Educational Development Corp 10-Q for FY2027 Q1

Educational Development Corp (EDUC)

10-Q 2026-07-09 For: 2026-05-31

Added on July 09, 2026

About this 10-Q

Educational Development Corp filed this 10-Q on July 9, 2026, covering the quarter ended May 31, 2026 (FY2027 Q1).

Headline figures

Quarter ended May 31, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.76M; down 33.1% from $7.11M a year earlier
Net loss: $1.4M; compared with a net loss of $1.08M a year earlier
Diluted EPS: -$0.16; compared with -$0.13 a year earlier

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Delaware		73-0750007
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

5402 South 122nd East Ave, Tulsa, Oklahoma		74146
(Address of principal executive offices)		(Zip Code)

Common Stock, $.20 par value		EDUC		NASDAQ
(Title of class)		(Trading symbol)		(Name of each exchange on which registered)

Large accelerated filer ☐	Accelerated filer ☐

Non-accelerated filer ☒	Smaller reporting company ☒

	Emerging Growth Company ☐

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	21

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22
Item 1A.	Risk Factors	22
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22
Item 3.	Defaults Upon Senior Securities	22
Item 4.	Mine Safety Disclosures	22
Item 5.	Other Information	22
Item 6.	Exhibits	23
Signatures		24

	●	our success in recruiting and retaining new brand partners,

	●	our ability to locate and procure desired books,

	●	product and supplier concentrations,

	●	our relationship with our primary supplier and the related distribution requirements and contractual limitations,

	●	adverse publicity associated with our Company or the industry,

	●	our ability to ship timely,

	●	changes to our primary sales channels, including social media and party plan platforms,

	●	changing consumer preferences and demands,

	●	cybersecurity threats and incidents,

	●	changes in macroeconomic conditions in international trade including changes in existing and future tariffs,

	●	legal matters,

	●	reliance on information technology infrastructure,

	●	potential restrictions imposed in the agreements governing our indebtedness,

	●	our ability to obtain adequate financing for working capital and capital expenditures,

	●	economic and competitive conditions, regulatory changes and other uncertainties, as well as

	●	those factors discussed below and elsewhere in our Annual Report on Form 10-K for the year ended February 28, 2026 and in this Quarterly Report on Form 10Q, all of which are difficult to predict.

	May 31,			February 28,
	2026			2026
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,662,500		$	1,118,400
Restricted cash		147,000			222,000
Accounts receivable, less allowance for credit losses of $73,000 (May 31) and $109,600 (February 28)		570,500			861,300
Inventories - net		16,059,900			17,412,200
Prepaid expenses and other assets		496,400			374,600
Assets held for sale		450,000			563,600
Total current assets		19,386,300			20,552,100

INVENTORIES - net		20,149,200			20,251,700
PROPERTY, PLANT AND EQUIPMENT - net		6,120,800			6,291,200
OPERATING LEASE RIGHT-OF-USE ASSETS		6,742,000			6,716,100
OTHER ASSETS		480,900,			500,500
TOTAL ASSETS	$	52,879,200		$	54,311,600

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,618,200		$	1,686,400
Deferred revenues		417,000			320,500
Operating lease liabilities, current		1,315,900			1,371,700
Accrued salaries and commissions		311,700			218,600
Income taxes payable		1,153,600			1,146,800
Other current liabilities		1,241,600			1,427,500
Total current liabilities		6,058,000			6,171,500

OPERATING LEASE LIABILITIES, noncurrent		5,426,100			5,344,400
OTHER LONG-TERM LIABILITIES		200			5,200
Total liabilities		11,484,300			11,521,100

SHAREHOLDERS’ EQUITY:
Common stock, $0.20 par value; Authorized 16,000,000 shares; Issued 12,702,080 shares; Outstanding 8,511,364 (May 31 and February 28) shares		2,540,400			2,540,400
Capital in excess of par value		13,769,400			13,769,400
Retained earnings		38,232,600			39,628,200
		54,542,400			55,938,000
Less treasury stock, at cost		(13,147,500	)		(13,147,500	)
Total shareholders’ equity		41,394,900			42,790,500
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	52,879,200		$	54,311,600

