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Item 1. Financial Statements

2020-08-12 compared with 2020-02-12 · 151 added, 186 removed, 322 unchanged (51% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 29, 2019 (UNAUDITED) AND MARCH 31, 2019

JUNE 28, 2020 (UNAUDITED) AND MARCH 29, 2020

(amounts in thousands, except share and per share amounts)

December 29, 2019

June 28, 2020

March 29, 2020

1 unchanged sentence

Cash and cash equivalents

Accounts receivable (net of allowances of $665 at December 29, 2019 and $407 at March 31, 2019):

Accounts receivable (net of allowances of $587 at June 28, 2020 and $530 at March 29, 2020):

Due from factor

23 unchanged sentences

Dividends payable

Income taxes payable

Operating lease liabilities, current

Unearned revenue

Other accrued liabilities

Current maturities of long-term debt

Total current liabilities

6 unchanged sentences

Common stock - $0.01 par value per share;

Authorized 40,000,000 shares at December 29, 2019 and March 31, 2019;

Issued 12,603,301 shares at December 29, 2019 and 12,546,789 shares at March 31, 2019

Authorized 40,000,000 shares at June 28, 2020 and March 29, 2020;

Issued 12,623,301 shares at June 28, 2020 and 12,603,301 shares at March 29, 2020

Additional paid-in capital

Treasury stock - at cost - 2,436,494 shares at December 29, 2019 and 2,424,231 shares at March 31, 2019

Treasury stock - at cost - 2,436,494 shares at June 28, 2020 and March 29, 2020

Retained Earnings

5 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

(amounts in thousands, except per share amounts)

Three-Month Periods Ended

Nine-Month Periods Ended

December 29, 2019

December 30, 2018

December 29, 2019

December 30, 2018

June 28, 2020

June 30, 2019

Cost of products sold

1 unchanged sentence

Income from operations

Other income (expense):

Other (expense) income:

Interest expense - net of interest income

Gain on sale of property, plant and equipment

Income before income tax expense

2 unchanged sentences

Effect of dilutive securities

Earnings per share:

Earnings per share - basic and diluted

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

THREE AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

Common Shares

Treasury Shares

Shareholders'

Number of Shares

Retained Earnings

Shareholders' Equity

(Dollar amounts in thousands)

Three-Month Periods

Balances - September 30, 2018

Stock-based compensation

Dividends declared on common stock - $0.08 per share

Balances - December 30, 2018

Balances - September 29, 2019

Issuance of shares

Stock-based compensation

Acquisition of treasury stock

Dividends declared on common stock - $0.33 per share

Balances - December 29, 2019

Nine-Month Periods

Balances - April 1, 2018

Issuance of shares

Balances - March 31, 2019

Stock-based compensation

1 unchanged sentence

Dividends declared on common stock - $0.08 per share

Balances - December 30, 2018

Balances - June 30, 2019

Balances - March 29, 2020

1 unchanged sentence

Stock-based compensation

Acquisition of treasury stock

Dividends declared on common stock - $0.49 per share

Balances - December 29, 2019

Balances - June 28, 2020

See notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE-MONTH PERIODS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

(amounts in thousands)

Nine-Month Periods Ended

December 29, 2019

December 30, 2018

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Operating activities:

4 unchanged sentences

Deferred income taxes

Gain on sale of property, plant and equipment

Reserve for unrecognized tax liabilities

9 unchanged sentences

Capital expenditures for property, plant and equipment

Proceeds from sale of property, plant and equipment

Net cash used in investing activities

Financing activities:

1 unchanged sentence

Borrowings under revolving line of credit

Proceeds from long-term debt

Purchase of treasury stock

Issuance of common stock

Dividends paid

Net cash used in financing activities

Net decrease in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

10 unchanged sentences

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE-MONTH PERIODS ENDED DECEMBER 29, 2019 AND DECEMBER 30, 2018

FOR THE THREE-MONTH PERIODS ENDED JUNE 28, 2020 AND JUNE 30, 2019

Note 1 – Summary of Significant Accounting Policies

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The accompanying unaudited consolidated financial statements include the accounts of Crown Crafts, Inc.

(the “Company”) and its subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information as promulgated by the Financial Accounting Standards Board (“FASB”).

(the “Company”) and its subsidiaries and have been prepared pursuant to accounting principles generally accepted in the United States (“GAAP”) applicable to interim financial information as promulgated by the Financial Accounting Standards Board (“FASB”).

Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements.

References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which has been established by the FASB as the authoritative source for GAAP to be applied by nongovernmental entities.

In the opinion of management, the interim unaudited consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of December 29, 2019 and the results of its operations and cash flows for the periods presented.

References herein to GAAP are to topics within the FASB Accounting Standards Codification (the “FASB ASC”), which the FASB periodically revises through the issuance of an Accounting Standards Update (“ASU”) and which has been established by the FASB as the authoritative source for GAAP recognized by the FASB to be applied by nongovernmental entities.

In the opinion of management, the interim unaudited consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of June 28, 2020 and the results of its operations and cash flows for the periods presented.

Such adjustments include normal, recurring accruals, as well as the elimination of all significant intercompany balances and transactions.

Operating results for the three and nine-month periods ended December 29, 2019 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 29, 2020.

Operating results for the three-month period ended June 28, 2020 are not necessarily indicative of the results that may be expected by the Company for its fiscal year ending March 28, 2021.

For further information, refer to the Company’s consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended March 29, 2020.

5 unchanged sentences

Use of Estimates :

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated balance sheets and the reported amounts of revenues and expenses during the periods presented on the unaudited consolidated statements of income and cash flows.

