EDUCATIONAL DEVELOPMENT CORP

Previous wording

Total operating expenses not associated with a reporting segment decreased $0.3 million, or 13.0%, to $2.0 million for the three-month period ended August 31, 2025, when compared to $2.3 million for the same quarterly period a year ago. Operating expenses decreased primarily as a result of a $0.1 million decrease in labor expenses within our warehouse operations due primarily to lower number of orders and outbound shipments, a $0.1 million decrease in depreciation expenses as certain assets have moved to Assets Held for Sale and depreciation is no longer applied, and a $0.1 million decrease in property taxes and insurance.

Current wording

Total operating expenses not associated with a reporting segment decreased $0.4 million, or 15.4%, to $2.2 million for the three-month period ended November 30, 2025, when compared to $2.6 million for the same quarterly period a year ago. Operating expenses decreased primarily because of a $0.2 million decrease in labor expense within our warehouse operations due to lower number of orders, as well as a $0.2 million decrease in freight handling expenses due to less orders being shipped compared to prior year.

Previous wording

Income taxes decreased $0.2 million, or 28.6%, to a tax benefit of $0.5 million for the three months ended August 31, 2025, from a tax benefit of $0.7 million for the same quarterly period a year ago, resulting primarily from a decrease in gross sales. Our effective tax rate decreased to 26.0% for the quarter ended August 31, 2025, from 26.9% for the quarter ended August 31, 2024, 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 increased $3.1 million to an income tax expense of $2.8 million for the three months ended November 30, 2025, from a tax benefit of $0.3 million for the same quarterly period a year ago, resulting primarily from an increase in other income as result of the sale of the Hilti Complex. Our effective tax rate increased to 26.7% for the quarter ended November 30, 2025, from 24.8% for the quarter ended November 30, 2024, 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

Non-Segment Operating Results for the Six Months Ended August 31, 2025

Current wording

Non-Segment Operating Results for the Nine Months Ended November 30, 2025

Previous wording

Total operating expenses not associated with a reporting segment decreased $0.8 million, or 16.0%, to $4.2 million for the six-month period ended August 31, 2025, when compared to $5.0 million for the same period a year ago. Labor expenses decreased $0.5 million from staff reductions across all departments and freight handling costs decreased $0.1 million for the six months ended August 31, 2025, both associated with reduced sales, and a $0.2 million decrease in depreciation expenses as certain assets have moved to Assets Held for Sale and depreciation is no longer applied.

Current wording

Total operating expenses not associated with a reporting segment decreased $1.2 million, or 15.8%, to $6.4 million for the nine month period ended November 30, 2025, when compared to $7.6 million for the same period a year ago. Labor expenses decreased $0.7 million from staff reductions across all departments, a decrease in freight handling of $0.2 million due to less overall sales orders and shipments compared to the prior year, and a $0.3 million decrease in depreciation expense related to the reclassification of the disassembled equipment to assets held for sale and resulting in the discontinuation of depreciation.

Previous wording

Other income increased $0.2 million, or 18.2%, to $1.3 million for the six months ended August 31, 2025, when compared to $1.1 million for the same quarterly period a year ago, primarily from a $0.4 million increase in rental income from the new tenant in the Hilti Complex, offset by a $0.2 decrease in other income related to a Chik-fil-A promotion held last year and the loss associated with the sale of property and equipment.

Current wording

Other income increased $12.1 million to $13.8 million for the nine months ended November 30, 2025, when compared to $1.7 million for the same quarterly period a year ago, primarily from the sale of the Hilti Complex, which resulted in an increase of other income due to the gain of $12.2 million and an increase in rental income of $0.3 million, offset by $0.3 million from the impairment of the line equipment in assets held for sale and a $0.1 million decrease in other income related to a Chick-fil-A promotion held last year.

