EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED BALANCE SHEETS (UNAUDITED)

	November 30,			February 29,
ASSETS	2020			2020
CURRENT ASSETS
Cash and cash equivalents	$	31,494,300		$	2,999,400
Accounts receivable, less allowance for doubtful accounts of $345,000 (November 30) and $237,400 (February 29)		4,115,600			2,967,200
Inventories - net		47,313,800			30,087,300
Income taxes receivable		8,400			221,700
Prepaid expenses and other assets		1,163,700			950,600
Total current assets		84,095,800			37,226,200

INVENTORIES - net		754,200			1,016,700
PROPERTY, PLANT AND EQUIPMENT - net		27,209,800			26,377,700
OTHER ASSETS		108,300			82,200
TOTAL ASSETS	$	112,168,100		$	64,702,800


LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	45,159,800		$	9,661,100
Deferred revenues		2,330,900			385,300
Current maturities of long-term debt		527,700			1,027,400
Accrued salaries and commissions		6,252,900			1,657,200
Dividends payable		835,500			417,400
Other current liabilities		7,432,100			3,238,200
Total current liabilities		62,538,900			16,386,600

LONG-TERM DEBT - net of current maturities		10,587,100			17,784,300
DEFERRED INCOME TAXES - net		183,500			993,300
OTHER LONG-TERM LIABILITIES		137,300			145,800
Total liabilities		73,446,800			35,310,000

SHAREHOLDERS' EQUITY
Common stock, $0.20 par value; Authorized 16,000,000 shares; Issued 12,410,080 (November 30) and 12,410,080 (February 29) shares; Outstanding 8,355,972 (November 30) and 8,348,651 (February 29) shares		2,482,000			2,482,000
Capital in excess of par value		10,552,600			9,843,900
Retained earnings		38,349,900			29,732,200
		51,384,500			42,058,100
Less treasury stock, at cost		(12,663,200	)		(12,665,300	)
Total shareholders' equity		38,721,300			29,392,800
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	112,168,100		$	64,702,800

See notes to ~~condensed~~ financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended November 30, Nine Months Ended November 30,
2017 2016 2017 2016

GROSS SALES $ 41,894,600 $ 34,397,300 $ 100,989,500 $ 91,657,200
  Less discounts and allowances (6,762,300 ) (6,948,000 ) (19,929,300 ) (20,581,900 )
  Transportation revenue 3,775,700 3,248,300 8,959,900 8,299,500
NET REVENUES 38,908,000 30,697,600 90,020,100 79,374,800
COST OF GOODS SOLD 10,494,800 8,328,100 24,579,200 22,500,300
           Gross margin 28,413,200 22,369,500 65,440,900 56,874,500

OPERATING EXPENSES:
  Operating and selling 7,837,300 6,520,300 17,549,900 16,790,900
  Sales commissions 12,510,400 9,521,000 28,759,300 24,802,200
  General and administrative 4,735,200 4,525,900 12,359,600 12,237,600
           Total operating expenses 25,082,900 20,567,200 58,668,800 53,830,700

OTHER INCOME (EXPENSE):
   Interest expense (287,600 ) (265,000 ) (863,800 ) (730,000 )
   Other income 390,100 502,800 1,189,400 1,251,600
           Total other income 102,500 237,800 325,600 521,600

EARNINGS BEFORE INCOME TAXES 3,432,800 2,040,100 7,097,700 3,565,400

INCOME TAXES 1,304,400 765,900 2,707,100 1,352,500
NET EARNINGS $ 2,128,400 $ 1,274,200 $ 4,390,600 $ 2,212,900

BASIC AND DILUTED EARNINGS PER SHARE:
  Basic $ 0.52 $ 0.31 $ 1.07 $ 0.54
  Diluted $ 0.52 $ 0.31 $ 1.07 $ 0.54

DIVIDENDS PER SHARE $ 0.00 $ 0.09 $ 0.00 $ 0.27

WEIGHTED AVERAGE NUMBER OF COMMON
   AND EQUIVALENT SHARES OUTSTANDING:

  Basic 4,087,268 4,079,916 4,087,686 4,074,355
  Diluted 4,090,011 4,084,863 4,090,053 4,079,833

EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)

	Three Months Ended November 30,						Nine Months Ended November 30,
	2020			2019			2020			2019
GROSS SALES	$	83,137,500		$	53,619,900		$	203,717,200		$	122,635,300
Less discounts and allowances		(24,131,100	)		(16,406,500	)		(58,390,400	)		(37,978,900	)
Transportation revenue		7,743,900			3,611,200			18,965,300			8,193,600
NET REVENUES		66,750,300			40,824,600			164,292,100			92,850,000
COST OF GOODS SOLD		19,597,800			13,279,900			48,302,800			30,382,500
Gross margin		47,152,500			27,544,700			115,989,300			62,467,500

OPERATING EXPENSES
Operating and selling		11,616,200			6,513,500			28,488,300			15,089,900
Sales commissions		22,960,300			13,008,600			56,865,200			28,804,700
General and administrative		7,082,200			4,373,500			17,282,200			12,029,300
Total operating expenses		41,658,700			23,895,600			102,635,700			55,923,900


INTEREST EXPENSE		119,300			216,500			441,500			691,000
OTHER INCOME		(399,800	)		(403,100	)		(1,305,600	)		(1,196,300	)

EARNINGS BEFORE INCOME TAXES		5,774,300			3,835,700			14,217,700			7,048,900

INCOME TAXES		1,504,700			1,099,900			3,762,000			1,941,900
NET EARNINGS	$	4,269,600		$	2,735,800		$	10,455,700		$	5,107,000

BASIC AND DILUTED EARNINGS PER SHARE
Basic	$	0.51		$	0.33		$	1.25		$	0.62
Diluted	$	0.51		$	0.33		$	1.25		$	0.61

WEIGHTED AVERAGE NUMBER OF COMMON AND EQUIVALENT SHARES OUTSTANDING
Basic		8,355,831			8,406,709			8,354,156			8,301,209
Diluted		8,355,831			8,412,638			8,354,156			8,307,496
Dividends per share	$	0.10		$	0.05		$	0.22		$	0.15

See notes to ~~condensed~~ financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2017

Common Stock
(par value $0.20 per share)

Number of Capital in Treasury Stock
Shares Excess of Retained Number of Shareholders’
Issued Amount Par Value Earnings Shares Amount Equity

BALANCE—March 1, 2017 6,041,040 $ 1,208,200 $ 8,548,000 $ 16,317,800 1,950,966 $ (10,856,600 ) $ 15,217,400
  Exercise of stock options 5,000 1,000 25,300 - - - 26,300
  Purchases of treasury stock - - - - 10,041 (98,000 ) (98,000 )
  Sales of treasury stock - - - - (3,901 ) 32,000 32,000
  Net earnings - - - 4,390,600 - - 4,390,600
BALANCE— November 30, 2017 6,046,040 $ 1,209,200 $ 8,573,300 $ 20,708,400 1,957,106 $ (10,922,600 ) $ 19,568,300

EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)

FOR THE NINE MONTHS ENDED NOVEMBER 30, 2020

	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 29, 2020		12,410,080	$	2,482,000	$	9,843,900	$	29,732,200			4,061,429		$	(12,665,300	)	$	29,392,800
Purchases of treasury stock		-		-		-		-			17,565			(75,500	)		(75,500	)
Sales of treasury stock		-		-		5,000		-			(21,167	)		66,000			71,000
Dividends declared ($0.06/share)		-		-		-		(502,200	)		-			-			(502,200	)
Share-based compensation expense (see Note 6)		-		-		169,000		-			-			-			169,000
Net earnings		-		-		-		1,931,100			-			-			1,931,100
BALANCE - May 31, 2020		12,410,080		2,482,000		10,017,900		31,161,100			4,057,827			(12,674,800	)		30,986,200
Sales of treasury stock		-		-		11,500		-			(2,438	)		7,600			19,100
Dividends declared ($0.06/share)		-		-		-		(500,300	)		-			-			(500,300	)
Share-based compensation expense (see Note 6)		-		-		216,200		-			-			-			216,200
Net earnings		-		-		-		4,255,000			-			-			4,255,000
BALANCE – August 31, 2020		12,410,080		2,482,000		10,245,600		34,915,800			4,055,389			(12,667,200	)		34,976,200
Sales of treasury stock		-		-		15,200		-			(1,281	)		4,000			19,200
Dividends declared ($0.10/share)		-		-		-		(835,500	)		-			-			(835,500	)
Share-based compensation expense (see Note 6)		-		-		291,800		-			-			-			291,800
Net earnings		-		-		-		4,269,600			-			-			4,269,600
BALANCE - November 30, 2020		12,410,080	$	2,482,000	$	10,552,600	$	38,349,900			4,054,108		$	(12,663,200	)	$	38,721,300

FOR THE NINE MONTHS ENDED NOVEMBER 30, 2019

	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, 2019		12,092,080	$	2,418,400	$	8,975,100		$	25,754,900			3,896,998		$	(11,217,900	)	$	25,930,500
Purchases of treasury stock		-		-		-			-			36,959			(302,500	)		(302,500	)
Sales of treasury stock		-		-		68,100			-			(19,171	)		54,300			122,400
Dividends declared ($0.05/share)		-		-		-			(408,900	)		-			-			(408,900	)
Share-based compensation expense (see Note 6)		-		-		166,300			-			-			-			166,300
Net earnings		-		-		-			1,363,600			-			-			1,363,600
BALANCE - May 31, 2019		12,092,080		2,418,400		9,209,500			26,709,600			3,914,786			(11,466,100	)		26,871,400
Purchases of treasury stock		-		-		-			-			60,357			(417,100	)		(417,100	)
Sales of treasury stock		-		-		54,000			-			(22,961	)		54,600			108,600
Dividends declared ($0.05/share)		-		-		-			(422,300	)		-			-			(422,300	)
Share-based compensation expense (see Note 6)		-		-		166,200			-			-			-			166,200
Issuance of restricted share awards for vesting		308,000		61,600		(61,600	)		-			-			-			-
Net earnings		-		-		-			1,007,600			-			-			1,007,600
BALANCE - August 31, 2019		12,400,080		2,480,000		9,368,100			27,294,900			3,952,182			(11,828,600	)		27,314,400
Purchases of treasury stock		-		-		-			-			84,841			(534,100	)		(534,100	)
Sales of treasury stock		-		-		69,000			-			(24,959	)		83,400			152,400
Dividends declared ($0.05/share)		-		-		-			(423,500	)		-			-			(423,500	)
Share-based compensation expense (see Note 6)		-		-		166,300			-			-			-			166,300
Net earnings		-		-		-			2,735,800			-			-			2,735,800
BALANCE - November 30, 2019		12,400,080	$	2,480,000	$	9,603,400		$	29,607,200			4,012,064		$	(12,279,300	)	$	29,411,300

See notes to financial statements.

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EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30,

2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings $ 4,390,600 $ 2,212,900
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation 911,700 780,400
Deferred income taxes 179,400 (35,400 )
Provision for doubtful accounts 438,000 558,900
Provision for inventory valuation allowance 33,000 (37,300 )
Changes in assets and liabilities:
     Accounts receivable (1,355,700 ) (1,994,200 )
     Inventories, net 9,760,000 (16,775,100 )
     Prepaid expenses and other assets (304,700 ) (1,661,300 )
     Accounts payable (7,301,700 ) 6,889,100
     Deferred revenue 28,600 6,632,500
     Accrued salaries and commissions 2,765,200 375,600
     Other liabilities 1,320,000 2,307,700
     Income taxes payable 469,600 576,800
          Total adjustments 6,943,400 (2,382,300 )
          Net cash provided by (used in) operating activities 11,334,000 (169,400 )

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment (1,330,500 ) (2,123,600 )
             Net cash used in investing activities (1,330,500 ) (2,123,600 )

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payments on long-term debt (657,800 ) (530,200 )
  Proceeds from long-term debt 1,019,000 4,000,000
  Cash received from sales of treasury stock 32,000 170,700
  Cash used to purchase treasury stock (98,000 ) (200 )
Proceeds from the issuance of stock options 26,300 -
  Net payments under the line of credit (4,882,900 ) (451,800 )
  Dividends paid - (1,099,500 )
             Net cash provided by (used in) financing activities (4,561,400 ) 2,089,000

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,442,100 (204,000 )
CASH AND CASH EQUIVALENTS—BEGINNING OF PERIOD 699,200 1,183,700

CASH AND CASH EQUIVALENTS—END OF PERIOD $ 6,141,300 $ 979,700

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest $ 868,900 $ 730,000
  Cash paid for income taxes $ 2,058,100 $ 811,100

EDUCATIONAL DEVELOPMENT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS ENDED NOVEMBER 30,

	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings	$	10,455,700		$	5,107,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		1,207,900			1,054,100
Deferred income taxes		(809,800	)		81,100
Provision for doubtful accounts		115,800			39,900
Provision for inventory valuation allowance		166,200			283,400
Share-based compensation expense		677,000			498,800
Changes in assets and liabilities:
Accounts receivable		(1,264,200	)		(845,400	)
Inventories, net		(17,130,200	)		3,147,500
Prepaid expenses and other assets		(239,200	)		583,600
Accounts payable		35,498,700			(2,221,100	)
Accrued salaries and commissions, and other liabilities		8,781,000			1,173,700
Deferred revenues		1,945,600			(470,800	)
Income taxes		213,300			591,000
Total adjustments		29,162,100			3,915,800
Net cash provided by operating activities		39,617,800			9,022,800
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment		(2,040,000	)		(402,200	)
Net cash used in investing activities		(2,040,000	)		(402,200	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on term debt		(9,144,300	)		(719,400	)
Proceeds from term debt		1,447,400			-
Sales of treasury stock		109,300			383,400
Purchases of treasury stock		(75,500	)		(1,253,700	)
Dividends paid		(1,419,800	)		(1,241,300	)
Net cash used in financing activities		(9,082,900	)		(2,831,000	)
NET INCREASE IN CASH AND CASH EQUIVALENTS		28,494,900			5,789,600
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		2,999,400			3,199,300
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	31,494,300		$	8,988,900

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION
Cash paid for interest	$	463,600		$	693,800
Cash paid for income taxes	$	3,789,500		$	1,318,000

See notes to ~~condensed~~ financial statements.

