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DATE

Wednesday, Oct. 14, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Craig White
• Chief Sales and Marketing Officer - Heather Cobb
• Chief Financial Officer - Dan O’Keefe

TAKEAWAYS

• Net Revenues -- $4.1 million, representing an 11% decrease from $4.6 million in the prior year second quarter.
• Sales Decline Rate -- 11% in the current quarter, which management reported is an improvement from declines of 30% or more observed in previous periods.
• Active Brand Partners -- 5,100 at the end of August 2026, compared to 5,800 at the end of August 2025.
• Brand Partner Growth -- 19% since February 2026, increasing from 4,300 to 5,100 over a six-month period.
• Loss Before Income Taxes -- $1.6 million, reflecting an improvement from a $1.8 million pre-tax loss in the second quarter of the previous fiscal year.
• Net Loss -- $1.6 million, compared to $1.3 million last year, impacted by a valuation adjustment on deferred tax assets.
• Loss Per Share -- $0.19 on a fully diluted basis, compared to a loss of $0.15 in the same period last year.
• Year-to-Date Revenue -- $8.8 million for the first six months of fiscal 2027, compared to $11.7 million in the prior year.
• Year-to-Date Pre-Tax Loss -- $2.9 million, improved from a $3.2 million loss before income taxes in the previous year.
• Year-to-Date Net Loss -- $3.0 million, compared to a $2.4 million net loss for the same period last year.
• Year-to-Date Loss Per Share -- $0.35, compared to a loss of $0.28 in the first half of the prior fiscal year.
• Inventory Reduction -- $2.8 million generated in cash flow from inventory reductions as levels declined from $37.7 million to $34.9 million since the fiscal year began.
• Cash Balance -- $1.2 million as of Aug. 31, 2026, representing a slight decrease from $1.3 million at the end of February 2026.
• General and Administrative Cost Reductions -- $1.2 million in expected savings for the current fiscal year due to cost reduction initiatives implemented at the beginning of the period.
• Monthly Rental Savings -- $15,000 per month expected starting in November as the company vacates an outside warehouse facility in October.
• Asset Write-Down -- $100,000 one-time write-down recorded in the first quarter of fiscal 2027 related to assets held for sale, including a legacy distribution system.
• Deferred Tax Asset Impact -- $0.28 per share in potential tax gains if the valuation adjustment for deferred tax assets is reversed upon a return to profitability.
• Credit Facility -- $2 million available under a line of credit, with zero borrowings reported during the quarter.
• Operational Cash Flow -- Positive for the first half of the year, as $2.8 million from inventory reductions nearly offset $2.9 million in operating losses.
• Staffing Changes -- Staff reductions were completed at the beginning of the fiscal year as part of the broader cost-cutting strategy.
• Inventory Composition -- Several years of inventory remains at current sales levels, specifically within the Usborne Publishing Limited product line.

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RISKS

• White stated, "our second quarter is typically our softest quarter of the year and our quarters cannot be analyzed sequentially," highlighting the seasonal volatility that can impact performance comparisons.

SUMMARY

Educational Development Corporation (EDUC -1.83%) reported results for the fiscal 2027 second quarter, which management identified as the company’s seasonally slowest period. Management reported that the company's turnaround plan resulted in a significantly lower rate of sales decline than previously projected, supported by the resumption of new product introductions and increased active brand partner counts. The company focused on converting inventory to cash, reducing total inventory by $2.8 million since the start of the fiscal year. Management stated that the reduction in operating expenses, including executive compensation cuts and facility consolidations, helped narrow pre-tax losses despite lower year-over-year revenue levels.

• Revenue performance significantly outperformed internal expectations, with management reporting an 11% decline compared to initial internal projections of a 35% decline.
• The company is returning to a consistent product introduction schedule, with plans for two main season and two mid-season releases annually to drive repeat customer engagement.
• Management introduced "Read," an AI-assisted search tool on the e-commerce site, designed to provide personalized book discovery based on customer interests and preferences.
• The company has implemented strategic outreach to former brand partners to re-engage them with improved product offerings, technology enhancements, and updated programs.
• President and Chief Executive Officer White stated that the company intends for AI to increase employee efficiency rather than serve as a basis for further headcount reductions.
• Management reported using AI pattern recognition to create automated touchpoints for brand partners, such as recognizing high-volume orders or first sales in real time.
• Retail sales interest remains strong across the Kane Miller, Learning Wrap-Ups, and SmartLab Toys brands, with sizable orders received for recently introduced titles.

