What changed in this filing

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Item 9A. Controls and Procedures

2024-05-21 compared with 2023-05-17 · 266 added, 139 removed, 520 unchanged (44% of the section changed)

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Changes in Internal Control over Financial Reporting

During the fourth quarter of the fiscal year covered by this report on Form 10-K, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the fiscal year covered by this report on Form 10-K, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management ’ s Report on Internal Control Over Financial Reporting

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Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Projections of any evaluation of effectiveness to future periods are subject to the risk,

that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on our evaluation under the 2013 COSO Framework and applicable SEC rules, our management concluded that our internal control over financial reporting was effective as of February 29, 2024.

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(a) Identification of Directors

The information required by this Item 10 is furnished by incorporation by reference to the information under the caption "Election of Directors" in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

(b) Identification of Executive Officers

The information required by this Item 10 is furnished by incorporation by reference to the information under the caption "Executive Officers of the Registrant" in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

The information required by this Item 10 is furnished by incorporation by reference to the information under the caption "Section 16 (a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

EXECUTIVE COMPENSATION

The information required by this Item 11 is furnished by incorporation by reference to the information under the caption "Executive Compensation" in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 is furnished by incorporation by reference to the information under the captions "Security Ownership of Certain Beneficial Owners and Management" and "Compensation Plans" in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item 14 is furnished by incorporation by reference to the information under the caption "Independent Registered Public Accountants" in our definitive Proxy Statement to be filed in connection with the Annual Meeting of Shareholders to be held on June 29, 2023.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this report:

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Statements of Operations for the Years ended February 29, 2024 and February 28, 2023

Statements of Comprehensive Income (Loss) for the Years ended February 29, 2024 and February 28, 2023 30

Statements of Shareholders' Equity for the Years ended February 29, 2024 and February 28, 2023 31

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Lease Agreement dated December 1, 2015 by and between the Company and Hilti, Inc., Tulsa, OK incorporated herein by reference to Exhibit 10.9 to Form 10-K dated February 28, 2019 (File No.

Amended and Restated Loan Agreement dated February 15, 2021 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.10 to form 10-K dated February 28, 2021 (File No.

First Amendment to the Amended and Restated Loan Agreement, dated April 1, 2021 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.11 to Form 10-K dated February 28, 2021 (File No.

Second Amendment to the Amended and Restated Loan Agreement, dated July 16, 2021 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.1 to Form 10-Q dated August 31, 2021 (File No.

Third Amendment to the Amended and Restated Loan Agreement, dated August 31, 2021 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.2 to Form 10-Q dated August 31, 2021 (File No.

Fourth Amendment to the Amended and Restated Loan Agreement, dated November 19, 2021 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.01 to Form 8-K dated November 24, 2021 (File No.

Fifth Amendment to the Amended and Restated Loan Agreement, dated April 11, 2022 by and between the Company and MidFirst Bank, Tulsa, OK is incorporated herein by reference to Exhibit 10.14 to form 10-K dated February 28, 2022 (File No.

Usborne Distribution Agreement dated May 16, 2022 by and between the Company and Usborne Publishing Limited, London, England is incorporated herein by reference to Exhibit 10.2 to form 10-Q dated May 31, 2022 (File No.

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Is incorporated herein by reference to Exhibit 10.4 to Form 10-Q dated November 30, 2022 (File No.

Second Amendment to Credit Agreement, dated May 10, 2023 by and between the Company and BOKF, NA, Tulsa, OK.

Second Amendment to Credit Agreement, dated May 10, 2023 by and between the Company and BOKF, NA, Tulsa, OK is incorporated herein by reference to Exhibit 10.18 to Form 10-K dated February 28, 2023 (File No.

Third Amendment to Credit Agreement, dated August 9, 2023 by and between the Company and BOKF, NA, Tulsa, OK is incorporated herein by reference to Exhibit 10.01 to Form 8-K dated August 17, 2023 (File No.

Fourth Amendment to Credit Agreement, dated December 1, 2023 by and between the Company and BOKF, NA, Tulsa, OK is incorporated herein by reference to Exhibit 10.01 to Form 8-K dated December 28, 2023 (File No.

Consent of Independent Registered Public Accounting Firm.

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Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Incorporated Clawback Policy to Form 10-K dated February 29,2024.

Inline XBRL Instance Document

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Chairman of the Board

Clerico, Director

Kara Gae Neal

Kara Gae Neal, Director

/s/ Joshua J.

Peters, Director

/s/ Bradley V.

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of Educational Development Corporation (the Company) as of February 28, 2023 and 2022, the related statements of operations, shareholders' equity and cash flows for the years then ended, and the related notes to the financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 28, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of Educational Development Corporation (the Company) as of February 29, 2024 and February 28, 2023, the related statements of operations, comprehensive income (loss), shareholders' equity and cash flows for the years then ended, and the related notes to the financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of February 29, 2024 and February 28, 2023, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Liquidity and Management's Plans

While the Company received a waiver for the fixed charge ratio default that occurred on February 28, 2023, the borrowing and purchasing capacity was restricted and management's forecast indicated that the Company will not be in compliance in future periods as described in Note 9.

These conditions, among others in the aggregate, raise substantial doubt over the Company's ability to meet its obligations over the next twelve months.

Certain adverse conditions and events raised substantial doubt over the Company's ability to meet its obligations over the next twelve months.

Management has evaluated these conditions and concluded that its plans have alleviated the substantial doubt about the Company's ability to continue for at least the next twelve months.

To assess their ability to meet obligations as they come due and assess future compliance with debt covenants for at least twelve months from the issuance date of the financial statements, the Company has forecasted future financial results which requires significant judgment and estimation.

Additionally, there is significant judgment and increased level of audit effort involved in determining that it is probable that management's plans will be effectively implemented and alleviate substantial doubt about the Company's ability to continue beyond the next twelve months.

Our audit procedures we performed to address this critical audit matter included, among others:

Reading and evaluating management's plans for dealing with the adverse effects of the conditions and events.

Obtaining the Company's amended debt agreement and assessing whether the terms were appropriately considered on the Company's debt covenant compliance.

To assess their ability to meet obligations as they come due, the Company has forecasted future financial results which require significant judgment and estimation.

