{"url_path":"/sec/educ/10-k/2026/item-16","section_key":"item-16","section_title":"Item 16 FORM 10-K SUMMARY","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-19","source_url":"https://www.sec.gov/Archives/edgar/data/31667/0001185185-26-001927-index.html","accession_number":"0001185185-26-001927","cik":"0000031667","ticker":"EDUC","issuer_name":"EDUCATIONAL DEVELOPMENT CORP","edgar_url":"https://www.sec.gov/Archives/edgar/data/31667/0001185185-26-001927-index.html","primary_entity_key":"0000031667","primary_entity_name":"EDUCATIONAL DEVELOPMENT CORP"},"word_count":11997,"has_tables":true,"body_markdown":"Item 16.  FORM 10-K SUMMARY\n\n \n\nNot applicable\n\n \n\n22\n\n[Table of Contents](#TableOfContents)\n\n \n\nSIGNATURES\n\n \n\nPursuant to the requirements\nof Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the\nundersigned, thereunto duly authorized.\n\n \n\n**EDUCATIONAL DEVELOPMENT CORPORATION**\n\n \n\nDate: \nMay 19, 2026\nBy\n/s/ Craig M. White\n\n \n \nCraig M. White\n\n \n \nPresident, Chief Executive Officer, and\n\nChairman of the Board\n\n \n \n(Principal Executive Officer)\n\n \n \n \n\nDate:\nMay 19, 2026\nBy\n/s/ Dan E. O’Keefe\n\n \n \nDan E. O’Keefe\n\n \n \nChief Financial Officer and\n\nCorporate Secretary\n\n \n \n(Principal Financial and Accounting Officer)\n\n \n\nPursuant to the requirements\nof the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in\nthe capacities and on the date indicated.\n\n \n\nDate: \nMay 19, 2026\n/s/ Craig M. White\n\n \nCraig M. White, Director\n\n \nPresident, Chief Executive Officer, and\n\nChairman of the Board\n\n \n(Principal Executive Officer)\n\n \n \n\n \nMay 19, 2026\n/s/ Dr. Kara Gae Neal\n\n \nDr. Kara Gae Neal,\n\n \nDirector\n\n \n \n\n \nMay 19, 2026\n/s/ Bradley V. Stoots\n\n \nBradley V. Stoots,\n\n \nDirector\n\n \n \n\n \nMay 19, 2026\n/s/ Dr. Amy N. Emmerson\n\n \nDr. Amy N. Emmerson,\n\n \nDirector\n\n \n \n\n \nMay 19, 2026\n/s/ Steven Hooser\n\n \nSteven Hooser\n\n \nDirector\n\n \n \n\n \nMay 19, 2026\n/s/ Dan E. O’Keefe\n\n \nDan E. O’Keefe\n\n \nChief Financial Officer and\n\nCorporate Secretary\n\n \n(Principal Financial and Accounting Officer)\n\n \n\n23\n\n[Table of Contents](#TableOfContents)\n\n \n\n**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING\nFIRM**\n\n \n\nTo the Shareholders and the Board of Directors\nof Educational Development Corporation\n\n \n\n**Opinion on the Financial Statements**\n\n \n\nWe have audited the accompanying balance sheets\nof Educational Development Corporation (the Company) as of February 28, 2026 and 2025, the related statements of operations, comprehensive\nincome (loss), shareholders’ equity and cash flows for the years then ended, and the related notes to the financial statements (collectively,\nthe financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of\nthe Company as of February 28, 2026 and 2025, and the results of its operations and its cash flows for the years then ended, in conformity\nwith accounting principles generally accepted in the United States of America.\n\n \n\n**Basis for Opinion**\n\n \n\nThese financial statements are the responsibility\nof the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our\naudits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are\nrequired to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations\nof the Securities and Exchange Commission and the PCAOB.\n\n \n\nWe conducted our audits in accordance with the\nstandards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial\nstatements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged\nto perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding\nof internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s\ninternal control over financial reporting. Accordingly, we express no such opinion.\n\n \n\nOur audits included performing procedures to assess\nthe risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond\nto those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.\nOur audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating\nthe overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.\n\n \n\n**Critical Audit Matters**\n\n \n\nCritical audit matters are matters arising from\nthe current period audit of the financial statements that were communicated or required to be communicated to the audit committee and\nthat: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,\nsubjective or complex judgments. We determined that there are no critical audit matters.\n\n \n\n/s/ HOGANTAYLOR LLP\n\n \n\nWe have served as the Company’s auditor\nsince 2005.\n\n \n\nTulsa, Oklahoma\n\nMay 19, 2026\n\n \n\n24\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL DEVELOPMENT CORPORATION\nBALANCE SHEETS**\n\n**AS OF FEBRUARY 28,**\n\n** **\n\n  \n2026  \n2025 \n\nASSETS \n   \n  \n\nCURRENT ASSETS: \n   \n  \n\nCash and cash equivalents \n$1,118,400  \n$428,400 \n\nRestricted cash \n 222,000  \n 548,100 \n\nAccounts receivable, less allowance for credit losses of $109,600 (2026) and $112,300 (2025) \n 861,300  \n 2,126,000 \n\nInventories - net \n 17,412,200  \n 29,099,600 \n\nPrepaid expenses and other assets \n 374,600  \n 768,100 \n\nAssets held for sale \n 563,600  \n 19,277,000 \n\nTotal current assets \n 20,552,100  \n 52,247,200 \n\n  \n    \n   \n\nINVENTORIES - net \n 20,251,700  \n 15,592,500 \n\nPROPERTY, PLANT AND EQUIPMENT - net \n 6,291,200  \n 6,398,700 \n\nDEFERRED INCOME TAX ASSET - net \n -  \n 2,536,100 \n\nOPERATING LEASE RIGHT-OF-USE ASSETS \n 6,716,100  \n 1,108,100 \n\nOTHER ASSETS \n 500,500  \n 431,700 \n\nTOTAL ASSETS \n$54,311,600  \n$78,314,300 \n\n  \n    \n   \n\nLIABILITIES AND SHAREHOLDERS’ EQUITY \n    \n   \n\nCURRENT LIABILITIES: \n    \n   \n\nAccounts payable \n$1,686,400  \n$1,847,400 \n\nLine of credit \n -  \n 4,198,100 \n\nDeferred revenues \n 320,500  \n 491,800 \n\nOperating lease liabilities, current \n 1,371,700  \n 697,000 \n\nCurrent maturities of long-term debt \n -  \n 26,685,500 \n\nAccrued salaries and commissions \n 218,600  \n 313,700 \n\nIncome taxes payable \n 1,146,800  \n 460,900 \n\nOther current liabilities \n 1,427,500  \n 2,528,300 \n\nTotal current liabilities \n 6,171,500  \n 37,222,700 \n\n  \n    \n   \n\nOPERATING LEASE LIABILITIES, noncurrent \n 5,344,400  \n 411,100 \n\nOTHER LONG-TERM LIABILITIES \n 5,200  \n 112,900 \n\nTotal liabilities \n 11,521,100  \n 37,746,700 \n\n  \n    \n   \n\nSHAREHOLDERS’ EQUITY: \n    \n   \n\nCommon stock, $0.20 par value; Authorized 16,000,000 shares; Issued 12,702,080 shares; Outstanding 8,511,364 (2026) and 8,583,201 (2025) shares \n 2,540,400  \n 2,540,400 \n\nCapital in excess of par value \n 13,769,400  \n 13,800,000 \n\nRetained earnings \n 39,628,200  \n 37,303,000 \n\nAccumulated other comprehensive loss \n -  \n (15,400)\n\n  \n 55,938,000  \n 53,628,000 \n\nLess treasury stock, at cost \n (13,147,500) \n (13,060,400)\n\nTotal shareholders’ equity \n 42,790,500  \n 40,567,600 \n\nTOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY \n$54,311,600  \n$78,314,300 \n\n \n\nSee notes to financial statements.\n\n \n\n25\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL DEVELOPMENT CORPORATION\nSTATEMENTS OF OPERATIONS**\n\n**FOR\nTHE YEARS ENDED FEBRUARY 28,**\n\n \n\n  \n2026  \n2025 \n\nPRODUCT REVENUES, net of discounts and allowances \n$21,814,500  \n$32,547,700 \n\nTransportation revenue \n 1,099,100  \n 1,643,300 \n\nNET REVENUES \n 22,913,600  \n 34,191,000 \n\nCOST OF GOODS SOLD \n 9,309,300  \n 13,163,300 \n\nGross margin \n 13,604,300  \n 21,027,700 \n\n  \n    \n   \n\nOPERATING EXPENSES: \n    \n   \n\nOperating and selling \n 3,462,400  \n 5,751,600 \n\nSales commissions \n 6,399,200  \n 10,096,600 \n\nGeneral and administrative \n 10,928,100  \n 11,955,100 \n\nTotal operating expenses \n 20,789,700  \n 27,803,300 \n\n  \n    \n   \n\nINTEREST EXPENSE \n 1,478,900  \n 2,188,400 \n\nOTHER INCOME  \n    \n   \n\nGain from sale of assets - net \n (12,190,900) \n - \n\nOther - net \n (1,820,200) \n (2,109,000)\n\nTotal other income \n (14,011,100) \n (2,109,000)\n\n  \n    \n   \n\nEARNINGS (LOSS) BEFORE INCOME TAXES \n 5,346,800  \n (6,855,000)\n\n  \n    \n   \n\nINCOME TAX EXPENSE (BENEFIT) \n 3,021,600  \n (1,591,400)\n\nNET EARNINGS (LOSS) \n$2,325,200  \n$(5,263,600)\n\n  \n    \n   \n\nBASIC AND DILUTED EARNINGS (LOSS) PER SHARE: \n    \n   \n\nBasic \n$0.27  \n$(0.63)\n\nDiluted \n$0.27  \n$(0.63)\n\n  \n    \n   \n\nWEIGHTED AVERAGE NUMBER OF COMMON AND EQUIVALENT SHARES OUTSTANDING: \n    \n   \n\nBasic \n 8,563,491  \n 8,348,971 \n\nDiluted \n 8,563,491  \n 8,348,971 \n\nDividends per share \n$-  \n$- \n\n \n\nSee notes to financial statements.\n\n \n\n26\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL** **DEVELOPMENT** **CORPORATION**\n\n**STATEMENTS** **OF** **COMPREHENSIVE\nINCOME (LOSS)**\n\n**FOR\nTHE YEARS ENDED FEBRUARY 28,**\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nNet earnings (loss) \n$2,325,200  \n$(5,263,600)\n\nOther comprehensive income: \n    \n   \n\nUnrealized loss on interest rate exchange agreement \n -  \n (39,800)\n\nComprehensive income (loss) \n$2,325,200  \n$(5,303,400)\n\n \n\nSee\nnotes to financial statements.\n\n \n\n27\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL\nDEVELOPMENT CORPORATION**\n\n**STATEMENTS\nOF SHAREHOLDERS**’ **EQUITY**\n\n**AS\nOF FEBRUARY 28 (29),**\n\n \n\n  \nCommon Stock\n(par value $0.20 per\nshare)  \n   \n   \nAccumulated  \nTreasury Stock  \n  \n\n  \nNumber of\nShares\nIssued  \nAmount  \nCapital in\nExcess of\nPar Value  \nRetained\nEarnings  \nOther\nComprehensive\nIncome (Loss)  \nNumber of\nShares  \nAmount  \nShareholders’\nEquity \n\nBALANCE - February 29, 2024 \n 12,702,080  \n$2,540,400  \n$13,405,400  \n$42,566,600  \n$24,400  \n 4,126,992  \n$(13,086,100) \n$45,450,700 \n\nPurchases of treasury stock \n -  \n -  \n 600  \n -  \n -  \n 400  \n (1,300) \n (700)\n\nSales of treasury stock \n -  \n -  \n (9,300) \n -  \n -  \n (8,513) \n 27,000  \n 17,700 \n\nChange in fair value of interest rate exchange agreement \n -  \n -  \n -  \n -  \n (39,800) \n -  \n -  \n (39,800)\n\nShare-based compensation expense – net \n -  \n -  \n 403,300  \n -  \n -  \n -  \n -  \n 403,300 \n\nNet loss \n -  \n -  \n -  \n (5,263,600) \n -  \n -  \n -  \n (5,263,600)\n\nBALANCE - February 28, 2025 \n 12,702,080  \n$2,540,400  \n$13,800,000  \n$37,303,000  \n$(15,400) \n 4,118,879  \n$(13,060,400) \n$40,567,600 \n\nPurchases of treasury stock \n -  \n -  \n -  \n -  \n -  \n 87,837  \n (137,900) \n (137,900)\n\nSales of treasury stock \n -  \n -  \n (30,600) \n -  \n -  \n (16,000) \n 50,800  \n 20,200 \n\nChange in fair value of interest rate exchange agreement \n -  \n -  \n -  \n -  \n 15,400  \n -  \n -  \n 15,400 \n\nNet earnings \n -  \n -  \n -  \n 2,325,200  \n -  \n -  \n -  \n 2,325,200 \n\nBALANCE - February 28, 2026 \n 12,702,080  \n$2,540,400  \n$13,769,400  \n$39,628,200  \n -  \n 4,190,716  \n$(13,147,500) \n$42,790,500 \n\n \n\nSee\nnotes to financial statements.