Eaco Corp 10-Q for FY2025 Q1
Eaco Corp (EACO)
About this 10-Q
Eaco Corp filed this 10-Q on January 13, 2025, covering the quarter ended November 30, 2024 (FY2025 Q1).
Headline figures
Quarter ended November 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $93.92M
- up 17.0% from $80.26M a year earlier
- Net income
- $6.89M
- up 287.2% from net income of $1.78M a year earlier
- Diluted EPS
- $1.41
- up 291.7% from $0.36 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
For the transition period from to
Commission File No.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices)
(
(Registrant’s Telephone No.)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | |
Smaller reporting company | Emerging growth company |
| |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of January 13, 2025,
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 | ||||
| | November 30, | ||||
|
| 2024 |
| 2023 | ||
Net sales | | $ | | | $ | |
Cost of sales |
| | | |
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Gross margin |
| | | |
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Operating expenses: |
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Selling, general and administrative expenses |
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Impairment on termination of lease | | | | | | |
Income from operations |
| | | |
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|
| | | |
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Other income (expense): |
| | | |
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Net gain (loss) on trading securities |
| | | |
| ( |
Interest and other expense, net | | | ( | | | ( |
Other income (expense), net |
| | | |
| ( |
Income before income taxes |
| | | |
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Provision for income taxes |
| | | |
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Net income |
| | | |
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Cumulative preferred stock dividend |
| | ( | |
| ( |
Net income attributable to common shareholders | | $ | | | $ | |
Basic earnings per common share | | $ | | | $ | |
Basicweighted average common shares outstanding | | | | | | |
Diluted earnings per common share: |
| $ | | | $ | |
Diluted weighted average common shares outstanding | | | | | | |
See accompanying notes to unaudited condensed consolidated financial statements.
2
EACO Corporation and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income
(in thousands)
(Unaudited)
| | Three Months Ended | ||||
| | November 30, | ||||
|
| 2024 |
| 2023 | ||
Net income | | $ | | | $ | |
Other comprehensive (loss), net of tax: | | | | | | |
Foreign translation (loss) | | | ( | | | ( |
Total comprehensive income | | $ | | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
3
EACO Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share information)
(Unaudited)
| | November 30, | | August 31, | ||
|
| 2024 |
| 2024* | ||
ASSETS |
| |
|
| |
|
Current Assets: |
| |
|
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|
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
| | | | |
Trade accounts receivable, net | |
| | | | |
Inventory, net | |
| | | | |
Marketable securities, trading | |
| | | | |
Prepaid expenses and other current assets | |
| | | | |
Total current assets | |
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Non-current Assets: | |
| | | | |
Property, equipment and leasehold improvements, net | | | | | | |
Operating lease right-of-use assets | | | | | | |
Other assets, net | | | | | | |
Total assets | | $ | | | $ | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | |
| |
Current Liabilities: | | | | | | |
Trade accounts payable | | $ | | | $ | |
Accrued expenses and other current liabilities | | | | | | |
Current portion of long-term debt | |
| | |
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Current portion of operating lease liabilities | | | | | | |
Total current liabilities | |
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Non-current Liabilities: | |
| | | | |
Long-term debt | | | | | | |
Operating lease liabilities | | | | | | |
Total liabilities | |
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Commitments and Contingencies Note 9 | |
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Shareholders’ Equity: | |
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Convertible preferred stock, $ | | | | | | |
Common stock, $ | |
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Additional paid-in capital | | | | | | |
Accumulated other comprehensive income | |
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Retained earnings | |
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Total shareholders’ equity | |
| | |
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Total liabilities and shareholders’ equity | | $ | | | $ | |
*
See accompanying notes to unaudited condensed consolidated financial statements.
