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Item 1. Financial Statements

2021-04-01 compared with 2009-08-21 · 457 added, 926 removed, 122 unchanged (92% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED FEBRUARY 28, 2009 (RESTATED) AND MARCH 1, 2008 UNAUDITED

FOR THE PERIODS ENDED FEBRUARY 27, 2021 AND FEBRUARY 29, 2020 –

(In thousands)

1 unchanged sentence

February 27, 2021

March 1, 2008

February 29, 2020

Operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

$ 4,011  

$ 1,210  

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

Equity in undistributed income of investments and unconsolidated affiliated companies

Provision for losses on accounts and notes receivable

Provision for lease and loan guarantees

Other than temporary impairment of investments

Realized income from investments

Gain on lease modification

( 20 )  

Gain on sale of property and equipment

Deferred income taxes

Payment to terminate lease

Changes in operating assets and liabilities:

Accounts receivable

( 2,380 )  

( 8,050 )  

Other current assets

Accounts payable and accrued liabilities

Net cash used in operating activities

( 768 )  

Right of use assets under operating leases

Customer deposits

Accounts payable and other liabilities

Obligations under operating leases

( 7,072 )  

Net cash provided by (used in) operating activities

Investing activities:

Purchases of property and equipment

Purchases of retail real estate

( 895 )  

Proceeds from sales of property and equipment

Acquisition of retail licensee stores, net of cash acquired

Proceeds from sales of investments

Purchases of investments

Dividends from an affiliate

Net cash received on licensee notes

Net cash provided by investing activities

( 302 )  

Net cash used in investing activities

( 1,189 )  

Financing activities:

Net borrowings (repayments) under revolving credit facility

Repayments of real estate notes payable

Issuance of common stock

Repurchases of common stock

Cash dividends

Net cash provided by / (used in) financing activities

( 3,718 )  

Other issuance of common stock

Repurchases of common stock

( 534 )  

Taxes paid related to net share settlement of equity awards

( 219 )  

Repayments of finance lease obligations

( 173 )  

Net cash used in financing activities

( 4,561 )  

Change in cash and cash equivalents

( 766 )  

Cash and cash equivalents - beginning of period

45,799  

19,687  

Cash and cash equivalents - end of period

The accompanying notes to condensed consolidated financial statements are an integral part of the

condensed consolidated financial statements.

$ 45,033  

$ 12,189  

The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the

instructions to Form 10-Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

In our opinion, all adjustments considered necessary for a

fair presentation have been included.

The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated

(Bassett, we, our, the Company) and our majority owned subsidiaries of which we have operating control.

The equity method of accounting is used for our investments in affiliated companies in which we

exercise significant influence but do not maintain control, unless consolidated pursuant to Financial Accounting Standards Board (FASB) Revised Interpretation No.

46 Consolidation of Variable Interest Entities

For comparative purposes, certain amounts in the 2008 financial statements have been reclassified to conform to the 2009

presentation.

Due to our fiscal calendar, our first quarter of 2008 consisted of 14 weeks as compared to 13 weeks for the first quarter of 2009.

Restatement of Previously Reported Results

the first quarter of 2009, the Staff of the Securities and Exchange Commission (the SEC) began its triennial review of our Form 10-K for the year ended November 29, 2008 and subsequently our Form 10-Q for the quarter ended

FEBRUARY 27, 2021

Three primary issues were identified by the SEC as a result of their review.

These included our initial valuation of notes receivable issued to our licensees (primarily for amounts converted from past due accounts receivable

due from them), our methodology for determining reserves for our accounts receivable, notes receivable, and loan guarantees, and our classification of our revolving debt as current or long-term.

As a result of the SECs comments, we began a review of the accounting policies and processes in the areas previously mentioned.

Consequently, we determined that we

should have recorded lower values for certain of our notes receivable upon inception and, subsequently, recorded additional reserves on those notes due to an error in how we determined an appropriate market rate of interest for those notes.

addition, we also concluded that we should have recognized revenue for certain customers on a cost recovery basis for shipments beginning in the first quarter of 2009 and that additional reserves for loan guarantees should be established.

we recorded an additional $3,280 of net charges in the quarter ended February 28, 2009 to account for these lower note values, increased reserves and reduced revenue.

Of the amount recorded, $1,936 related to periods prior to the quarter ended

February 28, 2009.

However, based on our consideration of the underlying quantitative and qualitative factors surrounding the prior period errors, the effects on the previous annual and interim periods were determined to be immaterial and,

therefore, prior periods have not been restated.

As a result, our net loss increased $3,280 to $11,963 and net loss per share increased $0.29 per share to

$1.05 per share.

The recognition of this additional expense and reduced revenue caused us to violate the net worth covenant contained in our revolving credit facility for the quarter ended February 28, 2009.

As such, we have reclassified our

debt under the revolving credit facility from long-term to current and have provided expanded disclosures around our liquidity.

The following consolidated statements of operations and retained earnings, consolidated balance sheet, and consolidated

statement of cash flows reconcile the previously reported and restated information.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Consolidated Statements of Operations and Retained Earnings (Restated)

for the quarter ended February 28, 2009

For the Quarter Ended February 28, 2009

As previously

Cost of sales

Selling, general and administrative expenses

Income (loss) from operations

Other income (loss), net

Income (loss) before income taxes

Income tax provision

Net income (loss)

Retained earnings-beginning of period

Cumulative effect of change in accounting principleAdoption of FIN 48

Cash dividends

Retained earnings-end of period

Basic earnings (loss) per share

Diluted earnings (loss) per share

Dividends per share

Represents revenue and cost of sales reversed for shipments that do not meet the requirement for revenue recognition at the time of shipment.

Represents additional bad debt and notes receivable valuation charges.

Represents additional loan guarantee charges.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10 -Q and do not include all of the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements.

In our opinion, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

References to “ASC”

included hereinafter refer to the Accounting Standards Codification established by the Financial Accounting Standards Board (“FASB”) as the source of authoritative GAAP.

The condensed consolidated financial statements include the accounts of Bassett Furniture Industries, Incorporated (“Bassett”, “we”, “our”, or the “Company”) and our wholly-owned subsidiaries of which we have a controlling interest.

In accordance with ASC Topic 810, we have evaluated our licensees and certain other entities to determine whether they are variable interest entities (“VIEs”) of which we are the primary beneficiary and thus would require consolidation in our financial statements.

To date we have concluded that none of our licensees nor any other of our counterparties represent VIEs.

Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of income net of estimates for returns and allowances.

Revenues from logistical services are generated by our wholly-owned subsidiary, Zenith Freight Lines, LLC (“Zenith”).

Sales of logistical services from Zenith to our wholesale and retail segments have been eliminated in consolidation, and Zenith’s operating costs and expenses are included in selling, general and administrative expenses in our condensed consolidated statements of income.

Recently Adopted Accounting Pronouncements

Effective as of the beginning of fiscal 2021, we have adopted Accounting Standards Update No.

2016 - 13, Financial Instruments –

Credit Losses (Topic 326 ):

Measurement of Credit Losses on Financial Instruments (“ASU 2016 - 13”

The guidance in ASU 2016 - 13 replaces the incurred loss impairment methodology under previous GAAP.

The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments.

We determined that the guidance in ASU 2016 - 13 applied to our trade receivables and contract assets, and that there was no material impact to our financial condition or results of operations as a result of the adoption.

Effective as of the beginning of fiscal 2021, we have adopted Accounting Standards Update No.

2018 - 15, Accounting Standards Update No.

2018 - 15 –

Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350 - 40 ):

Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license.

The amendments in ASU 2018 - 15 align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license).

The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in ASU 2018 - 15.

We adopted ASU 2018 - 15 on a prospective basis and the adoption did not have a material impact upon our financial position or results of operations.

Impact of the COVID- 19 Pandemic Upon our Financial Condition and Results of Operations

On March 11, 2020, the World Health Organization declared the current coronavirus (“COVID- 19”

) outbreak to be a global pandemic.

In response to this declaration and the rapid spread of COVID- 19 within the United States, federal, state and local governments throughout the country imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.

These measures had a significant adverse impact upon many sectors of the economy, including non-essential retail commerce, beginning in our second fiscal quarter of 2020.

Therefore, our results of operations for the quarter ended February 29, 2020 were not impacted by COVID- 19.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

Consolidated Balance Sheet (Restated)

as of February 28, 2009

As of February 28, 2009

As previously

Current assets

Cash and cash equivalents

Accounts receivable, net

Other current assets

Total current assets

Property and equipment

Less accumulated depreciation

Property and equipment, net

Retail real estate

Notes receivable, net

Liabilities and Stockholders Equity

Current liabilities

Accounts payable

Accrued compensation and benefits

Customer deposits

Dividends payable

Other accrued liabilities

Current portion of real estate notes payable

Total current liabilities

Long-term liabilities

Post employment benefit obligations

Real estate notes payable

Distributions in excess of affiliate earnings

Other long-term liabilities

Commitments and Contingencies

Stockholders equity

Retained earnings

Additional paid-in-capital

Accumulated other comprehensive loss

Total stockholders equity

Total liabilities and stockholders equity

Represents reclassification of reserves to notes receivable, net and loan guarantee reserves (Other long-term liabilities) and reduction of accounts receivable due to revenue

recognition reversals.

Represents additional bad debt and note discount reserves.

Represents reclassification of debt from long-term to current.

Represents additional reserves for loan guarantees.

Represents total additional charges for bad debt, notes receivable valuation and loan guarantee reserves.

