EACO 10-K & 10-Q changes, risk factors and insider trading

Costs of raw materials used in our vendors’productsvendors’ 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 products have risen as well and may continue to rise. While we typically try to pass increased supplier prices and shipping costs through to our customers or to modify 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 and could make our products less competitive, either of which could adversely impact our margins and results of operations.

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 and CEO, and Don Wagner, BiscoBisco’s President and Chief Operating Officer, as well as other executive officers and senior management. The loss of service of one or more of our key management members 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, who sell similar or sometimes identical products, 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, 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 failure to compete in the marketplace can adversely affect our business operations and financial performance.

One of our primary growth strategies is to grow our business through the opening of sales offices in new geographic markets. This strategy requires continued investment, both financially, as well as management’s efforts to get the new offices operational. Based on our analysis of demographics in the United States, Canada, Mexico and countries within Asia, we currently estimate there is potential market opportunity in North America and Asia to support additional sales offices.offices in these regions and plans to open a sales office in Mexico in December 2025.

In addition, our expansion into international markets such as Asia may encounter additional risks, challenges and difficulties that aremay not be present for our U.S. operations, including the following:

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. In October 2023, the Company used $31.0 million$31,000,000 of cash to purchase our Anaheim corporate headquarters and distribution center. As of August 31, 2024,2025, there was no outstanding balance on our line of credit, which line of credit is secured by substantially all of Bisco’s assets. Further, the Company has a loan agreement with the Bank that financed the tenant improvements on the corporate headquarters, of which approximately $4.3 million$4,214,000 was outstanding as of August 31, 2024.2025. See Notes 4 and 910 of the Notes to Consolidated Financial Statements, included in Part II, Item 8 of this Annual Report for further explanation. Our ability to continue to secure financing is subject to our satisfaction of certain covenants contained in such agreements. AsOur aability resultto ofsecure favorable financing is affected by various factors, including the recentmacroeconomic economic uncertainty primarily caused byenvironment, inflation and high borrowing interest rates,rates. In addition, we may need to pursue additional debt or equity financing or to refinance our existing loans, which funding may not be available on acceptable or favorable terms, on a timely basis or at all. The securities that might be issued in any future equity financing may have rights, preferences, and privileges that are senior to our common stock. Our failure to obtain such funding could adversely impact our ability to execute our business plan and our financial condition and results of operations.

There is currently no established trading market for our common stock, and the trading volume of anyour common stock saleson the OTC market has been generally been low. As of August 31, 2024,2025, the number of shares held by non-affiliates of Mr. Ceiley was less than 200,000 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. Due to the limited available public float, certain investors may not be able or willing to invest in the Company’s securities, which could also impact the market price of our common stock.

We currently have, and from time to time have had, material weaknesses in our internal controls over financial reporting due to a variety of issues, including, without limitation, significant deficiencies in the process related to the preparation of our consolidated 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. As previously disclosed, a material weakness existed as of August 31, 2024, related to the Company’s internal controls over the financial reporting related to our financial closing process, including manual journal entries recorded in the preparation of the consolidated financial statements related to the Company’s lease accounts, and certain inventory and accrued liability accounts. Although we believe we are making progress in mitigating 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 applicable reporting. 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 consolidated 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 consolidated 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.

WeThe deriveCompany ourderives its revenue primarily from product sales. We determine revenueRevenue 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, we satisfy a performance obligation.obligations are satisfied.

The Company’s contract with the customer is executed with a customer purchase order and performance obligations consist solely of productproducts 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.products as stated on the Company’s invoice to the customer. Revenue is recognized net of returns and any taxes collected from customers. WeThe offerCompany generally offers industry standard contractual terms in ourits purchaseterms orders.and conditions stated on its invoices and Company website.

