EDUCATIONAL DEVELOPMENT CORP

Previous wording

We are the owner and exclusive publisher of Kane Miller children’s books; Learning Wrap-Ups, maker of educational manipulatives; and SmartLab Toys, maker of STEAM-based toys and games. We are also the exclusive United States Multi-Level Marketing (“MLM”) distributor of Usborne Publishing Limited (“Usborne”) children’s books. Significant portions of our product offering, and inventory are concentrated with Usborne. Our distribution agreement with Usborne includes annual minimum purchase volumes along with specific payment terms, which, if not met or if payments are not received in a timely manner, offer Usborne the right to terminate the agreement. During fiscal 2024, the Company did not meet the minimum purchase volumes and certain payments were not received timely. No notification of non-compliance or termination has been received from Usborne. Should termination of the agreement occur, the Company will be allowed, at a minimum, to sell through their remaining Usborne inventory over the twelve months following the termination date.

Current wording

We are the owner and exclusive publisher of Kane Miller children’s books; Learning Wrap-Ups, maker of educational manipulatives; and SmartLab Toys, maker of STEAM-based toys and games. We are also the exclusive United States Multi-Level Marketing (“MLM”) distributor of Usborne Publishing Limited (“Usborne”) children’s books. Significant portions of our product offering and inventory are concentrated with Usborne. Our distribution agreement with Usborne includes annual minimum purchase volumes along with specific payment terms, which, if not met or if payments are not received in a timely manner, offer Usborne the right to terminate the agreement. During fiscal 2024 and fiscal 2025, the Company did not meet the minimum purchase volumes and certain payments were not received timely. No notification of non-compliance or termination has been received from Usborne. Should termination of the agreement occur, the Company will be allowed, at a minimum, to sell through their remaining Usborne inventory over the twelve months following the termination date.

Previous wording

Total operating expenses not associated with a reporting segment decreased $0.6 million, or 20.7%, to $2.3 million for the three-month period ended August 31, 2024, when compared to $2.9 million for the same quarterly period a year ago. Operating expenses decreased primarily as a result of a $0.4 million decrease in labor from staff reductions across all departments associated with the reduction in revenues, and a $0.2 million decrease in depreciation expense.

Current wording

Total operating expenses not associated with a reporting segment decreased $0.3 million, or 10.3%, to $2.6 million for the three-month period ended November 30, 2024, when compared to $2.9 million for the same quarterly period a year ago. Operating expenses decreased primarily as a result of a $0.2 million decrease in labor from staff reductions across all departments associated with the reduction in revenues, and a $0.1 million decrease in freight expenses due to less shipments compared to the same quarterly period a year ago.

Previous wording

Interest expense decreased $0.2 million, or 28.6%, to $0.5 million for the three months ended August 31, 2024, when compared to $0.7 million for the same quarterly period a year ago due to paydown on the Company’s borrowings, period over period.

Current wording

Interest expense decreased $0.1 million, or 14.3%, to $0.6 million for the three months ended November 30, 2024, when compared to $0.7 million for the same quarterly period a year ago due to paydown on the Company’s borrowings, period over period.

Previous wording

Other income decreased $3.7 million, or 86.0%, to $0.6 million for the three months ended August 31, 2024, when compared to $4.3 million for the same quarterly period a year ago resulting from the receipt of the Employee Retention Credit totaling $3.8 million and $0.1 million from the gain on the sale of assets, both in the quarter ended August 31, 2023, offset by a $0.2 million increase in rental income in the quarter ended August 31, 2024 from the new tenant in the Hilti Complex.

Current wording

Other income decreased $3.7 million, or 84.1%, to $0.7 million for the three months ended November 30, 2024, when compared to $4.4 million for the same quarterly period a year ago resulting from the sale of the old headquarters building of $4.0 million in the prior year, offset by a $0.3 million increase in rental income in the quarter ended November 30, 2024 from the new tenant in the Hilti Complex.