During fiscal 2020, in response to the restrictive measures imposed by governmental authorities and for the protection of our employees and customers, we temporarily closed our dedicated stores, our manufacturing locations and many of our warehouses for several weeks primarily during the second fiscal quarter.

This extended period of suspended operations had a material adverse impact upon our results of operations during the second fiscal quarter and resulted in a significant net loss for the year ended November 28, 2020.

However, since restarting our manufacturing operations and reopening stores, we have seen a significant improvement in business conditions which allowed us to return to overall profitability for the third and fourth fiscal quarters of 2020 continuing into the first quarter of fiscal 2021.

Tempering these improvements are the continuing logistical challenges faced by the entire home furnishings industry resulting from COVID-related labor shortages and supply chain disruptions creating significant delays in order fulfillment and increasing backlogs.

Whereas most state and local governments have eased restrictions on commercial retail activity and mass vaccination programs in the U.S.

are underway, it is nevertheless possible that a resurgence in COVID- 19 cases could prompt a return to tighter restrictions in certain areas of the country.

Furthermore, while the home furnishings industry has fared much better during the pandemic than certain other sectors of the economy, continued economic weakness may eventually have an adverse impact upon our business, and order cancellations could result if the present delays in order fulfillment continue for an extended period of time.

Therefore, significant uncertainty remains regarding the ongoing impact of the COVID- 19 outbreak upon our financial condition and future results of operations, as well as upon the significant estimates and assumptions we utilize in reporting certain assets and liabilities.

Interim Financial Presentation

All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The results of operations for the three months ended February 27, 2021 are not necessarily indicative of results for the full fiscal year.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10 -K for the year ended November 28, 2020.

We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income and use that effective tax rate to record our year-to-date income tax provision. 

Any change in annual projections of pretax income could have a significant impact on our effective tax rate for the respective quarter.

Our effective tax rates for the quarters ended February 27, 2021 and February 29, 2020 of 29.4 % and 34.5 %, respectively, differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences, including tax deficiencies of $ 135 and $ 114 during the quarters ended February 27, 2021 and February 29, 2020, respectively, arising from stock-based compensation.

Financial Instruments and Fair Value Measurements

Financial Instruments

Our financial instruments include cash and cash equivalents, short-term investments in certificates of deposit (CDs), accounts receivable, and accounts payable.

Because of their short maturities, the carrying amounts of cash and cash equivalents, short-term investments in CDs, accounts receivable, and accounts payable approximate fair value.

Our short-term investments of $ 17,715 at February 27, 2021 and November 28, 2020 consisted of CDs.

At February 27, 2021, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.05 % to 1.20 %.

At February 27, 2021, the weighted average remaining time to maturity of the CDs was approximately five months and the weighted average yield of the CDs was approximately 0.12 %.

Each CD is placed with a federally insured financial institution and all deposits are within federal deposit insurance limits.

Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at February 27, 2021 and November 28, 2020 approximates their fair value.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

Consolidated Statements of Cash Flows (Restated)

for the quarter ended February 28, 2009

For the Quarter ended February 28, 2009

As previously

Operating activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

Equity in undistributed income of investments and unconsolidated affiliated companies

Provision for losses on accounts and notes receivable

Provision for lease and loan guarantees

Other than temporary impairment of investments

Realized income from investments

Deferred income taxes

Payment to terminate lease

Changes in operating assets and liabilities

Fair Value Measurement

The Company accounts for items measured at fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures .

ASC 820’s valuation techniques are based on observable and unobservable inputs.

Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.

ASC 820 classifies these inputs into the following hierarchy:

Level 1 Inputs –

Quoted prices for identical instruments in active markets.

Level 2 Inputs –

Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs –

Instruments with primarily unobservable value drivers.

We believe that the carrying amounts of our current assets and current liabilities approximate fair value due to the short-term nature of these items.

Our primary non-recurring fair value estimates typically involve business acquisitions or the impairment of long-lived assets which involve a combination of Level 2 and Level 3 inputs.

Accounts Receivable

Other current assets

Accounts payable and accrued liabilities

Net cash used in operating activities

Investing activities:

Purchases of property and equipment

Purchases of retail real estate

Proceeds from sales of property and equipment

Acquisition of retail licensee stores, net of cash acquired

Proceeds from sales of investments

Purchases of investments

Dividends from an affiliate

Net cash received on licensee notes

Net cash provided by investing activities

Financing activities:

Net borrowings (repayments) under revolving credit facility

Repayments of real estate notes payable

Issuance of common stock

Repurchases of common stock

Cash dividends

Net cash provided by / (used in) financing activities

Change in cash and cash equivalents

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Represents the increase in the net loss as a result of the restatement.

Represents additional bad debt and notes receivable valuation charges.

Represents total amount of charges recorded for loan and lease guarantee reserves.

Represents reclass of initial charge for loan and lease guarantee reserves which were previously recorded in other, net.

Represents net reduction to accounts receivable for revenue reversal adjustment.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Interim Financial Presentation

All intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The results of operations for the quarter ended February 28, 2009, as restated, are not

necessarily indicative of results for the fiscal year.

These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form

10-K for the year ended November 29, 2008.

We calculate an anticipated effective tax rate for the year based on our annual estimates of pretax income

or loss and use that effective tax rate to record our year-to-date income tax provision.

Any change in annual projections of pretax income or loss could have a significant impact on our effective tax rate for the respective quarter.

fourth quarter of 2008, we recorded a $23,383 charge to establish a valuation allowance against substantially all of our deferred tax assets as we were in a cumulative loss position for the past three years, which is considered significant negative

evidence as to whether our deferred tax assets will be realized.

Since we reported losses in the quarter and remained in this cumulative loss position, we recorded no tax benefits on the losses generated for the quarter ended February 28, 2009.

The tax provision for the quarter ended February 28, 2009 represents the accrual of income taxes to be paid in certain states and the accrual of penalties and interest associated with certain unrecognized tax benefits.

Revenue Recognition

Revenue is recognized when the risks and

rewards of ownership and title to the product have transferred to the buyer.

This occurs upon the shipment of goods to independent dealers or, in the case of Company-owned retail stores, upon delivery to the customer.

Staff Accounting Bulletin No.

Revenue Recognition (SAB 104) outlines the four basic criteria for recognizing revenue as follows:

(1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sellers price to the buyer is fixed or determinable, and (4) collectibility is reasonably assured.

further asserts that if collectibility of all or a portion of the revenue is not reasonably assured, revenue recognition should be deferred until payment is received.

In our judgment, collectibility is not reasonably assured when the decision has

been made to exit a dealer.

Currently, there are 6 dealers where revenue is being recognized on a cost recovery basis.

This resulted in a deferral of revenue and cost of $2,789 and $1,952, respectively, for the quarter ended February 28, 2009.

There were no such dealers that met the criteria for revenue deferral during the quarter ended March 1, 2008.

Inventories are valued at the lower of cost or market.

Cost is determined for domestic furniture inventories using the last-in, first-out (LIFO) method.

The costs for

imported inventories are determined using the first-in, first-out (FIFO) method.

Accounts receivable consists of the following:

Gross accounts receivable

$ 25,914  

$ 23,551  

Allowance for doubtful accounts

( 1,194 )  

Accounts receivable, net

$ 24,720  

$ 22,340  

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.

The allowance for doubtful accounts is based on a review of specifically identified accounts in addition to an overall aging analysis which is applied to accounts pooled on the basis of similar risk characteristics.

Judgments are made with respect to the collectibility of accounts receivable within each pool based on historical experience, current payment practices and current economic trends based on our expectations over the expected life of the receivables, which is generally ninety days or less.

Actual credit losses could differ from those estimates.

Activity in the allowance for doubtful accounts for the three months ended February 27, 2021 was as follows:

Balance at November 28, 2020

$ 1,211  

Additions charged to expense

Write-offs against allowance

Balance at February 27, 2021

$ 1,194  

We believe that the carrying value of our net accounts receivable approximates fair value.

The inputs into these fair value estimates reflect our market assumptions and are not observable.

Consequently, the inputs are considered to be Level 3 as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurements and Disclosures .

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

Domestic furniture inventories are valued at the lower of cost, which is determined using the last-in, first -out (LIFO) method, or market.

Imported inventories and those applicable to our Lane Venture and Bassett Outdoor lines are valued at the lower of cost, which is determined using the first -in, first -out (FIFO) method, or net realizable value.

Inventories were comprised of the following:

February 28, 2009

November 29, 2008

Finished goods

Wholesale finished goods

$ 29,620  

$ 25,001  

Work in process

Raw materials and supplies

17,188  

14,836  

Retail merchandise

Total inventories at FIFO

29,040  

27,946  

Total inventories on first-in, first-out method

76,498  

68,299  

LIFO adjustment

( 9,084 )  

Reserve for excess and obsolete inventory

We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and

historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO.

( 4,478 )  

$ 62,936  

$ 54,886  

We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO.

The need for these reserves is primarily driven by the normal product life cycle.

As products mature and sales volumes decline, we

rationalize our product offerings to respond to consumer tastes and keep our product lines fresh.

As products mature and sales volumes decline, we rationalize our product offerings to respond to consumer tastes and keep our product lines fresh.

If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

determining reserves, we calculate separate reserves on our wholesale and retail inventories.

Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution

In determining reserves, we calculate separate reserves on our wholesale and retail inventories.

Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution model.

These wholesale reserves primarily represent design and/or style obsolescence.

Typically, product is only shipped to our retail warehouses when a consumer has ordered and paid a deposit for the product.

We do not typically hold inventory for

stock purposes.

Consequently, floor sample inventory and inventory for delivery to customers accounts for the majority of our inventory at retail.