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NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Unaudited Condensed Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim condensed financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. The Unaudited Condensed Financial Statements include all adjustments considered necessary for a fair presentation of the financial position and results of operations for the interim periods presented. Such adjustments consist only of normal recurring items, unless otherwise disclosed herein. Accordingly, the Unaudited Condensed Financial Statements do not include all of the information and notes required by GAAP for complete financial statements. However, we believe that the disclosures made are adequate to make the information not misleading. These interim Unaudited Condensed Financial Statements should be read in conjunction with our audited financial statements as of and for the year ended February ~~28, 2017~~29, 2020 included in our Form 10-K. The results of operations for interim periods are not necessarily indicative of the results to be expected for a full year due to the seasonality of our product sales.

~~Reclassifications~~

~~Certain reclassifications have been made~~

COVID-19 Update

In December 2019, a novel strain of coronavirus, known as COVID-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and President Trump declared the COVID-19 outbreak in the United States as a national emergency. The Company has taken numerous steps, and will continue to take further actions, in its approach to minimize the impact of the COVID-19 pandemic. To ensure the well-being of our employees, the Company offered employees in our office the ability to work from home on a temporary basis; we instructed employees in our warehouse and office to take their temperature at the start of every shift; we requested employees forgo any in-person meetings and instead opt to utilize virtual meeting spaces; and we published and continually updated our employees on the most recent developments related to COVID-19 and best practices for safety and health in the office, warehouse and at home. We are closely monitoring the impact of the COVID-19 pandemic and continually assessing its potential effects on our business. On April 16, 2020, the Company entered into a loan with MidFirst Bank as the lender in an aggregate principal amount of $1.4 million pursuant to the ~~fiscal 2017 condensed balance sheet~~Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and ~~condensed statement of earnings~~Economic Security (CARES) Act. This loan program provided paycheck protection for our employees from the economic impact to ~~conform~~our business due to COVID-19, which was seen most by the decline in our Publishing division’s sales due to the ~~classifications used~~temporary closure of many retail outlets across the country, and in our UBAM division’s School and Library and Book Fair sales due to the temporary closure of many schools nation-wide. The Company determined the PPP loan was no longer needed and therefore repaid the loan in full on May 12, 2020. While the Company did not experience a decrease in net revenues in the first nine months of fiscal year 2021 compared with the same period in fiscal ~~2018. These reclassifications had no effect on net earnings.~~

year 2020, the severity and duration of the pandemic are uncertain and the extent to which our results are affected by COVID-19 cannot be accurately predicted.

Use of Estimates in the Preparation of Financial Statements

The preparation of the Unaudited Condensed Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Significant Accounting Policies

Our significant accounting policies, other than the adoption of new accounting pronouncements separately documented herein, are consistent with those disclosed in Note 1 to our audited financial statements as of and for the year ended February ~~28, 2017,~~29, 2020 included in our Form 10-K.

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 accounting standards updates (“ASU”) and concluded that the following recently issued accounting standards apply to us.us:

Table of Contents

In ~~May 2014,~~December 2019, the FASB ~~issued~~published ASU ~~No. 2014-09,~~2019-12: Income Taxes (Topic 740), which simplifies the accounting for income taxes. Topic 740 addresses a number of topics including but not limited to the removal of certain exceptions currently included in the standard related to intra-period allocation when there are losses, in addition to calculation of income taxes when current year-to-date losses exceed anticipated loss for the year. The amendment also simplifies accounting for certain franchise taxes and ~~amended with ASU No. 2015-14 “Revenue from Contracts with Customers,” which provides a single revenue recognition model which~~disclosure of the effect of enacted change in tax laws or rates. Topic 740 is ~~intended to improve comparability over a range of industries, companies and geographical boundaries and will also result in enhanced disclosures. The changes are~~ effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2017, which means the first quarter of our fiscal year 2019. We do not expect the adoption of this ASU will have a significant impact on the Company’s financial position, results of operations and cash flows.

In July 2015, FASB issued ASU No. 2015-11 "Inventory - Simplifying the Measurement of Inventory", which is intended to allow measurement of inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This ASU ~~became effective for the Company on March 1, 2017. The adoption of this ASU did not have a material impact on the Company’s financial position, results of operations and cash flows.~~

~~Table of Contents~~

In November 2015, FASB issued ASU No. 2015-17, “Income Taxes - Balance Sheet Classification of Deferred Taxes,” which is intended to improve how deferred taxes are classified on organizations’ balance sheets by eliminating the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent. The changes are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods, which means the first quarter of our fiscal year 2018. We have retrospectively implemented this new presentation in our condensed financial statements. As such, for the period ending of February 28, 2017, we reclassified $466,000 of current deferred tax assets to noncurrent assets and netted $338,000 of deferred tax liabilities against the balance on the condensed balance sheet. The adoption of this ASU did not affect our statements of earnings.

In February 2016, FASB issued ASU No. 2016-02, “Leases,” which is intended to establish a comprehensive new lease accounting model. The new standard clarifies the definition of a lease, requires a dual approach to lease classification similar to current lease classifications, and causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset. The new standard is effective for interim and annual periods beginning after December 15, 2018, which means the first quarter of our fiscal year 2020. The new standard requires a modified retrospective transition for capital or operating leases existing at or entered into after the beginning of the earliest comparative period presented in the financial statements. We are currently reviewing the ASU and evaluating the potential impact on our financial statements.

In March 2016, FASB issued ASU No. 2016-09, “Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting,” which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU became effective for the Company on March 1, 2017. The adoption of this ASU did not have a material impact on the Company's financial position, results of operations and cash flows.

In June 2016, FASB issued ASU No. 2016-13 "Financial Instruments—Credit Losses", which requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. The new standard is effective for fiscal years, beginning after December 15, ~~2019, including interim periods within those fiscal years, which means~~2020. The impact of the ~~first quarter~~adoption of ~~our fiscal year 2021. We expect~~ the ~~implementation of this ASU will~~standard has not ~~have a significant impact on our financial statements.~~

yet been determined and is being evaluated.

In ~~May 2017,~~March 2020, the FASB issued ASU ~~2017-09, “Compensation - Stock Compensation~~2020-04: Reference Rate Reform (Topic ~~718): Scope~~848) Facilitation of ~~Modification Accounting.”~~the Effects of Reference Rate Reform on Financial Reporting. This update ~~amends~~provides optional guidance for a limited period of time to ease potential accounting impacts associated with transitioning away from reference rates that are expected to be discontinued, such as London Interbank Offered Rate (LIBOR). This ASU includes practical expedients for contract modifications due to reference rate reform. Generally, contract modifications related to reference rate reform may be considered an event that does not require remeasurement or reassessment of a previous accounting determination at the ~~scope of~~ modification accounting surrounding share-based payment arrangements as issued in ASU 2016-09 by providing guidance on the various types of changes which would trigger modification accounting for share-based payment awards.date. This ASU is effective ~~for annual periods beginning after~~March 12, 2020 through December ~~15, 2017, and interim periods within those annual periods, which means~~31, 2022. The Company’s debt agreements include the ~~first quarter~~use of ~~our fiscal year 2019. Early adoption~~alternate rates when LIBOR is ~~permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have~~ not ~~yet been issued.~~available. We do not expect the ~~adoption of ASU 2017-09~~change from LIBOR to an alternate rate will have a material ~~effect on~~impact to our financial ~~position, results~~statements and, to the extent we enter into modifications of ~~operations and cash flows.~~

agreements that are impacted by the LIBOR phase-out, we will apply such guidance to those contract modifications.

Note 2 – INVENTORIES

Inventories consist of the following:

2017
November 30, February 28,
Current:
  Book inventory $ 24,480,900 $ 34,278,100
  Inventory valuation allowance (25,000 ) (25,000 )

Inventories net–current $ 24,455,900 $ 34,253,100

Noncurrent:
  Book inventory $ 502,200 $ 467,100
  Inventory valuation allowance (305,900 ) (275,000 )

Inventories net–noncurrent $ 196,300 $ 192,100

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	2020
	November 30,			February 29,
Current:
Book inventory	$	47,785,300		$	30,346,900
Inventory valuation allowance		(471,500	)		(259,600	)
Inventories net – current	$	47,313,800		$	30,087,300

Noncurrent:
Book inventory	$	993,600		$	1,226,500
Inventory valuation allowance		(239,400	)		(209,800	)
Inventories net – noncurrent	$	754,200		$	1,016,700

Book inventory quantities in excess of what we expect will be sold within the normal operating cycle, based on ~~2.5~~2 ½ years of anticipated sales, are included in noncurrent inventory.

Significant portions of our inventory purchases are concentrated with an England-based publishing ~~company.~~company, Usborne Publishing, Ltd. (“Usborne”). Purchases received from this company were approximately ~~$6.9~~$26.2 million and ~~$10.9~~$4.2 million for the three months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Total inventory purchases received from all suppliers were ~~$10.9~~$35.0 million and ~~$15.2~~$6.9 million for the three months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

Purchases received from ~~this company~~Usborne were approximately ~~$18.2~~$37.5 million and ~~$29.9~~$16.1 million for the nine months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively. Total inventory purchases received from all suppliers were ~~$27.5~~$53.2 million and ~~$43.7~~$24.1 million for the nine months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

Note 3 – ~~PROPERTY, PLANT AND EQUIPMENT~~ LEASES

We have both lessee and lessor arrangements. Our leases are evaluated at inception or at any subsequent modification. Depending on the terms, leases are classified as either operating or finance leases if we are the lessee, or as operating, sales-type or direct financing leases if we are the lessor, as appropriate under ASC 842. Our lessee arrangement includes a rental agreement where we have the exclusive use of dedicated office space in San Diego, California, and qualifies as an operating lease. Our lessor arrangements include three rental agreements for warehouse and office space in Tulsa, Oklahoma, and each qualifies as an operating lease under ASC 842.

In accordance with ASC 842, we have made an accounting policy election to not apply the new standard to lessee arrangements with a term of one year or less and no purchase option that is reasonably certain of exercise. We will continue to account for these short-term arrangements by recognizing payments and expenses as incurred, without recording a lease liability and right-of-use asset.

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We have also made an accounting policy election for both our lessee and lessor arrangements to combine lease and non-lease components. This election is applied to all of our lease arrangements as our non-lease components are not material and do not result in significant timing differences in the recognition of rental expenses or income.

Operating Leases – Lessee

We recognize a lease liability, reported in other liabilities on the condensed 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. We also recognize a right-of-use asset, reported in other assets on the condensed balance sheets, for each lease, valued at the lease liability, adjusted for prepaid or accrued rent balances existing at the time of initial recognition. The lease liability and right-of-use asset are reduced over the term of the lease as payments are made and the assets are used.

	2020
	November 30,			February 29,
Operating lease assets:
Right-of-use asset	$	37,000		$	45,200

Operating lease liabilities:
Current lease liability	$	13,700		$	13,500
Long-term lease liability	$	23,300		$	31,700

Remaining lease term (months)		34			43
Discount rate		4.60	%		4.60	%

Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses on our condensed statements of earnings. Variable and short-term rental payments are recognized as costs and expenses as they are incurred.

