Thank you, Chloe, and welcome everyone to the call. We appreciate your continued interest.

I will start today's call with some general comments regarding the quarter. I will pass the call over to Dan to run through the financials, after which Heather will provide an update on sales and marketing and IT projects, and then I will provide an update on our plans for the rest of fiscal 2027.

During March, we ran a recruiting special surrounding our March 14th, Pi Day, which yielded better than expected results. We added over 1,300 new brand partners, which brought our active brand partner numbers above 5,200, and we have maintained this level of brand partners to this day.

This was a 20% growth in brand partners numbers since the end of last year, and continuing our brand partner growth is a key focus. Also, at the beginning of the quarter, we made several expense reductions, which are expected to exceed $1.2 million in savings for the fiscal year.

These savings, which include decreases in pay for our executive team, were made to improve our cash flow and give us the ability to continue to execute our conservative purchasing plan to replenish some of our best-selling titles, as well as bring in new titles. Bringing in new titles energizes our brand partners and gives our retail reps some new products to present.

I'm happy to say that many of these new titles came in throughout the last several months, and we have introduced them with much very early success. That is some confirmation that our strategy is on point.

The results for the quarter were driven by our lower revenue levels, offset by lower expenses. The focus of our fiscal 2027 turnaround plan remains on growing our revenue and brand partner levels back to pre-pandemic levels, and I'm happy with the initial progress our team has achieved.

Heather will talk more about this progress in her marketing update. As I have said before, our turnaround plan is not an overnight change, but a carefully developed plan for growth over the next few quarters and years.

With that, I'll now turn the call over to Dan O'Keefe to provide a brief overview of financials.

Thank you, Craig. Our 2027 fiscal first quarter results compared to the first quarter last year include net revenues were $4.8 million, compared to $7.1 million.

Our average active brand partners for the quarter totaled 5,300, compared to 7,700 last year. Loss before income taxes were $1.4 million in both quarters.

Net loss totaled $1.4 million for the quarter, compared to a net loss last year of $1.1 million in the first quarter. Loss per share totaled $0.16, compared to a loss per share of $0.13 on a fully diluted basis.

Now for an update on our working capital. Inventory levels decreased from $37.7 million at the beginning of fiscal year 2027 to $36.2 million at the end of May, generating $1.5 of cash flow from inventory reductions.

Our cash balance increased from $1.3 million at the end of February to $1.8 million at the end of the first quarter. I would also like to mention an unusual accounting adjustment we continue to make.

Due to our historical losses and operating expectations during the turnaround period, we evaluated the need for a valuation allowance for our deferred tax assets. Based on this evaluation, we continue to recognize a valuation adjustment offsetting the deferred tax asset and eliminating the tax benefit on our income statement.

This adjustment has no cash flow impact but had a direct impact to our tax expense, net earnings, and earnings per share. When the company returns to profitability, this evaluation adjustment will be reversed.

The reversal will have no cash flow impact but will have a direct impact to tax expense, net earnings, and earnings per share. This concludes the financial update.

I will now turn the call back to Heather Cobb for a sales and marketing update. Heather?

Thanks, Dan. As Craig mentioned, our PaperPie Day celebration in March delivered positive results across the business.

The promotion generated strong recruiting activity, drove sales through our site-wide offer, increased engagement with our newly created account credits program, and helped introduce several new titles to customers. It was a great example of how coordinated initiatives can create engagement across multiple areas of the company at the same time.

In April, members of our team attended the Bologna Children's Book Fair, the premier event in children's publishing The fair provides an important opportunity to discover new content, strengthen relationships with our publishing partners, and evaluate future additions to our catalog. We also had the privilege of then traveling and celebrating many of our top performers during our incentive trip to Bermuda, recognizing those who continue to share our products and build thriving businesses, helping to expand our reach and impact.

May brought the announcement of our next StoryScape incentive trip, which will take earners to Zion National Park in 2027. These experiences continue to be a powerful way to recognize achievement while inspiring future growth across the field.

While brand partners were focused on serving customers and building their businesses throughout the spring, our home office team was busy preparing for Unfold, our annual convention. The event generated tremendous energy and optimism as attendees explored new product releases, participated in recruiting focus initiatives, and received an early look at several technology enhancements currently in development.

These include our new AI-assisted book buddy named Read, which launched this week, as well as our upcoming projects like our wish list and registry options, and the ability to identify and market to specific audiences with targeted offers. The response to all of this reinforced what we're seeing throughout the organization, a strong belief in where we're headed, and excitement about what lies ahead.

Throughout this time period, our retail team was attending trade shows and showrooms, highlighting the new titles that we have available, as well as our vast backlist offerings. As we move forward through the summer months, our attention is centered on our well-read summer campaign.

