Good afternoon, ladies and gentlemen, welcome to the Educational Development Corporation's first quarter fiscal year 2024 earnings call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a Q&A session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, the 13th of July, 2023. Before beginning the call, we would like to remind you that some of the statements made today will be forward-looking and are protected under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those expressed or implied due to a variety of factors. We refer you to the Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. I would now like to turn the conference over to Jean Marie Young from Three Part Advisors. Please go ahead. Thank you, JP, and good afternoon, everyone. Thank you for joining us today for Educational Development Corporation's fiscal first quarter earnings call. On the call with us today are Craig White, President and Chief Executive Officer, Heather Cobb, Chief Sales and Marketing Officer, and Dan O'Keefe, Chief Financial Officer. After the market closed this afternoon, the company issued a press release announcing its results for the fiscal first quarter. The release is available on the company's website at www.edcpub.com. With that, I'd like to turn the call over to Craig White, the company's President and CEO. Craig? Thank you, Jean, welcome everyone to the call. I will start today's call with some general comments in regards to the quarter. I will pass the call off to Dan and Heather to run through the financials and provide an update on our sales and marketing. I will wrap up the call with some comments on strategy and fiscal 2024 outlook. During the first quarter, our sales continued to be impacted by high inflation, which we will likely face for the remainder of the year. We have said on previous calls, our sales results are primarily driven by our active brand partners. This is our key indicator that reflects current sales levels and where we expect them to trend in the future. Our brand partner levels decreased again this quarter. We believe this is for a variety of reasons, like we mentioned, the economy, rebrand, et cetera. As I mentioned on the fourth quarter earnings call, some of this was carryover from rebranding, which takes some time to work through our entire network of sales partners. We are still making additional changes to improve our sales to not only make our brand partners more successful, but also entice new brand partners to join PaperPie. I will let Heather talk further about that later in the call. On a more positive note, our brand partners at leadership levels remain higher than pre-pandemic numbers, they are primary drivers for new recruiting and overall sales growth. Brand partner success generates additional brand partners, and that continues to be our number one focus. We will be looking at numbers of our active brand partner count from this summer as an indicator for the future. This is due to the fact that by the end of the summer, based on our definition of active, which hasn't changed, that each of our brand partners will either have joined under the new PaperPie brand and/or made a sale under this new brand. You will hear Heather discuss a bit more, our marketing promotions and programs are focused on building this number back up to higher levels. Another positive in the first quarter was the continued results from our Smart Lab Toys product line. We introduced 13 new Smart Lab Toys to our publishing and PaperPie customers, and our sales have exceeded expectations. Not only have we received great reception from our retail customers, we have also picked up some nice international orders as well. Our PaperPie division continues to drive the total sales for our company and the sales of Smart Lab Toys from this division are exceeding our original expectations. During the quarter, our gross sales of Smart Lab Toy products exceeded $1.4 million. We introduced 10 new products in June and have another 15 or so over the next 12 months. Some of these, our customers have never seen before, so we've started new development since we've owned them. With that, I will now turn the call over to Dan to provide a brief overview of the financials. Dan? Thank you, Craig. To our fiscal first quarter results compared to the first quarter of last year, net revenues of $14.5 million, a decrease of $8.7 million or 37.5% compared to $23.2 million. Our average active PaperPie brand partners for the first quarter totaled 23,200, compared to 32,200 in the first quarter last year, a decrease of 9,000 or 28%. Loss before income taxes totaled $1.2 million, a decrease of $1.5 million compared to an income of $0.3 million in the first quarter last year. After-tax loss totaled $900,000 compared to $200,000, a decrease of $1.1 million. Loss per share for the quarter was $0.11, compared to income of $0.03 per share on a fully diluted basis. To update everyone on our inventory and working capital levels, inventories decreased $8.3 million from $70.6 million at May 31st, 2022, compared to $62.3 million at May 31st, 2023. Our working capital line of credit was $11 million at the end of May 2023. That concludes the financial update, I'll turn the call over to Heather Cobb to talk about sales and marketing