Previous wording

Income taxes decreased $0.3 million, or 27.3%, to a tax benefit of $0.8 million for the six months ended August 31, 2025, from a tax benefit of $1.1 million for the same period a year ago primarily related to reduced operating losses between the periods. Our effective tax rate decreased to 25.9% for the six months ended August 31, 2025, from 26.8% for the six months ended August 31, 2024, 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 increased $3.4 million to a tax expense of $2.0 million for the nine months ended November 30, 2025, from a tax benefit of $1.4 million for the same period a year ago, primarily related to the increase in other income associated with the sale of the Hilti Complex. Our effective tax rate increased to 27.0% for the nine months ended November 30, 2025, from 26.4% for the nine months ended November 30, 2024, 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 $1.7 million, or 31.5%, to $3.7 million during the three months ended August 31, 2025, when compared to $5.4 million during the same period a year ago. The average number of active brand partners in the second quarter of fiscal 2026 was 5,800, a decrease of 8,100, or 58.3%, from 13,900 average active brand partners selling in the second quarter of fiscal 2025. The Company reports the average number of active Brand Partners as a key indicator for this division. The Company saw new Brand Partner recruiting negatively impacted due to several factors including economic challenges that include inflation, resulting in high fuel costs and food price increases that continue to impact the disposable income of our customers. Additionally, the Company executed a distribution agreement with Usborne Publishing Limited in fiscal 2023. This agreement required the rebranding of the direct sales division from Usborne Books & More (“UBAM”) to PaperPie along with providing a letter of credit and minimal level of annual purchases. This rebranding was completed in the fourth quarter of fiscal 2023. The letter of credit was not provided by the Company and the Company did not meet the minimum purchase requirements in fiscal 2024 or 2025, creating uncertainty with the relationship on a go-forward basis. The reduced sales and uncertainty resulting from the revised Usborne distribution agreement increased Brand Partner turnover and negatively impacted new Brand Partner recruits.

Current wording

PaperPie net revenues decreased $3.6 million, or 36.7%, to $6.2 million during the three months ended November 30, 2025, when compared to $9.8 million during the same period a year ago. The average number of active brand partners in the third quarter of fiscal 2026 was 5,100, a decrease of 7,300, or 58.9%, from 12,400 average active brand partners selling in the third quarter of fiscal 2025. The Company reports the average number of active Brand Partners as a key indicator for this division. The Company saw new Brand Partner recruiting negatively impacted due to several factors including economic challenges that include inflation, resulting in high fuel costs and food price increases that continue to impact the disposable income of our customers. Additionally, the Company executed a distribution agreement with Usborne Publishing Limited in fiscal 2023. This agreement required the rebranding of the direct sales division from Usborne Books & More (“UBAM”) to PaperPie along with providing a letter of credit and minimal level of annual purchases. This rebranding was completed in the fourth quarter of fiscal 2023. The letter of credit was not provided by the Company and the Company did not meet the minimum purchase requirements in fiscal 2024 or 2025, creating uncertainty with the relationship on a go-forward basis. The reduced sales and uncertainty resulting from the revised Usborne distribution agreement increased Brand Partner turnover and has negatively impacted new Brand Partner recruits over the past two years.

Previous wording

Recent sales levels have also been impacted by the lack of new titles being introduced and certain out of stock items, due to purchasing restrictions placed on us from our lender. We expect to place reorders and purchase new titles following the sale of Hilti Complex and the payoff of the loans with our bank. Returning to our past practice of introducing new titles, along with additional enhancements to our PaperPie e-commerce and “backoffice” systems, are expected to create existing Brand Partner excitement and increase our number of new recruits in this division.

Current wording

Recent sales levels have also been impacted by the lack of new titles being introduced and certain out of stock items, due to purchasing restrictions placed on us from our lender. The Company has started to place reorders and purchase new titles following the sale of the Hilti Complex and the payoff of the loans with our bank at the end of the third quarter fiscal 2026. The Company plans to return to our past practice of introducing new titles, along with additional enhancements to our PaperPie e-commerce and “Backoffice” systems that are expected to create existing Brand Partner excitement which should increase our number of new recruits in this division.

