CROWN CRAFTS INC

CROWN CRAFTS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2023 (UNAUDITED) AND APRIL 2, 2023

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

See notes to unaudited condensed consolidated financial statements.

CROWN CRAFTS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 31, 2023 AND JANUARY 1, 2023

(amounts in thousands, except per share amounts)

See notes to unaudited condensed consolidated financial statements.

CROWN CRAFTS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 31, 2023 AND JANUARY 1, 2023

See notes to unaudited condensed consolidated financial statements.

CROWN CRAFTS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE-MONTH PERIODS ENDED DECEMBER 31, 2023 AND JANUARY 1, 2023

(amounts in thousands)

See notes to unaudited condensed consolidated financial statements.

CROWN CRAFTS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE- AND NINE-MONTH PERIODS ENDED DECEMBER 31, 2023 AND JANUARY 1, 2023

Note1 – Interim Financial Statements

Basis of Presentation:The accompanying unaudited condensed consolidated financial statements include the accounts of Crown Crafts, Inc. (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 donot 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 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 the Company’s management, the unaudited condensed consolidated financial statements contained herein include all adjustments necessary to present fairly the financial position of the Company as of* December 31, 2023and 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 thethree*- andnine-months ended* December 31, 2023arenot* necessarily indicative of the results that* maybe expected by the Company for its fiscal year ending March 31, 2024.For further information, refer to the Company’s consolidated financial statements and notes thereto for the fiscal year ended April 2, 2023,included in the Company’s Annual Report on Form10*-K filed with the United States Securities and Exchange Commission (the “SEC”).

Fiscal Year: The Company’s fiscal year ends on the Sunday that is nearest to or on* March 31.References herein to “fiscal year2024”* or*“2024”* represent the52-week period ending* March 31, 2024and references herein to “fiscal year2023”* or*“2023”* represent the52-week period ended* April 2, 2023.*

Recently-Issued Accounting Standards:In June 2016,the FASB issued ASUNo. 2016-13, Financial Instruments–* Credit Losses (Topic326): Measurement of Credit Losses on Financial Instruments,the objective of which is to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by an entity. Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable that a loss has been incurred. Because this methodology restricted the recognition of credit losses that are expected, but didnot* yet meet the “probable” threshold, ASUNo. 2016-13 was issued to require the consideration of a broader range of reasonable and supportable information when determining estimates of credit losses. The ASU is to be applied using a modified retrospective approach, and the ASU could have been early-adopted in the fiscal year that began after* December 15, 2018.When issued, ASUNo.* 2016-13 was required to be adoptedno later than the fiscal year beginning after* December 15, 2019,but on November 15, 2019,the FASB issued ASUNo.* 2019-10, Financial Instruments–* Credit Losses (Topic326), Derivatives and Hedging (Topic815), and Leases (Topic842): Effective Dates*, which provided for the deferral of the effective date of ASUNo. 2016-13 for a registrant that is a smaller reporting company to thefirst interim period of the fiscal year beginning after* December 15, 2022.Accordingly, the Company adopted ASUNo.* 2016-13 effective as of* April 3, 2023.Because the Company assigns the majority of its trade accounts receivable under factoring agreements with The CIT Group/Commercial Services, Inc. (“CIT”), a subsidiary of CIT Group Inc., the adoption of the ASU hasnot* had a significant impact on the Company’s financial position, results of operations and related disclosures.

In* October 2023,the FASB issued ASUNo.* 2023-06, Disclosure Improvements–* Codification Amendments in Response to the SEC*’s Disclosure Update and Simplification Initiative, the objective of which is to clarify or improve disclosure and presentation requirements and to align the requirements in the FASB ASC with the SEC’s regulations. In* August 2018,the SEC issued ReleaseNo.* 33-10532, in which the SEC referred certain of its disclosure requirements that overlap with GAAP to the FASB for potential incorporation into the FASB ASC. The amendments in ASUNo. 2023-06 are the result of the FASB’s decision to incorporate into the FASB ASC14 of the27 disclosures referred by the SEC. The FASB noted that the disclosure requirements in the SEC’s guidance and the FASB ASC shouldnot be duplicated in both places. Accordingly, although the ASU was required to be adopted upon issuance, each amendment to the FASB ASC included in the ASU willnot become effective until the effective date upon which the related SEC disclosure isno longer required. The amendments in this ASU are to be applied prospectively, and early application of the amendments is prohibited. The Company doesnot anticipate that the adoption of ASUNo. 2023-06 will have a significant impact on the Company’s financial position, results of operations and related disclosures.

