EDUCATIONAL DEVELOPMENT CORP
For the period ended May 31, 2026. Filed Jul 9, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
May 31, 2026 · Filed Jul 9, 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-Q
Period ended 2025-11-30; filed 2026-01-13.
0001185185-26-000136
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-05-31; filed 2026-07-09.
0001185185-26-002870
Item 2. 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 74 previous paragraphs and 51 current paragraphs.
28 unchanged; 22 reworded; 1 added; 21 removed; 3 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 8 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 (1)
Current report
Interest expense decreased $0.5 million, or 100.0%, to $0.0 million for the three months ended May 31, 2026, when compared to $0.5 million for the same quarterly period a year ago, due to reduced borrowings of debt, period over period.
Removed paragraphs (21)
Previous report
Interest expense decreased $0.2 million, or 33.3%, to $0.4 million for the three months ended November 30, 2025, when compared to $0.6 million for the same quarterly period a year ago, 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.
Previous report
Other income increased $11.8 million to $12.5 million for the three months ended November 30, 2025, when compared to $0.7 million for the same quarterly period a year ago resulting from the gain of $12.2 million from the sale of the Hilti Complex, offset by a $0.1 million decrease in rental income from the sale of the Hilti Complex and a $0.3 million loss due to the impairment of the line equipment in assets held for sale.
Previous report
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 report
Interest expensedecreased $0.2 million, or 11.8%, to $1.5 million for the nine months ended November 30, 2025, when compared to $1.7 million for the same quarterly period a year ago, due to the sale of the Hilti Complex on October 27, 2025 and resulting debt payoff.
Previous report
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 report
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 report
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 report
PaperPie Operating Results for the Nine Months Ended November 30, 2025
Previous report
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 report
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 report
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 report
Publishing Operating Results for the Nine Months Ended November 30, 2025
Previous report
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 report
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 report
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 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.
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 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 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 November 30, 2025 and February 28, 2025, respectively.
Reworded paragraphs (22)
Previous 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.
Current wording
Total operating expenses not associated with a reporting segment decreased $0.5 million, or 22.7%, to $1.7 million for the three-month period ended May 31, 2026, when compared to $2.2 million for the same quarterly period a year ago. Operating expenses decreased primarily as a result of a $0.2 million decrease in labor expenses and a $0.1 million decrease in freight expense, due primarily to a lower number of outbound shipments, and a $0.1 million decrease in outside services expense as well as a $0.1 million decrease in various other general and administrative expenses.
Previous 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.
Current wording
Income taxes increased $0.4 million, or 100.0%, to $0.0 million expense for the three months ended May 31, 2026, from a tax benefit of $0.4 million for the same quarterly period a year ago, resulting primarily from a decrease in gross sales along with tax valuation allowance offsetting our net operating loss benefit due to the uncertainty that our deferred tax asset will be realizable. Our effective tax rate decreased to (1.2)% for the quarter ended May 31, 2026, from 25.8% for the quarter ended May 31, 2025 due primarily to sales mix fluctuations between states and the tax valuation allowance booked during the quarter. Our tax rates are lower than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes offset by the tax valuation allowance.
Previous wording
The following table summarizes the operating results of the PaperPie segment:
Current wording
The following table summarizes the operating results of the PaperPie segment for the three months ended May 31, 2026 and 2025:
Previous wording
PaperPie Operating Results for the Three and Nine Months Ended November 30, 2025
Current wording
PaperPie Operating Results for the Three Months Ended May 31, 2026
Previous 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.
Current wording
PaperPie net revenues decreased $1.9 million, or 31.1%, to $4.2 million during the three months ended May 31, 2026, when compared to $6.1 million during the same period a year ago. The average number of active brand partners in the first quarter of fiscal 2027 was 5,300, a decrease of 2,400, or 31.2%, from 7,700 average active brand partners selling in the first quarter of fiscal 2026. 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 and our distribution agreement with Usborne whereby Usborne actively sells their products through discounted retailers in the U.S. market. 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
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.
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 in the first three quarters of fiscal year 2026. Following the sale of the Hilti Complex in fiscal 2026 and corresponding payoff of the revolver and term loans with our bank which removed our purchasing restrictions, we have begun a conservative plan to place reorders and purchase new titles. The Company is 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
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.
Current wording
PaperPie gross margin decreased $1.1 million, or 30.6%, to $2.5 million during the three months ended May 31, 2026, when compared to $3.6 million during the same period a year ago. Gross margin as a percentage of net revenues for the three months ended May 31, 2026 increased to 59.7%, compared to 59.3% the same period a year ago. The increase in gross margin as a percentage of net revenues was primarily attributed to product mix.
Previous 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.