Significant estimates are made with respect to the allowances related to accounts receivable for customer deductions for returns, allowances and disputes.

The Company also has a certain amount of discontinued finished goods which necessitates the establishment of inventory reserves that are highly subjective.

The Company has also established estimated reserves in connection with the uncertainty concerning the amount of income tax recognized.

Actual results could differ materially from those estimates.

Cash and Cash Equivalents:

The Company considers highly-liquid investments, if any, purchased with original maturities of three months or less to be cash equivalents.

The Company’s credit facility consists of a revolving line of credit under a financing agreement with The CIT Group/Commercial Services, Inc.

5 unchanged sentences

Advertising Cost s :

The Company’s advertising costs are primarily associated with cooperative advertising arrangements with certain of the Company’s customers and are recognized using the straight-line method based upon aggregate annual estimated amounts for those customers, with periodic adjustments to the actual amounts of authorized agreements.

Costs associated with advertising on websites such as Facebook and Google and which are related to the Company’s online business are recorded as incurred.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $261,000 and $295,000 for the three months ended December 29, 2019 and December 30, 2018, respectively, and amounted to $805,000 and $968,000 for the nine months ended December 29, 2019 and December 30, 2018, respectively.

The Company’s advertising costs are primarily associated with cooperative advertising arrangements with certain of the Company’s customers and are recognized using the straight-line method based upon aggregate annual estimated amounts for these customers, with periodic adjustments to the actual amounts of authorized agreements.

Costs associated with advertising on websites such as Facebook and Google and which are associated with the Company’s online business are recorded as incurred.

Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $345,000 and $284,000 for the three months ended June 28, 2020 and June 30, 2019, respectively.

Revenue Recognition:

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Such terms usually stipulate that legal title will pass when the shipped products are no longer under the control of the Company, such as when the products are picked up at the Company’s facility by the customer or by a common carrier.

Payment terms can vary from prepayment for sales made directly to consumers and some international sales to payment due in arrears (generally, 60 days of being invoiced) for sales made to retailers.

A disaggregation of the Company’s revenue is set forth below under the heading “ Segment and Related Information ” in this Note 1.

Payment terms can vary from prepayment for sales made directly to consumers to payment due in arrears (generally, 60 days of being invoiced) for sales made to retailers.

Allowances Against Accounts Receivable:

Revenue from sales made to retailers is reported net of allowances for anticipated returns and other allowances, including cooperative advertising allowances, warehouse allowances, placement fees, volume rebates, coupons and discounts.

Such allowances are recorded commensurate with sales activity or applying the straight-line method, as appropriate, and the cost of such allowances is netted against sales in reporting the results of operations.

Such allowances are recorded commensurate with sales activity or using the straight-line method, as appropriate, and the cost of such allowances is netted against sales in reporting the results of operations.

The provision for the majority of the Company’s allowances occurs on a per-invoice basis.

9 unchanged sentences

Credit Concentration:

The Company’s accounts receivable as of December 29, 2019 amounted to $15.5 million, net of allowances of $665,000.

Of this amount, $14.6 million was due from CIT under the factoring agreements and $25,000 was due from CIT as a negative balance outstanding under the revolving line of credit.

The Company’s accounts receivable as of June 28, 2020 amounted to $15.1 million, net of allowances of $587,000.

Of this amount, $14.5 million was due from CIT under the factoring agreements and $6.2 million was due from CIT as a negative balance outstanding under the revolving line of credit.

The combined amount of $20.7 million represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements and the revolving line of credit.

Other Accrued Liabilities :

An amount of $272,000 was recorded as other accrued liabilities as of December 29, 2019.

Of this amount, $119,000 reflected unearned revenue recorded for payments from customers that were received before the products ordered were received by the customers.

Other accrued liabilities as of December 29, 2019 also include a reserve for customer returns of $14,000 and unredeemed store credits and gift certificates totaling $12,000.

The Company’s accounts receivable at March 29, 2020 amounted to $17.8 million, net of allowances of $530,000.

Of this amount, $17.1 million was due from CIT under the factoring agreements, which amount represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements.

Unearned Revenue :

Unearned revenue reflecting payments from customers that were received before the products ordered were received by the customers was $524,000 and $155,000 as of June 28, 2020 and March 29, 2020, respectively.

Segment and Related Information:

The Company operates primarily in one principal segment – infant, toddler and juvenile products.

These products consist of infant and toddler bedding, bibs, soft bath products, disposable products and accessories.

Net sales of bedding, blankets and accessories and net sales of bibs, bath, developmental toy, feeding, baby care and disposable products for the three and nine-month periods ended December 29, 2019 and December 30, 2018 are as follows (in thousands):

The Company operates primarily in one principal segment, infant and toddler products.

These products consist of infant and toddler bedding, bibs, soft bath products, disposable products, developmental and bath toys and accessories.

Net sales of bedding, blankets and accessories and net sales of bibs, bath, developmental toy, feeding, baby care and disposable products for the three-month periods ended June 28, 2020 and June 30, 2019 are as follows (in thousands):

Three-Month Periods Ended

Nine-Month Periods Ended

December 29, 2019

December 30, 2018

December 29, 2019

December 30, 2018

June 28, 2020

June 30, 2019

Bedding, blankets and accessories

1 unchanged sentence

Total net sales

Inventory Valuation:

Invento ry Valuation:

The preparation of the Company's financial statements requires careful determination of the appropriate value of the Company's inventory balances.

Such amounts are presented as a current asset in the accompanying condensed consolidated balance sheets and are a direct determinant of cost of products sold in the accompanying unaudited condensed consolidated statements of income and, therefore, have a significant impact on the amount of net income reported in the accounting periods.

