What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2025-12-11 compared with 2025-09-11 · 75 added, 116 removed, 441 unchanged (30% of the section changed)

44 unchanged sentences

Preferred stock, par value $ 0.01 , Shares authorized:

No shares issued or outstanding at August 2, 2025, February 1, 2025 and August 3, 2024

No shares issued or outstanding at November 1, 2025, February 1, 2025 and November 2, 2024

Common stock, par value $ 0.01 , Shares authorized:

18 unchanged sentences

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

Net retail sales

$ 114,635 $ 103,455 $ 234,224 $ 211,323

Commercial revenue

8,629 7,294 16,251 13,278

International franchising

983 1,049 2,167 1,927

Total revenues

124,247 111,798 252,642 226,528

Costs and expenses:

Cost of merchandise sold - retail

48,552 47,607 100,123 97,022

Cost of merchandise sold - commercial

3,419 3,008 6,433 5,541

Cost of merchandise sold - international franchising

765 614 1,588 1,231

Total cost of merchandise sold

52,736 51,229 108,144 103,794

Consolidated gross profit

71,511 60,569 144,498 122,734

Selling, general and administrative expense

56,399 49,212 109,955 96,774

Interest income, net

( 206 ) ( 188 ) ( 406 ) ( 614 )

Income before income taxes

15,318 11,545 34,949 26,574

Income tax expense

2,951 2,767 7,263 6,337

$ 12,367 $ 8,778 $ 27,686 $ 20,237

Foreign currency translation adjustment

( 9 ) 240 1,250 169

Comprehensive income

$ 12,358 $ 9,018 $ 28,936 $ 20,406

Income per common share:

$ 0.94 $ 0.64 $ 2.11 $ 1.47

$ 0.94 $ 0.64 $ 2.11 $ 1.46

Shares used in computing common per share amounts:

13,111,615 13,665,958 13,095,958 13,795,958

13,139,470 13,685,801 13,142,443 13,845,309

See accompanying notes to condensed consolidated financial statements.

3 unchanged sentences

(Dollars in thousands)

Twenty-six weeks ended

Thirty-nine weeks ended

Cash flows provided by operating activities:

$ 27,686 $ 20,237

Adjustments to reconcile net income to net cash provided by operating activities:

2 unchanged sentences

Provision/adjustments for doubtful accounts

( 27 ) ( 44 )

(Gain)/Loss on disposal of property and equipment

2 unchanged sentences

Inventories, net

( 11,240 ) ( 3,364 )

Receivables, net

2,928 ( 3,410 )

Prepaid expenses and other assets

2,950 ( 664 )

Accounts payable and accrued expenses

3,657 ( 4,332 )

Operating leases

( 481 ) ( 2,198 )

Gift cards and customer deposits

( 1,513 ) ( 2,304 )

Deferred revenue

( 83 ) ( 82 )

Net cash provided by operating activities

32,017 12,413

Cash flows used in investing activities:

Purchases of property and equipment

( 6,328 ) ( 5,700 )

Net cash used in investing activities

( 6,328 ) ( 5,700 )

Cash flows used in financing activities:

Purchases of common stock for employee equity awards, net of tax

( 1,266 ) ( 1,869 )

Cash dividends paid

( 5,836 ) ( 5,651 )

Purchases of Company’s common stock

( 7,323 ) ( 18,347 )

Net cash used in financing activities

( 14,425 ) ( 25,867 )

Effect of exchange rates on cash

Increase/(Decrease) in cash, cash equivalents, and restricted cash

11,350 ( 19,164 )

Decrease in cash, cash equivalents, and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

27,758 44,327

Cash, cash equivalents and restricted cash, end of period

$ 39,108 $ 25,163

Supplemental disclosure of cash flow information:

Cash and cash equivalents

$ 38,707 $ 24,768

Restricted cash from long-term deposits

Total cash, cash equivalents and restricted cash

$ 39,108 $ 25,163

Net cash paid during the period for income taxes

$ 4,697 $ 8,230

See accompanying notes to condensed consolidated financial statements.