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

Revenues consist primarily of sales of component parts and fasteners and also include, to a lesser extent, kitting charges and order fees, as well as freight charged to customers. The increase in revenues in fiscal 20242025 compared to fiscal 20232024 was largely due to addedan expanding sales employeesforce during fiscal 2024,2025, increasingwhich increased by 3328 sales employees when comparing to fiscal 2023.2024. We believe that increasing sales headcount leadsled to the additionacquisition of new customers and the ability to sell more products to existing customers and creating better customer relationships. Additionally, revenues for fiscal 20242025 have increased when compared to fiscal 20232024 primarily due to higher inventory stock available and an increased demand for those products. Gross margin for fiscal 20242025 havehas increased when compared to fiscal 20232024 primarily due to developing better relationships with vendors and customers.customers, which allowed us to negotiate better pricing from our vendors and quote more products to customers with higher margins.

Selling, general and administrative (“SG&A”) expense consists primarily of payroll and related expenses for the sales and administrative staff, professional fees (including accounting, legal and technology costs and expenses), and advertising costs. SG&A in fiscal 20242025 increased from fiscal 20232024 largely due to higher year end bonuses of $7,634,000 related to record sales in fiscal 2025 and to a lesser extent, due to higher personnel costs related to an increase in the number of sales and administrative employees, from 561 employees in fiscal 2023 to 604 employees in fiscal 2024.2024 Furthermore,to the644 increase in SG&A expenseemployees in fiscal 2024 also included a legal expense accrual in the amount of approximately $7.6 million related to a pending class action lawsuit to which we have reached an agreement in principle to settle, but is subject to court approval. We expect the settlement to be paid in the fiscal year ended August 31, 2025. See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report for further explanation.

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

Interest and other expense increased by $118,000$30,000 primarily due to a reduction in interest expense,income earned, which iswas relateddue to carryingexcess acash largerbeing balanceused onto thepurchase Company’sinvestments lineinstead of creditinterest duringbearing fiscaltreasury 2024 year when compared to fiscal 2023.accounts.

The provision for income taxes decreasedincreased by $1,185,000$4,283,000 in fiscal 20242025 compared to fiscal 2023,2024, which was primarily a result of lowerhigher book income in fiscal 20242025 as compared to fiscal 2023.2024. The income tax provision as a percentage of pre-tax income increaseddecreased by 3.6%5.1% in fiscal 20242025 compared to fiscal 2023,2024, which was primarily due to our prior year tax payable reconciliations.reconciliations and IRS refunds received in 2025.

As of August 31, 20242025 and 2023,2024, the Company held approximately $843,000$738,000 and $8,558,000$843,000 of unrestricted cash and cash equivalents, respectively. The Company also held $14,748,000$30,375,000 and $27,228,000$14,748,000 of marketable securities at August 31, 20242025 and August 31, 2023,2024, respectively, which could be liquidated, if necessary. The Company on a regular basis, uses its excess cash from operating activities to purchase short term investments. The Company also liquidates these investments time to time when cash is needed to cover operating or extraordinary expenses.

The Company currently has an available $20.0 million$20,000,000 line of credit with the Bank. The Company entered into a Change in Terms Agreement dated April 12, 2024 with the Bank, which increased the principal loan amount under the line of credit to $20.0 million$20,000,000 and extended the maturity date of the line of credit from July 5, 2024 to February 15, 2026. The line of credit has a variable interest rate set at the bank prime index rate, provided that in no event would such interest rate be less than 3.5% per annum. Borrowings are secured by substantially all of the assets of the Company and its subsidiaries. The line of credit agreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of August 31, 20242025 and August 31, 2023,2024, the Company was in compliance with all such covenants. The Company expects to renew the line of credit in the coming months before the agreement expires. There was no outstanding balance on the line of credit as of each of August 31, 20242025 and August 31, 2023.2024.

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

In April 2024, the Company engaged in a mediation concerning a pending class action lawsuit and reachedsettled anwith agreementcourt inapproval principle to settle the lawsuit. The Company is currently negotiating a settlement agreement and expectsfor the aggregate settlement amount toof be$7,795,000 approximatelyduring $7.5fiscal million,2025. whichIn settlementSeptember agreement,2025, when finalized, will be subject to court approval. Thethe Company has accrued $7.6 million in fiscal 2024 in anticipation of this settlement and related lawyer fees. The Company expects to useused existing cash and cash equivalents, and cashequivalents generated from operations to fund thisand settlement aftercomplete the legalpayment proceedingsof arethe completed in fiscal 2025.settlement. See Note 8 of the Notes to Consolidated Financial Statements of this Annual Report for further information.

