What changed in this filing

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Item 9A. Controls and Procedures

2026-05-19 compared with 2025-05-19 · 843 added, 950 removed, 393 unchanged (82% of the section changed)

CONTROLS AND PROCEDURES

of Disclosure Controls and Procedures

evaluation was performed of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to the Securities

Exchange Act of 1934 (the “Exchange Act”) Rule 13a-15(a) as of February 28, 2025.

This evaluation was conducted under the

supervision and with the participation of our management, including our Chief Executive Officer and Chairman of the Board (Principal

Executive Officer) and our Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer).

on that evaluation, these officers concluded that our disclosure controls and procedures were effective to ensure that information required

to be disclosed in reports that we file or submit under the Exchange Act is accumulated and communicated to them, as appropriate, to

allow timely decisions regarding required disclosure and is recorded, processed, summarized, and reported in accordance with the time

periods specified in the SEC rules and forms.

It should be noted that the design of any system of controls is based in part upon certain

assumptions about the likelihood of future events.

in Internal Control over Financial Reporting

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

Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such

term is defined in Rules 13(a) through 15(f) of the Exchange Act.

Under the supervision and with the participation of our management,

including our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our internal control over financial

reporting based on the framework set forth in the 2013 Internal Control – Integrated Framework issued by the Committee

of Sponsoring Organizations of the Treadway Commission (“COSO”).

All internal control systems, no matter how well they are

designed, have inherent limitations.

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.

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 28, 2025.

annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial

Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC

that permit us to provide only management’s report in this annual report.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed

of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to the Securities Exchange Act of

1934 (the “Exchange Act”) Rule 13a-15(a) as of February 28, 2026.

This evaluation was conducted under the supervision and

with the participation of our management, including our Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

and our Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer).

Based on that evaluation,

these officers concluded that our disclosure controls and procedures were effective to ensure that information required to be disclosed

in reports that we file or submit under the Exchange Act is accumulated and communicated to them, as appropriate, to allow timely decisions

regarding required disclosure and is recorded, processed, summarized, and reported in accordance with the time periods specified in the

SEC rules and forms.

It should be noted that the design of any system of controls is based in part upon certain assumptions about the

likelihood of future events.

Changes in 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

The Company’s management

is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13(a)

through 15(f) of the Exchange Act.

Under the supervision and with the participation of our management, including our Chief Executive Officer

and our Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the framework

set forth in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations

of the Treadway Commission (“COSO”).

All internal control systems, no matter how well they are designed, have inherent limitations.

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.

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 28, 2026.

This annual report does not

include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

report was not subject to attestation by our registered public accounting firm pursuant to the rules of the SEC that permit us to provide

only management’s report in this annual report.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Identification of Directors

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 July

Identification of Executive Officers

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 July 2, 2025.

Compliance with Section 16 (a) of the Exchange Act

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 July 2, 2025.

DISCLOSURE REGARDING

FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE

OFFICERS AND CORPORATE GOVERNANCE

(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 July 8, 2026.

(b) Identification of Executive

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 July 8, 2026.

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 July 8, 2026.

EXECUTIVE COMPENSATION

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

July 2, 2025.

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

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 July 2, 2025.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

PRINCIPAL ACCOUNTING FEES AND SERVICES

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 July 2, 2025.

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 July 8, 2026.

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 July 8, 2026.

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 July 8, 2026.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

(a) The following documents are filed as part of

Financial Statements

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Notes to Financial Statements 30-47

have been omitted as such information is either not required or is included in the financial statements.

Schedules have been omitted as such information

is either not required or is included in the financial statements.

Restated Certificate of Incorporation dated April 26, 1968, and Certificate of Amendment thereto dated June 21, 1968 are incorporated herein by reference to Exhibit 1 to Registration Statement on Form 10-K (File No.

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Eighth Amendment to Credit Agreement, effective April 4, 2025 by and between the Company and BOKF, NA, Tulsa, OK is incorporated herein by reference to Exhibit 10.01 to Form 8-K dated April 17, 2025 (File No.

Ninth Amendment to Credit Agreement, effective July 11, 2025 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 12, 2025 (File No.

Notice of Default and Reservation of Rights, dated September 30, 2025, from BOKF, NA, Tulsa, OK is incorporated herein by reference to Exhibit 10.20 to Form 10-Q dated August 31, 2025 (File No.

Consent of Independent Registered Public Accounting Firm.

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Certification of the Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer) of Educational Development Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification pursuant

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

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

Educational Development Corporation’s Clawback Policy is incorporated herein by reference to Exhibit 97.1 to Form 10-K dated May 21, 2024 (File No.

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Cover Page Interactive Data

File (formatted as Inline XBRL and contained in Exhibit 101)

*** Management

Contract or compensatory plan or arrangement

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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

Filed Herewith

Management Contract or compensatory plan or arrangement

FORM 10-K SUMMARY

to the requirements of 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 undersigned, thereunto duly authorized.

DEVELOPMENT CORPORATION

Not applicable

Pursuant to the requirements

of 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

undersigned, thereunto duly authorized.

EDUCATIONAL DEVELOPMENT CORPORATION

President, Chief Executive Officer, and

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(Principal Financial and Accounting Officer)

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the date indicated.

Pursuant to the requirements

of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in

the capacities and on the date indicated.

White, Director

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/s/ Bradley V.

/s/ Steven Hooser

Steven Hooser

Chief Financial Officer and

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(Principal Financial and Accounting Officer)

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Shareholders and the Board of Directors of Educational Development Corporation

on the Financial Statements

have audited the accompanying balance sheets of Educational Development Corporation (the Company) as of February 28, 2025 and February

29, 2024, 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 28, 2025 and February 29, 2024, 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.

financial statements are the responsibility of the Company’s management.

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

(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.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Shareholders and the Board of Directors

of Educational Development Corporation

Opinion on the Financial Statements

We have audited the accompanying balance sheets

of Educational Development Corporation (the Company) as of February 28, 2026 and 2025, 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 28, 2026 and 2025, 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

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our

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.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

and Management’s Plans

adverse conditions and events raised substantial doubt over the Company’s ability to meet its obligations over the next 12 months.

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 12 months.

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 12 months.

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

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

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

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

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

HOGANTAYLOR LLP

have served as the Company’s auditor since 2005.

DEVELOPMENT CORPORATION

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective or complex judgments.

We determined that there are no critical audit matters.

/s/ HOGANTAYLOR LLP

We have served as the Company’s auditor

Tulsa, Oklahoma

EDUCATIONAL DEVELOPMENT CORPORATION

BALANCE SHEETS

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PROPERTY, PLANT AND EQUIPMENT - net

DEFERRED INCOME TAX ASSET

DEFERRED INCOME TAX ASSET - net

OPERATING LEASE RIGHT-OF-USE ASSETS

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Total current liabilities

LONG-TERM DEBT - net

OPERATING LEASE LIABILITIES, noncurrent

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Retained earnings

Accumulated other comprehensive income (loss)

Accumulated other comprehensive loss

Less treasury stock, at cost

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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

notes to financial statements.

DEVELOPMENT CORPORATION

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED FEBRUARY 28 (29),

THE YEARS ENDED FEBRUARY 28,

PRODUCT REVENUES, net of discounts and allowances

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INTEREST EXPENSE

Gain from sale of assets - net

( 12,190,900 )

( 1,820,200 )

( 2,109,000 )

Total other income

( 14,011,100 )

( 2,109,000 )

EARNINGS (LOSS) BEFORE INCOME TAXES

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Dividends per share

notes to financial statements.

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED FEBRUARY 28 (29),

February 28 (29),

STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

THE YEARS ENDED FEBRUARY 28,

Net earnings (loss)

$ ( 5,263,600 )

Other comprehensive income (loss):

Unrealized gain (loss) on interest rate exchange agreement

Other comprehensive income:

Unrealized loss on interest rate exchange agreement

Comprehensive income (loss)

$ ( 5,303,400 )

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF SHAREHOLDERS ’ EQUITY

AS OF FEBRUARY 28 (29),

notes to financial statements.

DEVELOPMENT CORPORATION

OF SHAREHOLDERS ’ EQUITY

OF FEBRUARY 28 (29),

(par value $0.20 per

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BALANCE - February 29, 2024

$ ( 13,086,100 )

Purchases of treasury stock

Forfeiture of restricted shares

Issuance of restricted share awards for vesting

Sales of treasury stock

Change in fair value of interest rate exchange agreement

Share-based compensation expense – net

( 5,263,600 )

BALANCE - February 28, 2025

$ ( 13,060,400 )

Purchases of treasury stock

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Change in fair value of interest rate exchange agreement

Share-based compensation expense – net

BALANCE - February 28, 2026

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED FEBRUARY 28 (29),

$ ( 13,147,500 )

notes to financial statements.

DEVELOPMENT CORPORATION

OF CASH FLOWS

THE YEARS ENDED FEBRUARY 28,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Share-based compensation expense - net

Loss on abandonment of asset

Net loss (gain) on sale of assets

( 12,190,900 )

Impairment loss on assets

Changes in assets and liabilities:

Accounts receivable

Inventories - net

Prepaid expenses and other assets

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Accrued salaries and commissions and other liabilities

( 1,288,200 )

Deferred revenues

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Cash paid for interest

Cash paid for income taxes - net of refunds

Cash (received)/paid for income taxes - net of refunds

$ ( 200,500 )

$ ( 274,300 )

SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:

Fair value of the interest rate exchange agreement

See notes to financial statements.