Previous wording

Income taxes decreased $1.1 million, or 275.0%, to a tax benefit of $0.7 million for the three months ended August 31, 2024, from a tax expense of $0.4 million for the same quarterly period a year ago, primarily resulting from operating losses in the second quarter ended August 31, 2024. Our effective tax rate stayed the same 26.9% for the quarter ended August 31, 2024 and August 31, 2023. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

Current wording

Income taxes decreased $1.0 million, or 142.9%, to a tax benefit of $0.3 million for the three months ended November 30, 2024, from a tax expense of $0.7 million for the same quarterly period a year ago, primarily resulting from operating losses in the third quarter ended November 30, 2024. Our effective tax rate decreased to 24.8% for the quarter ended November 30, 2024, from 26.8% for the quarter ended November 30, 2023. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

Previous wording

Non-Segment Operating Results for the Six Months Ended August 31, 2024

Current wording

Non-Segment Operating Results for the Nine Months Ended November 30, 2024

Previous wording

Total operating expenses not associated with a reporting segment decreased $0.8 million, or 13.8%, to $5.0 million for the six-month period ended August 31, 2024, when compared to $5.8 million for the same period a year ago. Labor expenses decreased $0.6 million from staff reductions across all departments and freight handling costs decreased $0.2 million for the six months ended August 31, 2024, both associated with reduced sales.

Current wording

Total operating expenses not associated with a reporting segment decreased $1.1 million, or 12.6%, to $7.6 million for the nine-month period ended November 30, 2024, when compared to $8.7 million for the same period a year ago. Labor expenses decreased $0.8 million from staff reductions across all departments and freight handling costs decreased $0.3 million for the nine months ended November 30, 2024, both associated with reduced sales.

Previous wording

Interest expense decreased $0.4 million, or 26.7%, to $1.1 million for the six months ended August 31, 2024, when compared to $1.5 million for the same period a year ago, due to decreased borrowings period over period.

Current wording

Interest expense decreased $0.5 million, or 22.7%, to $1.7 million for the nine months ended November 30, 2024, when compared to $2.2 million for the same period a year ago, due to decreased borrowings period over period.

Previous wording

Other income decreased $3.5 million, or 76.1%, to $1.1 million for the six months ended August 31, 2024, when compared to $4.6 million for the same quarterly period a year ago, primarily from the receipt of the Employee Retention Credit totaling $3.8 million and $0.1 million from the gain on the sale of assets, both in the quarter ended August 31, 2023, offset by a $0.2 million increase in rental income from the new tenant in the Hilti Complex and a $0.1 increase in other income related to a Chik-fil-A promotion.

Current wording

Other income decreased $7.3 million, or 81.1%, to $1.7 million for the nine months ended November 30, 2024, when compared to $9.0 million for the same quarterly period a year ago, primarily from the receipt of the Employee Retention Credit totaling $3.8 million and the sale of the old headquarters building for $4.0 million, both in fiscal 2024, offset by a $0.4 million increase in rental income from the new tenant in the Hilti Complex and a $0.1 increase in other income related to a Chik-fil-A marketing promotion.

Previous wording

Income taxes decreased $1.2 million, or 1200.0%, to a tax benefit of $1.1 million for the six months ended August 31, 2024, from a tax expense of $0.1 million for the same period a year ago, primarily resulting from operating losses for the six months ended August 31, 2024. Our effective tax rate increased to 26.8% for the six months ended August 31, 2024, from 25.1% for the six months ended August 31, 2023 due primarily to sales mix fluctuations between states. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

Current wording

Income taxes decreased $2.2 million, or 275.0%, to a tax benefit of $1.4 million for the nine months ended November 30, 2024, from a tax expense of $0.8 million for the same period a year ago, primarily resulting from operating losses for the nine months ended November 30, 2024. Our effective tax rate decreased to 26.4% for the nine months ended November 30, 2024, from 26.7% for the nine months ended November 30, 2023 due primarily to sales mix fluctuations between states. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