10 unchanged sentences

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended February 1, 2025 , which were included in the Company’s Annual Report on Form 10 -K filed with the SEC on April 17, 2025.

Certain prior period amounts in the notes to the condensed consolidated financial statements have been reclassified to conform to the current period presentation.

These reclassifications did not affect net earnings attributable to Build-A-Bear Workshop, Inc.

Significant Accounting Policies

2 unchanged sentences

The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 11 — Segment Information for additional information).

The Company's direct-to-consumer reporting segment represents 92 % of consolidated revenue for the second quarter of fiscal 2025 .

The Company's direct-to-consumer reporting segment represents 92 % of consolidated revenue for the third quarter of fiscal 2025 .

The majority of these sales transactions were single performance obligations that were recorded when control of merchandise was transferred to the customer.

8 unchanged sentences

In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the consumers’ redemption pattern using an estimated breakage rate based on historical experience.

Subsequent to stores reopening following shutdowns caused by the pandemic, the Company experienced lower redemptions of its gift cards for all periods of outstanding activated cards compared to pre-pandemic redemption patterns (fiscal year 2019 and earlier), which impacts the gift card breakage rate.

Subsequent to stores reopening following shutdowns caused by the pandemic, the Company experienced lower redemptions of its gift cards for all periods of outstanding activated cards compared to pre-pandemic redemption patterns (fiscal 2019 and earlier), which impacts the gift card breakage rate.

The Company does not believe that the redemption pattern experienced during the pandemic reflects the pattern in the future and has adjusted the historical redemption data used to calculate the breakage rate.

9 unchanged sentences

The Company assesses the redemption rates of its certifications on a quarterly basis to update the rate at which loyalty program points turn into certifications and the rate that certifications are redeemed.

In regard to the consolidated balance sheet, contract liabilities related to the loyalty program are classified as deferred revenue and other.

The Company classifies contract liabilities related to the loyalty program as deferred revenue and other on the consolidated balance sheet.

The Company’s commercial segment includes transactions with other businesses and is mainly comprised of licensing the Company’s intellectual properties for third -party use and wholesale sales of merchandise, including supplies and fixtures.

12 unchanged sentences

Additionally, the Company amortizes these capitalized costs into expense in the same pattern as the development fee's recording of revenue as described previously.

These capitalized costs for the thirteen and twenty-six weeks ended August 2, 2025 are not material to the financial statements.

These capitalized costs for the thirteen and thirty-nine weeks ended November 1, 2025 are not material to the financial statements.

The Company reserves for “expected” credit losses on financial instruments and other commitments to extend credit rather than the “incurred loss” model.

These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions and reasonable and supportable forecasts.

For the twenty-six weeks ended August 2, 2025 and August 3, 2024 , the Company's accounts receivable are net of $ 6.9 million and $ 6.5 million, inclusive of the allowance for credit losses and the reserve for the UK's customs authority "HMRC" matter of $ 3.6 million and $ 3.1 million, respectively.

For the thirty-nine weeks ended November 1, 2025 and November 2, 2024 , the Company's accounts receivable are net of $ 7.1 million and $ 6.8 million, inclusive of the allowance for credit losses and the reserve for the UK's customs authority "HMRC" matter of $ 3.6 million and $ 3.4 million, respectively.

See Note 12 for further discussion of the HMRC matter.

7 unchanged sentences

Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.

The table below presents certain information related to the lease costs for operating leases for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 (in thousands).

The table below presents certain information related to the lease costs for operating leases for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 (in thousands).

Thirteen weeks ended

Twenty-six weeks ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Thirty-nine weeks ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

Operating lease costs

7 unchanged sentences

Other information

The table below presents supplemental cash flow information related to leases for the thirteen and twenty-six weeks ended August 2, 2025 and August 3, 2024 (in thousands).