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In* November 2023,the FASB issued ASUNo.* 2023-07, Segment Reporting (Topic280*)– Improvements to Reportable Segment Disclosures*, the objective of which is to improve the disclosures about a public entity’s reportable segments by providing more detailed information about a reportable segment’s expenses. For disclosures associated with annual and interim periods, the amendments in ASUNo. 2023-07 are required to be adopted for fiscal years beginning after* December 15, 2023and December 15, 2024,respectively, and early adoption is permitted. Upon adoption, a public entity must apply the amendments in ASUNo.* 2023-07 retrospectively to disclosures of all prior periods presented. The Company intends to adopt ASUNo. 2023-07 effective as of* April 1, 2024*and is evaluating the guidance of the ASU against its existing disclosures related to segment reporting.

In* December 2023,the FASB issued ASUNo.* 2023-09, Income Taxes (Topic740*)– Improvements to Income Tax Disclosures*, the objective of which is to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASUNo. 2023-09 are required to be adopted for fiscal years beginning after* December 15, 2024and early adoption is permitted. The Company is evaluating the guidance of the ASUNo.* 2023-09 against its existing disclosures related to income tax disclosures.

The Company has determined that all other ASUs issued which had become effective as of* December 31, 2023,or which will become effective at some future date, arenot* expected to have a material impact on the Company’s consolidated financial statements.

Note2 – Advertising Costs

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. Advertising expense is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income and amounted to $267,000 and $123,000 for thethree-month periods ended* December 31, 2023and January 1, 2023,respectively, and amounted to $631,000 and $370,000 for thenine*-month periods ended* December 31, 2023and January 1, 2023,*respectively.

Note3 – Segment and Related Information

The Company operates primarily inone principal segment, infant, toddler and juvenile products. These products consist of infant and toddler bedding, blankets, accessories, bibs, toys and disposable products. Net sales of bedding, blankets and accessories and net sales of bibs, toys and disposable products for thethree- andnine-month periods ended* December 31, 2023and January 1, 2023*are as follows (in thousands):

Note4 – Licensing Agreements

The Company has entered into licensing agreements that provide for royalty payments based on a percentage of sales with certain minimum guaranteed amounts. 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 consolidated statements of income and amounted to $1.3 million and $1.2 million for thethree months ended* December 31, 2023and January 1, 2023,respectively, and amounted to $3.8 million and $3.5 million for thenine* months ended* December 31, 2023and January 1, 2023,*respectively.

Note5 – Income Taxes

The Company files income tax returns in the many jurisdictions in which it operates, including the U.S., several U.S. states and the People’s Republic of China. The statute of limitations varies by jurisdiction; tax years open to examination or other adjustment as of* December 31, 2023were the fiscal years ended April 2, 2023,** April 3, 2022,** March 28, 2021,** March 29, 2020and March 31, 2019.*

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In* August 2020,the Company was notified by the Franchise Tax Board of the State of California (the “FTB”) of its intention to examine the Company’s California income tax returns for the fiscal years ended April 2, 2017,** April 1, 2018and March 31, 2019.On May 30, 2023,the Company and the FTB entered into an agreement to settle (the “Settlement Agreement”) the FTB’s proposed assessment of additional income tax in respect of these consolidated income tax returns under examination for the amount of $442,000, which included interest expense of $86,000, payment of which was made by the Company to the FTB on May 31, 2023.Because the examination was ongoing as of April 2, 2023,and because the Settlement Agreement was entered into prior to the issuance of the consolidated financial statements as of and for the fiscal year ended April 2, 2023,the Company recorded the effect of the Settlement Agreement in the consolidated balance sheet as of April 2, 2023and the consolidated statement of income for the fiscal year ended April 2, 2023.*

Although management believes that the calculations and positions taken on its filed income tax returns are reasonable and justifiable, the outcome of an examination could result in an adjustment to the position that the Company took on such income tax returns. Such adjustment could also lead to adjustments toone or more other state income tax returns, or to income tax returns for subsequent fiscal years, or both. To the extent that the Company’s reserve for unrecognized tax liabilities isnot 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, the 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.

Note6 – Inventories

As of* December 31, 2023and April 2, 2023,*the Company’s balances of inventory were $34.9 million and $34.2 million, respectively, nearly all of which were finished goods.