4
EACO Corporation and Subsidiaries
Condensed Consolidated Statement of Shareholders’ Equity
(in thousands, except share information)
(Unaudited)
| | Convertible | | | | | | | Additional | | Accumulated Other | | | | | Total | ||||||
| | Preferred Stock | | Common Stock | | Paid-in | | Comprehensive | | Accumulated | | Shareholders’ | ||||||||||
Three Months Ended November 30, 2024 |
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Income (Loss) |
| Earnings |
| Equity | ||||||
Balance, August 31, 2024 |
| | | $ | |
| | | $ | | | $ | | | $ | | | $ | | | $ | |
Preferred dividends |
| — | |
| — |
| — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Foreign translation (loss) |
| — | |
| — |
| — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
Net income |
| — | |
| — |
| — | |
| — | |
| — | |
| — | |
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Balance, November 30, 2024 | | | | $ | | | | | $ | | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | | | | | | | | | | |
Three Months Ended November 30, 2023 | | | | | | | | | | | | | | | | | | | | | | |
Balance, August 31, 2023 |
| | | $ | |
| | | $ | | | $ | | | $ | | | $ | | | $ | |
Preferred dividends | | — | | | — | | — | | | — | | | — | | | — | | | ( | | | ( |
Foreign translation (loss) | | — | | | — | | — | | | — | | | — | | | ( | | | — | | | ( |
Net income | | — | | | — | | — | | | — | | | — | | | — | | | | | | |
Balance, November 30, 2023 | | | | $ | | | | | $ | | | $ | | | $ | ( | | $ | | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
5
EACO Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| | Three Months Ended | ||||
| | November 30, | ||||
|
| 2024 |
| 2023 | ||
Operating activities: |
| |
|
| |
|
Net income | | $ | | | $ | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | |
| |
Depreciation and amortization | |
| | |
| |
Bad debt expense | | | | | | |
Deferred tax provision | | | ( | | | ( |
Net unrealized (gain) loss on trading securities | |
| ( | |
| |
Impairment on termination of lease | | | | | | |
Increase (decrease) in cash from changes in: | |
| | |
| |
Trade accounts receivable | |
| | |
| |
Inventory | |
| ( | |
| ( |
Prepaid expenses and other assets | |
| ( | |
| ( |
Operating lease right-of-use assets | |
| | |
| |
Trade accounts payable | |
| | |
| |
Accrued expenses and other current liabilities | |
| ( | |
| ( |
Right of use liabilities | | | ( | | | ( |
Net cash provided by operating activities | |
| | |
| |
Investing activities: | |
| | |
| |
Additions to property, equipment, and leasehold improvements | | | ( | | | ( |
(Purchase) proceeds from sale of marketable securities, trading | | | ( | | | |
Net cash used in investing activities | | | ( | | | ( |
Financing activities: | | | | | | |
Borrowing on revolving credit facility | | | — | | | |
Repayments of long-term debt | | | ( | | | ( |
Preferred stock dividend | |
| ( | |
| ( |
Bank overdraft | | | | | | |
Net cash provided by financing activities | |
| | |
| |
Effect of foreign currency exchange rate changes on cash and cash equivalents | |
| ( | |
| ( |
Net decrease in cash, cash equivalents, and restricted cash | |
| ( | |
| ( |
Cash, cash equivalents, and restricted cash - beginning of period | | | | | | |
Cash, cash equivalents, and restricted cash - end of period | | $ | | | $ | |
Supplemental disclosures of cash flow information: | |
| | |
| |
Cash paid for interest | | $ | | | $ | |
Cash paid for income taxes | | $ | | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
EACO CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
November 30, 2024
Note 1. Organization and Basis of Presentation
EACO Corporation (“EACO”), incorporated in Florida in September 1985, is a holding company, primarily comprised of its wholly-owned subsidiary, Bisco Industries, Inc. (“Bisco”) and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited. Substantially all of EACO’s operations are conducted through Bisco and Bisco Industries Limited. Bisco was incorporated in Illinois in 1974 and is a distributor of electronic components and fasteners with
Note 2. Significant Accounting Policies and Significant Recent Accounting Pronouncements
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include allowance for credit losses, provision for slow moving and obsolete inventory, recoverability of the carrying value and estimated useful lives of long-lived assets, and the valuation allowance against deferred tax assets, if any. Actual results could differ from those estimates.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in conformity with GAAP for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. In the opinion of management, all adjustments considered necessary in order to make the financial statements not misleading have been included.
Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations for presentation of interim financial information. Therefore, the condensed consolidated interim financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended August 31, 2024 (“fiscal 2024”). The condensed consolidated balance sheet as of August 31, 2024 and related disclosures were derived from the Company’s audited consolidated financial statements as of August 31, 2024. Operating results for the three months ended November 30, 2024 are not necessarily indicative of the results that may be expected for future quarterly periods or the entire fiscal year.