The table below presents supplemental cash flow information related to leases for the thirteen and thirty-nine weeks ended November 1, 2025 and November 2, 2024 (in thousands).

Thirteen weeks ended

Twenty-six weeks ended

August 2, 2025

August 3, 2024

August 2, 2025

August 3, 2024

Thirty-nine weeks ended

November 1, 2025

November 2, 2024

November 1, 2025

November 2, 2024

Operating cash flows for operating leases

$ 11,098 $ 10,737 $ 31,946 $ 30,852

As of August 2, 2025 and August 3, 2024 , the weighted-average remaining operating lease term was 6.1 years and 5.6 years, respectively, and the weighted-average discount rate was 7.1 % and 7.2 %, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets.

The value of our operating lease asset was $ 101.0 million and $ 94.2 million as of August 2, 2025 and August 3, 2024 , respectively.

As of November 1, 2025 and November 2, 2024 , the weighted-average remaining operating lease term was 6.1 years and 5.7 years, respectively, and the weighted-average discount rate was 7.0 % and 7.2 %, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets.

The value of our operating lease asset was $ 111.7 million and $ 91.3 million as of November 1, 2025 and November 2, 2024 , respectively.

The increase was driven by the Company entering into leases for new stores as well as securing longer-term extensions for existing stores resulting in contracts with more favorable terms.

For the thirteen and twenty-six weeks ended August 2, 2025 and the thirteen and twenty-six weeks ended August 3, 2024 the Company incurred no impairment charges against its right-of-use operating lease assets.

For the thirteen and thirty-nine weeks ended November 1, 2025 and the thirteen and thirty-nine weeks ended November 2, 2024 the Company incurred no impairment charges against its right-of-use operating lease assets.

Undiscounted cash flows

6 unchanged sentences

Long-term lease obligations

As of August 2, 2025 , the Company had additional executed leases that had not yet commenced with operating lease liab ilities of $ 32.8 millio n.

These leases are expected to commence in fiscal 2025 and fiscal 2026 with lease terms of ten to twenty years.

Prepaid expenses and other current assets consist of the following (in thousands):

3 unchanged sentences

105 1,248 1,209

Prepaid gift card fees

Prepaid royalties

Prepaid taxes (2)

253 1,512 579

Prepaid gift card fees

Prepaid royalties

7,550 6,467 6,784

15 unchanged sentences

$ 15,687 $ 13,268 $ 15,310

Current income taxes payable

Sales and value added taxes payable

1,962 1,359 2,043

Current income taxes payable

510 580 1,869

Accrued rent and related expenses (1)

5 unchanged sentences

Stock-based Compensation

On April 14, 2020, the Board of Directors (the “Board”) of Build-A-Bear Workshop, Inc.

(the “Company”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc.

On April 14, 2020, the Company's Board of Directors (the “Board”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc.

2020 Omnibus Incentive Plan (the “2020 Incentive Plan”).

7 unchanged sentences

2017 Omnibus Incentive Plan (the “2017 Plan”) that on or after April 14, 2020, may be forfeited, expire or be settled for cash.

For the thirteen weeks ended August 2, 2025 and August 3, 2024 , selling, general and administrative expense included stock-based compensation expense of $ 0.7 million and $ 0.6 million, respectively.

For the twenty-six weeks ended August 2, 2025 and August 3, 2024 , selling, general, and administrative expense included stock-based compensation expense of $ 1.2 million and $ 1.0 million, respectively.

As of August 2, 2025 , there was $ 6.4 million of total unrecognized compensation expense related to unvested restricted stock awards which is expected to be recognized over a weighted-average period of 2.1 years.

As of February 1, 2025 , and August 2, 2025 , the Company had no outstanding stock options.

The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for the twenty-six weeks ended August 2, 2025 :

For the thirteen weeks ended November 1, 2025 and November 2, 2024 , selling, general and administrative expense included stock-based compensation expense of $ 1.0 million and $ 0.7 million, respectively.

