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Item 1. Financial Statements

2023-03-30 compared with 2022-09-29 · 188 added, 259 removed, 350 unchanged (56% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE PERIODS ENDED AUGUST 27, 2022 AND AUGUST 28, 2021 –

FOR THE PERIODS ENDED FEBRUARY 25, 2023 AND FEBRUARY 26, 2022 –

(In thousands)

Nine Months Ended

August 27, 2022

August 28, 2021

Three Months Ended

February 25, 2023

February 26, 2022

Operating activities:

1 unchanged sentence

Depreciation and amortization

Gain on disposal of discontinued operations

Gain on sale of property and equipment

Deferred income taxes

6 unchanged sentences

Obligations under operating leases

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Investing activities:

1 unchanged sentence

Proceeds from sales of property and equipment

Proceeds from the disposal of discontinued operations, net

Net cash provided by (used in) investing activities

Net cash used in investing activities

Financing activities:

Cash dividends

Proceeds from the exercise of stock options

Other issuance of common stock

3 unchanged sentences

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Change in cash and cash equivalents

5 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

7 unchanged sentences

To date we have concluded that none of our licensees represent VIEs.

We were the primary beneficiary of one VIE by virtue of our control over the activities that most significantly impact the entity’s economic performance.

This VIE was created to effect a Section 1031 like-kind exchange involving the purchase of real property in the state of Florida and the sale of real property in the state of Texas (see Note 13, Retail Real Estate Transactions).

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.

4 unchanged sentences

The sale was completed on February 28, 2022.

Accordingly, the operations of our logistical services segment as well as the gain realized upon disposal are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheet as of November 27, 2021 as assets and liabilities of discontinued operations held for sale.

Accordingly, the operations of our logistical services segment for the three months ended February 26, 2022 are presented in the accompanying condensed consolidated statements of income as discontinued operations.

See Note 12, Discontinued Operations, for additional information.

Costs incurred by Bassett for logistical services performed for Bassett by Zenith are included in selling, general and administrative expenses.

Recently Adopted Accounting Pronouncements

Effective as of the beginning of fiscal 2022, we have adopted Accounting Standards Update No.

2019-12 –

Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes.

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 became effective for us as of the beginning of our 2022 fiscal year.

We adopted ASU 2019-12 on a prospective basis and the adoption did not have a material impact upon our financial condition or results of operations.

Certain prior year amounts have been reclassified to conform with the current year presentation.

Interim Financial Presentation

Costs incurred by Bassett for logistical services performed for Bassett by Zenith were included in selling, general and administrative expenses for the three months ended February 26, 2022.

On September 2, 2022, we acquired 100 % of the capital stock of Noa Home Inc.

(“Noa Home”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada.

Noa Home has operations in Canada, Australia, Singapore and the United Kingdom.

Since acquisition, Noa Home has been consolidated as a wholly-owned subsidiary.

See Note 3 for additional information.

Certain prior year amounts have been reclassified to conform to the current year presentation (see Note 13, Segments).

Interim Financial Presentation and Other Information

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

The results of operations for the three and nine months ended August 27, 2022 are not necessarily indicative of results for the full fiscal year.

The results of operations for the three months ended February 25, 2023 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 26, 2022.

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 rate was 36.8 % and 26.3 % for the three months ended February 25, 2023 and February 26, 2022, respectively.

These effective rates differ from the federal statutory rate of 21 % primarily due to increases in the valuation allowance placed on deferred tax assets associated with Noa Home, the effects of state income taxes and various permanent differences.

Non-cash Investing and Financing Activity

During the three months ended February 25, 2023 and February 26, 2022, $ 3,406 and $ 4119 , respectively, of lease right-of- use assets were added through the recognition of the corresponding lease obligations.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

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 rate was 22.8 % and 25.6 % for the three and nine months ended August 27, 2022, respectively, and 27.2 % and 27.3 % for the three and nine months ended August 28, 2021, respectively.

These effective rates differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences, including those associated with Company-owned life insurance, and tax of $ 552 for the nine months ended August 27, 2022 associated with non-deductible goodwill written off in connection with our sale of Zenith and included in income tax on discontinued operations, and tax deficiencies of $ 117 during the nine months ended August 28, 2021 arising from stock-based compensation.