Note7 – Acquisition

On* March 17, 2023 (the “Closing Date”), the Company acquired Manhattan Group, LLC (“Manhattan”) and Manhattan Toy Europe Limited (“MTE”), Manhattan’s wholly-owned subsidiary, from H Enterprises International, LLC (“HEI”) (the “Manhattan Acquisition”), for a purchase price of $17.0 million, subject to adjustments for cash at the Closing Date and to the extent that actual net working capital as of the Closing Date differed from target net working capital of $13.75 million (the “Aggregate Adjustment”). The Manhattan Acquisition was funded with cash available on the Closing Date and borrowings under the Company’s revolving line of credit with CIT. On September 29, 2023,*the Company and HEI agreed to a settlement of the Aggregate Adjustment, pursuant to which HEI paid $509,000 to the Company, which included interest income of $21,000.

The Manhattan Acquisition was accounted for in accordance with FASB ASC Topic805, Business Combinations. The Company is currently determining the allocation of the acquisition cost with the assistance of an independentthird party. The identifiable assets acquired were recorded at their estimated fair value, which has been preliminarily determined based on available information and the use of multiple valuation approaches. The estimated useful lives of the identifiable intangible assets acquired were determined based upon the remaining time that these assets are expected to directly or indirectly contribute to the future cash flow of the Company. Certain data necessary to complete the acquisition cost allocation isnot yet available, including the valuations of the assets acquired and liabilities assumed. The Company hasnot finalized its measurement of working capital items and goodwill.

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The acquisition cost paid on the Closing Date amounted to $17.4 million, which included an estimate for cash as of the Closing Date and an estimate for the net working capital acquired. The settlement of the Aggregate Adjustment decreased the acquisition cost to $16.9 million. The following table represents the Company’s preliminary allocation of this acquisition cost (in thousands) to the identifiable assets acquired and the liabilities assumed based on their respective estimated fair values as of the Closing Date. The excess of the acquisition cost over the estimated fair value of the identifiable net assets acquired is reflected as goodwill.

The Company expects to complete the acquisition cost allocation during the12-month period following the Closing Date, during which time the values of the assets acquired and liabilities assumed, including the goodwill,* mayneed to be revised as appropriate. Based upon the preliminary allocation of the acquisition cost, the Company recognized $787,000 of goodwill as of the Closing Date, the entirety of which was assigned to the reporting unit of the Company that produces and markets infant and toddler bibs, developmental toys, feeding, bath care and disposable products, and the entirety of which is expected to be deductible for income tax purposes. The following table represents the adjustments made to the amount of goodwill during thenine*-month period ended* December 31, 2023.*

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The Manhattan Acquisition resulted in net sales of $6.0 million and $14.5 million of developmental toy, feeding and baby care products for thethree andnine months ended* December 31, 2023,respectively. Manhattan recorded amortization expense associated with the acquired amortizable intangible assets of $32,000 and $90,000 during thethree* andnine months ended* December 31, 2023,*respectively, which is included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income. Amortization is computed using the straight-line method over the estimated useful lives of the assets, which are 15 years for the tradename,10 years for the customer and licensing relationships and 11 years on a weighted-average basis for the grouping taken together.

The Company has determined, on a pro forma basis, that the combined net sales and the combined net income of the Company and Manhattan, giving effect to the Manhattan Acquisition as if it had been completed on* April 4, 2022,would have been $26.0 million and $646,000, respectively, for thethree* months ended* January 1, 2023,and would have been $74.5 million and $2.7 million, respectively, for thenine* months ended* January 1, 2023.The combined net income includes adjustments related to the amortization of the amortizable intangible assets acquired and estimates of the interest expense and income tax expense or benefit that would have been incurred, but otherwise donot* reflect the costs of any integration activities or benefits that* mayresult from the realization of future cost savings from operating efficiencies, or any revenue, tax or other synergies that may*result from the Manhattan Acquisition.

Note8 – Financing Arrangements

Factoring Agreements: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. As such, the Company doesnot take advances on the factoring agreements. 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 mayat 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* mayseek 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 consolidated statements of income, amounted to $106,000 and $77,000 for thethree* months ended* December 31, 2023and January 1, 2023,respectively, and amounted to $265,000 and $224,000 for thenine* months ended* December 31, 2023and January 1, 2023,*respectively.

Credit Facility: The Company’s credit facility as of* December 31, 2023consisted of a revolving line of credit under a financing agreement with CIT of up to $35.0 million, which includes a $1.5 million sub-limit for letters of credit. The financing agreement matures on July 11, 2028,bears interest at prime minus 0.5% or the Secured Overnight Financing Rate (“SOFR”) plus 1.6%, and is secured by afirst* lien on all assets of the Company. At* December 31, 2023,*the Company had elected to pay interest on balances owed under the revolving line of credit under the SOFR option, which was 6.9%. The financing agreement also provides for the payment by CIT to the Company of interest at prime as of the beginning of the calendar month minus 2.0% on daily negative balances, if any, held at CIT.

