Financial Performance - Net revenues for the three months ended May 31, 2025, decreased by $2.9 million, or 29.0%, to $7.1 million compared to $10.0 million for the same period in 2024[93]. - Gross margin for the PaperPie segment decreased by $2.2 million, or 37.9%, to $3.6 million for the three months ended May 31, 2025, with gross margin as a percentage of net revenues dropping to 59.3% from 65.3%[99]. - Operating income for the PaperPie segment decreased by $0.3 million, or 37.5%, to $0.5 million during the three months ended May 31, 2025[101]. - Net revenues for the Publishing segment decreased by $0.1 million, or 9.1%, to $1.0 million during the three-month period ended May 31, 2025[103]. - Gross margin for the Publishing segment decreased by $0.1 million, or 16.7%, to $0.5 million during the three-month period ended May 31, 2025[104]. Operating Expenses - Total operating expenses for the PaperPie segment decreased by $1.9 million, or 38.0%, to $3.1 million during the three-month period ended May 31, 2025[100]. - Total operating expenses for the Publishing segment decreased by $0.1 million, or 25.0%, to $0.3 million during the three-month period ended May 31, 2025[105]. Active Brand Partners - The average number of active Brand Partners decreased by 5,700, or 42.5%, to 7,700 during the three months ended May 31, 2025, from 13,400 in the same period a year ago[98]. - Approximately 15.4% of active Brand Partners maintained consignment inventory, totaling $1.2 million at May 31, 2025[134]. Cash Flow and Debt Management - The Company experienced positive cash inflows from operations of $1,396,500 during the first three months of fiscal year 2026[107]. - As of the end of the first fiscal quarter of 2026, the revolving bank credit facility loan balance was $4.2 million with $0.6 million in available capacity[106]. - The Company plans to reduce debt by selling the Hilti Complex, with proceeds expected to pay off Term Loans and the Revolving Loan[123]. Loan Agreements and Amendments - The Company executed the Second Amendment to the Loan Agreement, waiving the fixed charge ratio default and reducing the revolving commitment from $15 million to $14 million, effective May 10, 2023[112]. - The Third Amendment extended the Revolving Loan maturity date to January 31, 2024, and introduced a stepdown to the Revolving Commitment from $13.5 million to $4 million by January 31, 2024[113]. - The Fourth Amendment increased the Revolving Loan commitment to $8 million and extended the maturity date to May 31, 2024, while allowing additional purchase orders up to $2.1 million[115]. - The effective interest rate on the Revolving Loan was 10.31% at May 31, 2025, with a borrowing rate of SOFR + 6.00%[121]. Inventory Valuation - The Company has estimated a valuation allowance for both current and noncurrent inventory of $1.2 million as of May 31, 2025[135]. - Noncurrent inventory balances prior to valuation allowances were $17.6 million at May 31, 2025, with valuation allowances of $0.8 million[133]. - The Company has an allowance for credit losses estimated at $0.1 million for both May 31, 2025, and February 28, 2025[131]. Management Plans - Management's plans include reducing inventory to generate free cash flows and building the active PaperPie Brand Partners to pre-pandemic levels[123].
EDC(EDUC) - 2026 Q1 - Quarterly Report