Cash paid for income taxes, net of refunds, during the nine months ended August 27, 2022 was $ 20,722 , including the estimated tax payable on the taxable gain realized on our sale of Zenith.

Cash paid for income taxes, net of refunds, during the nine months ended August 28, 2021 was $ 624 .

These cash payments for income taxes are included in cash flows from operating activities in the accompanying condensed consolidated statement of cash flows.

Business Combinations

On September 2, 2022, we acquired 100 % of the capital stock of Noa Home Inc.

(“Noa Home”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada.

Noa Home has operations in Canada, Australia, Singapore and the United Kingdom.

The initial purchase price (denominated in Canadian dollars) of approximately C$ 7,700 included cash payments of C$ 2,000 paid to the co-founders of Noa Home and approximately C$ 5,700 for the repayment of existing debt owed by Noa Home.

The Noa Home co-founders will also have the opportunity to receive additional cash payments totaling approximately C$ 1,330 per year for the three fiscal years following the year of acquisition based on established increases in net revenues and achieving certain internal EBITDA goals.

Under the acquisition method of accounting, the fair value of the consideration transferred was allocated to the tangible and intangible assets acquired and the liabilities assumed based on their estimated fair values as of the acquisition date with the remaining unallocated amount recorded as goodwill.

The allocation of the fair value of the acquired business has been based on a preliminary valuation.

Our estimates and assumptions are subject to change as we obtain additional information for our estimates during the measurement period (up to one year from the acquisition date).

The primary areas of the preliminary allocation of the fair value of consideration transferred that are not yet finalized relate to the fair values of certain tangible and intangible assets acquired and the residual goodwill.

As of February 25, 2023, there have been no changes to the preliminary allocation of the purchase price (translated into U.S.

dollars as of the acquisition date) which is as follows:

The following is a collective summary of the purchase price allocations for those acquisitions:

Fair value of consideration transferred in exchange for 100% of Noa Home:

Fair value of contingent consideration payable

Total fair value of consideration paid or payable

Allocation of the fair value of consideration transferred:

Identifiable assets acquired:

Other current assets

Property & equipment

Intangible asset - trade name

Total identifiable assets acquired

Liabilities assumed:

Accounts payable

Customer deposits

Other current liabilities and accrued expenses

Total liabilities assumed

Net identifiable assets acquired

Total net assets acquired

Goodwill was determined based on the residual difference between the fair value of the consideration transferred and the value assigned to the tangible and intangible assets and liabilities recognized in connection with the acquisition and is deductible for tax purposes.

Among the factors that contributed to a purchase price resulting in the recognition of goodwill are the expected synergies arising from combining the Company’s manufacturing and distribution capabilities with Noa Home’s position in the international e-commerce market for home furnishings and accessories.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

A portion of the fair value of the consideration transferred in the amount of $ 1,929 has been assigned to the identifiable intangible asset associated with the Noa Home trade name.

This intangible asset is considered to have an indefinite life.

The indefinite-lived intangible asset and goodwill are not amortized but will be tested for impairment annually or between annual tests if an indicator of impairment exists.

The fair values of consideration transferred and net assets acquired were determined using a combination of Level 2 and Level 3 inputs as specified in the fair value hierarchy in ASC 820, Fair Value Measurements and Disclosures .

The revenues and results of operations of Noa Home for the three months ended February 25, 2023 were not material.

The pro forma impact of the acquisition has not been presented because it was not material to our consolidated results of operations for the three months ended February 26, 2022.

Financial Instruments and Investments

2 unchanged sentences

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 August 27, 2022 and November 27, 2021 consisted of CDs.

At August 27, 2022, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.25 % to 3.00 %.

At August 27, 2022, the weighted average remaining time to maturity of the CDs was approximately six months and the weighted average yield of the CDs was approximately 2.17 %.

Our short-term investments of $ 17,725 and $ 17,715 at February 25, 2023 and November 26, 2022 consisted of CDs.

At February 25, 2023, the CDs had original terms averaging eight months, bearing interest at rates ranging from 0.3 % to 4.75 %.

At February 25, 2023, the weighted average remaining time to maturity of the CDs was approximately five months and the weighted average yield of the CDs was approximately 4.29 %.