Principles of Consolidation
The consolidated financial statements for all periods presented include the accounts of EACO, its wholly-owned subsidiary, Bisco, and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited (all of which are collectively referred to herein as the “Company”, “we”, “us” and “our”). All significant intercompany transactions and balances have been eliminated in consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Allowance for Credit Losses
We maintain an allowance for credit losses for estimated losses on our trade receivables, resulting from the inability of our customers to make payments for products sold. The allowance for credit losses is based on a variety of factors, including credit reviews, historical experience, length of time receivables are due, current economic trends and changes in customer payment behavior. We also record specific provisions for individual accounts when we become aware of a customer’s inability to meet its financial obligations to us, such
7
as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. The allowance for credit losses was $
Inventories, Net
Inventories consist primarily of electronic fasteners and components and are stated at the lower of cost or estimated net realizable value. Cost is determined using the average cost method. Inventories are adjusted for slow moving or obsolete items, which was approximately $
Marketable Trading Securities
The Company invests in marketable trading securities, which include long and short positions in equity securities. Securities are stated at fair value, which is determined using the quoted closing prices at each reporting date. Realized gains and losses on investment transactions are recognized as incurred in the consolidated statements of operations. Net unrealized gains and losses are reported in the consolidated statements of operations and represent the change in the market value of investment holdings during the period.
Property, Equipment, and Leasehold Improvements
Property, equipment, and leasehold improvements are stated at cost net of accumulated depreciation and amortization. Depreciation and amortization expense is determined using the straight-line method over the estimated useful lives of the assets. The depreciable life for buildings is
Impairment of Long Lived Assets
The Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measured by a comparison of the carrying value of each asset to the future net undiscounted cash flows expected to be generated by such assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value.
On October 20, 2023, the Company completed the purchase of its corporate headquarters located at 5065 East Hunter Avenue in Anaheim, California (the “Hunter Property”) from the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”) for $
Income Taxes
Deferred taxes on income result from temporary differences between the reporting of income for financial statement and tax reporting purposes. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that some or all of the deferred tax asset will not be realized. In making such determination, management considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance.
The Company provides for tax contingencies, if any, for federal, state, local and international exposures relating to audit results, tax planning initiatives and compliance responsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of these tax audits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on the Company’s results of operations.
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Revenue Recognition
The Company derives its revenue primarily from product sales. Revenue recognition is determined through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, performance obligations are satisfied.
The Company’s contract with the customer is executed with a customer purchase order and performance obligations consist solely of product shipped to customers. Revenue from product sales is recognized upon transfer of control of promised products, which the Company’s standard terms and conditions are shipping point, to customers at a point in time in an amount that reflects the consideration we expect to receive in exchange for these products as stated on the Company’s invoice to the customer. Revenue is recognized net of returns and any taxes collected from customers. The Company offer industry standard contractual terms in its terms and conditions stated on its invoices and Company website.
Freight revenues associated with product sales are recognized at point of shipment and when the criteria discussed above have been met. Freight revenues have represented less than
Operating Leases
The Company determines if a contractual arrangement contains a lease, for accounting purposes, at contract inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, the current portion of operating lease liabilities,and the operating lease liabilities in the accompanying consolidated balance sheets.
The ROU assets represent the Company’s right to control the use of a leased asset for the contractual term, and lease liabilities represent the related obligation to make lease payments arising from the contractual arrangement. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the contractual term. The operating lease ROU assets also include any prepaid lease payments made and exclude lease incentives. Lease expense is recognized on a straight-line basis over the contractual term.
Many of the Company’s leases include both lease (such as fixed payment amounts including rent, taxes, and insurance costs) and non-lease components (such as common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases.
Many leases include one or more options to renew the contract. Therefore, renewals to extend the lease terms are not included in our ROU assets and lease liabilities as they are not reasonably certain to be exercised. The Company regularly evaluates the renewal options each reporting period and when they are reasonably certain to be exercised, management will include the lease renewal period in our contractual term when estimating the ROU assets and related liabilities.
Since most of the Company’s leases do not provide an implicit rate, as defined by GAAP, the Company uses an incremental borrowing rate based on our line of credit variable interest rate that is set at the bank prime index rate in order to determine the present value of the lease payments. The Company applies a portfolio approach for determining the incremental borrowing rate. As of November 30, 2024, the Company has right of use assets of approximately $
Earnings Per Common Share
Basic earnings per common share for the three months ended November 30, 2024 and 2023 were computed based on the weighted average number of common shares outstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, giving effect to all potentially dilutive common shares that were outstanding during the respective periods. Potentially dilutive common shares represent
9
Foreign Currency Translation and Transactions
Assets and liabilities recorded in functional currencies other than the U.S. dollar (Canadian dollars for Bisco’s Canadian subsidiary) are translated into U.S. dollars at the period-end rate of exchange. The exchange rate for Canadian dollars on November 30, 2024 and 2023 was $
Concentrations
Net sales to customers outside the United States were approximately
No single customer accounted for more than 10% of revenues for the three months ended November 30, 2024 and 2023. In addition, no single customer’s receivable balance accounted for more than 10% of total customer receivables as of November 30, 2024 and August 31, 2024, respectively.