EDUCATIONAL DEVELOPMENT CORPORATION

NONCASH TRANSACTIONS

Leased assets obtained in exchange for operating lease liabilities

Inventory donations

notes to financial statements.

YEARS ENDED FEBRUARY 28, 2025 AND FEBRUARY 29, 2024

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES

Nature of Business —Educational

Development Corporation (“we,” “our,” “us,” or “the Company”) distributes books and educational

products and publications through our PaperPie and EDC Publishing (“Publishing”) divisions to individual consumers, book,

toy and gift stores, libraries and home educators located throughout the United States (“U.S.”).

We are the owner and exclusive

publisher of Kane Miller children’s books;

DEVELOPMENT CORPORATION

TO FINANCIAL STATEMENTS

ENDED FEBRUARY 28, 2026 AND FEBRUARY 28, 2025

DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Business —Educational Development Corporation (“we,” “our,” “us,” or “the Company”)

distributes books and educational products and publications through our PaperPie and EDC Publishing (“Publishing”) divisions

to individual consumers, book, toy and gift stores, libraries and home educators located throughout the United States (“U.S.”).

We are the owner and exclusive publisher of Kane Miller children’s books;

Learning Wrap-Ups, maker of educational manipulatives;

and SmartLab Toys, maker of STEAM-based

toys and games.

We are also the exclusive United States Multi-Level Marketing (“MLM”) distributor of Usborne Publishing Limited

(“Usborne”) children’s books.

and SmartLab Toys, maker of STEAM-based toys and games.

We are also the exclusive United States Multi-Level Marketing (“MLM”)

distributor of Usborne Publishing Limited (“Usborne”) children’s books.

Estimates —Our

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could differ from these estimates.

Reclassifications —

Certain reclassifications have been made to the fiscal 2024 statement of operations and notes to the financial statements to combine gross

sales and discounts and allowances now presented as product revenues, net of discount and allowances to conform with the current year

financial statement presentation.

These reclassifications had no effect on net earnings.

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 raises 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 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.

We believe that the estimated values used in our going concern analysis are based on reasonable assumptions.

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

The short-term duration of

the revolving and term loans and uncertainty of the bank’s ongoing support beyond July 11, 2025, along with recurring operating

losses and other items, raise substantial doubt over the Company’s ability to continue as a going concern.

To address these concerns,

the Company has taken steps in its plans to pay off its bank debts by selling owned real estate.

Upon closing, the proceeds from the real

estate sale are expected to pay off the Term Loans and Revolving Loan.

Following the loan payoff, management plans to fund ongoing operations

with limited borrowings through local banks or other financing sources.

The Company began listing the owned real estate in fiscal 2024

but due to the size of the real estate transaction, the sale process has continued beyond several of the short-term amendment expirations.

The bank has continued to extend the maturity dates on the revolving and term loans providing evidence of their support of the sale process

and management’s plans to use the proceeds to pay off all bank debts.

In addition, management’s plans include reducing inventory

which will generate free cashflows and building the number of active PaperPie Brand Partners back to historical levels.

Although there

is no guarantee these plans will be successful, management believes these plans, if achieved, will alleviate the substantial doubt about

continuing as a going concern and generate sufficient liquidity to meet our obligations as they become due over the next twelve months.

Sales Concentration —Significant

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

Of these sales, a substantial portion are facilitated through

the use of social media collaboration platforms that allow our Brand Partners to interact in real-time, or near real-time, with customers.

Brand Partners use these platforms to invite potential customers to “online parties,” provide product recommendations, answer

questions, and provide links to other supporting online materials.

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

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 .

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.

the extent to which conditions or events raises 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, 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.

We believe that the estimated

values used in our going concern analysis are based on reasonable assumptions.

However, such assumptions are inherently uncertain, and

actual results could differ materially from those estimates.

In prior periods, we identified

conditions and events that raised substantial doubt about the Company’s ability to continue as a going concern within one year

after the date that the financial statements were issued.

During the third quarter of fiscal 2026, the Company completed the planned

sale 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

plans for returning to profitability.

Paying off the bank debts and eliminating the bank-imposed restrictions allows the Company to begin

a conservative plan to re-order some key out of stock products along with introducing a limited number of new titles which are expected

to energize our Brand Partners and provide our retail customers with new offerings..

In addition, subsequent to year end, the Company

obtained 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

debt, the Company’s current cash and other resources, and management’s operating plans, we have concluded that the Company

has sufficient liquidity to meet its obligations as they become due for at least twelve months from the issuance date of these financial

Accordingly, management determined that substantial doubt about the Company’s ability to continue as a going concern

has been alleviated.

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

Of these sales, a

substantial portion is facilitated through the use of social media collaboration platforms that allow our Brand Partners to interact

in real-time, or near real-time, with customers.

Brand Partners use these platforms to invite potential customers to “online parties,”

provide product recommendations, answer questions, and provide links to other supporting online materials.

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 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.

of payments settled from banks for third party credit card transactions process within three to twenty business days, depending on the

credit card processors reserve requirements.

The payments in transit from our credit card processors and the short-term certificate of

deposit with our bank supporting our monthly credit card usage are classified as restricted cash.

Cash and cash equivalents include demand

and time deposits, money market funds, and other short-term investments 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.

Extended payment terms are offered at certain times of the year for orders that meet minimum quantities or amounts.

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

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.

The carrying amount also

includes rent receivables in connection with our lessor arrangements, which include three rental agreements for warehouse and office space

in Tulsa, Oklahoma, and qualify as operating leases under ASC 842 (See Note 11 of the financial statements for additional information).

Management periodically reviews

accounts receivable balances and based on an assessment of historical bad debts, current customer receivable balances, age of customer

receivable balances, customers’ financial conditions, and current economic trends, estimates the portion of the balance that will

not be collected.

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 made

reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable.

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

The majority of payments settled from banks for third party credit card transactions within three to twenty business days, depending

on the credit card processors’ reserve requirements.

The payments in transit from our credit card processors and the short-term

certificate of deposit with our bank supporting our monthly credit card usage are classified as restricted cash.

Cash and cash equivalents

include demand and time deposits, money market funds, and other short-term investments with maturities of three months or less when acquired.

Receivable —Accounts receivable are uncollateralized customer obligations due under normal trade terms, generally requiring

payment within thirty days from the invoice date.

Extended payment terms are offered at certain times of the year for orders that meet

minimum quantities or amounts.

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

remittance advice.

Accounts receivable is stated at net realizable value, which includes an allowance for credit losses representing

the amount expected to be uncollectible.

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.

for Credit Losses — The allowance for credit losses is the Company’s best estimate of the amount of expected lifetime

credit losses in the Company’s accounts receivable.

The Company, as required by ASU 2025-05, has elected to use the practical expedient

method, which permits entities to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating

expected credit losses for current accounts receivable.

The practical expedient method and allowance for credit losses is based on our

history of write-off levels, along with evaluating current market conditions, customers concentrations and economic indicators.

Inventories —Inventories

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Occasionally we purchase product 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.

the normal operating cycle due to the minimum order requirements of our suppliers or changes in sales levels.

We estimate non-current

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of anticipated sales are classified as noncurrent inventory.

The Company assumes title

and responsibility for inventory purchased according to the contract language with our suppliers, and the individual shipment terms for

The Company maintains insurance for the value of the inventory once the title has been passed until it is received at our warehouse

(“inventory in transit”).

Brand Partners that meet certain

eligibility requirements may request and receive inventory on consignment.

Consignment inventory is stated at the lower of either cost

or net realizable value, less an estimated reserve for consignment inventory that is not expected to be sold or returned to the Company.

The total cost of inventory on consignment, excluding the estimated reserve, with Brand Partners was $ 1,335,700 and $ 1,388,700 at February

28, 2025 and February 29, 2024, respectively.

The Company has a reserve for consignment inventory not expected to be sold or returned

of $ 402,400 and $ 379,600 as of February 28, 2025, and February 29, 2024, respectively.

Inventories are presented

net of a valuation allowance, which includes reserves for inventory obsolescence and Brand Partner consignment inventory that is not expected

to be sold or returned.

Company assumes title and responsibility for inventory purchased according to the contract language with our suppliers, and the individual

shipment terms for the order.

The Company maintains insurance for the value of the inventory once the title has been passed until it

is received at our warehouse (“inventory in transit”).

Partners that meet certain eligibility requirements may request and receive inventory on consignment.

Consignment inventory is stated

at the lower of either cost or net realizable value, less an estimated reserve for consignment inventory that is not expected to be sold

or returned to the Company.

The total cost of inventory on consignment, excluding the estimated reserve, with Brand Partners was $ 1,110,200

and $ 1,335,700 at February 28, 2026 and February 28, 2025, respectively.

The Company has a reserve for consignment inventory not expected

to be sold or returned of $ 340,300 and $ 402,400 as of February 28, 2026, and February 28, 2025, respectively.

are presented net of a valuation allowance, which includes reserves for inventory obsolescence and Brand Partner consignment inventory

that is not expected to be sold or returned.