Retail reserves are based on accessory and clearance floor sample inventory in our stores and any

inventory that is not associated with a specific customer order in our retail warehouses.

Activity in the reserves for excess quantities and obsolete

inventory by segment are as follows:

November 29, 2008

Additions Charged

February 28, 2009

Typically, product is not shipped to our retail warehouses until a consumer has ordered and paid a deposit for the product.

We do not typically hold retail inventory for stock purposes.

Consequently, floor sample inventory and inventory for delivery to customers account for the majority of our inventory at retail.

Retail reserves are based on accessory and clearance floor sample inventory in our stores and any inventory that is not associated with a specific customer order in our retail warehouses.

Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:

Retail Segment

Balance at November 28, 2020

$ 3,421  

$ 1,101  

$ 4,522  

Additions charged to expense

( 364 )  

( 275 )  

Balance at February 27, 2021

$ 3,366  

$ 1,112  

$ 4,478  

Our estimates and assumptions have been reasonably accurate in the past.

We have not made any significant changes

to our methodology for determining inventory reserves during the quarter ended February 28, 2009 and do not anticipate that our methodology is reasonably likely to change in the future.

A plus or minus 10% change in our inventory reserves would

not have been material to our financial statements for the periods presented.

We have not made any significant changes to our methodology for determining inventory reserves in 2021 and do not anticipate that our methodology is likely to change in the future.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

Notes Receivable

Our notes receivable consist of the following:

Goodwill and Other Intangible Assets

Goodwill and other intangible assets consisted of the following:

February 27, 2021

Intangibles subject to amortization

Customer relationships

$ 3,550  

$ ( 1,411 )  

$ 2,139  

Technology - customized applications

( 725 )  

Total intangible assets subject to amortization

$ 4,384  

$ ( 2,136 )  

Intangibles not subject to amortization:

12,146  

Total goodwill and other intangible assets

$ 23,732  

November 28, 2020

Notes receivable

Allowance for doubtful accounts

Discounts on notes receivable

Notes receivable, net

current portion of notes receivable

Long term notes receivable

Our notes receivable, which bear interest at rates ranging from 8.25% to 2%, consist primarily of amounts due from

our licensees from loans made by the Company to help licensees fund their operations.

67% and 65% of our notes receivable represent conversions of past due accounts receivable at February 28, 2009 and November 29, 2008, respectively.

the inception of the note receivable, and in accordance with the provisions of Accounting Principles Board Opinion No.

21, Interest on Receivables and Payables, we determine whether the note bears a market rate of interest.

A discount on

the note is recorded if we determine that the note bears an interest rate below the market rate.

We amortize the related note discount over the contractual term of the note and cease amortizing the discount to interest income when the present value

of expected future cash flows is less than the carrying value of the note.

We recorded $189 and $206 in total interest income on these notes for the quarters ended February 28, 2009 and March 1, 2008, respectively, which is included in

other income (loss), net.

As part of the improvement plans with one of our licensees, we converted $1,100 of past due trade accounts receivable and

refinanced an existing note with a remaining balance of $224 into a $1,324 long-term note bearing interest at 4.75% during the quarter ended February 28, 2009.

This note requires interest only payments through 2011 and interest and principal

payments due monthly through its maturity on December 31, 2016.

The initial carrying value of the note is determined using present value techniques which consider the fair market rate of interest based on the licensees risk profile and

estimated cash flows to be received.

We considered the stated interest rate to be below market due to the overall lack of availability of credit in the financial markets.

Consequently, we discounted the estimated cash flows at a 19.5% discount rate

which resulted in an initial fair value of $672.

The inputs into this fair value calculation reflect our market assumptions and are not observable.

Consequently, the inputs are considered to be Level III as specified in the fair value hierarchy in

157, Fair Value Measurements (See also Note 14).

On a quarterly basis and in accordance with the provisions of Statement of

Financial Accounting Standards No.

114, Accounting by Creditors for Impairment of a Loanan amendment of FASB Statements No.

5 and 15 (SFAS 114) , we examine these notes for evidence of impairment, considering

factors such as licensee capitalization, projected operating performance, the viability of the market in which the licensee operates and the licensees operating history, including our cash receipts from the licensee, licensee sales and any

underlying collateral.

After considering these factors, should we believe that all or a portion of the expected cash flows attributable to the note receivable will not be received, we record an impairment charge on the note by estimating future cash

flows and discounting them at the effective interest rate.

Any difference between the estimated discounted cash flows and the carrying value of the note is recorded as an increase to the allowance for doubtful accounts.

These notes, as well as our accounts receivable, are secured by the filing of security statements in accordance with the Uniform Commercial Code and/or real estate owned

by the note holder and in some cases, personal guarantees by our licensees.

Intangibles subject to amortization

Customer relationships

$ 3,550  

$ ( 1,346 )  

$ 2,204  

Technology - customized applications

( 695 )  

Total intangible assets subject to amortization

$ 4,384  

$ ( 2,041 )  

Intangibles not subject to amortization:

12,146  

Total goodwill and other intangible assets

$ 23,827  

The carrying amounts of goodwill by reportable segment at both February 27, 2021 and November 28, 2020 are as follows:

$ 9,188  

$ ( 1,971 )  

$ 7,217  

( 1,926 )  

Logistical services

Total goodwill

$ 16,043  

$ ( 3,897 )  

$ 12,146  

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Unconsolidated Affiliated Companies

The International Home Furnishings Center (IHFC) owns and leases out floor space in a showroom facility in High Point, North Carolina.

We owned 46.9% of IHFC at February 28, 2009, and March 1,

2008, and accounted for the investment using the equity method since we do not maintain operating control of IHFC.

Our investment reflects a credit balance of $13,927 and $11,910 at February 28, 2009, and November 29, 2008, respectively,

which is reflected in the liabilities section in the accompanying consolidated balance sheets as distributions in excess of affiliate earnings. Based on current and expected future earnings of IHFC, we believe the market value of this

investment is positive and substantially greater than its negative book value at February 28, 2009.

This negative book value resulted from IHFCs refinancing of its real estate based on the market value of the property and using the

proceeds to pay a special dividend to its owners.

We recorded income and received dividends from IHFC as follows:

Quarter ended

FEBRUARY 27, 2021

March 1, 2008

Income recorded

Dividends received

Summarized unaudited income statement information for IHFC for its first three months of 2009 and 2008,

respectively, is as follows:

Operating income

In addition to our investment in IHFC, we have a 49% ownership interest in Zenith Freight Lines, LLC

(Zenith) and we recorded the following in other income (loss), net in our condensed consolidated statements of operations and retained earnings:

Quarter ended

February 28, 2009

March 1, 2008

Income (loss)

Real Estate Notes Payable and Other Long-Term Debt

Certain of our retail real estate properties have been financed through commercial mortgages with interest rates ranging from 6.73% to 9.18%.

These mortgages are

collateralized by the respective properties with net book values totaling approximately $29,814 and $29,668 at February 28, 2009, and November 29, 2008, respectively.

The current portion of these mortgages, $6,389 and $812 as of

February 28, 2009, and November 29, 2008, respectively, has been included as a current liability in the accompanying condensed consolidated balance sheets.

The long-term portion, $15,573 and $21,346 as of February 28, 2009, and

November 29, 2008, respectively, is presented as real estate notes payable in the condensed consolidated balance sheets.

We currently have $18,000

outstanding on our revolving credit facility which provides for borrowings of up to $45,000 at a variable interest rate of LIBOR plus 1.75% (1.92% on February 28, 2009).

The facility is secured by a pledge of certain marketable securities and

substantially all of our receivables and inventories and matures on November 30, 2010.

It contains, among other provisions, certain defined financial covenants including a minimum level of net worth that requires us to have Tangible Net Worth,

as defined in the credit agreement, of $118,000 as of the quarterly testing dates.

As a result of the impact of the adjustments made as outlined in Note 2, we were no longer in compliance with the Tangible Net Worth covenant which represents an

Event of Default as defined in our credit agreement.

Consequently, our bank has the ability to immediately demand repayment of the loan and we have

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

reclassified the debt to the current liabilities section of our condensed consolidated balance sheet.

During the quarter, our tangible net worth decreased by

$11,931 due primarily to operating losses of $8,601 and both realized and unrealized losses associated with the Alternative Asset Fund and our marketable securities portfolio of $2,369.

This covenant violation also prevents us from making any

additional borrowings under the facility until the covenant is waived and/or amended.

However, had there been no covenant violation, we would have had an additional $8,013 of availability under the facility.

We have begun discussions with our lender to amend the Tangible Net Worth covenant.

We expect to complete these discussions during the third quarter of 2009.

currently believe that we will be successful in obtaining an amendment.

However, should we be unsuccessful, the lender has the ability to accelerate repayment under the facility.

If such liquidity needs were to arise, we would explore other

liquidity options such as negotiating with another lender, sale of our interest in IHFC, sale of existing investment real estate or mortgaging other investment real estate.

Should we be unsuccessful with these and all other potential options in

obtaining the necessary liquidity, this could have a material adverse effect on our operations.

Comprehensive Income

For the quarters ended February 29, 2008, and March 1, 2008, total comprehensive loss was $(11,947) and $(774), respectively.

Changes in accumulated other

comprehensive income (loss) for the quarters ended February 28, 2009, and March 1, 2008 are as follows:

Amortization expense associated with intangible assets during the three months ended February 27, 2021 and February 29, 2020 was as follows:

Quarter Ended

February 28, 2009

March 1, 2008

Balance at beginning of period

Unrealized holding gains (losses)

Amortization associated with SERP Plan

Balance at end of quarter

Licensee Acquisition

Effective December 1, 2008, we acquired the net assets of our licensee stores in Scottsdale and Tucson, Arizona and began operating them as Company-owned stores.