Previous wording

PaperPie gross margin decreased $0.8 million, or 26.7%, to $2.2 million during the three months ended August 31, 2025, when compared to $3.0 million during the same period a year ago. Gross margin as a percentage of net revenues for the three months ended August 31, 2025 increased to 57.9%, compared to 55.1% the same period a year ago, representing an increase of $0.2 million. The increase in gross margin as a percentage of net revenues was primarily attributed to increased discounts offered in the prior year to spur sales along with additional shipping promotions.

Current wording

PaperPie gross margin decreased $2.3 million, or 37.1%, to $3.9 million during the three months ended November 30, 2025, when compared to $6.2 million during the same period a year ago. Gross margin as a percentage of net revenues for the three months ended November 30, 2025 decreased to 62.1%, compared to 62.9% for the same period a year ago. The decrease in gross margin as a percentage of net revenues was primarily attributed to increased discounts offered in the current quarter to spur sales along with additional shipping promotions.

Previous wording

Total PaperPie operating expenses decreased $1.3 million, or 37.1%, to $2.2 million during the three-month period ended August 31, 2025, when compared to $3.5 million reported in the same quarter a year ago. Operating and selling expenses decreased $0.6 million, or 50.0%, to $0.6 million during the three-month period ended August 31, 2025, when compared to $1.2 million reported in the same quarter a year ago. These decreased expenses were due to a $0.3 million decrease in shipping costs associated with the decrease in volume of orders shipped, and a decrease of $0.3 million in accruals for Brand Partner incentive trip expenses as the Division expects less trip earners this year. Sales commissions decreased $0.6 million, or 33.3%, to $1.2 million during the three-month period ended August 31, 2025, when compared to $1.8 million reported in the same quarter a year ago, due primarily to the decrease in net revenues. General and administrative expenses decreased $0.1 million, or 20.0%, to $0.4 million during the three months ended August 31, 2025, when compared to $0.5 million during the same period a year ago. This decrease was due to a $0.1 million decrease in credit card transaction fees associated with decreased sales volumes coupled with a decrease in Home Office challenge awards used to incentivize selling more products each quarter.

Current wording

Total PaperPie operating expenses decreased $1.7 million, or 33.3%, to $3.4 million during the three-month period ended November 30, 2025, when compared to $5.1 million reported in the same quarter a year ago. Operating and selling expenses decreased $0.3 million, or 23.1% to $1.0 million during the three-month period ended November 30, 2025, when compared to $1.3 million reported in the same quarter a year ago. These decreased expenses were due to a $0.2 million decrease in shipping costs associated with the decrease in sales and volume of orders shipped, and a decrease of $0.1 million in accruals for Brand Partner incentive trip expenses as the division expects less trip earners this year. Sales commissions decreased $1.3 million, or 39.4%, to $2.0 million during the three-month period ended November 30, 2025, when compared to $3.3 million reported in the same quarter a year ago, due primarily to the decrease in net revenues, which resulted in a decrease of weekly commissions of $0.7 million, a $0.5 million decrease in commission overrides, as well as a $0.1 million decrease in commissions related to sales bonus. General and administrative expenses decreased $0.1 million, or 20.0%, to $0.4 million during the three months ended November 30, 2025, when compared to $0.5 million during the same period a year ago due to a decrease in credit card transaction fees associated with decreased sales volumes.

Previous wording

Operating loss for the PaperPie segment decreased $0.5 million, to $14,700 during the three months ended August 31, 2025, when compared to the loss of $0.5 million reported in the same quarter a year ago. Operating loss for the PaperPie division as a percentage of net revenues for the year ended August 31, 2025 was (0.4)%, compared to (8.7)% for the year ended August 31, 2024, a decrease of 8.3%. Operating loss as a percentage of net revenues changed from the prior year primarily due to the decrease in net revenues due primarily to the reduced number of active brand partners and higher discounts offered to spur sales, offset by a decrease in operating expenses as shown above.

