EDUCATIONAL DEVELOPMENT CORP
For the period ended Feb 28, 2026. Filed May 19, 2026.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2026 · Filed May 19, 2026
EDUC$0.89-9.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2025-02-28; filed 2025-05-19.
0001185185-25-000516
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2026-02-28; filed 2026-05-19.
0001185185-26-001927
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 77 current paragraphs.
46 unchanged; 20 reworded; 11 added; 28 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 32 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
Total operating expenses not associated with a reporting segment were $8.9 million for the fiscal year ended February 28, 2026, compared to $9.9 million for the same period a year ago. Operating expenses decreased primarily because of a $0.6 million decrease in labor expense within our warehouse operations due to lower number of orders, a decrease of $0.3 million in depreciation due to Lines 1, 2 & 3 moved to ‘Assets Held for Sale” in Fiscal 25, as well as a $0.1 million in other various operating expenses.
Current report
Interest expense decreased $0.7 million, to $1.5 million for fiscal year ended February 28, 2026, compared to $2.2 million reported for fiscal year ended February 28, 2025 due to the Company selling the Hilti Complex at the end of October 2025 and paying in full all outstanding indebtedness and terminating all commitments and obligations under its Credit Agreement dated August 9, 2022 between the Company and its Lender.
Current report
Other income increased $11.9 million, to $14.0 million for fiscal year ended February 28, 2026, compared to $2.1 million reported for fiscal year ended February 28, 2025, resulting from the gain of $12.4 million from the sale of the Hilti Complex, offset by a $0.5 million decrease in rental income from existing tenant leases that were assigned to the buyer with the sale of the Hilti Complex.
Current report
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 in the first three quarters of this fiscal year. We have begun a conservative plan to place reorders and purchase new titles since the sale of the Hilti Complex, the payoff of the revolver and term loans with our bank and subsequent removal of purchasing restrictions. 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.
Current report
Our Publishing division’s net revenues decreased $0.7 million, or 16.3%, to $3.6 million for fiscal year ended February 28, 2026 from $4.3 million reported for fiscal year ended February 28, 2025. The change in net revenues was directly associated with the decrease in overall sales volume offset by a slight decrease in discounts.
Current report
Operating income decreased $0.5 million, or 41.7%, to $0.7 million for fiscal year ended February 28, 2026, from $1.2 million for fiscal year ended February 28, 2025. 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.
Current report
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.
Current report
Leases
Current report
We have both lessee and lessor arrangements. Our lessee arrangements include six rental agreements where we have the exclusive use of dedicated office space in San Diego, California, Ogden, Utah, a warehouse space in Joplin, Missouri and three leases for office and warehouse space locally in Tulsa, Oklahoma, all of which qualify as operating leases under ASC 842. Our lessor arrangements include one rental agreement for warehouse and office space in Tulsa, Oklahoma, and qualify as operating leases under ASC 842.
Current report
We recognize an operating lease liability on the balance sheets for each lease based on the present value of remaining minimum fixed rental payments (which includes payments under any renewal option that we are reasonably certain to exercise), using a discount rate that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. Expected payments in the next twelve months are classified as current operating lease liabilities. Payments in excess of twelve months are classified as long-term operating lease liabilities. We also recognize an operating lease right-of-use asset on the balance sheets, valued at the lease liability and adjusted for prepaid or accrued rent balances existing at the time of initial recognition. The operating lease liability and right-of-use assets are reduced over the term of the lease as payments are made and the assets are used.
Current report
The Company assesses its leases to determine whether it is reasonably certain that these renewal options will be exercised. In general, most of the office space outside of Tulsa, Oklahoma is associated with remote employees. Their continued employment determines the need for this space. Much of the warehouse space outside of the Hilti Complex is used to store non-current inventory. As the Company sells down excess inventory, less outside space will be needed, and any renewals will be for less space. The Company also considered the renewal options for the operating lease at the Hilti Complex and is not reasonably certain to exercise the renewal options. Accordingly, the renewal options are not included in the calculation of its right-of-use assets and lease liabilities, as the Company does not believe that it is reasonably certain that these renewal options will be exercised.
