EDC(EDUC) - 2025 Q4 - Annual Report

Financial Performance - For fiscal year 2025, net revenues decreased to $34,191,000 from$51,030,300 in fiscal year 2024, representing a decline of approximately 33.1%[66] - Gross margin for fiscal year 2025 was $21,027,700, down from$32,984,900 in fiscal year 2024, indicating a decline of approximately 36%[66] - Net loss for fiscal year 2025 was $5,263,600, compared to a net earnings of$546,400 in fiscal year 2024, marking a significant downturn[66] - Other income fell to $2,109,000 in fiscal year 2025 from$9,394,300 in fiscal year 2024, a decrease of approximately 77.6%[69] - The effective tax rate decreased to 23.2% for fiscal year 2025 from 25.6% in fiscal year 2024, primarily due to fluctuations in sales mix and eligible credits[70] Brand Partner Activity - The PaperPie division added 7,800 new Brand Partners in fiscal year 2025, down from 10,800 in fiscal year 2024, resulting in a total of 7,800 active Brand Partners at the end of fiscal year 2025 compared to 15,000 in fiscal year 2024[53] - The average number of active Brand Partners decreased by 6,000, or 32.8%, to 12,300 in fiscal year 2025 from 18,300 in fiscal year 2024[71] - Active Brand Partners decreased from 15,000 in fiscal year 2024 to 7,800 in fiscal year 2025, with 7,800 new Brand Partners added during fiscal year 2025[53] - Approximately 17.3% of active Brand Partners maintained consignment inventory at the end of fiscal year 2025, with total consignment inventory costs of $1.3 million[118] Operating Expenses - Total operating expenses for fiscal year 2025 were$27,803,300, a decrease from $38,885,800 in fiscal year 2024, reflecting a reduction of approximately 28.5$9.3 million, or 36.0%, to $16.5 million for the fiscal year ended February 28, 2025[73] - Operating expenses decreased by$0.5 million, or 26.3%, to $1.4 million for the fiscal year ended February 28, 2025, compared to$1.9 million for the previous fiscal year[78] Inventory Management - Noncurrent inventory balances were $16.3 million as of February 28, 2025, compared to$12.3 million at February 29, 2024, with valuation allowances of $0.7 million and$0.6 million respectively[117] - Management has estimated a valuation allowance for inventory, including reserves for consigned inventory, of $1.2 million at February 28, 2025, compared to$1.0 million at February 29, 2024[119] - The total cost of inventory on consignment with Brand Partners was $1.3 million and$1.4 million at February 28, 2025 and February 29, 2024, respectively[118] Cash Flow and Financing - Cash flows from operations were positive at $3,211,700 during fiscal year 2025 despite a net loss of$5,263,600[82] - The Company executed multiple amendments to its credit agreement, with the latest extending the maturity date of the Revolving Loan to July 11, 2025, and adjusting the interest rate to SOFR + 6.00%[100] - As of the end of fiscal year 2025, the revolving bank credit facility loan balance was $4.2 million with$0.6 million of borrowing availability[81] - Cash used in financing activities totaled $3,083,000, consisting of net payments on the line of credit and term debt[87] Division Performance - PaperPie net revenues decreased by$15.7 million, or 34.4%, to $29.9 million for the fiscal year ended February 28, 2025, compared to$45.6 million for the fiscal year ended February 29, 2024[71] - Publishing division net revenues decreased by $1.1 million, or 20.4$4.3 million for fiscal year ended February 28, 2025, due to the new distribution agreement with Usborne[76] - Gross margin for PaperPie decreased by $11.5 million, or 38.5$18.4 million, with gross margin as a percentage of net revenues decreasing to 61.8% from 65.5%[72] - Gross margin for the Publishing division decreased by $0.5 million, or 16.1$2.6 million, while gross margin as a percentage of net revenues increased to 59.5% from 57.5%[77] Debt Management - The Company plans to reduce debt by selling owned real estate, with proceeds expected to pay off Term Loans and the Revolving Loan[104] - The Company has taken steps to address concerns about its ability to continue as a going concern by planning to reduce debt through the sale of owned real estate[104]