The net assets acquired consisted of inventory of

$613 and leasehold improvements and other assets of $470 and we assumed certain liabilities of $180.

The acquisition was primarily funded through existing accounts receivable from the licensee and did not result in any goodwill or other intangibles.

Our Fredericksburg, Maryland store ceased operations as a licensee-owned store as of the end of January, 2009.

Beginning in February, 2009, this store

began operating as a Company-owned store.

We own the real estate associated with this store.

Contingencies

We are involved in various legal and environmental matters, which arise in the normal course of business.

Although the final outcome of these matters cannot be

determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

We lease land and buildings that are used in the operation of our Company-owned retail stores as well as in the operation of licensee-owned stores.

We had obligations of

$93,301 and $96,773 at February 28, 2009 and November 29, 2008, respectively, for future minimum lease payments under non-cancelable operating leases having remaining terms in excess of one year.

We also have guaranteed certain lease

obligations of licensee operators.

Lease guarantees range from one to ten years.

We were contingently liable under licensee lease obligation guarantees in the amount of $11,147 and $11,605 at February 28, 2009, and November 29, 2008,

respectively.

Intangible asset amortization expense

Estimated future amortization expense for intangible assets that exist at February 27, 2021 is as follows:

Remainder of fiscal 2021

$ 2,248  

Bank Credit Facility

Our bank credit facility provides for a line of credit of up to $ 25,000 .

At February 27, 2021, we had $ 3,181 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,819 .

In addition, we have outstanding standby letters of credit with another bank totaling $ 325 .

The line bears interest at the rate of LIBOR plus 1.9 %, with a fee of 0.25 % charged for the unused portion of the line and is secured by a general lien on our accounts receivable and inventory.

We were in compliance with all covenants under the agreement as of February 27, 2021 and expect to remain in compliance through the end of fiscal 2021.

The credit facility matures on January 31, 2022.

Post Employment Benefit Obligations

Defined Benefit Plans

We have an unfunded Supplemental Retirement Income Plan (the “Supplemental Plan”) that covers one current and certain former executives.

The liability for the Supplemental Plan was $ 8,525 and $ 8,565 as of February 27, 2021 and November 28, 2020, respectively.

We also have the Bassett Furniture Industries, Incorporated Management Savings Plan (the “Management Savings Plan”) which was established in the second quarter of fiscal 2017.

The Management Savings Plan is an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees.

As part of the Management Savings Plan, we have made Long Term Cash Awards (“LTC Awards”) totaling $ 2,000 to certain management employees in the amount of $ 400 each.

The liability for the LTC Awards was $ 1,533 and $ 1,506 as of February 27, 2021 and November 28, 2020, respectively.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

We have also guaranteed loans to certain of our licensees to finance initial inventory packages and other operating

requirements for those stores.

The total contingent liabilities with respect to these loan guarantees as of February 28, 2009, and November 29, 2008, were $6,900 and $7,869, respectively.

In the event of default by an independent dealer under the guaranteed lease or loan, we believe that the risk of loss is mitigated through a combination of options that

include, but are not limited to, arranging for a replacement dealer, liquidating the collateral (primarily inventory), and pursuing payment under the personal guarantees of the independent dealer.

The proceeds of the above options are expected to

cover the estimated amount of our future payments under the guarantee obligations, net of recorded reserves.

The fair value of lease and loan guarantees (an estimate of the cost to the Company to perform on these guarantees) at February 28,

2009, and November 29, 2008, was $2,131 and $2,005, respectively, and are recorded in accrued liabilities in the accompanying condensed consolidated balance sheets.

Post Employment Benefit Obligations

We have an unfunded Supplemental Retirement Income Plan (the

Supplemental Plan) that covers one current and certain former executives.

The liability for this plan was $10,584 and $10,671 as of February 28, 2009 and November 29, 2008, respectively, and is recorded as follows in the

consolidated balance sheets:

FEBRUARY 27, 2021

November 29, 2008

Other accrued liabilities

(Dollars in thousands except share and per share data)

The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets:

Accrued compensation and benefits

Post employment benefit obligations

Total pension liability

Components of net periodic pension costs are as follows:

$ 10,058  

$ 10,071  

Components of net periodic pension costs for our defined benefit plans for the three months ended February 27, 2021 and February 29, 2020 are as follows:

Quarter Ended

February 27, 2021

March 1, 2008

February 29, 2020

Interest cost

Amortization of transition obligation

Amortization of prior service costs

Amortization of loss

Net periodic pension cost

We have an unfunded Deferred Compensation Plan that covers one current and certain former executives and provides

for voluntary deferral of compensation.

The components of net periodic pension cost other than the service cost component are included in other loss, net in our condensed consolidated statements of income.

Deferred Compensation Plans

We have an unfunded deferred compensation plan that covers one current executive and certain former executives and provides for voluntary deferral of compensation.

This plan has been frozen with no additional participants or deferrals permitted.

We recognized expense of $114 for the first quarter of both 2009 and 2008.

Our liability under this plan was $3,323 and $3,347

as of February 28, 2009 and November 29, 2008, respectively, and is reflected in post employment benefit obligations.

Our liability under this plan was $ 1,664 and $ 1,677 as of February 27, 2021 and November 28, 2020, respectively.

We also have an unfunded, nonqualified deferred compensation plan maintained for the benefit of certain highly compensated or management level employees which was established under the Management Savings Plan.

Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $ 1,533 and $ 1,250 as of February 27, 2021 and November 28, 2020, respectively.

Our combined liability for all deferred compensation arrangements, including Company contributions and participant deferrals under the Management Savings Plan, is recorded as follows in the condensed consolidated balance sheets:

February 27, 2021

November 28, 2020

Accrued compensation and benefits

Post employment benefit obligations

Total deferred compensation liability

$ 3,197  

$ 2,927  

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

We recognized expense under our deferred compensation arrangements during the three months ended February 27, 2021 and February 29, 2020 as follows:

Quarter Ended

February 27, 2021

February 29, 2020

Deferred compensation expense

Commitments and Contingencies

We are involved in various legal and environmental matters, which arise in the normal course of business.

Although the final outcome of these matters cannot be determined, based on the facts presently known, we believe that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

Lease Guarantees

We have guaranteed certain lease obligations of licensee operators.

Lease guarantees range from one to three years.

We were contingently liable under licensee lease obligation guarantees in the amounts of $ 2,064 and $ 1,811 at February 27, 2021 and November 28, 2020, respectively.

In the event of default by an independent dealer under the guaranteed lease, we believe that the risk of loss is mitigated through a combination of options that include, but are not limited to, arranging for a replacement dealer or liquidating the collateral (primarily inventory).

The proceeds of the above options are expected to cover the estimated amount of our future payments under the guarantee obligations, net of recorded reserves.

The fair value of lease guarantees (an estimate of the cost to the Company to perform on these guarantees) at February 27, 2021 and November 28, 2020 was not material.

Earnings Per Share

The following reconciles basic and diluted earnings per share:

Weighted Average

For the quarter ended February 28, 2009 (as restated):

Weighted Average Shares

Net Income Per Share

For the quarter ended February 27, 2021:

Basic earnings per share

$ 4,011  

9,919,518  

$ 0.40  

Add effect of dilutive securities:

Options and restricted shares

20,287  

Diluted earnings per share

For the quarter ended March 1, 2008:

$ 4,011  

9,939,805  

$ 0.40  

For the quarter ended February 29, 2020:

Basic earnings per share

$ 1,210  

10,027,227  

$ 0.12  

Add effect of dilutive securities:

Options and restricted shares

25,969  

Diluted earnings per share

Due to the net loss, the potentially dilutive securities would have been antidilutive and are therefore excluded.

Options to purchase 1,206,138 and 1,458,685 shares of common stock at February 28, 2009 and March 1, 2008, respectively, were excluded from the computation as

their effect is antidilutive.

Fair Value Disclosures

Our investments consist of the Alternative Asset Fund with a value of $8,942 and $23,053 and a portfolio of marketable securities with a value of $10,849 and $12,007 as of February 28, 2009 and November 29, 2008, respectively.

Collectively, these are recorded in our consolidated balance sheet under the caption of investments.

In September 2006, the Financial Accounting Standards

Board issued SFAS No.

157, Fair Value Measurements (SFAS 157 or the Standard.) The Standard defines fair value, provides a consistent framework for measuring fair value under accounting principles generally

accepted in the United States and expands fair value financial statement disclosure requirements.

SFAS 157 does not require any new fair value measurements.

It only applies to accounting pronouncements that already require or permit fair value

measures, except for standards that relate to share-based payments (SFAS 123R Share Based Payment.)

SFAS 157s valuation techniques are based on

observable and unobservable inputs.

Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions.

The Standard classifies these inputs into the following hierarchy:

Level 1 Inputs Quoted prices for identical instruments in active markets.

Level 2 Inputs Quoted prices for similar instruments in active markets;

quoted prices for identical or similar instruments in markets that are not active;

and model-derived valuations whose inputs are

observable or whose significant value drivers are observable.

Level 3 Inputs Instruments with primarily unobservable value drivers.

Our investment in the Bassett Industries Alternative Asset Fund LP (BIAAF) is valued at fair value primarily based on the net asset values which are

determined by the investee fund, based on its underlying financial instruments as provided by the general partner.

Investment balances by fund are presented below.

$ 1,210  

10,053,196  

$ 0.12  

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

For the three months ended February 27, 2021 and February 29, 2020, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

Quarter Ended

February 27, 2021

November 29, 2008

Styx Partners, L.P.