INDUSTRY GLOSSARY

• PaperPie: The direct sales division of Educational Development Corporation that utilizes independent brand partners for product distribution.
• Usborne Publishing Limited: A United Kingdom-based publisher for which EDC serves as the exclusive United States distributor through the multi-level marketing channel.
• Kane Miller: A division of EDC that specializes in publishing children’s books from international authors and illustrators.
• Learning Wrap-Ups: Educational manipulatives owned by EDC designed to help children learn basic facts in subjects like mathematics.
• SmartLab Toys: An EDC-owned brand that produces STEAM-based educational toys and science kits.
• STEAM: An educational approach incorporating Science, Technology, Engineering, the Arts, and Mathematics.
• Brand Partner: Independent sales representatives who market and sell EDC products through social media, book fairs, and home events.
• Read: An AI-assisted discovery tool integrated into the company’s e-commerce platform to facilitate intuitive book searches.

Full Conference Call Transcript

Operator: Good afternoon, everyone, and thank you for participating in today's conference call to discuss Educational Development Corporation's financial and operating results for its fiscal 2027 second quarter and year-to-date results. As a reminder, this conference is being recorded. On the call 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 2027 second quarter and year-to-date results. The release will be available later today on the company's website at www.edcpub.com.

Before turning to the prepared remarks, I 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 Educational Development Corporation's recent filings with the SEC for a more detailed discussion of the company's financial condition. With that, I would like to turn the call over to Craig White, the company's President and Chief Executive Officer. Craig?

Craig White: Thank you, Alan, and welcome, everyone, to the call. We appreciate your continued interest. I will start today's call with some general comments regarding the quarter, then 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. First, I would like to remind everyone that our second quarter is typically our softest quarter of the year and our quarters cannot be analyzed sequentially. During the quarter, we saw progress in the execution of our turnaround strategy. This is most evident by a reduction in our sales decline.

Over the past quarters, we have reported sales declines of 30% or more, and our forecasts have been for 35% down. During the second quarter, our sales decline decreased to 11%. This shows that our strategies and turnaround plan is working. During the quarter, we were able to replenish some existing best-selling titles that were out of stock as well as introduce several new titles, both energizing our sales force. The overall 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 progress we have made in the second quarter, which, as I said, is our softest period of the year. Heather will talk more about this progress in her marketing update. As I've 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 will now turn the call over to Dan O'Keefe to provide a brief overview of the financials.

Dan O'Keefe: Thank you, Craig. Our fiscal 2027 second quarter results compared to the second quarter last year include net revenues were $4.1 million compared to $4.6 million, a decrease of approximately 11%. Average Active Brand Partners totaled 5,100 compared to 5,800 at the end of August 2025. Our average Active Brand Partners increased from 4,300 at the end of February 2026 to 5,100 at the end of August 2026, an increase of approximately 19%. Our loss before income taxes were $1.6 million compared to a loss in the second quarter last year of $1.8 million. Net loss totaled $1.6 million in the second quarter compared to $1.3 million in the second quarter last year.

Loss per share totaled $0.19 compared to a loss of $0.15 on a fully diluted basis. Now for an update on our working capital. Inventory levels have decreased from $37.7 million at the beginning of the fiscal year to $34.9 million at the end of August, generating $2.8 million of cash flow from inventory reductions. Our cash balance decreased slightly from $1.3 million at the end of February 2026 to $1.1 million at the end of August. We had no borrowings under our $2 million line of credit during the quarter. I would also like to mention an unusual accounting adjustment that continues through the second quarter.

Due to our historical losses and operational expectations during our turnaround period, we evaluated the need for a valuation allowance for our net 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 on our tax expense, net earnings and earnings per share. When the company shows signs of returning to profitability, this valuation adjustment will be reversed. The reversal will have no cash flow impact, but it will have a direct impact to our tax expense, net earnings and earnings per share. That concludes the financial update.

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

Heather Cobb: Thanks, Dan. As Craig mentioned earlier, our second quarter is traditionally our slowest selling period. As we entered June, our internal sales projections anticipated a decline of approximately 35% compared to the prior year, reflecting the trends we've seen in recent quarters. Instead, we finished the quarter with an overall revenue decline of approximately 11%, significantly outperforming those internal expectations. While we recognize there's still work ahead, we're encouraged by this progress, especially as several important initiatives began coming together during the quarter. One of the most significant developments was the return of new product intros. In mid- to late June, we released our first full group of new titles.

