BASSETT FURNITURE INDUSTRIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIODS ENDED MAY 31, 2025 AND JUNE 1, 2024 – UNAUDITED (In thousands) Six Months Ended May 31, 2025 June 1, 2024 Operating activities: Net income (loss) $ 3,772 $ ( 8,394 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 4,478 5,291 Asset impairment charges - 5,515 Inventory valuation charges 1,292 3,879 Deferred income taxes 1,374 ( 1,440 ) Other, net 642 689 Changes in operating assets and liabilities: Accounts receivable 298 241 Inventories ( 5,689 ) 2,228 Recoverable income taxes and other current assets 1,352 ( 1,217 ) Right of use assets under operating leases 8,474 8,707 Customer deposits ( 1,713 ) 233 Accounts payable and other liabilities 978 ( 6,930 ) Obligations under operating leases ( 8,355 ) ( 10,721 ) Net cash provided by (used in) operating activities 6,903 ( 1,919 ) Investing activities: Purchases of property and equipment ( 2,275 ) ( 3,683 ) Other ( 74 ) ( 383 ) Net cash used in investing activities ( 2,349 ) ( 4,066 ) Financing activities: Cash dividends ( 3,476 ) ( 3,153 ) Other issuance of common stock 165 179 Repurchases of common stock ( 1,158 ) ( 489 ) Taxes paid related to net share settlement of equity awards ( 136 ) ( 161 ) Repayments of finance lease obligations ( 67 ) ( 153 ) Net cash used in financing activities ( 4,672 ) ( 3,777 ) Effect of exchange rate changes on cash and cash equivalents - 1 Change in cash and cash equivalents ( 118 ) ( 9,761 ) Cash and cash equivalents - beginning of period 39,551 52,407 . Cash and cash equivalents - end of period $ 39,433 $ 42,646 The accompanying notes to condensed consolidated financial statements are an integral part of the condensed consolidated financial statements. 6 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 1. 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. As of and for the periods ended May 31, 2025 and June 1, 2024 and as of November 30, 2024 we have concluded that none of the evaluated entities represent VIEs. Revenue from the sale of furniture and accessories is reported in the accompanying condensed consolidated statements of operations net of estimates for returns and allowances. We exclude from revenues amounts collected from customers for sales tax. Our fiscal year, which ends on the last Saturday of November, periodically results in a 53-week year instead of the normal 52 weeks. The prior fiscal year ended November 30, 2024 was a 53-week year, with the additional week being included in the first fiscal quarter. Accordingly, the information presented below includes 26 weeks of operations for the six months ended May 31, 2025 as compared with 27 weeks included in the six months ended June 1, 2024. 2. 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 six months ended May 31, 2025 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 30, 2024. Certain prior period amounts have been reclassified to conform to current period presentation. Income Taxes 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. Our effective tax rate was 26.1 % and 26.8 % for the three and six months ended May 31, 2025, respectively. The effective rates for the three and six months ended May 31, 2025 differ from the federal statutory rate of 21 % primarily due to the effects of state income taxes and various permanent differences. Our effective tax rate was 11.2 % and 14.5 % for the three and six months ended June 1, 2024, respectively. The effective rates for the three and six months ended June 1, 2024 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 Inc. (“Noa Home”), the effects of state income taxes and various permanent differences. Supplemental Cash Flow Information During the six months ended May 31, 2025 and June 1, 2024, $ 378 and $ 3,476 , respectively, of lease right-of-use assets were added through the recognition of the corresponding lease obligations. Taxes paid net of refunds received during the six months ended May 31, 2025 and June 1, 2024 was $ 383 and $ 48 , respectively. Interest paid during the six months ended May 31, 2025 and June 1, 2024 was $ 14 and $ 10 , respectively. 7 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) Lessor Income We receive lease income as the lessor on a small number of leased premises which we have subleased to other tenants. Sublease income for closed stores and warehouses is included in selling general and administrative expense in the accompanying condensed consolidated statements of operations and was $ 148 and $ 251 for the three and six months ended May 31, 2025, respectively, and $ 103 and $ 205 for the three and six months ended June 1, 2024. We also sublease one location to a licensee. This sublease income is included in other loss, net in the accompanying condensed consolidated statements of operations and was $ 114 and $ 228 for the three and six months ended May 31, 2025, respectively, and $ 114 and $ 228 for the three and six months ended June 1, 2024, respectively. 