Current wording

Operating income for the PaperPie segment decreased $0.5 million or 50%, to $0.5 million during the three months ended November 30, 2025, when compared to the loss of $1.0 million reported in the same quarter a year ago. Operating income for the PaperPie division as a percentage of net revenues for the year ended November 30, 2025 decreased to 8.4%, when compared to 10.4% for the year ended November 30, 2024, a decrease of 2.0%. Operating income as a percentage of net revenues changed from the prior year primarily due to the decrease in net revenues from the reduced number of active brand partners in addition to higher discounts offered to spur sales, which are both offset by a decrease in operating expenses as shown above.

Previous wording

PaperPie net revenues decreased $4.5 million, or 31.5%, to $9.8 million during the six-month period ended August 31, 2025, compared to $14.3 million from the same period a year ago. The average number of active brand partners in the six-month period ended August 31, 2025, was 6,800, a decrease of 6,900, or 50.4%, from 13,700 selling in same period a year ago. Recruiting and maintaining brand partners has been negatively impacted by several factors including record inflation, our 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 2025 continued to be negatively impacted by continuing inflationary pressures and we expect this to continue through the rest of fiscal year 2026, 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 $8.1 million, or 33.6%, to $16.0 million during the nine-month period ended November 30, 2025, compared to $24.1 million from the same period a year ago. The average number of active brand partners in the nine-month period ended November 30, 2025, was 6,200, a decrease of 7,100, or 53.4%, from 13,300 selling in same period a year ago. Recruiting and maintaining brand partners has been negatively impacted by several factors including continued inflation, our distribution agreement with Usborne, and the rebranding of the division in the fourth quarter of fiscal year 2023. Inflation was most evident in the increase of food and fuel prices, both impacting the disposable income of our target customer base, which is families with small children. Sales during the first nine months of fiscal 2026 continued to be negatively impacted by continuing inflationary pressures and we expect this to continue through the rest of fiscal year 2026, 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

Recent sales levels have also been impacted by the lack of new titles being introduced and certain out of stock items, due to purchasing restrictions placed on us from our lender. We expect to place reorders and purchase new titles following the sale of Hilti Complex and the payoff of the loans with our bank. Returning to our past practice of introducing new titles, along with additional enhancements to our PaperPie e-commerce and “backoffice” systems, are expected to create existing Brand Partner excitement and increase our number of new recruits in this division.

Current wording

Recent sales levels have also been impacted by the lack of new titles being introduced and certain out of stock items due to purchasing restrictions placed on us from our lender. We have begun a conservative plan to place reorders and purchase new titles since the sale of the Hilti Complex and the payoff of the loans with our bank. The Company is now returning to our past practice of introducing new titles, along with additional enhancements to our PaperPie e-commerce and “Backoffice” systems that are expected to create existing Brand Partner excitement and should increase our number of new recruits in this division.

Previous wording

Gross margin decreased $3.0 million, or 34.1%, to $5.8 million during the six-month period ended August 31, 2025, when compared to $8.8 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 58.8% for the six-month period ended August 31, 2025, when compared to 61.5% 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, as well as increased cost of goods from the tariffs implemented by the current administration on our SmartLab Toys product line.

Current wording

Gross margin decreased $5.4 million, or 36.0%, to $9.6 million during the nine-month period ended November 30, 2025, when compared to $15.0 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 60.1% for the nine-month period ended November 30, 2025, when compared to 62.1% 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, as well as increased cost of goods from the tariffs implemented by the current administration on our SmartLab Toys product line.