Additionally, there is significant judgment and increased levels of audit effort involved in determining that it is probable that management's plans will be effectively implemented and alleviate substantial doubt about the Company's ability to continue beyond the next twelve months.

Our audit procedures performed to address this critical audit matter included, among others:

Reviewing and evaluating management's plans for dealing with the adverse effects of the conditions and events.

Evaluating the reasonableness of management's significant assumptions and judgments used in the preparation of the forecast.

Comparing the forecast to budgets provided to the board of directors, to historical results, to recent trends used in other audit areas and to subsequent actual results.

Comparing the forecast to historical results, recent trends used in other audit areas and actual results subsequent to year end.

Evaluating the adequacy of the disclosure included in the notes to the financial statements.

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Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts of

Restricted cash

Accounts receivable, less allowance for credit losses of

$ 129,000 (2024) and $ 211,700 (2023)

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Prepaid expenses and other assets

Assets held for sale

Total current assets

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DEFERRED INCOME TAX ASSET

OPERATING LEASE RIGHT-OF-USE ASSETS

LIABILITIES AND SHAREHOLDERS' EQUITY

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Deferred revenues

Operating lease liabilities, current

Current maturities of long-term debt

Accrued salaries and commissions

Dividends payable

Income taxes payable

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LONG-TERM DEBT - net

OPERATING LEASE LIABILITIES, non-current

OTHER LONG-TERM LIABILITIES

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Retained earnings

Accumulated other comprehensive income

Less treasury stock, at cost

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EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED FEBRUARY 29 (28),

February 29 (28),

Net earnings (loss)

Other comprehensive income:

Unrealized gain on interest rate exchange agreement

Comprehensive income (loss)

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF SHAREHOLDERS ’ EQUITY

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Treasury Stock

Shares Issued

Capital in Excess

Accumulated Other Comprehensive Income

Shareholders'

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Sales of treasury stock

Forfeiture of restricted shares

Issuance of restricted share awards for vesting

Dividends declared ($ 0.40 /share)

Share-based compensation expense – net

BALANCE - February 28, 2023

Sales of treasury stock

Purchases of treasury stock

Forfeiture of restricted shares

Issuance of restricted share awards for vesting

Change in fair value of interest rate exchange agreement

Share-based compensation expense – net

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Net earnings (loss)

Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation and amortization

Deferred income taxes

Provision for doubtful accounts

Provision for credit losses

Provision for inventory valuation allowance

Share-based compensation expense - net

Net gain on sale of assets

Changes in assets and liabilities:

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Total adjustments

Net cash provided by (used in) operating activities

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property, plant and equipment

Proceeds from sale of assets

Purchases of other assets

Net cash used in investing activities

Net cash provided by (used in) investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

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Sales of treasury stock

Net borrowings (payments) under line of credit

Cash paid to acquire treasury stock

Net payments under line of credit

Dividends paid

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS - END OF YEAR

Net cash provided by (used in) financing activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:

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Cash paid for income taxes (net of refunds)

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:

Fair value of the interest rate exchange agreement

See notes to financial statements.

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Actual results could differ from these estimates.

Liquidity - In accordance with ASU No.

2014-15, Disclosure of Uncertainties about an Entity ’ s Ability to Continue as a Going Concern (Subtopic 205-40) , 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 that the consolidated financial statements are issued.

Reclassifications —Certain reclassifications have been made to the fiscal 2023 balance sheet to conform with the current year financial statement presentation.

These reclassifications had no effect on net earnings.

Liquidity — 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 that the financial statements are issued.

Determining the extent to which conditions or events raise substantial doubt about our ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by us.

Our significant estimates related to this analysis may include identifying business factors such as changes in our brand partners, growth and profitability used in the forecasted financial results and liquidity.

Our significant estimates related to this analysis may include identifying business factors such as completing the planned sale of owned real estate, changes in our Brand Partners, sales growth and profitability used in the forecasted financial results and liquidity.

Further, we make assumptions about the probability that management's plans will be effectively implemented and alleviate substantial doubt and our ability to continue as a going concern.

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However, such assumptions are inherently uncertain and actual results could differ materially from those estimates.

See Note 9 for more information about our going concern assessment.

The short-term duration of the Revolving Loan and uncertainty of the bank’s ongoing support beyond May 31, 2024, along with recurring operating losses and other items, raise substantial doubt over the Company's ability to continue as a going concern.

Management has plans to sell the Hilti Complex and pay off the Term Loans and Revolving Loan.

The proceeds from the sale are expected to generate sufficient cashflow to allow the Company to continue operations with limited borrowings.

The Company expects these borrowings to be available through local banks or other financing sources.

In addition, management’s plans include reducing inventory, which will generate free cashflows, 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 are probable of being achieved to alleviate the substantial doubt about our ability to continue as a going concern and generate sufficient liquidity to meet our obligations as they become due over the next twelve months.

Sales Concentration —Significant portions of our sales are generated in our Direct Sales division, PaperPie.

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When a customer is ready to purchase products from the online party, they are redirected from the social media platform to the Brand Partner’s company hosted e-commerce site where the order can be placed.

Cash and Cash Equivalents —Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits of $ 250,000 .

Cash, Cash Equivalents and Restricted Cash —Cash, cash equivalents and restricted cash are maintained at financial institutions and, at times, balances may exceed federally insured limits of $ 250,000 .

We have never experienced any losses related to these balances.

The majority of payments due from banks for third party credit card transactions process within two business days.

These amounts due are classified as cash and cash equivalents.

Cash and cash equivalents also include demand and time deposits, money market funds and other marketable securities with maturities of three months or less when acquired.

The majority of payments due from banks for third party credit card transactions process within five to twenty business days.

These amounts due are classified as restricted cash.

Cash and cash equivalents include demand and time deposits, money market funds and other marketable securities with maturities of three months or less when acquired.

Accounts Receivable —Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring payment within thirty days from the invoice date.

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Payments of accounts receivable are allocated to the specific invoices identified on the customers’ remittance advice.

Accounts receivable are carried at original invoice amount less an estimated reserve made for returns and discounts based on quarterly review of historical rates of returns and expected discounts to be taken.