And over the past several months, we've also replenished inventory for several of our best-selling titles and series. We've shared previously that new titles are an important sales driver for our business, and we believe the sales results we are seeing continue to reinforce that. Even more importantly, we're moving back toward a consistent release schedule with 2 main season and 2 mid-season product intros planned each year. This is an integral step forward because it creates a more predictable flow of new products and gives our brand partners and retail sales reps more opportunities to reconnect with customers, generate excitement and drive repeat purchases throughout the year.

We're seeing encouraging activity within our EDC Pub retail division, where our retail partners continue to respond positively to our offerings across Kane Miller Books, Learning Wrap-Ups and SmartLab Toys. We're receiving strong interest and sizable orders across these brands, reinforcing the demand we're seeing for our educational products. The response to our recently introduced new titles has been enthusiastic, and we're already seeing excitement surrounding additional releases planned for January from both Kane Miller and SmartLab Toys. As we return to a more consistent product intro schedule, we believe these offerings will create additional sales opportunities across both our sales channels. Alongside product availability, another key priority remains rebuilding and strengthening our PaperPie Brand Partner community.

During the quarter, we offered a special activation opportunity in June, along with a targeted summer sales event designed to encourage engagement, generate customer activity and support our brand partners during a traditionally slower season. And while our brand partner population remains below where it was a year ago, we're encouraged that we've grown from approximately 4,300 Active Brand Partners at the beginning of the fiscal year to approximately 5,100 at the end of August. As Dan mentioned, that represents an increase of nearly 19% over the first 6 months of our fiscal year. We recognize that growing our brand partner community is only one part of the equation.

Equally important is helping those brand partners become active, productive and successful in building their businesses. We continue to focus on both growth and new customer acquisition because those 2 priorities are closely connected. We're also taking a renewed strategic approach to social media and communications, focusing on strengthening our PaperPie Brand presence, creating more consistent and engaging content and expanding our reach to new audiences. We've added team members to support these efforts with an emphasis on connecting with today's consumers and the next generation of brand partners.

And looking beyond the quarter, we've begun additional outreach directly to former brand partners, highlighting the many improvements we've made to our products, programs and technology and inviting them to take another look at the opportunities available with PaperPie today. That brings me to our IT and enterprise initiatives where we've continued to make significant progress. Over the past several months, our team has successfully completed and launched numerous enhancements to our e-commerce platform and supporting systems. These improvements are an important part of our overall strategy because we're not simply focused on bringing more people to PaperPie. We're also focused on making it easier for them to shop, share and build their businesses.

We continue to enhance our mobile shopping experience, knowing it's where most shopping trips happen today. We've also introduced [ Read ], our new AI-assisted book discovery and search tool on the e-commerce site. [ Read ] helps customers navigate our product selection and discover books based on their interests, needs and preferences, creating a much more personalized and intuitive shopping experience. Additionally, we've launched new wish lists and registry features, making it easier for customers to save and share their favorite products with family and friends. While these may all sound like individual website enhancements, collectively, they represent something much more important.

We are building a much more modern, accessible and efficient shopping platform that supports both the customers and the productivity of our brand partners. As we move into the second half of our fiscal year, our priorities remain clear. We're focused on growing and engaging our brand partner community, reaching new customers, maintaining a consistent flow of new products and continuing to improve the tools and technology that support our business. We're especially encouraged to enter our stronger selling season period with improved product availability, new titles in the market and these additional new releases on the horizon. We understand that sustainable growth won't happen overnight, and we recognize that we still have work to do.

But we're encouraged by the progress we've made this quarter, not only in our sales performance relative to our expectations, but also in restoring important elements of our business and strengthening the foundation that we have for future growth. We believe our products, people and increasingly modernized tools and systems position us to keep making meaningful progress in the quarters ahead. As we continue to develop these things, we're placing an increased emphasis on improving internal efficiencies, simplifying processes and creating technology solutions that can support this growth without requiring proportional increases in operating costs, which Craig will share a bit more about. With that, I'll turn the call back over to Craig.

Craig White: Thank you, Dan and Heather. As I mentioned before, we are happy with the initial results of our turnaround plan. Specifically, we are building our brand partner levels and they are excited about our new titles and our IT improvements. You heard from Heather about some of our recent IT initiatives that are focused on making it easier to do business with us and improving the shopping experience. I believe you've also heard me say that I am a big proponent of AI, not as a solution to all our problems, but as a tool to assist in achieving our strategic goals. It is also not part of the plan to further reduce headcount as part of our AI strategy.

I want it to be used to make our current employees more efficient so that we can -- so that we do not need to hire as many new employees as we get back to growth. Part of my overall strategy is to help us more effectively build community. AI can assist with this by recognizing patterns, good or bad, very quickly. I began using AI to help me create more touch points with our brand partners by recognizing certain achievements much closer to real time. I send weekly e-mails for large orders recognizing effort and impact and e-mails when new brand partners make their first sale. It has been very well received.

Another key initiative is to be recognized by customers and the greater community as experts in providing educational resources, our books and toys, for their children. This in part can be achieved by establishing blogs or social media posts to build trust in our brands. This will, in turn, strengthen our positioning in AI LLMs recommendations of our products, which is becoming the new search engines. This is a major undertaking that we have many, many assets available for use and a clear path to get there aided by our 2 new hires. And then in general, I support any employee or department in their AI exploration process to transform EDC.

I believe that AI can help automate processes to free up employees to do more critical thinking work. We have also engaged a company who has created their own front end sitting on our data, which will allow us to ask natural language questions without IT involvement to make more informed, timely decisions. For example, I can use the software to provide me daily morning briefs of milestones that were achieved overnight as a result of posted sales. It just provides readily useful data more quickly. Many companies in the direct selling industry are evaluating their recruiting and engagement methods to attract and retain brand partners and customers.

I can tell you that our brand -- our PaperPie sales and marketing teams and the IT department are working actively to analyze our strategies to engage this target group as well. I really feel like we are rebuilding from a position of strength. What our small, scrappy staff throughout the building can accomplish is really amazing, and we have solid short-term strategies that everyone can get behind. We are truly all pulling in the same direction. Lastly, I want to thank our shareholders for their patience, our employees for their commitment to our mission and our customers and brand partners for their loyalty.

I'm 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 will now turn the call back over to the operator for question and answer. Alan?

Operator: [Operator Instructions] Your first question comes from Igor Novgorodtsev of Lares Capital.

Igor Novgorodtsev: Nice to see that deterioration is declining. So I understand it will take some time to come around. I have quite a few questions, and I'll probably ask a few and if nobody else behind me [indiscernible]. So let me get started by asking about the new versus titles already in your inventory. So you started selling new titles in June. How much -- like what percentage of the titles that were sold as new titles? And how -- what percentage of the titles in the inventory? And what is your inventory level looks like after this quarter?

Heather Cobb: I'll take the first part as far as the percentages. The percentage of new titles that go into actual sales of overall sales is actually relatively small. What it does is it provides that excitement and bump of enthusiasm to get out and share with customers. And what we consistently see over time is that when those new titles are placed on an order, they are almost always accompanied by what we call backlist titles, which are the additional titles that have always been there and available for purchase but that people are going ahead and taking advantage of buying while they're on the site and doing so.

Igor Novgorodtsev: Okay. We do not have the inventory levels yet. I assume I have to wait for the 10-Q, right?

Craig White: No, I think, Igor, you joined just a little bit late. We said that early on. Our inventory levels decreased from $37.7 million at the beginning of fiscal year 2027 to $34.9 million. So...

Igor Novgorodtsev: Okay. Yes. So my next question is about the current quarter in active members. Now this is obviously right now is the most important quarter of the year. How is it looking? What is like active members are increasing? What does the sales look like as much as you guys can tell us at this point now that we're halfway through?

Heather Cobb: Sure. I referenced that a little bit in my conversation, and Dan mentioned it as well. While the Active Brand Partner count year-over-year is lower than it was at the same time last year, we've seen an almost 20% increase since the beginning of fiscal year '27, which is promising and something that we look at as extremely positive.

Igor Novgorodtsev: So maybe we can just dig in a little bit more. I believe you ran a promotion in the last quarter. And at one point of time, you had 5,300 members. Now I understand there is something that's churning off and now it's 5,100 members. Should we expect that the numbers will start increasing or stabilize? Or how should we look at that?

Dan O'Keefe: Igor, I will tell you that historically, in the fall, we have an increase in brand partners because it's the strongest selling season of the year. So we have some brand partners that go inactive during the year, but come back to us in the fall. So typically, our fall is our time frame where our brand partner numbers increase. The summer is typically a time when they actually decrease because a lot of the fall people that join in the fall, fall off in the summer because they don't make a sale during the first 6 months of the year. But then they come back in the fall each year. So fall is typically our highest brand partner levels.

