dated March 26, 2013, and executed in connection with a loan or other financial accommodations between COMMUNITY BANK and BISCO INDUSTRIES, INC.

The above referenced loan represents a renewal debt under the conditions of your Commercial Guaranty.

Guarantor(s):

/s/ GLEN F. CEILEY

GLEN F. CEILEY

GLEN F. CEILEY AND BARBARA A. CEILEY REVOCABLE TRUST

BY:	/s/ GLEN F. CEILEY
	GLEN F. CEILEY, TRUSTEE of the GLEN F. CEILEY AND BARBARA A. CEILEY REVOCABLE TRUST

BY:	/s/ BARBARA A. CEILEY
	BARBARA A. CEILEY, TRUSTEE of the GLEN F. CEILEY AND BARBARA A. CEILEY REVOCABLE TRUST

EACO CORPORATION

BY:	/s/ GLEN F. CEILEY
	GLEN F. CEILEY, AUTHORIZED OFFICER

THIS NOTICE TO GUARANTOR(S) IS EXECUTED ON MARCH 26, 2013.

BORROWER:

BISCO INDUSTRIES, INC.

By:	/s/ GLEN F. CEILEY
	GLEN F. CEILEY, CHAIRMAN and CEO of BISCO INDUSTRIES, INC.

LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2013.    All Rights Reserved.   - CA G:\CFI50\CFI\LPL\120.FC  TR - 18064 PR-38

DISBURSEMENT REQUEST AND AUTHORIZATION

Principal $10,000,000.00	Loan Date  03-01-2013	Maturity 03-01-2015	Loan No  155354101	Call / Coll  CLS 07 / 240	Account 600714	Officer 765	Initials
References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations.

Borrower:	BISCO INDUSTRIES, INC.	Lender:	COMMUNITY BANK
	1500 NORTH LAKEVIEW AVENUE		ANAHEIM BRANCH
	ANAHEIM, CA 92807		1750 S. STATE COLLEGE BLVD.
			ANAHEIM, CA 92806
			(800) 788-9999

LOAN TYPE. This is a Variable Rate Nondisclosable Revolving Line of Credit Loan to a Corporation for $10,000,000.00 due on March 1, 2015. This is an unsecured renewal loan.

PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:

¨ Personal, Family, or Household Purposes or Personal Investment.

x Business (Including Real Estate Investment).

SPECIFIC PURPOSE. The specific purpose of this loan is: RENEWAL.

DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Lender's conditions for making the loan have been satisfied. Please disburse the loan proceeds of $10,000,000.00 as follows:

Undisbursed Funds:	$	3,308,469.61
Other Disbursements:	$	6,691,530.39
$6,691,530.39 BALANCE AS OF 3/26/13
Note Principal:	$	10,000,000.00

CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:

Prepaid Finance Charges Paid in Cash:	$	18,698.00
$ 18,698.00 Interest Payment due 4/1/13
Total Charges Paid in Cash:	$	18,698.00

AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to deduct from Borrower's Demand Deposit - Checking account, numbered 704000652, the amount of any loan payment. If the funds in the account are insufficient to cover any payment, Lender shall not be obligated to advance funds to cover the payment. At any time and for any reason, Borrower or Lender may voluntarily terminate Automatic Payments.

FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED MARCH 26, 2013.

BORROWER:

BISCO INDUSTRIES, INC.

By:	/s/ GLEN F. CEILEY
	GLEN F. CEILEY, CHAIRMAN and CEO of BISCO INDUSTRIES, INC.

LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2013.    All Rights Reserved.   - CA G:\CFI50\CFI\LPL\120.FC  TR - 18064 PR-38

EX-31.1

Exhibit 31.1

Certification

I, Glen Ceiley, certify that:

1.   I have reviewed this Quarterly Report on Form 10-Q of EACO Corporation (the “registrant”).

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 the statements 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 the financial 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, to ensure 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 my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness 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 recent fiscal 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, the registrant’s internal control over financial reporting; and

5.   I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Audit Committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

a)   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: July 15, 2013	/s/Glen Ceiley
	Glen Ceiley
	Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer and Principal Financial Officer)

EX-31.2

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with Quarterly Report of EACO Corporation (the “Company”) on Form 10-Q for the quarter ended May 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glen Ceiley, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 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 of the Company.