We're leaning into the growing consumer interest in analog experiences, reading, and intentional time together by focusing on book lovers and families seeking alternatives to screen-based entertainment. With additional promotions planned throughout the season, we believe that there are tailwinds to build on the engagement that we've seen so far this year.

I will now turn the call back over to Craig White.

Thank you, Heather and Dan. As I mentioned before, we are happy with the initial results of our turnaround plan.

Specifically, we are continuing our effort to build our brand partner levels. They are excited about our new titles and our IT improvements.

You heard from Heather about some of our recent IT initiatives are focused on making it easier to do business with us and adapting to the new way that different generations prefer to transact with us. This new generation presents challenges, not just for our company, but many companies in the direct selling industry to revise their engagement methods.

I can tell you that our sales and marketing, as well as IT departments, are working actively to ensure our strategies take into account this important group. Lastly, I want to thank all shareholders for their patience, our employees for their commitment to our mission.

Our customers and brand partners for their loyalty. I am confident that the steps we have taken and will continue to take will result in sales growth and our return to profitability.

Now that we have provided a summary of some recent activity, I'll now turn the call back over to the operator for question and answer.

Thank you. Good afternoon, everyone.

Thanks for taking my questions.

Sure.

First question is more of a housekeeping question. Most shareholders probably know Randall White's long history with EDC.

I was just curious about the beneficial owners disclosure in your proxy circular. He's no longer listed as a 5% beneficial owner.

Was there an ownership transition or was that just?

It's a good question, Paul. The challenge is we don't know.

He's not a NOBO owner. We have no visibility to his ownership levels.

We could not include it in the proxy because we could not confirm his share ownership.

Okay. No, that's fine.

I was just curious about that. Just to clarify one thing on the brand partner numbers.

Your press release referenced average active brand partners of 5,300 for the quarter. Your comment said that it started at 4,300 and then ended the quarter at 5,200.

What happened there? Is that a reflection of an increased quite a bit after the March promotion and then sort of even then towards the end of the quarter?

Well, it increased in March and then kind of remained pretty consistent through the end of the quarter. Yeah.

Based on the way we count active, at the end of every month, there's some people that fall off that we had such a great addition that that's why we increased as a net.

Okay, great. Just related to that, maybe this is a question for Heather.

I know in your fiscal fourth quarter, the average Beachbody account, I think, was 4,500. In Q1, you ran several recruiting promotions, including that successful March initiative.

By the end of May, the average number was up to 5,200, which is definitely encouraging. I'm just trying to understand the sustainability of this trajectory.

Do you feel you have a pipeline of new recruiting initiatives and ideas that you can continue to use to expand the Brand Partner base from here, or was the March recruiting promotion the big one that caused a spike in anything, and sort of going forward might not be as big as that?

That's a great question, Paul. I would say we consistently offer a variety of different kind of recruiting initiatives and promotions, not only just because we know that different audiences may be paying attention at different times of the year, but also different things attract different audiences as well.

When we offer any sort of recruiting special or promotion, it will vary in some way, shape, or form, whether it's cost or what is available as part of the kit, different things like that. We did a promotion immediately out of convention.

We have other promotions planned coming later in the year as well. I don't think that we are now or have ever been in the business that we can lean solely on a single promotion in a year and think that that is a place that we're in good standing.

Direct selling as a whole is a business of people coming in and people staying and people going at some sort of level. I think that we're definitely looking ahead and planning ahead, both in the current day and in the coming six months to a year.

Does that answer your question?

Yeah, that's helpful.

Let me add just a little bit, Paul. While I'm certainly not forecasting what's going to be happening the rest of this year, I think this is evidence that our strategy is somewhat working.

They were waiting for new titles, and now that we've released some new titles, everyone's excited. There's a buzz in the field.

Convention was incredible. That's how it works.

It's word of mouth, and while our Brand Partners are energized and excited and enthusiastic, it's just easier for them to recruit. I think that's basically what's happening.

Actually, that's a really good point. I'm curious, do you measure that?

I'm sure you measure a lot of behaviors within the Brand Partners, but since you are now able to buy new titles, are you noticing in the data that Brand Partners are sticking around and being active for longer than maybe they were a year ago, or is it just too early to say at this point?

That's a great question. I will say we do look at all sorts of data like that.

I think considering our new titles dropped, we released a few in March and April, but when I say a few, I mean that pretty literally. Considering we're not even a full month into our full release of new titles, it's really too early to look at any concrete data that would show that.

Okay, great. Just switching gears, and I apologize, I just have two quick last questions here.

Last quarter, you talked about moving away from deeper promotional discounting and just returning more towards historical gross margins. You had product promotions during Q1 to reduce inventory.