3. Financial Instruments and Investments 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, accounts receivable, and accounts payable approximate fair value. Investments Our short-term investments of $ 20,385 and $ 20,360 at May 31, 2025 and November 30, 2024, respectively, consisted of CDs. At May 31, 2025, the CDs had original terms averaging seven months, bearing interest at rates ranging from 0.7 % to 5.15 % and the weighted average remaining time to maturity was approximately three months and the weighted average yield of the CDs was approximately 3.9 %. Each CD is placed with a federally insured financial institution and, except as noted below, 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 May 31, 2025 and November 30, 2024 approximates their fair value. Our investment in CDs at May 31, 2025 and November 30, 2024 includes one CD in the amount of $ 2,500 which was placed with a financial institution that provides merchant services for our retail segment. This CD has been pledged as security for the merchant services agreement. The CD has a six-month term maturing in October 2025 and an interest rate of 2.0 %. The requirement to maintain the pledge will be reassessed prior to the end of fiscal 2025, therefore the CD is classified as a current asset with our other CDs. This CD is in excess of the $250 Federal deposit insurance limit. 4. Accounts Receivable Accounts receivable consists of the following: May 31, 2025 November 30, 2024 Gross accounts receivable $ 13,435 $ 14,278 Allowance for credit losses ( 552 ) ( 1,097 ) Accounts receivable, net $ 12,883 $ 13,181 We maintain an allowance for credit losses for estimated losses resulting from the inability of our customers to make required payments. The allowance for credit losses 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 collectability 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. 8 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) Activity in the allowance for credit losses for the six months ended May 31, 2025 was as follows: Balance at November 30, 2024 $ 1,097 Additions charged to expense 40 Write-offs against allowance ( 585 ) Balance at May 31, 2025 $ 552 Substantially all of the accounts receivable written off against the reserve during the three and six months ended May 31, 2025 originated during fiscal 2024. 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 . 5. Inventories 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: May 31, 2025 November 30, 2024 Wholesale finished goods $ 27,072 $ 24,841 Work in process 535 519 Raw materials and supplies 16,647 14,921 Retail merchandise 32,872 31,744 Total inventories on first-in, first-out method 77,126 72,025 LIFO adjustment ( 11,950 ) ( 11,665 ) Reserve for excess and obsolete inventory ( 5,814 ) ( 5,395 ) $ 59,362 $ 54,965 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. 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 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. 9 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (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 Total Balance at November 30, 2024 $ 4,158 $ 1,237 $ 5,395 Additions charged to expense 966 326 1,292 Write-offs ( 682 ) ( 191 ) ( 873 ) Balance at May 31, 2025 $ 4,442 $ 1,372 $ 5,814 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 2025 and do not anticipate that our methodology is likely to change in the future. 6. Goodwill and Other Intangible Assets Goodwill and other intangible assets consisted of the following: May 31, 2025 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization Customer relationships $ 512 $ ( 421 ) $ 91 Intangibles not subject to amortization: Trade names 6,848 Total intangible assets $ 6,939 Goodwill $ 7,217 November 30, 2024 Gross Carrying Amount Accumulated Amortization Intangible Assets, Net Intangibles subject to amortization Customer relationships $ 512 $ ( 392 ) $ 120 Intangibles not subject to amortization: Trade names 6,848 Total intangible assets $ 6,968 Goodwill $ 7,217 There were no changes in the carrying amounts of goodwill during the three and six months ended May 31, 2025 or June 1, 2024. 