Accounts receivables are carried at original invoice amount less an estimated reserve made for returns and discounts based on quarterly review of historical rates of returns and expected discounts to be taken.

The carrying amount of accounts receivable is reduced, if needed, by a valuation allowance that reflects management’s best estimate of the amounts that will not be collected.

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Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation account based on its assessment of the current status of the individual accounts.

Balances which remain outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Balances which remain outstanding after management has made reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

Recoveries of accounts receivable previously written off are recorded as income when received.

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We present a portion of our inventory as a noncurrent asset.

Occasionally we purchase products inventory in quantities in excess of what will be sold within the normal operating cycle due to the minimum order requirements of our primary supplier.

Occasionally we purchase products inventory in quantities in excess of what will be sold within the normal operating cycle due to the minimum order requirements of our primary supplier or changes in sales levels.

We estimate noncurrent inventory using an anticipated turnover ratio by title, based primarily on historical trends.

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Machinery and equipment

Capitalized software

Furniture and fixtures

Capitalized software

Molds and tooling

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Training and maintenance costs are expensed as incurred, while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality.

Assets Held for Sale — The Company classifies long-lived assets, or disposal groups to be sold, as held for sale in the period in which all of the following criteria are met per ASC 360:

(1) management, having the authority to approve the action, commits to a plan to sell the asset or disposal group;

(2) the asset or disposal group is available for immediate sale in its present condition subject only 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 actions required to complete the plan to sell the asset or disposal group have been initiated;

(4) the sale of the asset or disposal group is probable, and transfer of the asset or disposal group is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year;

(5) the asset or disposal group is being actively marketed for sale at a price that is reasonable in relation to its current fair value;

and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

We initially measure a long-lived asset or disposal group that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held-for-sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset or disposal group until the date of sale.

We assess the fair value of a long-lived asset or disposal group less any costs to sell each reporting period it remains classified as held for sale and report any subsequent changes as an adjustment to the carrying value of the asset or disposal group, as long as the new carrying value does not exceed the carrying value of the asset at the time it was initially classified as held for sale.

Upon determining that a long-lived asset or disposal group meets the criteria to be classified as held for sale, the Company ceases depreciation of the asset and reports long-lived assets and/or the assets and liabilities of the disposal group, if material, in the line items assets held for sale and liabilities held for sale, respectively, in our balance sheet.

Refer to Note 3.

Impairment of Long-Lived Assets —We review the value of long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable based on estimated future cash flows.

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Our leases are evaluated at inception or at any subsequent modification.

Depending on the terms, leases are classified as either operating or finance leases if we are the lessee, or as operating, sales-type or direct financing leases if we are the lessor, as appropriate under Accounting Standards Codification (“ASC”) 842 - Leases.

In accordance with ASC 842, we have made an accounting policy election to not apply the standard to lessee arrangements with a term of one year or less and no purchase option that is reasonably certain of exercise.

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Certain PaperPie sales contracts associated with the hostess award programs include sales incentives, such as discounted products.

These incentives provide a separate performance obligation in the contract and material right to the customer.

These incentives provide a separate performance obligation in the contract and material rights to the customer.

The transaction price is allocated to the material right based on its relative standalone selling price and is recognized in revenue as the performance obligations are satisfied, which occurs at shipping point or at the expiration of the material right.

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Management uses a moving average calculation to estimate the allowance for sales returns.

We are not responsible for product damaged in transit.

Damaged returns are primarily from retail stores.

We are not responsible for a product damaged in transit and most damaged returns are primarily from retail stores.

These returns result from damage that occurs in the stores, not in shipping to the stores.

It is industry practice to accept non-damaged returns from retail customers.

Management has estimated sales returns of approximately $ 201,500 as of both February 28, 2023 and February 28, 2022, which is included in other current liabilities on the Company’s balance sheets.

Management has estimated sales returns of approximately $ 201,500 for both February 29, 2024 and February 28, 2023, which is included in other current liabilities on the Company’s balance sheets.

In addition, management has recorded an asset for the expected value of non-damaged inventories to be returned.

The estimated value of returned products of $ 100,800 is included in other current assets on the Company’s balance sheets as of both February 28, 2023 and February 28, 2022.

The estimated value of returned products of $ 100,800 is included in other current assets on the Company’s balance sheets for both February 29, 2024 and February 28, 2023.

The Company generally expenses sales commissions in the same period that the revenue is recognized.

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Forfeitures are recognized when they occur.

Interest Rate Exchange Agreement —The interest rate exchange agreement (“swap agreement”) is recognized on the balance sheet at its fair value.

On the date the swap agreement is entered into, the Company designates the swap agreement as a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash-flow hedge) if the applicable criteria are met.

Changes in the fair value of the swap agreement are recorded in other comprehensive income until earnings are affected by the variability of cash flows.

The Company formally documents all relationships between hedging instruments and hedged items as well as its risk-management objective and strategy for undertaking various hedged transactions.

This process includes linking all cash-flow hedges to specific assets and liabilities on the balance sheet or forecasted transactions.

The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether they are highly effective in offsetting changes in cash flows of hedged items.

When it is determined that the swap agreement is not highly effective or that it has ceased to be highly effective, the Company discontinues hedge accounting prospectively as discussed below.

The Company discontinues hedge accounting prospectively when (a) it is determined that the swap agreement is no longer effective in offsetting changes in the cash flows of a hedged item (including forecasted transactions);

(b) the swap agreement expires or is sold, terminated or exercised;

(c) the swap agreement is de-designated as a hedge instrument because it is unlikely that a forecasted transaction will occur;

or (d) management determines that designation as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the swap agreement will continue to be carried on the balance sheet at its fair value, and gains and losses that were accumulated in other comprehensive income or loss will be recognized immediately in earnings.

In all other situations in which hedge accounting is discontinued, the swap agreement will be carried at its fair value on the balance sheet with subsequent changes in its fair value recognized in the current period’s earnings.

Earnings per Share —Basic earnings (loss) per share (“EPS”) is computed by dividing net earnings (loss) by the weighted average number of common shares outstanding during the period.

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New Accounting Pronouncements — The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting.