For the thirty-nine weeks ended November 1, 2025 and November 2, 2024 , selling, general, and administrative expense included stock-based compensation expense of $ 2.2 million and $ 1.7 million, respectively.

As of November 1, 2025 , there was $ 6.4 million of total unrecognized compensation expense related to unvested restricted stock awards which is expected to be recognized over a weighted-average period of 1.9 years.

As of November 1, 2025 , and, February 1, 2025 the Company had no outstanding stock options.

The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for the thirty-nine weeks ended November 1, 2025 :

Time-Based Restricted Stock

11 unchanged sentences

Forfeited (1)

Outstanding, August 2, 2025 (1)

Outstanding, November 1, 2025 (1)

84,380 $ 37.71 171,742 $ 32.69

( 1 ) Performance-based restricted stock outstanding, granted, and forfeited are presented at 100% of target.

The total fair value of shares vested during the twenty-six weeks ended August 2, 2025 and August 3, 2024 was $ 2.5 million and $ 2.2 million, respectively.

The outstanding performance shares as of August 2, 2025 consist of the following:

The total fair value of shares vested during the thirty-nine weeks ended November 1, 2025 and November 2, 2024 was $ 2.5 million and $ 2.2 million, respectively.

The outstanding performance shares as of November 1, 2025 consist of the following:

Performance Shares

5 unchanged sentences

2025 - 2027 consolidated revenue growth objectives

Performance shares outstanding, August 2, 2025

On July 4, 2025, the "One Big Beautiful Bill Act" ("OBBB") was signed into law.

Performance shares outstanding, November 1, 2025

On July 4, 2025, the "One Big Beautiful Bill Act" ("OBBBA") was signed into law.

The Company has analyzed the legislation and expects that the OBBBA will have an immaterial impact on our FY25 and FY26 effective tax rate.

The Company is continuing to evaluate the impacts as additional information is provided.

The Company's effective tax rate was 19.3 % and 20.8 % for the thirteen and twenty-six weeks ended August 2, 2025 compared to 24.0 % and 23.8 % for the thirteen and twenty-six weeks ended August 3, 2024 .

The Company's effective tax rate was 24.3 % and 21.6 % for the thirteen and thirty-nine weeks ended November 1, 2025 compared to 24.5 % and 24.1 % for the thirteen and thirty-nine weeks ended November 2, 2024 .

The fiscal 2025 effective tax rate differed from the statutory rate of 21 % primarily due to state income tax expense offset by the tax impact of equity awards vesting, the foreign-derived intangible income deduction and discrete benefits related to settlement of a prior period tax position.

The fiscal 2024 effective tax rate differed from the statutory rate of 21 % primarily due to state income tax expense partially offset by the tax impact of equity awards vesting.

In addition, in the second quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

In addition, in the third quarter of fiscal 2025 and 2024, the Company remains in a full valuation allowance in certain foreign jurisdictions.

Stockholders’ Equity

The following table sets forth the changes in stockholders’ equity (in thousands) for the thirteen weeks ended August 2, 2025 and August 3, 2024 (in thousands):

For the thirteen weeks ended August 2, 2025

For the thirteen weeks ended August 3, 2024

The following table sets forth the changes in stockholders’ equity (in thousands) for the thirteen weeks ended November 1, 2025 and November 2, 2024 (in thousands):

For the thirteen weeks ended November 1, 2025

For the thirteen weeks ended November 2, 2024

Balance, beginning

13 unchanged sentences

( 2 ) Accumulated other comprehensive loss (“AOCI”)

The following table sets forth the changes in stockholders’ equity (in thousands) for the twenty-six weeks ended August 2, 2025 and August 3, 2024 (in thousands):

For the twenty-six weeks ended August 2, 2025

For the twenty-six weeks ended August 3, 2024

The following table sets forth the changes in stockholders’ equity (in thousands) for the thirty-nine weeks ended November 1, 2025 and November 2, 2024 (in thousands):

For the thirty-nine weeks ended November 1, 2025

For the thirty-nine weeks ended November 2, 2024

Balance, beginning

18 unchanged sentences

( 2 ) Accumulated other comprehensive loss (“AOCI”)

During the thirteen and twenty-six weeks ended August 2, 2025 , the Company utilized $ 3.1 million in cash to repurchase 59,083 shares and utilized $ 7.3 million in cash to repurchase 167,585 shares, respectively, under its $ 100 million dollar stock repurchase program that was authorized by the Board of Directors on September 11, 2024 ( the "September 2024 Stock Repurchase Program").