\n\n \n\n28\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL\nDEVELOPMENT CORPORATION**\n\n**STATEMENTS\nOF CASH FLOWS**\n\n**FOR\nTHE YEARS ENDED FEBRUARY 28,**\n\n \n\n  \n2026  \n2025 \n\nCASH FLOWS FROM OPERATING ACTIVITIES: \n   \n  \n\nNet earnings (loss) \n$2,325,200  \n$(5,263,600)\n\nAdjustments to reconcile net earnings (loss) to net cash provided by operating activities: \n    \n   \n\nDepreciation and amortization \n 1,391,700  \n 1,724,900 \n\nDeferred income taxes \n 2,536,100  \n (1,129,600)\n\nProvision for credit losses \n 36,000  \n 48,000 \n\nProvision for inventory valuation allowance \n 144,000  \n 144,000 \n\nShare-based compensation expense - net \n -  \n 403,300 \n\nNet loss (gain) on sale of assets \n (12,190,900) \n 3,300 \n\nImpairment loss on assets \n 287,100  \n 318,100 \n\nChanges in assets and liabilities: \n    \n   \n\nAccounts receivable \n 1,228,700  \n (237,100)\n\nInventories - net \n 6,884,200  \n 10,754,100 \n\nPrepaid expenses and other assets \n 297,800  \n (168,300)\n\nAccounts payable \n (161,000) \n (2,062,800)\n\nAccrued salaries and commissions and other liabilities \n (1,288,200) \n (918,400)\n\nDeferred revenues \n (171,300) \n (91,700)\n\nIncome taxes payable/receivable \n 685,900  \n (312,500)\n\nTotal adjustments \n (319,900) \n 8,475,300 \n\nNet cash provided by operating activities \n 2,005,300  \n 3,211,700 \n\nCASH FLOWS FROM INVESTING ACTIVITIES: \n    \n   \n\nPurchases of property, plant and equipment \n (542,800) \n (439,400)\n\nProceeds from sale of assets \n 29,932,600  \n 9,800 \n\nNet cash provided by (used in) investing activities \n 29,389,800  \n (429,600)\n\nCASH FLOWS FROM FINANCING ACTIVITIES: \n    \n   \n\nPayments on term debt \n (26,715,400) \n (1,800,000)\n\nCash paid to acquire treasury stock \n (137,900) \n (700)\n\nSales of treasury stock \n 20,200  \n 17,700 \n\nNet payments under line of credit \n (4,198,100) \n (1,300,000)\n\nNet cash used in financing activities \n (31,031,200) \n (3,083,000)\n\nNET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH \n 363,900  \n (300,900)\n\nCASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD \n 976,500  \n 1,277,400 \n\nCASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD \n$1,340,400  \n$976,500 \n\n  \n    \n   \n\nSUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: \n    \n   \n\nCash paid for interest \n$1,337,500  \n$2,156,300 \n\nCash (received)/paid for income taxes - net of refunds \n$(200,500) \n$(274,300)\n\n  \n    \n   \n\nSUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES: \n    \n   \n\nFair value of the interest rate exchange agreement \n$-  \n$(39,800)\n\n  \n    \n   \n\nNONCASH TRANSACTIONS \n    \n   \n\nLeased assets obtained in exchange for operating lease liabilities \n$6,338,900  \n$282,800 \n\nInventory donations \n$291,700  \n - \n\n \n\nSee\nnotes to financial statements.\n\n \n\n29\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EDUCATIONAL\nDEVELOPMENT CORPORATION**\n\n**NOTES\nTO FINANCIAL STATEMENTS**\n\n**YEARS\nENDED FEBRUARY 28, 2026 AND FEBRUARY 28, 2025**\n\n \n\n**1.\nDESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**\n\n \n\n**Nature\nof Business**—Educational Development Corporation (“we,” “our,” “us,” or “the Company”)\ndistributes books and educational products and publications through our PaperPie and EDC Publishing (“Publishing”) divisions\nto individual consumers, book, toy and gift stores, libraries and home educators located throughout the United States (“U.S.”).\nWe are the owner and exclusive publisher of Kane Miller children’s books; Learning Wrap-Ups, maker of educational manipulatives;\nand SmartLab Toys, maker of STEAM-based toys and games. We are also the exclusive United States Multi-Level Marketing (“MLM”)\ndistributor of Usborne Publishing Limited (“Usborne”) children’s books.\n\n \n\n**Estimates**—Our\nfinancial statements were prepared in conformity with accounting principles generally accepted in the United States of America, which\nrequires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Actual results\ncould differ from these estimates.\n\n \n\n**Liquidity**—In\naccordance with ASC 205-40, Going Concern, the Company has evaluated whether there are conditions and events considered in the aggregate\nthat raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the\nfinancial statements are issued.\n\n \n\nDetermining\nthe extent to which conditions or events raises substantial doubt about our ability to continue as a going concern and the extent to\nwhich mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by us. Our significant\nestimates related to this analysis may include identifying business factors such as changes in our Brand Partners, sales growth and profitability\nused in the forecasted financial results and liquidity. Further, we make assumptions about the probability that management’s plans\nwill be effectively implemented and alleviate substantial doubt and our ability to continue as a going concern. We believe that the estimated\nvalues used in our going concern analysis are based on reasonable assumptions. However, such assumptions are inherently uncertain, and\nactual results could differ materially from those estimates.\n\n \n\nIn prior periods, we identified\nconditions and events that raised substantial doubt about the Company’s ability to continue as a going concern within one year\nafter the date that the financial statements were issued. During the third quarter of fiscal 2026, the Company completed the planned\nsale of the Hilti Complex and paid off the Line of Credit and Term Loans with the Company’s bank, which was a key step in management’s\nplans for returning to profitability. Paying off the bank debts and eliminating the bank-imposed restrictions allows the Company to begin\na conservative plan to re-order some key out of stock products along with introducing a limited number of new titles which are expected\nto energize our Brand Partners and provide our retail customers with new offerings.. In addition, subsequent to year end, the Company\nobtained a $2.0 million line of credit with a local bank to cover any short-term borrowing needs. Based on the elimination of the bank\ndebt, the Company’s current cash and other resources, and management’s operating plans, we have concluded that the Company\nhas sufficient liquidity to meet its obligations as they become due for at least twelve months from the issuance date of these financial\nstatements. Accordingly, management determined that substantial doubt about the Company’s ability to continue as a going concern\nhas been alleviated.\n\n \n\n**Sales\nConcentration**—Significant portions of our sales are generated in our Direct Sales division, PaperPie. Of these sales, a\nsubstantial portion is facilitated through the use of social media collaboration platforms that allow our Brand Partners to interact\nin real-time, or near real-time, with customers. Brand Partners use these platforms to invite potential customers to “online parties,”\nprovide product recommendations, answer questions, and provide links to other supporting online materials. When a customer is ready to\npurchase products from the online party, they are redirected from the social media platform to the Brand Partner’s company hosted\ne-commerce site where the order can be placed.\n\n \n\n**Cash,\nCash Equivalents and Restricted Cash**—Cash, cash equivalents, and restricted cash are maintained at financial institutions\nand, at times, balances may exceed federally insured limits of $250,000. We have never experienced any losses related to these balances.\nThe majority of payments settled from banks for third party credit card transactions within three to twenty business days, depending\non the credit card processors’ reserve requirements. The payments in transit from our credit card processors and the short-term\ncertificate of deposit with our bank supporting our monthly credit card usage are classified as restricted cash. Cash and cash equivalents\ninclude demand and time deposits, money market funds, and other short-term investments with maturities of three months or less when acquired.\n\n \n\n30\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Accounts\nReceivable**—Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring\npayment within thirty days from the invoice date. Extended payment terms are offered at certain times of the year for orders that meet\nminimum quantities or amounts. Payments of accounts receivable are allocated to the specific invoices identified on the customers’\nremittance advice. Accounts receivable is stated at net realizable value, which includes an allowance for credit losses representing\nthe amount expected to be uncollectible. Balances which remain outstanding after management has made reasonable collection efforts are\nwritten off through a charge to the valuation allowance and a credit to accounts receivable. Recoveries of accounts receivable previously\nwritten off are recorded as income when received.