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BUSINESS CONCENTRATION

6 Months Ended

Aug. 31, 2023

Concentration Risk Disclosure [Text Block]

Note 8 – BUSINESS CONCENTRATION

Significant portions of our inventory purchases are concentrated with an England-based publishing company, Usborne Publishing Limited (“Usborne”). During fiscal 2023, we entered into a new distribution agreement (“Agreement”) with Usborne. The Agreement includes annual minimum purchase volumes, based on Usborne’s fiscal year ending January 31st, along with specific payment terms and letter of credit requirements, which if not met may result in Usborne having the right to terminate the Agreement on less than 30 days’ written notice. Should termination of the Agreement occur, the Company will be allowed to sell its remaining Usborne inventory for an agreed upon period, but not less than twelve months following the termination date. The Company did not meet the minimum purchase requirements for the fiscal period ending January 31, 2023, did not supply the letter of credit required under the Agreement and certain payments were not received timely, which could allow Usborne to exercise their option to terminate the Agreement. As of August 31, 2023, Usborne has not notified the Company of termination of the Agreement. During Usborne’s fiscal year ended January 31, 2022, the Company earned a volume rebate of approximately $1,000,000, which was documented in the new Agreement. Usborne has refused to pay the $1,000,000 volume rebate owed to the Company due to not meeting the minimum purchase requirements or supplying the required letter of credit. The Company is disputing the cancellation of the rebate but has not recognized any reduced cost of goods sold from the rebate in fiscal year 2024 due to its uncertainty.

Under the terms of the Agreement, the Company no longer has the rights to distribute Usborne’s products to retail customers after November 15, 2022, at which time Usborne was slated to use a different distributor to supply retail accounts with its products. As a courtesy upon Usborne’s request, the November 15, 2022 transition was extended into the first quarter of fiscal 2024 at which time the Company discontinued sales of Usborne products to its retail customers.

The following table summarizes Usborne product gross sales by division and inventory purchases by product type:

	Three Months Ended August 31,						Six Months Ended August 31,
	2023			2022			2023			2022
Gross sales of Usborne products by division:
PaperPie division	$	6,227,900		$	12,462,900		$	14,590,200		$	27,254,600
% of total PaperPie gross sales		48.8	%		61.1	%		49.8	%		60.4	%
Publishing division		-			6,214,200			2,740,000			11,665,200
% of total Publishing gross sales		0.0	%		84.5	%		41.1	%		83.5	%
Total gross sales of Usborne products	$	6,227,900		$	18,677,100		$	17,330,200		$	38,919,800

Purchases received by product type:
Usborne	$	625,200		$	1,206,200		$	1,560,700		$	4,783,500
% of total purchases received		21.9	%		38.1	%		25.8	%		52.3	%
All other product types		2,223,400			1,956,900			4,478,000			4,358,200
% of total purchases received		78.1	%		61.9	%		74.2	%		47.7	%
Total purchases received	$	2,848,600		$	3,163,100		$	6,038,700		$	9,141,700

Total Usborne inventory owned by the Company and included in our balance sheet was $33,029,300 and $35,363,500 as of August 31, 2023 and February 28, 2023, respectively.