Date: July 15, 2013	/s/ Glen Ceiley
	Glen Ceiley
	Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer & Principal Financial Officer)

XML

Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012	Aug. 31, 2012
Letters of Credit Pledged as Collateral Towards Workers Compensation	$ 2,713,000		$ 2,713,000		$ 2,855,000
Pledged Financial Instruments, Not Separately Reported, Securities for Letter of Credit Facilities	549,000		549,000		548,000
Restricted Cash and Cash Equivalents	619,000		619,000
Allowance for Doubtful Accounts Receivable	197,000		197,000		273,000
Inventory Valuation Reserves	$ 910,000		$ 910,000		$ 972,000
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	40,000	40,000	40,000	40,000
Convertible Preferred Stock, Shares Issued upon Conversion	36,000	36,000	36,000	36,000
Exchange Rate on Foreign Currency Translation and Transactions	$ 1.02	$ 1.00	$ 1.03	$ 1.01
Entity Wide Information on Geographic Areas Trade Accounts Receivable from External Customers Percentage Attributed to Foreign Countries	7.00%	7.00%	7.00%	7.00%
Entity Wide Information on Geographic Areas Revenue from External Customers Percentage Attributed to Foreign Countries	4.00%		4.00%		4.00%
Percentage of Revenue Per Entity, Maximum	10.00%	10.00%	10.00%	10.00%

XML

Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	May 31, 2013	Aug. 31, 2012
ASSETS
Cash and cash equivalents	$ 2,481	$ 2,568
Restricted cash, current	619	0
Trade accounts receivable, net	13,442	13,972
Inventory, net	13,686	12,189
Marketable securities, trading	126	197
Prepaid expenses and other current assets	433	464
Assets held for sale	339	2,016
Deferred tax asset, current	290	290
Total current assets	31,416	31,696
Non-current Assets:
Restricted cash, non-current	549	548
Real estate properties held for leasing, net	7,322	7,758
Equipment and leasehold improvements, net	1,369	1,106
Deferred tax asset	1,441	2,111
Other assets, principally deferred charges, net of accumulated amortization	1,025	1,110
Total assets	43,122	44,329
LIABILITIES AND SHAREHOLDERS' EQUITY
Trade accounts payable	8,598	9,519
Accrued expenses and other current liabilities	1,921	2,482
Securities sold short, at fair value	619	0
Liabilities of discontinued operations - short-term	146	146
Liabilities of assets held for sale	394	1,568
Current portion of long-term debt	159	463
Total current liabilities	11,837	14,178
Non-current Liabilities:
Liabilities of discontinued operations - long-term	2,456	2,567
Deposit liability	87	147
Long-term debt	11,374	12,544
Total liabilities	25,754	29,436
Shareholders' Equity:
Convertible preferred stock, $0.01 par value per share; 10,000,000 shares authorized; 36,000 shares outstanding (liquidation value $900)	1	1
Common stock, $0.01 par value per share; 8,000,000 shares authorized; 4,861,590 shares outstanding	49	49
Additional paid-in capital	12,378	12,378
Accumulated other comprehensive income	703	478
Retained earnings	4,237	1,987
Total shareholders’ equity	17,368	14,893
Total liabilities and shareholders’ equity	$ 43,122	$ 44,329

XML

Earnings per Share

9 Months Ended

May 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 4. Earnings per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted computations for net income per share attributable to common shareholders:

	For the Three Months Ended May 31,				For the Nine Months Ended May 31,
	2013		2012		2013		2012
(In thousands, except share and per share information)
EPS:
Net income	$	1,284	$	957	$	2,308	$	1,985
Less: accrued preferred stock dividends		(19)		(19)		(57)		(57)
Net income available for common shareholders	$	1,265	$	938	$	2,251	$	1,928
Earnings per common share – basic and diluted	$	0.26	$	0.19	$	0.46	$	0.40

For the three and nine months ended May 31, 2013 and 2012, 40,000 potential common shares have been excluded from the computation of diluted earnings per share because their effect would have been anti-dilutive.