\n\n \n\n**Allowance\nfor Credit Losses**— The allowance for credit losses is the Company’s best estimate of the amount of expected lifetime\ncredit losses in the Company’s accounts receivable. The Company, as required by ASU 2025-05, has elected to use the practical expedient\nmethod, which permits entities to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating\nexpected credit losses for current accounts receivable. The practical expedient method and allowance for credit losses is based on our\nhistory of write-off levels, along with evaluating current market conditions, customers concentrations and economic indicators.\n\n \n\n**Inventories**—Inventories\nare stated at the lower of either cost or net realizable value. Cost is determined using the average costing method. We present a portion\nof our inventory as a non-current asset. Occasionally we purchase product inventory in quantities in excess of what will be sold within\nthe normal operating cycle due to the minimum order requirements of our suppliers or changes in sales levels. We estimate non-current\ninventory using an anticipated turnover ratio by title, based primarily on historical trends. These excess quantities of 2½ years\nof anticipated sales are classified as noncurrent inventory.\n\n \n\nThe\nCompany assumes title and responsibility for inventory purchased according to the contract language with our suppliers, and the individual\nshipment terms for the order. The Company maintains insurance for the value of the inventory once the title has been passed until it\nis received at our warehouse (“inventory in transit”).\n\n \n\nBrand\nPartners that meet certain eligibility requirements may request and receive inventory on consignment. Consignment inventory is stated\nat the lower of either cost or net realizable value, less an estimated reserve for consignment inventory that is not expected to be sold\nor returned to the Company. The total cost of inventory on consignment, excluding the estimated reserve, with Brand Partners was $1,110,200\nand $1,335,700 at February 28, 2026 and February 28, 2025, respectively. The Company has a reserve for consignment inventory not expected\nto be sold or returned of $340,300 and $402,400 as of February 28, 2026, and February 28, 2025, respectively.\n\n \n\nInventories\nare presented net of a valuation allowance, which includes reserves for inventory obsolescence and Brand Partner consignment inventory\nthat is not expected to be sold or returned. Management estimates the allowance for both current and noncurrent inventory. The allowance\nis based on management’s identification of slow-moving inventory and estimated consignment inventory that will not be sold or returned.\n\n \n\n**Property,\nPlant and Equipment**—Property, plant and equipment are stated at cost and depreciated on a straight-line basis over their\nestimated useful life, as follows:\n\n \n\nBuilding\n \n30 years\n\nBuilding\nimprovements\n \n5 – 15 years\n\nMachinery\nand equipment\n \n3 – 15 years\n\nFurniture\nand fixtures\n \n3 years\n\nCapitalized\nsoftware\n \n4 – 10 years\n\nMolds\nand tooling\n \n3 – 5 years\n\n \n\nCapitalized\nprojects that are not placed in service are recorded as in progress and are not depreciated until the related assets are placed in service,\nincluding capitalized software. The development of customer and Brand Partner software applications is critical to our ongoing business\noperations and included in capitalized software. External and internal costs associated with the development of new software applications\nincurred during the application development stage are capitalized. Training and maintenance costs are expensed as incurred, while upgrades\nand enhancements are capitalized if it is probable that such expenditures will result in additional functionality.\n\n \n\n31\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Assets\nHeld for Sale**— The Company classifies long-lived assets, or disposal groups to be sold, as held for sale in the period\nin which all of the following criteria are met per ASC 360: (1) management, having the authority to approve the action, commits to a\nplan to sell the asset or disposal group; (2) the asset or disposal group is available for immediate sale in its present condition subject\nonly to terms that are usual and customary for sales of such assets or disposal groups; (3) an active program to locate a buyer and other\nactions required to complete the plan to sell the asset or disposal group have been initiated; (4) the sale of the asset or disposal\ngroup is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one\nyear, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond\none year; (5) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current\nfair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made\nor that the plan will be withdrawn.\n\n \n\nWe\ninitially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair\nvalue less any costs to sell. Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria\nare met. Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of the sale. We assess\nthe fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for\nsale and report any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying\nvalue does not exceed the carrying value of the asset at the time it was initially classified as held for sale.\n\n \n\nUpon\ndetermining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation\nof the asset and reports long-lived assets and/or the assets and liabilities of the disposal group, if material, in the line items assets\nheld for sale and liabilities held for sale, respectively, in our balance sheet. Refer to Note 3.\n\n \n\nDuring\nthe second quarter of fiscal year 2025, the Company entered into a triple-net lease agreement for approximately 111,000 square feet of\navailable office and warehouse space in the Hilti Complex to a new tenant. To create space for this new tenant, the Company removed three\nproduction lines from the warehouse before July 31, 2024. As a result, in the second quarter of fiscal 2025, the Company made available\nand committed to sell the disassembled equipment. The Company is actively marketing the unused equipment using a national on-line auction\nhouse. The Company is subject to the presentation and disclosure requirements since the equipment meets all the criteria and is classified\nas an “Asset Held for Sale.” Once management determined that the disassembled equipment met the criteria to be classified\nas held for sale, the Company ceased depreciation of the asset and reported it separately on the balance sheet, beginning on August 31,\n2024. The Company evaluated the carrying amount of the assets and the estimated fair values less costs to sell and recorded an impairment\nloss on the assets of $287,100 as of February 28, 2026.\n\n \n\n**Impairment\nof Long-Lived Assets**—We review the value of long-lived assets for possible impairment whenever events or changes in circumstances\nindicate that the carrying value of the assets may not be recoverable based on estimated future cash flows. Such indicators include,\namong others, the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability\nmeasurements. If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, we recognize an impairment\ncharge for the excess of the carrying value of the asset over its estimated fair value. Determination as to whether and how much an asset\nis impaired involves management estimates and can be impacted by other uncertainties. No impairment was noted during fiscal year 2025\nbut we recorded an impairment of $287,100 during fiscal year 2026.\n\n \n\n**Leases**—We\nhave both lessee and lessor arrangements. Our leases are evaluated at inception or at any subsequent modification. Depending on the terms,\nleases are classified as either operating or finance leases if we are the lessee, or as operating, sales-type or direct financing leases\nif we are the lessor, as appropriate under ASC 842 – *Leases*. In accordance with ASC 842, we have made an accounting policy\nelection to not apply the standard to lessee arrangements with a term of one year or less and no purchase option that is reasonably certain\nof exercise. We account for these short-term arrangements by recognizing payments and expenses as incurred, without recording a lease\nliability and right-of-use asset. We have also made an accounting policy election for both our lessee and lessor arrangements to combine\nlease and non-lease components. This election is applied to all of our lease arrangements as our non-lease components are not material\nand do not result in significant timing differences in the recognition of rental expenses or income.\n\n \n\nWe\nrecognize lease liabilities, reported on the balance sheets, for each lease based on the present value of the remaining minimum fixed\nrental payments (which include payments under any renewal option that we are reasonably certain to exercise), using a discount rate that\napproximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. Expected payments in\nthe next twelve months are classified as current lease liabilities. Payments in excess of twelve months are classified as long-term lease\nliabilities. We also recognize a right-of-use asset, on the balance sheet for each lease, which is valued at the lease liability and\nadjusted for prepaid or accrued rent balances existing at the time of the initial recognition. The lease liability and right-of-use assets\nare reduced over the term of the lease as payments are made and the assets are used. Minimum fixed rental payments are recognized on\na straight-line basis over the life of the lease as costs and expensed in our statements of operations. Variable and short-term rental\npayments are recognized as costs and expenses as they are incurred.\n\n \n\nRevenues\nassociated with the lessor leases are recorded on a straight-line basis over the initial lease term and are reported in other income\nin the statements of operations. We recognize variable rental payments as revenue in the period in which the changes in facts and circumstances,\non which the variable lease payments are based, occur. Sublease rental income is recognized on a straight-line basis over the duration\nof each lease term.