opportunities in further detail. Heather? Thank you, Dan. As Craig mentioned earlier, we have made some recent changes to bring success to our brand partners this summer. We know that success begets success. This is true with our brand partners as well. Success with our brand partners leads to better recruiting, which leads to more sales. The most impactful change that we have made is to reduce the freight change on outbound shipping to our customers, thus reducing hurdles that prevent them from shopping with our brand partners. Prior to this change, we saw a reduction in the number of smaller orders overall. We believe that this is a direct reflection of the impact of inflation on the economy. By reducing our freight charge to a simple flat rate structure, we expect to entice these customers to complete a purchase with a smaller order, as opposed to abandoning their cart and not buying anything from their brand partner. We also expect for our number of higher dollar orders to stay approximately the same. An additional benefit from these smaller orders is that they introduce more new customers to our products. Having more customers introduced to these products gives our brand partners more opportunities to find their next party host and possibly even recruit their next brand partner. We've heard stories from all levels of our brand partners that they join for the books, but then they turn their discount into a successful business. Because we want our brand partners to be even more successful with their business this summer, we've offered them additional cash bonuses on their sales. This is due to the fact that we have seen a direct correlation between our brand partners who sell during the summer months and then them continuing to sell, and have success during the fall, which is always our busiest season of the year. We have also added other promotions and specials this summer to give our brand partners reason to contact their existing and potential new customers with these new and exciting offers. The summer is normally our slowest time of the year, so we are giving our brand partners lots of reasons to stay engaged and build their businesses. This concludes our sales and marketing update for today. I'm turning the call back over to Craig now for closing remarks. Craig? Thank you both, Heather and Dan. As I have said before, EDC has decades-long history of profitability. Naturally, it's easier to grow profitability when revenues are increasing and steadily outpacing expenses. However, we are in a period where we have seen our revenues decline and thus we are having to manage our costs. We are continuing to make operating adjustments each month to reduce our costs. The single most significant cost reduction this year will come from normalizing our inflated inventory levels. As we reduce inventory, it turns into free cash flow, which will be used to pay down debt, which will reduce the interest expense that hits our PNL. This will be one of the most significant improvements to profitability in fiscal 2024. To normalize inventory levels, we are executing a two-pronged approach. First and foremost, as Heather mentioned earlier, we are taking significant steps to energize our sales force. We expect to introduce new incentives and promotions not only this summer, but throughout the rest of the year. Additionally, we will maintain a strict discipline in our purchasing. Over the past 12 months, we have made significant efforts to reduce the quantities of titles we are printing and put increased focus on ordering more frequently. We expect this two-pronged approach will normalize our inventory faster. As an example, we have purchased roughly half of what we did last year and about a quarter of what we did pre-pandemic levels. We have also reduced payroll and other operating costs and looked for every opportunity to improve our bottom line performance. We will continue on this path until we reach profitability. Once we return to profitability and pay down debt levels, we plan to reinstate our past practice of paying quarterly dividends to our shareholders. This has been and continues to be a top priority for myself and our shareholders. I'd like to take this opportunity also to mention, we've just come off a couple of our largest opportunities to energize our sales force and make our PaperPie division as attractive as possible. In June, we had our convention where we had a good average number of attendees, but what we kind of heard is that a lot of them were coming to just kind of see what the brand, the rebrand was all about. To a person, every single person left much more positive than they'd come into it. They were very impressed with what our sales and marketing teams have done with the brand. We really focused on our mission, which is children's literacy and learning. Those things at convention was a very positive impact. Right now, Heather and I happen to be on our sales incentive trip. We came from Rome last week, where we had roughly, that's the highest level trip. It had roughly 40 people that were family members and such. We brought about 125 people, and now we're in Punta Cana, Dominican Republic, where we have roughly 400 people, and that's not all earners, but that's including family