UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

OR

Commission file number: 001-32320

BUILD-A-BEAR WORKSHOP, INC.

(Exact Name of Registrant as Specified in Its Charter)

(314) 423-8000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒    No   ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 14(a) of the Exchange Act. ☐    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No   ☒

As of June 8,September 7, 2020, there were 15,439,53815,591,553 issued and outstanding shares of the registrant’s common stock.

BUILD-A-BEAR WORKSHOP, INC.

INDEX TO FORM 10-Q

1. Basis of Presentation

The condensed consolidated financial statements included herein are unaudited and have been prepared by Build-A-Bear Workshop, Inc. and its subsidiaries (collectively, the “Company”) pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet of the Company as of February 1, 2020 was derived from the Company’s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein are unaudited and reflect all adjustments which are, in the opinion of management, necessary to summarize fairly the financial position of the Company and the results of the Company’s operations and cash flows for the periods presented. All of these adjustments are of a normal recurring nature. All significant intercompany balances and transactions have been eliminated in consolidation. Because of the seasonal nature of the Company’s operations, results of operations of any single reporting period should not be considered as indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended February 1, 2020, which were included in the Company’s Annual Report on Form 10-K10-K filed with the SEC on April 16, 2020. 

COVID-19COVID-19 Pandemic

In March 2020, the World Health Organization announced that COVID-19COVID-19 is a global pandemic. On March 17, 2020, the Company announced the temporary closure of all owned and operatedcorporately-managed stores in the United States, Canada, the United Kingdom, Denmark and Ireland as a result of the pandemic. In addition, on March 26, 2020, the Company announced the temporary closure of its warehouse and e-commerce fulfillment center in Ohio as it reviewed its process related to workplace safety, including social distancing and sanitation practices recommended by the Centers for Disease Control and Prevention. The Ohio warehouse was reopened on April 1, 2020 following the review and reconfiguration of workflow and workspaces to further promote social distancing and minimize interaction as orders are fulfilled. While some storesThe Company took various steps in the United States and the e-commerce businesses in the United States and the United Kingdom continue to serve customers during this crisis, the Company has experienced a loss of sales and earnings as a result of the store closures. In addition, many of the Company's wholesale customers have also closed their retail stores affecting their inventory purchases. Although the store closures are expected to be temporary and the Company has begun to open stores where allowable by local law, the Company cannot estimate the duration of the store closures for the remainder of stores, the impact on our interactive retail experience once stores are reopened, or the full financial effect as a result of COVID-19.

In response to COVID-19, the Company has taken the following actions:

Operational and Distribution Network Update for the second quarter due to COVID-19:COVID-19:

The Company's operating results for the thirteen and twenty-six weeks ended August 1, 2020may not be indicative of the results that may be expected for the fiscal year ending January 30, 2021 because of the impact of the COVID-19 pandemic. The pandemic has had, and will continue to have, a negative impact on the Company's business, financial condition, and cash flows, although the full extent is uncertain. As the pandemic continues to evolve, the extent of the impact will depend on future developments, including, but not limited to, the duration and extent of any temporary closing of certain of its stores, the duration of quarantines, shelter-in-place orders and other travel restrictions within the U.S. and other affected countries, the duration and spread of the pandemic (including any relapses), its severity, the actions to contain the virus and/or treat its impact, the duration, timing and severity of the impact on consumer spending (including the recession resulting from the pandemic), and how quickly and to what extent normal economic and operating conditions can resume, all of which are highly uncertain and cannot be predicted.

In addition, the Company’s business is subject to seasonal fluctuations, with significant portions of the Company’s revenues and net income being realized during the fourth quarter of the fiscal year due to the holiday selling season. Therefore, the results for the thirteen and twenty-six weeks ended August 1, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending January 30,2021, or for any other future interim period or for any future year.