Removed paragraphs (28)
Previous report
Total operating expenses not associated with a reporting segment were $9.9 million for the fiscal year ended February 28, 2025, compared to $11.3 million for the same period a year ago. Operating expenses decreased $1.4 million primarily as a result of a reduction in labor expenses of $0.9 million, with our warehouse payroll having the largest reduction, plus a $0.7 million decrease in depreciation expense due to the sale of the Company’s old headquarters and classification as assets held for sale of our current headquarters and excess warehouse and machinery and equipment, and a $0.4 million decrease in freight-handling costs associated with a decrease in product revenues prior to discounts and allowances, offset by a $0.4 million increase in building rent due to sale and leaseback of our excess warehouse facility and additional warehouse space in Tulsa and Missouri used to house excess inventory, $0.1 million increase in personal property taxes, and $0.1 million increase in reserve for bad debt due to an increase in long-term and consignment inventory reserves.
Previous report
Interest expense decreased $0.6 million, to $2.2 million for fiscal year ended February 28, 2025, compared to $2.8 million reported for fiscal year ended February 29, 2024, with a $0.3 million decrease due primarily to the paydown of the line of credit required by the bank, and a $0.3 million decrease from the reduction of principle on the two term loans.
Previous report
Other income decreased $7.3 million, to $2.1 million for fiscal year ended February 28, 2025, compared to $9.4 million reported for fiscal year ended February 29, 2024, due to a $3.8 million decrease of other income related to the Employee Retention Credit received in fiscal 2024, a $4.0 million decrease due to the gain from the sale of the excess warehouse facility recognized in fiscal 2024, and a $0.3 million decrease from the loss associated with the abandonment of the Host Portal IT project, offset by $0.7 million increase in rental income due to the new tenant lease in our headquarters facility that started in the second quarter of fiscal 2025, and a $0.1 million increase related to royalties received from a promotion with Chick-fil-A which used a version of our books to distribute with their kids meals.
Previous report
Our Publishing division’s net revenues decreased $1.1 million, or 20.4%, to $4.3 million for fiscal year ended February 28, 2025 from $5.4 million reported for fiscal year ended February 29, 2024. The Publishing divisions net revenues decreased as the new distribution agreement with Usborne does not allow the retail division to sell these products. Retail sales of Usborne products discontinued in the first quarter of fiscal 2024.
Previous report
Operating income for the segment remained consistent at $1.2 million for fiscal year ended February 28, 2025 and February 29, 2024.
Previous report
Cash used in financing activities was $3,083,000, which was comprised of net payments on the line of credit of $1,300,000 and payments on term debt of $1,800,000, offset by $17,000 from other financing activities.
Previous report
On August 9, 2022, the Company executed a Credit Agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma” or the “Lender”). The Loan Agreement established a fixed rate term loan in the principal amount of $15,000,000 (the “Fixed Rate Term Loan”), a floating rate term loan in the principal amount of $21,000,000 (the “Floating Rate Term Loan”; together with the Fixed Rate Term Loan, collectively, the “Term Loans”), and a revolving promissory note in the principal amount up to $15,000,000 (the “Revolving Loan” or “Line of Credit”).
Previous report
On December 22, 2022, the Company executed the First Amendment to our Loan Agreement with the Lender. This amendment clarified the definition of the Fixed Charge Coverage Ratio to exclude dividends paid prior to November 30, 2022, and placed restrictions on acquisitions and cash dividends.
Previous report
On May 10, 2023, the Company executed the Second Amendment to our Loan Agreement with the Lender. This amendment waived the fixed charge ratio default which occurred on February 28, 2023 and amended the financial covenant to not require the fixed charge ratio to be measured at May 31, 2023. The Second Amendment also added a cumulative maximum level of fiscal year to date inventory purchases through the expiration of the Revolving Loan Agreement, increased the borrowing rate on the Company’s Revolving Loan to Term SOFR Rate plus 3.5%, required certain swap agreements be executed within 30 days of the amendment, reduced the revolving commitment from $15,000,000 to $14,000,000, effective May 10, 2023, and further reduced the revolving commitment to $13,500,000, effective July 15, 2023, among other items.
Previous report
On June 6, 2023, pursuant to its interest rate risk and risk management strategy, the Company entered into a swap transaction (the “Swap Transaction”) with the Lender, which converts a portion of the original $21,000,000 Floating Rate Term Loan from a floating interest rate to a fixed interest rate for the next two years. The Swap Transaction has a notional amount of $18,000,000 through fiscal quarter ending May 31, 2024, and then resets to $13,000,000 through May 30, 2025, while continuing to mirror the amortizing balance of the Floating Rate Term Loan. Under the terms of this agreement, the Company, in effect, has exchanged the floating interest rate of 30-Day Term SOFR Rate at the trade date of June 5, 2023, to a fixed rate of 4.73%. The Swap Transaction commenced on June 7, 2023, with a termination date of May 30, 2025.