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Fixed lease cost	$	3,300	$	3,200	$	9,800	$	9,400

Future minimum rental payments under operating leases with initial terms greater than one year as of November 30, 2020, are as follows:

Year ending February 28 (29),
2021	$	3,400
2022		13,700
2023		14,200
2024		8,400
Total future minimum rental payments		39,700
Present value discount		(2,700	)
Total operating lease liability	$	37,000

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

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Operating cash flows – operating lease	$	3,300	$	3,200	$	9,800	$	9,400

~~Property,~~

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Operating Leases – Lessor

We recognize fixed rental income on a straight-line basis over the life of the lease as revenue on our condensed statements of earnings. Variable rental payments are recognized as revenue in the period in which the changes in facts and circumstances on which the variable lease payments are based occur.

On April 4, 2020, we executed an amendment to one of our existing leases that abated rental payments for the months of May, June and July 2020. The amendment also extended the term of the lease for three additional months. This amendment represents a lease modification and, as such, we have adjusted our fixed rental income on a straight-line basis over the remaining term starting May 1, 2020.

Future minimum payments receivable under operating leases with terms greater than one year are estimated as follows:

Year ending February 28 (29),
2021	$	383,400
2022		1,542,100
2023		1,573,200
2024		1,577,900
2025		1,547,100
Thereafter		9,615,300
Total	$	16,239,000

The cost of the leased space was approximately $10,846,200 and $10,789,500 as of November 30, 2020 and February 29, 2020, respectively. The accumulated depreciation associated with the leased assets was $2,120,000 and $1,828,900 as of November 30, 2020 and February 29, 2020, respectively. Both the leased assets and accumulated depreciation are included in property, plant and ~~equipment consist of~~equipment-net on the ~~following:~~

2017
November 30, February 28,

  Land $ 4,107,200 $ 4,107,200
  Building 20,321,800 20,321,800
  Building improvements 1,750,100 1,692,500
  Machinery and equipment 6,493,200 5,230,700
  Furniture and fixtures 109,000 101,600
32,781,300 31,453,800
Less accumulated depreciation (5,328,200 ) (4,419,500 )
Net property, plant and equipment $ 27,453,100 $ 27,034,300

~~During fiscal year 2018, the Company purchased and installed new warehouse equipment and made software enhancements to increase its daily shipping capacity.~~

condensed balance sheets.

Note 4 – DEBT

Debt consists of the following:

2017
November 30, February 28,

Line of credit $ - $ 4,882,900

Long-term debt (net of debt issue costs) $ 21,925,500 $ 21,564,300
Less current maturities (1,239,500 ) (898,500 )
LONG-TERM DEBT-net of current maturities $ 20,686,000 $ 20,665,800

	2020
	November 30,			February 29,

Line of credit	$	-		$	-

Long-term debt	$	11,114,800		$	18,811,700
Less current maturities		(527,700	)		(1,027,400	)
Long-term debt, net of current maturities	$	10,587,100		$	17,784,300

We have a Loan Agreement dated as of March 10, 2016 (as amended the “Loan Agreement”) with MidFirst Bank (“the Bank”) which includes ~~multiple loans.~~ Term Loan #1 ~~is comprised of~~ Tranche A totaling ~~$13.4~~$11.1 million ~~and Tranche B totaling $5.0 million, both~~as of November 30, 2020, with the maturity date of December 1, 2025. Tranche A has a fixed interest rate of 4.23% and interest is payable monthly. ~~Tranche B interest~~Term Loan #1 is secured by the primary office, warehouse and land.

The Loan Agreement also provides a $10.0 million revolving loan (“line of credit”) through August 15, 2021, which is limited to advance rates on eligible receivables and eligible inventory levels. Interest is payable monthly at the greater of 2.75% or the bank adjusted LIBOR Index plus a tiered pricing rate based on the Company’s Adjusted Funded Debt to EBITDA Ratio ~~(4.41%~~(2.75% at November 30, ~~2017)~~2020). ~~Term~~

On August 15, 2020, the Company executed the Eleventh Amendment Loan ~~#1 is secured by~~Agreement with the ~~primary office, warehouse~~Bank related to our Loan Agreement. The amendment modified the Loan Agreement, extended the termination date of the line of credit to August 15, 2021, reduced the maximum revolving principal amount from $15.0 million to $10.0 million, and ~~land. The outstanding borrowings on Tranche A were $12,566,300~~amended the definition of the LIBOR and ~~$12,902,800 at November 30, 2017 and February 28, 2017, respectively. The outstanding borrowings on Tranche B were $4,717,900 and $4,813,800 at November 30, 2017 and February 28, 2017, respectively.~~

Prime rate, establishing that the rate charged, including the LIBOR Margin or Prime Margin, shall never be less than 2.75%.

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We also have Term Loan #2 with the Bank in the amount of $4.0 million with the maturity date of June 28, 2021, and interest payable monthly at the bank adjusted LIBOR Index plus a tiered pricing rate based on the Company’s Adjusted Funded Debt to EBITDA Ratio (4.41% at November 30, 2017). Term Loan #2 is secured by our secondary warehouse and land. The Loan Agreement also provided a $15.0 million revolving loan (“line of credit”) through June 15, 2018 with interest payable monthly at the bank adjusted LIBOR Index plus a tiered pricing rate based on the Company’s Adjusted Funded Debt to EBITDA Ratio (4.41% at November 30, 2017). The outstanding borrowings on Term Loan #2 were $3,639,000 and $3,847,700 at November 30, 2017 and February 28, 2017, respectively. We had $0 and $4,882,900 in borrowings outstanding on line of credit at November 30, 2017 and February 28, 2017, respectively. Available credit under the revolving credit agreement was $9,105,500 at November 30, 2017 and $2,117,100 at February 28, 2017.

The Loan Agreement was amended on June 15, 2017 to include an advancing term loan (the “Advancing Term Loan”) of $3.0 million which the Company will use to cover up to ninety percent of the cost of planned fiscal 2018 capital improvements to increase its daily shipping capacity. The Advancing Term Loan accrues interest monthly, at the bank adjusted LIBOR Index plus a tiered pricing rate based on the Company’s Adjusted Funded Debt to EBITDA Ratio (4.41% at November 30, 2017), between June 15 and December 15, 2017, at which time the amount advanced was converted to a term loan and will amortized over a thirty-six-month period. The outstanding borrowings on the Advancing Term Loan was $1,019,100 at November 30, 2017.

The Company has capitalized certain debt issue costs associated with amending the Loan Agreement and these costs are being amortized over the term of the respective borrowings. Unamortized debt issues costs were $16,800 at November 30, 2017.

The Tranche B, the line of credit, the Term Loan #2 and the Advancing Term Loan all accrue interest at a tiered rate based on our Adjusted Funded Debt to EBITDA ratio which is payable monthly. The current pricing tier is as follows:

~~Pricing Tier~~	~~Adjusted Funded Debt to EBITDA Ratio~~	~~LIBOR Margin (bps)~~
I	~~>3.00~~	~~350.50~~
II	~~>2.50 but~~ <~~3.00~~	~~337.50~~
~~III~~	~~>2.00 but~~ <~~2.50~~	~~325.00~~
IV	<~~2.00~~	~~312.50~~

Adjusted Funded Debt is defined as all ~~long term~~long-term and short-term bank debt less the outstanding balances of Tranche ~~A and Trance B Term Loans.~~A. EBITDA is defined in the Loan Agreement as earnings before interest expense, income tax expense (benefit) and depreciation and amortization ~~expenses.~~expenses, reduced by rental income. The ~~$15.0 million~~variable interest pricing tier is as follows:

Pricing Tier	Adjusted Funded Debt to EBITDA Ratio	LIBOR Margin (bps)
I	>2.00	300.00
II	>1.50 but <2.00	275.00
III	>1.00 but <1.50	250.00
IV	<1.00	225.00

We had no borrowings outstanding on our line of credit ~~is limited to advance rates on eligible receivables~~at November 30, 2020 and ~~eligible inventory levels.~~

~~The President~~February 29, 2020. Available credit under the revolving line of credit was approximately $10.0 million and ~~Chief Executive Officer~~$11.0 million at November 30, 2020 and his wife have executed a Guaranty Agreement obligating them to repay $3,680,000 of any unpaid Term Loans, unpaid accrued interest and any recourse amounts as defined in the Continuing Guaranty Agreement.

February 29, 2020, respectively.

The Loan Agreement contains a provision for our use of the Bank’s letters of credit. The Bank agrees to issue or obtain issuance of commercial or stand-by letters of credit provided that no letters of credit will have an expiry date later than ~~June~~August 15, ~~2018,~~2021, and that the sum of the line of credit plus the letters of credit would not exceed the borrowing base in effect at the time. ~~For the quarter ended~~As of November 30, ~~2017,~~2020, we had no letters of credit outstanding.

On April 16, 2020, the Company entered into a loan with the Bank of approximately $1.4 million pursuant to the PPP under the CARES Act. The PPP Loan ~~Agreement also contains provisions that require us~~had a fixed interest rate of 1.00%, with principal and interest payments starting December 1, 2020 and a scheduled maturity date of May 1, 2022. Subsequent to ~~maintain specified financial ratios, restrict transactions with related parties, prohibit mergers~~receiving the loan, the Company determined the PPP loan was not needed and repaid the loan in full, including interest accrued to date, on May 12, 2020.

On June 3, 2020, the Company paid off the remaining balance of the $4.0 million Term Loan #2 which originated on June 28, 2016. The final payment, including accrued interest, totaled $2.9 million. There were no additional fees or ~~consolidation, disallow~~penalties resulting from the payoff of Term Loan #2.

On August 4, 2020, the Company paid off the remaining balance of the $5.0 million Term Loan #1 Tranche B which originated on March 10, 2016. The final payment, including accrued interest, totaled $4.2 million. There were no additional fees or penalties resulting from the payoff of Term Loan #1 Tranche B.

The following table reflects aggregate future scheduled maturities of long-term debt during the next five fiscal years and limit the amount of compensation, salaries, investments, capital expenditures, leasing transactions we can make on a quarterly basis. Additionally, the Loan Agreement suspends dividends and stock buybacks.

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thereafter as follows:

Year ending February 28 (29),
2021	$	128,800
2022		533,400
2023		556,800
2024		581,100
2025		605,400
Thereafter		8,709,300
Total	$	11,114,800

Note 5 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net earnings 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. In computing diluted EPS, we have utilized the treasury stock method.

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

Three Months Ended November 30, Nine Months Ended November 30,
2017 2016 2017 2016

Net earnings $ 2,128,400 $ 1,274,200 $ 4,390,600 $ 2,212,900
Shares:
Weighted average shares outstanding – basic 4,087,268 4,079,916 4,087,686 4,074,355

Assumed exercise of options 2,743 4,947 2,367 5,478
Weighted average shares outstanding – diluted 4,090,011 4,084,863 4,090,053 4,079,833

Basic Earnings Per Share $ 0.52 $ 0.31 $ 1.07 $ 0.54
Diluted Earnings Per Share $ 0.52 $ 0.31 $ 1.07 $ 0.54

In April 2008, the Board of Directors authorized management to purchase up to an additional 500,000 shares of our common stock under the Stock Purchase Plan (the “Plan”) initiated in 1998. This Plan has no expiration date. During the nine months ended November 30, 2017, the Company purchased 6,497 shares of common stock from terminated employees that elected to withdraw their contributions from the Company’s 401(k) plan. The shares were purchased at the closing price of the stock on the day the employee executed their withdrawal form. In addition, the Company’s 401(k) plan purchased 3,901 shares of common stock held in treasury during the nine months ended November 30, 2017. The remaining maximum number of shares that can be repurchased in the future is 296,632. ~~Additionally~~, ~~at an exercise price of $5.25 per share,~~ ~~the Company purchased into treasury shares 3,544 shares at $9.85 during the nine months ended November 30, 2017.~~

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Earnings:
Net earnings applicable to common shareholders	$	4,269,600	$	2,735,800	$	10,455,700	$	5,107,000

Weighted average shares:
Weighted average shares outstanding-basic		8,355,831		8,406,709		8,354,156		8,301,209
Assumed exercise of options		-		5,929		-		6,287
Weighted average shares outstanding-diluted		8,355,831		8,412,638		8,354,156		8,307,496

Earnings per share:
Basic	$	0.51	$	0.33	$	1.25	$	0.62
Diluted	$	0.51	$	0.33	$	1.25	$	0.61

Note 6 – STOCK-BASED COMPENSATION

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 establishes up to 600,000 shares of restricted stock which can 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 number of restricted shares to be distributed depends on attaining the performance metrics defined by the 2019 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 2019 LTI Plan. Restricted shares granted under the 2019 LTI Plan “cliff vest” after five years.