The Company has had not borrowed on its credit facility as of JuneSeptember 8, 2020. DueOn August 25, 2020, Build-A-Bear Workshop, Inc. entered into a Revolving Credit and Security Agreement with PNC Bank, National Association, as agent. The agreement provides for a senior secured revolving loan in aggregate principal amount of up to $25,000,000 (subject to a borrowing base formula), which may be increased with the impactsconsent of COVID-19 and the continued closurelenders by an amount not to exceed $25,000,000. Additionally, on August 25, 2020, upon execution of a majoritythe agreement with PNC Bank, the Company terminated its existing bank credit line with U.S. Bank. Inclusive of our corporately managed stores, our financial performance in the second quarter of fiscal 2020 will be negatively impacted. Thenew credit facility, the Company's liquidity may be negatively impacted if stores do not resume normal operations and the Company may be required to pursue additional sourcespandemic results in the temporary closing of financing to meetcertain of its financial obligations. Obtaining such financing is not guaranteed and is largely dependent on market conditions and other factors.stores. The Company believes that its current cash balance, access to its revolving credit facility, along with the actions taken as outlined above, provide it with sufficient current liquidity. FutureThe future impact of COVID-19 COVID-19may require further actions by the Company to improve its cash position, including but not limited to, monetizing Company assets including the Company ownedCompany-owned warehouse in Ohio, inventory, implementing furtheradditional employee furloughs or position eliminations, and foregoing capital expenditures and other discretionary expenses.

Significant Accounting Policies

The Company's significant accounting policies are summarized in Note 2 to the consolidated financial statements included in ourits Form 10-K10-K for the year ended February 1, 2020. An update and supplement to these policies is needed for the Company's accounting for government assistance, long-live asset impairment, and lease modifications as a result of activity during the firstsecond quarter of fiscal 2020.

Government Grants

The Company applied for reimbursement of payroll expenses in certain jurisdictions through COVID-19COVID-19 related government programs for payroll paid to employees who were paid while not providing services to the Company prior toduring the end of the first quarter and second quarters of fiscal 2020. These programs require the Company to apply to the government for reimbursement of wages based on the applicable laws and programs within each jurisdiction. Through review of and application to these programs, the Company believes it qualifies for such reimbursement, and it is probable that the expenses will be reimbursed. As a result, the Company recorded a reduction to expenses of approximately $1.5 million for the thirteen weeks ended August 1, 2020 and $3.0 million for the twenty-six weeks ended August 1, 2020related to these wages within the Selling, general and administrative line withinin the Condensed Consolidated Statement of Operations and Comprehensive (Loss) Income (Loss) for the period ending May 2,August 1, 2020. In addition, a portion of these amounts was received subsequent to the end of the quarter.

Long-live Assets, including right-of-use operating lease assets

Whenever facts and circumstances indicate that the carrying value of long-lived assets and right-of-use operating lease assets may not be recoverable, the carrying value of those assets is reviewed. If this review indicates that the carrying value of the asset will not be recovered, as determined based on projected undiscounted cash flows related to the asset over its remaining life, the carrying value of the asset is reduced to its estimated fair value. The Company typically performs an annual assessment of theits store assets in the direct-to-consumer (“DTC”) segment, based on operating performance and forecasts of future performance. As a result of the COVID-19COVID-19 pandemic, wethe Company experienced lower than projected revenues and identified indicators of impairment for ourits store fleet. WeThe Company performed the recoverability test for these assets by comparing the estimated undiscounted future cash flow analysesflows over the remaining useful life for its long-lived assets and right-of-use assets and determined that certain stores had long-lived and right-of-use assets with carrying values that exceeded their estimated undiscounted future cash flows. Weflows for the remaining useful life of the respective assets..