Significant Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses”, which will require the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance is effective, as amended for smaller reporting companies for all periods beginning after December 15, 2022, including interim periods within those fiscal years. Management has evaluated and implemented this standard, effective September 1, 2023, which adoption had no material impact on its results of operations or financial position.
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which is intended to enhance transparency into the nature and function of expenses. The amendments require that on an annual and interim basis, entities disclose disaggregated operating expense information about specific categories, including purchases of inventory, employee compensation, depreciation, amortization and depletion. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Upon adoption, ASU 2024-03 should be applied on a prospective basis while retrospective application is permitted. We are currently evaluating the impact ASU 2024-03 will have on our financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The amendments require that on an annual basis, entities disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, the amendments require that entities disclose additional information about income taxes paid as well as additional disclosures of pretax income and income tax expense, and remove the requirement to disclose certain items that are no longer considered cost beneficial or relevant. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. Upon adoption, ASU 2023-09 should be applied on a prospective basis while retrospective application is permitted.
In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which is intended to improve reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. The Company expects to adopt the new annual disclosures as required for fiscal year ending August 31, 2025 (“fiscal 2025”) and the interim disclosures as required beginning subsequent to fiscal 2025.
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Other recently issued accounting pronouncements are not expected to have a material impact on the Company’s consolidated financial statements.
Note 3. Accrued Liabilities
The Company’s accrued liabilities as of November 30, 2024 and August 31, 2024 are summarized as follows (in thousands):
|
| November 30, |
| August 31, | ||
| | 2024 | | 2024 | ||
Accrued expenses and other current liabilities: |
| |
|
| |
|
| | | | | | |
Accrued accounts payable | | $ | | | $ | |
Accrued compensation and payroll | |
| | |
| |
Accrued taxes | |
| | |
| |
Total Accrued expenses and other current liabilities | | $ | | | $ | |
Note 4. Debt
The Company has a $
The line of credit has a variable interest rate set at the bank prime index rate, but provided that in no event would such interest rate be less than
The Construction Loan’s future principal due until maturity by fiscal year is as follows:
Fiscal Year |
| Principal Amount Due | |
2025 | | $ | |
2026 | |
| |
2027 | |
| |
Total | | $ | |
The Company has also entered into a business loan agreement (and related $
Note 5. Leases
The Company leases its facilities and automobiles under operating lease agreements (
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On October 20, 2023, The Company purchased the Hunter Property from the Trust for a purchase price of $
Minimum future rental payments under operating leases are as follows:
Years Ending : |
|
| |
2025 (remaining nine months) | | $ | |
2026 | |
| |
2027 | |
| |
2028 | |
| |
2029 | |
| |
Thereafter | |
| |
Future minimum lease payments | | $ | |
Less interest | |
| ( |
Present value of minimum lease payments | | $ | |
Operating lease cost under these leases was approximately $
Other information related to operating leases is as follows:
|
| November 30, |
| August 31, |
|
| | 2024 | | 2024 |
|
Weighted average remaining lease term | | | | ||
Weighted average discount rate |
| | % | | % |
The discount rate used on the operating right-of-use assets represented the Company’s incremental borrowing rate at lease inception.