Between the end of the second fiscal quarter of 2025 and September 8, 2025, the Company utilized an additional $ 1.9 million in cash to repurchase 34,949 under the September 2024 Stock Repurchase Program, leaving the aggregate $ 80.0 million available for future repurchases under that plan.

For the thirteen and twenty-six weeks ended August 2, 2025 , the Company's Board of Directors authorized cash dividends to shareholders of $ 2.9 million and $ 5.8 million, respectively.

During the thirteen and twenty-six weeks ended August 3, 2024 , the Company utilized $ 9.1 million in cash to repurchase 341,621 shares and utilized $ 18.2 million in cash to repurchase 685,027 shares, respectively, under its prior $ 50.0 million program authorized by its Board of Directors on August 31, 2022 ( the "August 2022 Stock Repurchase Program").

For the thirteen and twenty-six weeks ended August 3, 2024, the Company's Board of Directors authorized cash dividends to shareholders of $ 2.7 million and $ 5.6 million, respectively.

During the thirteen and thirty-nine weeks ended November 1, 2025 , the Company utilized $ 10.1 million in cash to repurchase 168,456 shares and utilized $ 17.4 million in cash to repurchase 336,041 shares, respectively, under its $ 100 million dollar stock repurchase program that was authorized by the Board on September 11, 2024 ( the "September 2024 Stock Repurchase Program").

Between the end of the third fiscal quarter of 2025 and December 8, 2025, the Company utilized an additiona l $ 2.4 million in cash to repurchase 46,831 under the September 2024 Stock Repurchase Program, leaving the aggregate $ 71.8 million available for future repurchases under that plan.

For the thirteen and thirty-nine weeks ended November 1, 2025 , the Board authorized cash dividends to shareholders of $ 2.9 million and $ 8.7 million, respectively.

Additionally, on November 12, 2025, the Board declared a quarterly cash dividend of $ 0.22 per share on the issued and outstanding common stock of the company.

The dividend will be paid on January 8, 2026, to all stockholders of record as of November 26, 2025.

During the thirteen and thirty-nine weeks ended November 2, 2024 , the Company utilized $ 4.8 million in cash to repurchase 147,917 shares and utilized $ 23.0 million in cash to repurchase 832,944 shares, respectively.

During that quarter, the Company repurchased shares under two separate stock repurchase programs.

For the thirteen weeks ending November 2, 2024, the company repurchased 73,274 shares utilizing $ 2.0 million in ash under the Company's $ 50.0 million program authorized by its Board of Directors on August 31, 2022 ( the "August 2022 Stock Repurchase Program").

For the thirteen and thirty-nine weeks ended November 2, 2024, the company utilized $ 2.8 million in cash to repurchase 74,643 shares under the September 2024 Stock Repurchase Program.

For the thirteen and thirty-nine weeks ended November 2, 2024, the Company's Board of Directors authorized cash dividends to shareholders of $ 2.7 million and $ 8.3 million, respectively.

Income per Share

1 unchanged sentence

Thirteen weeks ended

Twenty-six weeks ended

Thirty-nine weeks ended

$ 8,122 $ 9,870 $ 35,808 $ 30,107

9 unchanged sentences

$ 0.62 $ 0.73 $ 2.73 $ 2.20

In calculating the diluted income per share for the thirteen and twenty-six weeks ended August 2, 2025 , respectively, there were 28,036 and 14,018 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect.