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 August 27, 2022 and November 27, 2021 approximates their fair value.

Due to the nature of these investments and their relatively short maturities, the carrying amount of the short-term investments at February 25, 2023 and November 26, 2022 approximates their fair value.

Accounts Receivable

Accounts receivable consists of the following:

August 27, 2022

February 25, 2023

November 26, 2022

9 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

Activity in the allowance for credit losses for the nine months ended August 27, 2022 was as follows:

Activity in the allowance for credit losses for the three months ended February 25, 2023 was as follows:

Balance at November 26, 2022

1 unchanged sentence

Write-offs against allowance

Balance at August 27, 2022

Balance at February 25, 2023

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

4 unchanged sentences

Inventories were comprised of the following:

August 27, 2022

February 25, 2023

November 26, 2022

20 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

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

Wholesale Segment

Retail Segment

1 unchanged sentence

Additions charged to expense

Balance at August 27, 2022

Balance at February 25, 2023

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

2 unchanged sentences

Goodwill and other intangible assets consisted of the following:

August 27, 2022

Gross Carrying

February 25, 2023

Gross Carrying Amount

Accumulated Amortization

Intangible Assets, Net

Intangibles subject to amortization

10 unchanged sentences

Total goodwill and other intangible assets

Page 10 of 36

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

The carrying amounts of goodwill by reportable segment at both August 27, 2022 and November 27, 2021 are as follows:

Total goodwill

Goodwill and other intangible assets associated with our logistical services segment totaling $ 9,094 at November 27, 2021 are included in assets of discontinued operations held for sale in the accompanying balance sheet (see Note 12).

Amortization expense associated with intangible assets during the three and nine months ended August 27, 2022 and August 28, 2021 was as follows:

Changes in the carrying amounts of goodwill by reportable segment were as follows:

Corporate & Other

Balance as of November 26, 2022

Foreign currency translation adjustments

Balance as of February 25, 2023

Accumulated impairment losses at both February 25, 2023 and November 26, 2022 were $ 3,897 .

Amortization expense associated with intangible assets during the three months ended February 25, 2023 and February 26, 2022 was as follows:

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Intangible asset amortization expense

Estimated future amortization expense for intangible assets that exist at August 27, 2022 is as follows:

Estimated future amortization expense for intangible assets that exist at February 25, 2023 is as follows:

Remainder of fiscal 2023

1 unchanged sentence

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

At August 27, 2022, we had $ 3,931 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,069 .

In addition, we had outstanding standby letters of credit with another bank totaling $ 325 at August 27, 2022.

At February 25, 2023, we had $ 3,731 outstanding under standby letters of credit against our line, leaving availability under our credit line of $ 21,269 .

In addition, we had outstanding standby letters of credit with another bank totaling $ 250 at February 25, 2023.

The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.5 % and is unsecured.

Our bank charges a fee of 0.25 % on the daily unused balance of the line, payable quarterly.

Under the terms of the facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis:

Under the terms of the bank credit facility, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis:

Consolidated fixed charge coverage ratio of not less than 1.4 times,

1 unchanged sentence

Minimum tangible net worth of $ 140,000 .

We were in compliance with these covenants at August 27, 2022 and expect to remain in compliance for the foreseeable future.

We were in compliance with these covenants at February 25, 2023 and expect to remain in compliance for the foreseeable future.

The credit facility will mature on January 27, 2025, at which time any amounts outstanding under the facility will be due.

Page 11 of 36

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

2 unchanged sentences

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 $ 9,062 and $ 9,192 as of August 27, 2022 and November 27, 2021, respectively.

The liability for the Supplemental Plan was $ 6,007 and $ 5,987 as of February 25, 2023 and November 26, 2022, 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.

1 unchanged sentence

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 $ 1,560 and $ 1,548 as of August 27, 2022 and November 27, 2021, respectively.

The liability for the LTC Awards was $ 1,300 and $ 1,275 as of February 25, 2023 and November 26, 2022, respectively.