The Company estimated fair values of these long-lived assets based on ourits discounted future cash flows for the remaining useful life of the asset or market rent assessments. Our analysis indicated that the carrying values of certain of ourits long-lived assets exceeded their respective fair values.values determined by the discounted future cash flow analysis or the market rent assessment. As a result, wethe Company recognized an impairment charge of $4.8$2.1 million for the thirteen weeks ended May 2,August 1, 2020., with approximately $2.4$1.2 million for right-of-use operating lease assets and $2.4$0.9 million for fixed assets including leasehold improvements, and fixtures, furniture and fixtures, and machinery and equipment. The charge isequipment, and construction-in-progress. For the twenty-six weeks ended August 1, 2020 the Company has recognized impairment charges totaling $6.9 million, with approximately $3.6 million for right-of-use operating lease assets and $3.3 million for fixed assets including leasehold improvements, fixtures, furniture and fixtures, machinery and equipment, and construction-in-progress. These charges are recorded in Store asset impairment within the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss). for the respective periods. These impairment charges were primarily driven by lower than projected revenues and the effect of store closures as a result of the COVID-19COVID-19 pandemic. The majority of the impairment was recorded for assets associated with stores in North America. For the thirteen weeks ended May 4,August 3, 2019, the Company recorded 0 impairment charges and for the twenty-six weeks ended August 3, 2019 the Company recorded impairments charges of $5.9$5.9 million on right-of-use assets into retained earnings as a result of the adoption of ASC 842, Leases.

The determination of estimated market rent used in the fair value estimate of the Company’s operating lease assets included within the respective store asset group requires significant management judgment. Changes in these estimates could have a significant impact on whether long-lived store assets should be further evaluated for impairment and could have a significant impact on the resulting impairment charge. The significant estimates, all of which are considered Level 3 inputs, used in the fair value methodology include: the Company’s expectations for future operations and projected cash flows, including revenues, operating expenses including market rents, and market conditions.

Lease modifications

In April 2020, the FASB issued guidance indicating that entities may elect not to evaluate whether a concessionconcessions provided by lessors isare a lease modification. Under existing lease guidance, an entity would have to determine if a lease concession was the result of a new arrangement reached with the landlord, which would be accounted for under the lease modification framework, or if the concession was under the enforceable rights and obligations that existed in the original lease, which would be accounted for outside the lease modification framework. The FASB guidance provides entities with the option to elect to account for lease concessions as though the enforceable rights and obligations existed in the original lease. During the firstsecond quarter of 2020, the Company did elected to not modify adopt this accounting guidance, but rather account for any leases as a result of the COVID-19 pandemic and as a result, the Company has not yet made a policy election with respect to lease modifications.changes under guidance previously issued for ASC 842,Leases. Refer to Note 3 to the consolidated financial statements for further discussion regarding the Company's accounting for leases.

2. Revenue

Nearly all the Company’s revenue is derived from retail sales (including from its e-commerce sites) and is recognized when control of the merchandise is transferred to the customer. The Company's disaggregated revenue is fully disclosed as net sales to external customers by reporting segment and by geographic area (See Note 11 — Segment Information for additional information). The Company's direct-to-consumer reporting segment represents 98%97% of consolidated revenue for the firstsecond quarter of fiscal 2020. The majority of these sales transactions are single performance obligations that are recorded when control is transferred to the customer.

The following is a description of principal activities from which the Company generates its revenue, by reportable segment.

The Company’s direct-to-consumer segment includes the operating activities of corporately-managed stores, other retail-delivered operations and online sales. Direct-to-consumer revenue is recognized when control of the merchandise is transferred to the customer and for the Company's online sales, generally upon estimated delivery to the customer. Revenue is measured as the amount of consideration, including any discounts or incentives, the Company expects to receive in exchange for transferring the merchandise. Product returns have historically averaged less than one-halfone-half of one percent due to the personalized and interactive nature of sales, where consumers customize their own stuffed animal. The Company has elected to exclude from revenue all collected sales, value added and other taxes paid by its customers.