Note 6. Earnings per Share
The following is a reconciliation of the numerators and denominators of the basic and diluted computations for earnings per common share (in thousands, except per share data):
| | Three Months Ended | ||||
| | November 30, | ||||
(In thousands, except per share information) |
| 2024 |
| 2023 | ||
EPS – basic and diluted: | | |
|
| |
|
Net income | | $ | | | $ | |
Less: cumulative preferred stock dividend |
| | ( | |
| ( |
Net income attributable to common shareholders for basic and diluted EPS computation | | $ | | | $ | |
Weighted average common shares outstanding for basic EPS computation | | | | | | |
Earnings per common share – basic | | $ | | | $ | |
Weighted average common shares outstanding for diluted EPS computation | | | | | | |
Earnings per common share – diluted | | $ | | | $ | |
For the three months ended November 30, 2024 and 2023,
Note 7. Related Party Transactions
The Company leases its Chicago area sales office and distribution center located in Glendale Heights, Illinois under an operating lease agreement (the “Glendale Lease”) from the Trust, which is the grantor trust of Glen Ceiley, the Company’s Chief Executive Officer, Chairman of the Board, and majority shareholder. The Glendale Lease is a
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On July 26, 2019, the Company entered into a Commercial Lease Agreement with the Trust (the “Hunter Lease”), for the lease of the Hunter Property, which houses the Company’s corporate headquarters. The Company completed its move to the headquarters located at the Hunter Property in March 2020. The term of the Hunter Lease commenced on September 2, 2019 and ended on October 20, 2023, when the Company purchased the Hunter Property. The Hunter Lease had an initial monthly rental rate of $
On October 5, 2023, the Company entered into a Standard Purchase Agreement and Escrow Instructions (the “Purchase Agreement”) to purchase the Hunter Property for a purchase price of $
Note 8. Income Taxes
During the three months ended November 30, 2024 and 2023, the Company recorded an income tax provision of $
Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. For the three months ended November 30, 2024 and 2023, the Company did
The Company’s tax years for 2021, 2022, and 2023 are subject to examination by the taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxing authorities for years before 2020.
Note 9. Commitments and Contingencies
From time to time, the Company may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes could be costly and time consuming, subject the Company to damages or equitable remedies, and divert management and key personnel from core business operations.
In January 2023, a class action lawsuit was filed with the Los Angeles County Superior Court against Bisco, alleging wage and hour violations and related claims. The class action covers a class of former and current employees of Bisco who were employed between January 13, 2019 and the present time. In March 2023, Plaintiff filed a First Amended Complaint that added claims under the California Private Attorneys General Act (“PAGA”). Both parties requested to stay the litigation pending mediation, which mediation commenced in April 2024. As a result of the mediation, the parties agreed in principle to settle this matter for approximately $
Note 10. Subsequent Events
Management has evaluated events subsequent to November 30, 2024, through the date that these unaudited condensed consolidated financial statements are filed with the SEC, for transactions and other events which may require adjustment of and/or disclosure in such financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” and similar words or expressions. These forward-looking statements include, but are not limited to, statements regarding our anticipated revenue, expenses, profits and capital needs. These statements are based on our current expectations, estimates, projections, and the impact of certain accounting pronouncements, and are subject to a number of risks and uncertainties that could cause our actual results to differ materially from those projected or estimated, including, but not limited to adverse economic conditions, competitive pressures, unexpected costs and losses from operations or investments, increases in costs and overhead, our ability to maintain an effective system of internal controls over financial reporting, potential losses from trading in securities, our ability to retain key personnel and good relationships with suppliers, the willingness of lenders to extend financing commitments and the availability of capital resources, a potential health pandemic and the other risks set forth in “Risk Factors” in Part II, Item 1A of our Annual Report on Form 10-K filed with the SEC on November 29, 2024 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
The condensed consolidated financial statements comprise the accounts of EACO and its wholly-owned subsidiary, Bisco, and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited.
EACO is a holding company primarily comprised of its wholly-owned subsidiary, Bisco. Bisco is a distributor of electronic components and fasteners with 51 sales offices and seven distribution centers located throughout the United States and Canada and 1 sales office located in the Philippines. Bisco supplies parts used in the manufacture of products in a broad range of industries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marine industries.
Critical Accounting Policies
The Company’s discussion and analysis of its financial condition and results of operations are based upon its condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires Management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Within the context of these critical accounting policies, Management is not currently aware of any reasonably likely events or circumstances that would result in materially different amounts being reported. There have been no changes to the Company’s critical accounting policies for the three months ended November 30, 2024.
Revenue Recognition
We derive our revenue primarily from product sales. We determine revenue recognition through the following steps: (1) identification of the contract with a customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.
The Company’s performance obligations consist solely of product shipped to customers. Revenue from product sales is recognized upon transfer of control of promised products, which the Company’s are at shipping point pursuant to the Company’s standard terms and conditions, to customers at a point in time in an amount that reflects the consideration we expect to receive in exchange for these products. Revenue is recognized net of returns and any taxes collected from customers. We offer industry standard contractual terms in our purchase orders.