Such amounts are presented as a current asset in the accompanying condensed consolidated balance sheets and are a direct determinant of cost of products sold in the accompanying condensed consolidated statements of income and, therefore, have a significant impact on the amount of net income reported in the accounting periods.

The basis of accounting for inventories is cost, which includes the direct supplier acquisition cost, duties, taxes and freight, and the indirect costs to design, develop, source and store the product until it is sold.

1 unchanged sentence

The determination of the indirect charges and their allocation to the Company's finished goods inventories is complex and requires significant management judgment and estimates.

If management made different judgments or utilized different estimates, then such differences would result in a change in the valuation of the Company's inventories and the amount and timing of the Company's cost of products sold and the resulting net income for the reporting period.

If management made different judgments or utilized different estimates, then differences would result in the valuation of the Company's inventories and in the amount and timing of the Company's cost of products sold and the resulting net income for the reporting period.

On a periodic basis, management reviews its inventory quantities on hand for obsolescence, physical deterioration, changes in price levels and the existence of quantities on hand which may not reasonably be expected to be sold within the Company’s normal operating cycle.

2 unchanged sentences

Only when inventory for which an allowance has been established is later sold or is otherwise disposed is the allowance reduced accordingly.

Management judgment is required in determining the amount and adequacy of this allowance.

If actual results differ from management's estimates or these estimates and judgments are revised in future periods, then the Company may not fully realize the carrying value of its inventory or may need to establish additional allowances, either of which could materially impact the Company's financial position and results of operations.

Significant management judgment is required in determining the amount and adequacy of this allowance.

In the event that actual results differ from management's estimates or these estimates and judgments are revised in future periods, the Company may not fully realize the carrying value of its inventory or may need to establish additional allowances, either of which could materially impact the Company's financial position and results of operations.

Royalty Payments:

1 unchanged sentence

These royalty amounts are accrued based upon historical sales rates adjusted for current sales trends by customers.

Royalty expense is included in cost of products sold in the accompanying unaudited condensed consolidated statements of income and amounted to $1.3 million for each of the three-month periods ended December 29, 2019 and December 30, 2018, and amounted to $3.5 million and $3.7 million for the nine-month periods ended December 29, 2019 and December 30, 2018, respectively.

Royalty expense is included in cost of products sold in the accompanying unaudited consolidated statements of income and amounted to $1.2 million and $881,000 for the three-month periods ended June 28, 2020 and June 30, 2019, respectively.

Depreciation and Amortization:

13 unchanged sentences

Provision for Income Taxes:

The Company’s provision for income taxes includes all currently payable federal, state, local and foreign taxes and is based upon the Company’s estimated annual effective tax rate (“ETR”), which is based on the Company’s forecasted annual pre-tax income, as adjusted for certain expenses within the consolidated statements of income that will never be deductible on the Company’s tax returns and certain charges expected to be deducted on the Company’s tax returns that will never be deducted on the consolidated statements of income, multiplied by the statutory tax rates for the various jurisdictions in which the Company operates.

The Company’s provisions for income taxes for the nine-month periods ended December 29, 2019 and December 30, 2018 are based upon an estimated annual ETR from continuing operations of 23.3% and 24.2%, respectively.

The Company provides for deferred income taxes based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates that will be in effect when the differences are expected to reverse.

The Company’s provision for income taxes includes all currently payable federal, state, local and foreign taxes and is based upon the Company’s estimated annual effective tax rate (the “ETR”), which is based on the Company’s forecasted annual pre-tax income, as adjusted for certain expenses within the consolidated statements of income that will never be deductible on the Company’s tax returns and certain charges expected to be deducted on the Company’s tax returns that will never be deducted on the consolidated statements of income, multiplied by the statutory tax rates for the various jurisdictions in which the Company operates and reduced by certain anticipated tax credits.

The Company files income tax returns in the many jurisdictions in which it operates, including the U.S., several U.S.

1 unchanged sentence

The statute of limitations varies by jurisdiction;

tax years open to examination or other adjustment as of December 29, 2019 were the tax years ended March 31, 2019, April 1, 2018, April 2, 2017, April 3, 2016, March 29, 2015 and March 30, 2014.

tax years open to federal or state audit or other adjustment as of June 28, 2020 were the tax years ended March 29, 2020, March 31, 2019, April 1, 2018, April 2, 2017, April 3, 2016 and March 30, 2014.

Management evaluates items of income, deductions and credits reported on the Company’s various federal and state income tax returns filed and recognizes the effect of positions taken on those income tax returns only if those positions are more likely than not to be sustained.

The Company applies the provisions of FASB ASC Sub-topic 740-10-25, which requires a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements.

The Company applies the provisions of accounting guidelines that require a minimum recognition threshold that a tax benefit must meet before being recognized in the financial statements.

Recognized income tax positions are measured at the largest amount that has a greater than 50% likelihood of being realized.

2 unchanged sentences

However, the Company also realizes that the ultimate resolution of such tax position could result in a tax charge that is more than the amount realized based upon the application of the tax position taken.

Therefore, the Company’s measurement regarding the potential impact of an unfavorable resolution of its tax position related to state apportionment percentages resulted in the Company recording discrete reserves for unrecognized tax liabilities of $29,000 and $7,000 during the three-month periods ended December 29, 2019 and December 30, 2018, respectively, and $71,000 and $66,000 during the nine-month periods ended December 29, 2019 and December 30, 2018, respectively, in the accompanying unaudited condensed consolidated statements of income.

The Company’s policy is to accrue interest expense and penalties as appropriate on estimated unrecognized tax liabilities as a charge to interest expense in the Company’s consolidated statements of income.