Management estimates the allowance for both current and noncurrent inventory.

The allowance is based on management’s

identification of slow-moving inventory and estimated consignment inventory that will not be sold or returned.

Property, Plant and

Equipment — Property, plant and equipment are stated at cost and depreciated on a straight-line basis over their estimated

useful life, as follows:

Building improvements

Machinery and equipment

Furniture and fixtures

Capitalized software

Molds and tooling

Capitalized projects that

are not placed in service are recorded as in progress and are not depreciated until the related assets are placed in service, including

capitalized software.

The development of customer and Brand Partner software applications is critical to our ongoing business operations

and included in capitalized software.

External and internal costs associated with the development of new software applications incurred

during the application development stage are capitalized.

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

(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.

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 the 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.

The allowance

is based on management’s identification of slow-moving inventory and estimated consignment inventory that will not be sold or returned.

Plant and Equipment —Property, plant and equipment are stated at cost and depreciated on a straight-line basis over their

estimated useful life, as follows:

and equipment

projects that are not placed in service are recorded as in progress and are not depreciated until the related assets are placed in service,

including capitalized software.

The development of customer and Brand Partner software applications is critical to our ongoing business

operations and included in capitalized software.

External and internal costs associated with the development of new software applications

incurred during the application development stage are capitalized.

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 .

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

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

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.

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

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

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.

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.

Such indicators include, among others,

the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability measurements.

If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, we recognize an impairment charge

for the excess of the carrying value of the asset over its estimated fair value.

Determination as to whether and how much an asset is

impaired involves management estimates and can be impacted by other uncertainties.

No impairment was noted during fiscal years 2025 or

the second quarter of fiscal year 2025, the Company entered into a triple-net lease agreement for approximately 111,000 square feet of

available office and warehouse space in the Hilti Complex to a new tenant.

To create space for this new tenant, the Company removed three

production lines from the warehouse before July 31, 2024.

As a result, in the second quarter of fiscal 2025, the Company made available

and committed to sell the disassembled equipment.

The Company is actively marketing the unused equipment using a national on-line auction

The Company is subject to the presentation and disclosure requirements since the equipment meets all the criteria and is classified

as an “Asset Held for Sale.” Once management determined that the disassembled equipment met the criteria to be classified

as held for sale, the Company ceased depreciation of the asset and reported it separately on the balance sheet, beginning on August 31,

The Company evaluated the carrying amount of the assets and the estimated fair values less costs to sell and recorded an impairment

loss on the assets of $ 287,100 as of February 28, 2026.

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.

Such indicators include,

among others, the nature of the asset, the projected future economic benefit of the asset, historical and future cash flows and profitability

measurements.

If the carrying value of an asset exceeds the future undiscounted cash flows expected from the asset, we recognize an impairment

charge for the excess of the carrying value of the asset over its estimated fair value.

Determination as to whether and how much an asset

is impaired involves management estimates and can be impacted by other uncertainties.

No impairment was noted during fiscal year 2025

but we recorded an impairment of $287,100 during fiscal year 2026.

have both lessee and lessor arrangements.

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and do not result in significant timing differences in the recognition of rental expenses or income.

We recognize lease liabilities,

reported on the balance sheets, for each lease based on the present value of the remaining minimum fixed rental payments (which include

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, on the balance sheet for each lease, which is valued at the lease liability and adjusted for prepaid or accrued rent balances existing

at the time of the initial recognition.

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.

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.

Revenues associated with the

lessor leases are recorded on a straight-line basis over the initial lease term and are reported in other income in the statements of

We recognize variable rental payments as revenue in the period in which the changes in facts and circumstances, on which the

variable lease payments are based, occur.

Sublease rental income is recognized on a straight-line basis over the duration of each lease

Income Taxes —We

account for income taxes under ASC 740 - Income Taxes , which requires an asset and liability approach.

Under this method, deferred

tax assets and liabilities are determined based on the difference between the financial statement and the tax basis of assets and liabilities

using the current tax laws and rates.

A valuation allowance is established, when necessary, to reduce net deferred tax assets to the amounts

that are “more likely than not” to be realized.

Revenue Recognition —Revenue

is derived from the sales of children’s books and related products which are generally capable of being distinct and accounted for

as a single performance obligation to deliver tangible goods.

Substantially all of our products are sold to end consumers through our

PaperPie division and to retail outlets through our Publishing division.

Refer to Note 16 – Business Segments for revenue by segment.

Revenues of both divisions are recognized when the product is shipped, FOB-Shipping Point, which is the point in time the customer obtains

control of the products and risk of loss and rewards of ownership have been transferred.

Sales taxes that are collected from customers

and remitted to governmental authorities are accounted for as a pass-through liability and therefore are excluded from net sales.

The majority of PaperPie’s

sales contracts have a single performance obligation and are short-term in nature.

PaperPie’s sales are generally collected at the

time the product is ordered.

Sales which have been paid for but not shipped are classified as deferred revenue on the balance sheet.

associated with consignment inventory are recognized when reported by the consignee and payment associated with the sale has been collected.

Transportation revenue represents the amount billed to the customer for shipping the product and is recorded when the product is shipped.

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 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.

As the products included as sales incentives are shipped with the associated products

ordered, there is no deferral required.

Revenues allocated to the material right are recognized in product revenues, net of discounts

and allowances, and cost of goods sold in our statements of operations.

The majority of Publishing’s

sales contracts have a single performance obligation and are short-term in nature.

Publishing’s sales may be collected at the time

the product is shipped, or the customers may be given payment terms based primarily on their credit worthiness and payment history.

Estimated allowances for sales

returns, which reduce net revenues and cost of goods sold, are recorded as sales are recognized.

Management uses a moving average calculation

to estimate the allowance for sales returns.

We are not responsible for a product damaged in transit 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 an industry practice

to accept non-damaged returns from retail customers.

Management has estimated sales returns of approximately $ 201,500 for both February

28, 2025 and February 29, 2024, which is included in other current liabilities on the Company’s balance sheet.

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 sheet for both February 28, 2025 and February 29, 2024.

The Company generally expenses

sales commissions in the same period that the revenue is recognized.

These costs are recorded within operating expenses.

The Company does

not disclose the value of unsatisfied performance obligations for contracts with an unexpected length of one year or less.

Advertising Costs —Advertising

costs are expensed as incurred.

Advertising expenses, included in general and administrative expenses in the statements of operations,

were $ 265,500 and $ 373,400 for the years ended February 28, 2025 and February 29, 2024, respectively.

Shipping and Handling

Costs —We classify shipping and handling costs as operating and selling expenses in the statements of operations.

and handling costs include postage, freight, handling costs, as well as shipping materials and supplies.

These costs were $ 4,574,200 and

$ 6,744,400 for the years ended February 28, 2025 and February 29, 2024, respectively.

Share-Based Compensation —We

account for share-based compensation whereby share-based payment transactions with employees, such as stock options and restricted stock,

are measured at estimated fair value at the date of grant.

For awards subject to service conditions, compensation expense is recognized

over the vesting period on a straight-line basis.

Awards subject to performance conditions are attributed separately for each vesting

tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche.

Forfeitures are

recognized when they occur.

Interest Rate Exchange

Agreement —The interest rate exchange agreement (“swap agreement”) is recognized on the balance sheet at its

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.

The Company formally documents

all the 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;

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

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.

Diluted EPS is based on the combined weighted average number of common shares outstanding and dilutive

potential common shares issuable which include, where appropriate, the assumed exercise of options and the assumed vesting of granted

restricted share awards.

recognize lease liabilities, reported on the balance sheets, for each lease based on the present value of the remaining minimum fixed

rental payments (which include 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

We also recognize a right-of-use asset, on the balance sheet for each lease, which is valued at the lease liability and

adjusted for prepaid or accrued rent balances existing at the time of the initial recognition.

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.

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.

associated with the lessor leases are recorded on a straight-line basis over the initial lease term and are reported in other income

in the statements of operations.

We recognize variable rental payments as revenue in the period in which the changes in facts and circumstances,

on which the variable lease payments are based, occur.

Sublease rental income is recognized on a straight-line basis over the duration

of each lease term.

Taxes —We account for income taxes under ASC 740 - Income Taxes , which requires an asset and liability approach.

Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and the

tax basis of assets and liabilities using the current tax laws and rates.

A valuation allowance is established, when necessary, to reduce

net deferred tax assets to the amounts that are “more likely than not” to be realized.

Company’s calculation of its tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations

in various taxing jurisdictions.

The Company recognizes tax liabilities for uncertain tax positions based on management’s estimate

of whether it is more likely than not that additional taxes will be required.

The Company had no uncertain tax positions as of February

28, 2026 and 2025.

income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis

of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates.

Temporary differences

arise from net operating losses, differences in depreciation methods of property and equipment, disallowed interest, accounts receivable

allowances, inventory capitalization and allowances, sales returns, and other accrued expenses.

application of tax laws and regulations is subject to legal and factual interpretation, judgment and uncertainty.

Tax laws and regulations

themselves are subject to change as a result of changes in fiscal policy, changes in legislation, the evolution of regulations and court

Therefore, the actual liability for U.S., or the various state jurisdictions, may be materially different from management’s

estimates, which could result in the need to record additional tax liabilities or potentially reverse previously recorded tax liabilities

and valuation allowances.

Interest and penalties are included in tax expense.

Recognition —Revenue is derived from the sales of children’s books and related products which are generally capable

of being distinct and accounted for as a single performance obligation to deliver tangible goods.

Substantially all of our products are

sold to end consumers through our PaperPie division and to retail outlets through our Publishing division.

Refer to Note 16 – Business

Segments for revenue by segment.

Revenues of both divisions are recognized when the product is shipped, FOB-Shipping Point, which is

the point in time the customer obtains control of the products and risk of loss and rewards of ownership have been transferred.

taxes that are collected from customers and remitted to governmental authorities are accounted for as a pass-through liability and therefore

are excluded from net sales.

majority of PaperPie’s sales contracts have a single performance obligation and are short-term in nature.

PaperPie’s sales

are generally collected at the time the product is ordered.

Sales which have been paid for but not shipped are classified as deferred

revenue on the balance sheet.

Sales associated with consignment inventory are recognized when reported by the consignee and payment associated

with the sale has been collected.

Transportation revenue represents the amount billed to the customer for shipping the product and is

recorded when the product is shipped.

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 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.

As the products included as sales incentives are shipped with

the associated products ordered, there is no deferral required.

Revenues allocated to the material right are recognized in product revenues,

net of discounts and allowances, and cost of goods sold in our statements of operations.

majority of Publishing’s sales contracts have a single performance obligation and are short-term in nature.

Publishing sales may

be collected at the time the product is shipped, or the customers may be given payment terms based primarily on their credit worthiness

and payment history.

allowances for sales returns, which reduce net revenues and cost of goods sold, are recorded as sales are recognized.

Management uses

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

We are not responsible for a product damaged in transit and

most damaged returns are primarily from retail stores.

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

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

Management has estimated sales returns of

approximately $ 201,500 for both February 28, 2026 and February 28, 2025, which is included in other current liabilities on the Company’s

balance sheet.

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 sheet for both February 28,

2026 and February 28, 2025.

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

These costs are recorded within operating

The Company does not disclose the value of unsatisfied performance obligations for contracts with an unexpected length of one

year or less.

Costs —Advertising costs are expensed as incurred.

Advertising expenses, included in general and administrative expenses

in the statements of operations, were $ 249,800 and $ 265,500 for the years ended February 28, 2026 and February 28, 2025, respectively.

and Handling Costs —We classify shipping and handling costs as operating and selling expenses in the statements of operations.

Shipping and handling costs include postage, freight, handling costs, as well as shipping materials and supplies.

These costs were $ 2,809,500

and $ 4,574,200 for the years ended February 28, 2026 and February 28, 2025, respectively.

Compensation —We account for share-based compensation whereby share-based payment transactions with employees, such as stock

options and restricted stock, are measured at estimated fair value at the date of grant.

For awards subject to service conditions, compensation

expense is recognized over the vesting period on a straight-line basis.

Awards subject to performance conditions are attributed separately

for each vesting tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche.

Forfeitures are recognized when they occur.

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.

Diluted EPS is based on the combined weighted average number of common

shares outstanding and dilutive potential common shares issuable which include, where appropriate, the assumed exercise of options and

the assumed vesting of granted restricted share awards.

In computing Diluted EPS, we have utilized the treasury stock method.

The computation of weighted

average common and common equivalent shares used in the calculation of basic and diluted EPS is shown below:

computation of weighted average common and common equivalent shares used in the calculation of basic and diluted EPS is shown below:

Year Ended February 28,

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$ ( 5,263,600 )

Weighted average shares outstanding-basic

Issued unvested restricted stock and assumed shares issuable under granted unvested restricted stock awards

Weighted average shares outstanding-diluted

Diluted earnings (loss) per share:

As shown in the table below,

the following shares have not been included in the calculation of diluted earnings (loss) per share as they would be anti-dilutive to

the calculation above:

Weighted average shares outstanding:

Earnings (loss) per share:

shown in the table below, the following shares have not been included in the calculation of diluted earnings (loss) per share as they

would be anti-dilutive to the calculation above:

Year Ended February 28,

1 unchanged sentence

Issued unvested restricted stock and assumed shares issuable under granted unvested restricted stock awards

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 the following new accounting

standard updates (“ASU”) apply to us:

New Accounting Standards or Updates Adopted

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 ASU requires public entities to adopt this new guidance on a retrospective basis.

Company adopted ASU 2023-07 for the fiscal year ended February 28, 2025, and applied it retrospectively to all prior periods presented.

See Note 16 “Business Segments” for further information.

New Accounting Standards or Updates Not Yet

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.

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 the following new accounting standard updates (“ASU”) apply to us:

Accounting Standards or Updates Adopted

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.

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

In November 2024, the FASB

issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires disclosure about the types of costs and expenses included in certain

expense captions presented on the income statement.

The new disclosure requirements are effective for the Company’s annual periods beginning

March 1, 2027, and interim periods beginning March 1, 2028, with early adoption permitted, and may be applied either prospectively or

retrospectively.

The Company is currently evaluating the ASU to determine its impact on the Company’s financial statements and disclosures.

The table below reconciles

cash, cash equivalents, and restricted cash as reported in the balance sheet to the total of the same amounts shown in the statements

of cash flows:

February 28 (29),

This ASU is effective for our Form 10-K for fiscal 2026 and the Company has applied the application on a prospective basis.

July 2025, the FASB issued Accounting Standards Update 2025-05 – Financial Instruments – Credit Losses (Topic ASC 326) Measurement

of Credit Losses for Accounts Receivable and Contract Assets.

The amendments in this ASU provide entities with a practical expedient

they may elect to use when developing an estimate of expected credit losses on current accounts receivable and current contract asset

balances arising from transactions accounted for under Topic ASC 606 – Revenue from Contracts with Customers.

Under this practical

expedient, entities may elect to assume that current conditions as of the balance sheet date do not change for the remaining life of

The amendments in ASU 2025-05 become effective for fiscal years and for interim periods beginning after December 15, 2025,

and 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

ASU as of February 28, 2026 and applied the changes prospectively.

The adoption of this ASU did not have a material effect to the measurement

of credit losses.

Accounting Standards or Updates Not Yet Adopted

December 2025, the FASB issued ASU 2025-12, Codification Improvements (“ASU 2025-12”).

ASU 2025-12 addresses suggestions

received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S.

update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that

are intended to make it easier to understand and apply.

ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and

interim periods within those fiscal years.

Entities are required to apply the amendments to ASC 260 retrospectively.

All other amendments

may be applied prospectively or retrospectively.

Early adoption is permitted.

We are currently evaluating the impact this ASU may have

on our financial statement disclosures.

December 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-11,

Interim Reporting (Topic 270) Improvements to Interim Disclosure Requirements.

The standard clarifies disclosure requirements for interim

financial statements and is effective for interim periods beginning after December 15, 2027.

Early adoption is permitted.

We are currently

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

September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40):

Targeted Improvements

to the Accounting for Internal-Use Software (“ASU 2025-06”), which requires software capitalization to begin when both of

the following occur:

(1) management has authorized and committed to funding the software project;

and (2) it is probable that the project

will be completed and the software will be used to perform the function intended.

For public entities, the provisions within ASU 2025-06

are effective for the first annual and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

provisions within ASU 2025-06 allow for a prospective, modified, or retrospective transition approach.

The Company is currently evaluating

this ASU to determine its impact on the Company’s financial statements and disclosures.

November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures

(Subtopic 220-40):

Disaggregation of Income Statement Expenses , which requires disclosure about the types of costs and expenses

included in certain expense captions presented on the income statement.

The new disclosure requirements are effective for the Company’s

annual periods beginning March 1, 2027, and interim periods beginning March 1, 2028, with early adoption permitted, and may be applied

either prospectively or retrospectively.

The Company is currently evaluating the ASU to determine its impact on the Company’s financial

statements and disclosures.

table below reconciles cash, cash equivalents, and restricted cash as reported in the balance sheet to the total of the same amounts

shown in the statements of cash flows:

Cash and cash equivalents

1 unchanged sentence

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

The Company has contracted

with Nexio and PayPal, Inc., third-party merchant service processors, to capture Visa, Discover, Mastercard and PayPal payments from customers.

Company has contracted with Nexio and PayPal, Inc., third-party merchant service processors, to capture Visa, Discover, Mastercard and

PayPal payments from customers.

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

These processors hold cash payments

received from customers in reserve for a specified number of days to offset any potential chargebacks.

The Company also has a short-term

certificate of deposit with the Company’s bank as collateral for business credit card use.

The Company has classified the cash held

in reserves by Nexio and PayPal and the restricted certificate of deposit as restricted cash.

processors hold cash payments received from customers in reserve for a specified number of days to offset any potential chargebacks.

The Company also has a short-term certificate of deposit with the Company’s bank as collateral for business credit card use.

Company has classified the cash held in reserves by Nexio and PayPal and the restricted certificate of deposit as restricted cash.

ASSETS HELD FOR SALE

During the third quarter of

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 November 2024 with a market value of approximately $ 47,410,000 .

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.

As presented in the marketing

materials associated with the listed Hilti Complex, EDC expects to assign the existing tenant leases to the buyer along with executing

a new lease for the Company’s occupied space;

but retain ownership of the excess land, consisting of approximately 17 acres of undeveloped

land adjacent to the Hilti Complex.