Current wording
Total PaperPie operating expenses decreased $1.0 million, or 32.3%, to $2.1 million during the three-month period ended May 31, 2026, when compared to $3.1 million reported in the same quarter a year ago. Operating and selling expenses decreased $0.2 million, or 28.6%, to $0.5 million during the three-month period ended May 31, 2026, when compared to $0.7 million reported in the same quarter a year ago. These decreased expenses were due to a $0.1 million decrease in shipping costs associated with the decrease in volume of orders shipped and a decrease of $0.1 million in accruals for Brand Partner incentive trip expenses. Sales commissions decreased $0.7 million, or 35.0%, to $1.3 million during the three-month period ended May 31, 2026, when compared to $2.0 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 25.0%, to $0.3 million during the three months ended May 31, 2026, when compared to $0.4 million during the same period a year ago. This decrease was due to a $0.1 million decrease in depreciation expense associated with the discontinued operation of line equipment currently in assets held for sale.
Previous 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.
Current wording
Operating income for the PaperPie segment decreased $0.1 million, or 20.0% to $0.4 million during the three months ended May 31, 2026, when compared to $0.5 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 May 31, 2026 was 9.1%, compared to 7.6% for the year ended May 31, 2025, an increase of 1.5%. Operating income as a percentage of net revenues changed from the prior year primarily due to both the decrease in operating and selling expenses and general and administrative expenses compared to last fiscal year.
Previous wording
The following table summarizes the operating results of the Publishing segment:
Current wording
The following table summarizes the operating results of the Publishing segment for the three months ended May 31, 2026 and 2025:
Previous wording
Publishing Operating Results for the Three and Nine Months Ended November 30, 2025
Current wording
Publishing Operating Results for the Three Months Ended May 31, 2026
Previous 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.
Current wording
Our Publishing division’s net revenues decreased $0.4 million, or 40.0%, to $0.6 million during the three-month period ended May 31, 2026, from $1.0 million reported in the same period a year ago. The change in net revenues was primarily from an overall sales volume decrease that was driven by the decrease in new titles available to present to our retail customers due to the purchasing restrictions in fiscal 2026 imposed by our lender.
Previous 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.
Current wording
Gross margin decreased $0.2 million, or 40.0%, to $0.3 million during the three-month period ended May 31, 2026, from $0.5 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 increased to 56.7% during the three-month period ended May 31, 2026, from 52.2% 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 first quarter of last year to spur sales.
Previous 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.
Current wording
Total operating expenses of the Publishing segment decreased $0.1 million, or 33.4%, to $0.2 million, from $0.3 million, during the three-month periods ended May 31, 2026 and 2025, respectively. This change was primarily due to a $0.1 million decrease in different general and administrative expenses associated with the decrease in volume of orders shipped.
Previous 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.
Current wording
Operating income of the Publishing division decreased $0.1 million, or 50.0%, to $0.1 from $0.2 million for the three-month periods ending May 31, 2026 and 2025, respectively. Operating income for the Publishing division as a percentage of net revenues for the year ended May 31, 2026 was 15.7%, compared to 20.0% for the year ended May 31, 2025, a decrease of 4.3%. Operating income as a percentage of net revenues changed from the prior year primarily due to the decrease in operating and selling expenses compared to last fiscal year.
Previous 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:
Current wording
During the first three months of fiscal year 2027, we experienced positive cash inflows from operations of $564,300. These cash inflows resulted from:
Previous 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.
Current wording
Cash used in investing activities was $95,200 for capital expenditures, consisting of $96,000 in upgrades to our proprietary systems that our PaperPie Brand Partners use to monitor their business and place customer orders offset by $800 from the sale of machinery and equipment.
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 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.
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 have obtained a $2 million short-term loan 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
We have both lessee and lessor arrangements. Our lessee arrangements include seven rental agreements where we have the exclusive use of dedicated office space in San Diego, California, Ogden, Utah, Seattle, Washington, 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 wording
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.
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 $17.5 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.
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 $21.0 million and $21.1 million at May 31, 2026 and February 28, 2026, respectively. Noncurrent inventory valuation allowances were $0.9 million at May 31, 2026 and $0.8 million at February 28, 2026.
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 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.
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 19.5% of our active Brand Partners maintained consignment inventory at the end of the first quarter of fiscal year 2027. 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 $1.0 million and $1.1 million at May 31, 2026 and February 28, 2026, 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 $1.3 million and $1.2 million at November 30, 2025 and February 28, 2025.
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 May 31, 2026 and February 28, 2026.
Rearranged previous paragraphs (3)
Previous report — wording carried elsewhere
Non-Segment Operating Results for the Nine Months Ended November 30, 2025
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
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.