At* December 31, 2023and April 2, 2023,the balances on the revolving line of credit were $10.0 million and $12.7 million, respectively, there wasno letter of credit outstanding and $19.8 million and $20.0 million, respectively, 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 31, 2023.*

Credit Concentration:The Company’s accounts receivable at December 31, 2023amounted to $22.0 million, net of allowances of $2.5 million. Of this amount, $17.6 million was due from CIT under the factoring agreements, which represents the maximum loss that the Company could incur if CIT failed completely to perform its obligations under the factoring agreements. The Company’s accounts receivable at* April 2, 2023*amounted to $22.8 million, net of allowances of $1.5 million. Of this amount, $20.7 million was due from CIT under the factoring agreements, which represented the maximum loss that the Company could have incurred if CIT had failed completely to perform its obligations under the factoring agreements.

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Note9 – Goodwill

Goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in business combinations. For the purpose of presenting and measuring for the impairment of goodwill, the Company hastwo reporting units:one that produces and markets infant and toddler bedding, blankets and accessories and another that produces and markets infant and toddler bibs, toys and disposable products. The Company’s reporting units have recognized goodwill as of* December 31, 2023and April 2, 2023*of $30.8 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 $7.9 million.

The Company measures for impairment the goodwill within its reporting units annually as of thefirst day of the Company’s fiscal year. An additional interim measurement for impairment is performed during the year whenever an event or change in circumstances occurs that suggests that the fair value of either of the reporting units of the Company has more likely thannot (defined as having a likelihood of greater than50%) fallen below its carrying value. The annual or interim measurement for impairment is performed byfirst assessing qualitative factors to determine whether it is more likely thannot that the fair value of a reporting unit is less than its carrying amount. If such qualitative factors so indicate, then the measurement for impairment is continued by calculating an estimate of the fair value of each reporting unit and comparing the estimated fair value to the carrying value of the reporting unit. 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 3, 2023,the Company performed a qualitative assessment to determine if it is more likely thannot* that the fair values of the Company’s reporting units are less than their carrying values by evaluating relevant events and circumstances, including financial performance, market conditions and share price. Based on this assessment, the Company concluded that the goodwill for each of the Company’s reporting units wasnot considered at risk of impairment.

Note10 – Other Intangible Assets

Other intangible assets as of* December 31, 2023and April 2, 2023consisted 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 31, 2023and April 2, 2023and the amortization expense for thethree*- andnine-month periods ended* December 31, 2023and January 1, 2023,*the entirety of which has been included in marketing and administrative expenses in the accompanying unaudited condensed consolidated statements of income, are as follows (in thousands):

Note11 – Leases

During thethree- andnine-month periods ended* December 31, 2023,the Company recognized operating lease obligations as right of use assets and recognized corresponding lease liabilities in the amount of $959,000, and entered intono* such transactions during thethree- andnine-month periods ended* January 1, 2023.The Company made cash payments related to its recognized operating leases of $1.1 million and $492,000 during thethree*-month periods ended* December 31, 2023and January 1, 2023,respectively, and $2.5 million and $1.5 million for thenine*-month periods ended* December 31, 2023and January 1, 2023,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. The Company recognized noncash reductions to its operating right of use assets resulting from reductions to its lease liabilities in the amount of $254,000 and $16,000 during thethree*-month periods ended* December 31, 2023and January 1, 2023,respectively, and $757,000 and $59,000 during thenine*-month periods ended* December 31, 2023and January 1, 2023,respectively. As of December 31, 2023and April 2, 2023,*the Company’s operating leases had weighted-average remaining lease terms of 4.2 years and 5.0 years, respectively, and weighted-average discount rates of 6.0% and 5.9%, respectively.