The initial term of the lease is expected to be 10 years, and the initial lease rate is expected to

be $8.00 per square foot, with 2.0% annual escalations beginning in year two of the lease.

The Lease will also include triple-net terms,

where the Seller will be responsible for utilities, insurance, property taxes, and regular maintenance, including roof and structural

Additionally, the Seller will retain the rights to sublease, subject to buyer approval, any available unused space in the

building during the lease term.

The Lease will also encompass other standard terms that are customary in the local market.

During the second quarter

of fiscal year 2025, the Company entered into a triple-net lease agreement for approximately 111,000 square feet of available office and

warehouse space in the Hilti Complex to a new tenant.

To create space for this new tenant, the Company removed three production lines

from the warehouse before July 31, 2024.

As a result, In the second quarter of fiscal 2025, the Company made available and committed to

sell the equipment removed.

The Company is actively trying to locate a buyer as of February 28, 2025.

The Company is subject to the presentation

and disclosure requirements since the equipment meets all the criteria and is classified as an “Asset Held for Sale.” Once

Management determined that the equipment removed met the criteria to be classified as held for sale, the Company ceased depreciation of

the asset and reported it separately on the balance sheet, beginning on August 31, 2024.

The assets held for sale consist

of property and equipment.

assets held for sale on the balance sheet at February 28, 2025, totaling $ 19,277,000 consisted of disassembled equipment, the Hilti Complex

and approximately 17 acres of excess land.

The assets held for sale at February 28, 2026, totaling $ 563,600 consists of disassembled

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

The total carrying value of assets held for sale was $ 19,277,000 and $ 18,281,100 as of February 28, 2025, and February 29, 2024, respectively,

and is separately recorded on the balance sheet.

Inventories consist of the following:

February 28 (29),

the third quarter of fiscal 2024, the Company listed its real estate property located at 5402 S.

Ave, Tulsa, Oklahoma 74146

The property consisted 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.

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.

October 27, 2025, the Company completed the sale of the Hilti Complex to 10Mark 10K Industrial, LLC.

The agreed upon sale price of the

Hilti Complex per the executed Contract totaled $ 32,200,000 .

The net proceeds less than the carrying value of the assets held for sale

resulted 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

the 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

The proceeds from the sale were utilized to pay off the Term Loans and Revolving Loan outstanding in the Credit Agreement with

the Company’s Bank.

At closing, EDC assigned the existing third-party tenant leases to the Buyer and executed a separate Triple-Net

Lease for its occupied space in the Hilti Complex.

the second quarter of fiscal year 2025, the Company entered into a triple-net lease agreement for approximately 111,000 square feet of

available office and warehouse space in the Hilti Complex to a new tenant.

To create space for this new tenant, the Company removed three

production lines from the warehouse before July 31, 2024.

As a result, in the second quarter of fiscal 2025, the Company made available

and committed to sell the disassembled equipment with a net book value of $ 850,700 .

The Company is actively marketing the unused equipment

using a national on-line auction house as of February 28, 2026.

The Company is subject to the presentation and disclosure requirements

since the equipment meets all the criteria and is classified as an “Asset Held for Sale.” Once management determined that

the disassembled equipment met the criteria to be classified as held for sale, the Company ceased depreciation of the asset and reported

it separately on the balance sheet, beginning in the second quarter of fiscal 2025.

In the third quarter of fiscal 2026, the Company

evaluated the carrying amount of the assets and the estimated fair values less costs to sell and recorded an impairment loss on the assets

of $ 287,100 .

consist of the following at:

Product inventory

4 unchanged sentences

Inventories net - noncurrent

Inventory in transit totaled

$ 25,500 and $ 264,000 at February 28, 2025 and February 29, 2024, respectively.

Product inventory quantities in excess of what we

expect will be sold within the normal operating cycle, based on 2 ½ years of anticipated sales, are included in noncurrent inventory.

in transit totaled $ 147,900 and $ 25,500 at February 28, 2026 and February 28, 2025, respectively.

inventory quantities in excess of what we expect will be sold within the normal operating cycle, based on 2 ½ years of anticipated

sales, are included in noncurrent inventory.

BUSINESS CONCENTRATION

Significant portions of our

inventory purchases are concentrated with an England-based publishing company, Usborne Publishing Limited (“Usborne”).

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 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, 2025, the Company did not meet the minimum purchase requirements and did not supply the letter of credit required under the Agreement,

which offers Usborne the right to exercise their option to terminate the Agreement.

Usborne has not notified the Company of termination

of the Agreement.

In addition, Usborne has refused to pay the $ 1.0 million volume rebate owed to the Company from purchases made during

The Company is disputing the cancellation of the rebate but has not recognized any rebate 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 through

our Publishing division.

As a result, the Company discontinued selling Usborne products to retail customers in the first quarter of fiscal

The following table summarizes Usborne product

revenues, net of discounts, by division and inventory purchases by product type:

portions of our inventory purchases are concentrated with an England-based publishing company, Usborne Publishing Limited (“Usborne”).

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 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

As of February 28, 2026, the Company did not meet the minimum purchase requirements and did not supply the letter of credit required

under the Agreement, which offers Usborne the right to exercise their option to terminate the Agreement.

Usborne has not notified the

Company of termination of the Agreement.

In addition, 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 due to its

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

to retail customers through our Publishing division.

As a result, the Company discontinued selling Usborne products to retail customers

in the first quarter of fiscal 2024.

following table summarizes Usborne product revenues, net of discounts, by division and inventory purchases by product type:

Year Ended February 28,

10 unchanged sentences

Total purchases received

Total Usborne inventory owned

by the Company and included in our balance sheets was $ 23,696,800 and $ 29,010,200 as of February 28, 2025 and February 29, 2024, respectively.

PROPERTY, PLANT AND EQUIPMENT

Usborne 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

February 28, 2025, respectively.

PROPERTY, PLANT AND EQUIPMENT

consist of the following:

February 28 (29),

plant and equipment consist of the following:

Machinery and equipment

8 unchanged sentences

Property, plant and equipment-net

During the fourth quarter

of fiscal 2025 the Company decided to abandon a third-party host platform project that was customized for PaperPie brand partners.

cost associated with the development of this project was removed from capitalized software-in progress and the related loss on abandonment

of $ 318,100 is included in other income on the statement of operations for the year ended February 28, 2025.

OTHER CURRENT LIABILITIES

Other current liabilities

consist of the following:

February 28 (29),

current liabilities consist of the following:

Accrued royalties

5 unchanged sentences

Total other current liabilities

A summary of other income

is shown below:

summary of other income (expense) is shown below:

Year Ended February 28,

Federal tax credits realized

Gain from sale of assets

Gain from sale of assets - net

Rental income

Other income (loss)

Impairment on assets

Total other income

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 28 (29),

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:

Deferred tax assets:

15 unchanged sentences

( 1,341,600 )

Net deferred income tax assets

(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.

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 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:

Valuation allowance (3)

( 1,554,800 )

Net deferred tax assets

(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.

Company’s disallowed interest was generated from interest expense that was not deductible for tax purposes due to a maximum allowable

deduction of 30 % of taxable income.

The disallowed interest is carried forward to be deducted against future income, subject to the 30 %

(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.

reconciliation of taxes at the federal statutory rate to our provision for income taxes for the year ended February 28, 2026 was as follows:

February 28, 2026

federal statutory income tax rate

Research and development

Nontaxable or nondeductible items

state and local income taxes, net of federal benefit

Changes in valuation allowance

Effective tax rate

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

Year Ended February 28,

State and local (1)

( 1,439,500 )

State and local

( 1,591,400 )

1 unchanged sentence

$ ( 1,591,400 )

(1) The Company incurred losses in

fiscal 2025, resulting in a net operating loss carryforward and reclassification from current to deferred.

The following reconciles our expected income tax

rate to the U.S.

Company incurred losses in fiscal 2025, resulting in a net operating loss carryforward and reclassification from current to deferred.

following reconciles our expected income tax rate to the U.S.

federal statutory income tax rate:

2 unchanged sentences

state and local income taxes–net of federal benefit

Valuation allowance

Total income tax expense

We file our tax returns in

file 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 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.

Therefore, no reserves for uncertain income tax positions have been recorded.

We classify interest and penalties associated with income taxes as a component of income tax expense on the statements of operations.

The Company qualifies for certain research and development tax credits which lowers the overall expected income taxes to be paid.

We are no longer subject to income tax examinations

by tax authorities for the fiscal years before 2020.

EMPLOYEE BENEFIT PLAN

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

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

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 NASDAQ.

This plan incorporates the provisions of Section 401(k) of the Internal Revenue Code that allow favorable

tax treatments on investments.

The EDC 401(k) Plan is available to all employees that meet specific age and length of service requirements.

The Company’s matching

contributions are discretionary and approved at the annual meeting of the EDC 401(k) Plan’s Trustees and Company’s management.

Matching contributions made to the Plan by the Company totaled $ 104,000 and $ 151,700 during the years ended February 28, 2025 and February

29, 2024, respectively.

We have both lessee and lessor

arrangements.