10 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) The carrying amounts of goodwill by reportable segment, including accumulated impairment losses, at both May 31, 2025 and November 30, 2024 were as follows: Original Accumulated Recorded Impairment Carrying Value Losses Amount Wholesale $ 9,188 $ ( 1,971 ) $ 7,217 Retail 1,926 ( 1,926 ) - Corporate and other 5,409 ( 5,409 ) - Total goodwill $ 16,523 $ ( 9,306 ) $ 7,217 Amortization expense associated with intangible assets during the three and six months ended May 31, 2025 and June 1, 2024 was as follows: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Intangible asset amortization expense $ 14 $ 14 $ 29 $ 28 Estimated future amortization expense for intangible assets that exist at May 31, 2025 is as follows: Remainder of fiscal 2025 $ 29 Fiscal 2026 57 Fiscal 2027 5 Total $ 91 7. Bank Credit Facility On May 15, 2024, we entered into the Eighth Amended and Restated Credit Agreement with our bank (the “Credit Facility”). This Credit Facility provides for a line of credit of up to $ 25,000 . At May 31, 2025, we had $ 8,182 outstanding under standby letters of credit against our line. The line bears interest at the One-Month Term Secured Overnight Financing Rate (“One-Month Term SOFR”) plus 1.75 % and is secured by our accounts receivable and inventory. Our bank charges a fee of 0.25 % on the daily unused balance of the line, payable quarterly. Under the terms of the Credit Facility, Consolidated Minimum Tangible Net Worth (as defined in the Credit Facility) shall at no time be less than $ 120,000 . In addition, we must maintain the following financial covenants, measured quarterly on a rolling twelve-month basis and commencing as of the end of the first fiscal quarter after the first date that the used commitment (the sum of any outstanding advances plus standby letters of credit) equals or exceeds $ 8,250 : ● Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.2 times and ● Consolidated Lease Adjusted Leverage to EBITDAR Ratio (as defined in the Credit Facility) not to exceed 3.35 times. Since our used commitment was less than $ 8,250 at May 31, 2025, we were not required to test the Consolidated Fixed Charge Coverage Ratio or the Consolidated Lease Adjusted Leverage to EBITDAR Ratio. However, had we been required to test those ratios, we would have been in full compliance. Our availability under the Credit Facility is currently $ 16,818 . 11 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 8. 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 $ 5,578 and $ 5,557 as of May 31, 2025 and November 30, 2024, 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 five management employees in the amount of $ 400 each. We are accounting for the LTC Awards as a defined benefit pension plan. Currently, two of those employees have retired and are receiving benefits. The liability for the LTC Awards was $ 1,401 and $ 1,360 as of May 31, 2025 and November 30, 2024, respectively. The combined pension liability for the Supplemental Plan and LTC Awards is recorded as follows in the condensed consolidated balance sheets: May 31, 2025 November 30, 2024 Accrued compensation and benefits $ 792 $ 792 Post employment benefit obligations 6,187 6,125 Total pension liability $ 6,979 $ 6,917 Components of net periodic pension costs for our defined benefit plans for the three and six months ended May 31, 2025 and June 1, 2024 are as follows: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Service cost $ 4 $ 3 $ 8 $ 7 Interest cost 81 98 163 195 Amortization of prior service costs - 25 - 51 Amortization of loss ( 16 ) ( 16 ) ( 32 ) ( 32 ) Net periodic pension cost $ 69 $ 110 $ 139 $ 221 The components of net periodic pension cost other than the service cost component, which is included in selling, general and administrative expenses, are included in other loss, net in our condensed consolidated statements of operations. 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. Our liability under this plan was $ 1,584 and $ 1,601 as of May 31, 2025 and November 30, 2024, 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 $ 3,373 and $ 3,486 as of May 31, 2025 and November 30, 2024, respectively. 12 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (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: May 31, 2025 November 30, 2024 Accrued compensation and benefits $ 330 $ 330 Post employment benefit obligations 4,627 4,757 Total deferred compensation liability $ 4,957 $ 5,087 We recognized expense under our deferred compensation arrangements during the three and six months ended May 31, 2025 and June 1, 2024 as follows: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Deferred compensation expense $ 82 $ 171 $ 116 $ 626 9. Other Gains and Losses Fiscal 2025 For the three and six months ended May 31, 2025, selling, general and administrative expenses include a gain of $ 698 for proceeds received from a business interruption insurance claim arising from the previously disclosed cybersecurity incident which occurred during the third quarter of fiscal 2024. $ 569 of the gain is allocated to our retail segment and $ 129 is allocated to our wholesale segment. These insurance proceeds are included in cash provided by operating activities in the accompanying condensed consolidated statement of cash flows for the six months ended May 31, 2025. Fiscal 2024 During the three and six months ended June 1, 2024, we recognized non-cash charges for asset impairments totaling $ 5,515 which consisted of the following: ● $ 2,887 in our retail segment which included $ 