Did gross margins kind of move closer to historical levels, or are you still seeing some impact from clearing out some of that excess inventory?

I would say that we're still seeing impact related to that. The promotions that we ran and the site-wide sale we ran were surrounding our PaperPie Day, kind of was consistent with the promotions that we ran in the first quarter last year.

We don't see a lot of margin improvement yet.

Okay. Just one observation about that.

I know as of now, I think your book value per share is around $4.87, which is obviously quite a bit above your current stock price. 90% of that, give or take, is represented by inventory.

I recognize the need to generate cash and improve inventory turns, but given the amount of shareholder value that's tied up in inventory, how are you balancing the desire to reduce inventory levels with ensuring that you're not sacrificing too much in terms of gross margin through promotions?

Well, again, good question. It's kind of a balancing act, right?

We need to bring in cash, but we don't want to reduce the value of our product. We look at it every single month.

Okay, do we need to do something in the next quarter or things like that. It's not, I'd like to say it's an overall strategy where we're not going to discount as much, and that is the case, but there's just times where it's necessary.

Is that balance shifting more towards not sacrificing gross margin? You said you need to raise cash, and obviously when you had the bank facility, there was that ongoing need and pressure from your bank.

You don't have that, and I think you said your cash actually went up from $1 million to $1.5 million during the quarter. It doesn't sound like you actively need cash, or at least your cash balance to grow as much as maybe you did in the past, and just wondering if that is directly playing into your decision on promotions.

Well, it's a great question. I'd like to say we're back, we've just so recently come out of difficult periods.

I am somewhat conservative, but I think you're right. We need to focus on new title acquisition and really make sure we're not missing the window of opportunity here.

It's a point well taken, I agree with you. We need to try to reduce the times that we're discounting so much.

You're right.

I think I'll add too, Paul, that when we do look at times that we're discounting, we're looking at it through a different lens. When we were doing deep discounting across the board as a site-wide sale, that looks very different than some of the things that we've done recently, where we've done more of a category sale approach.

We've deep discounted a handful of titles as opposed to just an across the board. Things like that while from an outside view, it might look like, oh, they're still offering site-wide sales.

If you dig a little deeper, you will see that move that will get us back to those normal gross margins without just stopping that activity altogether in anticipation that the consumers are ready for that.

Okay. That's great.

That's very helpful. Well, that's it for me.

Thanks very much, everybody.

Yeah, appreciate it.

Thanks, Paul.

Thanks, Paul.

Thank you very much. Can you hear me okay?

There's an echo that makes it hard to hear you.

Okay. It should be better now.

Now it's a little better, right? Apologies.

Yes.

Okay. Sounds good.

I have several questions, and hopefully I won't take that much of your time. Regarding the new, we're happy to see the new partners.

I actually want to point out, I did the count today. This is the first time in 10 quarters that the partner number is actually up, not down.

That's nice to see. However, it doesn't look like it's translated into actual sales.

I understand this is the new partners and it takes time. What's a typical ramp-up time when you start seeing the actual tangible results from these new partners?

Yeah, that's a great question. I think that goes back a little bit to the question that Paul had about, we've released new titles, we have these new brand partners.

Do we consider that a success? We brought in these new brand partners in March.

We have a decent amount of turnaround time to get them into the culture, into selling, introducing new titles, different things like that. I would say within the next couple of quarters, we'll definitely see some of that fall into place in the bottom line.

There is a significant lag. Just because you sign up new partners, it takes them time, basically, to get up to speed and to start delivering the revenue.

It's usually there's a couple of quarters lag, right? That's how I understood this.

It can be. It can also happen the other way, where you see an immediate bolt to that and then it continues.

It can happen either way. We just don't consider it completely negative if it doesn't happen that way immediately.

Right. Fair enough.

I know you put some effort in the promotion, but promotion cannot be continuous. How are you planning to keep the numbers of partners up going forward?

What are your plans? What are you going to do differently?

Because the count has been falling for two years, and this time it seems to be turning around, but obviously you're just in the beginning of a turnaround. What are your plans to keep the numbers up?

Yeah, I think that's a great question, and I think it's what Craig and I both mentioned and alluded to as we shared the summary. Two main things are making sure that our inventory that we have in place is really what consumers are looking for right now, whether that means new titles or staying in stock of some of the most beloved titles that we need to order reprints for and things like that.

That's where our conservative phase purchasing approach, we really feel is key as part of that strategy. The other thing is those IT initiatives that we mentioned.

Some of the ones that we very specifically mentioned is they all filter through this lens of just removing any sort of friction points and making it easier, not only for the consumer to actually make that purchase, but also for the brand partner to get the information to them, and help them along through the process of finding what they're looking for.