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

August 27, 2022

February 25, 2023

November 26, 2022

2 unchanged sentences

Total pension liability

Components of net periodic pension costs for our defined benefit plans for the three and nine months ended August 27, 2022 and August 28, 2021 are as follows:

Components of net periodic pension costs for our defined benefit plans for the three months ended February 25, 2023 and February 26, 2022 are as follows:

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Interest cost

6 unchanged sentences

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

Our liability under this plan was $ 1,657 and $ 1,648 as of August 27, 2022 and November 27, 2021, respectively.

Our liability under this plan was $ 1,626 and $ 1,616 as of February 25, 2023 and November 26, 2022, 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 $ 1,946 and $ 1,789 as of August 27, 2022 and November 27, 2021, respectively.

Page 12 of 36

Our liability under this plan, including both accrued Company contributions and participant salary deferrals, was $ 2,447 and $ 2,070 as of February 25, 2023 and November 26, 2022, respectively.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

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:

August 27, 2022

February 25, 2023

November 26, 2022

2 unchanged sentences

Total deferred compensation liability

We recognized expense under our deferred compensation arrangements during the three and nine months ended August 27, 2022 and August 28, 2021 as follows:

We recognized expense under our deferred compensation arrangements during the three months ended February 25, 2023 and February 26, 2022 as follows:

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Deferred compensation expense (benefit)

3 unchanged sentences

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 $ 1,871 and $ 1,845 at August 27, 2022 and November 27, 2021, respectively.

We were contingently liable under a licensee lease obligation guarantee in the amounts of $ 1,889 and $ 1,880 at February 25, 2023 and November 26, 2022, respectively.

The remaining term under this lease guarantee extends for five years.

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 August 27, 2022 and November 27, 2021 was not material.

Page 13 of 36

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

The fair value of this lease guarantee (an estimate of the cost to the Company to perform on the guarantee) at February 25, 2023 and November 26, 2022 was not material.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

2 unchanged sentences

Weighted Average

For the quarter ended August 27, 2022:

For the quarter ended February 25, 2023:

Basic earnings per share - continuing operations

2 unchanged sentences

Diluted earnings per share - continuing operations

Basic loss per share - discontinued operations

Add effect of dilutive securities:

Restricted shares

Diluted loss per share - discontinued operations

For the quarter ended August 28, 2021:

For the quarter ended February 26, 2022:

Basic earnings per share - continuing operations

6 unchanged sentences

Diluted loss per share - discontinued operations

For the nine months ended August 27, 2022:

Basic earnings per share - continuing operations

Add effect of dilutive securities:

Restricted shares

Diluted earnings per share - continuing operations

Basic earnings per share - discontinued operations

Add effect of dilutive securities:

Restricted shares

Diluted earnings per share - discontinued operations

For the nine months ended August 28, 2021:

Basic earnings per share - continuing operations

Add effect of dilutive securities:

Options and restricted shares

Diluted earnings per share - continuing operations

Basic earnings per share - discontinued operations

Add effect of dilutive securities:

Options and restricted shares

Diluted earnings per share - discontinued operations

Page 14 of 36

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

(Dollars in thousands except share and per share data)

For the three and nine months ended August 27, 2022 and August 28, 2021, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

For the three months ended February 25, 2023 and February 26, 2022, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive:

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Unvested shares

1 unchanged sentence

On January 31, 2022, we entered into a definitive agreement to sell substantially all of the assets of Zenith to J.B.

The sale was completed on February 28, 2022, at which time we received the following net proceeds:

The sale was completed on February 28, 2022.

Subsequent to the first quarter of fiscal 2022 and through the end of fiscal 2022, we received the following net proceeds:

Sales price prior to post-closing working capital adjustment

3 unchanged sentences

Net proceeds from the sale

To be held in escrow until the first anniversary of the sale, at which time any amount not distributed or reserved for specified claims will be released to the Company.

This amount is included in other current assets in the accompanying condensed consolidated balance sheet at August 27, 2022.

Included in cash flows from investing activities in the accompanying condensed consolidated statement of cash flows for the nine months ended August 27, 2022.

The sales price was subject to a customary post-closing working capital adjustment which was paid during the third quarter of fiscal 2022.

Including the effect of the working capital adjustment, we recognized a pre-tax gain from the sale of Zenith of $ 53,061 .