Previous wording

Total operating expenses decreased $3.2 million, or 37.6%, to $5.3 million during the six-month period ended August 31, 2025, from $8.5 million for the same period a year ago. Operating and selling expenses decreased $1.4 million, or 51.9%, to $1.3 million during the six-month period ended August 31, 2025, when compared to $2.7 million reported in the same period a year ago. This decrease relates primarily to a decrease in shipping costs associated with the decrease in volume of orders shipped, totalling approximately $0.9 million; a $0.4 million decrease in brand partner incentive trip expenses as fewer brand partners are expected to earn the trip this year; and a $0.1 million decrease in various other operating and selling expenses. Sales commissions decreased $1.7 million, or 34.7%, to $3.2 million during the six-month period ended August 31, 2025, when compared to $4.9 million reported in the same period a year ago, primarily due to the decrease in net revenues. General and administrative expenses decreased $0.2 million, or 20.0%, to $0.8 million, from $1.0 million recognized during the same period last year, due primarily to decreased credit card transaction fees associated with decreased sales volumes totalling $0.1 million and a $0.1 million decrease in other various general and administrative expenses.

Current wording

Total operating expenses decreased $4.9 million, or 36.0%, to $8.7 million during the nine-month period ended November 30, 2025, from $13.6 million for the same period a year ago. Operating and selling expenses decreased $1.7 million, or 42.5%, to $2.3 million during the nine-month period ended November 30, 2025, when compared to $4.0 million reported in the same period a year ago. This decrease relates primarily to a decrease in shipping costs associated with the decrease in volume of orders shipped, totalling approximately $1.2 million, as well as a $0.5 million decrease in brand partner incentive trip expenses as fewer brand partners are expected to earn the trip this year. Sales commissions decreased $2.9 million, or 35.8%, to $5.2 million during the nine-month period ended November 30, 2025, when compared to $8.1 million reported in the same period a year ago primarily due to the decrease in net revenues, which resulted in a decrease of weekly commissions of $1.6, a $1.2 million decrease in monthly commission overrides, as well as a decrease in sales bonus’ of $0.1 million. General and administrative expenses decreased $0.3 million, or 20.0%, to $1.2 million, from $1.5 million recognized during the same period last year, due primarily to $0.2 million of decreased credit card transaction fees associated with decreased sales volumes and a $0.1 million decrease in other various general and administrative expenses.

Previous wording

Operating income of the PaperPie segment increased $0.1 million, or 33.3%, to $0.4 million during the six months ended August 31, 2025, when compared to $0.3 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, 2025 was 4.6%, compared to 2.1% for the six months ended August 31, 2024. Operating income for the PaperPie division increased primarily from reduced operating expenses

Current wording

Operating income of the PaperPie segment decreased $0.3 million, or 23.1%, to $1.0 million during the nine months ended November 30, 2025, when compared to $1.3 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, 2025 was 6.0%, compared to 5.5% for the nine months ended November 30, 2024. Operating income as a percentage of net revenues changed from the prior year primarily due to the decrease in net revenues from the reduced number of active brand partners in addition to higher discounts offered to spur sales, which are both offset by the decrease in operating expenses as shown above.

Previous wording

Our Publishing division’s net revenues decreased $0.2 million, or 18.2%, to $0.9 million during the three-month period ended August 31, 2025, from $1.1 million reported in the same period a year ago. The change in net revenues was primarily from additional discounts offered to retail customers in the second quarter of fiscal 2026 to spur sales.

Current wording

Our Publishing division’s net revenues decreased $0.5 million, or 38.5%, to $0.8 million during the three-month period ended November 30, 2025, from $1.3 million reported in the same period a year ago. The change in net revenues was directly associated with the decrease in overall sales volume offset by a slight decrease in discounts.

Previous wording

Gross margin decreased $0.1 million, or 16.7%, to $0.5 million during the three-month period ended August 31, 2025, from $0.6 million reported in the same quarter a year ago, primarily due to the decrease in net revenues. Gross margin as a percentage of net revenues decreased to 59.1% during the three-month period ended August 31, 2025, from 60.5% reported in the same quarter a year ago. Gross margin as a percentage of net revenues changed primarily from additional discounts offered to retail customers in the second quarter of fiscal 2026 to spur sales.