Previous report
On August 9, 2023, the Company executed the Third Amendment along with a Revised Credit Agreement (“Revised Loan Agreement”) with the Lender. This amendment extended the Revolving Loan maturity date to January 31, 2024 and introduced a stepdown to the Revolving Commitment from $13,500,000, through August 30, 2023; to $10,500,000 through October 30, 2023; to $9,000,000 through November 29, 2023; to $5,000,000 through December 30, 2023; to $4,500,000 through January 30, 2024; and to $4,000,000 on January 31, 2024. The amendment restricted the Company from entering into any new purchase orders and encouraged the Company to use its best efforts to cancel existing purchase orders. The Third Amendment also increased the borrowing rate on the Revolving Loan to 30-Day Term SOFR Rate + 4.50%. The Revised Loan Agreement was updated for the changes in the Third Amendment as well as removed the fixed charge ratio and the ability for borrowings to be accelerated before the January 31, 2024 Revolving Loan maturity date.
Previous report
Prior to the Third Amendment, executed on August 9, 2023, the Loan Agreement contained provisions that required the Company to maintain a minimum fixed charge ratio. The Company was in violation of the minimum fixed charge ratio covenant as of February 28, 2023, for which the Company obtained a written waiver of compliance from the Lender and was not required to measure the fixed charge ratio as of May 31, 2023. Concurrent with the execution of the Third Amendment to the Loan Agreement, the Loan Agreement was modified to incorporate the changes outlined in the Third Amendment and the fixed charge ratio covenant was removed, as well as the Lender’s right to accelerate the maturities of the Fixed Rate Term Loan and Floating Rate Term Loan due to the fixed charge ratio covenant.
Previous report
On November 30, 2023, the Company executed the Fourth Amendment to the Credit Agreement (“Amendment”) with the Lender. The Amendment, effective December 1, 2023, increased the Revolving Loan commitment to $8,000,000 and extended the maturity date to May 31, 2024. The Amendment also required the Company to list the Hilti Complex for sale, allowed the Company to execute additional purchase orders, subject to the lender’s approval and conditions, not to exceed $2,100,000 between December 1, 2023 and March 31, 2024, among other items.
Previous report
On June 13, 2024, the Company executed the Fifth Amendment to the Existing Credit Agreement with the Lender. The Amendment, effective May 31, 2024, adjusts the maximum availability of the Revolving Loan commitment to $7,000,000 through the maturity date of October 4, 2024. The Amendment also requires an additional decrease in the Revolving Loan to $4,500,000.
Previous report
On October 7, 2024, the Company executed the Sixth Amendment to the Existing Credit Agreement with the Lender. The Amendment, effective October 3, 2024, extended the maturity date to January 4, 2025 and includes required step downs on the Revolving Loan to $5,500,000 by November 30, 2024.
Previous report
On January 13, 2025, the Company executed the Seventh Amendment to the Existing Credit Agreement with the Lender. The Amendment, effective January 4, 2025, adjusted the maximum availability of the Revolving Loan commitment to $4,750,000 through the maturity date of April 4, 2025.
Previous report
On April 16, 2025, the Company executed the Eighth Amendment to the Existing Credit Agreement with the Lender. The Amendment, effective April 4, 2025, increases the Revolving Loan interest rate on the effective date to SOFR + 6.00%, extends the maturity date of the Revolving Loan to July 11, 2025, and includes a required step down on the Revolving Loan to $4,500,000 million by May 31, 2025. The Amendment also redefined the maturity dates of the two term loans to September 19, 2025 (see Note 20 of the notes to the financial statements).
Previous report
Available credit under the current $4,750,000 revolving line of credit with the Company’s Lender was approximately $551,900 at February 28, 2025.
Previous report
Features of the Revised Loan Agreement include:
Previous report
Risks and Uncertainties
Previous report
In accordance with ASC 205-40,Going Concern, the Company has evaluated whether there are conditions and events considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.
Previous report
The short-term duration of the revolving and term loans and uncertainty of the bank’s ongoing support beyond July 11, 2025, 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 reduce debt by selling owned real estate. The proceeds from the sale 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.