During fiscal 2024,2025, the Company provided $14,077,000$17,169,000 in net cash from its operating activities. The current period cash provided by operating activities was primarily due to the increases in net income of $14,951,000income, and to a lesser extent, an increase in accrued expenses and in trade accounts payable.payable Thisand wasaccrued partiallyexpenses. offset by increasesIncreases in tradenet accountsincome receivablein fiscal 2025 is primarily due to increased sales orders and inventory.higher gross margin. Increases in accrued expenses is primarily due increases in accrued payroll and accrued accounts payable related to theinventory accrual of the class action lawsuit approximately $7,600,000.purchases. Increases in trade accounts payable is primarily due to an increase in inventory. The increase in cash provided by operating activities was partially offset by increases in inventory.inventory purchases and trade accounts receivable. Increases in trade accounts receivable increased due to increased sales orders during the period. Inventory increased due to increases in sales and inventory purchases for projected sales.

Cash used in investing activities was $23,815,000$16,442,000 for fiscal 2023.2025. This was primarily due to the purchase of marketable securities. with excess cash the Company accumulated through its business operations. Management expects to continue moving excess cash to investments though the following fiscal year.

Cash used in financing activities for fiscal 20242025 was $1,372,000,$843,000, which was primarily due to a decrease in bank overdraft when comparing fiscal 20242025 to fiscal 2023.2024. Bank overdraft represents outstanding checks in excess of cash held in our bank account. If the bank account is over drawn, the Company has a nightly sweep feature, which funds the outgoing cash account from the main deposit bank account. If the main deposit account does not have enough cash to cover the sweep, the deposit account is funded by the line of credit withto cover the Bank.remaining sweep balance. The cash used in financing activities for the prior period is primarily due to ana increasedecrease in the bank overdraft balance.

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

This Quarterly Report on Form 10-Q (this “Quarterly Report”) 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,” “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. 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 the impact of adverse economic conditions, competitive pressures, the pricing and availability of our products, the impact of products offered by our competitors, unexpected costs and losses from operations or investments, increases in costs and overhead, impact of tariffs and international conflicts, 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 hire additional qualified personnel, our ability to open additional sales offices and maintain good relationships with suppliers, the willingness of lenders to extend financing commitments and the availability of capital resources, as well as the uncertainty related to international tariffs and the impact of the continuing international conflicts and the other risks set forth in “Risk Factors” in Part II, Item 1A of this Quarterly 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 or the date of any other filing with the SEC, as applicable. 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.

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 FebruaryMay 28,31, 2026.

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 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 generally offer industry standard contractual terms in our sales orders.

Comparison of the Three Months Ended FebruaryMay 28,31, 2026 and 2025

The increase in revenues in the three months ended FebruaryMay 28,31, 2026 (“Q2Q3 2026”) as compared to the three months ended FebruaryMay 28,31, 2025 (“Q2Q3 2025”) was largely due to increased sales of our products as a result of the expansion of our sales force and increasing demand from customers. We increased the number of sales personnel and sales management by 4248 employees in the current period, from 440443 sales employees in Q2Q3 2025 to 482491 sales employees in Q2Q3 2026. We believe that increasing sales headcount leads to the addition of new customers and enables us to sell more products to existing customers and provides additional resources to find new customers. Revenues and gross profit for Q2Q3 2026 also increased as compared to Q2Q3 2025 due to the development of better relationships with vendors and customers, and higher inventory stock readily available to meet customer demand in the current period, particularly in the aerospace and defense industries. Gross profit as a percent of net sales has increased 1.2%,0.6%, primarily due to the development of better relationships with our customers and vendors.vendors and high demand for products the Company has in stock. Better relationship with our vendors have enabled the Company to get better pricing for its products and access to products that are restricted to authorized distributors.