We have reviewed the recently issued pronouncements and concluded that no new accounting standard updates (“ASU”) had or may have a material impact on the Company.

We have reviewed the recently issued pronouncements and concluded the following new accounting standard updates (“ASU”) apply to us:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which provides updates to qualitative and quantitative reportable segment disclosure requirements, including enhanced disclosures about significant segment expenses and increased interim disclosure requirements, among others.

The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted, and the amendments should be applied retrospectively.

This ASU will be effective for our Form 10-K for fiscal 2025 and our Form 10-Q for the first quarter of fiscal 2026.

We are currently evaluating the impact this ASU may have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which provides qualitative and quantitative updates to the rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid.

The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied prospectively;

however, retrospective application is also permitted.

This ASU will be effective for our Form 10-K for fiscal 2026.

We are currently evaluating the impact this ASU may have on our financial statement disclosures.

The below table reconciles cash, cash equivalents and restricted cash as reported in the balance sheets to the total of the same amounts shown in the statements of cash flows:

February 29, 2024

February 28, 2023

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

The Company has historically contracted with Braintree Payment Services and PayPal, Inc.

(together “PayPal”) and most recently Nexio, third-party merchant service processors, to capture PayPal, Visa, Discover and Mastercard payments from customers.

Approximately 90% of all payments received by the Company have been channeled through these processors.

During the second quarter of fiscal 2024, PayPal, under the terms of our agreements, began to hold cash payments received from customers in reserve to offset any potential chargebacks.

During the third quarter of fiscal 2024, the Company switched most merchant services for Visa, Discover and Mastercard from Braintree to Nexio, which required a shorter hold period.

This switch allowed a portion of the reserves to be released prior to November 30, 2023.

The Company has classified the remaining cash held in reserves by PayPal and Nexio as restricted cash.

ASSETS HELD FOR SALE

During fiscal 2024, the Company executed the Third Amendment to the existing Credit Agreement with BOKF, NA.

This amendment required the Company to list its real estate property located at 10302 East 55 th Place, Tulsa, Oklahoma 74146 for sale by August 18, 2023.

The Company ceased recording depreciation on the assets upon meeting the held for sale criteria at the end of its second quarter of fiscal 2024.

During the third quarter of fiscal 2024, the Company entered into a sale agreement and closed on the sale of this property for $ 5,100,000 .

The gain from the sale of the property, of approximately $ 4,016,700 , is reflected in other income in the statements of operations.

Subsequent to the closing of the sale, the Company executed a lease agreement on the property with the third-party buyer for 36 months.

See Note 11 for further details.

Also, during fiscal 2024, the Company listed its real estate property located at 5402 S.

Ave, Tulsa, Oklahoma 74146 for sale.

This property, consisting of approximately 402,000 square feet of office and warehouse space on 35 -acres (the “Hilti Complex”), along with 17 -acres of adjacent undeveloped land, was appraised in July, 2023 with a market value of $ 41,970,000 .

The Company ceased recording depreciation on the assets upon meeting the held for sale criteria at the end of the third quarter of fiscal 2024.

The Company records assets held for sale at the lower of their carrying value or fair value less costs to sell.

As of February 29, 2024, the total carrying value of assets held for sale was $ 18,281,100 and is separately recorded on the balance sheets.

Inventories consist of the following:

February 29 (28),

Product inventory

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During fiscal 2023, we entered into a new distribution agreement (“Agreement”) with Usborne.

The Agreement includes annual minimum purchase volumes along with specific payment terms and letter of credit requirements, which if not met may result in Usborne having the right to terminate the Agreement on less than 30 days’ written notice.

The Agreement includes annual minimum purchase volumes along with specific payment terms and letter of credit requirements, which if not met offer Usborne the right to terminate the Agreement on less than 30 days’ written notice.

Should termination of the Agreement occur, the Company will be allowed to sell its remaining Usborne inventory for an agreed upon period, but not less than twelve months following the termination date.

As of February 28, 2023, the Company did not meet the minimum purchase requirements and did not supply the letter of credit required under the Agreement, which could allow Usborne to exercise their option to terminate the Agreement.

As of February 28, 2024, the Company did not meet the minimum purchase requirements and did not supply the letter of credit required under the Agreement, which allows Usborne the right to exercise their option to terminate the Agreement.

Usborne has not notified the Company of termination of the Agreement.

Usborne has refused to pay the $ 1.0 million volume rebate owed to the Company from purchases made during fiscal 2022.

The Company is disputing the cancellation of the rebate but has not recognized any rebate in fiscal 2023 due to its uncertainty.

Additionally, under the terms in the Agreement, the Company no longer has the rights to distribute Usborne’s products to retail customers after November 15, 2022, at which time Usborne was to use a different distributor to supply retail accounts with its products.

As a courtesy upon Usborne’s request, the November 15, 2022 transition was extended until their new supplier can start distribution in 2023.

The Company is disputing the cancellation of the rebate but has not recognized any rebate in fiscal 2023 or fiscal 2024 due to its uncertainty.

Additionally, under the terms in the Agreement, the Company no longer has the rights to distribute Usborne’s products to retail customers.

The Company discontinued selling Usborne products to retail customers in the first quarter of fiscal 2024.

Gross sales attributed to Usborne’s products sold within the Publishing division accounted for 24.2 %, or $ 2,740,000 , during the fiscal year ended February 29, 2024, and 83.1 %, or $ 23,220,600 , during the fiscal year ended February 28, 2023.

5 unchanged sentences

Property, plant and equipment consist of the following:

February 29 (28),

Building improvements

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Property, plant and equipment-net

During fiscal year 2022, the Company added two new pick-pack-ship lines to increase the Company’s daily shipping capacity and acquired Learning Wrap-Ups.

In fiscal year 2023, the Company purchased the SmartLab Toys product line and opened facilities in Seattle, Washington.

The Company has continued its development of its new customer portal and e-commerce platform, both of which are expected to be released in fiscal year 2024.

During fiscal year 2023, the Company purchased the SmartLab Toys product line.

During the fourth quarter of fiscal 2024, the Company implemented its new proprietary e-commerce platform resulting in the reclassification of the development costs in progress to capitalized software.

OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

February 29 (28),

Accrued royalties

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Total other current liabilities

A summary of other income is show below:

February 29 (28),

Federal tax credits realized

$ 3,808,700 $ -

Gain from sale of assets

Rental income

1,544,000 1,565,000

Other income (loss) 24,900 ( 237,600 )

Total other income

$ 9,394,300 $ 1,327,400

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The tax effects of significant items comprising our net deferred tax assets and liabilities are as follows:

February 29 (28),

Deferred tax assets:

Allowance for doubtful accounts

Allowance for credit losses

Inventory overhead capitalization

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Net operating loss carryforward (1)

Disallowed interest

Total deferred tax assets

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Authoritative guidance requires a valuation allowance to be established when determining whether deferred tax assets are more likely-than-not to be realized.

Based on the Company’s evaluation, we determined the net deferred tax assets do meet the requirements to be realized, and as such, no valuation allowance has been established.

Based on the Company’s evaluation, we determined the net deferred tax assets meet the requirements to be realized, and as such, no valuation allowance has been established.

The components of income tax expense (benefit) are as follows:

February 29 (28),

Total income tax expense (benefit)

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federal statutory income tax rate:

February 29 (28),

federal statutory income tax rate

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and certain state jurisdictions in which we have nexus.

We are no longer subject to income tax examinations by tax authorities for fiscal years before 2017.

We are no longer subject to income tax examinations by tax authorities for the fiscal years before 2020.

Based upon a review of our income tax filing positions, we believe that our positions would be sustained upon an audit and do not anticipate any adjustments that would result in a material change to our financial position.

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The Company has created the Educational Development Corporation Employee 401(k) Plan (“EDC 401(k) Plan”) as a benefit plan for employees offering retirement investment options as well as profit sharing with its employees, in the form of matching contributions.

The EDC 401(k) Plan includes, as an investment option, the ability to purchase shares of the Company’s stock which the Plan Administrator acquires directly from the NASDAQ.

The EDC 401(k) Plan includes, as an investment option, the ability to purchase shares of the Company’s stock which the Plan Administrator acquires directly from NASDAQ.

This plan incorporates the provisions of Section 401(k) of the Internal Revenue Code that allow favorable tax treatments on investments.

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We have both lessee and lessor arrangements.

Our lessee arrangements include four rental agreements where we have the exclusive use of dedicated office space in San Diego, California, warehouse and office space in Layton, Utah, warehouse and office space in Seattle, Washington, and warehouse space locally in Tulsa, OK, all of which qualify as an operating lease.

Our lessor arrangements includes one rental agreement for warehouse and office space in Tulsa, Oklahoma, and qualifies as an operating lease under ASC 842.

Our lessee arrangements include four rental agreements where we have the exclusive use of dedicated office space in San Diego, California, warehouse and office space in Layton, Utah, and two leases for warehouse space locally in Tulsa, OK, all of which qualify as an operating lease.

Our lessor arrangements include one rental agreement for warehouse and office space in Tulsa, Oklahoma, and qualifies as an operating lease under ASC 842.

Operating Leases – Lessee

We recognize a lease liability, reported in other liabilities on the balance sheets, for each lease based on the present value of remaining minimum fixed rental payments (which includes payments under any renewal option that we are reasonably certain to exercise), using a discount rate that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term.

Expected payments in the next twelve months are classified as current lease liabilities.

Payments in excess of twelve months are classified as long-term lease liabilities.

We also recognize a right-of-use asset, reported in other assets on the balance sheets, for each lease, valued at the lease liability and adjusted for prepaid or accrued rent balances existing at the time of initial recognition.

The lease liability and right-of-use asset are reduced over the term of the lease as payments are made and the assets are used.

The lease liability and right-of-use assets are reduced over the term of the lease as payments are made and the assets are used.

February 29 (28),

Operating lease assets:

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Weighted-average discount rate

Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses in our statements of operations.

Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expensed in our statements of operations.

Variable and short-term rental payments are recognized as costs and expenses as they are incurred.

February 29 (28),

Fixed lease costs

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The following table provides further information about our operating leases reported in our financial statements:

February 29 (28),

Operating cash flows – operating leases

Operating Leases – Lessor

In connection with the 2015 purchase of our 400,000 square-foot facility on 40 acres, we entered into a 15 -year lease with the seller, a non-related third party, who leases 181,300 square feet, or 45.3 % of the facility.

In connection with the 2015 purchase of our 400,000 square-foot facility on 50 acres (the “Hilti Complex”), we entered into a 15 -year lease with the seller, a non-related third party, who leases 181,300 square feet, or 45.3 % of the facility.

The lessee pays $ 123,900 per month, through the lease anniversary date of December 2024 with a 2.0% annual increase adjustment on each anniversary date thereafter.

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Years ending February 29 (28),

The cost of the leased space was approximately $ 10,637,900 and $ 10,834,300 as of February 28, 2023 and February 28, 2022, respectively.

The cost of the leased space was approximately $ 10,159,500 as of February 29, 2024, and $ 10,637,900 as of February 28, 2023, respectively.

The accumulated depreciation associated with the leased assets was $ 2,776,400 and $ 2,853,200 as of February 29, 2024, and February 28, 2023, respectively.

Both the leased assets and accumulated depreciation are included in property, plant and equipment-net on the balance sheets.

During the third quarter of fiscal 2024, the Company announced its plans to sell the Hilti Complex and reclassified the land and buildings from property, plant and equipment to assets held for sale.

The leased space was included in this reclassification.

Debt consists of the following:

February 29 (28),

Line of credit

Floating rate term loan(s) (1)

Floating rate term loan

Fixed rate term loan

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Long-term debt, net

(1) The February 28, 2022 floating rate term loans balance of $14,651,000 was comprised of the MidFirst Bank advancing term loans #1 and #2.

The Company’s payment to MidFirst Bank, including interest, was $ 45,028,600 , which satisfied all of the Company’s debt obligations with MidFirst Bank.

The Company did not incur any early termination penalties as a result of the repayment of indebtedness or termination of the Amended and Restated Loan Agreement, which provided Term Loan #1, Advancing Term Loan #1, Advancing Term Loan #2 and the Revolving Loan.