Previous wording

PaperPie net revenues decreased $3.9 million, or 41.9%, to $5.4 million during the three months ended August 31, 2024, when compared to $9.3 million during the same period a year ago. The average number of active brand partners in the second quarter of fiscal 2025 was 13,900, a decrease of 4,200, or 23.2%, from 18,100 average active brand partners selling in the second quarter of fiscal 2024. The Company reports the average number of active Brand Partners as a key indicator for this division. We saw new Brand Partner recruiting negatively impacted by the recent change in our distribution agreement with Usborne Publishing Limited. This agreement required the rebranding of the direct sales division from Usborne Books & More (“UBAM”) to PaperPie. This rebranding was completed in the fourth quarter of fiscal 2023. Subsequent to the rebranding, Brand Partner levels declined due to several reasons including economic factors that include recent record inflation, resulting in high fuel costs and food price increases that continue to impact the disposable income of our customers. The reduced sales resulted in increased Brand Partner turnover and lower levels of new Brand Partner recruits. We expect this impact on sales to continue as inflationary pressures persist through fiscal 2025.

Current wording

PaperPie net revenues decreased $5.9 million, or 37.6%, to $9.8 million during the three months ended November 30, 2024, when compared to $15.7 million during the same period a year ago. The average number of active brand partners in the third quarter of fiscal 2025 was 12,400, a decrease of 4,000, or 24.4%, from 16,400 average active brand partners selling in the third quarter of fiscal 2024. The Company reports the average number of active Brand Partners as a key indicator for this division. We saw new Brand Partner recruiting negatively impacted by the change in our distribution agreement with Usborne Publishing Limited. This agreement required the rebranding of the direct sales division from Usborne Books & More (“UBAM”) to PaperPie. This rebranding was completed in the fourth quarter of fiscal 2023. Subsequent to the rebranding, Brand Partner levels declined due to several reasons including economic factors that include recent record inflation, resulting in high fuel costs and food price increases that continue to impact the disposable income of our customers. The reduced sales resulted in increased Brand Partner turnover and lower levels of new Brand Partner recruits. We expect this impact on sales to continue as inflationary pressures persist through fiscal 2025.

Previous wording

Net revenues during the fiscal 2025 second quarter were also negatively impacted from increased discounts. Discounts as a percentage of sales before discounts and allowances increased from 32.6% in the second quarter of fiscal 2024 to 55.3% in the second quarter of this fiscal year, resulting in less net revenues of approximately $2.2 million. The increased discounts resulted from recruiting promotions to increase band partner levels and additional customer discounts offered to spur sales during the quarter.

Current wording

Net revenues during the fiscal 2025 third quarter were also negatively impacted from increased discounts. Discounts as a percentage of sales before discounts and allowances increased from 31.2% in the third quarter of fiscal 2024 to 39.9% in the third quarter of this fiscal year, resulting in less net revenues of approximately $0.9 million. The increased discounts resulted from recruiting promotions to increase band partner levels and additional customer discounts offered to spur sales during the quarter.

Previous wording

Gross margin decreased $3.1 million, or 50.8.%, to $3.0 million during the three months ended August 31, 2024, when compared to $6.1 million during the same period a year ago. Gross margin as a percentage of net revenues for the three months ended August 31, 2024 decreased to 55.1%, compared to 65.4% the same period a year ago, representing a decrease of $0.6 million. The decrease in gross margin as a percentage of net revenues was primarily attributed to increased discounts between the periods related to recruiting promotions and increased customer discounts.

Current wording

Gross margin decreased $4.2 million, or 40.4%, to $6.2 million during the three months ended November 30, 2024, when compared to $10.4 million during the same period a year ago. Gross margin as a percentage of net revenues for the three months ended November 30, 2024 decreased to 62.9%, compared to 66.3% the same period a year ago, representing a decrease of $0.3 million. The decrease in gross margin as a percentage of net revenues was primarily attributed to increased discounts between the periods related to recruiting promotions and increased customer discounts.

Previous wording

PaperPie operating expenses consists of operating and selling expenses, sales commissions and general and administrative expenses. Operating and selling expenses primarily consists of freight expenses and materials and supplies. Sales commissions include amounts paid to Brand Partners for new sales and promotions. These operating expenses are directly tied to the sales volumes of the PaperPie segment. General and administrative expenses include payroll, outside services, inventory reserves and other expenses directly associated with the segment.