During fiscal year 2019, the Company granted 308,000 restricted shares under the 2019 LTI Plan with an average grant-date fair value of $9.94 per share. In the third quarter ~~ended~~of fiscal year 2021, 5,000 of these restricted shares were forfeited. These shares were made available to be reissued to remaining participants upon forfeiture. The remaining compensation expense for the outstanding awards, totaling approximately $1,470,400, will be recognized ratably over the remaining vesting period of approximately 27 months.

During fiscal year 2021, the Company initially granted 151,000 restricted shares under the 2019 LTI Plan with an average grant-date fair value of $6.30 per share. 8,000 of these shares were granted, forfeited and re-granted to remaining participants in fiscal year 2021. In the third quarter of fiscal year 2021, the Company increased the number of shares granted for fiscal year 2021 from 151,000 to 305,000 due to revised performance expectations for the year. The remaining compensation expense of these awards, totaling approximately $1,669,400, will be recognized ratably over the remaining vesting period of approximately 51 months. As of November 30, ~~2017,~~2020, there are no restricted shares available for issuance as future awards under the 2019 LTI Plan.

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

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019

Share-based compensation expense	$	291,800	$	166,300	$	677,000	$	498,800

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The following table summarizes stock award activity during fiscal year 2021 under the 2019 LTI Plan:

	Shares			Weighted Average Fair Value (per share)

Outstanding at February 29, 2020		308,000		$	9.94
Granted		305,000			6.30
Vested		-			-
Forfeited		(13,000	)		(7.70	)
Outstanding at November 30, 2020		600,000		$	8.14

As of November 30, 2020, total unrecognized stock-based compensation expense related to unvested restricted shares was $3,139,800, which we expect to recognize over a ~~former employee exercised 5,000 vested stock options.~~

weighted-average period of 39.8 months.

Note 7 – SHIPPING AND HANDLING COSTS

~~Outbound freight~~

We classify shipping and handling costs ~~incurred are included in~~as operating and selling expenses in the statements of earnings. Shipping and handling costs include postage, freight, handling costs, as well as, shipping materials and supplies. These costs were ~~$5,328,900~~$10,610,900 and ~~$4,569,900~~$6,037,600 for the three months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively. These costs were ~~$12,200,100~~$26,910,800 and ~~$12,134,700~~$14,087,400 for the nine months ended November 30, ~~2017~~2020 and ~~2016,~~2019, respectively.

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~~Note 8~~ – ~~COMMITMENTS~~

W~~e have a 15-year lease with a non-related tenant, who leases 181,300 square feet, or 45.3% of our main facility. The lease is being accounted for as an operating lease.~~

The lessee pays $107,900 per month, with a 2.0% annual increase adjustment on the anniversary of the lease. The lease terms allow for one five-year extension, which is not a bargain renewal option, at the expiration of the 15-year term. Revenue associated with the lease is being recorded on a straight-line basis over the 15-year lease and is reported in other income on the condensed statement of earnings.

The Company executed purchase orders with several vendors during the first two quarters of fiscal 2018 to buy and install equipment that will increase the daily shipping capabilities of its distribution center located in Tulsa, OK. The original purchase orders totaled approximately $1,500,000. The Company received and installed approximately half of the equipment in the second quarter of fiscal 2018 and has approximately $400,000 of remaining commitments on the original purchase orders. The remaining equipment is scheduled to be received and installed in the fourth quarter of the fiscal year.

Note 98 – BUSINESS SEGMENTS

~~The Company has~~

We have two reportable segments: Usborne Books & More (“UBAM”) and Publishing. 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. ~~The~~Our UBAM segment markets its products through a network of independent sales consultants 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 and museums, through commissioned sales representatives, trade and specialty wholesalers and anour internal tele-sales group. ~~The UBAM segment markets its products through a network of independent sales consultants using a combination of home shows, internet shows and book fairs.~~

The accounting policies of the segments are the same as those ~~described in~~of the ~~summary~~rest of ~~significant accounting policies disclosed in~~ the ~~Company’s most recent 10-K annual report for the fiscal year ended February 28, 2017.~~Company. We evaluate segment performance based on earnings before income taxes of the segments, which is defined as segment net ~~sales~~revenues reduced by cost of sales and direct expenses. Corporate expenses, depreciation, interest expense 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~~.

basis.

Information by reporting segment for the ~~three~~three- and nine-month periods ended November 30, ~~2017~~2020 and ~~2016,~~2019, are as follows:

NET REVENUES

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Publishing	$	2,580,600	$	2,724,200	$	6,284,600	$	7,766,300
UBAM		64,169,700		38,100,400		158,007,500		85,083,700
Total	$	66,750,300	$	40,824,600	$	164,292,100	$	92,850,000

EARNINGS (LOSS) BEFORE INCOME TAXES

	Three Months Ended November 30,						Nine Months Ended November 30,
	2020			2019			2020			2019
Publishing	$	773,000		$	832,900		$	1,858,400		$	2,253,300
UBAM		10,821,600			6,501,200			26,311,300			14,358,500
Other		(5,820,300	)		(3,498,400	)		(13,952,000	)		(9,562,900	)
Total	$	5,774,300		$	3,835,700		$	14,217,700		$	7,048,900

NET REVENUES
Three Months Ended November 30, Nine Months Ended November 30,
2017 2016 2017 2016
Publishing $ 2,439,600 $ 3,075,000 $ 6,538,700 $ 7,244,600
UBAM 36,468,400 27,622,600 83,481,400 72,130,200
Total $ 38,908,000 $ 30,697,600 $ 90,020,100 $ 79,374,800

EARNINGS BEFORE INCOME TAXES
Three Months Ended November 30, Nine Months Ended November 30,
2017 2016 2017 2016
Publishing $ 556,800 $ 979,500 $ 1,514,200 $ 2,138,700
UBAM 6,915,400 4,719,800 15,865,200 11,286,200
Other (4,039,400 ) (3,659,200 ) (10,281,700 ) (9,859,500 )
Total $ 3,432,800 $ 2,040,100 $ 7,097,700 $ 3,565,400

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Note 109 – FAIR VALUE MEASUREMENTS

The valuation hierarchy included in ~~U.S.~~ GAAP considers the transparency of inputs used to value assets and liabilities as of the measurement date. A financial ~~instrument's~~instrument’s classification within the valuation hierarchy is based on the lowest level of input that is significant to its fair value measurement. The three levels of the valuation hierarchy and the classification of our financial assets and liabilities within the hierarchy are as follows:

Level 1 -– Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 -– Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly. If an asset or liability has a specified term, a Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 -– Unobservable inputs for the asset or liability.

We do not report any assets or liabilities at fair value in the financial statements. However, the estimated fair value of our ~~line of credit is estimated by management to approximate the carrying value of $0~~ ~~and $4,882,900~~ ~~at November 30, 2017 and February 28, 2017, respectively. The estimated fair value of our~~ term notes payable is estimated by management to approximate ~~$20,812,600~~$11,508,200 and ~~$20,130,100~~$19,155,500 at November 30, ~~2017~~2020 and February ~~28, 2017,~~29, 2020, respectively. ~~Management's~~Management’s estimates are based on the ~~obligations'~~obligations’ characteristics, including floating interest rate, maturity, and collateral. Such valuation inputs are considered a Level 2 measurement in the fair value valuation hierarchy.

Note 1110 – DEFERRED ~~REVENUE~~

AsREVENUES

The Company’s UBAM division receives payments on orders in advance of shipment. Any payments received prior to the end of the ~~third quarter, we had~~period that were not shipped as of November 30, 2020 or February 29, 2020 are recorded as deferred revenues on the condensed balance sheets. We received approximately ~~$661,700~~$2,330,900 and $385,300 as of November 30, 2020 and February 29, 2020 in payments for sales orders which were shipped out subsequent to the ~~quarter end. As~~end of ~~November 30, 2017, these prepaid sales orders are~~the period. Orders that were included in deferred ~~revenue on~~revenues predominantly shipped within the ~~condensed balance sheet.~~

first few days of the next fiscal period.

Note 1211 – SUBSEQUENT ~~EVENT~~

EVENTS

On ~~December 22, 2017, the U.S. President signed the Tax Cuts and Jobs Act~~January 7, 2021, our Board of ~~2017 (the “Act”). Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740, Income Taxes (“ASC 740”) requires that the effects~~Directors declared a distribution of ~~changes in tax laws~~$0.10 per share of common stock. This cash distribution will be paid on or ~~tax rates be recognized in the financial statements in the period in which such changes were enacted. Among other things, changes in tax laws or tax rates can affect the amount~~about March 11, 2021 to shareholders of taxes payable for the current period, as well as the amount and timing of deferred tax liabilities and deferred tax assets. The Company is a fiscal year reporting company and as such would be required to account for the impact related to the Act in the financial statements included in the annual reportrecord on ~~Form 10-K for~~ February ~~28, 2018.~~

23, 2021.

Table of Contents

~~ITEM~~Item 2. ~~MANAGEMENT'S~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Factors Affecting Forward-Looking Statements

The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside our ~~control, including among other things, the risk factors discussed in our Annual Report on Form 10-K for the year ended February 28, 2017.~~control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, our success in recruiting and retaining new consultants, our ability to locate and procure desired books, our ability to ship the volume of orders that are received without creating ~~backlog,~~backlogs, our ability to obtain adequate financing for working capital and capital expenditures, economic and competitive conditions, regulatory changes and other uncertainties, the COVID-19 pandemic, as well as those factors discussed below and elsewhere in our Annual Report on Form 10-K for the year ended February ~~28, 2017~~29, 2020 and this Quarterly Report on Form 10-Q, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may or may not occur. See “Cautionary Remarks Regarding Forward-Looking Statements” in the front of this Quarterly Report on Form 10-Q.

Overview

We are the exclusive United States trade co-publisher of Usborne children’s books and the owner of Kane Miller. We operate two separate ~~segments:~~segments, UBAM and Publishing, to sell our Usborne and Kane Miller ~~lines of~~ children’s books. These two segments each have their own customer base. The Publishing segment markets its products on a wholesale basis to various retail accounts. The UBAM segment markets its products through a network of independent sales consultants using a combination of home shows, internet ~~shows~~party plan events and book fairs. All other supporting administrative activities are recognized as other expenses outside of our two segments. Other expenses ~~are~~consist primarily of the compensation of our office, warehouse and sales support staff as well as the cost of operating and maintaining our corporate office and distribution facility.

The following table shows our condensed statements of earnings data:

Three Months Ended November 30, Nine Months Ended November 30,
2017 2016 2017 2016
Net revenues $ 38,908,000 $ 30,697,600 $ 90,020,100 $ 79,374,800
Cost of goods sold 10,494,800 8,328,100 24,579,200 22,500,300
  Gross margin 28,413,200 22,369,500 65,440,900 56,874,500
Operating expenses:
  Operating and selling 7,837,300 6,520,300 17,549,900 16,790,900
  Sales commissions 12,510,400 9,521,000 28,759,300 24,802,200
  General and administrative 4,735,200 4,525,900 12,359,600 12,237,600
  Total operating expenses 25,082,900 20,567,200 58,668,800 53,830,700
Other income (expense)
  Interest expense (287,600 ) (265,000 ) (863,800 ) (730,000 )
  Other income 390,100 502,800 1,189,400 1,251,600
Earnings before income taxes 3,432,800 2,040,100 7,097,700 3,565,400
Income taxes 1,304,400 765,900 2,707,100 1,352,500
Net earnings $ 2,128,400 $ 1,274,200 $ 4,390,600 $ 2,212,900

	Three Months Ended November 30,						Nine Months Ended November 30,
	2020			2019			2020			2019
Net revenues	$	66,750,300		$	40,824,600		$	164,292,100		$	92,850,000
Cost of goods sold		19,597,800			13,279,900			48,302,800			30,382,500
Gross margin		47,152,500			27,544,700			115,989,300			62,467,500

Operating expenses
Operating and selling		11,616,200			6,513,500			28,488,300			15,089,900
Sales commissions		22,960,300			13,008,600			56,865,200			28,804,700
General and administrative		7,082,200			4,373,500			17,282,200			12,029,300
Total operating expenses		41,658,700			23,895,600			102,635,700			55,923,900

Interest expense		119,300			216,500			441,500			691,000
Other income		(399,800	)		(403,100	)		(1,305,600	)		(1,196,300	)
Earnings before income taxes		5,774,300			3,835,700			14,217,700			7,048,900

Income taxes		1,504,700			1,099,900			3,762,000			1,941,900
Net earnings	$	4,269,600		$	2,735,800		$	10,455,700		$	5,107,000

See the detailed discussion of revenues, costs of ~~services,~~goods sold, gross margin ~~general~~ and ~~administrative~~operating expenses by reportable segment below. The following is a discussion of significant changes in the non-segment related ~~general and administrative~~operating expenses, ~~other income and expenses~~interest expense and income taxes during the respective periods.