Current wording

Gross margin decreased $0.4 million, or 50.0%, to $0.4 million during the three-month period ended November 30, 2025, from $0.8 million reported in the same quarter a year ago, primarily due to the decrease in net revenues. Gross margin as a percentage of net revenues decreased to 56.4% during the three-month period ended November 30, 2025, from 58.9% reported in the same quarter a year ago. Gross margin as a percentage of net revenues changed primarily from the increase in cost of goods due to the additional tariffs implemented by the current administration on our SmartLab Toys product line.

Previous 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 August 31, 2025 and 2024, respectively. This change was primarily due to a $0.1 million decrease in shipping costs associated with the decrease in volume of orders shipped.

Current wording

Total operating expenses of the Publishing segment stayed consistent at $0.3 million, during the three-month periods ended November 30, 2025 and 2024, respectively.

Previous wording

Operating income decreased $0.1 million, or 33.3%, to $0.2 million, from $0.3 million, during the three-month periods ended August 31, 2025 and 2024, respectively. Operating income for the Publishing division as a percentage of net revenues for the year ended August 31, 2025 was 23.1%, compared to 23.9% for the year ended August 31, 2024, a decrease of 0.8%. The decrease in operating income was primarily associated with the decline in revenues associated with the increased discounts to spur sales.

Current wording

Operating income decreased $0.3 million, or 75.0%, to $0.1 million during the three-month period ended November 30, 2025, from $0.4 million reported in the same quarter a year ago, respectively. Operating income for the Publishing division as a percentage of net revenues for the year ended November 30, 2025 was 17.2%, compared to 33.1% for the year ended November 30, 2024, a decrease of 15.9%. The decrease in operating income was primarily associated with the decline in net revenues associated with the decrease in gross sales in addition to the increase in cost of goods due to the additional tariffs implemented by the current administration on our SmartLab Toys product line.

Previous wording

Our Publishing division’s net revenues decreased by $0.3 million, or 13.6%, to $1.9 million during the six-month period ended August 31, 2025, from $2.2 million reported in the same period a year ago primarily due to the increased discounts offered to spur sales.

Current wording

Our Publishing division’s net revenues decreased by $0.7 million, or 20.6%, to $2.7 million during the nine-month period ended November 30, 2025, from $3.4 million reported in the same period a year ago primarily due to the increased discounts offered to spur sales and the decrease in gross sales volume compared to the prior year.

Previous wording

Gross margin decreased $0.2 million, or 15.4%, to $1.1 million during the six-month period ended August 31, 2025, from $1.3 million reported in the same period a year ago. Gross margin as a percentage of net revenues decreased to 55.4%, during the six-month period ended August 31, 2025, from 59.8% 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 and the increased discounts offered to customers during the current fiscal year.

Current wording

Gross margin decreased $0.5 million, or 25.0%, to $1.5 million during the nine-month period ended November 30, 2025, from $2.0 million reported in the same period a year ago. Gross margin as a percentage of net revenues decreased to 55.7%, during the nine-month period ended November 30, 2025, from 59.4% 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: Kane Miller, SmartLab Toys and Learning Wrap-Ups products, as well as the increase in cost of goods due to the additional tariffs implemented by the current administration on our SmartLab Toys product line.

Previous wording

Total operating expenses of the Publishing segment decreased $0.1 million, or 12.5%, to $0.7 million during the six-month period ended August 31, 2025, from $0.8 million reported in the same period a year ago. This change was due to a $0.1 million decrease in shipping costs associated with the decrease in volume of orders shipped.