Current wording

PaperPie operating expenses consist of operating and selling expenses, sales commissions, and general and administrative expenses. Operating and selling expenses primarily consists of freight expenses, materials, and supplies. Sales commissions include amounts paid to Brand Partners for new sales and promotions. These operating expenses are directly tied to the sales volumes of the PaperPie segment. General and administrative expenses include payroll, outside services, inventory reserves and other expenses directly associated with the segment.

Previous wording

Total operating expenses decreased $2.2 million, or 38.6%, to $3.5 million during the three-month period ended August 31, 2024, when compared to $5.7 million reported in the same quarter a year ago. Operating and selling expenses decreased $0.4 million, or 25.0%, to $1.2 million during the three-month period ended August 31, 2024, when compared to $1.6 million reported in the same quarter a year ago, primarily due to less freight expense on fewer sales. Sales commissions decreased $1.7 million, or 48.6%, to $1.8 million during the three-month period ended August 31, 2024, when compared to $3.5 million reported in the same quarter a year ago, due to the decrease in net revenues. Sales commissions as a percentage of net revenues decreased from 37.4% to 33.6% between periods, primarily due to the mix of order type. Web orders pay higher commissions than special programs such as book fairs. General and administrative expenses decreased $0.1 million, or 16.7%, to $0.5 million during the three months ended August 31, 2024, when compared to $0.6 million during the same period a year ago, due primarily to $0.1 million of reduced bank fees from fewer credit card transactions associated with reduced sales.

Current wording

Total operating expenses decreased $3.7 million, or 42.0%, to $5.1 million during the three-month period ended November 30, 2024, when compared to $8.8 million reported in the same quarter a year ago. Operating and selling expenses decreased $1.2 million, or 48.0%, to $1.3 million during the three-month period ended November 30, 2024, when compared to $2.5 million reported in the same quarter a year ago, primarily due to less freight expense on fewer sales and a decrease in brand partner incentive trip expenses as fewer brand partners are expected to earn the trip this year. Sales commissions decreased $2.3. million, or 41.1%, to $3.3 million during the three-month period ended November 30, 2024, when compared to $5.6 million reported in the same quarter a year ago, due to the decrease in net revenues. Sales commissions as a percentage of net revenues decreased from 35.4.% to 33.3% between periods, primarily due to the mix of order types. Web orders pay higher commissions than special programs such as book fairs. General and administrative expenses decreased $0.3 million, or 37.5%, to $0.5 million during the three months ended November 30, 2024, when compared to $0.8 million during the same period a year ago, due primarily to $0.2 million of reduced bank fees from fewer credit card transactions associated with reduced sales and $0.1 million in other various general and administrative expenses.

Previous wording

Operating income (loss) for the PaperPie segment decreased $0.9 million, or 225.0% to an operating loss of $(0.5) million during the three months ended August 31, 2024, when compared to $0.4 million reported in the same quarter a year ago. Operating income (loss) for the PaperPie division decreased primarily from reduced sales; along with additional recruiting and product discounts partially offset by reduced operating expenses.

Current wording

Operating income for the PaperPie segment decreased $0.6 million, or 37.5% to $1.0 million during the three months ended November 30, 2024, when compared to $1.6 million reported in the same quarter a year ago. Operating income for the PaperPie division decreased primarily from reduced sales; along with additional recruiting and product discounts partially offset by reduced operating expenses.

Previous wording

PaperPie net revenues decreased $7.6 million, or 34.7%, to $14.3 million during the six-month period ended August 31, 2024, compared to $21.9 million from the same period a year ago. The average number of active brand partners in the six-month period ended August 31, 2024 was 13,700, a decrease of 6,900, or 33.5%, from 20,600 selling in same period a year ago. Recruiting and maintaining brand partners has been negatively impacted by several factors including record inflation, our new distribution agreement with Usborne and the rebranding of the division in the fourth quarter of fiscal year 2023. Inflation was most evident in increased food and fuel prices, which impacts the disposable income of our target customer base, which is families with small children. Sales during the first and second quarters of fiscal year 2024 continued to be negatively impacted by continuing inflationary pressures and we expect this to continue through the rest of fiscal year 2025, as these pressures persist. Historically, when we have experienced these difficult inflationary times, our active brand partner numbers have been positively impacted as more families look for non-traditional income streams to offset rising costs of living.