For the thirteen and twenty-six weeks ended August 3, 2024 , respectively, there were 36,689 and 28,989 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect.

In calculating the diluted income per share for the thirteen and thirty-nine weeks ended November 1, 2025 , respectively, there were no and 23,753 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect.

For the thirteen and thirty-nine weeks ended November 2, 2024 , respectively, there were 1,141 and 29,288 shares of common stock that were outstanding at the end of the period that were not included in the computation of diluted income per share due to their anti-dilutive effect.

Comprehensive Income

The difference between comprehensive income or loss and net income or loss is the result of foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency is not the U.S.

The accumulated other comprehensive loss balance on August 2, 2025 and August 3, 2024 was comprised entirely of foreign currency translation.

For the thirteen weeks ended August 2, 2025 and August 3, 2024 , the Company had no reclassifications out of accumulated other comprehensive loss.

The accumulated other comprehensive loss balance on November 1, 2025 and November 2, 2024 was comprised entirely of foreign currency translation.

For the thirteen weeks ended November 1, 2025 and November 2, 2024 , the Company had no reclassifications out of accumulated other comprehensive loss.

Segment Information

9 unchanged sentences

International

Thirteen weeks ended August 2, 2025

Thirteen weeks ended November 1, 2025

Total Revenue

10 unchanged sentences

Income before income taxes

Thirteen weeks ended August 3, 2024

Thirteen weeks ended November 2, 2024

Total Revenue

10 unchanged sentences

Income before income taxes

Twenty-six weeks ended August 2, 2025

Thirty-nine weeks ended November 1, 2025

Total Revenue

10 unchanged sentences

Income before income taxes

Twenty-six weeks ended August 3, 2024

Thirty-nine weeks ended November 2, 2024

Total Revenue

13 unchanged sentences

International

Thirteen weeks ended August 2, 2025

Thirteen weeks ended November 1, 2025

Depreciation and amortization

2 unchanged sentences

5,191 - 1,353 6,544

Thirteen weeks ended August 3, 2024

Thirteen weeks ended November 2, 2024

Depreciation and amortization

2 unchanged sentences

2,618 - - 1,253 3,871

Twenty-six weeks ended August 2, 2025

Thirty-nine weeks ended November 1, 2025

221,198 14,364 1,976 88,961 $ 326,499

3 unchanged sentences

9,211 - - 3,660 12,871

Twenty-six weeks ended August 3, 2024

Thirty-nine weeks ended November 2, 2024

$ 197,080 $ 11,405 $ 2,767 $ 74,611 $ 285,862

7 unchanged sentences

The following schedule is a summary of the Company’s sales to external customers and long-lived assets by geographic area (in thousands):

Thirteen weeks ended August 2, 2025

Thirteen weeks ended November 1, 2025

Net sales to external customers

$ 102,690 $ 18,143 $ 1,846 $ 122,679

Thirteen weeks ended August 3, 2024

Thirteen weeks ended November 2, 2024

Net sales to external customers

$ 100,835 $ 16,080 $ 2,515 $ 119,430

Twenty-six weeks ended August 2, 2025

Thirty-nine weeks ended November 1, 2025

Net sales to external customers

2 unchanged sentences

57,587 4,700 62,287

Twenty-six weeks ended August 3, 2024

Thirty-nine weeks ended November 2, 2024

Net sales to external customers

22 unchanged sentences

The Company maintains a provision against the related receivable, based on a current evaluation of collectability, using the latest facts available in the dispute.

As of August 2, 2025 , the Company had a gross receivable balance of $ 5.1 million and a reserve of $ 3.6 million, leaving a net receivable of $ 1.5 million.

As of November 1, 2025 , the Company had a gross receivable balance of $ 4.6 million and a reserve of $ 3.6 million, leaving a net receivable of $ 1.0 million.

The Company believes that the outcome of this dispute will not have a material adverse impact on the results of operations, liquidity, or financial position of the Company.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements