BUILD-A-BEAR WORKSHOP INC

The table below presents supplemental cash flow information related to leases for thethirteen weeks ended* May 4, 2024and April 29, 2023* (in thousands).

As of* May 4, 2024and April 29, 2023*, the weighted-average remaining operating lease term was 4.8 years and 4.0 years, respectively, and the weighted-average discount rate was 6.9% and 6.3%, respectively, for operating leases recognized on the Company's condensed consolidated balance sheets.

For thethirteen weeks ended* May 4, 2024* and thethirteen weeks ended* April 29, 2023* the Company incurredno impairment charges against its right-of-use operating lease assets.

Undiscounted cash flows

The table below reconciles the undiscounted cash flows for each of thefirst five years and total of the remaining years to the operating lease liabilities recorded on the balance sheet (in thousands).

As of* May 4, 2024*, the Company had additional executed leases that hadnot yet commenced with operating lease liab ilities of $33.8 million. These leases are expected to commence in fiscal2024 and fiscal2025 with lease terms oftwo totwenty years.

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4. Other Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Other non-current assets consist of the following (in thousands):

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

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6. Stock-based Compensation

On* April14,* 2020, the Board of Directors (the “Board”) of Build-A-Bear Workshop, Inc. (the “Company”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc.2020 Omnibus Incentive Plan (the*“2020* Incentive Plan”). On* June 11, 2020,the Company’s stockholders approved the2020* Incentive Plan. On* April11,* 2023, the Board adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. Amended and Restated2020 Omnibus Incentive Plan (the “Restated2020 Incentive Plan”). On* June 8, 2023,at the Company’s2023* Annual Meeting of Stockholders (the “Annual Meeting”), the Company’s stockholders approved the Restated2020 Incentive Plan. The Restated2020 Incentive Plan, which is administered by the Compensation and Development Committee of the Board, permits the grant of stock options (including both incentive and non-qualified stock options), stock appreciation rights, other stock-based awards, including restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the Restated2020 Incentive Plan. The Restated2020 Incentive Plan will terminate on* April 11, 2033,unless earlier terminated by the Board. The total number of shares of the Company’s common stock authorized for issuance under the Restated2020* Incentive Plan increased by 800,000 to a maximum of 1,800,000 since its inception as the2020 Incentive Plan, subject to customary capitalization adjustments, substitutions of acquired company awards and certain additions of acquired company plan shares, plus shares that are subject to outstanding awards made under the Build-A-Bear Workshop, Inc.2017 Omnibus Incentive Plan (the*“2017* Plan”) that on or after* April 14, 2020** may*be forfeited, expire or be settled for cash.

For thethirteen weeks ended* May 4, 2024and April 29, 2023*, selling, general and administrative expense included stock-based compensation expense of $0.4 million and $1.1 million, respectively. As of* May 4, 2024*, there was $4.1 million of total unrecognized compensation expense related to unvested restricted stock awards which is expected to be recognized over a weighted-average period of 2.1 years.

The following table is a summary of the balances and activity for stock options for thethirteen weeks ended* May 4, 2024*:

The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for thethirteen weeks ended* May 4, 2024*:

The total fair value of shares vested during thethirteen weeks ended* May 4, 2024and April 29, 2023* was $2.1 million and $1.6 million, respectively.

The outstanding performance shares as of* May 4, 2024* consist of the following:

7. Income Taxes

The Company's effective tax rate was 23.8% for thethirteen weeks ended* May 4, 2024*, compared to 24.5% for thethirteen weeks ended* April 29, 2023*. In thefirst quarter of fiscal2024, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax expense partially offset by the tax impact of equity awards vesting. In thefourth quarter of fiscal2023, the Company reversed the valuation allowance on deferred tax assets expected to be realized in the U.K. In thefirst quarter of fiscal2024, the Company remains in a full valuation in certain other foreign jurisdictions. In thefirst quarter of fiscal2023, the effective tax rate differed from the statutory rate of 21% primarily due to state income tax. In addition, the Company remained in a full valuation in certain foreign jurisdictions, including the UK.

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8. Stockholders’ Equity

The following table sets forth the changes in stockholders’ equity (in thousands) for thethirteen weeks ended* May 4, 2024and April 29, 2023* (in thousands):

(1) Additional paid-in capital (“APIC”)

(2) Accumulated other comprehensive loss (“AOCI”)

During thethirteen weeks ended* May 4, 2024*, the Company utilized $9.2 million in cash to repurchase 343,406 shares under its $50.0 million program that was authorized by its Board of Directors on* August 31, 2022.The Company's Board of Directors also authorized a quarterly cash dividend of $0.20 per share that was paid on April 11, 2024,to all stockholders of record as of March 28, 2024.*

For thethirteen weeks ended* April 29, 2023*, the Company recorded credit impairment charges of $0.8 million on trade receivables into retained earnings as a result of the adoption of ASC326 - Credit Impairment. During thethirteen weeks ended* April 29, 2023,the Company utilized $3.1 million in cash to repurchase 132,385 shares under its $50.0 million program that was authorized by its Board of Directors on August 31, 2022.The Company's Board of Directors also authorized a special cash dividend of $1.50 per share that was paid on April 6, 2023,to all stockholders of record as of March 23, 2023.*

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9. Income per Share

The following table sets forth the computation of basic and diluted net income per share (in thousands, except share and per share data):

In calculating the diluted income per share for thethirteen weeks ended* May 4, 2024and April 29, 2023*, respectively, there were 8,199 and 9,069 shares of common stock that were outstanding at the end of the period that werenot included in the computation of diluted income per share due to their anti-dilutive effect.

10. Comprehensive Income

The difference between comprehensive income or loss and net income or loss is the result of foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency isnot the U.S. dollar. The accumulated other comprehensive loss balance on* May 4, 2024and April 29, 2023* was comprised entirely of foreign currency translation. For thethirteen weeks ended* May 4, 2024and April 29, 2023*, the Company hadno reclassifications out of accumulated other comprehensive loss.

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11. Segment Information

The Company’s operations are conducted through three operating segments consisting of direct-to-consumer (“DTC”), commercial and international franchising. The DTC segment includes the operating activities of corporately-managed locations and other retail delivery operations in the U.S., Canada, Ireland and the U.K., including the Company’s e-commerce sites and temporary stores. The commercial segment includes the Company’s transactions with other businesses, mainly comprised of licensing the Company’s intellectual properties forthird-party use and wholesale activities. The international franchising segment includes the licensing activities of the Company’s franchise agreements with store locations in select countries in Asia, Australia, the Middle East, Africa, and South America. The operating segments have discrete sources of revenue, different capital structures and different cost structures. These operating segments represent the basis on which the Company’s chief operating decision maker regularly evaluates the business in assessing performance, determining the allocation of resources and the pursuit of future growth opportunities. Accordingly, the Company has determined that each of its operating segments represent a reportable segment. Thethree reportable segments follow the same accounting policies used for the Company’s consolidated financial statements.

Following is a summary of the financial information for the Company’s reportable segments (in thousands):

The Company’s reportable segments are primarily determined by the types of products and services that they offer. Each reportable segment* may*operate in many geographic areas. Revenues are recognized in the geographic areas based on the location of the customer or franchisee. The following schedule is a summary of the Company’s sales to external customers and long-lived assets by geographic area (in thousands):

For purposes of this table only:

(1) North America includes corporately-managed locations in the United States and Canada.

(2) Europe includes corporately-managed locations in the U.K. and Ireland and sales to wholesale customers in Europe.

(3) Other includes franchise businesses outside of North America and Europe.

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12. Contingencies

In the normal course of business, the Company is subject to legal proceedings, government inquiries and claims, and other commercial disputes. Ifone or more of these matters has an unfavorable resolution, it is possible that the results of operations, liquidity or financial position of the Company could be materially affected in any particular period. The Company accrues a liability for these types of contingencies when it believes that it is both probable that a liability has been incurred and that it can reasonably estimate the amount of the loss. Gain contingencies are recorded when the underlying uncertainty has been settled.

Assessments made by the U.K. customs authority in2012 were appealed by the Company, which has paid the disputed duty, strictly under protest, pending the outcome of the continuing dispute, and this is included in receivables, net in the DTC segment. The U.K. customs authority contested the Company's appeal. Rulings by the First Tier Tribunal in* November 2019and Upper Tribunal in March 2021held that duty was due on some, butnot* all, of the products at issue. The Company petitioned the Court of Appeal for permission to appeal certain elements of the Upper Tribunal decision, and in early* November 2021,a judge granted the Company's petition for permission to appeal those elements of the Upper Tribunal decision on some, butnot* all, of the grounds of appeal that the Company had put forward. An appeal was heard by the Court of Appeal during thefirst quarter of fiscal2022, and the Court of Appeal dismissed the appeal in thethird quarter of fiscal2022. During thefourth quarter of fiscal2022**, the UK Supreme Court declined to hear the appeal. The Company is engaging with the customs authority to attempt to resolve all outstanding issues following the application of the determined principles. The case will return to the lower tribunal for a final ruling if outstanding issues cannot be resolved. The Company maintains a provision against the related receivable, based on a current evaluation of collectability, using the latest facts available in the dispute. As of* May 4, 2024*, the Company had a gross receivable balance of $4.8 million and a reserve of $3.7 million, leaving a net receivable of $1.1 million. The Company believes that the outcome of this dispute willnot have a material adverse impact on the results of operations, liquidity, or financial position of the Company.

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