Our lessee arrangements include six rental agreements where we have the exclusive use of dedicated office space in San Diego,

California, Ogden, Utah, Seattle, Washington, a warehouse space in Joplin, Missouri and two leases for office and warehouse space locally

in Tulsa, Oklahoma, all of which qualify as operating leases under ASC 842.

Our lessor arrangements include three rental agreements for

warehouse and office space in Tulsa, Oklahoma, and qualify as operating leases under ASC 842.

Operating Leases – Lessee

The Company’s lease

assets and liabilities recognized within its balance sheets were as follows:

February 28 (29),

The Company’s matching contributions are discretionary and approved at the annual meeting of the EDC 401(k) Plan’s Trustees

and Company’s management.

Matching contributions made to the Plan by the Company totaled $ 126,100 and $ 104,000 during the years

ended February 28, 2026 and February 28, 2025, respectively.

have both lessee and lessor arrangements.

Our lessee arrangements include six rental agreements where we have the exclusive use of dedicated

office space in San Diego, California, Ogden, Utah, a warehouse space in Joplin, Missouri and three leases for office and warehouse space

locally in Tulsa, Oklahoma, all of which qualify as operating leases under ASC 842.

Our lessor arrangements include one rental agreement

for warehouse and office space in Tulsa, Oklahoma, and qualify as operating leases under ASC 842.

connection with the sale of the Hilti Complex, the Company leased back a portion of the Complex for office and warehouse space.

of 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

five-year renewal and extension options with 2.5% increases annually in the base rental rate of the preceding year.

The Lease also includes

triple-net terms, where the Company and other tenants will be responsible for utilities, insurance, property taxes, and regular maintenance.

Leases – Lessee

recognize an operating lease liability on the balance sheets for each lease based on the present value of remaining minimum fixed rental

payments (which includes payments under any renewal option that we are reasonably certain to exercise), using a discount rate that approximates

the rate of interest we would have to pay to borrow on a collateralized basis over a similar term.

Expected payments in the next twelve

months are classified as current operating lease liabilities.

Payments in excess of twelve months are classified as long-term operating

lease liabilities.

We also recognize an operating lease right-of-use asset on the balance sheets, valued at the lease liability and adjusted

for prepaid or accrued rent balances existing at the time of initial recognition.

The operating lease liability and right-of-use assets

are reduced over the term of the lease as payments are made and the assets are used.

Operating lease assets:

3 unchanged sentences

Long-term lease liabilities $ 5,344,400 $ 411,100

The weighted-average remaining

lease term and weighted-average discount rate used to calculate the present value of lease liabilities are as follows:

Year Ended February 28 (29),

Weighted-average remaining lease term (months) 108.9 18.4

Weighted-average discount rate 6.36 % 4.89 %

The components of lease cost are as follows:

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.

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

Year Ended February 28,

Fixed lease costs

Future minimum rental payments

under operating leases with initial terms greater than one year as of February 28, 2025, are as follows:

minimum rental payments under operating leases with initial terms greater than one year as of February 28, 2026, are as follows:

Years ending February 28

1 unchanged sentence

imputed interest

( 3,034,700 )

Total operating lease liabilities

Supplemental cash flow information

related to leases is as follows:

cash flow information related to leases is as follows:

Year Ended February 28,

Operating cash flows – operating leases

The Company assesses its leases to determine whether

it is reasonably certain that these renewal options will be exercised.

In general, most of the office space outside of Tulsa, Oklahoma

is associated with remote employees.

Their continued employment determines the need for this space.

Much of the warehouse space outside

of the Hilti Complex is used to store non-current inventory.

As the Company sells down excess inventory, less outside space will be needed

and any renewals will be for less space.

Accordingly, the renewal options are not included in the calculation of its right-of-use assets

and lease liabilities, as the Company does not believe that it is reasonably certain that these renewal options will be exercised.

Operating Leases – Lessor

In connection with the 2015

purchase of 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 $ 126,400 per month, through the lease anniversary date of December 2025 with a 2.0 % annual increase

adjustment on each anniversary date thereafter.

The lease terms allow for one five-year extension , which is not a bargain renewal option,

at the expiration of the 15 -year term.

On May 26, 2024, the Company

entered into a triple-net lease agreement for approximately 111,000 square feet of available office and warehouse space in the Hilti Complex

to a new tenant.

The initial lease term was for five years , commenced July 1, 2024, and included an option to extend the lease term for

an additional five years .

The lessee pays $ 84,000 per month, with 3 % escalations at the beginning of each year of the lease.

includes standard triple-net terms such that the tenant shall be responsible for utilities, insurance, property taxes, repairs, and maintenance,

excluding roof and structure, which shall be the landlord’s responsibility.

On December 20, 2024, the Company executed an amendment

to its lease with the tenant.

The amendment provides the tenant a $ 500,000 improvement allowance, providing $ 10,000 credit per month on

their scheduled rental payments for 50 months, in exchange for extending the term of the lease for an additional five years through June

The Company also subleases

some office and warehouse space in one of it’s leased facilities.

Future minimum payments receivable

under operating leases with terms greater than one year are estimated as follows:

Years ending February 28 (29),

The cost of the leased space

was approximately $ 16,333,900 as of February 28, 2025, and $ 10,159,500 as of February 29, 2024, respectively.

The accumulated depreciation

associated with the leased assets was $ 3,906,700 and $ 2,776,400 as of February 28, 2025, and February 29, 2024, respectively.

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.

Year Ended February 28,

NONCASH TRANSACTIONS

Lease assets obtained in exchange for new lease liabilities

Company assesses its leases to determine whether it is reasonably certain that these renewal options will be exercised.

In general, most

of the office space outside of Tulsa, Oklahoma is associated with remote employees.

Their continued employment determines the need for

Much of the warehouse space outside of the Hilti Complex is used to store non-current inventory.

As the Company sells down

excess inventory, less outside space will be needed, and any renewals will be for less space.

The Company also considered the renewal

options for the operating lease at the Hilti Complex and is not reasonably certain to exercise the renewal options.

Accordingly, the

renewal options are not included in the calculation of its right-of-use assets and lease liabilities, as the Company does not believe

that it is reasonably certain that these renewal options will be exercised.

Leases – Lessor

Company also subleases some office and warehouse space in one of its leased facilities.

minimum payments receivable under operating leases was $52,700 to be received during the year-ended February 28, 2027.

cost of the leased space was approximately $ 0 as of February 28, 2026, and $ 16,333,900 as of February 28, 2025, respectively.

The accumulated

depreciation associated with the leased assets was $ 0 and $ 3,906,700 as of February 28, 2026, and February 28, 2025, respectively.

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 28 (29),

During the third quarter

of fiscal 2026, the Company completed the sale and leaseback of the Hilti Complex, which resulted in a net gain of $ 12,243,700 .

consists of the following:

Line of credit

4 unchanged sentences

( 26,685,500 )

( 1,800,000 )

Less debt issue cost

Long-term debt, net

On August 9, 2022, the Company

executed a Credit Agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma” or the “Lender”).

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

a floating rate term loan in the principal amount of $ 21,000,000 (the “Floating Rate Term Loan”;

together with the Fixed Rate

Term Loan, collectively, the “Term Loans”), and a revolving promissory note in the principal amount up to $ 15,000,000 (the

“Revolving Loan” or “Line of Credit”).

On December 22, 2022, the

Company executed the First Amendment to our Loan Agreement with the Lender.

This amendment clarified the definition of the Fixed Charge

Coverage Ratio to exclude dividends paid prior to November 30, 2022, and placed restrictions on acquisitions and cash dividends.

On May 10, 2023, the Company

executed the Second Amendment to our Loan Agreement with the Lender.

This amendment waived the fixed charge ratio default which occurred

on February 28, 2023 and amended the financial covenant to not require the fixed charge ratio to be measured at May 31, 2023.

Amendment also added a cumulative maximum level of fiscal year to date inventory purchases through the expiration of the Revolving Loan

Agreement, increased the borrowing rate on the Company’s Revolving Loan to Term SOFR Rate plus 3.5 %, required certain swap agreements

be executed within 30 days of the amendment, reduced the revolving commitment from $15,000,000 to $ 14,000,000 , effective May 10, 2023,

and further reduced the revolving commitment to $ 13,500,000 , effective July 15, 2023, among other items.

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

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

On August 9, 2023, the Company

executed the Third Amendment along with a Revised Credit Agreement (“Credit 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

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

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

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

$ 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 use its best efforts to cancel existing purchase orders.

The Third Amendment also increased the borrowing rate

on the Revolving Loan to 30-Day Term SOFR Rate + 4.50 %.

The Credit 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

On November 30, 2023, the

Company executed the Fourth Amendment to the Credit Agreement with the Lender.

This 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.

On June 13, 2024, the Company

executed the Fifth Amendment to the Credit Agreement with the Lender.

The amendment, effective May 31, 2024, adjusts the maximum availability

of the Revolving Loan commitment to $ 7,000,000 through the maturity date of October 4, 2024 .

The Amendment decreased in the Revolving

Loan to $ 4,500,000 from the effective date of the sale of the Hilti Complex among other restrictions and requirements.

On October 7, 2024, the Company

executed the Sixth Amendment to the Credit Agreement with the Lender.

The amendment, effective October 3, 2024, extended the maturity

date to January 4, 2025 , and decreased on the Revolving Loan to $ 5,500,000 by November 30, 2024.