Table of Contents

Non-Segment Operating Results for the Three Months Ended November 30 ~~2017~~

~~Operating~~, 2020

Total operating expenses not associated with a reporting segment ~~totaled $4.1~~increased $2.4 million, or 64.9%, to $6.1 million for the ~~quarter~~three-month period ended November 30, ~~2017, an increase of $0.2~~2020, compared to $3.7 million ~~over the $3.9 million of operating expenses reported~~ for the same quarterly period ~~ending November 30, 2016.~~a year ago. Operating expenses increased primarily as a result of ana $1.0 million increase in ~~the bonus accrual~~labor in our warehouse, a $0.6 million increase in freight handling costs associated with increased order volumes and a $0.2 million increase in incentive payroll expenses associated with the Company’s ~~increased operating profits of approximately $0.4~~improved financial performance.

Interest expense decreased $0.1 million, ~~partially offset by other cost reductions.~~

~~Interest expense~~ ~~was $0.3~~or 50.0%, to $0.1 million for the three months ended November 30, ~~2017, which was consistent with the interest expense reported~~2020, when compared to $0.2 million for the same quarterly period a year ago as a result of the payoff of two long-term notes during the second quarter ~~last year.~~

of fiscal year 2021.

Income taxes increased ~~$0.5~~$0.4 million, or 36.4%, to ~~$1.3~~$1.5 million for the three months ended November 30, ~~2017,~~2020, from ~~$0.8~~$1.1 million for the same quarterly period a year ago. Our effective tax rate decreased 2.6%, to 26.1% for the quarter ended November 30, ~~2016. The income tax expense increase was directly attributed to the increase in earnings for the quarter. Our effective tax rate was 38.0%~~2020, from 28.7% for the quarter ended November 30, ~~2017, and 37.5% for the quarter ended November 30, 2016. These~~2019 due to sales mix fluctuations between states. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

Non-Segment Operating Results for the Nine Months Ended November 30 ~~2017~~

~~Operating~~, 2020

Total operating expenses not associated with a reporting segment increased ~~totaling $10.6~~$4.7 million, or 46.5%, to $14.8 million for the nine-month period ~~ending~~ended November 30, ~~2017~~2020, compared to ~~$10.4~~$10.1 million for the same period a year ago. Operating expenses increased ~~due to an~~primarily as a result of a $2.4 million increase in labor in our warehouse, a $1.6 million increase in freight handling costs, both associated with the ~~bonus accrual~~increase in order volumes, and a $0.3 million increase in incentive payroll expenses associated with the Company’s ~~increased operating profits of approximately $0.4 million, partially offset by reduced other expenses totaling $0.2 million.~~

improved financial performance.

Interest expense ~~totaled $0.9~~ decreased $0.3 million, or 42.9%, to $0.4 million for the nine months ended November 30, ~~2017, an increase of $0.2 million over the~~2020, when compared to $0.7 million ~~of interest expense reported~~ for the same period a year ~~ago. Interest expense increased~~ago as a result of the payoff of two long-term debt agreements during the ~~current~~second quarter of fiscal year ~~due~~2021.

Income taxes increased $1.9 million, or 100.0%, to ~~primarily to increased borrowings on the line of credit during the current year.~~

~~Income taxes~~ ~~increased $1.3 million to $2.7~~$3.8 million for the nine months ended November 30, ~~2017,~~2020, from ~~$1.4~~$1.9 million for the same period a year ago. Our effective tax rate ~~was 38.1%~~decreased by 1.0%, to 26.5% for the nine months ended November 30, ~~2017, and 37.9%~~2020, from 27.5% for the ~~same period a year ago. These~~nine months ended November 30, 2019 due to sales mix fluctuations between states. Our tax rates are higher than the federal statutory rate of 21% due to the inclusion of state income and franchise taxes.

UBAM Operating Results for the Three and Nine Months Ended November 30 ~~2017~~

, 2020 and 2019

The following table summarizes the operating results of the UBAM ~~segment for the three and nine months ended November 30, 2017 and 2016:~~

For the Three Months Ended
November 30,

For the Nine Months Ended
November 30,

2017 2016 2017 2016
Gross sales $ 36,761,700 $ 27,907,200 $ 87,143,200 $ 76,263,200
Less discounts and allowances (4,059,000 ) (3,528,100 ) (12,595,300 ) (12,414,500 )
Transportation revenue 3,765,700 3,243,500 8,933,500 8,281,500
Net revenues 36,468,400 27,622,600 83,481,400 72,130,200

Cost of goods sold 9,114,200 6,577,500 20,939,500 18,549,700
Gross margin 27,354,200 21,045,100 62,541,900 53,580,500

Operating Expenses
Operating and selling 6,860,200 5,613,300 14,752,100 14,311,500
Sales commissions 12,420,000 9,425,300 28,507,800 24,561,100
General and administrative 1,158,600 1,286,700 3,416,800 3,421,700
Total operating expenses 20,438,800 16,325,300 46,676,700 42,294,300

Operating income $ 6,915,400 $ 4,719,800 $ 15,865,200 $ 11,286,200

Average number of active consultants 31,100 28,100 29,500 24,800

segment:

	Three Months Ended November 30,						Nine Months Ended November 30,
	2020			2019			2020			2019
Gross sales	$	77,674,100		$	47,974,800		$	190,488,500		$	106,219,100
Less discounts and allowances		(21,244,700	)		(13,469,600	)		(51,379,800	)		(29,298,200	)
Transportation revenue		7,740,300			3,595,200			18,898,800			8,162,800
Net revenues		64,169,700			38,100,400			158,007,500			85,083,700

Cost of goods sold		18,230,200			11,830,100			45,048,500			26,317,100
Gross margin		45,939,500			26,270,300			112,959,000			58,766,600

Operating expenses
Operating and selling		10,055,900			5,599,200			24,619,800			12,690,500
Sales commissions		22,865,000			12,912,200			56,674,800			28,511,700
General and administrative		2,197,000			1,257,700			5,353,100			3,205,900
Total operating expenses		35,117,900			19,769,100			86,647,700			44,408,100

Operating income	$	10,821,600		$	6,501,200		$	26,311,300		$	14,358,500

Average number of active consultants		57,200			33,600			45,200			32,900

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UBAM Operating Results for the Three Months Ended November 30 ~~2017~~

~~The~~ , 2020

UBAM ~~segment’s sales consist of home shows, internet shows and book fairs. Net~~net revenues increased ~~$8.9~~$26.1 million, or ~~32.2%~~68.5%, to ~~$36.5~~$64.2 million during the ~~three-month period ending~~three months ended November 30, ~~2017, when~~2020, compared ~~with net revenues of $27.6~~to $38.1 million ~~reported the same quarter a year ago. The increase in net revenues resulted primarily from an increase in the orders received~~ during ~~the period and an increase in our daily shipping volumes over the same period last year.~~

~~Our orders increased during the quarter from~~ the same period a year ~~ago primarily due to the increase in the number of our active consultants.~~ago. The average number of active consultants ~~increased 3,000, or 10.7% from 28,100~~ in the third quarter of fiscal ~~year 2017 to 31,100~~2021 was 57,200, an increase of 23,600, or 70.2%, from 33,600 average active consultants selling in the third quarter of fiscal ~~2018. Our consultant growth is driven primarily by existing~~2020. The Company reports the average number of active consultants ~~recruiting~~each quarter as a key indicator for this division. UBAM's increase in active consultants resulted from several factors, including: an increase in families looking for non-traditional income streams to supplement or replace income lost from the COVID-19 pandemic; a change in new consultant kits which offered lower introductory prices; the restructure of our UBAM consultant success program, which was introduced during the first quarter of fiscal 2021; and ~~retaining new consultants.~~

technology improvements that have enhanced the customer experience and streamlined the proprietary systems that our consultants use to run their business. Our ~~daily shipping volumes~~increase in active consultants and our ability to receive orders online and deliver directly to our customers’ homes resulted in our increased ~~over~~revenues during the quarter.

Gross margin increased $19.6 million, or 74.5%, to $45.9 million during the three months ended November 30, 2020, compared to $26.3 million during the same period ~~last~~a year due to recent facility changes. During the first and second quarters of this fiscal year, we modified our distribution center setup and added new automation that increased our daily shipping capacity. With this increased capacity, our shipments were able to keep pace with our incoming orders during the quarter ended November 30, 2017. During the third quarter last year, our shipments ~~did not keep pace with~~ ~~incoming orders and we ended the quarter with a large backlog of orders totaling approximately $9.6 million, which was recognized as deferred revenue at quarter end.~~

ago. Gross margin as a percentage of net revenues increased ~~$6.3 million~~2.6% to ~~$27.4 million~~71.6% for the three-month period ~~ending~~ended November 30, ~~2017 from $21.0 million reported during~~2020 when compared to 69.0% the same ~~quarter~~period a year ago. The increase in gross margin ~~primarily resulted from the increase in sales. Gross margins~~ as a percentage of net revenues ~~remained consistent between~~was due to the ~~periods.~~

change in mix of order types received during the quarter. During the quarter our web sales, which have the lowest discounts and pay the highest commissions, increased significantly while book fairs, school and library sales and other in-person sales types declined year over year, due to the quarantining effects of the COVID-19 pandemic. The increase in web sales and decrease in in-person sales also resulted in overall higher sales commissions as a percentage of net revenues during the quarter. The overall net profit impact of the order type mix change after selling expenses, commissions and direct operating expenses was minimal.

UBAM operating expenses consists of operating and selling expenses, sales commissions and general and administrative expenses. Operating and selling expenses primarily consists of freight expenses and ~~hostess awards associated with sales orders.~~materials and supplies. Sales commissions include amounts paid to consultants for new sales and promotions. These operating expenses are directly tied to the sales volumes of the UBAM segment. General and administrative expenses include payroll, ~~travel and entertainment expenses,~~ outside services, inventory reserves and other expenses directly associated with the UBAM segment. Total operating expenses increased ~~$4.1~~$15.3 million, or ~~25.1%~~77.3%, to ~~$20.4~~$35.1 million during the three-month period ~~ending~~ended November 30, ~~2017,~~2020, when compared ~~with~~to $19.8 million reported in the same quarter a year ago. Operating and selling expenses increased $4.5 million, to $10.1 million, during the three-month period ended November 30, 2020, when compared to $5.6 million reported in the same quarter a year ago, primarily due to an increase in postage and freight costs of $3.9 million and an increase in accruals for trips and other consultant rewards of $0.5 million, both associated with increased UBAM sales. Sales commissions increased $10.0 million, to $22.9 million, during the three-month period ended November 30, 2020, when compared to $12.9 million reported in the same quarter a year ago, due primarily to the increase in sales volume and the increase in internet-based sales, which offer fewer discounts and higher sales commissions to consultants. General and administrative expenses increased $0.9 million to $2.2 million during the three months ended November 30, 2020, compared to $1.3 million during the same period last year. ~~Operating expenses~~This increase was primarily due to $0.6 million of increased ~~primarily from increased operating and selling costs and~~credit card transaction fees associated with increased sales ~~commissions, both tied to the growth~~volumes and a $0.2 million increase in ~~revenues during the period.~~

promotions and marketing expenses associated with increased consultant counts.

Operating income of the UBAM segment increased ~~$2.2~~$4.3 million, or ~~46.8%~~66.2%, to ~~$6.9~~$10.8 million during the ~~three-month period ending~~three months ended November 30, ~~2017,~~2020, when compared to $6.5 million reported in the same quarter a year ago, primarily due to ~~primarily~~the growth in net revenues. Operating income of the UBAM division as a percentage of net revenues for the three months ended November 30, 2020 remained consistent at 16.9%, compared to ~~increased sales and gross margins, partially offset by increased operating and selling expenses and sales commissions.~~

17.1% for the three months ended November 30, 2019.