XML

Debt (Details Textual) (USD $)	1 Months Ended	9 Months Ended			1 Months Ended		0 Months Ended
	May 31, 2013	May 31, 2013	Aug. 31, 2012	Mar. 10, 2011	Oct. 31, 2002 Orange Park Property [Member]	May 31, 2013 Orange Park Property [Member]	Nov. 09, 2007 Sylmar Property [Member]	May 31, 2013 Sylmar Property [Member]	Aug. 31, 2012 Sylmar Property [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 10,000,000	$ 10,000,000
Line of Credit Facility, Interest Rate Description		bear interest at either the 30, 60, or 90 day London Inter-Bank Offered Rate (“LIBOR”) (0.27% and 0.43% for the 90 day LIBOR at May 31, 2013 and August 31, 2012, respectively) plus 1.75% and/or the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012).
Line of Credit Facility, Amount Outstanding	6,465,000	6,465,000	7,450,000
Line of Credit Facility, Remaining Borrowing Capacity	3,535,000	3,535,000	2,550,000
Loans Payable to Bank				1,000,000
Proceeds from Notes Payable							5,875,000
Debt Instrument, Maturity Date, Description		two years
Debt Instrument, Periodic Payment	43,083				10,400		39,658
Long-term Debt, Percentage Bearing Fixed Interest, Percentage Rate	3.25%	3.25%	3.25%				6.00%
Debt Instrument, Interest Rate Terms					thirty-day LIBOR rate (.20% and .24% at May 31, 2013 and August 31, 2012, respectively) plus 3.75%
Debt Instrument, Interest Rate During Period					7.34%
Debt Instrument, Maturity Date		Mar. 01, 2015			Dec. 31, 2016
Long-term Debt	$ 0	$ 0				$ 394,000		$ 5,068,000	$ 5,252,000

XML

Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	May 31, 2013	May 31, 2012
Operating activities:
Net income	$ 2,308	$ 1,985
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	464	638
Bad debt expense	58	111
Change in inventory reserve	(62)	(66)
Gain on sale of property	(780)	0
Net loss (gain) on trading securities	34	(398)
Decrease (increase) in:
Trade accounts receivable	472	(1,656)
Inventory	(1,435)	(751)
Prepaid expenses and other assets	83	(3)
Deferred tax asset	670	867
(Decrease) increase in:
Trade accounts payable	(829)	759
Accrued expenses and other current liabilities	(561)	(287)
Deposit liability	(60)	0
Liabilities of discontinued operations	(111)	(120)
Net cash provided by operating activities	251	1,079
Investing activities:
Purchase of property and equipment	(631)	(347)
Sale of marketable securities, trading	37	1,023
Proceeds from securities sold short	619	637
Proceeds from sale of property	2,830	0
Increase in restricted cash	(620)	(553)
Net cash provided by investing activities	2,235	760
Financing activities:
Net (payments) borrowings on revolving credit facility	(985)	100
Change in bank overdraft	(92)	1,261
Preferred dividend	(57)	(57)
Payments on long-term debt	(1,663)	(583)
Net cash (used in) provided by financing activities	(2,797)	721
Effect of foreign currency exchange rate changes on cash and cash equivalents	224	(72)
Net (decrease) increase in cash and cash equivalents	(87)	2,488
Cash and cash equivalents - beginning of period	2,568	1,368
Cash and cash equivalents - end of period	2,481	3,856
Supplemental disclosures of cash flow information:
Cash paid for interest	512	564
Cash paid for taxes	196	451
Supplemental disclosures of noncash investing and financing activities:
Note receivable issued in connection with sale of real estate properties	$ 350	$ 0

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Significant Accounting Policies

9 Months Ended

May 31, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2. Significant Accounting Policies

Restricted Cash

The State of Florida Division of Workers’ Compensation (the “Division”) requires self-insured companies to pledge collateral in favor of the Division in an amount sufficient to cover the projected outstanding liability. In compliance with this requirement, the Company pledged two irrevocable letters of credit totaling $2,713,000 as of May 31, 2013 and $2,855,000 as of August 31, 2012. These letters were secured by certificates of deposits totaling approximately $549,000 and $548,000 at May 31, 2013 and August 31, 2012, respectively, and the Company’s two real estate properties in Sylmar, California (the “Sylmar Properties”).

The Company also has restricted cash of approximately $619,000 at May 31, 2013 on deposit with a securities brokerage firm, which relates to the potential liability for short sales of trading securities. There was no such restricted cash at August 31, 2012.

Trade Accounts Receivable

Trade accounts receivable are carried at original invoice amount, less an estimate for doubtful accounts. The allowance for doubtful accounts was approximately $197,000 and $273,000 at May 31, 2013 and August 31, 2012, respectively.

Inventories

Inventories consist of finished goods, primarily electronic fasteners and components stated at the lower of cost or estimated market value. Cost is determined using the average cost method. Inventories are reported net of a reserve for slow moving or obsolete items of approximately $910,000 and $972,000 at May 31, 2013 and August 31, 2012, respectively. The reserve is based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company.