On January 13, 2025, the Company

executed the Seventh Amendment to the Credit Agreement with the Lender.

The amendment, effective January 4, 2025, decreased the maximum

availability of the Revolving Loan commitment to $ 4,750,000 through the maturity date of April 4, 2025.

On April 16, 2025, subsequent

to year end, the Company executed the Eighth Amendment to the Credit Agreement with the Lender.

August 9, 2022, the Company executed a Credit Agreement (“Loan Agreement”) with BOKF, NA (“Bank of Oklahoma”

or the “Lender”).

The Loan Agreement established a fixed rate term loan in the principal amount of $ 15,000,000 (the “Fixed

Rate Term Loan”), a floating rate term loan in the principal amount of $ 21,000,000 (the “Floating Rate Term Loan”;

together with the Fixed Rate Term Loan, collectively, the “Term Loans”), and a revolving promissory note in the principal

amount up to $ 15,000,000 (the “Revolving Loan” or “Line of Credit”).

April 16, 2025, the Company executed the Eighth Amendment to the Credit Agreement with the Lender.

The amendment, effective April 4,

increased the Revolving Loan interest rate on the effective date to SOFR + 6.00 %, extended the maturity date of the Revolving Loan to

July 11, 2025, and includes a required step down on the Revolving Loan to $ 4,500,000 million by May 31, 2025.

2025, increased the Revolving Loan interest rate on the effective date to SOFR + 6.00 %, extended the maturity date of the Revolving Loan

to July 11, 2025, and includes a required step down on the Revolving Loan to $ 4,500,000 million by May 31, 2025.

The amendment also changed

the maturity dates of the two term loans to September 19, 2025.

Available credit under the

current $ 4,750,000 revolving line of credit with the Company’s Lender was approximately $ 551,900 at February 28, 2025.

Features of the Revised Loan

Agreement include:

(i) Two Term Loans on 20-year amortization with 5-year maturity date of August 9, 2027 , revised to September 19, 2025 subsequent to year end.

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

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

(iv) $ 4.8 Million Revolving Loan with maturity date of July 11, 2025 .

The Revolving Loan bears interest at a rate per annum equal to Term SOFR Rate + 5.50 % (effective rate was 9.85 % at February 28, 2025), revised subsequent to year end to Term SOFR Rate + 6.00 %

(v) Revolving Loan allows for Letters of Credit upon bank approval (none were outstanding at February 28, 2025)

August 12, 2025, Educational Development Corporation executed the Ninth Amendment to the Existing Credit Agreement with the Lender.

Amendment, effective July 11, 2025, extended the maturity date of the Revolving Loan to September 19, 2025, increased the Revolving Loan

interest rate on the effective date to SOFR + 8.00 % and added a 2 % deferred interest rate to the Term loans and Revolving Loan.

Company’s credit agreement with its lender expired on September 19, 2025, with the balances of our Term Loans and the Revolving

September 30, 2025, the Company received a Reservation of Rights notice from its lender outlining that events of default have occurred

and 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

The Lender did not waive the specified defaults and reserved all of its rights, powers, privileges and remedies under the credit

agreement, the UCC, and applicable law.

Under the credit agreement, the lender had the right, among other remedies listed, to demand

payment or repossess and liquidate the Company’s assets used as collateral for the loans.

Under the terms of the credit agreement,

an additional default interest rate of 2 % was added to the existing interest rates defined in the credit agreement.

October 27, 2025, upon the completion of the sale of the Hilti Complex, the Company repaid in full all outstanding indebtedness and terminated

all commitments and obligations under its Credit Agreement dated August 9, 2022, between the Company and its Lender.

The Company’s

payment, including interest, was approximately $ 30.0 million, which satisfied all of the Company’s debt obligations with the Lender.

The Company did not incur any early termination penalties because of the repayment of indebtedness or termination of the Amended and

Restated Credit Agreement.

Further, the Lender waived the additional 2 % default interest charge associated with the Ninth Amendment.

In connection with the repayment of outstanding indebtedness, the Company was released from all security interests, mortgages, liens

and encumbrances under the Amended and Restated Credit Agreement with the Lender.

SHARE-BASED COMPENSATION

We account for share-based

compensation whereby share-based payment transactions with employees, such as stock options and restricted stock, are measured at estimated

fair value at the date of grant.

For awards subject to service conditions, compensation expense is recognized over the vesting period

on a straight-line basis.

Awards subject to performance conditions are attributed separately for each vesting tranche of the award and

are recognized ratably from the service inception date to the vesting date for each tranche.

Forfeitures are recognized when they occur.

The probability of restricted share awards granted with future performance conditions is evaluated at each reporting period and share

awards are updated and compensation expense is adjusted based on updated information.

In July 2018, our shareholders

approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI Plan”).

The 2019 LTI Plan established up to 600,000

shares of restricted stock available to be granted to certain members of management based on exceeding specified net revenues and pre-tax

performance metrics during fiscal years 2019, 2020 or 2021.

The Company exceeded all defined metrics during these fiscal years and 600,000

shares were granted to members of management according to the Plan.

The granted shares under the 2019 LTI Plan “cliff vest”

after five years from the fiscal year that the defined metrics were exceeded.

In July 2021, our shareholders

approved the Company’s 2022 Long-Term Incentive Plan (“2022 LTI Plan”).

The 2022 LTI Plan establishes up to 300,000

shares of restricted stock available to be granted to certain members of management based on exceeding specified net revenues and pre-tax

performance metrics during fiscal years 2022 and 2023.

The number of restricted shares to be distributed depends on attaining the performance

metrics defined by the 2022 LTI Plan and may result in the distribution of a number of shares that is less than, but not greater than,

the number of restricted shares outlined in the terms of the 2022 LTI Plan.

Restricted shares granted under the 2022 LTI Plan “cliff

vest” after five years from the fiscal year that the defined metrics were exceeded.

During fiscal year 2021, the

Company granted 297,000 restricted shares under the 2019 LTI Plan with an average grant-date fair value of $ 6.30 per share.

During fiscal

year 2023, 18,000 restricted shares were forfeited, along with 760 additional shares purchased with dividends received from the original

The 18,000 forfeited shares were re-granted to participants during fiscal 2023 with an average grant-date fair value of $ 2.08 .

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 .

These granted shares totaling 297,000 shares vested on February 28, 2025.

A summary of compensation

expense recognized in connection with restricted share awards as follows:

account for share-based compensation whereby share-based payment transactions with employees, such as stock options and restricted stock,

are measured at estimated fair value at the date of grant.

For awards subject to service conditions, compensation expense is recognized

over the vesting period on a straight-line basis.

Awards subject to performance conditions are attributed separately for each vesting

tranche of the award and are recognized ratably from the service inception date to the vesting date for each tranche.

Forfeitures are

recognized when they occur.

The probability of restricted share awards granted with future performance conditions is evaluated at each

reporting period and share awards are updated and compensation expense is adjusted based on updated information.

July 2018, our shareholders approved the Company’s 2019 Long-Term Incentive Plan (“2019 LTI Plan”).

The 2019 LTI Plan

established up to 600,000 shares of restricted stock available to be granted to certain members of management based on exceeding specified

net revenues and pre-tax performance metrics during fiscal years 2019, 2020 or 2021.

The Company exceeded all defined metrics during

these fiscal years, and 600,000 shares were granted to members of management according to the Plan.

The granted shares under the 2019

LTI Plan “cliff vest” after five years from the fiscal year that the defined metrics were exceeded.

All remaining shares

under the 2019 Long-Term Incentive Plan vested on February 28, 2025.

summary of compensation expense recognized in connection with restricted share awards follows:

Year Ended February 28,

Share-based compensation expense - net of forfeitures

The following table summarizes

stock award activity during fiscal year 2025 under the 2019 LTI Plan:

Outstanding at February 29, 2024

Outstanding at February 28, 2025

STOCK REPURCHASE PLAN

In April 2008, the Board of

Directors authorized us to repurchase up to an additional 1,000,000 shares of our common stock under the plan initiated in 1998 (“amended

On February 4, 2019, the Board of Directors replaced the amended 2008 plan with a new plan which authorized us to repurchase

up to 800,000 shares of outstanding common stock in the open market or in privately negotiated transactions, and to utilize any derivative

or similar instrument to effect share repurchase transactions (including without limitation, accelerated share repurchase contracts, equity

forward transactions, equity swap transactions, floor transactions or other similar transactions or any combination of the foregoing transactions).

April 2008, the Board of Directors authorized us to repurchase up to an additional 1,000,000 shares of our common stock under the plan

initiated in 1998 (“amended 2008 plan”).

On February 4, 2019, the Board of Directors replaced the amended 2008 plan with

a new plan which authorized us to repurchase up to 800,000 shares of outstanding common stock in the open market or in privately negotiated

transactions, and to utilize any derivative or similar instrument to effect share repurchase transactions (including without limitation,

accelerated share repurchase contracts, equity forward transactions, equity swap transactions, floor transactions or other similar transactions

or any combination of the foregoing transactions).

This plan has no expiration date.

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 .

fiscal year 2025, 400 shares were repurchased under the amended 2008 plan.