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Impairment of Long Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measured by a comparison of the carrying value of each asset to the future net undiscounted cash flows expected to be generated by such assets. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value.
On October 20, 2023, the Company completed the purchase of its corporate headquarters located at 5065 East Hunter Avenue in Anaheim, California (the “Hunter Property”) from the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust (the “Trust”) for $31,000,000 in cash. An appraisal, conducted in September 2023 by an independent third party, valued the Hunter Property at $31 million, which was inclusive of tenant improvements previously purchased and recorded by the Company. Upon completion of the Hunter Property purchase and the termination of the Hunter Lease during the first quarter of fiscal 2024, the Company recorded an asset impairment of $3.9 million, which was the net book carrying value of the tenant improvements at the date the building was acquired.
Deferred Tax Assets
A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefit, or when future deductibility is uncertain. The Company records net deferred tax assets to the extent management believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance.
Inventory
The Company’s inventory provisions are based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company. The Company’s methodology for estimating these adjustments to the cost basis is evaluated for factors that could require changes to the cost basis including significant changes in product demand, market conditions, condition of the inventory or net realizable value. If business or economic conditions change, the Company’s estimates and assumptions may be adjusted as deemed appropriate.
Results of Operations
Comparison of the Three Months Ended November 30, 2024 and 2023
Net Sales and Gross Profit ($ in thousands)
| | Three Months Ended | | | | | | | ||||
|
| November 30, | | $ | | % | | |||||
| | 2024 |
| 2023 |
| Change |
| Change | | |||
Net sales | | $ | 93,920 | | $ | 80,255 | | $ | 13,665 | | 17.0 | % |
Cost of sales | | | 66,139 | | | 56,683 | | | 9,456 | | 16.7 | % |
Gross margin | | $ | 27,781 | | $ | 23,572 | | $ | 4,209 | | 17.9 | % |
Gross margin as a percent of revenues | |
| 29.6 | % |
| 29.4 | % |
| | | 0.2 | % |
Net sales consist primarily of sales of component parts and fasteners, but also include, to a lesser extent, kitting charges and special-order fees, as well as freight charged to customers.
The three months ended November 30, 2024 (“Q1 2025”) as compared to the three months ended November 30, 2023 (“Q1 2024”) increase in revenues was largely due to added sales employees during Q1 2025, increasing by 13 sales employees when comparing to Q1 2024. We believe that this increased sales headcount led to the addition of new customers and the ability to sell more products to existing customers and creating better customer relationships. Additionally, revenues for Q1 2025 have increased when compared to Q1 2024 due to higher inventory stock available and an increased demand for those products. Gross margin for Q1 2025 and Q1 2024 have stayed consistent at approximately 29.6% and 29.4%, respectively.
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Operating Expenses ($ in thousands)
| | Three Months Ended | | | | | | | ||||
| | November 30, | | $ | | % | | |||||
|
| 2024 |
| 2023 |
| Change |
| Change | | |||
Operating expenses: | | | | | | | | | | | | |
Selling, general and administrative expense | | $ | 18,938 | | $ | 17,217 | | $ | 1,721 | | 10.0 | % |
Impairment on termination of lease | | | — | | | 3,906 | | | (3,906) | | (100.0) | % |
Total operating expenses | | $ | 18,938 | | | 21,123 | | | (2,185) | | (10.3) | % |
Percent of net sales | |
| 20.2 | % |
| 26.3 | % |
| | | (6.1) | % |
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. The increase in SG&A is primarily due to higher personnel costs related to an increase in the number of sales and administrative employees, from 577 employees in Q1 2024 to 605 employees in Q1 2025, as well as higher bonuses and commissions related to the higher sales in The Company recognized an impairment charge of $3.9 million in Q1 2024 related to the Hunter Property and termination of the Hunter Lease, which charge was not present in Q1 2025.
Other (Expense), Net ($ in thousands)
| | Three Months Ended | | | | | | | ||||
| | November 30, | | $ | | % | | |||||
|
| 2024 |
| 2023 |
| Change |
| Change |
| |||
Other income (expense): |
|
| |
| | |
| | |
| | |
Net gain (loss) on trading securities | | $ | 454 | | $ | (44) | | $ | 498 | | 1,131.8 | % |
Interest and other expense, net | | | (48) | | | (9) | | | (39) | | (433.3) | % |
Other Income (expense), net | | $ | 406 | | $ | (53) | | $ | 459 | | 866.0 | % |
Percent of net sales | |
| 0.4 | % |
| (0.1) | % |
| | | 0.5 | % |
Other income (expense), net, primarily consists of income or loss on trading in short-term marketable equity securities of publicly-held corporations and interest related to the Company’s debt obligations. The Company’s investment strategy consists of both long and short positions, as well as utilizing options designed to improve returns. During Q1 2025, the Company recognized a net gain on trading securities of $454,000 as compared to a net loss of $44,000 in Q1 2024. The change in net trading securities in Q1 2024 was primarily due to timing of sales and purchases and general market climate for short and long positions during the period.
Interest and other (expense), net, increased in Q1 2025 compared to Q1 2024, which was primarily due to larger amount of interest income earned from US treasury bonds held during Q1 2024.
Income Tax Provision ($ in thousands)
| | Three Months Ended | | | | | | | ||||
| | November 30, | | $ | | % | | |||||
| | 2024 |
| 2023 |
| Change |
| Change |
| |||
Income tax provision |
| $ | 2,361 |
| $ | 617 |
| $ | 1,744 |
| 282.7 | % |
Percent of pre-tax income | |
| 25.5 | % |
| 25.8 | % |
| | | (0.3) | % |
The provision for income taxes increased by $1,744,000 in Q1 2025 over the prior year period. This decrease was due to higher taxable income in the current quarter as compared to the prior year period. The income tax provision as a percent of pre-tax income decreased from 25.8% at Q1 2024 to 25.5% at Q1 2025.
Liquidity and Capital Resources
As of November 30, 2024 and August 31, 2024, the Company held approximately $591,000 and $843,000 of unrestricted cash and cash equivalents, respectively. The Company also held $20,521,000 and $14,748,000 of marketable securities at November 30, 2024 and August 31, 2024, respectively, which could be liquidated, if necessary.
The Company currently has an available $20.0 million line of credit with the Bank. The Company entered into a Change in Terms Agreement dated April 12, 2024 with the Bank, which increased the principal loan amount under the line of credit to $20.0 million and extended the maturity date of the line of credit from July 5, 2024 to February 15, 2026. The line of credit has a variable interest rate set at the bank prime index rate, provided that in no event would such interest rate be less than 3.5% per annum. Borrowings are secured by
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substantially all of the assets of the Company and its subsidiaries. The line of credit agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of November 30, 2024 and August 31, 2024, the Company was in compliance with all such covenants. There was no outstanding balance on the line of credit as of each of November 30, 2024 and August 31, 2024.
In April 2024, the Company engaged in a mediation concerning a pending class action lawsuit and reached an agreement in principle to settle the lawsuit. The Company entered into a settlement agreement in this litigation, which agreement is subject to court approval and won’t be payable until late in fiscal 2025. The Company expects the aggregate settlement amount to be approximately $7.5 million. The Company has accrued $7.6 million in fiscal 2024 in anticipation of this settlement and related lawyer fees. The Company expects to use existing cash and cash equivalents, and cash generated from operations to fund this settlement after the legal proceedings are completed in fiscal 2025.
Cash Flows from Operating Activities
Cash provided by operating activities was $2,012,000 for the three months ended November 30, 2024 as compared with cash provided by operations of $301,000 for the three months ended November 30, 2023. Cash provided by operating activities in the current period was primarily due to net income earned in the period and an increase in trade accounts payable. This was adversely impacted by an increase in inventory purchases and decrease in accrued expenses and other liabilities for the three months ended November 30, 2024. The prior period cash provided by operating activities was primarily due to net income earned in the period, impairment on termination of lease, and a reduction in operating lease right of use assets. Changes related to the impairment and operating lease right of use assets is primarily due to the termination of the Hunter Lease and the purchase of the Hunter Property.
Cash Flows from Investing Activities
Cash used in investing activities was $5,691,000 for the three months ended November 30, 2024 as compared with cash used in investing activities of $8,910,000 for the three months ended November 30, 2023. Cash used in investing activities in the three months ended November 30, 2024 was primarily due to purchase of marketable securities. Cash used in investing activities in the three months ended November 30,2023 was due to the purchase of the Hunter Property in the period, partially offset by sale of marketable securities.
Cash Flows from Financing Activities
Cash provided by financing activities for the three months ended November 30, 2024 was $3,461,000 as compared with cash provided by financing activities of $6,681,000 for the three months ended November 30, 2023. The cash provided in financing activities for the current period is primarily due to the change in bank overdraft, which represents outstanding checks in excess of cash due to the nightly sweep feature of the cash account to the line of credit with the Bank. The cash provided by financing activities for the prior period is primarily due to borrowing on revolving credit facility and the change in bank overdraft.
Contractual Financial Obligations
In addition to using cash flow generated from operations, the Company finances its operations through borrowings under its line of credit. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result being that amounts owed under debt agreements and finance leases are recorded as liabilities on the consolidated balance sheets while lease obligations recorded as operating leases are disclosed in the notes to the consolidated financial statements and management’s discussion and analysis of financial condition and results of operations in the Company’s annual report on Form 10-K for the year ended August 31, 2024 as filed with the SEC on November 29, 2024.
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
Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (who is our Principal Executive Officer) and our Chief Financial Officer (who is our Principal Financial Officer and Principal Accounting Officer), of the effectiveness of the design of our disclosure controls and procedures (as defined by Exchange Act Rules 13a-15(e) or 15d-15(e))
17
as of November 30, 2024, pursuant to Exchange Act Rule 13a-15(b). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of November 30, 2024 because of the material weakness in internal control over financial reporting discussed below.
Notwithstanding the material weakness in internal control over financial reporting described below, our management has concluded that our consolidated financial statements included in the Quarterly Report on Form 10-Q are fairly stated in all material respects in accordance with GAAP.
Material Weakness
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Management concluded that there was a material weakness in the Company’s internal control over financial reporting as of August 31, 2024, related to the Company’s internal controls over the financial statement closing process, including manual journal entries recorded in the preparation of the financial statements related to the Company’s lease accounts, and certain inventory and accrued liability accounts.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and/or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Remediation Plan
We are in the process of developing and implementing a detailed plan for remediation of the material weakness, including developing and maintaining additional levels of review and approval. The Company has hired a third-party accounting consultant and has recently hired an Assistant Controller to aid in implementing additional levels of review and approval. We will continue to assess the effectiveness of our remediation efforts in connection with our future assessments of the effectiveness of internal control over financial reporting and disclosure controls and procedures.
Changes in Internal Control over Financial Reporting
Except as disclosed above, there were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the period ended November 30, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes could be costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations. We currently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial position or cash flows. Please see Note 9 of the Notes to Consolidated Financial Statements of this Report for disclosure regarding a lawsuit to which we have reached an agreement in principle to settle, which agreement is subject to court approval.
Item 1A. Risk Factors
Item 1A of Part I of our Annual Report on Form 10-K for the year ended August 31, 2024, filed with the SEC on November 29, 2024, contains risk factors identified by the Company. Except as noted below, there have been no material changes to the risk factors we previously disclosed in our filings with the SEC. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.
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. As such, our customers typically do not have any obligation to purchase any products from us. A variety of conditions, both specific to each customer and generally affecting each customer’s industry for which we do not have control, may cause customers to reduce, cancel or delay orders that were either previously made or anticipated. In addition, customers may go bankrupt or fail, default on their payments or encounter difficulties and changes in their business operations that may cause them to reduce or cancel orders for our products. Significant or numerous cancellations, reductions, delays in orders by customers, losses of customers, and/or customer defaults on payment, particularly those by our major customers, could materially adversely affect our business and revenues.
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
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Item 6. Exhibits
No. |
| Exhibit |
| | |
31.1* | | |
32.1* | | |
101.INS | | XBRL Instance Document |
101.SCH | | XBRL Taxonomy Extension Schema Document |
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document |
*Filed herewith.
20
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: January 13, 2025 | /s/ Glen Ceiley |
| Glen Ceiley |
| Chief Executive Officer |
| (Principal Executive Officer & Principal Financial Officer) |
| |
| /s/ Michael Narikawa |
| Michael Narikawa |
| Chief Financial Executive |
| (Principal Accounting Officer) |
21
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: January 13, 2025 |
| /S/ GLEN CEILEY |
| | Glen Ceiley |
| | Chief Executive Officer and Chief Financial Officer |
| | (Principal Executive Officer and Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
(PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the accompanying Quarterly Report on Form 10-Q of EACO Corporation (the “Company”) on Form 10-Q for the quarter ended November 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, Glen Ceiley, the Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies 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. |
Dated: January 13, 2025 |
| /S/ GLEN CEILEY |
| | Glen Ceiley |
| | Chief Executive Officer and Chief Financial Officer |
| | (Principal Executive Officer and Principal Financial Officer) |