Okay, that's helpful. Regarding the new titles, I know it's not a precise equation, but could you give us some sense of how your mix of sales has changed, or has it changed so far?

Like of new titles versus the titles coming of your inventory, or how it's going to change going forward. Is there percentages or how do you think about this?

Yeah, that's a great question. We are going to have to really dig through the data on that one since we haven't introduced new titles in quite a bit of time.

As we shared with Paul, we did that big drop in the middle of June, and so we aren't even a month into full sales cycle of new titles. It really is too early to tell any of those percentages.

If I were to give any sort of percentages right now, they'd be so inflated with people that are buying new titles because they're excited about them, that it really wouldn't be accurate of the representation of what that means going forward.

Well.

Oh.

Oh, sorry. Go ahead.

Yeah, I was just going to add that the new title drop was in the second quarter, it's not been reported. I just alluded in my summary that we're happy with the results, you could take that however you'd like.

Okay. No, I get it.

What that would be looking at is strictly old titles, so that makes sense.

Right.

Speaking about the Q2, and I know you're not providing guidance, but Q2 is summer, is usually your slowest quarter. Do you think this is going to remain this way?

Is that always seasonally this way, or something is different about the summer?

No, I think it's still hot and people are still on vacation. I think unless something drastically changes there, summer just remains one of the lowest quarters for us as a whole.

Right. Q3 is basically where we'll probably see the real results if things are turning around, right?

Realistically speaking.

Well, all the results that we report, we're comparing not sequentially, but year-over-year.

Right.

I mean, even though Q2 was slow, we're still hoping and planning and working towards it being up over last summer. I'm not saying it is, but that's the plan.

Right.

Yeah. Okay.

You alluded that there is a significant expense reduction. I can see that you're basically doing much better on a much lower revenue level, which is nice.

I have a twofold question. Cash flow.

You basically right now, earnings are not that important because we understand there is a depreciation, amortization and all that, and I don't have your balance sheet in front of me. I just want to understand, what does your cash flow look like from operations?

Even with your falling revenue levels, you were still able to pay the bank loan and your cash flow stayed positive. Is that still the story that you expect that your cash flow will still stay positive even at this reduced levels?

Well, I'll answer that on two points. The first point is that we had $1.4 million of operating losses in this quarter that we just reported, but our cash build was at $500,000.

Turning inventory into cash, it should translate into positive cash flow. The key thing for us is sales growth, because the faster we grow brand partners, and now that we're able to have new titles for our retail side, the faster we grow revenues overall, the more cash we'll build.

I don't have the crystal lens to tell you how much cash flow we're going to build over the next three quarters of fiscal 2027, the plan is to be cash flow positive and hopefully be very cash flow positive.

Okay. The cash flow cash increase came out of your inventory reduction, not from reduction of your accounts receivable, right?

Is that what I'm reading from the comments?

Yeah. Receivables dropped a little bit, it was primarily from inventory reductions.

Okay. That's really great to hear and that sort of gives comfort to investors' heart.

My last question, and it's sort of a comment. I know that I read your presentation, and that's one of the things it says, you said no to Amazon.

Given that you have so much inventory, have so many titles, and I actually did a dig into your titles, and you have some tremendous titles that have been around forever, and you have IP to them, intellectual property, the ownership. Do you guys would ever consider partnering with somebody to move some of your biggest inventory items, which are slow-moving, or you have too much and maybe making not exclusive and putting them on sale?

Maybe not building your own channels, I understand that takes cash and time, but maybe partnering with somebody to put it on an online store. Any thoughts to that?

Yeah. That's a good question.

We made the concerted effort and decision to not sell directly to Amazon over a decade ago, and we would say that we still consider that to be a good decision for us and both of our sales channels. We do focus on the retail side with brick and mortar stores mainly.

Whether it be independent bookstores or larger entities like a Barnes & Noble or someplace like that. In addition to that, our retail side, we have several partnerships with various different distributors and reps who sell through places, which it sounds like are ones that you are recommending.

We continue to work with places that are interested in potential large quantities. We've worked on that over time and are continuing to do so to sell off larger quantities of inventory where we can.

Right now, I believe you're something around 15% is non-partner revenue part. Do you think you can grow that part?

I think it can grow. Can it grow to 50%?

We don't anticipate that that's the case. It definitely has the potential to grow.

We've seen great response, not only in the book-selling side of it, but also in toy and gift, especially related to our SmartLab Toys division, and our Learning Wrap-Ups line. Yeah, I definitely think that there's room to grow.

Okay. Thank you very much.

I don't have any more questions.

Thank you.

Thanks for your question.