Current wording

Total operating expenses of the Publishing segment decreased $0.1 million, or 9.1%, to $1.0 million during the nine-month period ended November 30, 2025, from $1.1 million reported in the same period a year ago. This change was due to a $0.1 million decrease in shipping costs associated with the decrease in volume of orders shipped from decreased sales.

Previous wording

Operating income of the Publishing segment decreased $0.1 million, or 20.0%, to $0.4 million during the six-month period ended August 31, 2025 when compared to $0.5 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 discounts offered in the current fiscal year.

Current wording

Operating income of the Publishing segment decreased $0.4 million, or 44.4%, to $0.5 million during the nine-month period ended November 30, 2025 when compared to $0.9 million reported in the same period a year ago, due primarily to the decrease in sales and increase in cost of goods and operating and selling expenses compared to the prior year.

Previous wording

Prior to the last two fiscal years, which have been challenged with higher product discounting to spur sales and increased interest rates on borrowings, 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 excess 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 until it returns to profitability. In addition, the Company intends to sell its owned real estate to pay off the revolving line of credit and term debts with our bank. Available cash has historically been used to pay down the outstanding bank loan balances, for capital expenditures, to pay dividends, and to acquire treasury stock.

Current wording

Prior to the last two fiscal years, which have been challenged with higher product discounting to spur sales and increased interest rates on borrowings, 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 excess 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 until it returns to profitability. In addition, the Company sold its owned real estate and paid off the revolving line of credit and term debts with our bank. Available cash has historically been used to pay down the outstanding bank loan balances, for capital expenditures, to pay dividends, and to acquire treasury stock.

Previous wording

During the first six months of fiscal year 2026, we experienced positive cash inflows from operations of $1,459,700. These cash inflows resulted from:

Current wording

During the first nine months of fiscal year 2026, we experienced positive cash inflows from operations of $4,004,600. These cash inflows resulted from:

Previous wording

Cash used in investing activities was $263,900 for capital expenditures, consisting of $174,200 in software upgrades to our proprietary systems that our PaperPie Brand Partners use to monitor their business and place customer orders and $134,700 in building improvements currently in Assets Held for Sale, offset by $45,000 from the sale of machinery and equipment.

Current wording

Cash provided by investing activities totalled $29,480,500, consisting of $29,927,600 in proceeds from the sale of the Hilti Complex offset by $282,500 in software upgrades to our proprietary systems that our PaperPie Brand Partners use to monitor their business and place customer orders and $164,600 in building improvements in Assets Held for Sale.

Previous wording

Cash used in financing activities was $900,000 to pay down existing term debt.

Current wording

Cash used in financing activities was $31,031,200, consisting of $26,715,400 to pay down existing term debt, $4,198,100 to pay down existing line of credit, $137,900 paid to acquire treasury stock, offset by cash received of $20,200 from the sale of treasury stock.

Previous wording

The Company continues to expect the cash generated from operations, specifically from the reduction of excess inventory, will provide us with the liquidity we need to support ongoing operations. Additionally, we expect to obtain short term financing from traditional or non-traditional lenders following the completion of the sale of the Hilti Complex and the payoff of its debts with our current lender. Cash generated from operations will be used to acquire new inventory and pay down any short-term borrowings.

Current wording

The Company continues to expect the cash generated from operations, specifically from the reduction of excess inventory, will provide us with the liquidity we need to support ongoing operations. Additionally, we expect to obtain short-term financing from traditional or non-traditional lenders to fund any short-term cash flow needs. Cash generated from operations will be used to acquire new inventory and pay down any short-term borrowings we expect to obtain.