UBAM Operating Results for the Nine Months Ended November 30 ~~2017~~

~~Net~~, 2020

UBAM net revenues increased ~~$11.4~~$72.9 million, or ~~15.8%~~85.7%, to ~~$83.5~~$158.0 million during the nine-month period ~~ending~~ended November 30, ~~2017, when~~2020, compared ~~with net revenues of $72.1~~to $85.1 million ~~reported during~~from the same period a year ago. The increase in net revenues ~~primarily~~ resulted from the increase in the ~~number of active sales consultants during the period along with increase in the year over year shipments made during the third quarter.~~

~~The~~ average number of active consultants ~~increased 4,700,~~of 12,300, or ~~19.0%~~37.4%, to 45,200 during the first nine months of fiscal year 2021, and the overall increase in consultants to 60,500 by the end of November 2020, from ~~24,800~~an average number of active consultants of 32,900 in the first nine months of fiscal year ~~2017~~2020. UBAM's increase in active consultants resulted from several factors including: an increase in families looking for non-traditional income streams to ~~29,500~~supplement or replace income lost from the COVID-19 pandemic; a change in new consultant kits which offered lower introductory prices; the restructure of our UBAM consultant success program, which was introduced during the first quarter of fiscal 2021; and technology improvements that have enhanced the customer experience and streamlined the proprietary systems that our consultants use to run their business. Along with the significant increases in active consultants during the first nine months of fiscal ~~2018.~~year 2021, we experienced a significant increase in demand for educational materials in homes. Our ~~consultant growth is driven by existing~~increase in active consultants ~~recruiting~~ and ~~retaining new consultants.~~our ability to receive orders online and deliver directly to our customers’ homes resulted in our increased revenues.

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Gross ~~margins~~margin increased ~~$8.9~~$54.2 million, or 92.2%, to ~~$62.5~~$113.0 million ~~for~~during the nine-month period ~~ending~~ended November 30, ~~2017 from $53.6~~2020, when compared to $58.8 million ~~reported~~ during the same period a year ~~ago. The~~ago, due primarily to an increase in ~~gross margins primarily resulted from the increase in sales.~~net revenues. Gross ~~margins~~margin as a percentage of net revenues ~~remained consistent at 74.9%~~increased to 71.5% for the nine-month period ~~ending~~ended November 30, ~~2017~~2020, when compared to ~~74.3% reported~~69.1% for the same period a year ago.

During the first nine months of fiscal year 2021 our web sales, which have the lowest discounts and pay the highest commissions, increased significantly while book fairs, school and library sales and other in-person sales types declined year over year, due to the quarantining effects of the COVID-19 pandemic. While the increase in web sales and decrease in in-person sales resulted in overall higher gross margin percentages during the first nine months of fiscal year 2021, these higher gross margins were offset by higher sales commissions and increased direct operating expenses of the division. The overall net profit impact of the order type mix change after selling expenses, commissions and direct operating expenses was minimal.

Total ~~UBAM~~ operating expenses increased ~~$4.4~~$42.2 million, or ~~10.4%~~95.0%, to ~~$46.7~~$86.6 million during the nine-month period ~~ending~~ended November 30, ~~2017,~~2020, from $44.4 million for the same period a year ago. Operating and selling expenses increased $11.9 million, to $24.6 million during the nine-month period ended November 30, 2020, when compared to $12.7 million reported in the same period a year ago, primarily due to increased postage and freight costs of $11.4 million associated with ~~$42.3~~the increase in volume of orders shipped. Sales commissions increased $28.2 million ~~with~~to $56.7 million during the nine-month period ended November 30, 2020, when compared to $28.5 million reported in the same period a year ago, due primarily to the increase in ~~operating~~internet-based sales, which offer fewer discounts and ~~selling~~higher sales commissions to consultants. General and administrative expenses ~~and~~increased $2.2 million to $5.4 million, from $3.2 million recognized during the same period last year, due primarily to $1.6 million of increased credit card transaction fees associated with increased sales ~~commissions~~volumes and a $0.6 million increase in promotions and marketing expenses associated with ~~UBAM’s revenue growth.~~

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increased consultant counts.

Operating income of the UBAM segment increased ~~$4.6~~$11.9 million, or ~~40.7~~%82.6%, to ~~$15.9~~$26.3 million during the ~~nine-month period ending~~nine months ended November 30, ~~2017~~2020, when compared to ~~$11.~~3$14.4 million reported ~~during~~in the same period last year. Operating income of the UBAM division as a ~~year ago. The increase in operating~~percentage of net revenues for the nine months ended November 30, 2020 was 16.7%, compared to 16.9% for the nine months ended November 30, 2019, a change of 0.2%, or $0.4 million. Operating income ~~was~~as a percentage of net revenues changed from the prior year primarily due to increased ~~gross margins on increased sales.~~

postage and freight expenses as a percentage of net revenues totaling approximately $0.9 million, partially offset by the positive impact of the change to a “virtual” convention totaling approximately $0.5 million.

Publishing Operating Results for the Three and Nine Months Ended November 30 ~~2017~~

, 2020 and 2019

The following table summarizes the operating results of the Publishing ~~segment for the three and nine months ended November 30, 2017 and 2016:~~

For the Three Months Ended
November 30,

For the Nine Months Ended
November 30,

2017 2016 2017 2016
Gross sales $ 5,132,900 $ 6,490,100 $ 13,846,300 $ 15,394,000
Less discounts and allowances (2,703,300 ) (3,419,900 ) (7,334,000 ) (8,167,400 )
Transportation revenue 10,000 4,800 26,400 18,000
Net revenues 2,439,600 3,075,000 6,538,700 7,244,600

Cost of goods sold 1,380,600 1,750,600 3,639,700 3,950,600
Gross margin 1,059,000 1,324,400 2,899,000 3,294,000

Total operating expenses 502,200 344,900 1,384,800 1,155,300

Operating income $ 556,800 $ 979,500 $ 1,514,200 $ 2,138,700

segment:

	Three Months Ended November 30,						Nine Months Ended November 30,
	2020			2019			2020			2019
Gross sales	$	5,463,400		$	5,645,100		$	13,228,700		$	16,416,200
Less discounts and allowances		(2,886,400	)		(2,936,900	)		(7,010,600	)		(8,680,700	)
Transportation revenue		3,600			16,000			66,500			30,800
Net revenues		2,580,600			2,724,200			6,284,600			7,766,300

Cost of goods sold		1,367,600			1,449,800			3,254,300			4,065,400
Gross margin		1,213,000			1,274,400			3,030,300			3,700,900

Total operating expenses		440,000			441,500			1,171,900			1,447,600

Operating income	$	773,000		$	832,900		$	1,858,400		$	2,253,300

Publishing Operating Results for the Three Months Ended November 30 ~~2017~~

, 2020

Our Publishing ~~segment’s~~division’s net revenues decreased ~~$0.6~~$0.1 million, or ~~19.4%~~3.7%, to ~~$2.4~~$2.6 million ~~for~~during the ~~three months~~three-month period ended November 30, ~~2017~~2020, from ~~$3.1~~$2.7 million reported ~~for the quarter ended November 30, 2016. Revenues declined from~~in the same period ~~last~~a year ~~due~~ago. Many Publishing customers began to ~~smaller customer orders in~~re-open prior to the ~~third period~~start of ~~fiscal 2018 when compared to last year, as well as fewer customers placing orders. During~~ the third quarter of fiscal year ~~2017, we had significant delays~~2021. The slight decrease in ~~shipments which resulted in lost customers and customers reducing order sizes~~sales was primarily due to stores that were unable to remain open for the full third quarter of fiscal 2021 due to the COVID-19 pandemic.

Gross margin decreased $0.1 million, or 7.7%, to $1.2 million during the ~~fall selling season of fiscal 2018, based on slower delivery expectations.~~

~~Gross margins declined $0.2 million to $1.1 million for the quarter~~three-month period ended November 30, ~~2017,~~2020, from $1.3 million reported in the same quarter a year ago, primarily due to the decrease in net revenues. Gross margin as a percentage of net revenues remained consistent, increasing 0.2%, to 47.0% during the three-month period ended November 30, 2020, from 46.8% reported in the same quarter a year ago. Gross margin as a percentage of net revenues fluctuates primarily from the different discount levels offered to customers.

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Total operating expenses of the Publishing segment remained consistent at $0.4 million during the three-month periods ended November 30, 2020 and 2019.

Operating income of the Publishing segment remained consistent at $0.8 million for the three-month periods ended November 30, 2020 and 2019.

Publishing Operating Results for the Nine Months Ended November 30, 2020

Our Publishing division’s net revenues decreased $1.5 million, or 19.2%, to $6.3 million during the nine-month period ended November 30, 2020, from $7.8 million reported in the same period a year ago. The decrease in sales resulted from temporary store closures impacted by the COVID-19 pandemic. Many Publishing customers temporarily closed during our fiscal year 2021 first quarter, following the guidance from their local authorities to prevent the spread of the pandemic, and have begun reopening at varying times over the past six months.

Gross margin decreased $0.7 million, or 18.9%, to $3.0 million during the nine-month period ended November 30, 2020, from $3.7 million reported in the same period a year ago, primarily due to the decrease in net revenues. Gross margin as a percentage of net revenues increased 0.5%, to 48.2%, during the nine-month period ended November 30, 2020, from 47.7% reported in the same period a year ago. The increase in gross margin percentage results primarily from a change in our customer mix. Customers receive varying discounts due to sales volumes and contract terms.

Total operating expenses of the Publishing segment decreased $0.2 million to $1.2 million during the nine-month period ended November 30, 2020, from $1.4 million reported in the same period a year ago, resulting from a $0.1 million decrease in postage and freight from the decrease in sales volumes and a $0.1 million decrease in sales commissions due to decreased net revenues.

Operating income of the Publishing segment decreased $0.4 million, or 17.4%, to $1.9 million during the nine-month period ended November 30, 2020 when compared to $2.3 million reported in the same period a year ago, due primarily to the ~~decline in sales. Gross margins as a percentage of sales remained consistent between the periods.~~

Operating income declined $0.4 million to $0.6 million for the quarter ended November 30, 2017 from $1.0 million reported during the quarter ended November 30, 2016. The decline in operating income resulted primarily from the decline in sales and gross margins.

~~Publishing Operating Results for the Nine Months Ended November 30, 2017~~

The Publishing segment’s net revenues for the nine months ended November 30, 2017 were $6.5 million, a decrease of $0.7 million 9.7%, from $7.2 million reported for the same period last year. The year to date revenue decline primarily occurred in the third quarter of this year when the Company experience reduced orders sizes from existing customers and fewer customer orders placed during the third quarter, primarily resulting from the shipping delays that occurred during fiscal 2017.

Gross margins for the nine months ended November 30, 2017 were $2.9 million, a decrease of $0.4 million, or 12.1%, from $3.3 million reported for the same period a year ago. Gross margins decreased primarily due to the decrease in ~~sales. Gross Margins as a percentage of revenue remained consistent between the periods.~~

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Operating income for the segment declined $0.6 million, to $1.5 million, for the nine months ended November 30, 2017 from $2.1 million reported during the same period last year. The decline in operating income resulted primarily from the decline in sales and gross margins.

~~Sales in our Publishing segment are seasonal and our fiscal fourth and first quarters are traditionally lower than the second and third fiscal quarters sales.~~

net revenues.

Liquidity and Capital Resources

~~Our primary source~~

EDC has a history of ~~cash is typically operating~~profitability and positive cash flow. ~~The majority of~~We typically fund our operations from the cash ~~outflow over the past several years has been associated with increasing our inventory~~we generate. We also use available cash to ~~keep up with our increased demand~~pay down outstanding bank loan balances, for ~~our products.~~capital expenditures, to pay dividends, and to acquire treasury stock. We have utilized a bank credit facility and other term loan borrowings to meet our short-term cash needs, as well as fund capital expenditures, when necessary.

During the ~~nine-month period ended November 30, 2017,~~first nine months of fiscal 2021, we ~~experienced~~generated positive cash ~~inflow~~flows from our operations of ~~$11.3 million. Net~~$39,617,800. These cash flows resulted from:

● net earnings of ~~$4.4 million were increased by the following items:~~

~~a decrease in inventories of $9.8 million,~~

$10,455,700

Adjusted for:

● depreciation expense of ~~$0.9 million,~~

~~a decrease in deferred income taxes~~$1,207,900

● share-based compensation expense of ~~$0.2 million,~~

~~an increase in the~~$677,000

● provision for inventory valuation allowance of $166,200

● provision for doubtful accounts of ~~$0.4 million,~~$115,800

Offset by:

● deferred income taxes of $809,800

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Positively impacted by:

● increase in accounts payable of $35,498,700

● increase in accrued salaries and commissions, ~~of $2.8 million,~~

~~an increase in~~and other liabilities of ~~$1.3 million, and~~

an$8,781,000

● increase in deferred revenues of $1,945,600

● increase in income tax payable of ~~$0.5 million.~~

~~Offset~~$213,300

Negatively impacted by:

~~a decrease~~

● increase in ~~accounts payable~~inventories, net of ~~$7.3 million,~~

an$17,130,200

● increase in accounts receivable of ~~$1.3 million, and~~

an$1,264,200

● increase in prepaid expenses and other assets of ~~$0.3 million.~~

The significant decrease in inventory was primarily the result of management efforts to reduce inventory volumes that were purchased in recent quarters. These inventory purchases were made based on sales forecast assumptions that were greater than our actual sales results.