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During thethree- andnine-month periods ended* December 31, 2023and January 1, 2023,*the Company classified its operating lease costs within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

The maturities of the Company’s operating lease liabilities as of* December 31, 2023*are as follows (in thousands):

Note12 – Stock-based Compensation

The Company hasthree incentive stock plans, the2006 Omnibus Incentive Plan (the*“2006* Plan”), the2014 Omnibus Equity Compensation Plan (the*“2014* Plan”) and the2021 Incentive Plan (the*“2021* Plan”), although grants* may**no* longer be issued under either the2006 Plan or the2014 Plan. As of* December 31, 2023,549,000 shares of the Company’s common stock were available for future issuance under the2021* Plan, which* maybe issued from authorized and unissued shares of the Company’s common stock or treasury shares. The Company recorded stock-based compensation expense of $190,000 and $253,000 during thethree*-month periods ended* December 31, 2023and January 1, 2023,respectively, and $573,000 and $844,000 during thenine*-month periods ended* December 31, 2023and January 1, 2023,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 31, 2023.*

Stock Options: The following table represents stock option activity for thenine-month periods ended* December 31, 2023and January 1, 2023:*

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As of* December 31, 2023,the intrinsic value of the outstanding and exercisable stock options was $19,000 and $11,000, respectively. There wereno stock options exercised during thenine* months ended* December 31, 2023or thethree* months ended* January 1, 2023.The intrinsic value of the stock options exercised during thenine* months ended* January 1, 2023was $28,000. The Company receivedno* cash from the stock options exercised during thenine months ended* January 1, 2023.Upon the exercise of stock options, participants maychoose 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 $10,000 during thenine* months ended* January 1, 2023.*

Stock-based compensation is calculated according to FASB ASC Topic718, Compensation–* Stock Compensation,* which requires stock-based compensation to be accounted for using a fair-value-based measurement. 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 thenine months ended* December 31, 2023and January 1, 2023,*which stock options vest over atwo-year period, assuming continued service.

During thethree- andnine-month periods ended* December 31, 2023and January 1, 2023,*the Company classified its compensation expense associated with stock options within the accompanying unaudited condensed consolidated statements of income as follows (in thousands):

As of* December 31, 2023,*total unrecognized stock option compensation expense amounted to $69,000, which will be recognized as the underlying stock options vest over a weighted-average period of 9.9 months. 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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*Non-vested Stock Granted to Directors:*The following shares of non-vested stock were granted to the Company’s directors:

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

The non-vested stock granted on* August 11, 2021included 8,033 shares granted to E. Randall Chestnut, formerly the Company’s Chairman, President and Chief Executive Officer. On May 1, 2022,*upon the resignation of Mr. Chestnut from the Board of Directors of the Company (the “Board”) and his retirement from all positions that he held within the Company, the vesting of these 8,033 shares was accelerated, with such shares having an aggregate value on such date of $50,000.

The non-vested stock granted on* August 16, 2022included 11,724 shares granted to Sidney Kirschner, a director of the Company since2001.* Upon the death of Mr. Kirschner on* February 21, 2023,*the vesting of these 11,724 shares was accelerated, with such shares having an aggregate value on such date of $67,000.

In* August 2023and August 2022,*35,172 shares and 52,856 shares, respectively, that had been granted to the Company’s directors vested, having an aggregate value of $168,000 and $331,000, respectively. The remaining shares set forth above will vest over the periods indicated, assuming continued service.

*Non-vested Stock Granted to Employees:*The following shares of non-vested stock were granted to certain of the Company’s employees:

These shares vest on the dates indicated, assuming continued service. In* June 2022,*45,000 shares that had been granted to certain of the Company’s employees vested, having an aggregate value on their respective vesting dates of $293,000.

Performance Award Shares: On* March 1, 2022,performance awards were granted to certain of the Company’s executive officers, consisting of 187,500 shares of the Company’s common stock, of which: (a)75,000 shares shall be earned if the closing price per share of the Company’s common stock equals or exceeds $8.00 onten trading days within any period oftwenty* consecutive trading days prior to* March 1, 2027;and (b)112,500 shares shall be earned if the closing price per share of the Company’s common stock equals or exceeds $9.00 onten trading days within any period oftwenty* consecutive trading days prior to* March 1, 2027.Upon the achievement of each applicable stock hurdle described above: (i)one-third of the shares that are earned shall vest on the date on which the shares are earned; (ii)one-third of the shares that are earned shall vest on thefirst* anniversary of the date on which the shares are earned; and (iii)one-third shall vest on thesecond anniversary of the date on which the shares are earned. All shares that are non-earned or non-vested will be forfeited upon the termination of service. The Company, with the assistance of an independentthird party, determined that the grant date fair value of the awards amounted to $732,000.

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During thethree- andnine-month periods ended* December 31, 2023and January 1, 2023,*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):

As of* December 31, 2023,*total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $491,000, 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 6.8 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.

Note13 – Subsequent Events

The Company has evaluated all other events which have occurred between* December 31, 2023and the date that the accompanying unaudited condensed consolidated financial statements were issued, and has determined that there areno* material subsequent events that require disclosure.