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. SG&A in Q2Q3 2026 increased from Q2Q3 2025 primarily due to higher employee payroll expenses and benefit expenses due to increased total employee headcount, which increased from 627632 employees in Q2Q3 2025 to 674684 employees in Q2Q3 2026. The increase in SG&A was also attributed to higher bonus expenses and annual bonus accruals related to record sales and income for the Company in the current period.

Other income (expense), net, primarily consists of income or loss on trading in short-term marketable equity securities of publicly-heldpublicly- 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 Q2Q3 2026, the Company recognized a net gain on trading securities of $416,000$251,000 as compared to a net gain of $30,000$277,000 in Q2Q3 2025. The net trading securities gainschange inwhen Q2comparing Q3 2026 and Q2Q3 2025 was primarily due to an increase in investments in the periods as well as the timing of sales and purchases and general market climate for short and long positions during the applicable period.

Interest and other (expense), net, decreased in Q2the 2026current period compared to Q2the 2025,same period in the prior year, which was primarily due to less interest expense from carrying a lower balanceborrowings on the Company’s line of credit duringbeing Q2slightly 2026higher asin comparedthe tocurrent Q2year 2025.period.

The provision for income taxes increased by $1,049,000$1,478,000 in Q2Q3 2026 over the same prior year period. This increase was primarily due to higher income in the current quarter as compared to the prior year period. The income tax provision as a percent of pre-tax income remainedincreased consistentfrom 24.9% at Q3 2025 to 25.5% at Q2Q3 20252026, which was primarily due to the state tax rate mix and Q2permanent 2026.book tax differences.

Comparison of the SixNine Months Ended FebruaryMay 28,31, 2026 and 2025

The increase in revenues in the sixnine months ended FebruaryMay 28,31, 2026 as compared to the sixnine months ended FebruaryMay 28,31, 2025 was largely due to the expansion of our sales force headcount. The increase in revenues was also due to the development of better relationships with vendors and customers, and higher inventory stock readily available to meet customer demand in the current period. Gross profit as a percent of net sales has increased 1.4%1.1% in the current period, primarily due to the development of better relationships with our customers and vendors.

SG&A in the sixnine months ended FebruaryMay 28,31, 2026 increased from the same period in the prior year primarily due to higher employee payroll expenses and benefit expenses and due to increased total employee headcount in the current period. SG&A also increased in the current period when compared to the same period in the prior year due to increased bonus expense and accrued annual bonuses due to higher revenues and income in the current period.

During the sixnine months ended FebruaryMay 28,31, 2026, the Company recognized a net gain on trading securities of $459,000$710,000 as compared to a net gain of $484,000$761,000 in the same period in the prior year. The increase in the realized gain on marketable trading securities in the current period over the prior period was primarily due to a larger amount invested in treasury bond ETFs during the current period. The change in the unrealized (loss) gain on marketable securities in the current and prior periods was primarily due to timing of purchases and general market climate for short and long positions at the end of the applicable periods.

Interest and other (expense), net, decreased in the current period compared to the same period in the prior year, which was primarily due to interest expense from borrowings on the line of credit being slightly higher in the prior year period and having a higher interest rate of 6.75% compared to 6.00% in the current period.

The provision for income taxes increased by $1,883,000$3,361,000 in the sixnine months ended FebruaryMay 28,31, 2026 when compared to the same period in the prior year. This increase was primarily due to higher income in the current period as compared to the prior year period. The income tax provision as a percent of pre-tax income remained consistent at 25.5% inand both25.3% periods.for the nine months ended May 31, 2026 and May 31, 2025, respectively.

As of FebruaryMay 28,31, 2026 and August 31, 2025, the Company held approximately $5,140,000$758,000 and $728,000 of unrestricted cash and cash equivalents, respectively. The Company also held $24,929,000$33,235,000 and $30,375,000 of marketable securities at FebruaryMay 28,31, 2026 and August 31, 2025, respectively, which could be liquidated, if necessary.