The operations of our logistical services segment, which consisted entirely of the operations of Zenith, are presented in the accompanying condensed consolidated statements of income as discontinued operations, and the assets sold to and liabilities assumed by J.B.

Hunt are presented in the accompanying condensed consolidated balance sheet as assets and liabilities of discontinued operations held for sale as of November 27, 2021.

Page 15 of 36

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

(Dollars in thousands except share and per share data)

The following table summarizes the major classes of assets and liabilities of the discontinued operations held for sale as reported in the condensed consolidated balance sheet as of November 27, 2021:

November 27, 2021

Carrying amounts of major classes of assets included as part of discontinued operations:

Accounts receivable, net

Other current assets

Property and equipment, net

Goodwill and other intangible assets

Right of use assets under operating leases

Balance sheet classification:

Current assets of discontinued operations held for sale

Long-term assets of discontinued operations held for sale

Total assets of discontinued operations held for sale

Carrying amounts of major classes of liabilities included as part of discontinued operations:

Accounts payable

Accrued compensation and benefits

Current portion operating lease obligations

Other current liabilites and accrued expenses

Long-term portion of operating lease obligations

Other long-term liabilities

Balance sheet classification:

Current liabilities of discontinued operations held for sale

Long-term liabilities of discontinued operations held for sale

Total liabilities of discontinued operations held for sale

Following the sale of Zenith, certain of Zenith’s liabilities primarily representing reserves and accrued liabilities for pre-disposal workers’

compensation, health insurance and auto liability claims were retained by Bassett.

The remaining balance of these reserves and accruals total $537 at August 27, 2022 and are included in other current liabilities and accrued expenses in the accompanying condensed consolidated balance sheet.

Page 16 of 36

This was held in escrow until the first anniversary of the sale, at which time the full amount was released to the Company on March 2, 2023.

As of February 25, 2023 and November 26, 2022, this amount is included in other current assets in the accompanying condensed consolidated balance sheets.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

The following table summarizes the major classes of line items constituting income of the discontinued operations, as reported in the condensed consolidated statements of income for the three and nine months ended August 27, 2022 and August 28, 2021:

The sales price was subject to customary post-closing working capital adjustments which were paid during the second half of fiscal 2022 and resulted in a pre-tax gain from the sale of Zenith of $ 52,534 recognized subsequent to the first quarter of fiscal 2022.

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 26, 2022

Major line items constituting pretax income of discontinued operations:

2 unchanged sentences

Other loss, net

Income (loss) from operations of logistical services

Gain on disposal (less adjustments)

Pretax income of discontinued operations

Income tax expense (benefit)

Income (loss) from discontinued operations, net of tax

Income from operations of logistical services

Income tax expense

Income from discontinued operations, net of tax

The amounts for revenue and costs of logistical services shown above represent the results of Zenith’s business transactions with third parties.

Zenith also charged Bassett for logistical services provided to our wholesale segment in the amount of $ 9,121 during the nine months ended August 27, 2022, and $ 7,164 and $ 23,409 , respectively, for the three and nine months ended August 28, 2021.

We have entered into a service agreement with J.B.

Hunt for the continuation of these services for a period of seven years following the sale of Zenith.

Subsequent to the sale, we incurred $ 10,307 and $ 19,852 of expense during the three and nine months ended August 27, 2022, respectively, for the performance of logistical services, of which $ 17,818 had been paid in cash as of August 27, 2022.

Zenith also charged Bassett for logistical services provided to our wholesale segment in the amount of $ 9,121 during the three months ended February 26, 2022.

Upon the sale of Zenith we entered into a service agreement with J.B.

Hunt for the continuation of these services for a period of seven years.

We incurred $ 8,434 of expense during the three months ended February 25, 2023 for logistical services performed by J.B.

Included in other loss, net, is interest arising from finance leases assumed by J.B.

Hunt as part of the transaction.

Such interest amounted to $ 78 for the nine months ended August 27, 2022, and $ 86 and $ 207 , respectively, for the three and nine months ended August 28, 2021.

The following table summarizes the cash flows generated by discontinued operations during the nine months ended August 27, 2022 and August 28, 2021:

Nine Months Ended

August 27, 2022

August 28, 2021

Such interest amounted to $ 78 for the three months ended February 26, 2022.