For the Company’s gift cards, revenue, including any related gift card discounts, is deferred for single transactions until redemption including any related gift card discounts.redemption. Historically, most gift card redemptions have occurred within three years of acquisition and approximately 75% of gift cards have been redeemed within the firsttwelve months. In addition, unredeemed gift cards or breakage revenue is recorded in proportion to the customer’s redemption period using an estimated breakage rate based on historical experience. For certain qualifying transactions, a portion of revenue transactions are deferred for the obligation related to the Company’s loyalty program or when a material right in the form of a future discount is granted. In these transactions, the transaction price is allocated to the separate performance obligations based on the relative standalone selling price. The standalone selling price for the points earned for the Company's loyalty program is estimated using the net retail value of the merchandise purchased, adjusted for estimated breakage based on historical redemption patterns. The revenue associated with the initial merchandise purchased is recognized immediately and the value assigned to the points is deferred until the points are redeemed, forfeited or expired. In regard to the consolidated balance sheet, contract liabilities for gift cards are classified as gift cards and customer deposits.

The Company’s commercial segment includes transactions with other businesses and are mainly comprised of licensing the Company’s intellectual properties for third-partythird-party use and wholesale sales of merchandise, including supplies and fixtures. Revenue for wholesale sales is recognized when control of the merchandise or fixtures is transferred to the customer, which generally occurs upon delivery to the customer. The license agreements provide the customer with highly interrelated rights that are not distinct in the context of the contract and therefore, have been accounted for as a single performance obligation and recognized as licensee sales occur. If the contract includes a guaranteed minimum, the minimum guarantee is recognized on a straight-line basis over the guarantee term until such time as royalties earned through licensee sales exceed the minimum guarantee. The Company classifies these guaranteed minimum contract liabilities as deferred revenue on the consolidated balance sheet.

The Company’s international franchising segment includes the activities with franchisees who operate store locations in certain countries and includes development fees, sales-based royalties and merchandise, including supplies and fixture sales. The Company's obligations under the franchise agreement are ongoing and include operations and product development support and training, generally concentrated around new store openings. These obligations are highly interrelated rights that are not distinct in the context of the contract and, therefore, have been accounted for as a single performance obligation and recognized as franchisee sales occur. If the contract includes an initial, one-timeone-time nonrefundable development fee, this fee is recognized on a straight-line basis over the term of the franchise agreement, which may extend for periods up to 25 years, or if the agreement is terminated prior to the end of the term. The Company classifies these initial, one-timeone-time nonrefundable franchise fee contract liabilities as deferred revenue on the consolidated balance sheet. Revenue from merchandise and fixture sales is recognized when control is transferred to the franchisee which generally occurs upon delivery to the customer.

The Company also incurs expenses directly related to the startup of new franchises, includingwhich may include finder’s fees, legal and travel costs as well as expenses related to its ongoing support of the franchisees, predominantly travel expense and employee compensation. Accordingly, the Company’s policy is to capitalize theany finder’s fee, an incremental cost, and expense all other costs as incurred. Additionally, the Company amortizes these capitalized costs into expense in the same pattern as the development fee's recording of revenue as described previously.

 3. Leases

The majority of the Company's leases relate to retail stores and corporate offices. For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Most retail store leases have an original term of a five to ten-yearten-year base period and may include renewal options to extend the lease term beyond the initial base period and are typically much shorter than the original lease term giving the Company lease optionality. Some leases also include early termination options, which can be exercised under specific conditions. Additionally, the Company may operate stores for a period of time on a month-to-month basis after the expiration of the lease term. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. Additionally, certain leases contain incentives, such as construction allowances from landlords and/or rent abatements subsequent to taking possession of the leased property.

The table below presents certain information related to the lease costs for operating leases for the thirteen and twenty-six weeks ended May 2,August 1, 2020 and May 4,August 3, 2019 (in thousands).

Other information

The table below presents supplemental cash flow information related to leases for the thirteen and twenty-six weeks ended May 2,August 1, 2020 and May 4,August 3, 2019 (in thousands).

As of May 2,August 1, 2020 and May 4,August 3, 2019, the weighted-average remaining operating lease term was 5.65 years and 6.46 years, respectively, and the weighted-average discount rate was 6.1%6.0% and 5.9%, respectively, for operating leases recognized on ourthe Company's Condensed Consolidated Balance Sheets.

As discussed above, the Company incurred impairment charges during the thirteen week period ending May 2, and twenty-six weeks ended August 1, 2020, of $2.4$1.2 million and $3.6 million, respectively, against right-of-use operating lease assets.

During the quarter, the Company renegotiated a large portion of its store lease portfolio resulting in a combination of rent reductions, deferments, and abatements. These negotiations have increased the percentage of leases with variable rent structures to one-third of its North American fleet, which is intended to increase flexibility in an environment with expected high sales volatility and provide a natural hedge against potential sales declines. For these renegotiated leases, under ASC 842 Leases, the Company assessed if the renegotiated leases represented a new, separate contract or a modification of the existing lease. The Company concluded all renegotiated leases represented a modification of terms of each existing agreement. As such, the Company remeasured the lease liability and decreased the carrying amount of the right-of-use asset in proportion to the modification of the existing lease and recognized in profit or loss any difference between the reduction in the lease liability and the reduction in the right-of-us asset, which had an immaterial impact on the second quarter results. The Company remains in negotiations with certain landlords and expects further rent reductions, deferments or abatements to be recognized in the third quarter of the current fiscal year.

Undiscounted cash flows

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

As of May 2, 2020, the Company has additional executed leases that have not yet commenced with operating lease liabilities of $1.4 million. These leases will commence in 2020 with lease terms ranging from two to five years.

As of August 1, 2020, the Company had an additional executed leases that had not yet commenced with operating lease liabilities of $0.1 million. This lease is expected to commence in 2020 with a lease term of three years.

4. Prepaid Expenses and Other Current Assets

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

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

6. Stock-based Compensation

On March April 14, 2017,2020, the Company’s Board of Directors (the “Board”) of Build-A-Bear Workshop, Inc. (the “Company”) adopted, subject to stockholder approval, the Build-A-Bear Workshop, Inc. 20172020 Omnibus Incentive Plan (the “2017��2020 Incentive Plan”). On MayJune 11, 2017, 2020, at the Company’s 20172020 Annual Meeting of Stockholders (the “Annual Meeting”), the Company’s stockholders approved the 20172020 Incentive Plan. The 20172020 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, restricted stock, cash and other stock-based awards, some of which may be performance-basedincluding restricted stock and restricted stock units, cash-based awards, and performance awards pursuant to the terms of the 20172020 Incentive Plan. The Board may amend, modify or terminate the 2017 Plan at any time, except as otherwise provided in the 2017 Plan. The 20172020 Incentive Plan will terminate on MarchApril 14, 2027, 2030, unless earlier terminated by the Board.

The number of shares of the Company’s common stock authorized for issuance under the 20172020 Incentive Plan is 1,000,000, plus shares of stock that remained available for issuance under the Build-A-Bear Workshop, Inc. 2017 Omnibus Incentive Plan (the “2017 Incentive Plan”) at the time the 2020 Incentive Plan was approved by the Company’s stockholders, and shares that are subject to outstanding awards made under the Company's Third Amended and Restated 2004 Stock2017 Incentive Plan that on or after March 21, 2017 April 14, 2020 may be forfeited, expire or be settled for cash.

In accordance with its terms, as of the date the 2020 Incentive Plan was approved by the Company’s stockholders, the 2017 Incentive was frozen and no further awards will be issued thereunder. Awards issued pursuant to the 2017 Incentive Plan

that were outstanding as of the date of stockholder approval of the 2020 Incentive Plan will remain outstanding and will be administered in accordance with the terms of the 2017 Incentive Plan and applicable award agreements thereunder. All of the stock-based incentive compensation activity for the period ended August 1, 2020 and August 3, 2019 was under the 2017 Incentive Plan.

For the thirteen weeks ended May 2,August 1, 2020and May 4,August 3, 2019, Selling, general and administrative expense included $0.3$0.5 million and $0.7$0.7 million, respectively, of stock-based compensation expense.expense, and for the twenty-six weeks ended August 1, 2020 and August 3, 2019, Selling, general and administrative expense included $0.7 million and $1.5 million, respectively. As of May 2,August 1, 2020, there was $2.4was $2.0 million of total unrecognized compensation expense related to unvested restricted stock and option awards which is expected to be recognized over a weighted-average period of 1.21.1 years.