In connection with the repayment of outstanding indebtedness, the Company was automatically and permanently released from all security interests, mortgages, liens and encumbrances under the Amended and Restated Loan Agreement with MidFirst Bank.

The material terms of the Amended and Restated Loan Agreement with MidFirst Bank are described in the Company’s Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 5, 2022.

On August 9, 2022, the Company executed a new credit agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma” or the “Lender”).

The Loan Agreement establishes a fixed rate term loan in the principal amount of $ 15,000,000 (the “Fixed Rate Term Loan”), a floating rate term loan in the principal amount of $ 21,000,000 (the “Floating Rate Term Loan”;

On August 9, 2022, the Company repaid in full all outstanding indebtedness and terminated all commitments and obligations under its Amended and Restated Loan Agreement dated February 15, 2021 (as amended), between the Company and MidFirst Bank and executed a new Credit Agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma” or the “Lender”).

The Loan Agreement established a fixed rate term loan in the principal amount of $ 15,000,000 (the “Fixed Rate Term Loan”), a floating rate term loan in the principal amount of $ 21,000,000 (the “Floating Rate Term Loan”;

together with the Fixed Rate Term Loan, collectively, the “Term Loans”), and a revolving promissory note in the principal amount up to $ 15,000,000 (the “Revolving Loan” or “Line of Credit”).

Features of the Loan Agreement include:

Term Loans on 20-year amortization with 5-year maturity date of August 9, 2027

Revolving Loan maturity date of August 9, 2023

Fixed Rate Term Loan bears interest at a fixed rate per annum equal to 4.26 %

Floating Rate Term Loan bears interest at a rate per annum equal to Term SOFR Rate + 1.75 % (effective rate was 6.28 % at February 28, 2023)

Revolving Loan bears interest at a rate per annum equal to Term SOFR Rate + 2.50 % (effective rate was 7.03 % at February 28, 2023)

Revolving Loan allows for Letters of Credit up to $ 7,500,000 upon bank approval (none were outstanding at February 28, 2023)

The Loan Agreement also contains provisions that require the Company to maintain a minimum fixed charge ratio and limits any additional debt with other lenders.

The Company was in violation of the minimum fixed charge ratio covenant as of February 28, 2023, for which the Company obtained a written waiver of compliance from the Lender.

Available credit under the current $ 15,000,000 revolving line of credit with the Company’s Lender was approximately $ 4,365,500 at February 28, 2023.

On December 22, 2022, the Company executed the First Amendment to our Loan Agreement with the Lender.

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On May 10, 2023, the Company executed the Second Amendment to our Loan Agreement with the Lender.

This amendment waived the fixed charge ratio default which occurred on February 28, 2023.

The Second Amendment also added a cumulative maximum level of fiscal year to date inventory purchases through the expiration of the Revolving Loan Agreement, increased the borrowing rate on the Company’s Revolving Loan to Term SOFR Rate plus 3.5 %, requires certain swap agreements, reduced the revolving commitment from $15,000,000 to $ 14,000,000 , effective May 10, 2023, and further reduced the revolving commitment to $ 13,500,000 , effective July 15, 2023, among other items.

The Company does not expect to meet the fixed charge ratio, outlined in the amended Loan Agreement, during fiscal year 2024.

Under the terms of the amended Loan Agreement, not meeting this ratio could represent an Event of Default.

Should an Event of Default occur, the Lender will have the right to accelerate the maturities of the Fixed Rate Term Loan and Floating Rate Term Loan.

As an Event of Default is expected, and no waiver of the Event of Default is guaranteed to be received by the Lender, the long-term maturities of the Fixed Rate Term Loan and Float Rate Term Loan have been reclassified as current liabilities.

An Event of Default is expected associated with the amended Loan Agreement, there is no guaranty that the Event of Default will be waived by the Lender, and the bank may choose to accelerate the maturities of the Fixed Rate Term Loan and Floating Rate Term Loan.

These conditions, among others in the aggregate, raise substantial doubt over the Company's ability to continue as a going concern.

Management has plans to enter into a new financing agreement by August 9, 2023, with the Lender, that will allow it to operate without default and reclassify the non-current portions of the Fixed Rate Term Loan and Floating Rate Term Loan as long-term liabilities.

In addition, management’s plans include reducing inventory and related borrowing costs, building the active PaperPie Brand Partners to pre-pandemic levels, as the distraction and costs associated with the rebrand that occurred in fiscal year 2023 are expected to have a lesser impact in the future, reducing expenses due to lower revenue volumes and receipt of the contingent Employee Retention Credit.

Although there is no guarantee, we believe management's plans are probable of being achieved to alleviate the substantial doubt about our ability to continue as a going concern and we will have sufficient liquidity to meet our obligations as they become due over the next twelve months.

The following table reflects aggregate current maturities of term debt, excluding the Revolving Loan, during the next fiscal years as follows:

Year ending February 29,

This amendment waived the fixed charge ratio default which occurred on February 28, 2023 and amended the financial covenant to not require the fixed charge ratio to be measured at May 31, 2023.

The Second Amendment also added a cumulative maximum level of fiscal year to date inventory purchases through the expiration of the Revolving Loan Agreement, increased the borrowing rate on the Company’s Revolving Loan to Term SOFR Rate plus 3.5 %, required certain swap agreement be executed within 30 days of the amendment, reduced the revolving commitment from $15,000,000 to $ 14,000,000 , effective May 10, 2023, and further reduced the revolving commitment to $ 13,500,000 , effective July 15, 2023, among other items.

On June 6, 2023, pursuant to its interest rate risk and risk management strategy, the Company entered into a swap transaction (the “Swap Transaction”) with the Lender, which converts a portion of the original $ 21,000,000 Floating Rate Term Loan from a floating interest rate to a fixed interest rate for the next two years.

The Swap Transaction has a notional amount of $ 18,000,000 through fiscal quarter ending May 31, 2024, and then resets to $ 13,000,000 through May 30, 2025, while continuing to mirror the amortizing balance of the Floating Rate Term Loan.

Under the terms of this agreement, the Company, in effect, has exchanged the floating interest rate of 30-Day Term SOFR Rate at the trade date of June 5, 2023, to a fixed rate of 4.73 %.