	Three Months Ended May 31,
	2026			2025
PRODUCT REVENUES, net of discounts and allowances	$	4,537,400		$	6,764,800
Transportation revenue		218,400			341,600
NET REVENUES		4,755,800			7,106,400
COST OF GOODS SOLD		1,934,500			2,969,300
Gross margin		2,821,300			4,137,100

OPERATING EXPENSES
Operating and selling		677,000			994,600
Sales commissions		1,348,700			2,012,100
General and administrative		2,070,400			2,694,900
Total operating expenses		4,096,100			5,701,600

INTEREST EXPENSE		600			504,300
OTHER (INCOME) LOSS		103,700			(619,500	)

LOSS BEFORE INCOME TAXES		(1,379,100	)		(1,449,300	)

INCOME TAX EXPENSE (BENEFIT)		16,500			(374,100	)
NET LOSS	$	(1,395,600	)	$	(1,075,200	)

BASIC AND DILUTED LOSS PER SHARE
Basic	$	(0.16	)	$	(0.13	)
Diluted	$	(0.16	)	$	(0.13	)

WEIGHTED AVERAGE NUMBER OF COMMON AND EQUIVALENT SHARES OUTSTANDING:
Basic		8,511,364			8,583,201
Diluted		8,511,364			8,583,201
Dividends per share	$	-		$	-

	Common Stock (par value $0.20 per share)									Treasury Stock
	Number of Shares Issued		Amount		Capital in Excess of Par Value		Retained Earnings			Number of Shares		Amount			Shareholders’ Equity
BALANCE - February 28, 2026		12,702,080	$	2,540,400	$	13,769,400	$	39,628,200			4,190,716	$	(13,147,500	)	$	42,790,500
Net loss		-		-		-		(1,395,600	)		-		-			(1,395,600	)
BALANCE - May 31, 2026		12,702,080	$	2,540,400	$	13,769,400	$	38,232,600			4,190,716	$	(13,147,500	)	$	41,394,900

	Common Stock (par value $0.20 per share)									Accumulated			Treasury Stock
	Number of Shares Issued		Amount		Capital in Excess of Par Value		Retained Earnings			Other Comprehensive Loss			Number of Shares		Amount			Shareholders’ Equity
BALANCE – February 28, 2025		12,702,080	$	2,540,400	$	13,800,000	$	37,303,000		$	(15,400	)		4,118,879	$	(13,060,400	)	$	40,567,600
Change in fair value of interest rate exchange agreement		-		-		-		-			15,400			-		-			15,400
Net loss		-		-		-		(1,075,200	)		-			-		-			(1,075,200	)
BALANCE - May 31, 2025		12,702,080	$	2,540,400	$	13,800,000	$	36,227,800		$	-			4,118,879	$	(13,060,400	)	$	39,507,800

	May 31, 2026		May 31, 2025
Cash and cash equivalents	$	1,662,500	$	1,040,200
Restricted cash		147,000		720,400
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	$	1,809,500	$	1,760,600

	May 31, 2026			February 28, 2026
Current:
Product inventory	$	16,431,000		$	17,771,000
Inventory valuation allowance		(371,100	)		(358,800	)
Inventories net – current	$	16,059,900		$	17,412,200

Noncurrent:
Product inventory	$	21,010,200		$	21,056,700
Inventory valuation allowance		(861,000	)		(805,000	)
Inventories net – noncurrent	$	20,149,200		$	20,251,700

	May 31, 2026			February 28, 2026
Operating lease assets:
Right-of-use assets	$	6,742,000		$	6,716,100

Operating lease liabilities:
Current lease liabilities	$	1,315,900		$	1,371,700
Long-term lease liabilities	$	5,426,100		$	5,344,400

Weighted-average remaining lease term (months)		105.4			108.9
Weighted-average discount rate		6.35	%		6.36	%

Years ending February 28,
2027	$	998,300
2028		1,037,700
2029		958,200
2030		929,200
2031		952,500
Thereafter		4,766,500
Total future minimum rental payments		9,642,400
Less: imputed interest		(2,900,400	)
Total operating lease liabilities	$	6,742,000