After the repurchase, the maximum number of shares that may

be repurchased in the future is 375,993 as of February 28, 2025.

fiscal year 2025, the Company purchased 400 shares of treasury stock under the amended 2008 plan.

During fiscal year 2026, the Company

purchased 87,837 shares of treasury stock for an average purchase price of $ 1.57 per share, totaling $ 137,900 .

The maximum number of

shares that may be repurchased in the future is 288,156 as of February 28, 2026.

QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary

of the quarterly results of operations for the years ended February 28, 2025 and February 29, 2024:

following is a summary of the quarterly results of operations for the years ended February 28, 2026 and February 28, 2025:

First quarter

$ ( 1,075,200 )

Second quarter

( 1,294,700 )

Third quarter

Fourth quarter

( 3,107,000 )

First quarter

$ ( 1,279,000 )

Second quarter

( 1,803,400 )

Third quarter

Fourth quarter

( 1,345,500 )

$ ( 5,263,600 )

BUSINESS SEGMENTS

We have two reportable segments:

have two reportable segments:

PaperPie and Publishing.

These reportable segments are business units that offer different methods of distribution to different types

of customers.

These reportable segments are business units that offer different methods of distribution

to different types of customers.

They are managed separately based on the fundamental differences in their operations.

Our PaperPie segment markets its products

through a network of independent Brand Partners using a combination of internet sales, direct sales, home shows, and book fairs.

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 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.

Direct expenses are composed of

payroll, commissions, general and administrative, and operating and selling expenses.

Corporate expenses, depreciation, interest expense,

other income, and income taxes are not allocated to the segments but are listed in the “Other” row below.

Corporate expenses

include the executive department, accounting department, information services department, general office management, warehouse operations

and building facilities management.

Our PaperPie segment

markets its products through a network of independent Brand Partners using a combination of internet sales, direct sales, home shows,

and book fairs.

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 5 for

the impact of our updated Usborne distribution agreement on the Publishing segment.

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.

Direct expenses

are composed of payroll, commissions, general and administrative, and operating and selling expenses.

Corporate expenses, depreciation,

interest expense, other income, and income taxes are not allocated to the segments but are listed in the “Other” row below.

Corporate expenses include the executive department, accounting department, information services department, general office management,

warehouse operations and building facilities management.

Our assets and liabilities are not allocated on a segment basis.

Separate financial information is

regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources.

For the Company,

the Chief Executive Officer is the CODM.

Information by industry segment

for the years ended February 28, 2025 and February 29, 2024 is set forth below:

Separate financial

information is regularly evaluated by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources.

For the Company, the Chief Executive Officer is the CODM.

by industry segment for the years ended February 28, 2026 and February 28, 2025 is set forth below:

Year Ended February 28,

EARNINGS (LOSS) BEFORE INCOME TAXES

Publishing $ 3,568,900 $ 4,340,700

PaperPie 19,344,700 29,850,300

Total $ 22,913,600 $ 34,191,000

(LOSS) BEFORE INCOME TAXES

Year Ended February 28,

( 9,961,200 )

( 4,618,000 )

$ ( 6,855,000 )

Publishing Operating Results

The following table summarizes

the operating results of the Publishing segment for the twelve months ended February 28 (29):

Publishing $ 747,800 $ 1,155,400

PaperPie 944,300 1,950,800

Other 3,654,700 ( 9,961,200 )

Total $ 5,346,800 $ ( 6,855,000 )

Operating Results

following table summarizes the operating results of the Publishing segment for the twelve months ended February 28:

Year Ended February 28,

6 unchanged sentences

Operating income

PaperPie Operating Results

The following table summarizes

the operating results of the PaperPie segment for the twelve months ended February 28 (29):

Operating Results

following table summarizes the operating results of the PaperPie segment for the twelve months ended February 28:

Year Ended February 28,

6 unchanged sentences

Operating income

Average number of active Brand Partners

Information for the Other

segment above for the years ended February 28, 2025 and February 29, 2024 is set forth below:

OTHER NON-SEGMENT EARNINGS (LOSS) BEFORE INCOME

for the Other segment above for the years ended February 28, 2026 and February 28, 2025 is set forth below:

NON-SEGMENT EARNINGS (LOSS) BEFORE INCOME TAXES

Year Ended February 28,

1 unchanged sentence

Computer support

and selling total

Operating and selling total

General and administrative:

7 unchanged sentences

Interest expense

Gain from sale of assets - net

( 12,190,900 )

( 1,820,200 )

Total other non-segment loss before income taxes

( 2,109,000 )

Total other non-segment (earnings) loss before income taxes

$ ( 3,654,700 )

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, which 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 was $ 11,250,000 on February 28, 2025.

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 the current earnings.

The fair value of the interest rate swap is included

in the following caption on the balance sheets as follows:

Prepaid expenses and other assets

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.

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, which 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 was $ 11,250,000 on February 28, 2025.

The interest-rate swap contains no credit-risk-related

contingent features and is cross-collateralized by all assets of the Company.

The sell of the Hilti Complex enabled the company to repay

all the debt in October 2026.

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

the current earnings.

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

Other current liabilities

FINANCIAL INSTRUMENTS

The following methods and assumptions are used

in estimating the fair-value disclosures for financial instruments:

- The carrying amounts reported on 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 for the Hilti complex was approximately $ 37,000,000 as of February 28, 2025 and $ 40,019,200 as of February 29, 2024, respectively.

Management’s estimates are based on the recent listing price of the Hilti Complex less the estimated costs to sell plus an estimated value of the excess land of approximately 17 acres for $ 2,500,000 along with the estimated fair value of equipment held for sale of approximately $ 1,000,000 .

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

- 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.

- 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.

- 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.

- The fair value of the Company’s interest rate swap of $( 15,400 ) 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

The Company’s PaperPie

division receives payments on orders in advance of shipment.

Any payments received prior to the end of the period that were not shipped

as of February 28, 2025 or February 29, 2024 are recorded as deferred revenues on the balance sheets.

We received approximately $ 491,800

and $ 583,500 as of February 28, 2025 and February 29, 2024, respectively, in payments for sales orders which were, or will be, shipped

out subsequent to the end of the period.

Company’s PaperPie division receives payments on orders in advance of shipment.

Any payments received prior to the end of the period

that were not shipped as of February 28, 2026 or February 28, 2025 are recorded as deferred revenues on the balance sheets.

approximately $ 320,500 and $ 491,800 as of February 28, 2026 and February 28, 2025, respectively, in payments for sales orders which were,

or will be, shipped out subsequent to the end of the period.

SUBSEQUENT EVENTS

On March 21, 2025, the Company

executed a new brokerage agreement with Keen-Summit Capital Partners, LLC (“Keen-Summit”) to assist with the marketing and

sale of the Hilti Complex.

The Agreement offers Keen-Summit the opportunity to list and provide sale opportunities of the Hilti Complex

for a term of nine months, along with providing other services customary with brokerage agreements.

The Agreement includes the engagement

of McGraw Davisson Stewart, LLC to provide local services as a licensed broker in the state of Oklahoma.

On April 16, 2025, the Company

executed the Eighth Amendment to the Credit Agreement with the Lender.

The amendment, effective April 4, 2025, increased the Revolving

Loan interest rate on the effective date to SOFR + 6.00 %, extends the maturity date of the Revolving Loan to July 11, 2025, and included

a required step down on the Revolving Loan to $ 4.5 million by May 31, 2025.

The amendment also changed the maturity dates of the two term

loans to September 19, 2025.

On May 14, 2025, the Company

executed a Purchase and Sale Agreement (“Agreement”) with TG OTC, LLC (“Buyer”) for the Company’s headquarters

and distribution warehouse located at 5400-5402 South 122 nd East Avenue, Tulsa, Oklahoma 74146 (the “Hilti Complex”).

The agreed upon sale price

of the Hilti Complex per the executed Agreement totaled $35,150,000 less seller fees and closing costs.

The proceeds from the sale will

be utilized to pay off the Term Loans and Revolving Loan outstanding in the Credit Agreement with the Company’s Lender.

At closing, the

Company will assign the existing tenant leases to the Buyer and enter into a new lease for its occupied space in the Hilti Complex.

Agreement does not include the excess land parcel, consisting of approximately 17 acres of undeveloped land adjacent to the Hilti Complex,

which will remain under the ownership of the Company.

The Agreement provides the

Buyer a 90-day due diligence period to secure financing, perform inspections, review leases and perform other assessments.

of the sale is expected to be completed within 30 days following the due diligence period.

The initial term of the new

lease with Buyer will be for 10 years, and the initial lease rate will be $8.62 per square foot, with 2.0% annual escalations beginning

in year two of the lease and will include two five-year extension options.

The Lease will also include typical triple-net terms, where

the Seller will be responsible for utilities, insurance, property taxes, and regular maintenance.

The Lease is expected to also encompass

standard terms that are customary in the local market.

March 2026, the Company executed a new credit agreement with Regent Bank (the Lender).

The loan agreement establishes a revolving promissory

note in the principal amount up to $ 2,000,000 .

Interest shall be calculated each month on the outstanding borrowings.

The credit agreement

was secured by the assets of the Company including accounts receivable, inventory, equipment and excess land.

As an additional inducement

to enter into the loan agreement, the Lender required the personal guarantee of Craig White, President and Chief Executive Officer of

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