\n\n \n\n**Income\nTaxes**—We account for income taxes under ASC 740 - *Income Taxes*, which requires an asset and liability approach.\nUnder this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and the\ntax basis of assets and liabilities using the current tax laws and rates. A valuation allowance is established, when necessary, to reduce\nnet deferred tax assets to the amounts that are “more likely than not” to be realized.\n\n \n\nThe\nCompany’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations\nin various taxing jurisdictions. The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate\nof whether it is more likely than not that additional taxes will be required. The Company had no uncertain tax positions as of February\n28, 2026 and 2025.\n\n \n\nDeferred\nincome taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis\nof assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences\narise from net operating losses, differences in depreciation methods of property and equipment, disallowed interest, accounts receivable\nallowances, inventory capitalization and allowances, sales returns, and other accrued expenses.\n\n \n\nThe\napplication of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty. Tax laws and regulations\nthemselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court\nrulings. Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management’s\nestimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities\nand valuation allowances. Interest and penalties are included in tax expense.\n\n \n\n32\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Revenue\nRecognition**—Revenue is derived from the sales of children’s books and related products which are generally capable\nof being distinct and accounted for as a single performance obligation to deliver tangible goods. Substantially all of our products are\nsold to end consumers through our PaperPie division and to retail outlets through our Publishing division. Refer to Note 16 – Business\nSegments for revenue by segment. Revenues of both divisions are recognized when the product is shipped, FOB-Shipping Point, which is\nthe point in time the customer obtains control of the products and risk of loss and rewards of ownership have been transferred. Sales\ntaxes that are collected from customers and remitted to governmental authorities are accounted for as a pass-through liability and therefore\nare excluded from net sales.\n\n \n\nThe\nmajority of PaperPie’s sales contracts have a single performance obligation and are short-term in nature. PaperPie’s sales\nare generally collected at the time the product is ordered. Sales which have been paid for but not shipped are classified as deferred\nrevenue on the balance sheet. Sales associated with consignment inventory are recognized when reported by the consignee and payment associated\nwith the sale has been collected. Transportation revenue represents the amount billed to the customer for shipping the product and is\nrecorded when the product is shipped.\n\n \n\nCertain\nPaperPie sales contracts associated with the hostess award programs include sales incentives, such as discounted products. These incentives\nprovide a separate performance obligation in the contract and material rights to the customer. The transaction price is allocated to\nthe material right based on its relative standalone selling price and is recognized in revenue as the performance obligations are satisfied,\nwhich occurs at shipping point or at the expiration of the material right. As the products included as sales incentives are shipped with\nthe associated products ordered, there is no deferral required. Revenues allocated to the material right are recognized in product revenues,\nnet of discounts and allowances, and cost of goods sold in our statements of operations.\n\n \n\nThe\nmajority of Publishing’s sales contracts have a single performance obligation and are short-term in nature. Publishing sales may\nbe collected at the time the product is shipped, or the customers may be given payment terms based primarily on their credit worthiness\nand payment history.\n\n \n\nEstimated\nallowances for sales returns, which reduce net revenues and cost of goods sold, are recorded as sales are recognized. Management uses\na moving average calculation to estimate the allowance for sales returns. We are not responsible for a product damaged in transit and\nmost damaged returns are primarily from retail stores. These returns result from damage that occurs in the stores, not in shipping to\nthe stores. It is an industry practice to accept non-damaged returns from retail customers. Management has estimated sales returns of\napproximately $201,500 for both February 28, 2026 and February 28, 2025, which is included in other current liabilities on the Company’s\nbalance sheet. In addition, management has recorded an asset for the expected value of non-damaged inventories to be returned. The estimated\nvalue of returned products of $100,800 is included in other current assets on the Company’s balance sheet for both February 28,\n2026 and February 28, 2025.\n\n \n\nThe\nCompany generally expenses sales commissions in the same period that the revenue is recognized. These costs are recorded within operating\nexpenses. The Company does not disclose the value of unsatisfied performance obligations for contracts with an unexpected length of one\nyear or less.\n\n \n\n**Advertising\nCosts**—Advertising costs are expensed as incurred. Advertising expenses, included in general and administrative expenses\nin the statements of operations, were $249,800 and $265,500 for the years ended February 28, 2026 and February 28, 2025, respectively.\n\n \n\n**Shipping\nand Handling Costs**—We classify shipping and handling costs as operating and selling expenses in the statements of operations.\nShipping and handling costs include postage, freight, handling costs, as well as shipping materials and supplies. These costs were $2,809,500\nand $4,574,200 for the years ended February 28, 2026 and February 28, 2025, respectively.\n\n \n\n**Share-Based\nCompensation**—We account for share-based compensation whereby share-based payment transactions with employees, such as stock\noptions and restricted stock, are measured at estimated fair value at the date of grant. For awards subject to service conditions, compensation\nexpense is recognized over the vesting period on a straight-line basis. Awards subject to performance conditions are attributed separately\nfor each vesting tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche.\nForfeitures are recognized when they occur.\n\n \n\n33\n\n[Table of Contents](#TableOfContents)\n\n \n\n**Earnings\nper Share**—Basic earnings (loss) per share (“EPS”) is computed by dividing net earnings (loss) by the weighted\naverage number of common shares outstanding during the period. Diluted EPS is based on the combined weighted average number of common\nshares outstanding and dilutive potential common shares issuable which include, where appropriate, the assumed exercise of options and\nthe assumed vesting of granted restricted share awards. In computing Diluted EPS, we have utilized the treasury stock method.\n\n \n\nThe\ncomputation of weighted average common and common equivalent shares used in the calculation of basic and diluted EPS is shown below:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nEarnings (loss) per share: \n   \n  \n\nNet earnings (loss) applicable to common shareholders \n$2,325,200  \n$(5,263,600)\n\n  \n    \n   \n\nWeighted average shares outstanding: \n    \n   \n\nBasic \n 8,563,491  \n 8,348,971 \n\nDiluted \n 8,563,491  \n 8,348,971 \n\n  \n    \n   \n\nEarnings (loss) per share: \n    \n   \n\nBasic \n$0.27  \n$(0.63)\n\nDiluted \n$0.27  \n$(0.63)\n\n \n\nAs\nshown in the table below, the following shares have not been included in the calculation of diluted earnings (loss) per share as they\nwould be anti-dilutive to the calculation above:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nWeighted average shares: \n   \n  \n\nIssued unvested restricted stock and assumed shares issuable under granted unvested restricted stock awards \n -  \n 139,249 \n\n \n\n34\n\n[Table of Contents](#TableOfContents)\n\n \n\n**New\nAccounting Pronouncements**— The Financial Accounting Standards Board (“FASB”) periodically issues new accounting\nstandards in a continuing effort to improve standards of financial accounting and reporting. We have reviewed the recently issued pronouncements\nand concluded the following new accounting standard updates (“ASU”) apply to us:\n\n \n\n*New\nAccounting Standards or Updates Adopted*\n\n \n\nIn\nDecember 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): *Improvements to Income Tax Disclosures*, which provides qualitative\nand quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency\nof income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation\nby jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024,\nwith early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted.\nThis ASU is effective for our Form 10-K for fiscal 2026 and the Company has applied the application on a prospective basis. Refer to\nNote 9.\n\n \n\nIn\nJuly 2025, the FASB issued Accounting Standards Update 2025-05 – Financial Instruments – Credit Losses (Topic ASC 326) Measurement\nof Credit Losses for Accounts Receivable and Contract Assets. The amendments in this ASU provide entities with a practical expedient\nthey may elect to use when developing an estimate of expected credit losses on current accounts receivable and current contract asset\nbalances arising from transactions accounted for under Topic ASC 606 – Revenue from Contracts with Customers. Under this practical\nexpedient, entities may elect to assume that current conditions as of the balance sheet date do not change for the remaining life of\nthe asset. The amendments in ASU 2025-05 become effective for fiscal years and for interim periods beginning after December 15, 2025,\nand early adoption is permitted. This ASU is effective for our Form 10-K for fiscal 2027, but the Company has chosen to early adopt the\nASU as of February 28, 2026 and applied the changes prospectively. The adoption of this ASU did not have a material effect to the measurement\nof credit losses.\n\n \n\n*New\nAccounting Standards or Updates Not Yet Adopted*\n\n \n\nIn\nDecember 2025, the FASB issued ASU 2025-12, Codification Improvements (“ASU 2025-12”). ASU 2025-12 addresses suggestions\nreceived from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The\nupdate represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that\nare intended to make it easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and\ninterim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments\nmay be applied prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact this ASU may have\non our financial statement disclosures.\n\n \n\nIn\nDecember 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-11,\nInterim Reporting (Topic 270) Improvements to Interim Disclosure Requirements. The standard clarifies disclosure requirements for interim\nfinancial statements and is effective for interim periods beginning after December 15, 2027. Early adoption is permitted. We are currently\nevaluating the impact this ASU may have on our financial statement disclosures.\n\n \n\nIn\nSeptember 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements\nto the Accounting for Internal-Use Software (“ASU 2025-06”), which requires software capitalization to begin when both of\nthe following occur: (1) management has authorized and committed to funding the software project; and (2) it is probable that the project\nwill be completed and the software will be used to perform the function intended. For public entities, the provisions within ASU 2025-06\nare effective for the first annual and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The\nprovisions within ASU 2025-06 allow for a prospective, modified, or retrospective transition approach. The Company is currently evaluating\nthis ASU to determine its impact on the Company’s financial statements and disclosures.\n\n \n\nIn\nNovember 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures\n(Subtopic 220-40): *Disaggregation of Income Statement Expenses*, which requires disclosure about the types of costs and expenses\nincluded in certain expense captions presented on the income statement. The new disclosure requirements are effective for the Company’s\nannual periods beginning March 1, 2027, and interim periods beginning March 1, 2028, with early adoption permitted, and may be applied\neither prospectively or retrospectively. The Company is currently evaluating the ASU to determine its impact on the Company’s financial\nstatements and disclosures.\n\n \n\n35\n\n[Table of Contents](#TableOfContents)\n\n \n\n**2.\nCASH**\n\n \n\nThe\ntable below reconciles cash, cash equivalents, and restricted cash as reported in the balance sheet to the total of the same amounts\nshown in the statements of cash flows:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nCash and cash equivalents \n$1,118,400  \n$428,400 \n\nRestricted cash \n 222,000  \n 548,100 \n\nTotal cash, cash equivalents, and restricted cash shown in the statements of cash flows \n$1,340,400  \n$976,500 \n\n \n\nThe\nCompany has contracted with Nexio and PayPal, Inc., third-party merchant service processors, to capture Visa, Discover, Mastercard and\nPayPal payments from customers. Approximately 90% of all payments received by the Company are channeled through these processors. These\nprocessors hold cash payments received from customers in reserve for a specified number of days to offset any potential chargebacks.\nThe Company also has a short-term certificate of deposit with the Company’s bank as collateral for business credit card use. The\nCompany has classified the cash held in reserves by Nexio and PayPal and the restricted certificate of deposit as restricted cash.\n\n \n\n**3.\nASSETS HELD FOR SALE**\n\n \n\nThe\nassets held for sale on the balance sheet at February 28, 2025, totaling $19,277,000 consisted of disassembled equipment, the Hilti Complex\nand approximately 17 acres of excess land. The assets held for sale at February 28, 2026, totaling $563,600 consists of disassembled\nequipment. The Company records assets held for sale at the lower of their carrying value or fair value less costs to sell.\n\n \n\n**Hilti\nComplex**\n\n \n\nDuring\nthe third quarter of fiscal 2024, the Company listed its real estate property located at 5402 S. 122nd E. Ave, Tulsa, Oklahoma 74146\nfor sale. The property consisted of approximately 402,000 square feet of office and warehouse space on 35-acres (the “Hilti Complex”),\nalong with 17-acres of adjacent undeveloped land. The Company ceased recording depreciation on the assets upon meeting the held for sale\ncriteria at the end of the third quarter of fiscal 2024.\n\n \n\nOn\nOctober 27, 2025, the Company completed the sale of the Hilti Complex to 10Mark 10K Industrial, LLC. The agreed upon sale price of the\nHilti Complex per the executed Contract totaled $32,200,000. The net proceeds less than the carrying value of the assets held for sale\nresulted in a gain on sale of $12,243,700. Following the sale of the Hilti Complex, the 17 acres of excess land that was not part of\nthe sale agreement, with a cost basis of $850,000, was reclassified from Assets held for Sale to land, as it is no longer listed for\nsale. The proceeds from the sale were utilized to pay off the Term Loans and Revolving Loan outstanding in the Credit Agreement with\nthe Company’s Bank. At closing, EDC assigned the existing third-party tenant leases to the Buyer and executed a separate Triple-Net\nLease for its occupied space in the Hilti Complex.\n\n \n\n**Equipment**\n\n \n\nDuring\nthe second quarter of fiscal year 2025, the Company entered into a triple-net lease agreement for approximately 111,000 square feet of\navailable office and warehouse space in the Hilti Complex to a new tenant. To create space for this new tenant, the Company removed three\nproduction lines from the warehouse before July 31, 2024. As a result, in the second quarter of fiscal 2025, the Company made available\nand committed to sell the disassembled equipment with a net book value of $850,700. The Company is actively marketing the unused equipment\nusing a national on-line auction house as of February 28, 2026. The Company is subject to the presentation and disclosure requirements\nsince the equipment meets all the criteria and is classified as an “Asset Held for Sale.” Once management determined that\nthe disassembled equipment met the criteria to be classified as held for sale, the Company ceased depreciation of the asset and reported\nit separately on the balance sheet, beginning in the second quarter of fiscal 2025. In the third quarter of fiscal 2026, the Company\nevaluated the carrying amount of the assets and the estimated fair values less costs to sell and recorded an impairment loss on the assets\nof $287,100.\n\n \n\n36\n\n[Table of Contents](#TableOfContents)\n\n \n\n**4.\nINVENTORIES**\n\n \n\nInventories\nconsist of the following at:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nCurrent: \n   \n  \n\nProduct inventory \n$17,771,000  \n$29,530,100 \n\nInventory valuation allowance \n (358,800) \n (430,500)\n\nInventories net - current \n$17,412,200  \n$29,099,600 \n\n  \n    \n   \n\nNoncurrent: \n    \n   \n\nProduct inventory \n$21,056,700  \n$16,326,500 \n\nInventory valuation allowance \n (805,000) \n (734,000)\n\nInventories net - noncurrent \n$20,251,700  \n$15,592,500 \n\n \n\nInventory\nin transit totaled $147,900 and $25,500 at February 28, 2026 and February 28, 2025, respectively.\n\n \n\nProduct\ninventory quantities in excess of what we expect will be sold within the normal operating cycle, based on 2 ½ years of anticipated\nsales, are included in noncurrent inventory.\n\n \n\n**5.\nBUSINESS CONCENTRATION**\n\n \n\nSignificant\nportions of our inventory purchases are concentrated with an England-based publishing company, Usborne Publishing Limited (“Usborne”).\nDuring fiscal 2023, we entered into a new distribution agreement (“Agreement”) with Usborne. The Agreement includes annual\nminimum purchase volumes along with specific payment terms and letter of credit requirements, which if not met offer Usborne the right\nto terminate the Agreement on less than 30 days’ written notice. Should termination of the Agreement occur, the Company will be\nallowed to sell its remaining Usborne inventory for an agreed upon period, but not less than twelve months following the termination\ndate. As of February 28, 2026, the Company did not meet the minimum purchase requirements and did not supply the letter of credit required\nunder the Agreement, which offers Usborne the right to exercise their option to terminate the Agreement. Usborne has not notified the\nCompany of termination of the Agreement. In addition, Usborne has refused to pay the $1.0 million volume rebate owed to the Company from\npurchases made during fiscal 2022. The Company is disputing the cancellation of the rebate but has not recognized any rebate due to its\nuncertainty. Additionally, under the terms in the Agreement, the Company no longer has the rights to distribute Usborne’s products\nto retail customers through our Publishing division. As a result, the Company discontinued selling Usborne products to retail customers\nin the first quarter of fiscal 2024.\n\n \n\nThe\nfollowing table summarizes Usborne product revenues, net of discounts, by division and inventory purchases by product type:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nProduct revenues, net of discounts of Usborne products by division: \n   \n  \n\nPaperPie division \n$9,069,700  \n$12,282,100 \n\n% of total PaperPie Product revenues, net of discounts \n 49.7% \n 43.5%\n\nPublishing division \n -  \n - \n\n% of total Publishing Product revenues, net of discounts \n 0.0% \n 0.0%\n\nTotal Product revenues, net of discounts of Usborne products \n$9,069,700  \n$12,282,100 \n\n  \n    \n   \n\nPurchases received by product type: \n    \n   \n\nUsborne \n$567,900  \n$230,100 \n\n% of total purchases received \n 28.3% \n 9.3%\n\nAll other product types \n 1,436,800  \n 2,243,200 \n\n% of total purchases received \n 71.7% \n 90.7%\n\nTotal purchases received \n$2,004,700  \n$2,473,300 \n\n \n\nTotal\nUsborne inventory owned by the Company and included in our balance sheets was $20,158,500 and $23,696,800 as of February 28, 2026 and\nFebruary 28, 2025, respectively.