The Company accrued interest and penalties associated with its reserve for unrecognized tax liabilities during the three-month periods ended December 29, 2019 and December 30, 2018 of $18,000 and $22,000, respectively, and during the nine-month periods ended December 29, 2019 and December 30, 2018 of $62,000 and $68,000, respectively, in the accompanying unaudited condensed consolidated statements of income for interest expense and penalties on the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired.

Therefore, the Company’s measurement regarding the tax impact of the revised state apportionment percentages resulted in the Company recording discrete reserves for unrecognized tax liabilities during the three-month periods ended June 28, 2020 and June 30, 2019 of $13,000 and $11,000, respectively, in the accompanying unaudited condensed consolidated statements of income.

The Company’s policy is to accrue interest expense and penalties as appropriate on any estimated unrecognized tax liabilities as a charge to interest expense in the Company’s consolidated statements of income.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company accrued $17,000 and $26,000, respectively, for interest expense and penalties on the portion of the unrecognized tax liabilities for which the relevant statute of limitations remained unexpired.

No interest expense or penalties are accrued with respect to estimated unrecognized tax liabilities that are associated with state income tax overpayments that remain receivable.

In December 2016, the Company was notified by the Franchise Tax Board of the State of California (the “FTB”) of its intention to examine the Company’s claims for refund made in connection with amended consolidated income tax returns that the Company had filed for the fiscal years ended March 30, 2014, March 31, 2013, April 1, 2012 and April 3, 2011.

As outlined above, the Company has recorded discrete reserves for unrecognized tax liabilities for these and succeeding fiscal years, and has also accrued interest expense and penalties associated with these unrecognized tax liabilities.

On July 31, 2019, the FTB notified the Company that it would take no further action with regard to the fiscal years ended March 31, 2013, April 1, 2012 and April 3, 2011.

Accordingly, the Company reversed the reserves for unrecognized tax liabilities that it had previously recorded for these fiscal years, which resulted in the recognition of a discrete income tax benefit of $232,000 during the nine-month period ended December 29, 2019 in the accompanying unaudited condensed consolidated statements of income.

The Company also reversed the interest expense and penalties that it had accrued in respect of the unrecognized tax liabilities for these fiscal years, which resulted in the recognition of a credit to interest expense of $78,000 during the nine-month period ended December 29, 2019.

As of January 30, 2020, the status of the Company’s claim for refund made in connection with the amended consolidated income tax return that the Company filed for the fiscal year ended March 30, 2014 was not resolved.

Accordingly, the Company reversed the reserves for unrecognized tax liabilities that it had previously recorded for these fiscal years, which resulted in the recognition of a discrete income tax benefit of $232,000 during the three-month period ended June 30, 2019 in the unaudited condensed consolidated statements of income.

As of July 27, 2020, the status of the Company’s claim for refund made in connection with the amended consolidated income tax return that the Company filed for the fiscal year ended March 30, 2014 was not resolved.

The ultimate resolution of this claim for refund could include administrative or legal proceedings.

2 unchanged sentences

To the extent that the Company’s reserve for unrecognized tax liabilities is not adequate to support the cumulative effect of such adjustments, the Company could experience a material adverse impact on its future results of operations.

Conversely, to the extent that the calculations and positions taken by the Company on the filed income tax returns under examination are sustained, another reversal of all or a portion of the Company’s reserve for unrecognized tax liabilities could result in a favorable impact on its future results of operations.

During each of the three and nine-month periods ended December 29, 2019, the Company recorded a discrete income tax benefit of $276,000 to reflect the aggregate effect of certain tax credits.

During the three and nine-month periods ended December 29, 2019, the Company recorded a discrete income tax benefit of $1,000 and a net discrete income tax charge of $5,000, respectively, to reflect the effects of the excess tax benefits and tax shortfalls arising from the exercise of stock options and the vesting of non-vested stock during the periods.

The Company recorded a discrete income tax charge of $12,000 during the nine-month period ended December 30, 2018 to reflect the net effects of the excess tax benefits and tax shortfalls arising from the vesting of non-vested stock during the period.

The ETR on continuing operations and the discrete income tax charges and benefits set forth above resulted in an overall provision for income taxes of 16.0% and 25.8% for the nine-month periods ended December 29, 2019 and December 30, 2018, respectively.

Conversely, to the extent that the calculations and positions taken by the Company on the filed income tax returns under examination are sustained, or to the extent that the tax returns become closed to examination or other adjustment, another reversal of all or a portion of the Company’s reserve for unrecognized tax liabilities could result in a favorable impact on its future results of operations.

During the three-month period ended June 30, 2019, the Company recorded a discrete income tax charge of $2,000 to reflect the effects of the tax shortfalls arising from the vesting of non-vested stock during the period.

There was no such charge recorded during the three-month period ended June 28, 2020.

E arnings Per Share:

12 unchanged sentences

2016-13 was required to be adopted no later than the fiscal year beginning after December 15, 2019, but on November 15, 2019, the FASB issued ASU No.

2019-10, Financial Instruments – Credit Losses (Topic 326) , Derivatives and Hedging (Topi c 815), and Leases (Topic 842 ) :

2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) :

Effective Dates , which provided for the deferral of the effective date of ASU No.

2016-13 for registrants that are a smaller reporting company to the first interim period of the fiscal year beginning after December 15, 2022.

2016-13 for a registrant that is a smaller reporting company to the first interim period of the fiscal year beginning after December 15, 2022.

Accordingly, the Company intends to adopt ASU No.