HBK Fund, L.P.

DB Zwirn Special Opportunities Fund, L.P.

Cash and Other

We have requested our general partner to attempt to liquidate all of our investments in BIAAF.

During the first

quarter of 2009, we received $12,900 for liquidations associated with Styx Partners, L.P.

and HBK Fund, L.P.

We expect to receive the remaining portion of our investment in Styx Partners, L.P.

during our third quarter subject to completion of their

Due to the level of redemption requests, we have been informed that the remainder of the investment in HBK Fund, L.P.

should be redeemed with quarterly distributions over the next two years.

We also have been informed that due to the

magnitude of other redemption requests on the DB Zwirn Special Opportunities Fund, L,P., it is likely that it will be three to four years before our investment is fully redeemed.

We expect to receive the total stated net asset value for the HBK and

Zwirn investments, subject to any further change in the net asset value due to market variations.

The fair values of our marketable securities and our

investment in BIAAF based on the level of inputs are summarized below:

February 29, 2020

Fair Value Measurements Using

Marketable Securities

Investment in BIAAF

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

The table below provides a reconciliation of all assets measured at fair value on a recurring basis which use level

three or significant unobservable inputs for the quarter ended February 28, 2009.

Fair value Measurements Using

Significant Unobservable Inputs

Balance at November 29, 2008

Total losses included in earnings related to change in underlying net assets

Tax withholdings by general partner

Transfers in and/or out of Level 3

Balance February 28, 2009

We have $10,849 of marketable securities consisting of a combination of equity and fixed income securities.

classify our marketable securities as available-for-sale, which are reported at fair value.

Unrealized holding gains and losses, net of the related income tax effect, on available-for-sale securities are excluded from income and are reported as

other comprehensive income in stockholders equity.

Realized gains and losses from securities classified as available-for-sale are included in income.

We determine the fair value of our marketable securities based on quoted market prices.

Although we have the ability to buy and sell the individual marketable securities, we are required to maintain a certain dollar amount in those brokerage

accounts subject to the Securities Account Control Agreement as part of the revolving credit facility

In accordance with SFAS No.

Accounting for Certain Investments in Debt and Equity Securities, we review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary.

Should the decline be

considered other than temporary, we write down the cost basis of the security and include the loss in current earnings as opposed to recording an unrealized holding loss.

Due to the continued decline in the financial markets during the fiscal first

quarter of 2009, many of our holdings sustained significant losses.

Consequently, we recorded $1,255 in losses that are considered other than temporary in our consolidated statement of operations for the quarter ended February 28, 2009.

Unvested shares

34,000  

Segment Information

We have strategically aligned

our business into three reportable segments:

Wholesale, Retail and Investments/Real Estate.

The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network

of Bassett stores (independently-owned stores, Company-owned retail stores and partnership licensees) and independent furniture retailers.

Our wholesale segment includes our wood and upholstery operations as well as all corporate selling, general

and administrative expenses.

Our retail segment consists of Company-owned stores.

Our retail segment includes the revenues, expenses, assets and

liabilities (including real estate) and capital expenditures directly related to these stores.

Our investments/real estate segment consists of our

investments (Alternative Asset Fund and marketable securities), distributions in excess of affiliate earnings (IHFC) and retail real estate related to licensee stores.

Although this segment does not have operating earnings, income or loss from the

segment is included in other income in our condensed consolidated statements of operations and retained earnings.

Our equity investment in IHFC is not

We have strategically aligned our business into three reportable segments as defined in ASC 280, Segment Reporting , and as described below:

The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of furniture products to a network of Bassett stores (Company-owned and licensee-owned retail stores) and independent furniture retailers.

Our wholesale segment includes our wood and upholstery operations, which include Lane Venture, as well as all corporate selling, general and administrative expenses, including those corporate expenses related to both Company- and licensee-owned stores.

Our wholesale segment also includes our holdings of short-term investments and retail real estate previously leased as licensee stores.

The earnings and costs associated with these assets are included in other income (loss), net, in our condensed consolidated statements of income.

Retail –

 Company-owned stores.

Our retail segment consists of Company-owned stores and includes the revenues, expenses, assets and liabilities and capital expenditures directly related to these stores and the Company-owned distribution network utilized to deliver products to our retail customers.

Logistical services.

Our logistical services segment reflects the operations of Zenith.

In addition to providing shipping and warehousing services for the Company, Zenith also provides similar services to other customers, primarily in the furniture industry.

Revenue from the performance of these services to other customers is included in logistical services revenue in our condensed consolidated statements of income.

Zenith’s total operating costs, including those associated with providing logistical services to the Company as well as to third -party customers, are included in selling, general and administrative expenses and were $ 19,621 and $ 20,480 for the three months ended February 27, 2021 and February 29, 2020, respectively.

Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores and the elimination of Zenith logistics revenue from our wholesale and retail segments.

Inter-company income elimination includes the embedded wholesale profit in the Company-owned store inventory that has not been realized.

These profits will be recorded when merchandise is delivered to the retail consumer.

The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate, and the elimination of shipping and handling charges from Zenith for services provided to our wholesale and retail operations.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 28, 2009 (RESTATED)

FEBRUARY 27, 2021

(Dollars in thousands except share and per share data)

included in the identifiable assets of this segment since it has a negative book value and is therefore included in the long-term liabilities section of our

condensed consolidated balance sheet.

See Note 7 for a further discussion of IHFC.

Inter-company net sales elimination represents the elimination of

wholesale sales to our Company-owned stores.

Inter-company income elimination represents the embedded wholesale profit in the Company-owned store inventory that has not been realized.

These profits will be recorded when merchandise is delivered to

the end retail consumer.

The following table presents our segment information:

1 unchanged sentence

February 27, 2021

March 1, 2008

Inter-company elimination

February 29, 2020

Sales Revenue

$ 70,264  

$ 65,017  

Retail - Company-owned stores

60,395  

65,846  

Logistical services

20,081  

21,315  

Inter-company eliminations:

Furniture and accessories

( 29,004 )  

Logistical services

( 8,063 )  

$ 113,673  

$ 112,120  

Income (Loss) from Operations

$ 4,797  

$ 2,713  

Retail - Company-owned stores

Logistical services

Inter-company elimination

( 329 )  

$ 6,021  

$ 2,210  

Depreciation and Amortization

Investments/real estate

Retail - Company-owned stores

Logistical services

$ 3,331  

$ 3,623  

Capital Expenditures

Investments/real estate

February 28, 2009

November 29, 2008

Retail - Company-owned stores

Logistical services

$ 1,340  

Identifiable Assets

Investments/real estate

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

February 27, 2021

(Dollars in thousands except share and per share data)

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read along with the unaudited condensed consolidated financial

statements included in this Form 10-Q, as well as the companys 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission, which provides a more thorough discussion of the Companys products and services, industry

outlook, and business trends.

Bassett Furniture Industries Inc., based in Bassett, Va., is a leading retailer, manufacturer and marketer of branded home

Bassetts products are sold primarily through Bassett Furniture Direct (BFD) and Bassett Home Furnishings (BHF) stores, with secondary distribution through multi-line furniture stores, many with in-store Bassett Design Centers.

Bassettbaby cribs and casegoods are sold through specialty stores and mass merchants.

Bassett Furniture Direct (BFD or store) was

created in 1997 as a single source home furnishings retail store that provides a unique combination of stylish, well-made furniture and accessories with a high level of customer service.

This service includes complimentary room planning, in-home

design visits, quick delivery, and custom-order furniture.

The retail store program had 115 stores in operation at the end of the first quarter of 2009, 34 of which we own and operate.

We define imported product as fully finished product that is sourced internationally.

In the first quarter of 2009, 53% of our wholesale sales were of imported product compared to 58% in the first quarter of 2008.

domestic product includes certain products that contain components which are also sourced internationally.

We continue to believe that a blended strategy including domestically produced products primarily of a custom-order nature combined with

importing certain product categories and major collections, provides the best combination of value and quality to our customers.

Overall conditions for

our industry and our Company have been difficult over the past several years and have persisted throughout the first quarter of 2009.

New housing starts are down significantly and consumers continue to be faced with general economic uncertainty

fueled by deteriorating consumer credit markets and lagging consumer confidence as a result of volatile and often erratic financial markets.

All of these factors have significantly impacted big ticket consumer purchases such as

Consequently, this has put pressure on certain of our dealers ability to generate adequate profits to fully pay us for the furniture we have sold to them.

As a result, we incurred significantly increased bad debt related losses

during the second half of 2008 as well as during the first quarter of 2009.

Although management will continue to work closely with our licensees to ensure the success of both the licensee and Bassett, we expect an additional ten to twelve

underperforming stores to close during the remainder of 2009 of which four are currently running liquidation sales.

We also expect to increase the number of Company-owned stores during 2009, through acquisitions of certain licensee-owned stores.

During the first quarter of 2009, we acquired licensee stores in Scottsdale and Tucson, Arizona and Fredericksburg, Virginia.

Maintenance of a strong

balance sheet is a stated management goal and vital to our retail growth strategy.

The store program entails key business risks, including the realization of receivables and the coverage of both direct and contingent liabilities primarily associated

with retail real estate.

We have established decision criteria and business disciplines aimed at minimizing potential losses from these risks.

difficult and somewhat unprecedented environment, we have had no choice but to take several important actions aimed at improving our results and liquidity in the short-term.

These include:

Aggressively working with certain licensees to close those stores that are underperforming thereby limiting further exposure in our accounts receivable.

Reducing our inventory levels to improve working capital and cash flow.