The significant decrease in accounts payable from the end of the fiscal year 2017 was primarily a result of payments owed to our suppliers for increased inventory purchases made over the last six months of fiscal year 2017.

$239,200

Cash used in investing activities was ~~$1.3 million~~$2,040,000 for capital expenditures, which ~~was primarily~~were comprised of ~~improvements made~~$1,488,300 in equipment purchased to ~~two of~~increase our ~~pick lines which were upgraded with new automated routing functionality~~daily shipping capacity, $359,500 in software upgrades that our UBAM consultants use to ~~bypass zones that had no picks of approximately $1.0 million~~monitor their business and ~~inventory management systems of $0.1 million~~place customer orders and ~~various other improvements to the warehouse, facility~~$192,200 in building and ~~equipment totaling $0.2 million.~~

building improvements.

Cash used in financing activities was ~~$4.6 million,~~$9,082,900, which was ~~primarily~~ comprised of ~~repayment of borrowings under our line of credit of $4.9 million and payments on long-term~~net cash used to pay down term debt of ~~$0.7 million,~~$7,696,900, payments of $1,419,800 for dividends, offset by ~~draws on the recently executed Advancing Term Loan of $1.0 million along with other minor equity changes.~~

$33,800 net cash received in treasury stock transactions.

During fiscal year ~~2018,~~2021, we continue to expect our cash from operations, ~~and~~along with our ~~expanded~~ line of credit ~~with~~and any additional equipment financing needed from our Bank, will provide us the ability to meet our liquidity requirements. ~~We have a history of profitability and positive cash flow. Consequently, cash~~Cash generated from operations will be used to ~~increase~~replace inventory, ~~in anticipation of continued sales growth and~~ to liquidate existing ~~debt.~~

debt and any excess cash is expected to be distributed to our shareholders or used to purchase available shares on the market.

We have a Loan Agreement with the Bank, ~~including~~ Term Loan #1 ~~comprised of~~ Tranche A totaling $11.1 million as of ~~$13.4 million and Tranche B of $5.0 million both~~November 30, 2020, with ~~the~~a maturity date of December 1, 2025. Tranche A has a fixed interest rate of 4.23% and interest is payable monthly.

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The Loan Agreement also includes ~~Term Loan #2 in the amount of $4.0 million, which is secured by~~ a warehouse and land with the maturity date of June 28, 2021, a $15.0 million revolving loan (“line of credit”) through June 15, 2018 and an $3.0 million advancing term loan which matures November 30, 2020.

~~Effective March 10, 2016, we signed a First Amendment Loan Agreement with the Bank which provided an increase to $6.0 million from our original $4.0~~$10.0 million line of credit through ~~June~~August 15, ~~2017. Effective June 15, 2016, we signed a Second Amendment Loan Agreement with the Bank which provided a further increase to $7.0 million from our previous $6.0 million~~2021. The line of credit and extended it through June 15, 2017. Effective June 28, 2016, we signed a Third Amendment Loan Agreement with the Bank which included Term Loan #2 in the amount of $4.0 million. Effective February 7, 2017, we signed a Fourth Amendment Loan Agreement with the Bank which modified certain debt covenant calculations and waived an existing default that occurred in the fourth quarter of fiscal year 2017.

Effective, June 15, 2017, the Company executed the Fifth Amendment Loan Agreement with the Bank which modified the Loan Agreement to increase the maximum revolving principal amount from $7.0 million to $10.0 million and extended the termination date of the Loan Agreement to June 15, 2018. The Fifth Amendment also modified the Loan Agreement to include an Advancing Term Loan of $3.0 million which the Company is using to cover the cost of the fiscal 2017 capital improvements to increase its daily shipping capacity. The Company expects the amount of the planned capital improvements will be less than the Advancing Term Loan availability. The Advancing Term loan accrued interest between June 15 and December 1, 2017, at which time the balance was converted to a term loan and set to amortize over a thirty-six-month period

Effective September 1, 2017, we signed a Sixth Amendment Loan Agreement with the Bank which further increased the maximum revolving principal amount from $10.0 million to $15.0 million, subject to certain collateral restrictions.

We had no borrowings outstanding on our revolving credit agreement at November 30, 2017 and $4.9 million in borrowings at February 28, 2017. Available credit under the revolving credit agreement was $9,105,500 at November 30, 2017.

~~Trance B of Term Loan #1, Term Loan #2, the line of credit and the Advancing Term Loan accrue~~accrues interest monthly, at the bank adjusted LIBOR Index plus a tiered pricing rate based on the Company’s Adjusted Funded Debt to EBITDA ~~Ratio (4.41%~~Ratio. The Loan Agreement maintains a minimum rate on borrowings of 2.75%, should the calculated rate of the LIBOR Index plus the tiered pricing rate fall below this level.

We had no borrowings on our line of credit at November 30, ~~2017)~~2020 and February 29, 2020. Available credit under the revolving loan was $10.0 million at November 30, 2020.

During the second quarter of fiscal year 2021, we paid off Loan Agreement Term Loan #1 Tranche B totaling $4.2 million, which previously had a maturity date of December 1, 2025. In addition, we also paid off Term Loan #2 totaling $2.9 million, which previously had a maturity date of June 28, 2021. The purpose of paying off these loans early was to utilize our existing cash flows from operations to increase future profits by reducing interest expense, as well as, free up future cash flows to be used to either pay dividends or purchase additional shares.

On August 15, 2019, the Company executed the Tenth Amendment Loan Agreement which extended the termination date of the line of credit to August 15, 2020, amended the definition of LIBOR Margin, reduced the frequency of reports to the Lender, amended the Adjusted Funded Debt to EBITDA Ratio and amended the Compliance and Borrowing Base Certificates reporting requirements.

On August 15, 2020, the Company executed the Eleventh Amendment Loan Agreement which extended the termination date of the line of credit to August 15, 2021, reduced the maximum revolving principal amount from $15.0 million to $10.0 million, and amended the definition of the LIBOR Margin and Prime Margin, establishing a floor on the borrowing rates of 2.75%.

The Loan Agreement also contains a provision for our use of the Bank’s letters of credit. The Bank agrees to issue, or obtain issuance of, commercial or stand-by letters of credit provided that the sum of the line of credit plus the letters of credit issued would not exceed the borrowing base in effect at the time. ~~Additionally, the Loan Agreement suspends dividends. For the quarter ended~~As of November 30, ~~2017,~~2020, we had no letters of credit outstanding. The agreement contains provisions that require us to maintain specified financial ratios, restrict transactions with related parties, prohibit mergers or consolidation, disallow additional debt, and limit the ~~amount~~amounts of ~~compensation, salaries,~~dividends declared, investments, capital expenditures, leasing transactions, and ~~leasing transactions.~~establish a dollar limit on the amount of shares that can be repurchased.

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The following table reflects aggregate future maturities of long-term debt during the next five fiscal years and thereafter as follows:

Year Ending February 28 (29)

2018 267,100
2019 1,278,600
2020 1,331,200
2021 1,324,300
2022 1,069,000
Thereafter 16,672,100
Total Maturities $ 21,942,300

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Year ending February 28 (29),
2021	$	128,800
2022		533,400
2023		556,800
2024		581,100
2025		605,400
Thereafter		8,709,300
Total	$	11,114,800

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to our valuation of inventory, allowance for uncollectible accounts receivable, allowance for sales returns, long-lived assets and deferred income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may materially differ from these estimates under different assumptions or conditions. Historically, however, actual results have not differed materially from those determined using required estimates. Our significant accounting policies are described in the notes accompanying the financial statements included elsewhere in this report. However, we consider the following accounting policies to be more significantly dependent on the use of estimates and assumptions.

Revenue Recognition

Sales associated with product orders are ~~generally~~ recognized and recorded when products are shipped. Products are shipped FOB shipping point. ~~The UBAM segment’s~~UBAM’s sales are generally paid at the time the product is ordered. ~~These sales accounted for 93.7% of net revenues for the three-month period ended November 30, 2017, and 90.0% for the three-month period ended November 30, 2016.~~ Sales ~~that~~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 and payment associated with the sale has been remitted. Transportation revenue represents the amount billed to the customer for shipping the product and is recorded when the product is shipped.

Estimated allowances for sales returns are recorded as sales are ~~recognized and recorded.~~recognized. Management uses a moving average calculation to estimate the allowance for sales returns. We are not responsible for product damaged in transit. Damaged returns are primarily received from the retail ~~stores. These returns primarily result from damage that occurs~~stores of our Publishing Division. Those damages occur in the stores, not in shipping to the ~~stores.~~stores, and we typically do not offer credit for damaged returns. It is industry practice to accept non-damaged returns from retail customers. Management has estimated and included a reserve for sales returns of ~~$100,000~~$0.2 million as of November 30, ~~2017,~~2020 and ~~$190,000 as of~~ February ~~28, 2017.~~

29, 2020.

Allowance for Doubtful Accounts

We maintain an allowance for estimated losses resulting from the inability of our customers to make required ~~payments.~~payments and a reserve for vendor share markdowns (collectively “allowance for doubtful accounts”). An estimate of ~~uncollectable~~uncollectible amounts is made by management based upon historical bad debts, current customer receivable balances, age of customer receivable balances, ~~the customer's~~customers’ financial ~~condition~~conditions and current economic trends. Consignment inventory related to inactive consultants is reclassified to accounts receivable and the associated reserve is included within our allowance. If the actual uncollected amounts significantly exceed the estimated allowance, then our operating results would be significantly adversely affected. Management has estimated and included an allowance for doubtful accounts of ~~$537,000~~$0.3 million at November 30, ~~2017,~~2020, and ~~$485,000~~$0.2 million at February ~~28, 2017.~~29, 2020. Included within this allowance is ~~$264,000 and $217,000~~$0.1 million of reserve for vendor discounts to sell remaining inventory as of November 30, ~~2017~~2020 and February ~~28, 2017, respectively, of reserve related to consignment inventory held by inactive consultants.~~

29, 2020.

Inventory

Our inventory contains ~~approximately 2,200~~over 2,000 titles, each with different sell through rates ~~of sale,~~ depending upon the nature and popularity of the title. ~~Almost all of our product line is saleable as the books~~We maintain very few titles that are ~~not~~ topical in ~~nature and~~nature. As such, the majority of the titles we sell remain current in content ~~today as well as in the future.~~for several years. Most of our products are printed in China, Europe, ~~China,~~ Singapore, India, Malaysia and Dubai resulting in a ~~five~~four- to ~~eight-month~~six-month lead-time to have a title printed and delivered to us.

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Certain inventory is maintained in a noncurrent classification. Management continually estimates and calculates the amount of noncurrent inventory. Noncurrent inventory arises due to occasional purchases of titles in quantities in excess of what will be sold within the normal operating cycle, due to minimum order requirements of our suppliers. Noncurrent inventory was estimated by management using the current year turnover ratio by title. ~~All inventory~~Inventory in excess of 2 ½ years of anticipated sales is classified as noncurrent inventory. These inventory quantities have exposure of becoming out of date, and therefore have higher obsolescence reserves. Noncurrent inventory balances prior to valuation allowances were ~~$502,200~~$1.0 million and ~~$467,100~~$1.2 million at November 30, ~~2017~~2020 and February ~~28, 2017,~~29, 2020, respectively.

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Noncurrent inventory valuation allowances were $0.2 million at November 30, 2020 and February 29, 2020.

Consultants that meet certain eligibility requirements ~~are allowed to~~may request and receive inventory on consignment. We believe allowing our consultants to have consignment inventory greatly increases their ability to be successful in making effective presentations at home shows, book fairs and other events; ~~and~~in summary, having consignment inventory leads to additional sales opportunities. Approximately ~~12% and 11%~~4.2% of our active consultants maintained consignment inventory at ~~November 30, 2017 and February 28, 2017, respectively.~~the end of the third quarter of fiscal 2021. Consignment inventory is stated at cost, less an estimated reserve for consignment inventory that is not expected to be sold or returned to the Company. The total ~~value~~cost of inventory on consignment with ~~active~~ consultants was ~~$1,533,100 and $1,140,700~~$1.3 million at November 30, ~~2017~~2020 and $1.5 million at February ~~28, 2017, respectively. There is a seasonal~~29, 2020. During the current fiscal year, the Company increased its reserve for consignment inventory by approximately $0.2 million based on the estimated impact of the COVID-19 pandemic. Because our consultants are currently limited in their ability to sell consignment inventory at schools, book fairs or fall festivals, we expect an increase in ~~consignment inventory during the fall when UBAM~~write-offs associated with consultants acquire inventory for sales events at annual state fair and other regional fall festival events. Inventory related to inactive consultants is reclassified to accounts receivables and amounted to $264,000 and $309,000 as of November 30, 2017 and February 28, 2017, respectively.

that become inactive.