Current wording

PaperPie net revenues decreased $13.5 million, or 35.9%, to $24.1 million during the nine-month period ended November 30, 2024, compared to $37.6 million from the same period a year ago. The average number of active brand partners in the nine-month period ended November 30, 2024 was 13,300, a decrease of 5,900, or 30.7%, from 19,200 selling in same period a year ago. Recruiting and maintaining brand partners has been negatively impacted by several factors including record inflation, our new distribution agreement with Usborne and the rebranding of the division in the fourth quarter of fiscal year 2023. Inflation was most evident in increased food and fuel prices, which impacts the disposable income of our target customer base, which is families with small children. Sales during the first three quarters of fiscal year 2025 continued to be negatively impacted by inflationary pressures and we expect this to continue through the rest of fiscal year 2025, as these pressures persist. Historically, when we have experienced these difficult inflationary times, our active brand partner numbers have been positively impacted as more families look for non-traditional income streams to offset rising costs of living.

Previous wording

Gross margin decreased $5.7 million, or 39.3%, to $8.8 million during the six-month period ended August 31, 2024, when compared to $14.5 million during the same period a year ago, due primarily to a decrease in net revenues. Gross margin as a percentage of net revenues decreased to 61.5% for the six-month period ended August 31, 2024, when compared to 66.2% for the same period a year ago. The decrease in gross margin as a percentage of net revenues was primarily attributed to increased recruiting promotions offered to increase brand partner levels and additional discounts offered to customers between the periods to spur sales.

Current wording

Gross margin decreased $9.9 million, or 39.8%, to $15.0 million during the nine-month period ended November 30, 2024, when compared to $24.9 million during the same period a year ago, due primarily to a decrease in net revenues. Gross margin as a percentage of net revenues decreased to 62.1% for the nine-month period ended November 30, 2024, when compared to 66.2% for the same period a year ago. The decrease in gross margin as a percentage of net revenues was primarily attributed to increased recruiting promotions offered to increase brand partner levels and additional discounts offered to customers between the periods to spur sales.

Previous wording

Total operating expenses decreased $4.0 million, or 32.0%, to $8.5 million during the six-month period ended August 31, 2024, from $12.5 million for the same period a year ago. Operating and selling expenses decreased $0.8 million, or 22.9%, to $2.7 million during the six-month period ended August 31, 2024, when compared to $3.5 million reported in the same period a year ago, primarily due to a decrease in shipping costs associated with the decrease in volume of orders shipped totaling approximately $0.6 million and a $0.2 million decrease in brand partner incentive trip expenses as fewer brand partners are expected to earn the trip this year. Sales commissions decreased $2.7 million, or 35.5%, to $4.9 million during the six-month period ended August 31, 2024, when compared to $7.6 million reported in the same period a year ago, primarily due to the decrease in net revenues. General and administrative expenses decreased $0.4 million, or 28.6%, to $1.0 million, from $1.4 million recognized during the same period last year, due primarily to decreased credit card transaction fees associated with decreased sales volumes totaling $0.2 million and a $0.2 million decrease in payroll expenses.

Current wording

Total operating expenses decreased $7.7 million, or 36.2%, to $13.6 million during the nine-month period ended November 30, 2024, from $21.3 million for the same period a year ago. Operating and selling expenses decreased $1.9 million, or 32.2%, to $4.0 million during the nine-month period ended November 30, 2024, when compared to $5.9 million reported in the same period a year ago, primarily due to a decrease in shipping costs associated with the decrease in volume of orders shipped totaling approximately $1.3 million and a $0.6 million decrease in brand partner incentive trip expenses as fewer brand partners are expected to earn the trip this year. Sales commissions decreased $5.1 million, or 38.6%, to $8.1 million during the nine-month period ended November 30, 2024, when compared to $13.2 million reported in the same period a year ago, primarily due to the decrease in net revenues. General and administrative expenses decreased $0.7 million, or 31.8%, to $1.5 million, from $2.2 million recognized during the same period last year, due primarily to both decreased credit card transaction fees associated with decreased sales volumes totaling $0.3 million and a $0.2 million decrease in payroll expenses, as well as $0.2 million in other various general and administrative expenses.