Right-sizing our expense structure in both our wholesale and corporate retail divisions.

Suspending our quarterly dividend.

Delaying certain capital expenditures.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

We will also continue to work diligently with our network of licensees to improve their operating results.

existing and planned improvements in our retail program and our strong balance sheet, we believe we are well positioned not only to survive these turbulent times, but also to gain market share as some of our competitors exit the industry.

On March 19, 2009, we announced actions to reduce our overall cost structure that will result in lower expenditures for payroll, employee benefits,

warehousing and distribution, marketing, and other miscellaneous items.

Approximately 50 positions in departments throughout the Company were affected including corporate retail, administration, customer service, manufacturing, and marketing

resulting in an approximate 6% reduction in payroll.

Additionally, our Mt.

Airy, N.C., distribution facility closed on March 1, 2009 and has been consolidated to other warehouses in the U.S.

Overall distribution costs will be reduced

Airy facility has been listed for sale.

Marketing expenditures will be trimmed primarily through reduced television production costs and upcoming changes to our consumer catalog format.

We do, however, plan to continue to invest in

Upcoming improvements will feature enhanced aesthetics, easier navigation for individual items and collections, and improved E-commerce capabilities.

The new site will debut approximately May 1st.

As a result of these actions, we

expect to realize annualized savings of $7,000 to $8,000.

In addition, we plan to record severance charges during the second quarter of 2009 of $300 to $500.

Restatement of Previously Reported Results

During the first quarter of 2009, the Staff of the Securities and Exchange Commission (the

SEC) began its triennial review of our Form 10-K for the year ended November 29, 2008 and subsequently our Form 10-Q for the quarter ended February 28, 2009.

Three primary issues were identified by the SEC as a result of their

These included our initial valuation of notes receivable issued to our licensees (primarily for amounts converted from past due accounts receivable due from them), our methodology for determining reserves for our accounts receivable, notes

receivable, and loan guarantees, and our classification of our revolving debt as current or long-term.

As a result of the SECs comments, we began a

review of the accounting policies and processes in the areas previously mentioned.

Consequently, we determined that we should have recorded lower values for certain of our notes receivable upon inception and, subsequently, recorded additional

reserves on those notes due to an error in how we determined an appropriate market rate of interest for those notes.

In addition, we also concluded that we should have recognized revenue for certain customers on a cost recovery basis for shipments

beginning in the first quarter of 2009 and that additional reserves for loan guarantees should be established.

Therefore, we recorded an additional $3,280 of net charges in the quarter ended February 28, 2009 to account for these lower note

values, increased reserves and reduced revenue.

Of the amount recorded, $1,936 related to periods prior to the quarter ended February 28, 2009.

However, based on our consideration of the underlying quantitative and qualitative factors

surrounding the prior period errors, the effects on the previous annual and interim periods were determined to be immaterial and, therefore, prior periods have not been restated.

As a result, our net loss increased $3,280 to $11,963 and net loss per share increased $0.29 per share to $1.05 per share.

The recognition of this additional expense and reduced revenue caused us to violate the net

worth covenant contained in our revolving credit facility for the quarter ended February 28, 2009.

As such, we have reclassified our debt under the revolving credit facility from long-term to current and have provided expanded disclosures

around our liquidity.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Results of Operations Period ended February 28, 2009 (restated) compared with the period ended

March 1, 2008:

Net sales, gross profit, selling, general and administrative (SG&A) expense, and operating income (loss) were as follows for

the periods ended February 28, 2009 and March 1, 2008:

Quarter Ended

February 28, 2009

March 1, 2008

SG&A (see note below)

Bad debt and notes receivable valuation charges

Income (Loss) from operations

For comparability purposes, we have presented our selling, general and administrative expenses above

without consideration of the effects of the bad debt and notes receivable valuation charges.

On a consolidated basis, we reported net sales for the

first quarter of 2009 of $57,811, a decrease of $23,788, or 29.2% from sales levels attained in the first quarter of 2008.

Due to our fiscal calendar, the quarter ended March 1, 2008 included 14 weeks compared to 13 weeks for the quarter ended

February 28, 2009.

Segment Information

have strategically aligned our business into three reportable segments:

Wholesale, Retail and Investments/Real Estate.

The wholesale home furnishings segment is involved principally in the design, manufacture, sourcing, sale and distribution of

furniture products to a network of stores (independently-owned stores, Company-owned retail stores and partnership licensees) and independent furniture retailers.

Our wholesale segment includes our wood and upholstery operations as well as all

corporate selling, general and administrative expenses, including those corporate expenses related to both corporate and licensee owned stores.

segment consists of Company-owned stores.

Our retail segment includes the revenues, expenses, assets and liabilities (including real estate) and capital expenditures directly related to these stores.

Our investments/real estate segment consists of our investments (Alternative Asset Fund and marketable securities), distributions in excess of affiliate earnings (IHFC)

and retail real estate related to licensee stores.

Although this segment does not have operating earnings, income from the segment is included in other income, net in our condensed consolidated statements of income and retained earnings.

The following is a discussion of operating results for our wholesale and retail segments:

Wholesale Segment

Quarter Ended

February 28, 2009

March 1, 2008

SG&A (see note below)

Bad debt and notes receivable valuation charges

Income (Loss) from operations

For comparability purposes, we have presented our selling, general and administrative expenses above

without consideration of the effects of the bad debt and notes receivable valuation charges.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Net sales for the wholesale segment were $47,948 for the first quarter of 2009 as compared to $69,309 for the first

quarter of 2008, a decrease of 30.8%.

Due to our fiscal calendar, the quarter ended March 1, 2008 included 14 weeks compared to 13 weeks for the quarter ended February 28, 2009.

Approximately 53% of wholesale shipments during the first

quarter of 2009 were imported products compared to 58% for the first quarter of 2008.

Gross margins for the wholesale segment were 27.1% for the first quarter of 2009 as compared to 30.3% for the first quarter of 2008.

This decrease is primarily due

to lower realized margins on our wood furniture and certain discount programs designed to sell more furniture, partially offset by increased margins on our upholstered furniture due to its custom nature.

Wholesale SG&A decreased $4,326 primarily

due to decreased sales volumes.

We recorded $5,892 of bad debt and notes receivable valuation charges for the first quarter of 2009 as compared to $770 for the first quarter of 2008.

November 28, 2020

$ 177,204  

$ 176,243  

Retail - Company-owned stores

168,840  

169,105  

Logistical services

62,917  

57,201  

$ 408,961  

$ 402,549  

Wholesale shipments by type

1 unchanged sentence

February 27, 2021

March 1, 2008

Retail Segment Company-Owned Retail Stores

Quarter Ended

February 29, 2020

March 1, 2008

Operating loss

Our Company-owned store network had sales of $23,743 in the first quarter of 2009 as compared to $25,927 in the

first quarter of 2008, a decrease of 8.4%.

On a comparable store basis, sales decreased 12.4%.

Sales decreases were recorded for each major retail market for the Company-owned store network.

Gross margins for the quarter increased 0.6 percentage

points due to improved pricing and promotional strategies, coupled with less clearance sales activity as compared to 2008.

SG&A decreased $268 due to lower sales.

However, as part of the store acquisitions during the first quarter of 2009 and

late in 2008, we did not acquire the existing delivery backlog at the time of acquisition.

Consequently, we incurred significant SG&A expenses (rent and administrative payroll) without a commensurate level of delivered sales.

Excluding the

effects of these acquired stores, SG&A as a percent of sales would have been 56.0% for the first quarter of 2009.

Our retail segment includes the

expenses of retail real estate utilized by Company-owned retail stores.

Rental income and expenses from our properties utilized by independent licensees and partnership licensees are included in our investment and real estate segment.

Investment and Real Estate Segment and Other Items Affecting Net Income (Loss)

Our investments and real estate segment consists of our investments (Alternative Asset Fund and marketable securities), distributions in excess of affiliate earnings (IHFC) and retail real estate related to

licensee-owned stores.

Although this segment does not have operating earnings, income (loss) from the segment is included in other income (loss), net in our condensed consolidated statements of operations.

Our equity investment in IHFC is not

included in the identifiable assets of this segment since it has a negative book value and is therefore included in the long term

Bassett Custom Upholstery

$ 43,348  

61.7 %  

$ 40,033  

Bassett Leather

10.8 %  

Bassett Custom Wood

11,543  

16.4 %  

11,290  

Bassett Casegoods

11.1 %  

$ 70,264  

100.0 %  

$ 65,017  

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

liabilities section of our consolidated balance sheet.

Income and expense items for the first quarter of 2009 and

2008, are as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 27, 2021

March 1, 2008

Loss from Alternative Asset Fund

Income (loss) from marketable securities

Income from unconsolidated affiliated companies, net

Interest expense

Loan and lease guarantee expense

Other income (loss), net

In accordance with SFAS No.

115, Accounting for Certain Investments in Debt and Equity

Securities, we review our marketable securities to determine whether a decline in fair value of a security below the cost basis is other than temporary.

Should the decline be considered other than temporary, we write down the cost basis of the

security and include the loss in current earnings as opposed to recording an unrealized holding loss.

Due to the continued decline in the financial markets during the fiscal first quarter of 2009, many of our holdings sustained significant losses.

Consequently, we recorded $1,255 in losses in our consolidated statement of operations for the quarter ended February 28, 2009.

unconsolidated affiliated companies, net includes income from our investment in IHFC as well as income (loss) from other equity method investments.

We recognized income from IHFC of $794 in the first quarter of 2009 as compared to $1,040 during the

first quarter of 2008.