Inventories are presented net of a valuation allowance, which includes reserves for inventory obsolescence and ~~active consultant consignment~~reserves for consigned inventory that is not expected to be sold or ~~returned.~~returned to the Company. Management estimates the inventory obsolescence allowance for both current ~~inventory,~~and noncurrent inventory, ~~and active consultant consignment inventory balances. The allowance~~which is based on management’s identification of ~~slow moving inventory and estimated consignment inventory that will not be sold or returned.~~slow-moving inventory. Management has estimated a valuation allowance for ~~these combined inventories~~both current and noncurrent inventory, including the reserve for consigned inventory, of ~~$330,900~~$0.7 million and ~~$300,000~~$0.5 million as of November 30, ~~2017~~2020 and February ~~28, 2017,~~29, 2020, respectively.

Our principal supplier, based in England, generally requires a minimum ~~reorder~~re-order of 6,500 or more of a title in order to get a solo print run. Smaller orders would require a shared print run with the supplier’s other customers, which can result in lengthy delays to receive the ordered title. Anticipating customer preferences and purchasing habits requires historical analysis of similar titles in the same series. We then place the initial order or re-order based upon this analysis.

These factors and historical analysis have led our management to determine that 2 ½ years represents a reasonable estimate of the normal operating cycle for our products.

~~Stock-Based~~

Stock-Based Compensation

We account for stock-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 and recognized as~~grant. For awards subject to service conditions, compensation expense is recognized over the vesting period ~~net~~on a straight-line basis. Awards subject to performance conditions are attributed separately for each vesting tranche of ~~estimated forfeitures.~~the award and are recognized ratably from the service inception date to the vesting date for each tranche. Forfeitures are recognized when they occur. Any cash dividends declared after the restricted stock award is made, but before the vesting period is completed, will be reinvested in Company shares at the opening trading price on the dividend payment date. Shares purchased with cash dividends will also retain the same restrictions until the completion of the original vesting period associated with the awarded shares.

The restricted share awards granted under the 2019 Long-Term Incentive Plan (“2019 LTI Plan”) contain both service and performance conditions. The Company recognizes share-based compensation expense only for the portion of the restricted share awards that are considered probable of vesting. Shares are considered granted, and the service inception date begins, when a mutual understanding of the key terms and conditions between the Company and the employees have been established. The fair value of these awards is determined based on the closing price of the shares on the grant date. The probability of restricted share awards granted with future performance conditions is evaluated at each reporting period and compensation expense is adjusted based on the probability assessment.

During the first nine months of fiscal 2021, the Company recognized $0.7 million of compensation expense associated with the shares granted under the 2019 LTI Plan.

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Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4.CONTROLS AND PROCEDURES

An evaluation was performed of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e) as of November 30, ~~2017.~~2020. This evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer (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 pursuant to Exchange Act Rule 13a-15(e).

In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended November 30, ~~2017~~2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.LEGAL PROCEEDINGS

Not ~~Applicable.~~

applicable.

Item 1A.RISK FACTORS

Not required by smaller reporting company.

Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

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 (2)(3)

September 1 - 30, 2017 736 $ 10.19 0 297,368
October 1 - 31, 2017 0 $ N/A 0 297,368
November 1 - 30, 2017 0 N/A 0 297,368
Total 736 $ 10.19 0

~~(1)~~ Period	~~All~~	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 ~~shares of common stock set forth in this column were part of a publicly announced plan as described in Footnote 2 below.~~Plan (1)

September 1 - 30, 2020			-	$	-		-		519,594
October 1 - 31, 2020			-		-		-		519,594
November 1 - 30, 2020			-		-		-		519,594
Total			-	$	-		-

~~(2)~~

(1)

~~In April 2008,~~

On February 4, 2019 the Board of Directors ~~authorized us to purchase up to 500,000 shares of our common~~approved a new stock ~~under a~~repurchase plan, replacing the former 2008 stock repurchase plan. ~~Pursuant~~The maximum number of shares which can be purchased under the new plan is 800,000. Amounts in the table reflect the remaining number of shares available to ~~the~~be repurchased. This plan ~~we may purchase a total of 296,632 additional shares of our common stock until 500,000 shares have been repurchased.~~

~~(3)~~

~~There is~~has no expiration ~~date for the repurchase plan.~~

date.

Item 3.DEFAULTS UPON SENIOR SECURITIES

Not ~~Applicable.~~

applicable.

Item 4.MINE SAFETY DISCLOSURES

None.

Item 5. 5. OTHER INFORMATION

None.

Item 6.EXHIBITS

31.1

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

~~31.2~~
31.2		Certification of 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 furnished herewith.

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

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			EDUCATIONAL DEVELOPMENT CORPORATION (Registrant)

Date: January ~~16, 2018~~13, 2021	By	/s/ Randall W. White
		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)


~~Date:~~ ~~January 16, 2018~~	By	~~/s/ Dan E. O’Keefe~~
		~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~

~~Table of Contents~~

~~EXHIBIT INDEX~~

~~Exhibit No~~.~~Description~~

~~31.1~~

~~Certification of the Chief Executive Officer of Educational Development Corporation pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 furnished herewith.~~

~~31.2~~

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

~~32.1~~

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

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	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14 15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21 23
Item 4.	Controls and Procedures	21 23

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	22 24
Item 1A.	Risk Factors	22 24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	22 24
Item 3.	Defaults Upon Senior Securities	22 24
Item 4.	Mine Safety Disclosures	22 24
Item 5.	Other Information	22 24
Item 6.	Exhibits	22 24
Signatures		23 25

EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF EARNINGS (UNAUDITED)
	Three Months Ended November 30,						Nine Months Ended November 30,
	2017			2016			2017			2016

GROSS SALES	$	41,894,600		$	34,397,300		$	100,989,500		$	91,657,200
Less discounts and allowances		(6,762,300	)		(6,948,000	)		(19,929,300	)		(20,581,900	)
Transportation revenue		3,775,700			3,248,300			8,959,900			8,299,500
NET REVENUES		38,908,000			30,697,600			90,020,100			79,374,800
COST OF GOODS SOLD		10,494,800			8,328,100			24,579,200			22,500,300
Gross margin		28,413,200			22,369,500			65,440,900			56,874,500

OPERATING EXPENSES:
Operating and selling		7,837,300			6,520,300			17,549,900			16,790,900
Sales commissions		12,510,400			9,521,000			28,759,300			24,802,200
General and administrative		4,735,200			4,525,900			12,359,600			12,237,600
Total operating expenses		25,082,900			20,567,200			58,668,800			53,830,700

OTHER INCOME (EXPENSE):
Interest expense		(287,600	)		(265,000	)		(863,800	)		(730,000	)
Other income		390,100			502,800			1,189,400			1,251,600
Total other income		102,500			237,800			325,600			521,600

EARNINGS BEFORE INCOME TAXES		3,432,800			2,040,100			7,097,700			3,565,400

INCOME TAXES		1,304,400			765,900			2,707,100			1,352,500
NET EARNINGS	$	2,128,400		$	1,274,200		$	4,390,600		$	2,212,900

BASIC AND DILUTED EARNINGS PER SHARE:
Basic	$	0.52		$	0.31		$	1.07		$	0.54
Diluted	$	0.52		$	0.31		$	1.07		$	0.54


DIVIDENDS PER SHARE	$	0.00		$	0.09		$	0.00		$	0.27

WEIGHTED AVERAGE NUMBER OF COMMON AND EQUIVALENT SHARES OUTSTANDING:
Basic		4,087,268			4,079,916			4,087,686			4,074,355
Diluted		4,090,011			4,084,863			4,090,053			4,079,833

EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30, 2017

	Common Stock (par value $0.20 per share)
	Number of				Capital in				Treasury Stock
	Shares				Excess of		Retained		Number of						Shareholders’
	Issued		Amount		Par Value		Earnings		Shares			Amount			Equity


BALANCE—March 1, 2017		6,041,040	$	1,208,200	$	8,548,000	$	16,317,800		1,950,966		$	(10,856,600	)	$	15,217,400
Exercise of stock options		5,000		1,000		25,300		-		-			-			26,300
Purchases of treasury stock		-		-		-		-		10,041			(98,000	)		(98,000	)
Sales of treasury stock		-		-		-		-		(3,901	)		32,000			32,000
Net earnings		-		-		-		4,390,600		-			-			4,390,600
BALANCE— November 30, 2017		6,046,040	$	1,209,200	$	8,573,300	$	20,708,400		1,957,106		$	(10,922,600	)	$	19,568,300

EDUCATIONAL DEVELOPMENT CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED NOVEMBER 30,

	2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings	$	4,390,600		$	2,212,900
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities
Depreciation		911,700			780,400
Deferred income taxes		179,400			(35,400	)
Provision for doubtful accounts		438,000			558,900
Provision for inventory valuation allowance		33,000			(37,300	)
Changes in assets and liabilities:
Accounts receivable		(1,355,700	)		(1,994,200	)
Inventories, net		9,760,000			(16,775,100	)
Prepaid expenses and other assets		(304,700	)		(1,661,300	)
Accounts payable		(7,301,700	)		6,889,100
Deferred revenue		28,600			6,632,500
Accrued salaries and commissions		2,765,200			375,600
Other liabilities		1,320,000			2,307,700
Income taxes payable		469,600			576,800
Total adjustments		6,943,400			(2,382,300	)
Net cash provided by (used in) operating activities		11,334,000			(169,400	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(1,330,500	)		(2,123,600	)
Net cash used in investing activities		(1,330,500	)		(2,123,600	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt		(657,800	)		(530,200	)
Proceeds from long-term debt		1,019,000			4,000,000
Cash received from sales of treasury stock		32,000			170,700
Cash used to purchase treasury stock		(98,000	)		(200	)
Proceeds from the issuance of stock options		26,300			-
Net payments under the line of credit		(4,882,900	)		(451,800	)
Dividends paid		-			(1,099,500	)
Net cash provided by (used in) financing activities		(4,561,400	)		2,089,000

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		5,442,100			(204,000	)
CASH AND CASH EQUIVALENTS—BEGINNING OF PERIOD		699,200			1,183,700

CASH AND CASH EQUIVALENTS—END OF PERIOD	$	6,141,300		$	979,700

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	868,900		$	730,000
Cash paid for income taxes	$	2,058,100		$	811,100

	2017
	November 30,			February 28,
Current:
Book inventory	$	24,480,900		$	34,278,100
Inventory valuation allowance		(25,000	)		(25,000	)

Inventories net–current	$	24,455,900		$	34,253,100

Noncurrent:
Book inventory	$	502,200		$	467,100
Inventory valuation allowance		(305,900	)		(275,000	)

Inventories net–noncurrent	$	196,300		$	192,100

	For the Three Months Ended November 30,						For the Nine Months Ended November 30,
	2017			2016			2017			2016
Gross sales	$	36,761,700		$	27,907,200		$	87,143,200		$	76,263,200
Less discounts and allowances		(4,059,000	)		(3,528,100	)		(12,595,300	)		(12,414,500	)
Transportation revenue		3,765,700			3,243,500			8,933,500			8,281,500
Net revenues		36,468,400			27,622,600			83,481,400			72,130,200

Cost of goods sold		9,114,200			6,577,500			20,939,500			18,549,700
Gross margin		27,354,200			21,045,100			62,541,900			53,580,500

Operating Expenses
Operating and selling		6,860,200			5,613,300			14,752,100			14,311,500
Sales commissions		12,420,000			9,425,300			28,507,800			24,561,100
General and administrative		1,158,600			1,286,700			3,416,800			3,421,700
Total operating expenses		20,438,800			16,325,300			46,676,700			42,294,300

Operating income	$	6,915,400		$	4,719,800		$	15,865,200		$	11,286,200

Average number of active consultants		31,100			28,100			29,500			24,800

Year Ending February 28 (29)

2018		267,100
2019		1,278,600
2020		1,331,200
2021		1,324,300
2022		1,069,000
Thereafter		16,672,100
Total Maturities	$	21,942,300

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 (2)(3)

September 1 - 30, 2017		736	$	10.19		0		297,368
October 1 - 31, 2017		0	$	N/A		0		297,368
November 1 - 30, 2017		0		N/A		0		297,368
Total		736	$	10.19		0