Securities Sold Short

Securities sold short represent transactions in which the Company sells a security it does not own and is obligated to deliver such security at a future date. The short sale is recorded as a liability, and unrealized appreciation or depreciation is recorded for the difference between the proceeds received and the fair value of the open short position. The Company records a realized gain or loss when the short position is closed. By entering into short sales, the Company bears the market risk of an unfavorable increase in the price of the security sold short in excess of the proceeds received. Short sales are separately presented as a liability in the consolidated balance sheets.

The Company is required to establish a margin account with the brokers lending the securities sold short. While the short sale is outstanding, the short sale proceeds may be restricted to the extent of the fair value of the short position.

Revenue Recognition

For the Company’s distribution operations, the Company’s shipping terms are FOB shipping point. Revenue is considered to 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, the product has been shipped (and installed when applicable), the sales price is fixed or determinable, and collectability is reasonably assured. Therefore, the Company generally recognizes revenue at the time of product shipment.

The Company leases its real estate properties to tenants under operating leases with terms generally exceeding one year. Some of these leases contain scheduled rent increases. We record rent revenue for leases which contain scheduled rent increases on a straight-line basis over the term of the lease.

Earnings Per Common Share 

Basic earnings per common share for the three and nine months ended May 31, 2013 and 2012 were computed based on the weighted average number of common shares outstanding during each respective period. Diluted earnings per common share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the respective periods. Potential common shares represent 40,000 shares of common stock issuable upon conversion of 36,000 shares of preferred stock.

Foreign Currency Translation and Transactions

Assets and liabilities recorded in functional currencies other than the U.S. dollar (i.e. Canadian dollars for the Company’s Canadian subsidiary) are translated into U.S. dollars at the quarter-end rate of exchange. Revenue and expenses are translated at the weighted-average exchange rates for the three and nine months ended May 31, 2013 and 2012. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income. The average exchange rate for the three months ended May 31, 2013 and 2012 was $1.02 and $1.00 Canadian dollars for one U.S. dollar, respectively. The average exchange rate for the nine months ended May 31, 2013 and 2012 was $1.03 and $1.01 Canadian dollars for one U.S. dollar, respectively.

Concentrations

Net sales to customers outside the United States were approximately 7% for the nine months ended May 31, 2013 and 2012, and related accounts receivable were approximately 4% at May 31, 2013 and August 31, 2012, respectively.

No single entity accounted for more than 10% of revenues for the three months ended May 31, 2013 or 2012.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Management has evaluated its approach for making operating decisions and assessing the performance of our business and determined that the Company has two reportable segments: Distribution Operations and Rental Real Estate Operations.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) . The objective of the amendments contained in ASU 2011-05 is to increase the prominence of other comprehensive income in the financial statements. The amendments require entities to report components of net income and the components of other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.  In December 2011, the FASB issued ASU No. 2011-12, which deferred the specific requirements related to the presentation of reclassification adjustments. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.   The adoption of this ASU has affected financial statement presentation only.

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Related Party Transactions

9 Months Ended

May 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 5. Related Party Transactions

The Company leases three buildings under operating lease agreements from its majority stockholder. During each of the three months ended May 31, 2013 and 2012, the Company incurred approximately $128,000 of expense related to these leases.

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Debt

9 Months Ended

May 31, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 3. Debt

The Company has a $10,000,000 line of credit agreement with Community Bank. Borrowings under this agreement bear interest at either (i) the 30, 60 or 90 day London Inter-Bank Offered Rate (“LIBOR”) (0.27% and 0.43% for the 90 day LIBOR at May 31, 2013 and August 31, 2012, respectively) plus 1.75% and/or (ii) the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). Borrowings are secured by substantially all assets of Bisco and are guaranteed by the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder, Glen F. Ceiley. The agreement expires on March 1, 2015. The amounts outstanding under this line of credit as of May 31, 2013 and August 31, 2012 were approximately $6,465,000 and $7,450,000, respectively. Availability under the line of credit was approximately $3,535,000 and $2,550,000 at May 31, 2013 and August 31, 2012, respectively. The line of credit agreement contains nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of May 31, 2013 and August 31, 2012, the Company was in compliance with all such covenants.

On March 10, 2011, the Company entered into a $1,000,000 term loan agreement with Community Bank. The term loan required monthly payments of $43,083 for two years and accrued interest at the bank’s reference rate (3.25% at May 31, 2013 and August 31, 2012). The outstanding balance on this loan was repaid in full in March 2013.