The following table summarizes the cash flows generated by discontinued operations during the three months ended February 26, 2022:

Three Months Ended

February 26, 2022

Cash provided by operating activities

1 unchanged sentence

Cash used in financing activities

Net cash provided by (used in) discontinued operations

Retail Real Estate Transactions

During the third quarter of fiscal 2022, we sold one of our Company-owned store locations in Houston, Texas for $ 8,217 net of closing costs, resulting in a gain of $ 4,595 during the three and nine months ended August 27, 2022.

The sale closed on June 24, 2022, and we expect to vacate the premises during the fourth quarter of fiscal 2022.

This store will be relocated to a new leased store in the Houston market that we expect to open during the second quarter of fiscal 2023.

This sale, together with our recent purchase of real property in Tampa, Florida for $ 7,668 in cash during the second quarter of fiscal 2022 will be treated as an exchange of like-kind property under Section 1031 of the Internal Revenue Code of 1986, as amended, for the purpose of deferring approximately $ 4,300 of the taxable gain arising from the sale of the Houston property.

A VIE was established during the second quarter of fiscal 2022 for purposes of acquiring the Tampa, Florida property, of which the Company was the primary beneficiary by virtue of our control over the activities that most significantly impact the entity's economic performance.

Subsequent to the completion of the exchange transactions during the third quarter of fiscal 2022, the sole equity interest in the VIE was transferred to Bassett and the entity is now consolidated as a wholly owned subsidiary We plan to remodel the Tampa property and open as a Company-owned store in the second quarter of fiscal 2023.

Page 17 of 36

Net cash provided by discontinued operations

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

Segment Information

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

Beginning with the three months ended February 25, 2023, 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 loss, net, in our condensed consolidated statements of operations.

Our wholesale segment includes our wood and upholstery operations, which includes Lane Venture.

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.

Corporate and other –

Corporate and other includes the shared costs of corporate functions such as treasury and finance, information technology, accounting, human resources, legal and others, including certain product development and marketing functions benefitting both wholesale and retail operations.

In addition to property and equipment and various other assets associated with the shared corporate functions, the identifiable assets of Corporate and other include substantially all of our cash and our investments in CDs.

We consider our corporate functions to be other business activities and have aggregated them with our other insignificant operating segment, the recently acquired Noa Home (see Note 3).

Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores.

2 unchanged sentences

The inter-company income elimination also includes rent paid by our retail stores occupying Company-owned real estate.

Prior to the current period, the functions included in Corporate and other were included in our wholesale segment reportable segment, and Noa Home was included in our retail reportable segment for the fourth quarter of fiscal 2022 following its acquisition on September 2, 2022.

We believe that the new alignment of our reporting segments provides our chief operating decision maker with clearer information with which to assess the operating results of our wholesale segment.

Noa Home does not meet the requirements to be a separate reportable segment as it is below the thresholds of the revenue, income and asset tests.

The segment information presented below for the three months ended February 26, 2022 and as of November 26, 2022 has been restated to reflect the new alignment of our reportable segments.

Our former logistical services segment which represented the operations of Zenith is now presented as a discontinued operation in the accompanying condensed consolidated balances sheets and statements of income (see Note 12).

Page 18 of 36

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

1 unchanged sentence

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Sales Revenue

3 unchanged sentences

Retail sales of furniture and accessories

Corporate and other

Consolidated net sales of furniture and accessories

1 unchanged sentence

Retail - Company-owned stores

Net expenses - Corporate and other

Inter-company elimination

Gain on sale of real estate

Depreciation and Amortization

Retail - Company-owned stores

Corporate and other

Capital Expenditures

Retail - Company-owned stores

August 27, 2022

November 27, 2021

Corporate and other

Identifiable Assets

February 25, 2023

November 26, 2022

Retail - Company-owned stores

Discontinued Operations

Corporate and other

See Note 14, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments.

6 unchanged sentences

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 $ 40,311 and $ 51,492 as of August 27, 2022 and November 27, 2021, respectively.

Substantially all of the customer deposits held at November 27, 2021 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the three and nine months ended August 27, 2022.

Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less.

Sales commissions at wholesale are accrued upon the shipment of goods.