Igor Novgorodtsev: Okay. Fair enough. Maybe you can talk a little bit about the operating expenses. I know that you've been doing a good job reducing your operating expenses. I'm just curious, is the job less done at this point? Or are you still working on significantly reducing operating expenses going forward? I mean, I assume everything stays more or less equal.

Dan O'Keefe: Yes. I'll take this one, too. We kind of mentioned in -- at our fiscal year-end, our 10-K call and our Q1 call that we reduced our operating expenses during -- for the budget for the fiscal 2027 year by $1.2 million. That includes some expense reductions immediately. Our executive team took compensation reductions. We were able to -- we actually did a staff reduction immediately in the beginning of the fiscal year. But we also have expenses that are dropping off during the year.

For example, we have an outside warehouse facility that we're vacating in October, and it will save us $15,000 a month in rent expense by not using that outside warehouse, and that will start in November. So throughout the year, we're doing expense cutting. But cumulatively, we expect our operating expenses to be about $1.2 million below where they were last year.

Igor Novgorodtsev: Okay. My next question is, and then I'll get in queue and see if anybody else wants to ask questions. I'm a bit confused about the cash flow. Your press release specifically said that you had a positive cash flow, yet the cash has been reduced, I believe, by $100,000 from the beginning, $1.3 million to $1.2 million, and you had $1.8 million in May, if I'm not mistaken. Could you just kind of walk me through this? I understand that I would need to see your cash flow statement to fully understand this. But what did you allude to in the press release when you said that the cash flow in the first half was positive?

Dan O'Keefe: Well, the cash flow in the first half of the year is positive because we're reducing our inventory levels. So from a simple standpoint, we reduced our inventory levels $2.8 million and reducing -- and all that inventory is fully paid for, Igor. So that just generates positive cash for us. Now over the first 6 months, we've lost our earnings before taxes were negative $2.9 million. So from a simple math perspective, $2.8 million of positive cash flow offset by $2.9 million of operating losses is negative $100,000, and that's what our cash decreased over the first 6 months.

But I will also tell you that the fall selling season is our busiest selling season of the year, and we expect cash to be higher at the end of this quarter than it is right now.

Igor Novgorodtsev: No, I understand. So I would need to -- I see this. But do you expect -- you're fairly confident that on the trailing 12 months, your operating cash flow will be positive this year, it seems, right? I mean, it's fair to say that given that there's one quarter left and it's your strongest quarter. So your -- basically cash at the end of the year should be higher than it was in the beginning of the year. Is that -- are you on target on that?

Dan O'Keefe: I don't want to give forward-looking statements to Q4 since it's kind of -- but I can tell you that typically, at the end of Q3, we -- is our biggest cash position of the year.

Igor Novgorodtsev: Sorry, I -- Q3, right? Correct. Sorry. Okay. I'll try to get back in queue and if nobody else is on, then I'll ask more questions. And if not, then I'll ask at the end.

Operator: [Operator Instructions] The next question comes from Igor Novgorodtsev of Lares Capital.

Igor Novgorodtsev: Okay. I guess it's me again. All right. So let me ask a couple of more questions, if you don't mind. Usborne inventory. Last time I checked, it looks like about half of your inventory is from Usborne. Correct me if I'm wrong. Are you -- and it seems to be about 1/3 of your sales. Do you guys have any active conversations with Usborne? Because I would imagine some of the inventory is moving a little bit better, but some of it should be very, very slow moving. I did a little bit of a deep dive into Usborne titles, and it seems to be that the titles do not change that much.

Would they be interested in, let's say, maybe taking back some of the inventory and giving you credit and replacing with some other inventory? Or is any kind of the deal to basically push your slow-moving inventory through their channels, so you don't have to basically spend years trying to sell it off? Or what are your conversations right now with Usborne, if any?

Craig White: We have, at this point, limited conversations with Usborne. Dan has frequent regularly scheduled conversations with them. It's not been a regular practice that they ever take back titles. So we're not counting on that. And so our sales plans are like any of our other titles, just to sell through them best we can, replenish the best sellers and keep moving forward.