In October 2002, the Company refinanced and entered into a loan agreement with GE Capital for one restaurant property owned by the Company in Orange Park, Florida (the “Orange Park Property”). The loan requires monthly principal and interest payments totaling $10,400 through December 2016. Interest is at the thirty-day LIBOR rate (.20% and .24% at May 31, 2013 and August 31, 2012, respectively) plus 3.75% (minimum interest rate of 7.34%). As of May 31, 2013, the outstanding balance due under the Company’s loan with GE Capital was approximately $394,000. Such loan was reclassified as liabilities of assets held for sale on the accompanying consolidated balance sheets as of May 31, 2013 and August 31, 2012 (See Note 7).

On November 9, 2007, the Company completed the refinance of the Sylmar Properties in exchange for a note in the amount of $5,875,000 from Community Bank. The loan requires monthly principal and interest payments totaling $39,658 through December 2014. Interest is fixed at 6% per annum. As of May 31, 2013 and August 31, 2012, the outstanding balance due on the loan to Community Bank was approximately $5,068,000 and $5,252,000, respectively.

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Net income	$ 1,284	$ 957	$ 2,308	$ 1,985
Other comprehensive income (loss), net of tax:
Foreign translation gain (loss)	68	(42)	224	(72)
Total comprehensive income	$ 1,352	$ 915	$ 2,532	$ 1,913

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Significant Accounting Policies (Policies)

9 Months Ended

May 31, 2013

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

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

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended August 31, 2012. The condensed consolidated balance sheet as of August 31, 2012 and related disclosures in this report were derived from the audited consolidated financial statements as of August 31, 2012. Operating results for the three and nine months ended May 31, 2013 are not necessarily indicative of the results that may be expected for future quarterly periods or the entire fiscal year.

Reclassification, Policy [Policy Text Block]

Reclassification

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

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

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

Management has evaluated events subsequent to May 31, 2013 through the date that these condensed consolidated financial statements are being filed with the SEC for transactions and other events which may require adjustment of and/or disclosure in such financial statements.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

The State of Florida Division of Workers’ Compensation (the “Division”) requires self-insured companies to pledge collateral in favor of the Division in an amount sufficient to cover the projected outstanding liability. In compliance with this requirement, the Company pledged two irrevocable letters of credit totaling $2,713,000 as of May 31, 2013 and $2,855,000 as of August 31, 2012. These letters were secured by certificates of deposits totaling approximately $549,000 and $548,000 at May 31, 2013 and August 31, 2012, respectively, and the Company’s two real estate properties in Sylmar, California (the “Sylmar Properties”).

The Company also has restricted cash of approximately $619,000 at May 31, 2013 on deposit with a securities brokerage firm, which relates to the potential liability for short sales of trading securities. There was no such restricted cash at August 31, 2012.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

Trade Accounts Receivable

Trade accounts receivable are carried at original invoice amount, less an estimate for doubtful accounts. The allowance for doubtful accounts was approximately $197,000 and $273,000 at May 31, 2013 and August 31, 2012, respectively.

Inventory, Policy [Policy Text Block]

Inventories

Inventories consist of finished goods, primarily electronic fasteners and components stated at the lower of cost or estimated market value. Cost is determined using the average cost method. Inventories are reported net of a reserve for slow moving or obsolete items of approximately $910,000 and $972,000 at May 31, 2013 and August 31, 2012, respectively. The reserve is based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company.

Short-Duration Contracts Revenue Recognition, Policy [Policy Text Block]

Securities Sold Short

Securities sold short represent transactions in which the Company sells a security it does not own and is obligated to deliver such security at a future date. The short sale is recorded as a liability, and unrealized appreciation or depreciation is recorded for the difference between the proceeds received and the fair value of the open short position. The Company records a realized gain or loss when the short position is closed. By entering into short sales, the Company bears the market risk of an unfavorable increase in the price of the security sold short in excess of the proceeds received. Short sales are separately presented as a liability in the consolidated balance sheets.

The Company is required to establish a margin account with the brokers lending the securities sold short. While the short sale is outstanding, the short sale proceeds may be restricted to the extent of the fair value of the short position.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

For the Company’s distribution operations, the Company’s shipping terms are FOB shipping point. Revenue is considered to 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, the product has been shipped (and installed when applicable), the sales price is fixed or determinable, and collectability is reasonably assured. Therefore, the Company generally recognizes revenue at the time of product shipment.