Previous wording

Operating income of the PaperPie segment decreased $1.7 million, or 85.0%, to $0.3 million during the six months ended August 31, 2024, when compared to $2.0 million reported in the same period last year. Operating income of the PaperPie division as a percentage of net revenues for the six months ended August 31, 2024 was 2.1%, compared to 9.2% for the six months ended August 31, 2023. Operating income for the PaperPie division decreased primarily from reduced sales; along with additional recruiting promotions and customer discounts offered to increase brand partner levels and spur sales in the current year.

Current wording

Operating income of the PaperPie segment decreased $2.3 million, or 63.9%, to $1.3 million during the nine months ended November 30, 2024, when compared to $3.6 million reported in the same period last year. Operating income of the PaperPie division as a percentage of net revenues for the nine months ended November 30, 2024 was 5.5%, compared to 9.7% for the nine months ended November 30, 2023. Operating income for the PaperPie division decreased primarily from reduced sales; along with additional recruiting promotions and customer discounts offered to increase brand partner levels and spur sales in the current year.

Previous wording

Total operating expenses of the Publishing segment remained consistent at $0.4 million during the three-month periods ended August 31, 2024 and 2023.

Current wording

Total operating expenses of the Publishing segment decreased $0.1 million, or 25.0%, to $0.3 million, from $0.4 million, during the three-month periods ended November 30, 2024 and 2023, respectively.

Previous wording

Our Publishing division’s net revenues decreased by $1.0 million, or 31.3%, to $2.2 million during the six-month period ended August 31, 2024, from $3.2 million reported in the same period a year ago primarily due to the stoppage of distribution of Usborne products between the periods. Usborne sales in the first quarter of fiscal 2024 totaled $1.3 million.

Current wording

Our Publishing division’s net revenues decreased by $1.0 million, or 22.7%, to $3.4 million during the nine-month period ended November 30, 2024, from $4.4 million reported in the same period a year ago primarily due to the stoppage of distribution of Usborne products in this division between the periods. Usborne sales in the first quarter of fiscal 2024 totaled $1.3 million.

Previous wording

Gross margin decreased $0.5 million, or 27.8%, to $1.3 million during the six-month period ended August 31, 2024, from $1.8 million reported in the same period a year ago. Gross margin as a percentage of net revenues increased to 59.8%, during the six-month period ended August 31, 2024, from 55.7% reported in the same period a year ago. Gross margin as a percentage of net revenues changed primarily from changes in the mix of products sold between EDC-owned brands and Usborne, with Kane Miller, SmartLab Toys and Learning Wrap-Ups products carrying a better margin on average.

Current wording

Gross margin decreased $0.5 million, or 20.0%, to $2.0 million during the nine-month period ended November 30, 2024, from $2.5 million reported in the same period a year ago. Gross margin as a percentage of net revenues increased to 59.4%, during the nine-month period ended November 30, 2024, from 56.4% reported in the same period a year ago. Gross margin as a percentage of net revenues changed primarily from changes in the mix of products sold between EDC-owned brands and Usborne, with Kane Miller, SmartLab Toys and Learning Wrap-Ups products carrying a better margin on average.

Previous wording

Total operating expenses of the Publishing segment decreased $0.1 million, or 11.1%, to $0.8 million during the six-month period ended August 31, 2024, from $0.9 million reported in the same period a year ago. This change was due to a $0.1 million decrease in sales commissions due to decreased overall sales and the restructuring of the Company’s internal sales department.

Current wording

Total operating expenses of the Publishing segment decreased $0.2 million, or 15.4%, to $1.1 million during the nine-month period ended November 30, 2024, from $1.3 million reported in the same period a year ago. This change was primarily due to a $0.1 million decrease in sales commissions due to decreased overall sales and the restructuring of the Company’s internal sales department and a $0.1 million decrease in other various operating expenses.

Previous wording

Operating income of the Publishing segment decreased $0.4 million, or 44.4%, to $0.5 million during the six-month period ended August 31, 2024 when compared to $0.9 million reported in the same period a year ago, due primarily to the decrease in sales and operating expenses. The decrease in operating income was primarily associated with the decline in revenues associated with the stoppage of Usborne product sales in this division.