The Company currently has an available $20,000,000 line of credit with the Bank.Bank pursuant to the 2024 Business Loan Agreement. The Company entered into athe ChangeAmendment in Terms Agreement datedon February 15, 2026 with the Bank, which extended the maturity date of the line of credit from February 15, 2026 to February 15, 2028. 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 4.0% per annum. Borrowings are secured by substantially all of the assets of the Company and its subsidiaries. The line2024 ofBusiness creditLoan agreementAgreement contains certain nonfinancial and financial covenants, including the maintenance of certain financial ratios. As of each of FebruaryMay 28,31, 2026 and August 31, 2025, the Company was in compliance with all such covenants. The outstanding balance of the line of credit as of each of FebruaryMay 28,31, 2026 and August 31, 2025 was zero in both periods.zero.

Cash provided by operating activities was $890,000$4,532,000 for the sixnine months ended FebruaryMay 28,31, 2026 as compared with cash usedprovided inby operating activities of $1,063,000$9,404,000 for the sixnine months ended FebruaryMay 28,31, 2025. Cash provided by operating activities in the current period was due to net income of $19,117,000$32,682,000 in the sixnine months ended FebruaryMay 28,31, 2026 and an increase in accounts payable of $4,107,000 in the current period. The increase in accounts payable is primarily due to purchases of inventory in the current period. Increases in accounts payable is expected through the end of the current fiscal year due to our expected inventory growth.. Cash provided by operating activities was adversely impacted by increases in inventoryinventory, prepaid expenses, and decreasesaccounts inreceivable accrued expenses and other current liabilities.. The increase in inventory was primarily due to purchases of our main line inventory and expected customer demand of products. The decreaseincrease in accruedprepaid expenses andis otherdue currentto liabilitiesquarterly inpayments of estimated income taxes for the current periodfiscal wasyear . As of Q3 2026, the Company has paid $12,191,000 in estimated taxes related to the current fiscal year. The increase in accounts receivable is primarily due to the paymentincreased of the class action lawsuit settlementrevenues in September 2025. See Note 8 of the Notes to Consolidated Financial Statements of this Quarterly Report for further information. The accrued expense decrease was also in part due to timing of inventory purchased in the period and payment of accrued bonuses from fiscal 2025 paid during the current period.

The prior period cash usedprovided inby operating activities was primarily due to net income in the prior year period and an increase in trade accounts payable. Cash provided by operating activities in the prior year period was adversely impacted by increases in inventory and atrade decreaseaccounts in accrued expenses and other current liabilities.receivable.

Cash providedused byin investing activities was $3,762,000$5,475,000 for the sixnine months ended FebruaryMay 28,31, 2026 as compared with cash used in investing activities of $559,000$7,685,000 for the sixnine months ended FebruaryMay 28,31, 2025. Cash providedused byin investing activities in the current period was primarily due to the salepurchase of marketable securities and leasehold improvements in the current period. SalePurchase of marketable securities were made to provide enough cash to payinvest the Company’s employeeexcess annualcash bonusesin andthe estimated income taxes related to our fiscal year ended August 31, 2025.period. The Company expects to make marketable security purchases during the remainder of the fiscal year 2026 using its excess cash provided by operating activities. Purchase of leasehold improvements were made for our corporate headquarters campus expansion of the Hunter Property.

Cash usedprovided inby financing activities for the sixnine months ended FebruaryMay 28,31, 2026 was $298,000$970,000 as compared with cash provided by financing activities of $1,417,000$4,715,000 for the sixnine months ended FebruaryMay 28,31, 2025. The cash usedprovided inby financing activities for the current period was primarily due to the net decreaseincrease in bank overdraft in the current period, 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 was primarily due to an increase in the bank overdraft balance. The Company expects to see increases in the bank overdraft due to increased purchases of inventory due to projected sales growth and additionaltiming of cash being moved to marketable securities.