The Swap Transaction commenced on June 7, 2023, with a termination date of May 30, 2025.

On August 9, 2023, the Company executed the Third Amendment along with a Revised Credit Agreement (“Revised Loan Agreement”) with the Lender.

This amendment extended the Revolving Loan maturity date to January 31, 2024 and introduced a stepdown to the Revolving Commitment from $ 13,500,000 , through August 30, 2023;

to $ 10,500,000 through October 30, 2023;

to $ 9,000,000 through November 29, 2023;

to $ 5,000,000 through December 30, 2023;

to $ 4,500,000 through January 30, 2024;

and to $ 4,000,000 on January 31, 2024.

The amendment restricted the Company from entering into any new purchase orders and uses its best efforts to cancel existing purchase orders.

It also required the Company to list its real estate property located at 10302 East 55th Place, Tulsa, Oklahoma, for sale with a licensed commercial real estate broker satisfactory to the Lender on or before August 18, 2023, among other items.

Contingent upon the occurrence of an Event of Default in the agreement, the Company shall within 15 days list the Hilti Complex with a licensed commercial real estate broker satisfactory to the Lender.

The Third Amendment also increased the borrowing rate on the Revolving Loan to 30-Day Term SOFR Rate + 4.50 %, or 9.82 % at February 29, 2024.

The Revised Loan Agreement was updated for the changes in the Third Amendment as well as removed the fixed charge ratio and the ability for borrowings to be accelerated before the January 31, 2024 Revolving Loan maturity date.

Prior to the Third Amendment, executed on August 9, 2023, the Loan Agreement contained provisions that required the Company to maintain a minimum fixed charge ratio.

The Company was in violation of the minimum fixed charge ratio covenant as of February 28, 2023, for which the Company obtained a written waiver of compliance from the Lender and was not required to measure the fixed charge ratio as of May 31, 2023.

Concurrent with the execution of the Third Amendment to the Loan Agreement, the Loan Agreement was modified to incorporate the changes outlined in the Third Amendment and the fixed charge ratio covenant was removed, as well as the Lender’s right to accelerate the maturities of the Fixed Rate Term Loan and Floating Rate Term Loan due to the fixed charge ratio covenant.

On November 30, 2023, the Company executed the Fourth Amendment to the Credit Agreement (“Amendment”) with the Lender.

The Amendment, effective December 1, 2023, increased the Revolving Loan commitment to $ 8,000,000 and extended the maturity date to May 31, 2024.

The Amendment also required the Company to list the Hilti Complex for sale, allowed the Company to execute additional purchase orders, subject to the lender’s approval and conditions, not to exceed $ 2,100,000 between December 1, 2023 and March 31, 2024, among other items.

Proceeds from the sale of the property are to be used to pay down the borrowings with the Lender.

A third-party appraisal was completed on the Hilti Complex, consisting of the 400,000 square feet building complex on approximately 50 acres, along with approximately 15 acres of adjacent unused land, in July of 2023 with a market value of $ 41,970,000 .

Available credit under the current $ 8,000,000 revolving line of credit with the Company’s Lender was approximately $ 2,501,900 at February 29, 2024.

Features of the Revised Loan Agreement include:

Two Term Loans on 20-year amortization with 5-year maturity date of August 9, 2027

$ 15 Million Fixed Rate Term Loan bears interest at a fixed rate per annum equal to 4.26 %

$ 21 Million Floating Rate Term Loan bears interest at a rate per annum equal to Term SOFR Rate + 1.75 %

$ 8 Million Revolving Loan with maturity date of May 31, 2024 .

The Revolving Loan bears interest at a rate per annum equal to Term SOFR Rate + 4.50 % (effective rate was 9.82 % at February 29, 2024)

Revolving Loan allows for Letters of Credit up to $ 7,500,000 upon bank approval (none were outstanding at February 29, 2024)

The following table reflects aggregate current maturities of term debt, excluding the Revolving Loan, during the next fiscal year as follows:

Years ending February 28 (29),

COMMITMENTS AND CONTINGENCIES

As of February 28, 2023, the Company had outstanding purchase commitments for inventory totaling $ 4,868,600 , which will be received and payments due during fiscal year 2024.

Of these inventory commitments, $ 2,309,000 were with Usborne, $ 2,103,300 with various Kane Miller publishers and the remaining $ 456,300 with other suppliers.

As a response to the COVID-19 outbreak, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which contained a number of programs to assist workers, families and businesses.

Part of the CARES Act provides an Employee Retention Credit (“ERC”) which is a refundable tax credit against certain employment taxes equal to 50% of qualified wages paid, up to $10,000 per employee annually, from March 12, 2020 through January 1, 2021.

Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits to 70% of qualified wages paid, up to $10,000 per employee per quarter, through September 30, 2021.

At the time of the original filing of Form 941, we were unaware that we qualified for the ERC.

Subsequent to the original filing, we became aware of our qualification based on a more than nominal impact to the business due to a government order/mandate.

We recognized our qualification during the fourth quarter of fiscal 2023 based on a study provided by a third party amounting to $ 1,369,900 in the first quarter of 2021, $ 1,065,900 in the second quarter of 2021, and $ 1,196,100 in the third quarter of 2021.

On April 11, 2023 the Company filed 2021 Q1, Q2 and Q3 941-X forms to claim a refund for the ERC.

Due to the subjectivity of the credit, the Company elected to account for the ERC as a gain under ASC 450-30, Gain Contingencies.

The Company will not recognize the credit until all uncertainties are resolved and the income is “realized” or “realizable.”

As of February 29, 2024, the Company had outstanding purchase commitments for inventory totaling $ 1,424,800 with Kane Miller and SmartLab Toys suppliers, which will be received and payments due during fiscal year 2025.

SHARE-BASED COMPENSATION

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The 760 shares purchased with dividends were not reissued.

During fiscal year 2024, 35,285 restricted shares were forfeited and regranted to participants with an average grant-date fair value of $ 1.84 .

The remaining compensation expense of these awards, totaling approximately $ 403,600 as of February 29, 2024, will be recognized ratably over the remaining vesting period of 12 months.