The Company leases its real estate properties to tenants under operating leases with terms generally exceeding one year. Some of these leases contain scheduled rent increases. We record rent revenue for leases which contain scheduled rent increases on a straight-line basis over the term of the lease.

Earnings Per Share, Policy [Policy Text Block]

Earnings Per Common Share 

Basic earnings per common share for the three and nine months ended May 31, 2013 and 2012 were computed based on the weighted average number of common shares outstanding during each respective period. Diluted earnings per common share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all dilutive potential common shares that were outstanding during the respective periods. Potential common shares represent 40,000 shares of common stock issuable upon conversion of 36,000 shares of preferred stock.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translation and Transactions

Assets and liabilities recorded in functional currencies other than the U.S. dollar (i.e. Canadian dollars for the Company’s Canadian subsidiary) are translated into U.S. dollars at the quarter-end rate of exchange. Revenue and expenses are translated at the weighted-average exchange rates for the three and nine months ended May 31, 2013 and 2012. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income. The average exchange rate for the three months ended May 31, 2013 and 2012 was $1.02 and $1.00 Canadian dollars for one U.S. dollar, respectively. The average exchange rate for the nine months ended May 31, 2013 and 2012 was $1.03 and $1.01 Canadian dollars for one U.S. dollar, respectively.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

Concentrations

Net sales to customers outside the United States were approximately 7% for the nine months ended May 31, 2013 and 2012, and related accounts receivable were approximately 4% at May 31, 2013 and August 31, 2012, respectively.

No single entity accounted for more than 10% of revenues for the three months ended May 31, 2013 or 2012.

Segment Reporting, Policy [Policy Text Block]

Segment Reporting

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. Management has evaluated its approach for making operating decisions and assessing the performance of our business and determined that the Company has two reportable segments: Distribution Operations and Rental Real Estate Operations.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”) . The objective of the amendments contained in ASU 2011-05 is to increase the prominence of other comprehensive income in the financial statements. The amendments require entities to report components of net income and the components of other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where the components of net income and the components of other comprehensive income are presented.  In December 2011, the FASB issued ASU No. 2011-12, which deferred the specific requirements related to the presentation of reclassification adjustments. This amendment is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011.   The adoption of this ASU has affected financial statement presentation only.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	May 31, 2013	Aug. 31, 2012
Convertible preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Convertible preferred stock, shares authorized	10,000,000	10,000,000
Convertible preferred stock, shares outstanding	36,000	36,000
Convertible preferred stock, liquidated (in dollars)	$ 900	$ 900
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	8,000,000	8,000,000
Common stock, shares outstanding	4,861,590	4,861,590

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Condensed Consolidated Statements of Income (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Distribution sales	$ 31,124	$ 30,019	$ 88,566	$ 83,283
Cost of goods sold	22,273	21,417	63,719	60,197
Gross profit from distribution operations	8,851	8,602	24,847	23,086
Rental revenue	244	314	582	937
Cost of rental operations	132	188	319	481
Gross profit from rental operations	112	126	263	456
Operating expenses:
Selling, general and administrative expenses	7,708	6,826	22,318	20,150
Total operating expenses	7,708	6,826	22,318	20,150
Income from operations	1,255	1,902	2,792	3,392
Non-operating income (expense):
(Loss) gain on sale of trading securities	64	(17)	(14)	45
Unrealized gain (loss) on trading securities	21	68	(20)	353
Gain on sale of asset	240	0	780	0
Interest expense, net	(158)	(185)	(491)	(544)
Total non-operating income (expense)	167	(134)	255	(146)
Net income before income taxes	1,422	1,768	3,047	3,246
Provision for income taxes	138	811	739	1,261
Net income	1,284	957	2,308	1,985
Cumulative preferred stock dividend	(19)	(19)	(57)	(57)
Net income attributable to common shareholders	$ 1,265	$ 938	$ 2,251	$ 1,928
Basic and diluted earnings per share (in dollars per share)	$ 0.26	$ 0.19	$ 0.46	$ 0.40
Basic and diluted weighted average common shares outstanding (in shares)	4,861,590	4,861,590	4,861,590	4,861,590

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Real Estate Properties (Details Textual) (USD $)	3 Months Ended		9 Months Ended		1 Months Ended	0 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012	Aug. 30, 2012 Brooksville Property [Member]	Jan. 25, 2013 Deland Property [Member]	May 31, 2013 Orange Park Florida [Member]
Sales of Real Estate					$ 1,825,000	$ 1,100,000
Land and Land Improvements, Total							339,000
Proceeds from Sale of Real Estate						750,000
Real Estate Owned, Nature and Origin						The Company received $750,000 in cash and issued a two year note receivable at 7% interest payable in 24 installments on the remaining $350,000.
Gain (Loss) on Disposition of Real Estate, Discontinued Operations	$ 240,000	$ 0	$ 780,000	$ 0	$ 240,000	$ 540,000