Previous report
Share-Based Compensation
Previous report
We account for share-based compensation whereby share-based payment transactions with employees, such as stock options and restricted stock, are measured at estimated fair value at the date of grant. For awards subject to service conditions, compensation expense is recognized over the vesting period on a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche. Forfeitures are recognized when they occur. Any cash dividends declared after the restricted stock award is issued, but before the vesting period is completed, will be reinvested in Company shares at the opening trading price on the dividend payment date. Shares purchased with cash dividends will also retain the same restrictions until the completion of the original vesting period associated with the awarded shares.
Previous report
The restricted share awards under the 2019 Long-Term Incentive Plan (“2019 LTI Plan”) and 2022 Long-Term Incentive Plan (“2022 LTI Plan”) contain both service and performance conditions. The Company recognizes share-based compensation expense only for the portion of the restricted share awards that are considered probable of vesting. Shares are considered granted, and the service inception date begins, when a mutual understanding of the key terms and conditions between the Company and the employee has been established. The fair value of these awards is determined based on the closing price of the shares on the grant date. The probability of restricted share awards granted with future performance conditions is evaluated at each reporting period and compensation expense is adjusted based on the probability assessment.
Previous report
During fiscal years 2025 and 2024, the Company recognized $0.4 million and $0.2 million, respectively, of compensation expense associated with the shares granted.
Previous report
Allowance for Credit Losses
Previous report
We maintain an allowance for estimated losses resulting from the inability of our customers to make required payments and a reserve for vendor share markdowns, when applicable (collectively “credit losses”). An estimate of uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, customers’ financial conditions and current economic trends. Management has estimated and included an allowance for credit losses of $0.1 million for the fiscal years ended February 28, 2025 and February 29, 2024, respectively.
Reworded paragraphs (20)
Previous wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains a discussion of our business, including a general overview of our segments, our results of operations, our liquidity and capital resources, and our quantitative and qualitative disclosures about market risk.
Current wording
This Management’s Discussion and Analysis of Financial Condition and Results of Operations contain a discussion of our business, including a general overview of our segments, our results of operations, our liquidity and capital resources, and our quantitative and qualitative disclosures about market risk.
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 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 our remaining Usborne inventory over a period of 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 2025 and fiscal 2026, the Company did not meet the minimum purchase volumes. 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 our remaining Usborne inventory over a period of twelve months following the termination date.
Previous wording
PaperPie also generates revenues through various fundraiser programs directed toward schools and community organizations.Reach for the Starsis a pledge-based reading incentive program that provides cash and products to the sponsoring organization, and products for the participating children. An additional fundraising program,Cards for a Cause, offers Brand Partners the opportunity to help members of the community by sharing proceeds from the sale of specific items. Organizations do this by selling a variety box of greeting-type cards and donating a portion of the proceeds to help support their related causes.
Current wording
PaperPie also generates revenues through various fundraiser programs directed toward schools and community organizations.Reach for the Starsis a pledge-based reading incentive program that provides cash and products to the sponsoring organization, and products for the participating children. An additional fundraising program,Gathered Goods (2026), which replaced*Cards for a Cause (2025)*offers Brand Partners the opportunity to help members of the community by sharing proceeds from the sale of specific items. Organizations do this by selling a variety package of educational items and donating a portion of the proceeds to help support their related causes.
Previous wording
Publishing’s sales representatives actively target the smaller independent bookstore and gift shop customers. This market has seen continued growth due to a resurgence in the opening of local bookstores, toy stores, and specialty stores across the U.S., coupled with the efforts of both our in-house and outside sales representatives to increase sales to local and independent businesses. Our annual catalogs are mailed out to approximately 4,000 customers and potential customers on a yearly basis. See Publishing Operating Results for discussion of our updated distribution agreement with Usborne.
Current wording
Publishing’s sales representatives actively target the smaller independent bookstore and gift shop customers. This market has seen continued growth due to a resurgence in the opening of local bookstores, toy stores, and specialty stores across the U.S., coupled with the efforts of both our in-house and outside sales representatives to increase sales to local and independent businesses. References to our online Publishing catalog are mailed out to approximately 3,500 customers and potential customers on a yearly basis. See Publishing Operating Results for discussion of our updated distribution agreement with Usborne.