Previous wording

The default status of our credit agreement, along with recurring operating losses and other items, raise substantial doubt over the Company’s ability to continue as a going concern. To address these concerns, the Company has taken steps in its plans to eliminate the bank borrowings by selling the Hilti Complex. The proceeds from the sale of the Hilti Complex are expected to pay off the Term Loans and Revolving Loan. Following the loan payoff, management plans to fund ongoing operations with limited borrowings through local banks or other financing sources. In addition, management’s plans include reducing inventory, which will generate free cash flows, and building the active PaperPie Brand Partners to pre-pandemic levels. Although there is no guarantee these plans will be successful, management believes these plans, if achieved, will alleviate the substantial doubt about continuing as a going concern and generate sufficient liquidity to meet our obligations as they become due over the next twelve months.

Current wording

The Company’s continued recurring operating losses raise substantial doubt over the Company’s ability to continue as a going concern. To address these concerns management’s plans include reducing inventory, to generate free cash flows and building the active PaperPie Brand Partners to pre-pandemic levels. Although there is no guarantee these plans will be successful, management believes these plans, if achieved, will alleviate the substantial doubt about continuing as a going concern and generate sufficient liquidity to meet our obligations as they become due over the next twelve months.

Previous wording

Certain inventory is maintained in a non-current classification. Management continually estimates and calculates the amount of non-current inventory. Noncurrent inventory arises due to occasional purchases of titles in quantities in excess of what will be sold within the normal operating cycle, due to the minimum order requirements of our suppliers, as well as reduced sales volumes. Noncurrent inventory is estimated by management using an anticipated turnover ratio by title, based primarily on historical trends. Inventory in excess of 2½ years of anticipated sales is classified as noncurrent inventory. These inventory quantities have additional exposure for storage damages, aging of topical related content, and associated issues, and therefore have higher obsolescence reserves. Noncurrent inventory balances prior to valuation allowances were $17.8 million and $16.3 million at August 31, 2025 and February 28, 2025, respectively. Noncurrent inventory valuation allowances were $0.8 million at August 31, 2025 and $0.7 million at February 28, 2025.

Current wording

Certain inventory is maintained in a non-current classification. Management continually estimates and calculates the amount of non-current inventory. Noncurrent inventory arises due to occasional purchases of titles in quantities in excess of what will be sold within the normal operating cycle, due to the minimum order requirements of our suppliers, as well as reduced sales volumes. Noncurrent inventory is estimated by management using an anticipated turnover ratio by title, based primarily on historical trends. Inventory in excess of 2½ years of anticipated sales is classified as noncurrent inventory. These inventory quantities have additional exposure for storage damages, aging of topical related content, and associated issues, and therefore have higher obsolescence reserves. Noncurrent inventory balances prior to valuation allowances were $17.5 million and $16.3 million at November 30, 2025 and February 28, 2025, respectively. Noncurrent inventory valuation allowances were $0.8 million at November 30, 2025 and $0.7 million at February 28, 2025.

Previous wording

Brand Partners that meet certain eligibility requirements may request and receive inventory on consignment. We believe allowing Brand Partners to have consignment inventory greatly increases their ability to be successful in making effective presentations at home shows, book fairs, and other events; in summary, having consignment inventory leads to additional sales opportunities. Approximately 18.5% of our active Brand Partners maintained consignment inventory at the end of the second quarter of fiscal year 2026. Consignment inventory is stated at cost, less an estimated reserve for consignment inventory that is not expected to be sold or returned to the Company. The total cost of inventory on consignment with Brand Partners was $1.2 million and $1.3 million at August 31, 2025 and February 28, 2025, respectively.

Current wording

Brand Partners that meet certain eligibility requirements may request and receive inventory on consignment. We believe allowing Brand Partners to have consignment inventory greatly increases their ability to be successful in making effective presentations at home shows, book fairs, and other events; in summary, having consignment inventory leads to additional sales opportunities. Approximately 20.0% of our active Brand Partners maintained consignment inventory at the end of the third quarter of fiscal year 2026. Consignment inventory is stated at cost, less an estimated reserve for consignment inventory that is not expected to be sold or returned to the Company. The total cost of inventory on consignment with Brand Partners was $1.3 million at November 30, 2025 and February 28, 2025, respectively.