Loan and lease guarantee expense consists of adjustments to record the fair value of our loan and lease guarantee obligations that

we have entered into on behalf of our licensees.

We recognized expense of $426 and $34, respectively, for the quarters ended February 28, 2009 and March 1, 2008, to reflect the additional risk that we may have to assume the underlying

obligations with respect to our guarantees.

Other includes several items including losses related to our real estate investments that support our

We calculate an anticipated

effective tax rate for the year based on our annual estimates of pretax income or loss and use that effective tax rate to record our year-to-date income tax provision.

Any change in annual projections of pretax income or loss could have a

significant impact on our effective tax rate for the respective quarter.

During the fourth quarter of 2008, we recorded a $23,383 charge to establish a valuation allowance against substantially all of our deferred tax assets as we were in a

cumulative loss position for the past three years, which is considered significant negative evidence as to whether our deferred tax assets will be realized.

Since we reported losses in the quarter and remained in this cumulative loss position, we

recorded no tax benefits on the losses generated for the quarter ended February 28, 2009.

The tax provision for the quarter ended February 28, 2009 represents the accrual of income taxes to be paid in certain states and the accrual of

penalties and interest associated with certain unrecognized tax benefits.

The effective income tax rate for the first quarter of 2008 was 13.5% and was

lower than the statutory rate primarily due to exclusions for dividends received from our investment in IHFC.

Liquidity and Capital Resources

The Company is committed to maintaining a strong balance sheet in order to weather the current difficult industry conditions, to allow it to take

advantage of opportunities as market conditions improve, and to execute its long-term retail growth strategies.

Due to the continued housing slump and

deterioration in the major financial markets and the overall recessionary economic environment, consumer spending has decreased resulting in significant financial losses for us and

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

damaging the ability of certain of our licensees to generate sufficient cash flow in their businesses.

Currently, we are aggressively pursuing expense

reduction and cash preservation initiatives throughout all parts of the business to enhance our cash flow.

As previously discussed, we announced certain cost reduction actions that we expect to provide $7,000 to $8,000 in annualized cost savings.

As part of the improvement plans with one of our licensees, we converted $1,100 of trade accounts receivable to long-term interest bearing notes during

the quarter ended February 28, 2009 and expect additional conversions of accounts receivable to long-term notes over the remainder of the year.

We continually assess our level of bad debt reserves and recorded $5,892 in provisions for losses on

accounts and notes receivable in the first quarter of 2009, a $5,122 increase over the corresponding period in 2008.

A continuing difficult and weak retail environment could result in further bad debt expenses, reduced revenue and store real estate

charges, including lease termination and impairment charges.

Although we believe we have adequate reserves for bad debts, we will continue to work with our licensees to help limit bad debt exposure.

We expect ten to twelve underperforming stores to

close during 2009.

We used $5,056 of cash in operating activities during the first quarter of 2009 primarily due to the continued difficult environment at

retail resulting in lower collections on accounts receivable as well as increased cash requirements to fund the January new product rollout.

These cash requirements were funded through $12,900 of investment redemptions and $2,811 in dividends from

our investment in the International Home Furnishings Center.

We expect to receive additional redemptions from the Alternative Asset Fund of $2,000 to $3,000 over the remainder of the year.

In addition, we expect our wholesale inventories to decrease

$3,000 to $4,000 over the remainder of the year through improved management and coordination with our foreign suppliers.

As a result of an anticipated debt refinancing for IHFC, it is likely that dividend distributions will decrease or be eliminated

for the remainder of 2009.

We currently have $18,000 outstanding on our revolving credit facility which provides for borrowings of up to $45,000 at a

variable interest rate of LIBOR plus 1.75% (1.92% on February 28, 2009).

The facility is secured by a pledge of certain marketable securities and substantially all of our receivables and inventories and matures on November 30, 2010.

contains, among other provisions, certain defined financial covenants including a minimum level of net worth that requires us to have Tangible Net Worth, as defined in the credit agreement, of $118,000 as of the quarterly testing dates.

of the impact of the adjustments made as outlined in Note 2, we were no longer in compliance with the Tangible Net Worth covenant which represents an Event of Default as defined in our credit agreement.

Consequently, our bank has the ability to

immediately demand repayment of the loan and we have reclassified the debt to the current liabilities section of our condensed consolidated balance sheet.

During the quarter, our tangible net worth decreased by $11,931 due primarily to operating

losses of $8,601 and both realized and unrealized losses associated with the Alternative Asset Fund and our marketable securities portfolio of $2,369.

This covenant violation also prevents us from making any additional borrowings under the facility

until the covenant is waived and/or amended.

However, had there been no covenant violation, we would have had an additional $8,013 of availability under the facility.

We have begun discussions with our lender to amend the Tangible Net Worth covenant.

We expect to complete these discussions during the third quarter of 2009.

We currently believe that we will be successful in

obtaining an amendment.

However, should we be unsuccessful, the lender has the ability to accelerate repayment under the facility.

If such liquidity needs were to arise, we would explore other liquidity options such as negotiating with another

lender, sale of our interest in IHFC, sale of existing investment real estate or mortgaging other investment real estate.

Should we be unsuccessful with these and all other potential options in obtaining the necessary liquidity, this could have a

material adverse effect on our operations.

We currently have eight retail real estate properties that have been financed through commercial mortgages with

interest rates ranging from 6.73% to 9.18%.

These mortgages, with a total balance of $21,962, are collateralized by the respective properties with net book values totaling approximately $29,814 at February 28, 2009.

Two of the mortgages mature

in the first quarter of 2010 with another maturing in the second quarter of 2010.

Collectively, the balance for these three mortgages at February 28, 2009 was $8,377.

Although negotiations have not begun, we expect to refinance, obtain

alternate financing or forbearance of payment by the stated maturity dates.

However, there can be no certainty that any of these may occur and should we be required to fund these payments on the maturity dates, it could have a material adverse

effect on our liquidity.

Revenue Recognition

We recognize revenue when we transfer promised goods or services to our customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services.

For our wholesale and retail segments, revenue is recognized when the risks and rewards of ownership and title to the product have transferred to the buyer.

At wholesale, transfer occurs and revenue is recognized upon the shipment of goods to independent dealers and licensee-owned BHF stores.

At retail, transfer occurs and revenue is recognized upon delivery of goods to the customer.

All wholesale and retail revenues are recorded net of estimated returns and allowances based on historical patterns.

We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected upon delivery.

These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 44,674 and $ 39,762 as of February 27, 2021 and November 28, 2020, respectively.

Approximately 76 % of the customer deposits held at November 28, 2020 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the quarter ended February 27, 2021.

For our logistical services segment, line-haul freight revenue is recognized as services are performed and are billed to the customer upon the completion of delivery to the destination.

Because the customer receives the benefits of these services as the freight is in transit from point of origin to destination, we recognize revenue using a percentage of completion method based on our estimate of the amount of time freight has been in transit as of the reporting date compared with our estimate of the total required time for the deliveries.

The balances of assets recognized for shipping revenues earned but not billed as of February 27, 2021 and November 28, 2020 were not material.

Warehousing services revenue is based upon warehouse space occupied by a customer’s goods and inventory movements in and out of a warehouse and is recognized as such services are provided and billed to the customer concurrently in the same period.

We exclude from revenue all amounts collected from customers for sales tax.

We do not disclose amounts allocated to remaining unsatisfied performance obligations as they are expected to be satisfied within one year or less.

See Note 12, Segment Information, for disaggregated revenue information.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

We currently anticipate that total capital expenditures for the remainder of fiscal 2009 will be approximately $2,500

and will be used primarily for retrofits for the new prototype design at Company-owned stores and information systems to support e-commerce initiatives.

Receivables and Inventory

Cash collections on our accounts and notes receivable have a significant impact on our overall liquidity.

We used $5,056 of cash in operating activities during the first three months of 2009 due to the continued difficult environment at retail resulting in lower cash collections on accounts receivable as well as increased cash requirements to fund the

January new product rollout.

These slow cash collections have resulted in increasing accounts and notes receivable, deteriorating accounts receivable

aging with increases in our relative past due amounts, and a corresponding increase to our allowance for doubtful accounts.

As such, we recorded $5,892 of bad debt and notes receivable valuation charges for the first quarter of 2009 as compared to

$770 for the first quarter of 2008.

In response to slow collections, certain of our licensees have been placed on a temporary cash before delivery program for current orders that is designed to prevent any additional increase in the

accounts receivable exposure.

We expect the rate of cash collections to increase when the recessionary environment begins to subside such that our total receivables will begin to decrease.

The following table reflects our accounts receivable and

notes receivable and related bad debt reserves:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 27, 2021

November 29, 2008

Gross accounts receivable

Allowance for doubtful accounts

Net accounts receivable

Gross notes receivable

Allowance for doubtful accounts and notes discounts

Net notes receivable

Our accounts and notes receivable reserve and notes discount activity for the three months ended February 28,

2009 is as follows:

Balance at November 29, 2008

Bad debt and note valuation charges

Discount amortization

Balance at February 28, 2009, as restated

Our licensee review committee (LRC) consists of our CEO, CFO, Senior VP of Retail, VP of Licensed Retail, and

Corporate Director of Credit.

The LRC meets frequently to review licensee performance, typically reviewing a wide-range of licensee related issues, including licensee capitalization, projected operating performance, the viability of the market in

which the licensee operates and the licensees operating history, including our cash receipts from the licensee and its sales.

Should a licensee have substantial past due amounts due to us, but is otherwise considered viable and likely to

continue as a going concern, the committee may decide to move all or a portion of the licensees past due accounts receivables to a note receivable.