2 unchanged sentences

2016-13, because the Company assigns the majority of its trade accounts receivable under factoring agreements with CIT, the Company does not believe that the adoption of the ASU will have a significant impact on the Company’s financial position, results of operations and related disclosures.

The Company has determined that all other ASUs which had become effective as of December 29, 2019, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

The Company has determined that all other ASU’s issued which had become effective as of July 27, 2020, or which will become effective at some future date, are not expected to have a material impact on the Company’s consolidated financial statements.

Note 2 – Financing Arrangements

Factoring Agreement s:

The Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below.

To reduce its exposure to credit losses, The Company assigns the majority of its trade accounts receivable to CIT pursuant to factoring agreements, which have expiration dates that are coterminous with that of the financing agreement described below.

Under the terms of the factoring agreements, CIT remits customer payments to the Company as such payments are received by CIT.

Credit losses are borne by CIT with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts.

CIT bears credit losses with respect to assigned accounts receivable from approved shipments, while the Company bears the responsibility for adjustments from customers related to returns, allowances, claims and discounts.

CIT may at any time terminate or limit its approval of shipments to a particular customer.

If such a termination or limitation occurs, then the Company either assumes (and may seek to mitigate) the credit risk for shipments to the customer after the date of such termination or limitation or discontinues shipments to the customer.

Factoring fees, which are included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, amounted to $75,000 and $64,000 for the three-month periods ended December 29, 2019 and December 30, 2018, respectively, and amounted to $188,000 and $192,000 for the nine-month periods ended December 29, 2019 and December 30, 2018, respectively.

Factoring fees, which are included in marketing and administrative expenses in the accompanying consolidated statements of income, were $45,000 and $51,000 during the three-month periods ended June 28, 2020 and June 30, 2019, respectively.

There were no advances on the factoring agreements at June 30, 2020 or March 29, 2020.

Credit Facility:

The Company’s credit facility at December 29, 2019 consisted of a revolving line of credit under a financing agreement with CIT of up to $26.0 million, which includes a $1.5 million sub-limit for letters of credit, bearing interest at the rate of prime minus 0.50% or LIBOR plus 1.75%.

The Company’s credit facility at June 28, 2020 consisted of a revolving line of credit under a financing agreement with CIT of up to $26.0 million, which includes a $1.5 million sub-limit for letters of credit, bearing interest at the rate of prime minus 0.5% or LIBOR plus 1.75%.

The financing agreement matures on July 11, 2022 and is secured by a first lien on all assets of the Company.

As of December 29, 2019, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 3.44% as of December 29, 2019.

The financing agreement also provides for the payment by CIT of interest at the rate of prime as of the beginning of the calendar month minus 2.0%, which was 2.75% as of December 29, 2019, on daily negative balances, if any, held at CIT.

As of December 29, 2019, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and $23.7 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

At June 28, 2020, the Company had elected to pay interest on balances owed under the revolving line of credit, if any, under the LIBOR option, which was 2.74% as of June 28, 2020.

The financing agreement also provides for the payment by CIT to the Company of interest at the rate of prime as of the beginning of the calendar month minus 2.0%, which was 1.25% as of June 28, 2020, on daily negative balances, if any, held at CIT.

As of June 28, 2020, there was no balance owed on the revolving line of credit, there was no letter of credit outstanding and $20.6 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

As of March 29, 2020, there was a balance of $2.6 million owed on the revolving line of credit, there was no letter of credit outstanding and $20.1 million was available under the revolving line of credit based on the Company’s eligible accounts receivable and inventory balances.

The financing agreement contains usual and customary covenants for agreements of that type, including limitations on other indebtedness, liens, transfers of assets, investments and acquisitions, merger or consolidation transactions, transactions with affiliates, and changes in or amendments to the organizational documents for the Company and its subsidiaries.

The Company believes it was in compliance with these covenants as of December 29, 2019.

The Company believes it was in compliance with these covenants as of June 28, 2020.

Paycheck Protection Program Loan :

On April 19, 2020, the Company executed a Note (the “Note”) in connection with a loan (the “Loan”) made pursuant to the Paycheck Protection Program (the “PPP”), which is administered by the U.S.

Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”).

The Note was entered into with CIT Bank, N.A.

(the “Lender”) for the principal amount of $1,963,800 and will accrue interest at 1.0% per year.

The Note will mature on April 20, 2022, at which time all remaining outstanding principal and accrued interest amounts under the Note will become due and payable.

As authorized by the provisions of the CARES Act, the Company may apply to the Lender for forgiveness of all or a portion of the Loan in an amount equal to the sum of certain allowable costs incurred by the Company during the 8-week period beginning on April 20, 2020.

The Flexibility Act extended this to a period of up to 24 weeks beginning on April 20, 2020.

Such forgiveness will be determined, subject to limitations, based on the use of the proceeds of the Loan for payroll costs, mortgage interest, rent or utility costs.

The terms of the Note provided that beginning on November 1, 2020, the Company would be required to pay monthly installments of principal and interest in the amount necessary to fully amortize the Loan through the maturity date.

However, the Flexibility Act provides that principal and interest payments will not be required to begin until subsequent to the date that the forgiveness amount is remitted to the Lender by the SBA, or the SBA otherwise notifies the Lender that the Loan is not eligible for forgiveness.

The Note may be prepaid at any time prior to maturity without penalty.

The Company intends to submit an application to the Lender for forgiveness of the full amount of the Loan.

The Company has made a preliminary projection that the amount, if any, of the Loan that is determined to be forgiven will be remitted to the Lender by the SBA in December 2020.