members. That's the biggest recruiting factor, or one of the biggest recruiting factors for PaperPie, is to see the amazing trips we take people that earn on. Anyway, we're very, very encouraged coming out of convention and out of these trips, and we're looking forward to the fall. Now that we have provided a summary of some recent activity, I will now turn the call back over to the operator for Q&A. Thank you. Ladies and gentlemen, we will now begin the Q&A. If you have a question, please press star followed by the number one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. If you would like to cancel your request, please press star two. Please ensure you lift the handset if you are using a speakerphone before pressing any keys. Your first question comes from the line of Ed Norcini, private investor. Your line is now open. Thank you. Craig, I haven't talked to you in a while. I'm on the call and I was looking at the 10-K, and that was published in February of this year, February 28th. Your inventory at that level was $59 million. Today, it's $62 million, so it went up $3 million from the last quarter. Do you have any plans? Yeah, Ed. This is Dan. Yeah. This is Dan. Just to clarify, because I think you've got some numbers that are different. If you look at our press release, our inventory at the end of February of this year was, if you add both the current and the long-term inventory together, was $63.8 million. At the end of May, it's $62,300. We dropped about a million and a half this quarter. I just wanted to clarify that before, you know. Okay. We have dropped inventory a million and a half. Okay. Well, Dan, my point is, and Craig also in that 10-K that you released, you're having problems with the bank. They need their money. Is there any plans? Do you have any plans to sell any of your assets in bulk? Like, for example, selling the Hilti complex or sell Kane Miller, or maybe sell $30 million worth of this inventory back to Usborne or another distributor? Do you have any plans to get some massive amount of cash in to pay off these debts? I'm worried about it. Yeah, well, you kind of hit a bunch of points there. I was trying to keep track so I could respond. Okay. Yeah, inventory levels, I've said all along that we'll continue to order new titles. We have to do that. What we said earlier in the call was that we were reducing the quantities and potentially the number of new titles that we're ordering. We're being very aggressive on reducing our purchases. Very aggressive. Historically aggressively low. As we sell inventory, it'll turn into cash and we'll pay the bank back. Another point you made is that we owe the bank a lot of money. Yes, we do. We have renewal coming up next month, there's no indication whatsoever that we will not be able to renew successfully with them. That's for our working capital line. Another point you made is, do we have any plans to sell our assets? We have engaged with a firm to look into the market for a building of our size. The market is very good. We could turn the building around and sell it within 60days-90 days. We know that's available to us. I want to keep that in my back pocket as a last resort. We have plans for this property once we get sales back up. I don't want to get rid of that property just yet. Now, if we need to, we can. Again, I just want to reiterate that we have a good relationship with the bank, and there's I've had no indication that we're not going to be able to renew the line of credit. As far as the building debt, Hilti pays their part, we pay a smaller portion of it. We've never defaulted on any payments. Again, they're not concerned about the building debt. They just want us to work down the working capital line, which we're doing by selling inventory. That's helpful, Craig. My other main concern, for right now, in my mind, you have no concrete plans to sell $30 million-$40 million worth of that inventory back to Usborne or another distributor. Yep. I'm looking Craig, at your 2017, fiscal ending, where you had approximately 25,000 consultants, which is probably what you have today, but you had $34 million in inventory. It seems like to me, you're like close to $30 million over what you need based on. That's correct. 2017. Okay? That's correct. Wouldn't it be helpful if, just had a mass sale? Just because it seems like the consultants aren't producing enough sales to reduce this inventory to normal levels. Yeah, that's a good point. We are looking at options to do some mass inventory reductions. Whatever we do, we don't want to damage our brand partner's ability to continue to sell inventory. As far as selling it back to Usborne or other distributors, that's not an option. They have no incentive to buy back inventory from us. Again, we're looking at some major foundations. We're looking at some other inventory reduction sales and things like that. I'll also just add, Ed Norcini, that one of the things that we know that you look to us to do for the company is to manage not only the short-term challenges as well as successes, but with long-term things in mind. I'll just kind of reiterate what Craig White said. You know, we're looking at what all of our options are now, but one of the last things that we want to do is some sort of short-term