We believe that the note receivable allows the licensee to focus on keeping current and future

amounts current, while continuing to meet its financial obligations to us.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

As part of the improvement plans with one of our licensees, we converted $1,100 of past due trade accounts receivable

and refinanced an existing note with a remaining balance of $224 into a $1,324 long-term note bearing interest at 4.75% during the quarter ended February 28, 2009.

This note requires interest only payments through 2011 and interest and

principal payments due monthly through its maturity on December 31, 2016.

The initial carrying value of the note is determined using present value techniques which consider the fair market rate of interest based on the licensees risk

profile and estimated cash flows to be received.

We considered the stated interest rate to be below market due to the overall lack of availability of credit in the financial markets.

Consequently, we discounted the estimated cash flows at a 19.5%

discount rate which resulted in an initial fair value of $672.

Our investment in inventory affects our liquidity in several different ways.

paid for raw materials, labor, and factory overhead for the manufacture or assembly of our domestic inventories is typically paid out well in advance of receiving cash from the sale of these inventories.

Payments for our imported inventories are

funded much further in advance of receiving cash from the sale of these inventories as compared to our domestically manufactured or assembled inventories.

The length of our import supply chain necessitates complex forecasting of future demand levels

and is highly judgmental.

In economic downturns, the speed at which we can respond to decreasing demand is slowed, as we may have imported inventory in shipment or being manufactured at any given time.

In addition, we may also have inventory

commitments under purchase orders that have not begun the manufacturing process.

Consequently, as inventories build temporarily during downturns or as we near new product roll-outs, our liquidity is reduced as we have more cash invested in our

Second, the availability under our revolving credit facility is impacted by changes in our inventory balances.

Lastly, if we fail to respond to changes in consumer tastes quickly enough, inventories may build and decrease our liquidity.

Our inventories consist of the following:

Changes to Stockholders ’

The following changes in our stockholders’

equity occurred during the three months ended February 27, 2021 and February 29, 2020:

February 27, 2021

November 29, 2008

Finished goods

Work in process

Raw materials and supplies

Retail merchandise

Total inventories at FIFO

LIFO adjustment

Reserve for excess and obsolete inventory

We estimate an inventory reserve for excess quantities and obsolete items based on specific identification and

historical write-offs, taking into account future demand, market conditions and the respective valuations at LIFO.

The need for these reserves is primarily driven by the normal product life cycle.

As products mature and sales volumes decline, we

rationalize our product offerings to respond to consumer tastes and keep our product lines fresh.

If actual demand or market conditions in the future are less favorable than those estimated, additional inventory write-downs may be required.

determining reserves, we calculate separate reserves on our wholesale and retail inventories.

Our wholesale inventories tend to carry the majority of the reserves for excess quantities and obsolete inventory due to the nature of our distribution

These wholesale reserves primarily represent design and/or style obsolescence.

Typically, product is only shipped to our retail warehouses when a consumer has ordered and paid a deposit for the product.

We do not typically hold inventory for

stock purposes.

Consequently, floor sample inventory and inventory for delivery to customers accounts for the majority of our inventory at retail.

Retail reserves are based on accessory and clearance floor sample inventory in our stores and any

inventory that is not associated with a specific customer order in our retail warehouses.

February 29, 2020

Common Stock:

Beginning of period

$ 49,714  

$ 50,581  

Issuance of common stock

Forfeited shares

Purchase and retirement of common stock

( 178 )  

End of period

$ 49,567  

$ 50,173  

Common Shares Issued and Outstanding:

Beginning of period

9,942,787  

10,116,291  

Issuance of common stock

Forfeited shares

Purchase and retirement of common stock

( 35,512 )  

End of period

9,913,496  

10,034,591  

Additional Paid-in Capital:

Beginning of period

Issuance of common stock

Forfeited shares

Purchase and retirement of common stock

( 66 )  

Stock based compensation

End of period

Retained Earnings:

Beginning of period

$ 109,710  

$ 129,130  

Cumulative effect of a change in accounting principal

Net income for the period

Purchase and retirement of common stock

( 509 )  

Cash dividends declared

( 3,719 )  

End of period

$ 109,493  

$ 125,078  

Accumulated Other Comprehensive Loss:

Beginning of period

$ ( 1,394 )  

Amortization of pension costs, net of tax

End of period

$ ( 1,359 )  

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

FEBRUARY 28, 2009 (RESTATED)

(Dollars in thousands except share and per share data)

Activity in the reserves for excess quantities and obsolete inventory by segment are as follows:

November 29, 2008

Additions Charged

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 27, 2021

Our estimates and assumptions have been reasonably accurate in the past.

We have not made any significant changes

to our methodology for determining inventory reserves in 2009 and do not anticipate that our methodology is reasonably likely to change in the future.

A plus or minus 10% change in our inventory reserves would not have been material to our financial

statements for the periods presented.

We currently have a $45 million revolving credit facility.

However, our borrowings are limited by the amount of

eligible accounts receivable and inventory as defined in our credit agreement.

Although the facility has a $45 million maximum, our eligible accounts receivable and inventory amount to $42,559 at February 28, 2009.

Decreases in our eligible

accounts receivable and inventory would have a negative effect on the total availability under our revolving credit facility.

Critical Accounting

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7,

Managements Discussion and Analysis of Financial Condition and Results of Operations, included in our 10-K for the fiscal year ended November 29, 2008, except as follows:

Long Term Notes Receivable In the ordinary course of business, should a licensee have substantial past due amounts due to the Company, but is otherwise

considered viable and likely to continue as a going concern, the Company may decide to move all or a portion of a licensees past due accounts receivable to a long-term interest-bearing note receivable.

The Company believes that contractually

extending the time for repayment through a note allows the licensee to focus on keeping future amounts current, while continuing to meet its financial obligations to us.

While the majority of our notes receivable were issued as conversions of

existing accounts receivable, some were issued to assist licensees in opening or acquiring new stores in underserved markets, which we believed would benefit both the licensee and the Company.

Some of these notes are collateralized by real estate.

At the inception of the note receivable, and in accordance with the provisions of Accounting Principles Board Opinion No.

21 Interest on Receivables and Payables, we determine whether the note bears a market rate of interest.

estimating a market rate of interest, we first consider factors such as licensee capitalization, projected operating performance, the viability of the market in which the licensee operates and the licensees operating history, including our

cash receipts from the licensee, licensee sales and any underlying collateral.

For those licensees where there is a concern of collectability, our estimated market rate of interest is based on certain published high yield bond indices.

those where collectability is less of a concern, the estimated market rate of interest is generally based on the prime rate.

A discount on the note is recorded if we determine that the note bears an interest rate below the market rate and a premium

is recorded if we determine that the note bears an interest rate above the market rate.

At February 28, 2009, we had $5,583 in net discounts recorded on our notes receivable.

We amortize the related note discount or premium over the contractual

term of the note and cease amortizing the discount to interest income when the present value of expected future cash flows is less than the carrying value of the note.

Interest income associated with the discount amortization is immaterial and is

recorded in other income (loss), net, in our consolidated statement of operations.

On a quarterly basis and in accordance with the provisions of Statement of Financial Accounting Standards No.

114, Accounting by Creditors for Impairment of a

Loanan amendment of FASB Statements No.

5 and 15 (SFAS 114) , we examine these notes for evidence of impairment, considering factors such as licensee capitalization, projected operating performance, the viability of

the market in which the licensee operates and the licensees operating history, including our cash receipts from the licensee, licensee sales and any underlying collateral.

After considering these factors, should we believe that all or a

portion of the note receivable cannot or will not be paid, we record an impairment charge on the note using discounted cash flow methods to determine the impairment charge.

(Dollars in thousands except share and per share data)

Recent Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No.

2019 - 12 –

Income Taxes (Topic 740 ) Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in the accounting standards.

The amendments in ASU 2019 - 12 eliminate certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019 - 12 also clarifies and simplifies other aspects of the accounting for income taxes.

The amendments in ASU 2019 - 12 will become effective for us as of the beginning of our 2022 fiscal year.

Early adoption is permitted, including adoption in any interim period.

We are currently evaluating the impact that this guidance will have upon our financial position and results of operations, if any.

PART I-FINANCIAL INFORMATION-CONTINUED

2 unchanged sentences

(Dollars in thousands except share and per share data)

An impairment charge does not necessarily indicate that the loan has no recovery or salvage value, but rather that, based on managements judgment and the consideration of specific licensee factors, it is more

prudent than not to record an impairment charge.

Additionally, and in accordance with SFAS 114, we estimate future cash flows on our notes receivable and discount them at the effective interest rate in order to determine appropriate notes receivable

At February 28, 2009, we had $4,004 in notes receivable reserves and $5,583 in notes receivable discounts recorded against a gross notes receivable balance of $22,747.

Off-Balance Sheet Arrangements

We utilize stand-by letters of credit in the procurement of certain goods in the

normal course of business.

We lease land and buildings that are primarily used in the operation of both Company-owned and licensee stores.

We have guaranteed certain lease obligations of licensee operators of the stores, as part of our retail

expansion strategy.

We also have guaranteed loans of certain of our dealers to finance initial inventory packages for these stores.

See Note 9 to our condensed consolidated financial statements for further discussion of operating leases, lease

guarantees and loan guarantees, including descriptions of the terms of such commitments and methods used to mitigate risks associated with these arrangements.

Contingencies

We are involved in various legal and environmental matters, which arise in the normal course of business.

Although the final

outcome of these matters cannot be determined, based on the facts presently known, it is our opinion that the final resolution of these matters will not have a material adverse effect on our financial position or future results of operations.

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/A

Item 1. Financial Statements