\n\n \n\n37\n\n[Table of Contents](#TableOfContents)\n\n \n\n**6.\nPROPERTY, PLANT AND EQUIPMENT**\n\n \n\nProperty,\nplant and equipment consist of the following:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nLand \n$850,000  \n$- \n\nMachinery and equipment \n 10,191,200  \n 10,224,600 \n\nFurniture and fixtures \n 124,000  \n 124,000 \n\nCapitalized software \n 3,702,500  \n 3,350,100 \n\nMolds and tooling \n 733,200  \n 733,200 \n\nCapitalized software - in progress \n 25,800  \n - \n\nTotal property, plant and equipment \n 15,626,700  \n 14,431,900 \n\nLess accumulated depreciation \n (9,335,500) \n (8,033,200)\n\nProperty, plant and equipment-net \n$6,291,200  \n$6,398,700 \n\n \n\n**7.\nOTHER CURRENT LIABILITIES**\n\n \n\nOther\ncurrent liabilities consist of the following:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nAccrued royalties \n$137,300  \n$228,800 \n\nAccrued PaperPie incentives \n 267,700  \n 897,700 \n\nAccrued property tax \n 292,600  \n 254,400 \n\nSales tax payable \n 193,600  \n 237,200 \n\nShort-term note payable \n -  \n 407,300 \n\nAllowance for expected inventory returns \n 201,500  \n 201,500 \n\nOther \n 334,800  \n 301,400 \n\nTotal other current liabilities \n$1,427,500  \n$2,528,300 \n\n \n\n**8.\nOTHER INCOME**\n\n \n\nA\nsummary of other income (expense) is shown below:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nGain from sale of assets - net \n$12,190,900  \n$- \n\nRental income \n 1,939,000  \n 2,274,900 \n\nImpairment on assets \n (287,100) \n (318,100)\n\nOther, net \n 168,300  \n 149,800 \n\nTotal other income \n$14,011,100  \n$2,109,000 \n\n \n\n38\n\n[Table of Contents](#TableOfContents)\n\n \n\n**9.\nINCOME TAXES**\n\n \n\nDeferred\nincome taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial\nreporting purposes and the amounts used for income tax purposes. The tax effects of significant items comprising our net deferred tax\nassets and liabilities are as follows:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nDeferred tax assets: \n   \n  \n\nAllowance for credit losses \n$29,600  \n$30,300 \n\nInventory overhead capitalization \n 182,700  \n 115,000 \n\nInventory valuation allowance \n 96,900  \n 116,200 \n\nInventory valuation allowance – noncurrent \n 217,300  \n 198,200 \n\nAllowance for sales returns \n 27,200  \n 27,200 \n\nResearch and development capitalization \n -  \n 457,600 \n\nNet operating loss carryforward (1) \n 109,300  \n 1,141,200 \n\nDisallowed interest (2) \n 2,001,300  \n 1,655,500 \n\nAccruals \n 12,100  \n 136,500 \n\nTotal deferred tax assets \n 2,676,400  \n 3,877,700 \n\n  \n    \n   \n\nDeferred tax liabilities: \n    \n   \n\nProperty, plant, and equipment \n (1,121,600) \n (1,341,600)\n\nTotal deferred tax liabilities \n (1,121,600) \n (1,341,600)\n\n  \n    \n   \n\nValuation allowance (3) \n (1,554,800) \n - \n\nNet deferred tax assets \n$-  \n$2,536,100 \n\n \n\n \n\n(1) The Company’s net operating loss (“NOL”) carryforward was generated from losses incurred in fiscal 2025. The Company’s NOL can be carried forward indefinitely but are limited to an 80% maximum offset of taxable income.\n\n(2) The\nCompany’s disallowed interest was generated from interest expense that was not deductible for tax purposes due to a maximum allowable\ndeduction of 30% of taxable income. The disallowed interest is carried forward to be deducted against future income, subject to the 30%\nlimitation.\n\n(3) In evaluating the need for a valuation allowance and the realizability of deferred tax assets, the Company utilized the framework contained in ASC 740, “Income Taxes,” pursuant to which management analyzed all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more likely than not that they will not be realized. In conclusion, management placed significant emphasis on guidance in ASC 740, which includes that a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome. Based upon available evidence, it was concluded on a more-likely-than-not basis that certain deferred tax assets were not realizable as of February 28, 2026. Accordingly, a valuation allowance has been recorded to offset these deferred tax assets.\n\n \n\nThe\nreconciliation of taxes at the federal statutory rate to our provision for income taxes for the year ended February 28, 2026 was as follows:\n\n \n\n  \nFebruary 28, 2026 \n\n  \nAmount  \nPercentage \n\nU.S. federal statutory income tax rate \n$1,122,800  \n 21.0%\n\nTax credits \n    \n   \n\nResearch and development \n (60,000) \n (1.1)%\n\nNontaxable or nondeductible items \n 9,400  \n 0.2%\n\nU.S. state and local income taxes, net of federal benefit \n 326,500  \n 6.1%\n\nChanges in valuation allowance \n 1,554,800  \n 29.1%\n\nOther \n 68,100  \n 1.2%\n\nEffective tax rate \n$3,021,600  \n 56.5%\n\n \n\n39\n\n[Table of Contents](#TableOfContents)\n\n \n\nThe\ncomponents of income tax expense (benefit) are as follows:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nCurrent: \n   \n  \n\nFederal (1) \n$187,800  \n$- \n\nState and local (1) \n 129,000  \n - \n\n  \n 316,800  \n - \n\nDeferred: \n    \n   \n\nFederal \n 2,452,200  \n (1,439,500)\n\nState and local \n 252,600  \n (151,900)\n\n  \n 2,704,800  \n (1,591,400)\n\nTotal income tax expense (benefit) \n$3,021,600  \n$(1,591,400)\n\n \n\n \n\n(1)The\nCompany incurred losses in fiscal 2025, resulting in a net operating loss carryforward and reclassification from current to deferred.\n\n \n\nThe\nfollowing reconciles our expected income tax rate to the U.S. federal statutory income tax rate:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nU.S. federal statutory income tax rate \n 21.0% \n 21.0%\n\nU.S. state and local income taxes–net of federal benefit \n 6.1% \n 6.6%\n\nValuation allowance \n 29.1% \n -%\n\nOther \n 0.3% \n (4.4)%\n\nTotal income tax expense \n 56.5% \n 23.2%\n\n \n\nWe\nfile our tax returns in the U.S. and certain state jurisdictions in which we have nexus. We are no longer subject to income tax examinations\nby tax authorities for the fiscal years before 2020.\n\n \n\n**10.\nEMPLOYEE BENEFIT PLAN**\n\n \n\nThe\nCompany has created the Educational Development Corporation Employee 401(k) Plan (“EDC 401(k) Plan”) as a benefit plan for\nemployees offering retirement investment options as well as profit sharing with its employees, in the form of matching contributions.\nThe EDC 401(k) Plan includes, as an investment option, the ability to purchase shares of the Company’s stock which the Plan Administrator\nacquires directly from NASDAQ. This plan incorporates the provisions of Section 401(k) of the Internal Revenue Code that allow favorable\ntax treatments on investments. The EDC 401(k) Plan is available to all employees that meet specific age and length of service requirements.\nThe Company’s matching contributions are discretionary and approved at the annual meeting of the EDC 401(k) Plan’s Trustees\nand Company’s management. Matching contributions made to the Plan by the Company totaled $126,100 and $104,000 during the years\nended February 28, 2026 and February 28, 2025, respectively.\n\n \n\n40\n\n[Table of Contents](#TableOfContents)\n\n \n\n**11.\nLEASES**\n\n \n\nWe\nhave both lessee and lessor arrangements. Our lessee arrangements include six rental agreements where we have the exclusive use of dedicated\noffice space in San Diego, California, Ogden, Utah, a warehouse space in Joplin, Missouri and three leases for office and warehouse space\nlocally in Tulsa, Oklahoma, all of which qualify as operating leases under ASC 842. Our lessor arrangements include one rental agreement\nfor warehouse and office space in Tulsa, Oklahoma, and qualify as operating leases under ASC 842.\n\n \n\nIn\nconnection with the sale of the Hilti Complex, the Company leased back a portion of the Complex for office and warehouse space. The term\nof the lease is 10 years, and the initial lease rate is $8.00 per square foot, with 2.5% annual escalations. The Company also has two\nfive-year renewal and extension options with 2.5% increases annually in the base rental rate of the preceding year. The Lease also includes\ntriple-net terms, where the Company and other tenants will be responsible for utilities, insurance, property taxes, and regular maintenance.\n\n \n\n*Operating\nLeases*– *Lessee*\n\n \n\nWe\nrecognize an operating lease liability on the balance sheets for each lease based on the present value of remaining minimum fixed rental\npayments (which includes payments under any renewal option that we are reasonably certain to exercise), using a discount rate that approximates\nthe rate of interest we would have to pay to borrow on a collateralized basis over a similar term. Expected payments in the next twelve\nmonths are classified as current operating lease liabilities. Payments in excess of twelve months are classified as long-term operating\nlease liabilities. We also recognize an operating lease right-of-use asset on the balance sheets, valued at the lease liability and adjusted\nfor prepaid or accrued rent balances existing at the time of initial recognition. The operating lease liability and right-of-use assets\nare reduced over the term of the lease as payments are made and the assets are used.\n\n \n\n   February 28, \n\n   2026   2025 \n\nOperating lease assets:        \n\nRight-of-use assets  $6,716,100   $1,108,100 \n\n           \n\nOperating lease liabilities:          \n\nCurrent lease liabilities  $1,371,700   $697,000 \n\nLong-term lease liabilities  $5,344,400   $411,100 \n\n           \n\nWeighted-average remaining lease term (months)   108.9    18.4 \n\nWeighted-average discount rate   6.36%   4.89%\n\n \n\nMinimum\nfixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses in our statements of operations.\nVariable and short-term rental payments are recognized as costs and expenses as they are incurred.\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nFixed lease costs \n$1,018,400  \n$790,400 \n\n \n\n41\n\n[Table of Contents](#TableOfContents)\n\n \n\nFuture\nminimum rental payments under operating leases with initial terms greater than one year as of February 28, 2026, are as follows:\n\n \n\nYears ending February 28 \n  \n\n2027 \n$1,311,500 \n\n2028 \n 884,500 \n\n2029 \n 906,600 \n\n2030 \n 929,200 \n\n2031 \n 952,500 \n\nThereafter \n 4,766,500 \n\nTotal future minimum rental payments \n 9,750,800 \n\nLess: imputed interest \n (3,034,700)\n\nTotal operating lease liabilities \n$6,716,100 \n\n \n\nSupplemental\ncash flow information related to leases is as follows:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nOperating cash flows – operating leases \n$1,018,400  \n$790,400 \n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nNONCASH TRANSACTIONS \n   \n  \n\nLease assets obtained in exchange for new lease liabilities \n$6,338,900  \n$282,800 \n\n \n\nThe\nCompany assesses its leases to determine whether it is reasonably certain that these renewal options will be exercised. In general, most\nof the office space outside of Tulsa, Oklahoma is associated with remote employees. Their continued employment determines the need for\nthis space. Much of the warehouse space outside of the Hilti Complex is used to store non-current inventory. As the Company sells down\nexcess inventory, less outside space will be needed, and any renewals will be for less space. The Company also considered the renewal\noptions for the operating lease at the Hilti Complex and is not reasonably certain to exercise the renewal options. Accordingly, the\nrenewal options are not included in the calculation of its right-of-use assets and lease liabilities, as the Company does not believe\nthat it is reasonably certain that these renewal options will be exercised. \n\n \n\n*Operating\nLeases*– *Lessor*\n\n \n\nThe\nCompany also subleases some office and warehouse space in one of its leased facilities.\n\n \n\nFuture\nminimum payments receivable under operating leases was $52,700 to be received during the year-ended February 28, 2027.\n\n \n\nThe\ncost of the leased space was approximately $0 as of February 28, 2026, and $16,333,900 as of February 28, 2025, respectively. The accumulated\ndepreciation associated with the leased assets was $0 and $3,906,700 as of February 28, 2026, and February 28, 2025, respectively. During\nthe third quarter of fiscal 2024, the Company announced its plans to sell the Hilti Complex and reclassified the land and buildings from\nproperty, plant and equipment to assets held for sale. The leased space was included in this reclassification. During the third quarter\nof fiscal 2026, the Company completed the sale and leaseback of the Hilti Complex, which resulted in a net gain of $12,243,700.\n\n \n\n42\n\n[Table of Contents](#TableOfContents)\n\n \n\n**12.\nDEBT**\n\n \n\nDebt\nconsists of the following:\n\n \n\n  \nFebruary 28, \n\n  \n2026  \n2025 \n\nLine of credit \n$-  \n$4,198,100 \n\n  \n    \n   \n\nFloating rate term loan \n$-  \n$16,250,000 \n\nFixed rate term loan \n -  \n 10,550,900 \n\nTotal term debt \n -  \n 26,800,900 \n\n  \n -  \n   \n\nLess current portion \n -  \n (26,685,500)\n\nLess debt issue cost \n -  \n (115,400)\n\nLong-term debt, net \n$       -  \n$- \n\n \n\nOn\nAugust 9, 2022, the Company executed a Credit Agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma”\nor the “Lender”). The Loan Agreement established a fixed rate term loan in the principal amount of $15,000,000 (the “Fixed\nRate Term Loan”), a floating rate term loan in the principal amount of $21,000,000 (the “Floating Rate Term Loan”;\ntogether with the Fixed Rate Term Loan, collectively, the “Term Loans”), and a revolving promissory note in the principal\namount up to $15,000,000 (the “Revolving Loan” or “Line of Credit”).\n\n \n\nOn\nApril 16, 2025, the Company executed the Eighth Amendment to the Credit Agreement with the Lender. The amendment, effective April 4,\n2025, increased the Revolving Loan interest rate on the effective date to SOFR + 6.00%, extended the maturity date of the Revolving Loan\nto 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 changed\nthe maturity dates of the two term loans to September 19, 2025.\n\n \n\nOn\nAugust 12, 2025, Educational Development Corporation executed the Ninth Amendment to the Existing Credit Agreement with the Lender. The\nAmendment, effective July 11, 2025, extended the maturity date of the Revolving Loan to September 19, 2025, increased the Revolving Loan\ninterest rate on the effective date to SOFR + 8.00% and added a 2% deferred interest rate to the Term loans and Revolving Loan.\n\n \n\nThe\nCompany’s credit agreement with its lender expired on September 19, 2025, with the balances of our Term Loans and the Revolving\nLoan unpaid.\n\n \n\nOn\nSeptember 30, 2025, the Company received a Reservation of Rights notice from its lender outlining that events of default have occurred\nand are continuing due to our failure to pay in full in cash the unpaid balance of the Term Loans and Revolving Loan before the maturity\ndate. The Lender did not waive the specified defaults and reserved all of its rights, powers, privileges and remedies under the credit\nagreement, the UCC, and applicable law. Under the credit agreement, the lender had the right, among other remedies listed, to demand\npayment or repossess and liquidate the Company’s assets used as collateral for the loans. Under the terms of the credit agreement,\nan additional default interest rate of 2% was added to the existing interest rates defined in the credit agreement.\n\n \n\nOn\nOctober 27, 2025, upon the completion of the sale of the Hilti Complex, the Company repaid in full all outstanding indebtedness and terminated\nall commitments and obligations under its Credit Agreement dated August 9, 2022, between the Company and its Lender. The Company’s\npayment, including interest, was approximately $30.0 million, which satisfied all of the Company’s debt obligations with the Lender.\nThe Company did not incur any early termination penalties because of the repayment of indebtedness or termination of the Amended and\nRestated Credit Agreement. Further, the Lender waived the additional 2% default interest charge associated with the Ninth Amendment.\nIn connection with the repayment of outstanding indebtedness, the Company was released from all security interests, mortgages, liens\nand encumbrances under the Amended and Restated Credit Agreement with the Lender.\n\n \n\n43\n\n[Table of Contents](#TableOfContents)\n\n \n\n**13.\nSHARE-BASED COMPENSATION**\n\n** **\n\nWe\naccount for share-based compensation whereby share-based payment transactions with employees, such as stock options and restricted stock,\nare measured at estimated fair value at the date of grant. For awards subject to service conditions, compensation expense is recognized\nover the vesting period on a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting\ntranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche. Forfeitures are\nrecognized when they occur. The probability of restricted share awards granted with future performance conditions is evaluated at each\nreporting period and share awards are updated and compensation expense is adjusted based on updated information.\n\n \n\nIn\nJuly 2018, our shareholders approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI Plan”). The 2019 LTI Plan\nestablished up to 600,000 shares of restricted stock available to be granted to certain members of management based on exceeding specified\nnet revenues and pre-tax performance metrics during fiscal years 2019, 2020 or 2021. The Company exceeded all defined metrics during\nthese fiscal years, and 600,000 shares were granted to members of management according to the Plan. The granted shares under the 2019\nLTI Plan “cliff vest” after five years from the fiscal year that the defined metrics were exceeded. All remaining shares\nunder the 2019 Long-Term Incentive Plan vested on February 28, 2025.\n\n \n\nA\nsummary of compensation expense recognized in connection with restricted share awards follows:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nShare-based compensation expense - net of forfeitures \n$-  \n$403,300 \n\n \n\n**14.\nSTOCK REPURCHASE PLAN**\n\n \n\nIn\nApril 2008, the Board of Directors authorized us to repurchase up to an additional 1,000,000 shares of our common stock under the plan\ninitiated in 1998 (“amended 2008 plan”). On February 4, 2019, the Board of Directors replaced the amended 2008 plan with\na new plan which authorized us to repurchase up to 800,000 shares of outstanding common stock in the open market or in privately negotiated\ntransactions, and to utilize any derivative or similar instrument to effect share repurchase transactions (including without limitation,\naccelerated share repurchase contracts, equity forward transactions, equity swap transactions, floor transactions or other similar transactions\nor any combination of the foregoing transactions). This plan has no expiration date.\n\n \n\nDuring\nfiscal year 2025, the Company purchased 400 shares of treasury stock under the amended 2008 plan. During fiscal year 2026, the Company\npurchased 87,837 shares of treasury stock for an average purchase price of $1.57 per share, totaling $137,900. The maximum number of\nshares that may be repurchased in the future is 288,156 as of February 28, 2026.\n\n \n\n44\n\n[Table of Contents](#TableOfContents)\n\n \n\n**15.