1,978 related to the impairment of leasehold improvements and $ 750 from the impairment of right-of-use assets at certain underperforming retail stores, as well as $ 159 for the impairment of right-of-use assets at certain warehouse locations resulting from the consolidation of our retail warehouses. ● $ 727 for the impairment of plant and equipment in our wholesale segment related to the consolidation of our domestic wood production facilities. ● $ 1,901 for the impairment of long-lived assets at Noa Home. During the second quarter we concluded that Noa Home was not likely to achieve profitability in the foreseeable future and decided to cease operations. $ 1,827 of these charges are for the full impairment of the Noa Home trade name intangible asset, and $ 74 relates to the full impairment of customized software used in the Noa Home operations. All remaining Noa Home assets were substantially liquidated as of November 30, 2024. Our estimates of the fair value of the impaired right-of-use assets included estimates of discounted cash flows based upon current market rents and other inputs which we consider to be Level 3 inputs as specified in the fair value hierarchy in ASC Topic 820, Fair Value Measurement and Disclosure . Restructuring Reserve In the fourth quarter of fiscal 2024 we recognized a restructuring charge of $ 440 representing accrued severance pay for certain affected employees. At May 31, 2025 and November 30, 2024, $ 0 and $ 432 , respectively, of the accrual remained in other current liabilities. As of May 31, 2025, the cumulative total cost incurred for this restructuring was $ 440 , of which $ 190 was incurred by our retail segment, $ 83 by our wholesale segment, and $ 167 was charged to corporate and other. 13 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 10. 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 were contingently liable under licensee lease obligation guarantees in the amounts of $ 4,639 and $ 5,131 at May 31, 2025 and November 30, 2024, respectively. The remaining term under these lease guarantees extends for six years. In the event of default by the licensee, 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 licensee 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 obligation, net of recorded reserves. The fair value of these lease guarantees (an estimate of the cost to the Company to perform on the guarantee) at May 31, 2025 and November 30, 2024 was not material. Lease Commitments At May 31, 2025, we had commitments for two leases of real property which are expected to commence by the end of fiscal 2025. Together, these leases call for total annual rents averaging approximately $ 702 per year for an initial term of ten years. Both leases have two five -year renewal options. 14 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 11. Earnings (Loss) Per Share Basic earnings (loss) per common share is computed by dividing net income (loss) allocable to common shares by the weighted average number of common shares outstanding, adjusted for participating securities, if any. The following reconciles basic and diluted earnings (loss) per share: Net Income (Loss) Weighted Average Shares Earnings (Loss) Per Share For the quarter ended May 31, 2025: Basic earnings per share $ 1,918 8,667,908 $ 0.22 Add effect of dilutive securities: Restricted shares - 11,966 - Diluted earnings per share $ 1,918 8,679,874 $ 0.22 For the quarter ended June 1, 2024: Basic loss per share $ ( 7,201 ) 8,762,815 $ ( 0.82 ) Add effect of dilutive securities: Restricted shares* - - - Diluted loss per share $ ( 7,201 ) 8,762,815 $ ( 0.82 ) For the six months ended May 31, 2025: Basic earnings per share $ 3,772 8,673,339 $ 0.43 Add effect of dilutive securities: Restricted shares - 20,261 - Diluted earnings per share $ 3,772 8,693,600 $ 0.43 For the six months ended June 1, 2024: Basic loss per share $ ( 8,394 ) 8,751,315 $ ( 0.96 ) Add effect of dilutive securities: Restricted shares* - - - Diluted loss per share $ ( 8,394 ) 8,751,315 $ ( 0.96 ) * Due to the net loss for the period, potentially dilutive securities would have been anti-dilutive and are therefore excluded. For the three and six months ended May 31, 2025 and June 1, 2024, the following potentially dilutive shares were excluded from the computations as their effect was anti-dilutive: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Unvested shares 17,556 64,409 17,556 64,409 15 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 12. Segment Information We have strategically aligned our business into two reportable segments as defined in ASC 280, Segment Reporting , and as described below: ● Wholesale. 