Current wording

Operating income of the Publishing segment decreased $0.3 million, or 25.0%, to $0.9 million during the nine-month period ended November 30, 2024 when compared to $1.2 million reported in the same period a year ago, due primarily to the decrease in sales and operating expenses. The decrease in operating income was primarily associated with the decline in revenues associated with the stoppage of Usborne product sales in this division.

Previous wording

EDC has a history of profitability and positive cash flow. We typically fund our operations from the cash we generate. During periods of operating losses, EDC will reduce purchases and sell through inventory to generate cash flow. The Company expects to reduce current excess inventory levels and use the cash proceeds to offset any future operating losses, and to pay down the line of credit and portions of the term debt. Available cash has historically been used to pay down outstanding bank loan balances, for capital expenditures, to pay dividends and to acquire treasury stock. We utilize a bank credit facility and other term loan borrowings to meet our short-term cash needs, as well as fund capital expenditures, when necessary. As of the end of the second fiscal quarter of 2025, our revolving bank credit facility loan balance was $6.1 million with $0.9 million in available capacity.

Current wording

EDC has a history of profitability and positive cash flow. We typically fund our operations from the cash we generate. During periods of operating losses, EDC will reduce purchases and sell through inventory to generate cash flow. The Company expects to reduce current excess inventory levels and use the cash proceeds to offset any future operating losses, and to pay down the line of credit and portions of the term debt. Available cash has historically been used to pay down outstanding bank loan balances, for capital expenditures, to pay dividends and to acquire treasury stock. We utilize a bank credit facility and other term loan borrowings to meet our short-term cash needs, as well as fund capital expenditures, when necessary. As of the end of the third fiscal quarter of 2025, our revolving bank credit facility loan balance was $4.3 million with $1.2 million in available capacity.

Previous wording

During the first six months of fiscal year 2025, we experienced positive cash inflows from operations of $335,500. These cash inflows resulted from:

Current wording

During the first nine months of fiscal year 2025, we experienced positive cash inflows from operations of $4,778,300. These cash inflows resulted from:

Previous wording

●depreciation and amortization expense of $972,200

Current wording

●depreciation and amortization expense of $1,355,300

Previous wording

●share-based compensation expense, net of $201,600

Current wording

●share-based compensation expense, net of $302,400

Previous wording

●provision for inventory allowance of $191,300

Current wording

●provision for inventory allowance of $220,400

Previous wording

●provision for credit losses of $41,600

Current wording

●provision for credit losses of $53,600

Previous wording

●net loss on sale of assets of $3,700

Current wording

●net loss on sale of assets of $3,300

Previous wording

●decrease in inventories, net of $5,120,400

Current wording

●decrease in inventories, net of $8,582,700

Previous wording

●decrease in deferred revenues of $83,100

Current wording

●increase in deferred revenues of $794,600

Previous wording

●decrease in accrued salaries and commissions, and other liabilities of $693,600

Current wording

●increase in accrued salaries and commissions, and other liabilities of $377,800

Previous wording

●increase in income taxes payable of $353,500

Current wording

●increase in income taxes payable of $374,700

Previous wording

●decrease in accounts payable of $1,287,200

Current wording

●decrease in accounts payable of $1,577,500

Previous wording

●increase in accounts receivable of $183,800

Current wording

●increase in accounts receivable of $291,900

Previous wording

●increase in prepaid expenses and other assets of $259,000

Current wording

●increase in prepaid expenses and other assets of $241,900

Previous wording

Cash used in investing activities was $196,000 for capital expenditures, consisting of $200,000 in new software development costs to add new features to our proprietary systems that PaperPie Brand Partners use to monitor their business and place customer orders and offset by $4,000 from the sale of machinery and equipment.

Current wording

Cash used in investing activities was $298,500 for capital expenditures, consisting of $292,100 in new software development costs to add new features to our proprietary systems that PaperPie Brand Partners use to monitor their business and place customer orders and $16,200 in building improvements, offset by $9,800 from the sale of machinery and equipment.