Previous wording
Income taxes decreased $1.8 million, to a tax benefit of $1.6 million for the fiscal year ended February 28, 2025, from a tax expense of $0.2 million for the same period a year ago. This decrease was primarily related to the decrease in taxable income for the current fiscal year compared to the prior fiscal year. The effective tax rate decreased by 2.4%, to 23.2% for fiscal year ending February 28, 2025, as compared to 25.6% for fiscal year ended February 29, 2024, primarily due to sales mix fluctuations between states and credits eligible for research and development expenses. 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 $4.6 million, to a tax expense of $3.0 million for the fiscal year ended February 28, 2026, from a tax benefit of $1.6 million for the same period a year ago, resulting primarily from an increase in other income as result of the sale of the Hilti Complex and a valuation allowance adjustment of $1.5 million in the fourth quarter of fiscal 2026 offsetting the Company’s net deferred tax asset position. This increase was primarily related to the increase in taxable income for the current fiscal year compared to the prior fiscal year. The effective tax rate increased by 33.3%, to 56.5% for fiscal year ending February 28, 2026, as compared to 23.2% for fiscal year ended February 28, 2025, primarily due to the valuation adjustment, the sales mix fluctuations between states, and the credits eligible for research and development expenses. Our tax rates are higher than the federal statutory rate of 21% due to the one-time valuation adjustment and inclusion of state income and franchise taxes.
Previous wording
PaperPie net revenues decreased $15.7 million, or 34.4%, to $29.9 million for the fiscal year ended February 28, 2025, when compared with net revenues of $45.6 million reported for the fiscal year ended February 29, 2024. The average number of active Brand Partners in fiscal year 2025 was 12,300, a decrease of 6,000, or 32.8%, from 18,300 in fiscal year 2024. 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 factors 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 new 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. This rebranding was completed in the fourth quarter of fiscal 2023. The reduced sales and uncertainty resulting from the new Usborne distribution agreement increased Brand Partner turnover and negatively impacted new Brand Partner recruits. We expect this impact on sales to continue as inflationary pressures persist.
Current wording
PaperPie net revenues decreased $10.6 million, or 35.5%, to $19.3 million for the fiscal year ended February 28, 2026, when compared with net revenues of $29.9 million reported for the fiscal year ended February 28, 2025. The average number of active Brand Partners in fiscal year 2026 was 5,800, a decrease of 6,500, or 52.8%, from 12,300 in fiscal year 2025. The Company reports the average number of active Brand Partners as a key indicator for this division. Recruiting and maintaining Brand Partners has been negatively impacted by several factors including inflation, our distribution agreement with Usborne whereby Usborne actively sells their products through discounted retailers in the U.S. market, 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 fiscal 2026 continued to be negatively impacted by continuing inflationary pressures and we expect this to continue into the next fiscal year, 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
PaperPie gross margin decreased $11.5 million, or 38.5%, to $18.4 million for the fiscal year ended February 28, 2025, from $29.9 million reported for fiscal year ended February 29, 2024. Gross margin as a percentage of net revenues decreased 3.7% to 61.8% for fiscal year 2025 when compared to 65.5% for fiscal year 2024. The decrease in gross margin as a percentage of net revenues is primarily attributed to increased discounts and promotions offered in fiscal 2025 to spur sales and turn excess inventory into cash, which was used to pay down payables and bank debts.
Current wording
PaperPie gross margin decreased $6.8 million, or 37.0%, to $11.6 million for the fiscal year ended February 28, 2026, from $18.4 million reported for fiscal year ended February 28, 2025. Gross margin as a percentage of net revenues decreased 1.9% to 59.9% for fiscal year 2026 when compared to 61.8% for fiscal year 2025. 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 PaperPie operating expenses decreased $9.3 million, or 36.0%, to $16.5 million during the fiscal year ended February 28, 2025, when compared with $25.8 million reported for the fiscal year ended February 29, 2024. Operating and selling expenses decreased $2.6 million, to $4.6 million for the fiscal year ended February 28, 2025, from $7.2 million reported in the same period a year ago. These decreased expenses were due to a $1.7 million decrease in shipping costs associated with the decrease in volume of orders shipped, and a decrease of $0.8 million in accruals for Brand Partner incentive trip expenses, as well as a $0.1 million decrease in various other expenses. Sales commissions decreased $5.9 million, to $10.0 million during the fiscal year ended February 28, 2025, when compared to $15.9 million reported in the same period a year ago primarily due to the decrease in net revenues. General and administrative expenses decreased $0.8 million, to $1.9 million during the fiscal year ended February 28, 2025, when compared with $2.7 million reported for the fiscal year ended February 29, 2024. This decrease was due to a $0.4 million decrease in credit card transaction fees and $0.2 million decrease in payroll expenses, both associated with decreased sales volumes, as well as $0.2 million decrease in various other expenses.
