Welcome to The Parent Company's first quarter fiscal 2008 earnings conference call. (Operator Instructions) At this time I'd like to turn the conference over to Barry Hollingsworth, Chief Financial Officer.

Welcome to The Parent Company's first quarter earnings call for our fiscal year 2008. With me today is Mike Wagner, President and Chief Executive Officer. Before we get started I'd like to note that certain matters on this call are forward-looking statements that are subject to risks and uncertainties. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied. Although we may believe that expectations are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Please refer to the risk factors noted in our 10K filed with the SEC on May 1. On May 6 we filed an 8K providing guidance of our expected first quarter revenues of $9.8 million to $10 million with a net loss expectation of $6.1 million to $6.3 million. We'll file our 10Q later today and will file the contents of this call including the Q&A and 8K filing with the SEC early next week. Net sales in Q1 were $9.9 million which compares to $7.3 million in the prior year on a reported basis. Total operating costs were $9 million in Q1 compared to $5.9 million in the prior year. Our operating expenses are broken down into Fulfillment, Selling & Marketing, and G&A. Prior year results do not include the results of BabyUniverse side of the business which we acquired in October 2007. For context, BabyUniverse reported a net loss of $1.7 million in the first quarter last year which is not included in our reported results. Fulfillment expenses increased $210,000 or 12% to $2 million in the first quarter from $1.8 million in the prior year. First quarter fulfillment expenses improved to 20.3% of net sales compared to 24.8% in the prior year. Selling and marketing…

I'm Mike Wagner, CEO of The Parent Company. On the call today we'll discuss the business environment and performance of all of our key business segments. We'll discuss our baby business acquired from BabyUniverse in our merger and rationalized to profitability over recent months, now positioned for the right kind of growth in 2008, profitable growth. We'll discuss our acquired luxury business, how it continues to operate with attractive economics, and I'll tell you what we're doing to build our luxury brands through our catalog marketing expertise that has long been a standard of our business, an example of how the merged segments are working together. We'll discuss a toy business that has rebounded nicely from the challenges of the highly-publicized China toy recall and more specifically the reduction in our sales contribution from a key partner. Also related to our toy category, we'll discuss the steps we have taken to reestablish sales from our partner channel. The drop in revenue from this channel was a big issue for us in the fourth quarter. We think we have put in place attractive solutions to replace this hole in our sales as we move into the next year. On the content side of the equation we'll talk about two exciting new elements of our business model first, the expected increase in advertising revenue as we open up our eCommerce sites and our 59 million unique visitors to advertisers; second, and likely much more valuable in the long-run is the expected third quarter launch of Toys.com, a site that we hope will become the Internet's primary search site for families looking for toy-related products and content. Imagine Google or Shopping.com of the toys base. That is our goal for Toys.com. I will elaborate on these highlights in the next several minutes. To…

(Operator Instructions) We'll take our first question from Shawn Milne - Oppenheimer & Co.

Barry, Mike, I've got a few so I'll just list them and see if we can get them all taken care of. Just on the current quarter, the quarter that you just reported, do you have the comp store growth in eToys.com and give us a sense for how you think about that in the next couple of quarters. Secondly, if you look at the second half of the year, one thing that we're starting to hear a lot about in the eCommerce base is fuel surcharges which tend to work on a lagging basis. Can you give us a sense for your thoughts there? Are you trying to negotiate better deals with the carriers? Do you think you need to change your shipping policies? Anything on that front would be helpful. And then lastly, on Toys.com the comparison shopping site, how do you plan on promoting that site? More through natural search, I mean, obviously the URL would lend itself to that to some extent, or are you going to try to drive it through paid search? And where are you in getting other toy companies listings up? I know it's early but you'd obviously want to have that well in advance of the fourth quarter.

Okay, the first part of your question was comp store. First of all, we don’t' report segments but I will say as we mentioned in here that the PoshTots business was relatively flat for the quarter. Our eToys business started out slightly negative but ended with positive comps, single digits, and has continued into May and June to be that single digit positive comp. Our partners are pretty mixed. We have some partners that are up nicely and we have some partners that are down offsetting the increases there, so overall the partner business was probably a little softer than we would have liked. We don’t' control the marketing spend there so it's a little bit more of a challenge. And as I stated in the baby business, we started that off relatively quite a bit lower than planned trying to get to the 75% but ended on a better note that has continued through the period. So our My Twinn business was relatively flat but with a much better product margin due to less clearance items this year versus last year so sales maintained themselves with a much better product margin. Your second question was fuel surcharges and things. We are seeing a number of things there. We do lock in ahead of time and try to negotiate out some of the fuel surcharges. Our major carrier today is DHL which is going to be stopping their at home service through the post office so we are working with the other carriers to pick up some of that business and we'll probably have that tied up probably by the end of this week. They don't go away until September but we are going to change the way we charge shipping. Today if you go to our help section we…

Our next call comes from Kristine Koerber - JMP Securities.