strategy that will end up in some sort of, you know, damaging long-term effect that none of us want to see. While, yes, we are looking at various different creative and alternative ways to reduce this inventory, we definitely want to do it in a way that will allow us to continue the business, as we've done with PaperPie, as well as with our retail division, for the long term. Okay. Ed, you've. Oh, this is Dan. I'll kind of add another thought as well. You know, you mentioned the 2017 period. If you recall, during that time, we were also over-inventoried. You know, the over-inventory issue is we have excess quantities of our best-selling items. Those are the titles that we ordered the most quantity of, is the titles that are our best sellers. In 2017, what we did is just we worked through it. You know, through 2017 to 2018, we reduced our inventory from the high 40s down to about $30 million, we're sitting around about $18 million. That's kind of the approach we're taking right now, too. We're a little bit more aggressive on the purchasing than we were back in 2017, as Craig just explained earlier. You know, the excess inventory is working down, and it's in our best-selling items. Okay, that's understood. My other question, if you don't mind, it's about your relationship with Usborne. I read in the 10-K that you are in violation of the new distribution requirement. Is that correct? You're not buying enough minimum amounts from Usborne, so you're in violation. They, according to the 10-K, they can cut you off at any minute because you're violating the contract. What do you say to that? What kind of assurances can you say? Because you've been dealing with these people for decades. Also, they said that they owe you $1 million from last year, and they're not paying. To me, it's like, whoa, you've been dealing with these people for decades, and they're fighting you about a $1 million discount rebate. To me, it's like, what? This is not right. What do you say to that? Yeah, we have been dealing with Usborne for decades. I've just taken over and been dealing with them myself for the last two years. Recently, Nicola's father, Peter Usborne, the founder of the company, passed away. I'm dealing exclusively with Nicola at this point. There's no incentive for them to cancel the distribution agreement. That's not to say they won't. They know that we've just got to get this inventory situation back to a normal level. We will get back to purchasing inventory at historic levels. They have no options to replace us. They're on the PaperPie side. They're replacing us as a distributor for our retail division. That's going to be taking years and years for them to ramp up the inventory that's necessary to service the retail division. I really don't feel like it's in their best interest. Again, we're preparing ourselves. We are trying to protect ourselves. Whatever kind of cancellation of the distribution agreement gives us a sell-off period. We're just trying to get stronger financially by selling down inventory, and that gives us a little bit more leverage with Usborne. That's the, that's the approach we're taking. All right. Well, my other question, Dan, what's the status of the Employee Retention Credit? Well, we filed for it. Good enough. We're waiting on the IRS to take action. I'm sorry. Nothing concrete there. No, it's contentious. No- Go ahead. Okay. Okay. That's all. I was just wondering. There's nothing, there's no definitive answer from the IRS on that? Not yet. We meet the requirements. I would expect that we would get it at some level, which, man, if we could get some cash from that, would be outstanding. It's not necessary or required for us to continue on, it'd sure be great. Mm-hmm. Okay. Well, that's, And, Craig, I've been wanting to ask you this question. We're going to have to go back to the time machine. Christmas of 2016, do you remember, when you guys just moved into the Hilti complex, and you bought a software package- I do. You bought a software package from a company in Florida, and it broke down. Actually, it was a classic nightmare. Okay? Mm-hmm. Your father and you had grandkids up there trying to get all the packages out, and customer service was going crazy. You paid about $1 million for the software package, as I recall. Did you ever get your money back for that software package? No, no. You remember that? Oh, of course. I've been with the company for 30 years. I remember that. Of course I do. Both sides were working in good faith, and we had just determined that it was not in our best interest to continue with them. We severed the tie, and we moved on. We developed all the software programs we needed in-house. That's a distant memory. Yes. Well, it almost bankrupt your company at the time, if I recall, because you were also in violation with the covenants with the bank. I think it was MidFirst Bank at the time. Anyway, I kind of right now, I think you guys are in a pickle, and we have to get this inventory or cut some cash up to get them back, because you're working on a waiver right now. It seems like from the 10-K. How generous are they gonna be with the waiver? I mean, they could shut you off August 9th, I think, and you might be out of business as a going concern. No. Good