1.	Preparation of Interim Financial Statements

The condensed consolidated financial statements of Hooker Furniture Corporation and subsidiaries (referred to as “we,” “us,” “our,” “Hooker” or the “Company”) have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). All references to the “Hooker”, “Hooker Division” or “traditional Hooker” divisions or companies refer to the current components of our Hooker Casegoods and Upholstery operating segments, including Shenandoah since its characteristics (e.g. management, price points, margins and domestic manufacturing base), are like that of the other components of what we previously defined as the “legacy Hooker” business. In the opinion of management, these statements include all adjustments necessary for a fair statement of the results of all interim periods reported herein. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) are condensed or omitted pursuant to SEC rules and regulations. However, we believe that the disclosures made are adequate for a fair presentation of our results of operations and financial position. These financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our annual report on Form 10-K for the fiscal year ended January 29, 2017 (“2017 Annual Report”). The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect both the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from our estimates. Operating results for the interim periods reported herein may not be indicative of the results expected for the fiscal year.

The financial statements contained herein are being filed as part of a quarterly report on Form 10-Q covering the thirteen-week period (also referred to as “three months,” “three-month period,” “quarter,” “third quarter” or “quarterly period”) that began July 31, 2017, and the thirty-nine week period (also referred to as “nine months,” “nine-month period” or “year-to-date period”) that began January 30, 2017, which both ended October 29, 2017, compared to the thirteen-week period that began August 1, 2016 and the thirty-nine week period that began February 1, 2016, which both ended October 30, 2016; and our financial condition as of October 29, 2017 compared to January 29, 2017.

References in these notes to the condensed consolidated financial statements of the Company to:

§	the 2018 fiscal year and comparable terminology mean the fiscal year that began January 30, 2017 and will end January 28, 2018; and

§	the 2017 fiscal year and comparable terminology mean the fiscal year that began February 1, 2016 and ended January 29, 2017.

References in this document to “SFI” refer to the counterparties to the asset purchase agreement, Shenandoah Furniture, Inc. and its two former shareholders, entered into on September 6, 2017. References in this document to “Shenandoah” or “Shenandoah Furniture” refer to the newly acquired business operations of SFI acquired on September 29, 2017.

On September 29, 2017, we acquired substantially all of the assets and assumed certain liabilities of SFI for $32.7 million in cash and the issuance of 176,018 shares of our common stock valued at $8.4 million (such numbers are subject to agreed upon post-closing working capital adjustments). Based on the way we manage, evaluate and internally report our operations, we determined that Shenandoah’s newly acquired business will be reported in our Upholstery segment.

The results of operations of Shenandoah are included in our results of operations beginning on September 29, 2017 through the end of our fiscal 2018 third quarter ended on October 29, 2017. Consequently, comparable prior-year information for Shenandoah is not included in the financial statements presented in this report. The acquisition is discussed in greater detail below in Note 2. “Acquisition.”

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance for the recognition of revenue from contracts with customers. Subsequent Accounting Standards Updates have been issued to provide clarity and defer the effective date of the new guidance. The new revenue recognition standard eliminates the transaction- and industry-specific revenue recognition guidance under current GAAP and replaces it with a principles-based approach. Our analysis to date has included reviewing material agreements and sales policies and procedures, interviewing sales and customer care management and analyzing those findings based on the five-step model described in the new standard. Additionally, we have decided to implement the standard using the modified retrospective adjustment method as a cumulative-effect adjustment as of the date of adoption. Implementation matters remaining include completing our analysis, assessing accounting policy elections and disclosures under the new guidance and evaluating the systems and processes to support any possible changes to our revenue recognition practices. Based on our analysis to date, we do not believe the standard will have a material effect on our financial statements. However, our analysis is not yet complete and this preliminary conclusion is subject to change. The new revenue recognition guidance is effective for us beginning in fiscal 2019, which begins on January 29, 2018.