Can you just update us on kind of where you stand with the system implementation in the baby business with Omniture? I know you had some problems during the first quarter with the key word search. Where do you stand with that? And then just a little more color on the BabyUniverse or baby business catalog. It sounds like results are mixed and if you can just give us a little more color on that, that'd be helpful.

Omniture; we just implemented Omniture last fall and it's really two pieces to Omniture. You've got your web analytics that basically give you transactional conversion and performance on the front end of the web site. We've had no problems with that at all. We also implemented their search optimization key word buying tool that we continue to get better and better at. I think one of our key mistakes initially was relying too much on that for some of the higher velocity key words so we've kind of taken those off back manually and we're letting what I call that second tier of key words manage itself through the Omniture search tool. So I'm very confident. There's still improvement in that area. As you can see we continue to pay with the BabyUniverse online marketing spend. Some of that was a little bit of reaction to the first quarter to that Omniture tool but I think we've got that pretty much on a performance base. Our goal is to run somewhere between 10% to 15% on the BabyUniverse site and add spend to sales that they generate. And just as of last week we're finally below the 15% range so we're continuing to fine tune that area and I don't think that will be an issue and I think we'll experience some savings in the fourth quarter this year from last year based on having that tool up for a year and optimized the way it should be. Your next question was on the BabyUniverse catalog. The catalog, you've got to keep in mind, we tested a lot of lists, so what that means is there could e a list with 50,000 plus names on it and we're taking a small sample of that list and sending it out to maybe 5,000, something that's relevant. From that test we knew that a lot of those lists wouldn't perform and some would. So the real key as we dissect that is to say, "Okay, here are the ones that worked so now I can send out the other 45,000 names that we never sent to." And there are going to be a lot of lists that didn't work and we'll stop marketing to those lists. So when you say a test, we didn't expect it to pay for itself immediately. We really wanted to be able to take the segment data of the lists that we rented and say, "Here are the ones that worked. We can go deeper into those lists. And here are the ones that didn't work and we can eliminate those lists on future mailings."

Okay. Can you remind me how many catalogs you mailed during the test?

To the test it was just under 300,000 so not a big circulation. It went out in a couple of drops. The last drop was in homes in early May. So we're still waiting to see the results of that.

Okay. One other question on inventory, inventory looks like it's in pretty good shape. Just talk about promotional activity during the quarter. Did you have to do anything out of the ordinary as far as promotion?

Yeah. As I stated earlier the consumer's been a little finicky. Where we used to run our clearance sales, we used to get what I call a deal customer coming in and buying a lot of that stuff. That deal customer as I said earlier seems to be a little bit softer; probably more impacted by the economic times, but that's why our margin continues to be improved. The customer that's coming in is buying the right item for their child, less price sensitive, I don't want to say not price sensitive but less price sensitive, and we are doing different shipping promotions. Shipping promotions seems to be driving the best results compared to a clearance sale with similar economics. So we've kind of shifted after the first quarter we were looking at clearance. The clearance wasn't doing it and a lot of our clearance sometimes is the close out product that we bought to put on clearance throughout different promotional cycles so it's not clearance. Some of it's planned clearance to drive sales. So overall our margin rate continues to be better but we're seeing better success with shipping promotions as opposed to price promotions.

And that does conclude the question and answer session today. At this time I'd like to turn the call back to our speakers for any additional or closing remarks.

Yes, just in closing, I would say that I think we've got a lot of opportunities ahead of us, we've got a lot of great brands, and it's really a matter of monetizing them. I think one of the important things that maybe I didn't emphasize enough is we spent very little resources in our core toy business last year with the BabyUniverse. Shifting those resources as we have now will put us in a pretty powerful position for this fourth quarter this year and I think that's really important. I don't know. In the online space, you're either moving forward or you're falling behind. So we need to keep moving those sites forward and progressing and I do believe those will pay nice dividends across our businesses this year. And with that, I'd like to thank everybody for joining the call and have a good day.