Sales commissions at retail are accrued at the time a sale is written (i.e.

when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized.

At August 27, 2022 and November 27, 2021, our balance of prepaid commissions included in other current assets was $ 4,357 and $ 6,221 , respectively.

Page 19 of 36

These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 31,040 and $ 35,963 as of February 25, 2023 and November 26, 2022, respectively.

Approximately 81 % of the customer deposits held at November 26, 2022 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the three months ended February 25, 2023.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

Sales commissions are expensed as part of selling, general and administrative expenses at the time revenue is recognized because the amortization period would have been one year or less.

Sales commissions at wholesale are accrued upon the shipment of goods.

Sales commissions at retail are accrued at the time a sale is written (i.e.

when the customer’s order is placed) and are carried as prepaid commissions in other current assets until the goods are delivered and revenue is recognized.

At February 25, 2023 and November 26, 2022, our balance of prepaid commissions included in other current assets was $ 3,145 and $ 3,768 , respectively.

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.

Disaggregated revenue information for sales of furniture and accessories by product category for the three and nine months ended August 27, 2022 and August 28, 2021, excluding intercompany transactions between our segments, is a follows:

Disaggregated revenue information for sales of furniture and accessories by product category for the three months ended February 25, 2023 and February 26, 2022, excluding intercompany transactions between our segments, is a follows:

Quarter Ended

August 27, 2022

August 28, 2021

Bassett Custom Upholstery

Bassett Leather

Bassett Custom Wood

Bassett Casegoods

Accessories, mattresses and other (1)

Consolidated net sales of furniture and accessories

Nine Months Ended

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Bassett Custom Upholstery

4 unchanged sentences

Consolidated net sales of furniture and accessories

Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the  sale of furniture protection plans.

Page 20 of 36

Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans.

Our Corporate and other segment for the three months ended February 25, 2023 includes the sales of Noa Home, which was acquired on September 2, 2023 (see Note 3).

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

1 unchanged sentence

The following changes in our stockholders’

equity occurred during the three and nine months ended August 27, 2022 and August 28, 2021:

equity occurred during the three months ended February 25, 2023 and February 26, 2022:

Quarter Ended

Nine Months Ended

August 27, 2022

August 28, 2021

August 27, 2022

August 28, 2021

February 25, 2023

February 26, 2022

Common Stock:

22 unchanged sentences

Beginning of period

Cumulative translation adjustments, net of tax

Amortization of pension costs, net of tax

End of period

Page 21 of 36

The balance of cumulative translation adjustments, net of tax, was a net loss of $ 340 and $ 204 at February 25, 2023 and November 26, 2022, respectively.

PART I-FINANCIAL INFORMATION-CONTINUED

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

AUGUST 27, 2022

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

30 unchanged sentences

Early adoption is permitted.

As of August 27, 2022 we do not hold any investments in equity securities, therefore we do not currently expect that this guidance will have a material impact upon our financial position and results of operations.

Subsequent Events

On September 2, 2022, we acquired the capital stock of Noa Home Inc.

(“Noa”), a mid-priced e-commerce furniture retailer headquartered in Montreal, Canada.

Noa has operations in Canada, Australia, Singapore and the United Kingdom and had net revenues of approximately $ 15,300 (approximately C$ 19,100 ) for its most recent fiscal year ended February 28, 2022.

The initial purchase price of approximately $ 5,900 (approximately C$ 7,700 ) included cash payments of approximately $ 1,500 (approximately C$ 2,000 ) paid to the co-founders of Noa and approximately $ 4,300 (approximately C$ 5,700 ) for the repayment of existing debt.

The Noa co-founders will also have the opportunity to receive additional annual cash payments totaling approximately $ 1,000 per year (approximately C$ 1,330 per year) for the following three fiscal years based on established increases in net revenues and achieving certain internal EBITDA goals.

Page 22 of 36

As of February 25, 2023 we do not hold any investments in equity securities, therefore we do not currently expect that this guidance will have a material impact upon our financial position and results of operations.

PART I-FINANCIAL INFORMATION-CONTINUED

BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES

AUGUST 27, 2022

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED

FEBRUARY 25, 2023

(Dollars in thousands except share and per share data)

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

What changed 10-Q

Item 1. Financial Statements