luck. No. Good luck. That's highly unlikely. All right. Thank you, Ed. Appreciate it. All right. Thank you. Thanks, Ed. Your next question comes from the line of Frank Goodell, from Gene Goodell Associates. Your line is now open. Yes. Am I on? Yes, we can hear you. Yes, I had a couple of comments off of what Ed had said. I noticed the sales volumes are down quite a bit. Everything is healed, of course. I've been in business myself many years. Everything gets healed, as you can, if you can increase sales. What's the outlook for the next year or so, realistically? Well, we don't. This is Dan. Frank, we don't give guidance as far as revenue. Just to put that out there before I turn the call back over to Craig. As a small reporting company, it's been our past practice to just be conservative and not put out guidance. Craig, I'll let you take over from there. Yeah, no, that's good. Thank you. Well, things are looking up. We're doing all kinds of things to help increase sales, retain brand partners, and it takes a little time for those things to come to fruition. The sentiment right now is more positive than it has been. We're going to be releasing some of our software projects in the next couple of months, which will be a positive impact. Our products get better and better. When we keep our brand partners and salespeople and customers focused on our mission of children's literacy and learning, things always go better. We're doing all the right things. It's just taking a little longer than we'd hoped, but we will, we will survive this tough period and increase sales. second question I had, what are the insiders within EDUC doing as far as stock retention? Craig, all three of us are buying. Yes, go ahead, Dan. I was going to say, the insiders being, you know, the obviously the White family, the board, nobody has really been selling any shares. Of course, as Craig mentioned, Heather, Craig and I continue to buy shares every quarter. We've recently filed some Form fours that reflect our activity for the first quarter. To that point, one way you obviously improve cash flow is to pay in shares rather than salaries. Obviously, people have to make a certain amount of money to maintain a standard of living. Companies I worked for in the past often did that, call them golden handcuffs, whatever, they paid with shares when times were hard to reduce losses I guess you could say, by having high salaries. I don't know how long ago you're mentioning, but Frank, the key thing that... I mean, it's a great idea. It's something that, you know, Craig and I have talked about in the past, but I just wanted before Craig turn the call over to Craig, just want to make sure you're aware that it's not legal underneath the SEC rules for us to issue shares to management unless we've gotten shareholder approval to do so. To do that, we would have to file a registration statement registering the shares and have a shareholder vote. Just giving you current SEC guidance, Craig, I'll let you know, discuss the- Yeah. your thoughts on that. The only thing I was also going to add is that we do have short-term and long-term incentives. The long-term incentives are shares. Now, you know, those were earned and the first tranche was awarded this past March after a five-year vesting period. We have other chunks of stock that our top 15-20 management have earned over the past several years. They're still being vested and things like that. We do have long-term incentive plans in place. We have small cash bonuses with short-term. They've been bigger in the past. We're doing very nominal short-term cash incentives. Yeah, I like the thinking that we're doing some of that. Part of where I'm going is you are highly incentivized to turn this company around rather than bailing when it gets tough. You are in a tough situation right now. As a stockholder, I have a lot of patience if I have hope, but if you lose hope, then your patience goes away. Sure. It's just, it's been a tough time for EDUC and my own stock account that I have with it. Luckily, I have a lot of other assets, but it's just a very worrisome thing when you see a company's stock go down as heavily as EDUC has done in the last three years. I'm sure I'm not telling you anything new. I agree. Right. I'm probably in the top 10 largest shareholders, including institutional, so I get what you're saying. I've been through a lot of the good times, some of the bad times, and yeah, ever since I took over, it's been a little bit of a tough stretch with the pandemic and then economy and things like that. I'm here for the long haul. I've got to look at this as a long-term turnaround and we're here for it. All right. That's all the comments I have. Thank you. Thank you, Frank. Thanks, Frank. There are no further questions at this time. I will now hand over to Craig. Please continue. Thanks, everyone, for joining us on the call today. We appreciate your continued support and look forward to providing you an additional update when we report quarter two in October. We know it's been a tough time. We're doing everything we can to get this turned around, and we're seeing positive indicators, so hang in there. Have a great day. Thank you. Thank you, everyone. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.