The Company has not presumed that any amount of such forgiveness of the Loan will be obtained, either in whole or in part, and has therefore made the assumption that monthly installments will commence in January 2021 of principal and interest in the amount necessary to amortize the full amount of the Loan through the maturity date.

The Company has accordingly classified principal payments in the aggregate amount of $737,000 as a current liability in the accompanying condensed consolidated balance sheet as of June 28, 2020.

The remaining balance of the Loan outstanding as of June 28, 2020 of $1.2 million has been presented as long-term debt in the accompanying condensed consolidated balance sheet, such amount being due and payable in monthly installments from July 2021 through March 2022.

The Note contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the Note.

The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, and/or filing suit and obtaining judgment against the Company.

Additionally, the Note is subject to the terms and conditions applicable to loans administered by the SBA under the CARES Act and the Flexibility Act.

Note 3 – Goodwill

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one that produces and markets infant and toddler bedding, blankets and accessories and another that produces and markets infant and toddler bibs, developmental toys, bath care and disposable products.

The goodwill of the reporting units of the Company as of December 29, 2019 and March 31, 2019 amounted to $30.0 million, which is reflected in the accompanying condensed consolidated balance sheets net of accumulated impairment charges of $22.9 million, for a net reported balance of $7.1 million.

The goodwill of the reporting units of the Company as of June 28, 2020 and March 29, 2020 amounted to $30.0 million, which is reflected in the accompanying condensed consolidated balance sheets net of accumulated impairment charges of $22.9 million, for a net reported balance of $7.1 million.

The Company measures for impairment the goodwill within its reporting units annually as of the first day of the Company’s fiscal year.

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If the carrying value exceeds the estimated fair value of the reporting unit, then an impairment charge is calculated as the difference between the carrying value of the reporting unit and its estimated fair value, not to exceed the goodwill of the reporting unit.

On April 1, 2019, the Company performed the annual measurement for impairment of the goodwill of its reporting units and concluded that the estimated fair value of each of the Company’s reporting units exceeded their carrying values, and thus the goodwill of the Company’s reporting units was not impaired as of that date.

On March 30, 2020, the Company performed the annual measurement for impairment of the goodwill of its reporting units and concluded that the estimated fair value of each of the Company’s reporting units exceeded their carrying values, and thus the goodwill of the Company’s reporting units was not impaired as of that date.

Note 4 – Other Intangible Assets

Other intangible assets as of December 29, 2019 and March 31, 2019 consisted primarily of the fair value of identifiable assets acquired in business combinations other than tangible assets and goodwill.

The gross amount and accumulated amortization of the Company’s other intangible assets as of December 29, 2019 and March 31, 2019, the amortization expense for the three and nine-month periods ended December 29, 2019 and December 30, 2018 and the classification of such amortization expense within the accompanying unaudited condensed consolidated statements of income are as follows (in thousands):

Other intangible assets as of June 28, 2020 and March 29, 2020 consisted primarily of the fair value of identifiable assets acquired in business combinations other than tangible assets and goodwill.

The gross amount and accumulated amortization of the Company’s other intangible assets as of June 28, 2020 and March 29, 2020, the amortization expense for the three-month periods ended June 28, 2020 and June 30, 2019 and the classification of such amortization expense within the accompanying unaudited condensed consolidated statements of income are as follows (in thousands):

Amortization Expense

Periods Ended

Accumulated Amortization

Three-Month Periods Ended

Tradename and trademarks

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Major classes of inventory were as follows (in thousands):

December 29, 2019

June 28, 2020

March 29, 2020

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N ote 6 – Leases

On April 1, 2019, the Company commenced its initial application of the provisions of FASB ASC Topic 842, L ease s (“Topic 842”), under which the Company has capitalized most of its current operating lease obligations as right-of-use assets and recognized corresponding liabilities.

The Company has used a modified retrospective transition approach permitted by Topic 842.

The Company elected to use the “package of practical expedients,” which permitted the Company to avoid a reassessment of prior conclusions about lease identification, lease classification and initial direct costs.

The Company also elected the practical expedient that permitted the Company to exclude short-term agreements of less than 12 months from capitalization.

In its initial application of Topic 842, the Company recognized operating lease liabilities and corresponding right-of-use assets of $1.9 million based on the present value of the remaining minimum rental payments under the Company’s operating leases.

In addition to the recognition of operating lease liabilities and right-of-use assets, the Company also reclassified its deferred rent liability as of April 1, 2019 of $99,000 as an offset to the amount of its initial operating lease right-of-use assets.

The recognition of a cumulative-effect adjustment to the opening balance of the Company’s retained earnings was not required as a result of the initial application of Topic 842.

The Company is a party to various operating leases for offices, warehousing facilities and certain office equipment.

The leases expire at various dates, have varying options to renew and cancel, and may contain escalation provisions.

The Company expenses non-variable lease payments ratably over the lease term.

The Company recognizes as expense non-variable lease payments ratably over the lease term.

The key estimates for the Company’s leases include the discount rate used to discount the unpaid lease payment to present value and the lease term.

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For purposes of such estimates, a lease term includes the noncancellable period under the applicable lease.

Subsequent to the Company’s recognition of operating lease liabilities of $1.9 million on April 1, 2019, the Company made cash payments related to its recognized operating leases of $362,000 and $1.1 million during the three and nine months ended December 29, 2019, respectively.

The Company made cash payments related to its recognized operating leases of $408,000 and $352,000 during the three months ended June 28, 2020 and June 30, 2019, respectively.

Such payments reduced the operating lease liabilities and were included in the cash flows provided by operating activities in the accompanying unaudited condensed consolidated statements of cash flows.