Heather Cobb: Yes. And Igor, I'll jump in there as well and say they do offer new titles just as any publisher does. But as you potentially heard Craig say before, our books are on topics and in formats that don't go out of style. They're not necessarily trending topics, but more ABCs and 123s and all of the things that all parents want or should want to have in their homes for their kids. And so we don't have any concern of them not lasting to a point that we would not be able to sell them.

Igor Novgorodtsev: But let me just understand this, because it seems to be -- I just did a little projection, you have several years at the current sales level of Usborne inventory. Wouldn't they want to take this inventory at a discount? If I was Usborne, I would be all over it and say, give you a credit, so you can get some [indiscernible] because they sell it on Amazon, through HarperCollins, and through stores and so on. So they have other channels where they can actually move it through much quicker. And then in the end, they can potentially give you credits and you guys can buy the much higher hot items from them.

It just seems strange that you guys don't have any active conversations. It's not policy-based, talking about an unusual situation and kind of a deal where you guys have several years' worth of inventory.

Craig White: Well, we have several years of inventory at current sales levels. If we increase brand partners and increase sales, then the inventory will come down much quicker. But I mean, let's be realistic. They've already made that sale to us. There's no incentive for them to take it back. So we'll sell through it. We're not concerned about that at all, us being able to sell through it. And again, like I said, if we increase brand partners and sales, it will reduce more rapidly.

Igor Novgorodtsev: Like just for me to understand the inventory from their perspective, do they have -- do you have -- what's like -- what kind of -- do you have a lot of titles that's no longer being sold, except the new inventory or pretty much the vast majority of Usborne titles are still being actively sold, let's say, by you and elsewhere? And they still...

Heather Cobb: Yes, that's a great question. The vast majority are still being sold. You could find them in other markets. And like I said, they're not on trending topics that are going to expire. And so yes, just as a whole, the publishing industry doesn't tend to rotate through where they stop selling titles after 2 years. As long as those titles are still available, they will sell them and make them available to customers.

Igor Novgorodtsev: Right. And my last question is, I know that you said no to Amazon and to others, and I can kind of understand that you don't want to be competing with discount and the race to the bottom. But again, given your high inventory level, did you guys talk to any third parties of potentially moving some of your inventory through Internet? Not necessarily explicitly as you, but perhaps to third parties or something like that? Because I see a lot of titles that you carry on the Internet. There is obviously a significant market for this. Is that a consideration?

Heather Cobb: While our overall strategy is not to sell to Amazon or big box stores, we do work with third parties already that are selling significant quantities of our titles and making those available to the market in a variety of different ways.

Igor Novgorodtsev: I see. So you -- potentially somebody on Amazon may be selling your titles. It just would be a third party buying from you, something like this, right, or eBay or that's...

Heather Cobb: Yes. Through our retail division, we opted not to sell direct to Amazon because that gives us a little bit less control of the sales price that it can go for and things like that. And so as we sell to a customer that may or may not have a storefront on Amazon, we can give them more parameters and guidelines of strict discounting opportunities or different things like that. And so yes, they could be available on Amazon.

Igor Novgorodtsev: Okay. And my last question, and I'm sorry for asking so many questions, but I think, hopefully, it's useful for other people who will read the transcript. Gross margins and promotions. So last year, you mentioned several times that you have to do promotional activity and your gross margins were particularly good. I haven't had a chance to see your gross margins, but maybe you can talk a little bit, have your gross margins improved or you expect them to improve now that you don't have a bank breathing down your neck, so to speak?

Craig White: Well, we don't have a bank breathing down our neck, but we do have lots of inventory. So we do have to discount or we've employed that tool or tactic in the past. Our plans are to do those fewer and farther between, right? We don't want our customers only thinking they want to purchase from us when they're on discount. We need to get back to full retail, but it's still been a tactic that we've used periodically.

Igor Novgorodtsev: Okay. So do you -- so the gross margins are no longer deteriorating, would be fair to say that, right? If I look at the aggregate as far as the first half of the year.

Heather Cobb: Right.

Igor Novgorodtsev: Okay. All right. I don't have anything else.

Craig White: Yes. No problem. Like you said, I think others would probably have the same question. So I appreciate it.

Operator: There are no further questions at this time. I would hand over the call to Craig White for closing comments. Please go ahead.

Craig White: Yes. I think we're not raising the banner that says mission accomplished. We know we have work to do, but we feel this has been a positive step in the right direction. So we're feeling better right now. So anyway, I appreciate everyone being on the call. Thank you.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.