		May 31, 2026				May 31, 2025
Operating cash outflows – operating leases		$	388,300			$	170,700

	Three Months Ended May 31,
	2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,395,600	)	$	(1,075,200	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		273,100			366,100
Deferred income taxes		-			(390,600	)
Provision for credit losses		6,000			12,000
Provision for inventory valuation allowance		36,000			36,000
Net loss (gain) on sale of assets		(800	)		57,000
Impairment loss on assets		113,600			-
Changes in assets and liabilities:
Accounts receivable		284,800			113,700
Inventories - net		1,418,800			2,611,900
Prepaid expenses and other assets		(108,900	)		(47,800	)
Accounts payable		(68,200	)		(329,000	)
Accrued salaries and commissions and other liabilities		(97,800	)		(166,400	)
Deferred revenues		96,500			(26,300	)
Income taxes payable/receivable		6,800			235,100
Total adjustments		1,959,900			2,471,700
Net cash provided by operating activities		564,300			1,396,500
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(96,000	)		(207,400	)
Proceeds from sale of assets		800			45,000
Net cash used in investing activities		(95,200	)		(162,400	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term debt		-			(450,000	)
Net cash used in financing activities		-			(450,000	)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		469,100			784,100
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - BEGINNING OF PERIOD		1,340,400			976,500
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD	$	1,809,500		$	1,760,600

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid for interest	$	600		$	468,300
Cash (received)/paid for income taxes - net of refunds	$	9,700		$	(218,600	)

NONCASH TRANSACTIONS
Leased assets obtained in exchange for operating lease liabilities	$	305,100		$	26,200

	(i)	$2.0 million revolving loan with maturity date of March 6, 2027.

	(i)(a)	The revolving loan bears variable interest at a rate per annum equal to the U.S. Prime Rate + 2.00%.

	(i)(b)	The U.S. Prime Rate was 6.75% as of May 31, 2026, making the total interest rate equal to 8.75%.

	Three Months Ended May 31,
	2026			2025
Product revenues, net of discounts of Usborne products by division:
PaperPie division	$	1,309,200		$	2,539,100
% of total PaperPie Product revenues, net of discounts		33.1	%		44.4	%
Publishing division		-			-
% of total Publishing Product revenues, net of discounts		0.0	%		0.0	%
Total Product revenues, net of discounts of Usborne products	$	1,309,200		$	2,539,100

Purchases received by product type:
Usborne	$	-		$	43,100
% of total purchases received		0.00	%		26.1	%
All other product types		435,300			122,100
% of total purchases received		100.0	%		73.9	%
Total purchases received	$	435,300		$	165,200

	May 31,			February 28
	2026			2026
Deferred tax assets:
Allowance for credit losses	$	19,700		$	29,600
Inventory overhead capitalization		208,700			182,700
Inventory valuation allowance		100,200			96,900
Inventory valuation allowance – noncurrent		232,500			217,300
Allowance for sales returns		27,200			27,200
Net operating loss carry forward (1)		399,600			109,300
Disallowed interest (2)		2,001,300			2,001,300
Accruals		20,100			12,100
Total deferred tax assets		3,009,300			2,676,400

Deferred tax liabilities:
Property, plant, and equipment		(1,082,400	)		(1,121,600	)
Total deferred tax liabilities		(1,082,400	)		(1,121,600	)

Valuation allowance (3)		(1,926,900	)		(1,554,800	)
Net deferred tax assets	$	-		$	-

(1)	The Company’s net operating loss (“NOL”) carry forward was generated from losses incurred in fiscal 2025 and first quarter of fiscal 2027. The Company’s NOL can be carried forward indefinitely but are limited to an 80% maximum offset of taxable income.
(2)	The 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% limitation.
(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 analysed 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 May 31, 2026 and February 28, 2026. Accordingly, a valuation allowance has been recorded to offset these deferred tax assets.

	May 31, 2026
	Amount			Percentage
U.S. federal statutory income tax rate	$	(289,600	)		21.0	%
Tax credits
U.S. state and local income taxes, net of federal benefit		(85,000	)		6.2	%
Changes in valuation allowance		372,100			(27.0	)%
Other		19,000			(1.4	)%
Effective tax rate	$	16,500			(1.2	)%

	-	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 $450,000 as of May 31, 2026 and $563,600 February 28, 2026, respectively.