During the three and nine-month periods ended December 29, 2019, the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Periods Ended December 29, 2019

Three-Month Period

Nine-Month Period

As of June 28, 2020, the Company’s operating leases have a weighted-average remaining lease term of 2.8 years and the weighted-average discount rate is 3.81%.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Cost of products sold

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Total operating lease costs

The Company’s operating leases have a weighted-average remaining lease term of 3.2 years.

The weighted-average discount rate for the operating leases is 3.84%.

The following table represents the maturities of the Company’s operating lease liabilities as of December 29, 2019 (in thousands):

The maturities of the Company’s operating lease liabilities as of June 28, 2020 and March 29, 2020 are as follows (in thousands):

June 28, 2020

March 29, 2020

Total undiscounted operating lease payments

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Total operating lease liabilities

The following table represents the Company’s commitment for minimum guaranteed rental payments under its lease agreements as of March 31, 2019 (in thousands):

N ote 7 – S tock-based Compensation

Note 7 – S tock-based Compensation

The Company has two incentive stock plans, the 2006 Omnibus Incentive Plan (the “2006 Plan”) and the 2014 Omnibus Equity Compensation Plan (the “2014 Plan”).

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Awards may be granted subject to the achievement of performance goals or other conditions, and certain awards may be payable in stock or cash, or a combination of the two.

The 2014 Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”), which selects eligible employees, non-employee directors and other individuals to participate in the 2014 Plan and determines the type, amount, duration (such duration not to exceed a term of ten years for grants of options) and other terms of individual awards.

As of December 29, 2019, 440,000 shares of the Company’s common stock were available for future issuance under the 2014 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

The 2014 Plan is administered by the Compensation Committee (the “Compensation Committee”) of the Company’s Board of Directors (the “Board”), which selects eligible employees, non-employee directors and other individuals to participate in the 2014 Plan and determines the type, amount, duration (such duration not to exceed a term of ten (10) years for grants of options) and other terms of individual awards.

At June 28, 2020, 310,000 shares of the Company’s common stock were available for future issuance under the 2014 Plan, which may be issued from authorized and unissued shares of the Company’s common stock or treasury shares.

Stock-based compensation is calculated according to FASB ASC Topic 718, Compensation – Stock Compensation, which requires stock-based compensation to be accounted for using a fair-value-based measurement.

The Company recorded stock-based compensation expense of $79,000 and $84,000 for the three months ended December 29, 2019 and December 30, 2018, respectively, and recorded $219,000 and $281,000 for the nine months ended December 29, 2019 and December 30, 2018, respectively.

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company recorded $86,000 and $65,000 of stock-based compensation, respectively.

The Company records the compensation expense associated with stock-based awards granted to individuals in the same expense classifications as the cash compensation paid to those same individuals.

No stock-based compensation costs were capitalized as part of the cost of an asset as of December 29, 2019.

No stock-based compensation costs were capitalized as part of the cost of an asset as of June 28, 2020.

Stock Options:

The following table represents stock option activity for the nine-month periods ended December 29, 2019 and December 30, 2018:

Nine-Month Periods Ended

December 29, 2019

December 30, 2018

The following table represents stock option activity for the three-month periods ended June 28, 2020 and June 30, 2019:

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Outstanding at Beginning of Period

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Exercisable at End of Period

As of December 29, 2019, the intrinsic value of the outstanding stock options and the exercisable stock options was $205,000 and $28,000, respectively.

The Company did not receive any cash from the exercise of stock options during the three and nine months ended December 29, 2019.

Upon the exercise of stock options, participants may choose to surrender to the Company those shares from the option exercise necessary to satisfy the exercise amount and their income tax withholding obligations that arise from the option exercise.

The effect on the cash flow of the Company from these “cashless” option exercises is that the Company remits cash on behalf of the participant to satisfy his or her income tax withholding obligations.

The Company used cash to remit the required income tax withholding amounts from “cashless” option exercises of $3,000 during each of the three and nine-month periods ended December 29, 2019.

There were no options exercised during either of the three or nine-month periods ended December 30, 2018.

As of June 28, 2020, the intrinsic value of the outstanding and exercisable stock options was each $1,000.

There were no options exercised during either of the three-month periods ended June 28, 2020 or June 30, 2019.

To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value.

The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options that were awarded to certain employees during the nine-month periods ended December 29, 2019 and December 30, 2018, which options vest over a two-year period, assuming continued service.

Nine-Month Periods Ended

December 29, 2019

December 30, 2018

The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options that were awarded to certain employees during the three-month periods ended June 28, 2020 and June 30, 2019, which options vest over a two-year period, assuming continued service.

Three-Month Periods Ended

June 28, 2020

June 30, 2019

Number of options issued

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Fair value per option

During the three-month periods ended December 29, 2019 and December 30, 2018, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Period Ended December 29, 2019

Three-Month Period Ended December 30, 2018

Administrative

Options Granted in Fiscal Year

Total stock option compensation

During the nine-month periods ended December 29, 2019 and December 30, 2018, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Nine-Month Period Ended December 29, 2019

Nine-Month Period Ended December 30, 2018

During the three-month periods ended June 28, 2020 and June 30, 2019, the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

Three-Month Period Ended June 28, 2020

Three-Month Period Ended June 30, 2019

Administrative

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Total stock option compensation

As of December 29, 2019, total unrecognized stock option compensation expense amounted to $48,000, which will be recognized as the underlying stock options vest over a weighted-average period of 9.9 months.

As of June 28, 2020, total unrecognized stock option compensation expense amounted to $83,000, which will be recognized as the underlying stock options vest over a weighted-average period of 1.3 years.

The amount of future stock option compensation expense could be affected by any future stock option grants and by the separation from the Company of any individual who has received stock options that are unvested as of such individual’s separation date.