Current wording
Total PaperPie operating expenses decreased $5.9 million, or 35.8%, to $10.6 million during the fiscal year ended February 28, 2026, when compared with $16.5 million reported for the fiscal year ended February 28, 2025. Operating and selling expenses decreased $2.0 million, to $2.6 million for the fiscal year ended February 28, 2026, from $4.6 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, totaling approximately $1.4 million, as well as a $0.6 million decrease in brand partner incentive trip and meeting expenses as fewer brand partners participated in various meetings and earn the trip this year. Sales commissions decreased $3.7 million to $6.3 million during the fiscal year ended February 28, 2026, when compared to $10.0 million reported in the same period a year ago, primarily due to the decrease in net revenues, which resulted in a decrease of commissions of $3.6 million, as well as a decrease in sales bonuses of $0.1 million. General and administrative expenses decreased $0.2 million, to $1.7 million during the fiscal year ended February 28, 2026, when compared with $1.9 million reported for the fiscal year ended February 28, 2025, due primarily to $0.3 million of decreased credit card transaction fees associated with decreased sales volumes offset by a $0.1 million increase in other various general and administrative expenses.
Previous wording
Operating income of our PaperPie division decreased $2.1 million, or 51.2%, to $2.0 million for the fiscal year ended February 28, 2025, as compared to $4.1 million reported for fiscal year ended February 29, 2024. Operating income for the PaperPie division as a percentage of net revenues for the year ended February 28, 2025 was 6.5%, compared to 9.1% for the year ended February 29, 2024, a decrease of 2.6%. Operating income as a percentage of net revenues changed from the prior year primarily due to the decrease in net revenues due primarily from the reduced number of active brand partners and higher discounts offered to spur sales.
Current wording
Operating income of our PaperPie division decreased $1.1 million, or 55.0%, to $0.9 million for the fiscal year ended February 28, 2026, as compared to $2.0 million reported for fiscal year ended February 28, 2025. Operating income for the PaperPie division as a percentage of net revenues for the year ended February 28, 2026 was 4.9%, compared to 6.5% for the year ended February 28, 2025, a decrease of 1.6%. 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 were both offset by the decrease in operating expenses.
Previous wording
Gross margin decreased $0.5 million, or 16.1%, to $2.6 million for fiscal year ended February 28, 2025, from $3.1 million reported for fiscal year ended February 29, 2024. Gross margin as a percentage of net revenues increased 2.0%, to 59.5% for fiscal year 2025, compared to 57.5% reported in the same period a year ago mainly due to product mix change. During fiscal 2025, sales of SmartLab Toys increased, which has a lower cost of goods sold than the Usborne product line that was discontinued in fiscal 2024.
Current wording
Gross margin decreased $0.6 million, or 23.1%, to $2.0 million for fiscal year ended February 28, 2026, from $2.6 million reported for fiscal year ended February 28, 2025. Gross margin as a percentage of net revenues decreased 2.8%, to 56.7% for fiscal year 2026, compared to 59.5% reported in the same period a year ago mainly due to product mix change and 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
Operating expenses decreased $0.5 million, or 26.3%, to $1.4 million for fiscal year ended February 28, 2025, from $1.9 million reported for fiscal year ended February 29, 2024. The decrease in operating expenses resulted from the decrease in sales commissions of $0.1 million for EDC Publishing due to lower net revenues and the restructuring of our in-house sales department, a decrease in freight expense of $0.1 million associated with lower sales, and a decrease of $0.3 million in payroll expenses.
Current wording
Total operating expenses of the Publishing segment decreased $0.1 million, or 7.1%, to $1.3 million for fiscal year ended February 28, 2026, from $1.4 million reported for fiscal year ended February 28, 2025. The decrease in operating expenses resulted from the decrease in freight expense of $0.1 million associated with lower sales.
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 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, and to pay down the revolving line of credit and portions of the 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. 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 fiscal year 2025, our revolving bank credit facility loan balance was $4.2 million with $0.6 million of borrowing availability.