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Real Estate Properties

9 Months Ended

May 31, 2013

Real Estate [Abstract]

Real Estate Disclosure [Text Block]

Note 7. Real Estate Properties

On January 10, 2013, the Company entered into an agreement to sell the restaurant property in Deland, Florida (“Deland Property”) for $1,100,000. The Company received $750,000 in cash and issued a two year note receivable at 7% interest payable in 24 installments on the remaining $350,000. This transaction closed on January 25, 2013. The sale of this property resulted in a net gain of approximately $540,000. The outstanding balance of the note receivable has been included on the accompanying balance sheets as other current assets and other assets.

In August 2012, the Company entered into an agreement with the tenant of the Brooksville Property to sell the property for $1,825,000. The transaction closed in April 2013. The sale of this property resulted in a net gain of approximately $240,000.

The Company has received multiple offers to purchase the property located in Orange Park, Florida. The property is actively listed and management has committed to sell the property. The carrying value of the property consisting of land, building and improvements was approximately $339,000 and was reclassified as assets held for sale on the accompanying consolidated balance sheets as of May 31, 2013 and August 31, 2012. The associated mortgage to GE Capital was reclassified to liabilities of assets held for sale at May 31, 2013 and August 31, 2012.

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Segment Reporting (Tables)

9 Months Ended

May 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Management also reviews the returns on the rental real estate properties, inventory, accounts receivable and marketable securities (segment assets).

	For the Three Months Ended May 31, 2013						For the Three Months Ended May 31, 2012
	Rental  Real Estate		Distribution		Total		Rental Real  Estate		Distribution		Total
	(in thousands)
Revenues	$	244	$	31,124	$	31,368	$	314	$	30,019	$	30,333
Cost of revenues		132		22,273		22,405		188		21,417		21,605
Gross profit		112		8,851		8,963		126		8,602		8,728
Selling, general and     administrative expenses		54		7,654		7,708		92		6,734		6,826

	For the Nine Months Ended May 31, 2013						For the Nine Months Ended May 31, 2012
	Rental Real Estate		Distribution		Total		Rental Real Estate		Distribution		Total
	(in thousands)
Revenues	$	582	$	88,566	$	89,148	$	937	$	83,283	$	84,220
Cost of revenues		319		63,719		64,038		481		60,197		60,678
Gross profit		263		24,847		25,110		456		23,086		23,542
Selling, general and     administrative expenses		134		22,184		22,318		275		19,875		20,150

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Segment Reporting

9 Months Ended

May 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 6. Segment Reporting

The Company operates in two reportable business segments: Rental Real Estate Operations and Distribution Operations. The Distribution Operations are organized and operated as Bisco Industries, Inc., a wholly-owned subsidiary of the Company. Management evaluates performance based on gross margins, selling, general and administrative expenses. Management also reviews the returns on the rental real estate properties, inventory, accounts receivable and marketable securities (segment assets).

	For the Three Months Ended May 31, 2013						For the Three Months Ended May 31, 2012
	Rental  Real Estate		Distribution		Total		Rental Real  Estate		Distribution		Total
	(in thousands)
Revenues	$	244	$	31,124	$	31,368	$	314	$	30,019	$	30,333
Cost of revenues		132		22,273		22,405		188		21,417		21,605
Gross profit		112		8,851		8,963		126		8,602		8,728
Selling, general and     administrative expenses		54		7,654		7,708		92		6,734		6,826

	For the Nine Months Ended May 31, 2013						For the Nine Months Ended May 31, 2012
	Rental Real Estate		Distribution		Total		Rental Real Estate		Distribution		Total
	(in thousands)
Revenues	$	582	$	88,566	$	89,148	$	937	$	83,283	$	84,220
Cost of revenues		319		63,719		64,038		481		60,197		60,678
Gross profit		263		24,847		25,110		456		23,086		23,542
Selling, general and     administrative expenses		134		22,184		22,318		275		19,875		20,150

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Organization and Basis of Presentation

9 Months Ended

May 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1. Organization and Basis of Presentation

Organization and Merger with Bisco Industries, Inc.