The following table is a summary of the balances and activity for stock options for the thirteentwenty-six weeks ended May 2,August 1, 2020:

The following table is a summary of the balances and activity related to time-based and performance-based restricted stock for the thirteentwenty-six weeks ended May 2,August 1, 2020:

The total fair value of shares vested during the thirteentwenty-six weeks ended May 2,August 1, 2020 and May 4,August 3, 2019 was $1.9$2.3 million and $1.6$2.2 million, respectively.

The outstanding performance shares as of May 2,August 1, 2020 consist of the following:

7. Income Taxes

The Company's effective tax rate was (13.6%)0.5% and -7.6% for the thirteen and twenty-six weeks ended May 2,August 1, 2020,respectively, compared to 50.5%-65.1% and 101.7% for the thirteen and twenty-six weeks ended May 4,August 3, 2019,. In the first quarter of fiscal respectively. The 2020, the effective tax rate differed from the statutory rate of 21% primarily due tono tax benefit being recorded on the current period pretax loss as a full valuation allowance has now been recorded globally.  In addition, the first half of fiscal 2020 was impacted by the $3.3 million valuation allowance recorded on the beginning balance of the net deferred tax assets in certain jurisdictions offset by $0.8 million of benefit as a result of the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. In addition, no tax benefit was recorded on the current period pretax loss as a full valuation allowance has now been recorded globally.  In the first quarter of fiscal jurisdictions.  The 2019, the effective tax rate differed from the statutory rate of 21% primarily due to the valuation allowance being recorded in certain foreign loss companies and the $0.2 million tax impact of equity awards vesting.

8. Stockholders’ Equity

The following table sets forth the changes in stockholders’ equity (in thousands) for the thirteen weeks ended May 2,August 1, 2020 and May 4,August 3, 2019 (in thousands):

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

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

The following table sets forth the changes in stockholders’ equity (in thousands) for the twenty-six weeks ended August 1, 2020 and August 3, 2019 (in thousands):

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

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

In August 2017, the Company’s Board of Directors authorized a share repurchase program of up to $20.0 million. From the date of such authorization through May 2,August 1, 2020, the Company hashad repurchased approximately 1.3 million shares at an average price of $8.75 per share for an aggregate amount of approximately $11.2 million, leaving approximately $8.8 million authorized under the program as of that date. We do The Company does not plan to utilize cash to resume share repurchases in fiscal 2020. In addition, ourthe Company's ability to repurchase shares is limited by conditions set forth by ourits lender in ourits credit agreement, as described below.

9. Income per Share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data), in periods of net loss, no effect is given to the Company’s participating securities as they do not contractually participate in the losses of the Company:

In calculating the diluted income per share for the thirteen and twenty-six weeks ended May 2,August 1, 2020 and May 4, 2019, options to purchase 892,339833,353 and 938,622862,846 share of common stock, respectively, that were outstanding at the end of the period were not included in the computation of diluted income per share due to their anti-dilutive effect. For the thirteen and twenty-six weeks ended August 3, 2019, options to purchase 924,628 and 927,448 shares of common stock, respectively, that were outstanding at the end of the period were not included in the computation of diluted income per share due to their anti-dilutive effect.

10. Comprehensive Income (Loss)

The difference between comprehensive income or loss and net income or loss results fromis the result of foreign currency translation adjustments on the balance sheets of subsidiaries whose functional currency is not the U.S. Dollar. The accumulated other comprehensive income (loss) balance at May 2,August 1, 2020 and May 4,August 3, 2019 was comprised entirely of foreign currency translation. For the thirteen weeks ended May 2,August 1, 2020 and May 4,August 3, 2019, there were nothe Company had 0 reclassifications out of accumulated other comprehensive income (loss).