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August 9, 2017

August 10, 2016

These shares vest over a two-year period, assuming continued service.

The fair value of the non-vested stock granted to the Company’s non-employee directors was based on the closing price of the Company’s common stock on the date of each grant.

In each of August 2019 and 2018, 28,000 shares that had been granted to the Company’s non-employee directors vested, having an aggregate value of $135,000 and $151,000, respectively.

Non-vested Stock Granted to Employees:

On January 18, 2019, upon the appointment of Donna Sheridan to serve as the President and Chief Executive Officer of NoJo Baby & Kids, Inc.

(formerly known as Crown Crafts Infant Products, Inc.) (“NoJo”), a wholly-owned subsidiary of the Company, the Board granted 25,000 shares of non-vested stock to Ms.

(“NoJo”), a wholly-owned subsidiary of the Company, the Board granted 25,000 shares of non-vested stock to Ms.

These shares will vest on January 18, 2021, assuming continued service.

The fair value of these shares of non-vested stock is $5.86 per share, which is based upon the closing price of the Company’s common stock on the date of the grant.

On June 10, 2020, the Board granted 20,000 shares of non-vested stock to certain executive officers.

These shares will vest on June 10, 2022, assuming continued service.

The fair value of these shares of non-vested stock is $4.92 per share, which is based upon the closing price of the Company’s common stock on the date of the grants.

Performance Bonus Plan:

The Company maintains a performance bonus plan for certain executive officers that provides for awards of shares of common stock in the event that the aggregate average market value of the common stock during the relevant fiscal year, plus the amount of cash dividends paid in respect of the common stock during such period, increases.

These individuals may instead be awarded cash, if and to the extent that insufficient shares of common stock are available for issuance from all stockholder-approved, equity-based plans or programs of the Company in effect.

The performance bonus plan also imposes individual limits on awards and provides that shares of common stock that may be awarded will vest over a two-year period.

Compensation expense associated with performance bonus plan awards are recognized over a three-year period – the fiscal year in which the award is earned, plus the two-year vesting period.

No shares were granted in fiscal years 2019 or 2020 in connection with the performance bonus plan.

The Company recorded compensation expense during fiscal year 2019 of $116,000 related to shares granted in fiscal year 2018 that were earned in fiscal year 2017.

The table below sets forth the vesting of shares granted under the performance bonus plan, as well as the number of shares surrendered to the Company to satisfy the income tax withholding obligations that arose from the vesting of the shares and the taxes remitted to the appropriate taxing authorities on behalf of such individuals.

Vesting of shares during the nine -month periods ended

Dec ember 29, 201 9

Dec ember 30 , 2018

For the three-month periods ended December 29, 2019 and December 30, 2018, the Company recorded compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, as follows (in thousands):

Three-Month Period Ended December 29, 2019

Three-Month Period Ended December 30, 2018

Stock Granted in Fiscal Year

Total stock grant compensation

For the nine-month periods ended December 29, 2019 and December 30, 2018, the Company recorded compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, as follows (in thousands):

Nine-Month Period Ended December 29, 2019

Nine-Month Period Ended December 30, 2018

On June 9, 2020, the Compensation Committee terminated the Company’s 2012 Performance Bonus Plan (the “2012 Plan”).

Under the 2012 Plan, certain executive officers were eligible to receive awards of shares of the Company’s common stock if the aggregate average market value of the Company’s common stock during the relevant fiscal year, plus the amount of regular cash dividends paid in respect of the Company’s common stock during such period, increased.

No shares were granted and no compensation expense was recorded during the three-month periods ended June 28, 2020 or June 30, 2019 in connection with the 2012 Plan.

During the three-month period ended June 30, 2019, 21,125 shares that had been granted during fiscal year 2018 vested, with such shares having an aggregate value of $109,000.

Individuals holding shares that vested surrendered to the Company the number of shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company remitted $17,000 to the appropriate taxing authorities on behalf of such individuals.

For the three-month periods ended June 28, 2020 and June 30, 2019, the Company recorded compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, as follows (in thousands):

Three-Month Period Ended June 28, 2020

Three-Month Period Ended June 30, 2019

Stock Granted in Fiscal Year

Total stock grant compensation

As of December 29, 2019, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $313,000, which will be recognized over the respective vesting terms associated with each block of non-vested stock indicated above, such grants having an aggregate weighted-average vesting term of 12.3 months.

As of June 28, 2020, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $273,000, which will be recognized over the respective vesting terms associated with each block of non-vested stock indicated above, such grants having an aggregate weighted-average vesting term of 9.5 months.

The amount of future compensation expense related to the Company’s non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has non-vested stock grants as of such individual’s separation date.

N ote 8 – Subsequent Event s

On January 7, 2020, the Company’s California consolidated income tax return for the fiscal year ended March 29, 2015 became closed to examination or other adjustment.

Accordingly, the Company intends to reverse the reserve for the unrecognized tax liability for that fiscal year, which will result in the recognition of a discrete income tax benefit of $212,000 during the three-month period ending March 29, 2020.

The Company also intends to reverse the accumulated interest expense and penalties that it has accrued in respect of the unrecognized tax liability for the fiscal year ended March 29, 2015, which will result in the recognition of a credit to interest expense of $84,000 during the three-month period ending March 29, 2020.

The Company has evaluated all other events which have occurred between December 29, 2019 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no other material subsequent events that require disclosure.

The Company has evaluated events which have occurred between June 28, 2020 and the date that the accompanying consolidated financial statements were issued, and has determined that there are no material subsequent events that require disclosure.

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