EACO Corporation (“EACO”) was incorporated in the State of Florida in September 1985. From the inception of EACO through June 2005, EACO’s business consisted of operating restaurants in the State of Florida. On June 29, 2005, EACO sold all of its operating restaurants (the “Asset Sale”) including sixteen restaurant businesses, premises, equipment and other assets used in restaurant operations. The only remaining activity of the restaurant operations relates to the workers’ compensation claim liability, which is presented as liabilities of discontinued operations on the Company’s balance sheets. After the Asset Sale and prior to the acquisition of Bisco (described below), EACO’s operations principally consisted of managing real estate properties held for leasing located in Florida and California.

On March 24, 2010, EACO completed the acquisition of Bisco Industries, Inc. (“Bisco”), a company under the common control of EACO’s majority shareholder (Glen F. Ceiley). Bisco is a distributor of electronic components and fasteners with 44 sales offices and six 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.

Use of Estimates

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

Basis of Presentation

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

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended August 31, 2012. The condensed consolidated balance sheet as of August 31, 2012 and related disclosures in this report were derived from the audited consolidated financial statements as of August 31, 2012. Operating results for the three and nine months ended May 31, 2013 are not necessarily indicative of the results that may be expected for future quarterly periods or the entire fiscal year.

Reclassification

Certain prior year amounts have been reclassified to conform to the current year’s presentation.

Principles of Consolidation

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

Subsequent Events

Management has evaluated events subsequent to May 31, 2013 through the date that these condensed consolidated financial statements are being filed with the SEC for transactions and other events which may require adjustment of and/or disclosure in such financial statements.

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Earnings per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
EPS:
Net income	$ 1,284	$ 957	$ 2,308	$ 1,985
Less: accrued preferred stock dividends	(19)	(19)	(57)	(57)
Net income available for common shareholders	$ 1,265	$ 938	$ 2,251	$ 1,928
Earnings per common share - basic and diluted (in dollars per share)	$ 0.26	$ 0.19	$ 0.46	$ 0.40

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Earnings per Share (Tables)

9 Months Ended

May 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following is a reconciliation of the numerators and denominators of the basic and diluted computations for net income per share attributable to common shareholders:

	For the Three Months Ended May 31,				For the Nine Months Ended May 31,
	2013		2012		2013		2012
(In thousands, except share and per share information)
EPS:
Net income	$	1,284	$	957	$	2,308	$	1,985
Less: accrued preferred stock dividends		(19)		(19)		(57)		(57)
Net income available for common shareholders	$	1,265	$	938	$	2,251	$	1,928
Earnings per common share – basic and diluted	$	0.26	$	0.19	$	0.46	$	0.40

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Segment Reporting (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Revenues	$ 244	$ 314	$ 582	$ 937
Cost of revenues	132	188	319	481
Gross profit	112	126	263	456
Selling, general and administrative expenses	7,708	6,826	22,318	20,150
Real Estate Rental Operations [Member]
Revenues	244	314	582	937
Cost of revenues	132	188	319	481
Gross profit	112	126	263	456
Selling, general and administrative expenses	54	92	134	275
Distribution Operations [Member]
Revenues	31,124	30,019	88,566	83,283
Cost of revenues	22,273	21,417	63,719	60,197
Gross profit	8,851	8,602	24,847	23,086
Selling, general and administrative expenses	7,654	6,734	22,184	19,875
Segment Operation [Member]
Revenues	31,368	30,333	89,148	84,220
Cost of revenues	22,405	21,605	64,038	60,678
Gross profit	8,963	8,728	25,110	23,542
Selling, general and administrative expenses	$ 7,708	$ 6,826	$ 22,318	$ 20,150

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Earnings per Share (Details Textual)	3 Months Ended		9 Months Ended
	May 31, 2013	May 31, 2012	May 31, 2013	May 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	40,000	40,000	40,000	40,000

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Document And Entity Information	9 Months Ended
	May 31, 2013	Jul. 12, 2013
Document Information [Line Items]
Entity Registrant Name	EACO CORP
Entity Central Index Key	0000784539
Current Fiscal Year End Date	--08-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	eaco
Entity Common Stock, Shares Outstanding		4,861,590
Document Type	10-Q
Amendment Flag	false
Document Period End Date	May 31, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013

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Related Party Transactions (Details Textual) (Related Party [Member], USD $)	3 Months Ended
	May 31, 2013	May 31, 2012
Related Party [Member]
Operating Leases, Rent Expense	$ 128,000	$ 128,000