	●	depreciation and amortization expense of $273,100

	●	impairment on assets held for sale of $113,600

	●	provision for inventory allowance of $36,000

	●	provision for credit losses of $6,000

	●	decrease in inventories, net of $1,418,800

	●	increase in income taxes payable of $6,800

	●	decrease in accounts receivable of $284,800

	●	increase in deferred revenues of $96,500

	●	decrease in accounts payable of $68,200

	●	decrease in accrued salaries and commissions, and other liabilities of $97,800

	●	increase in prepaid expenses and other assets of $108,900

Period	Total # of Shares Purchased		Average Price Paid per Share		Total # of Shares Purchased as Part of Publicly Announced Plan (1)		Maximum # of Shares that may be Repurchased under the Plan (1)
March 1 - 31, 2026		-	$	-		-		288,156
April 1 - 30, 2026		-		-		-		288,156
May 1 - 31, 2026		-		-		-		288,156
Total		-	$	-		-

3.1*		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. 0-04957).

3.2*		Certificate of Amendment of Restated Certificate of Incorporation dated August 27, 1977 is incorporated herein by reference to Exhibit 20.1 to Form 10-K for fiscal year ended February 28, 1981 (File No. 0-04957).

3.3*		By-Laws, as amended, are incorporated herein by reference to Exhibit 20.2. to Form 10-K for fiscal year ended February 28, 1981 (File No. 0-04957).

3.4*		Certificate of Amendment of Restated Certificate of Incorporation dated November 17, 1986 is incorporated herein by reference to Exhibit 3.3 to Form 10-K for fiscal year ended February 28, 1987 (File No. 0-04957).

3.5		Certificate of Amendment of Restated Certificate of Incorporation dated March 22, 1996 is incorporated herein by reference to Exhibit 3.4 to Form 10-K for fiscal year ended February 28, 1997 (File No. 0-04957).

3.6		Certificate of Amendment of Restated Certificate of Incorporation dated July 15, 2002 is incorporated herein by reference to Exhibit 10.30 to Form 10-K dated February 28, 2003 (File No. 0-04957).

3.7		Certificate of Amendment of Restated Certificate of Incorporation dated August 15, 2018 is incorporated herein by reference to Exhibit 3.1 to Form 8-K dated August 21, 2018 (File No. 0-04957).

10.1		Usborne Distribution Agreement dated May 16, 2022 by and between the Company and Usborne Publishing Limited, London, England is incorporated herein by reference to Exhibit 10.2 to form 10-Q dated May 31, 2022 (File No. 0-04957).

10.2		Credit Agreement dated March 6, 2026 by and between the Company and Regent Bank Broken Arrow, OK is incorporated herein by reference to Exhibit 10.01 to form 8-K dated March 11, 2026 (File No. 0-04957).

31.1**		Certification of the Chief Executive Officer of Educational Development Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2**		Certification of Chief Financial Officer and Corporate Secretary of Educational Development Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

101.INS		Inline XBRL Instance Document

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101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase

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

	EDUCATIONAL DEVELOPMENT CORPORATION (Registrant)

Date: July 9, 2026	By	/s/ Craig M. White
		President, Chief Executive Officer, and Chairman of the Board (Principal Executive Officer)

Date: July 9, 2026	By	/s/ Dan E. O’Keefe
		Dan E. O’Keefe Chief Financial Officer and Corporate Secretary (Principal Financial and Accounting Officer)

/s/ Craig M. White
President, Chief Executive Officer, and
Chairman of the Board
(Principal Executive Officer)

/s/ Dan E. O’Keefe
Chief Financial Officer and Corporate Secretary
(Principal Financial and Accounting Officer)

Date: July 9, 2026	By	/s/ Craig M. White
		Craig M. White
		President, Chief Executive Officer, and
		Chairman of the Board
		(Principal Executive Officer)

Date: July 9, 2026	By	/s/ Dan E. O’Keefe
		Dan E. O’Keefe
		Chief Financial Officer and Corporate Secretary
		(Principal Financial and Accounting Officer)