Current wording
During the past two years we have offered higher product discounts to spur sales and experienced increased interest rates on borrowings due to restrictions imposed by our lender. Prior to this period EDC had 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 the real estate it owned, the Hilti Complex, 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 fiscal year 2025, we experienced positive cash flows from operations of $3,211,700. These cash flows resulted from:
Current wording
During fiscal year 2026, we experienced positive cash flows from operations of $2,005,300. These cash flows resulted from:
Previous wording
Cash used in investing activities was $429,600 for capital expenditures, consisting of $396,200 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 $43,200 in building improvements, offset by $9,800 from the sale of machinery and equipment.
Current wording
Cash provided by investing activities totaled $29,389,800, consisting of $29,932,600 in proceeds from the sale of the Hilti Complex, along with a few other assets, offset by $378,200 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
The Company continues to expect the cash generated from operations, specifically from the reduction of excess inventory, and cash available through our line of credit with our Lender, will provide us with the liquidity we need to support ongoing operations. Cash generated from operations will be used to pay down existing debts with our bank and to purchase replacement inventory and new inventory in order to improve our product offerings.
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, subsequent to the fiscal year end, we obtained a $2,000,000 line of credit from a new lender 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 Company experiences increased sales in the Fall season along with increased sales during the Easter holiday season. Historically, we have experienced an increase in inventory during the Summer in anticipation for the Fall increase in sales. We do not expect inventory to increase in fiscal year 2026 as we continue to sell-down excess inventory.
Current wording
The Company experiences increased sales in the Fall season along with increased sales during the Annual PaperPie Day sale annually on 3/14 as well as the Easter holiday season. Historically, we have experienced an increase in inventory during the Summer in anticipation for the Fall increase in sales.
Previous wording
Estimated allowances for sales returns are recorded as sales are recognized. Management uses a moving average calculation to estimate the allowance for sales returns. We are not responsible for a product damaged in transit. Damaged returns are primarily received from the retail customers of our Publishing division. This damage occurs in the stores, not in shipping to the stores, and we typically do not offer credit for damaged returns. It is an industry practice to accept non-damaged returns from retail customers. Management has estimated and included a reserve for sales returns of $0.2 million for the fiscal years ended February 28, 2025 and February 29, 2024.
Current wording
Estimated allowances for sales returns are recorded as sales are recognized. Management uses a moving average calculation to estimate the allowance for sales returns. We are not responsible for product getting damaged in transit. Damaged returns are primarily received from the retail customers of our Publishing division. This damage occurs in the stores, not in shipping to the stores, and we typically do not offer credit for damaged returns. It is an industry practice to accept non-damaged returns from retail customers. Management has estimated and included a reserve for sales returns of $0.2 million for the fiscal years ended February 28, 2026 and February 28, 2025.
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 $16.3 million and $12.3 million at February 28, 2025 and February 29, 2024, respectively. Noncurrent inventory valuation allowances were $0.7 million at February 28, 2025 and $0.6 million at February 29, 2024.
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 sales. 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 $21.1 million and $16.3 million at February 28, 2026 and February 28, 2025, respectively. Noncurrent inventory valuation allowances were $0.8 million at February 28, 2026 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 our 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 17.3% of our active Brand Partners maintained consignment inventory at the end of fiscal year 2025. 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 and $1.4 million at February 28, 2025 and February 29, 2024, 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 21.6% of our active Brand Partners maintained consignment inventory at the end 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 $1.1 million and $1.3 million at February 28, 2026 and February 28, 2025, respectively.
Previous wording
Inventories are presented net of a valuation allowance, which includes reserves for inventory obsolescence and reserves for consigned inventory that is not expected to be sold or returned to the Company. Management estimates the inventory obsolescence allowance for both current and noncurrent inventory, which is based on management’s identification of slow-moving inventory. Management has estimated a valuation allowance for both current and noncurrent inventory, including the reserve for consigned inventory, of $1.2 million at February 28, 2025, and $1.0 million at February 29, 2024.
Current wording
Inventories are presented net of a valuation allowance, which includes reserves for inventory obsolescence and reserves for consigned inventory that is not expected to be sold or returned to the Company. Management estimates the inventory obsolescence allowance for both current and noncurrent inventory, which is based on management’s identification of slow-moving inventory. Management has estimated a valuation allowance for both current and noncurrent inventory, including the reserve for consigned inventory, of $1.2 million at both February 28, 2026 and February 28, 2025.