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 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. In addition to the two reportable segments described above, we include our remaining business activities and assets in a reconciling category known as Corporate and other. This category 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 any of our operating segments that do not meet the requirements to be reportable segments. As of and for the three and six months ended June 1, 2024, the only such operating segment included in Corporate and other is Noa Home, which was acquired on September 2, 2022, subsequently closed during fiscal 2024 and substantially liquidated as of November 30, 2024. All sales reported in our Corporate and other category during fiscal 2024 were attributable to Noa Home, which generated substantially all of its sales outside of the United States. Inter-company net sales elimination represents the elimination of wholesale sales to our Company-owned stores. 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. 16 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) The following table presents our segment information: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Sales Revenue Wholesale sales of furniture and accessories $ 54,229 $ 52,609 $ 107,156 $ 107,310 Less: Sales to retail segment ( 24,113 ) ( 20,751 ) ( 48,172 ) ( 44,514 ) Wholesale sales to external customers 30,116 31,858 58,984 62,796 Retail sales of furniture and accessories 54,232 50,468 107,526 104,222 Corporate and other - Noa Home - 1,084 - 2,946 Consolidated net sales of furniture and accessories $ 84,348 $ 83,410 $ 166,510 $ 169,964 Income (Loss) before Income Taxes: Income (loss) from operations: Wholesale $ 8,290 $ 5,687 $ 16,975 $ 12,446 Retail - Company-owned stores 482 ( 2,222 ) 434 ( 3,834 ) Net expenses - Corporate and other ( 6,521 ) ( 6,942 ) ( 12,747 ) ( 14,537 ) Inter-company elimination 246 530 290 621 Asset impairment charges (see Note 9) - ( 5,515 ) - ( 5,515 ) Consolidated income (loss) from operations 2,497 ( 8,462 ) 4,952 ( 10,819 ) Interest income 521 627 1,080 1,383 Other loss, net ( 422 ) ( 276 ) ( 881 ) ( 380 ) Consolidated income (loss) before income taxes $ 2,596 $ ( 8,111 ) $ 5,151 $ ( 9,816 ) Depreciation and Amortization Wholesale $ 596 $ 629 $ 1,186 $ 1,248 Retail - Company-owned stores 982 1,337 1,992 2,717 Corporate and other 654 661 1,300 1,326 Consolidated $ 2,232 $ 2,627 $ 4,478 $ 5,291 Capital Expenditures Wholesale $ 362 $ 371 $ 1,115 $ 534 Retail - Company-owned stores 712 837 781 2,170 Corporate and other 331 399 379 979 Consolidated $ 1,405 $ 1,607 $ 2,275 $ 3,683 As of As of Identifiable Assets May 31, 2025 November 30, 2024 Wholesale $ 89,314 $ 88,533 Retail - Company-owned stores 149,197 158,084 Corporate and other 92,822 94,553 Consolidated $ 331,333 $ 341,170 See Note 13, Revenue Recognition, for disaggregated revenue information regarding sales of furniture and accessories by product type for the wholesale and retail segments. 17 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 13. 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. Our contract assets, which consist of our accounts receivable, net and are associated with our wholesale segment, were $ 12,883 , $ 13,181 and $ 13, 736 at May 31, 2025, November 30, 2024 and November 25, 2023. We typically collect a significant portion of the purchase price from our retail customers as a deposit upon order, with the balance typically collected at the time delivery is scheduled. These customer deposits are carried on our balance sheet as a current liability until delivery is fulfilled and amounted to $ 24,029 , $ 25,742 and $ 22,788 as of May 31, 2025, November 30, 2024 and November 25, 2023, respectively. Substantially all of the customer deposits held as of November 30, 2024 related to performance obligations that were satisfied during the current year-to-date period and have therefore been recognized in revenue for the six months ended May 31, 2025. 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 May 31, 2025 and November 30, 2024, our balance of prepaid commissions included in other current assets was $ 2,663 and $ 2,928 , 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 six months ended May 31, 2025 and June 1, 2024, excluding intercompany transactions between our segments, is a follows: Quarter Ended May 31, 2025 June 1, 2024 Wholesale Retail Corporate & Other Total Wholesale Retail Corporate & Other (2) Total Bassett Custom Upholstery $ 20,004 $ 29,540 $ - $ 49,544 $ 21,921 $ 27,256 $ - $ 49,177 Bassett Leather 3,917 1,791 - 5,708 3,563 1,117 - 4,680 Bassett Custom Wood 3,322 8,468 - 11,790 3,427 8,522 - 11,949 Bassett Casegoods 2,873 7,072 - 9,945 2,947 6,390 - 9,337 Accessories, mattresses and other (1) - 7,361 - 7,361 - 7,183 1,084 8,267 Consolidated net sales of furniture and accessories $ 30,116 $ 54,232 $ - $ 84,348 $ 31,858 $ 50,468 $ 1,084 $ 83,410 Six Months Ended May 31, 2025 June 1, 2024 Wholesale Retail Corporate & Other Total Wholesale Retail Corporate & Other (2) Total Bassett Custom Upholstery $ 38,850 $ 59,035 $ - $ 97,885 $ 42,222 $ 57,059 $ - $ 99,281 Bassett Leather 8,030 3,718 - 11,748 7,522 1,944 - 9,466 Bassett Custom Wood 6,635 16,174 - 22,809 7,185 16,720 - 23,905 Bassett Casegoods 5,469 13,724 - 19,193 5,867 13,775 - 19,642 Accessories, mattresses and other (1) - 14,875 - 14,875 - 14,724 2,946 17,670 Consolidated net sales of furniture and accessories $ 58,984 $ 107,526 $ - $ 166,510 $ 62,796 $ 104,222 $ 2,946 $ 169,964 (1) Includes the sale of goods other than Bassett-branded products, such as accessories and bedding, and also includes the sale of furniture protection plans. (2) Corporate and other for the three and six months ended June 1, 2024 includes the sales of Noa Home, which was acquired on September 2, 2022, closed during fiscal 2024 and substantially liquidated as of November 30, 2024. 18 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 14. Changes to Stockholders ’ Equity The following changes in our stockholders’ equity occurred during the three and six months ended May 31, 2025 and June 1, 2024: Quarter Ended Six Months Ended May 31, 2025 June 1, 2024 May 31, 2025 June 1, 2024 Common Stock: Beginning of period $ 43,462 $ 43,883 $ 43,681 $ 43,842 Issuance of common stock 87 98 166 191 Purchase and retirement of common stock ( 139 ) ( 173 ) ( 437 ) ( 225 ) End of period $ 43,410 $ 43,808 $ 43,410 $ 43,808 Common Shares Issued and Outstanding: Beginning of period 8,692,134 8,776,349 8,736,046 8,768,221 Issuance of common stock 17,454 19,629 33,189 38,117 Purchase and retirement of common stock ( 27,737 ) ( 34,646 ) ( 87,384 ) ( 45,006 ) End of period 8,681,851 8,761,332 8,681,851 8,761,332 Additional Paid-in Capital: Beginning of period $ - $ 175 $ 6 $ 93 Issuance of common stock ( 3 ) ( 5 ) ( 1 ) ( 12 ) Purchase and retirement of common stock ( 163 ) ( 316 ) ( 311 ) ( 425 ) Stock based compensation 166 198 306 396 End of period $ - $ 52 $ - $ 52 Retained Earnings: Beginning of period $ 122,556 $ 136,588 $ 122,847 $ 139,354 Net income (loss) for the period 1,918 ( 7,201 ) 3,772 ( 8,394 ) Purchase and retirement of common stock ( 135 ) - ( 546 ) - Cash dividends declared and paid ( 1,742 ) ( 1,580 ) ( 3,476 ) ( 3,153 ) End of period $ 122,597 $ 127,807 $ 122,597 $ 127,807 Accumulated Other Comprehensive Income (Loss): Beginning of period $ 781 $ ( 8 ) $ 793 $ 152 Cumulative translation adjustments, net of tax - ( 7 ) - ( 174 ) Amortization of pension costs, net of tax ( 12 ) 8 ( 24 ) 15 End of period $ 769 $ ( 7 ) $ 769 $ ( 7 ) The balance of cumulative translation adjustments, net of tax, was zero at both May 31, 2025 and November 30, 2024. 19 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED MAY 31, 2025 (Dollars in thousands except share and per share data) 15. Recent Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update 2023-07 – Segment Reporting (Topic ASC 740) Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require: that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); and that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. The other segment items category is the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss. The amendments in ASU 2023-07 will become effective for us for our 2025 fiscal year and for interim periods beginning with our 2026 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations. In December 2023, the FASB issued Accounting Standards Update 2023-09 – Income Taxes (Topic ASC 740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU 2023-09 will become effective for us as of the beginning of our 2026 fiscal year. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We do not expect that this guidance will have a material impact upon our financial position and results of operations. In November 2024, the FASB issued Accounting Standards Update 2024-03 – Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic ASC 220-40) Disaggregation of Income Statement Expenses. The amendments in this ASU require a public business entity to disclose specific information about certain costs and expenses in the notes to its financial statements for interim and annual reporting periods. The objective of the disclosure requirements is to provided disaggregated information about a public business entity's expenses to help investors (a) better understand the entity's performance, (b) better assess the entity's prospects for future cash flows, and (c) compare an entity's performance over time and with that of other entities. The amendments in ASU 2024-03 will become effective for us for our 2028 fiscal year and for interim periods beginning with our 2029 fiscal year. Early adoption is permitted. We do not expect that this guidance will have a material impact upon our financial position and results of operations. 20 of 35 PART I-FINANCIAL INFORMATION-CONTINUED BASSETT FURNITURE INDUSTRIES, INCORPORATED AND SUBSIDIARIES MAY 31, 2025 (Dollars in thousands except share and per share data)