\nQUARTERLY RESULTS OF OPERATIONS (UNAUDITED)**\n\n \n\nThe\nfollowing is a summary of the quarterly results of operations for the years ended February 28, 2026 and February 28, 2025:\n\n \n\n  \nNet\nRevenues  \nGross\nMargin  \nNet\nEarnings\n(Loss)  \nBasic\nEarnings\n(Loss)\nPer Share  \nDiluted\nEarnings\n(Loss)\nPer Share \n\n2026 \n   \n   \n   \n   \n  \n\nFirst quarter \n$7,106,400  \n$4,137,100  \n$(1,075,200) \n$(0.13) \n$(0.13)\n\nSecond quarter \n 4,621,100  \n 2,688,100  \n (1,294,700) \n (0.15) \n (0.15)\n\nThird quarter \n 7,007,800  \n 4,309,700  \n 7,802,100  \n 0.91  \n 0.91 \n\nFourth quarter \n 4,178,300  \n 2,469,400  \n (3,107,000) \n (0.37) \n (0.37)\n\nTotal year \n$22,913,600  \n$13,604,300  \n$2,325,200  \n$0.27  \n$0.27 \n\n  \n    \n    \n    \n    \n   \n\n2025 \n    \n    \n    \n    \n   \n\nFirst quarter \n$9,993,400  \n$6,459,400  \n$(1,279,000) \n$(0.15) \n$(0.15)\n\nSecond quarter \n 6,509,200  \n 3,646,700  \n (1,803,400) \n (0.22) \n (0.22)\n\nThird quarter \n 11,052,100  \n 6,903,900  \n (835,700) \n (0.10) \n (0.10)\n\nFourth quarter \n 6,636,300  \n 4,017,700  \n (1,345,500) \n (0.16) \n (0.16)\n\nTotal year \n$34,191,000  \n$21,027,700  \n$(5,263,600) \n$(0.63) \n$(0.63)\n\n \n\n**16.\nBUSINESS SEGMENTS**\n\n \n\nWe\nhave two reportable segments: PaperPie and Publishing. These reportable segments are business units that offer different methods of distribution\nto different types of customers. They are managed separately based on the fundamental differences in their operations. Our PaperPie segment\nmarkets its products through a network of independent Brand Partners using a combination of internet sales, direct sales, home shows,\nand book fairs. Our Publishing segment markets its products to retail accounts, which include book, school supply, toy and gift stores,\nmuseums, trade and specialty wholesalers, through commissioned sales representatives, and our internal tele-sales group. See Note 5 for\nthe impact of our updated Usborne distribution agreement on the Publishing segment.\n\n \n\nThe\naccounting policies for the segments are the same as those for the rest of the Company. We evaluate segment performance based on earnings\nbefore income taxes of the segments, which is defined as segment net revenues reduced by cost of sales and direct expenses. Direct expenses\nare composed of payroll, commissions, general and administrative, and operating and selling expenses. Corporate expenses, depreciation,\ninterest expense, other income, and income taxes are not allocated to the segments but are listed in the “Other” row below.\nCorporate expenses include the executive department, accounting department, information services department, general office management,\nwarehouse operations and building facilities management. Our assets and liabilities are not allocated on a segment basis. Separate financial\ninformation is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources.\nFor the Company, the Chief Executive Officer is the CODM.\n\n \n\nInformation\nby industry segment for the years ended February 28, 2026 and February 28, 2025 is set forth below:\n\n \n\n**NET\nREVENUES**\n\n \n\n   Year Ended February 28, \n\n   2026   2025 \n\nPublishing  $3,568,900   $4,340,700 \n\nPaperPie   19,344,700    29,850,300 \n\nTotal  $22,913,600   $34,191,000 \n\n \n\n45\n\n[Table of Contents](#TableOfContents)\n\n \n\n**EARNINGS\n(LOSS) BEFORE INCOME TAXES**\n\n \n\n   Year Ended February 28, \n\n   2026   2025 \n\nPublishing  $747,800   $1,155,400 \n\nPaperPie   944,300    1,950,800 \n\nOther   3,654,700    (9,961,200)\n\nTotal  $5,346,800   $(6,855,000)\n\n \n\n**Publishing\nOperating Results**\n\n \n\nThe\nfollowing table summarizes the operating results of the Publishing segment for the twelve months ended February 28:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nNet revenues \n$3,568,900  \n$4,340,700 \n\n  \n    \n   \n\nCost of goods sold \n 1,546,200  \n 1,757,300 \n\nGross margin \n 2,022,700  \n 2,583,400 \n\n  \n    \n   \n\nOperating expenses \n    \n   \n\nOperating and selling \n 281,300  \n 424,300 \n\nSales commissions \n 93,700  \n 97,700 \n\nGeneral and administrative \n 899,900  \n 906,000 \n\nTotal operating expenses \n 1,274,900  \n 1,428,000 \n\n  \n    \n   \n\nOperating income \n$747,800  \n$1,155,400 \n\n** **\n\n**PaperPie\nOperating Results**\n\n \n\nThe\nfollowing table summarizes the operating results of the PaperPie segment for the twelve months ended February 28:\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nNet revenues \n$19,344,700  \n$29,850,300 \n\n  \n    \n   \n\nCost of goods sold \n 7,763,100  \n 11,406,000 \n\nGross margin \n 11,581,600  \n 18,444,300 \n\n  \n    \n   \n\nOperating expenses \n    \n   \n\nOperating and selling \n 2,598,700  \n 4,575,400 \n\nSales commissions \n 6,305,500  \n 9,998,800 \n\nGeneral and administrative \n 1,733,100  \n 1,919,300 \n\nTotal operating expenses \n 10,637,300  \n 16,493,500 \n\n  \n    \n   \n\nOperating income \n$944,300  \n$1,950,800 \n\n \n\n46\n\n[Table of Contents](#TableOfContents)\n\n \n\nInformation\nfor the Other segment above for the years ended February 28, 2026 and February 28, 2025 is set forth below:\n\n \n\n**OTHER\nNON-SEGMENT EARNINGS (LOSS) BEFORE INCOME TAXES**\n\n \n\n  \nYear Ended February 28, \n\n  \n2026  \n2025 \n\nOperating and selling: \n   \n  \n\nFreight \n$447,000  \n$668,500 \n\nComputer support \n 135,400  \n 83,400 \n\nOperating and selling total \n 582,400  \n 751,900 \n\n  \n    \n   \n\nGeneral and administrative: \n    \n   \n\nPayroll \n 4,029,700  \n 4,672,600 \n\nDepreciation \n 1,086,100  \n 1,358,600 \n\nBuilding and warehouse rents \n 1,162,200  \n 830,900 \n\nOutside services \n 394,600  \n 458,000 \n\nProperty taxes \n 210,700  \n 370,300 \n\nDues and subscriptions \n 256,000  \n 260,200 \n\nProperty insurance \n 255,800  \n 242,200 \n\nProfessional service fees \n 233,400  \n 238,000 \n\nOther \n 666,600  \n 699,100 \n\nGeneral and administrative total \n 8,295,100  \n 9,129,900 \n\n  \n    \n   \n\nInterest expense \n 1,478,900  \n 2,188,400 \n\nGain from sale of assets - net \n (12,190,900) \n - \n\nOther income \n (1,820,200) \n (2,109,000)\n\nTotal other non-segment (earnings) loss before income taxes \n$(3,654,700) \n$9,961,200 \n\n** **\n\n**17.\nINTEREST RATE EXCHANGE AGREEMENT**\n\n \n\nThe\nCompany maintains an interest-rate risk-management strategy that uses interest-rate swap instruments to minimize significant, unanticipated\nearnings fluctuations caused by interest-rate volatility. The Company’s specific goal is to lower the cost of its borrowed funds,\nwhen possible.\n\n \n\nOn\nJune 5, 2023, the Company entered into a receive-variable (based on 30-Day SOFR)/pay-fixed interest-rate swap agreement related to $18,000,000\nof our $21,000,000 Floating Rate Term Loan. This swap is utilized to manage interest-rate exposure over the period of the interest-rate\nswap and is designated as a highly effective cash-flow hedge. The differential to be paid or received on the swap agreement is accrued\nas interest rates change and is recognized in interest expense over the life of the agreement. The swap agreement offsets a corresponding\nportion of the amortizing $21,000,000 Floating Rate Term Loan, which expires on May 30, 2025, and has effectively fixed the interest\nrate on the offsetting, outstanding balance of the $21,000,000 Floating Rate Term Loan at 6.48%. The notional amount of the swap and\nthe offsetting, outstanding portion of the term loan was $11,250,000 on February 28, 2025. The interest-rate swap contains no credit-risk-related\ncontingent features and is cross-collateralized by all assets of the Company. The sell of the Hilti Complex enabled the company to repay\nall the debt in October 2026.\n\n \n\nThe\neffective portion of the unrealized gain or loss on this interest-rate swap is reported as a component of other comprehensive income\n(“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.\nGains and losses on the interest rate swap representing amounts excluded from the assessment of hedge effectiveness are recognized in\nthe current earnings.\n\n \n\nThe\nfair value of the interest rate swap is included in the following caption on the balance sheets as follows:\n\n \n\n  \nFebruary 28,\n2026  \nFebruary 28,\n2025 \n\nOther current liabilities \n$           -  \n$15,400 \n\n \n\n**18.\nFINANCIAL INSTRUMENTS**\n\n** **\n\nThe\nfollowing methods and assumptions are used in estimating the fair-value disclosures for financial instruments:\n\n \n\n  - The carrying amounts reported on the balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.\n\n     \n\n  - The estimated fair value of our assets held for sale was $563,600 as of February 28, 2026, and $37,000,000 February 28, 2025, respectively.\n\n     \n\n  - The estimated fair value of our term notes payable is estimated by management to approximate $0 and $26,507,100 as of February 28, 2026 and February 28, 2025, respectively. Management’s estimates are based on the obligations’ characteristics, including floating interest rate, maturity, and collateral.\n\n \n\n**19.\nDEFERRED REVENUES**\n\n \n\nThe\nCompany’s PaperPie division receives payments on orders in advance of shipment. Any payments received prior to the end of the period\nthat were not shipped as of February 28, 2026 or February 28, 2025 are recorded as deferred revenues on the balance sheets. We received\napproximately $320,500 and $491,800 as of February 28, 2026 and February 28, 2025, respectively, in payments for sales orders which were,\nor will be, shipped out subsequent to the end of the period.\n\n \n\n**20.\nSUBSEQUENT EVENTS**\n\n \n\nIn\nMarch 2026, the Company executed a new credit agreement with Regent Bank (the Lender). The loan agreement establishes a revolving promissory\nnote in the principal amount up to $2,000,000. Interest shall be calculated each month on the outstanding borrowings. The credit agreement\nwas secured by the assets of the Company including accounts receivable, inventory, equipment and excess land. As an additional inducement\nto enter into the loan agreement, the Lender required the personal guarantee of Craig White, President and Chief Executive Officer of\nthe Company.\n\n \n\n47\n\n \n\n \n\nThe following table summarizes the operating results of the PaperPie segment for the twelve months ended February 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