2 unchanged sentences

Year Ended February 29 (28),

Share-based compensation expense

Share-based compensation expense - net of forfeitures

The following table summarizes stock award activity during fiscal year 2024 under the 2019 LTI Plan:

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Outstanding at February 29, 2024

As of February 28, 2023, total unrecognized share-based compensation expense related to unvested restricted shares was $ 769,500 , which we expect to recognize over a weighted-average period of 24.0 months.

STOCK REPURCHASE PLAN

2 unchanged sentences

This plan has no expiration date.

During fiscal years 2023 and 2022, there were no repurchases under the 2019 stock repurchase plan.

The maximum number of shares that may be repurchased in the future is 514,594 .

During fiscal year 2024, there was a repurchase of treasury stock for 138,201 shares for an average purchase price of $ 4.08 per share, which amounted to $ 563,900 .

After the repurchase, the maximum number of shares that may be repurchased in the future is 376,393 .

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

18 unchanged sentences

Our Publishing segment markets its products to retail accounts, which include book, school supply, toy and gift stores, museums, trade and specialty wholesalers, through commissioned sales representatives and our internal tele-sales group.

See Note 3 for the impact of our updated distribution agreement on the Publishing segment.

The accounting policies of the segments are the same as those of the rest of the Company.

See Note 5 for the impact of our updated Usborne distribution agreement on the Publishing segment.

The accounting policies for the segments are the same as those for the rest of the Company.

We evaluate segment performance based on earnings before income taxes of the segments, which is defined as segment net revenues reduced by cost of sales and direct expenses.

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EARNINGS (LOSS) BEFORE INCOME TAXES

INTEREST RATE EXCHANGE AGREEMENT

The Company maintains an interest-rate risk-management strategy that uses interest-rate swap instruments to minimize significant, unanticipated earnings fluctuations caused by interest-rate volatility.

The Company's specific goal is to lower the cost of its borrowed funds, when possible.

On June 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 of our $ 21,000,000 Floating Rate Term Loan.

This swap is utilized to manage interest-rate exposure over the period of the interest-rate swap and is designated as a highly effective cash-flow hedge.

The differential to be paid or received on the swap agreement is accrued as interest rates change and is recognized in interest expense over the life of the agreement.

The swap agreement offsets a corresponding portion of the amortizing $21,000,000 Floating Rate Term Loan, expires on May 30, 2025 , and has effectively fixed the interest rate on the offsetting, outstanding balance of the $21,000,000 Floating Rate Term Loan at 6.48 %.

The notional amount of the swap and the offsetting, outstanding portion of the term loan were $ 17,300,000 on February 29, 2024.

The interest-rate swap contains no credit-risk–related contingent features and is cross-collateralized by all assets of the Company.

The effective portion of the unrealized gain or loss on this interest-rate swap is reported as a component of other comprehensive income (“OCI”) and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

Gains and losses on the interest rate swap representing amounts excluded from the assessment of hedge effectiveness are recognized in current earnings.

The fair value of the interest rate swap is included in the following caption on the balance sheets as follows:

February 29, 2024

February 28, 2023

Prepaid expenses and other assets

FINANCIAL INSTRUMENTS

The following methods and assumptions are used in estimating the fair-value disclosures for financial instruments:

The carrying amounts reported in 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.

The carrying amounts reported in the balance sheets for cash and cash equivalents, restricted cash, accounts receivable and accounts payable approximate fair value due to the short-term maturity of these instruments.

The estimated fair value of our assets held for sale was $ 40,019,200 as of February 29, 2024.

The Company did not have any assets held for sale as of February 28, 2023.

Management's estimates are based on the appraised market value and listing price of the Hilti Complex and land, less the estimated costs to sell.

The estimated fair value of our term notes payable is estimated by management to approximate $ 28,152,800 and $ 34,253,500 as of February 29, 2024, and February 28, 2023, respectively.

Management's estimates are based on the obligations' characteristics, including floating interest rate, maturity, and collateral.

The fair value of the Company’s interest rate swap of $ 24,400 is based on Level 2 inputs, including the present value of estimated future cash flows based on market expectations of the yield curve on variable interest rates.

DEFERRED REVENUES

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SUBSEQUENT EVENTS

On May 10, 2023, the Company executed the Second Amendment to our Loan Agreement with BOKF, NA.

This amendment waived the fixed charge ratio default which occurred on February 28, 2023.

The Second Amendment also added a cumulative maximum level of fiscal year to date inventory purchases through the expiration of the Revolving Loan Agreement, increased the borrowing rate on the Company’s Revolving Loan to Term SOFR Rate + 3.5% , reduced the revolving commitment from $ 15,000,000 to $ 14,000,000 , effective May 10, 2023, and further reduced the revolving commitment to $ 13,500,000 , effective July 15, 2023, among lesser items.

See Note 9 for more information about our going concern assessment.

The Company pays personal property taxes to Tulsa County (“County”) for equipment as well as inventory on hand at December 31 st that is expected to be sold within the state of Oklahoma.

In March 2024, the Company filed their 2024 Personal Property Tax Rendition that continued to exclude inventory that is sold outside of Oklahoma as well as inventory that is not sold within the exemption period allowed by the County.

The Company’s estimated personal property taxes for fiscal 2024 were approximately $ 270,000 .

On April 24, 2024 the Company received a notice of disapproval of its rendition and a tax assessment against all of its owned inventory on hand at December 31,2023, thereby increasing the expected personal property tax to approximately $ 729,000 .

The Company plans to appeal the assessment and is requesting a reduction of the property tax assessment on inventory sold outside of Oklahoma.

Once the appeal is submitted, the County assessor will issue a written decision within seven (7) calendar days of the hearing.

If the decision is still denied, then the Company will appeal to the Tulsa County Board of Equalization (“Board”) within fifteen (15) calendar days of the date the decision is mailed.

Should the Board rule in favor of the County, the Company will then file a lawsuit with the Court of Tax Review.

Should the Court of Tax Review rule against the Board’s decision, the Company expects to further escalate the appeal to the Oklahoma Supreme Court.

The Company is continuing to accrue personal property taxes in calendar 2024 based on the original rendition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures