##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-Q





(Mark One)

|x | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended October 3, 2009

OR



| ̈ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission file number: 001-32320





BUILD-A-BEAR WORKSHOP, INC.

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 43-1883836                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)
|                                                               | 
|1954 Innerbelt Business Center Drive St. Louis, Missouri       |  | 63114                            
|(Address of Principal Executive Offices)                       |  | (Zip Code)                       

(314) 423-8000

(Registrants Telephone Number, Including Area Code)





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  x    No   ̈

Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).     Yes   ̈    No   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



| |  |                                               |  |                              |  | 
| |  | --------------------------------------------- |  | ---------------------------- |  | 
| |  | Large accelerated filer   ̈                    |  | Accelerated filer  x         |  | 
| |  |                                               | 
| |  | Non-accelerated filer   ̈                      |  | Smaller reporting company   ̈ |  | 
| |  | (Do not check if a smaller reporting company) |  |                             

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

As of November 9, 2009, there were 20,361,705 issued and outstanding shares of the registrants common stock.









---

##### Table of Contents

BUILD-A-BEAR WORKSHOP, INC.

INDEX TO FORM 10-Q



|                             |  |                                                                                       |  |     
|---------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|                             |  |                                                                                       |  | Page
|Part I Financial Information |  |                                                                                      
|                             |  |                                                                                      
|Item 1.                      |  | Financial Statements (Unaudited)                                                      |  |     
|                             |  | Consolidated Balance Sheets                                                           |  | 3   
|                             |  | Consolidated Statements of Operations                                                 |  | 4   
|                             |  | Consolidated Statements of Cash Flows                                                 |  | 5   
|                             |  | Notes to Consolidated Financial Statements                                            |  | 6   
|                             |  |                                                                                      
|Item 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12  
|                             |  |                                                                                      
|Item 3.                      |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 21  
|                             |  |                                                                                      
|Item 4.                      |  | Controls and Procedures                                                               |  | 21  
|                             | 
|Part II Other Information    |  |                                                                                      
|                             |  |                                                                                      
|Item 1A.                     |  | Risk Factors                                                                          |  | 22  
|Item 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 22  
|Item 6.                      |  | Exhibits                                                                              |  | 23  
|                             | 
|Signatures                   |  | 24                                                                                   



2



---

##### Table of Contents

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share and per share data)



|                                                                                                                                        |  |                |         |   |                |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | -------------- | - | ------- | -
|                                                                                                                                        |  | October 3,2009 |         |   | January 3,2009 |  
|ASSETS                                                                                                                                  | 
|Current assets:                                                                                                                         |  |                |         |   |                |   |         |  
|Cash and cash equivalents                                                                                                               |  | $              | 27,043  |   |                | $ | 47,000  |  
|Inventories                                                                                                                             |  |                | 48,457  |   |                |   | 50,586  |  
|Receivables                                                                                                                             |  |                | 5,124   |   |                |   | 8,288   |  
|Prepaid expenses and other current assets                                                                                               |  |                | 21,545  |   |                |   | 16,151  |  
|Deferred tax assets                                                                                                                     |  |                | 4,243   |   |                |   | 3,839   |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Total current assets                                                                                                                    |  |                | 106,412 |   |                |   | 125,864 |  
|Property and equipment, net of accumulated depreciation of $137,748 and $116,908, respectively                                          |  |                | 107,616 |   |                |   | 123,193 |  
|Goodwill                                                                                                                                |  |                | 33,247  |   |                |   | 30,480  |  
|Other intangible assets, net                                                                                                            |  |                | 4,037   |   |                |   | 3,903   |  
|Investment in affiliate                                                                                                                 |  |                | 3,159   |   |                |   | 7,721   |  
|Other assets, net                                                                                                                       |  |                | 10,584  |   |                |   | 8,991   |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Total Assets                                                                                                                            |  | $              | 265,055 |   |                | $ | 300,152 |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                    |  |                |         |   |                |   |         |  
|Current liabilities:                                                                                                                    |  |                |         |   |                |   |         |  
|Accounts payable                                                                                                                        |  | $              | 28,134  |   |                | $ | 37,547  |  
|Accrued expenses                                                                                                                        |  |                | 4,795   |   |                |   | 12,593  |  
|Gift cards and customer deposits                                                                                                        |  |                | 21,157  |   |                |   | 29,210  |  
|Deferred revenue                                                                                                                        |  |                | 7,811   |   |                |   | 7,634   |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Total current liabilities                                                                                                               |  |                | 61,897  |   |                |   | 86,984  |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Deferred franchise revenue                                                                                                              |  |                | 2,102   |   |                |   | 2,033   |  
|Deferred rent                                                                                                                           |  |                | 36,298  |   |                |   | 41,714  |  
|Other liabilities                                                                                                                       |  |                | 1,222   |   |                |   | 1,696   |  
|Stockholders equity:                                                                                                                   |  |                |         |   |                |   |         |  
|Preferred stock, par value $0.01, Shares authorized: 15,000,000; No shares issued or outstanding at October 3, 2009 and
January 3, 2009 |  |                |        |   |                |   |        |  
|Common stock, par value $0.01, Shares authorized: 50,000,000; Issued and outstanding: 20,370,095 and 19,478,750 shares,
respectively    |  |                | 204     |   |                |   | 195     |  
|Additional paid-in capital                                                                                                              |  |                | 78,871  |   |                |   | 76,852  |  
|Accumulated other comprehensive loss                                                                                                    |  |                | (7,247  | ) |                |   | (12,585 | )
|Retained earnings                                                                                                                       |  |                | 91,708  |   |                |   | 103,263 |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Total stockholders equity                                                                                                              |  |                | 163,536 |   |                |   | 167,725 |  
|                                                                                                                                        |  |                |         |   |                |   |         |  
|Total Liabilities and Stockholders Equity                                                                                              |  | $              | 265,055 |   |                | $ | 300,152 |  
|                                                                                                                                        |  |                |         |   |                |   |         |  

See accompanying notes to condensed consolidated financial statements.



3



---

##### Table of Contents

BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share and per share data)



|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|-------------------------------------------------- |  | -------------------- | ---------- | - | ----------------------- | - | ---------- | -------------- |  | - | ----------------- | - |  | - | ---------- | -
|                                                   |  | Thirteen weeks ended |            |   | Thirty-nine weeks ended |  
|                                                   |  | October 3,2009       |            |   | September 27,2008       |   |            | October 3,2009 |  |   | September 27,2008 |  
|Revenues:                                          |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Net retail sales                                   |  | $                    | 89,731     |   |                         | $ | 105,786    |                |  | $ | 267,354           |   |  | $ | 321,108    |  
|Franchise fees                                     |  |                      | 945        |   |                         |   | 982        |                |  |   | 2,153             |   |  |   | 3,055      |  
|Licensing revenue                                  |  |                      | 1,064      |   |                         |   | 478        |                |  |   | 1,978             |   |  |   | 1,585      |  
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Total revenues                                     |  |                      | 91,740     |   |                         |   | 107,246    |                |  |   | 271,485           |   |  |   | 325,748    |  
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Costs and expenses:                                |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Cost of merchandise sold                           |  |                      | 57,024     |   |                         |   | 63,471     |                |  |   | 172,663           |   |  |   | 191,640    |  
|Selling, general and administrative                |  |                      | 39,255     |   |                         |   | 43,491     |                |  |   | 113,683           |   |  |   | 130,492    |  
|Store preopening                                   |  |                      | 73         |   |                         |   | 871        |                |  |   | 90                |   |  |   | 2,046      |  
|Store closing                                      |  |                      | 250        |   |                         |   | 2,916      |                |  |   | 981               |   |  |   | 2,916      |  
|Equity losses from investment in affiliate         |  |                      | 4,592      |   |                         |   |           |                |  |   | 5,125             |   |  |   |           |  
|Interest expense (income), net                     |  |                      | (44        | ) |                         |   | (135       | )              |  |   | (92               | ) |  |   | (774       | )
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Total costs and expenses                           |  |                      | 101,150    |   |                         |   | 110,614    |                |  |   | 292,450           |   |  |   | 326,320    |  
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Loss before income taxes                           |  |                      | (9,410     | ) |                         |   | (3,368     | )              |  |   | (20,965           | ) |  |   | (572       | )
|Income tax benefit                                 |  |                      | (4,647     | ) |                         |   | (1,353     | )              |  |   | (9,408            | ) |  |   | (159       | )
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Net loss                                           |  | $                    | (4,763     | ) |                         | $ | (2,015     | )              |  | $ | (11,557           | ) |  | $ | (413       | )
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Loss per common share:                             |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Basic                                              |  | $                    | (0.25      | ) |                         | $ | (0.11      | )              |  | $ | (0.61             | ) |  | $ | (0.02      | )
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Diluted                                            |  | $                    | (0.25      | ) |                         | $ | (0.11      | )              |  | $ | (0.61             | ) |  | $ | (0.02      | )
|                                                   |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Shares used in computing common per share amounts: |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Basic                                              |  |                      | 18,876,697 |   |                         |   | 18,815,996 |                |  |   | 18,844,009        |   |  |   | 19,299,301 |  
|Diluted                                            |  |                      | 18,876,697 |   |                         |   | 18,815,996 |                |  |   | 18,844,009        |   |  |   | 19,299,301 |  

See accompanying notes to condensed consolidated financial statements.



4



---

##### Table of Contents

BUILD-A-BEAR WORKSHOP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



|                                                                            |  |                         |         |   |                   |   |         |  
|--------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ----------------- | - | ------- | -
|                                                                            |  | Thirty-nine weeks ended |        
|                                                                            |  | October 3,2009          |         |   | September 27,2008 |  
|Cash flows from operating activities:                                       |  |                         |         |   |                   |   |         |  
|Net loss                                                                    |  | $                       | (11,557 | ) |                   | $ | (413    | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                         |         |   |                   |   |         |  
|Depreciation and amortization                                               |  |                         | 21,114  |   |                   |   | 21,626  |  
|Impairment of store assets                                                  |  |                         | 312     |   |                   |   | 2,867   |  
|Deferred taxes                                                              |  |                         | (1,695  | ) |                   |   | (1,056  | )
|Equity losses from investment in affiliate                                  |  |                         | 5,125   |   |                   |   |        |  
|Loss on disposal of property and equipment                                  |  |                         | 138     |   |                   |   | 167     |  
|Stock-based compensation                                                    |  |                         | 3,145   |   |                   |   | 2,798   |  
|Change in assets and liabilities:                                           |  |                         |         |   |                   |   |         |  
|Inventories                                                                 |  |                         | 2,435   |   |                   |   | 443     |  
|Receivables                                                                 |  |                         | 3,224   |   |                   |   | 305     |  
|Prepaid expenses and other assets                                           |  |                         | (5,114  | ) |                   |   | (1,017  | )
|Accounts payable                                                            |  |                         | (8,616  | ) |                   |   | (13,991 | )
|Accrued expenses and other liabilities                                      |  |                         | (19,422 | ) |                   |   | (13,504 | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Net cash used in operating activities                                       |  |                         | (10,911 | ) |                   |   | (1,775  | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Cash flows from investing activities:                                       |  |                         |         |   |                   |   |         |  
|Purchases of property and equipment                                         |  |                         | (4,384  | ) |                   |   | (19,249 | )
|Purchases of other assets and other intangible assets                       |  |                         | (2,267  | ) |                   |   | (1,123  | )
|Investment in affiliate                                                     |  |                         | (562    | ) |                   |   | (3,187  | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Cash flow used in investing activities                                      |  |                         | (7,213  | ) |                   |   | (23,559 | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Cash flows from financing activities:                                       |  |                         |         |   |                   |   |         |  
|Exercise of employee stock options and employee stock purchases             |  |                         |        |   |                   |   | 185     |  
|Purchases of Companys common stock                                         |  |                         |        |   |                   |   | (13,540 | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Cash flow used in financing activities                                      |  |                         |        |   |                   |   | (13,355 | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Effect of exchange rates on cash                                            |  |                         | (1,833  | ) |                   |   | (249    | )
|                                                                            |  |                         |         |   |                   |   |         |  
|Net decrease in cash and cash equivalents                                   |  |                         | (19,957 | ) |                   |   | (38,938 | )
|Cash and cash equivalents, beginning of period                              |  |                         | 47,000  |   |                   |   | 66,261  |  
|                                                                            |  |                         |         |   |                   |   |         |  
|Cash and cash equivalents, end of period                                    |  | $                       | 27,043  |   |                   | $ | 27,323  |  
|                                                                            |  |                         |         |   |                   |   |         |  
|Supplemental disclosure of cash flow information:                           |  |                         |         |   |                   |   |         |  
|Cash paid during the period for:                                            |  |                         |         |   |                   |   |         |  
|Income taxes                                                                |  | $                       |        |   |                   | $ | 7,267   |  
|Noncash Transactions:                                                       |  |                         |         |   |                   |   |         |  
|Return of common stock in lieu of tax withholdings and option exercises     |  | $                       | 311     |   |                   | $ | 304     |  
|Unsettled repurchases of common stock at end of period                      |  | $                       |        |   |                   | $ | 584     |  

See accompanying notes to condensed consolidated financial statements.



5



---

##### Table of Contents

Notes to Condensed Consolidated Financial Statements

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 January 3, 2009 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 January 3, 2009 included in the Companys annual report on Form 10-K filed with the SEC on March 19, 2009.

2. Goodwill

Goodwill is accounted for in accordance with Accounting
Standards Codification (ASC) Section 350-20 and is reported as a component of the Companys retail segment. The following table summarizes the changes in goodwill for the thirty-nine weeks ended October 3, 2009 (in thousands):



|                                       |  |   |       
|-------------------------------------- |  | - | ------
|Balance as of January 3, 2009          |  | $ | 30,480
|Effect of foreign currency translation |  |   | 2,767 
|                                       |  |   |       
|Balance as of October 3, 2009          |  | $ | 33,247
|                                       |  |   |       

Goodwill is not subject to amortization and is tested for impairment annually or more
frequently if events or changes in circumstances indicate that the asset might be impaired. This testing requires comparison of carrying values to fair values, and when appropriate, the carrying value of impaired assets is reduced to fair value.
Goodwill will be tested for impairment no later than January 2, 2010.

3. Stock-based Compensation

The Company accounts for stock-based compensation in accordance with ASC Section 718. The Company uses the straight-line expense
attribution method for all stock-based compensation awards with graded vesting.

For the thirteen and thirty-nine weeks ended
October 3, 2009, selling, general and administrative expense includes $1.1 million ($0.5 million after tax) and $3.1 million ($1.7 million after tax), respectively, of stock-based compensation expense. For the thirteen and thirty-nine
weeks ended September 27, 2008, selling, general and administrative expenses includes $0.9 million ($0.5 million after tax) and $2.7 million ($1.9 million after tax), respectively, of stock-based compensation expense.

As of October 3, 2009, there was $9.0 million of total unrecognized compensation expense related to nonvested restricted stock and
option awards which is expected to be recognized over a weighted-average period of 1.7 years.

4. Stock Incentive Plans

In 2000, the Company adopted the Build-A-Bear Workshop, Inc. 2000 Stock Option Plan. In 2003, the Company adopted the Build-A-Bear Workshop,
Inc. 2002 Stock Incentive Plan, and, in 2004, the Company adopted the Build-A-Bear Workshop, Inc. 2004 Stock Incentive Plan (collectively, the Plans).

The Plans allow for the grant of incentive stock options, nonqualified stock options and restricted stock. Options granted under the Plans expire no later than 10 years from the date of the grant.
The exercise price of each stock option shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. The vesting provision of individual awards is at the discretion of the compensation committee
of the Board of Directors (the Committee) and generally ranges from one to four years.

On March 17, 2009, the Board of
Directors adopted, subject to stockholder approval at the Companys annual meeting of stockholders, certain amendments to the Amended and Restated 2004 Stock Incentive Plan (the Amended Incentive Plan). On May 14, 2009, the stockholders
approved the Amended Incentive Plan. The Amended Incentive Plan amendments, among other things: (i) provide that the number of shares authorized for issuance under the Amended Incentive Plan as of January 3, 2009 would be 3,230,000,
subject to certain adjustments; (ii) expressly prohibit the use of shares withheld to satisfy tax withholding obligations for reissuance under the Amended Incentive Plan; (iii) provide a formula for the share reserve ratio of awards under
the Amended Incentive Plan, including an increased ratio for certain awards; (iv) expressly prohibit the repricing of awards under the Amended



6



---

##### Table of Contents

Incentive Plan without the approval of stockholders; (v) revise a portion of the definition of change in control to state that a change in control occurs upon the occurrence of a
reorganization, merger or consolidation rather than stockholder approval of such transactions; (vi) expressly state that the purchase price of all options shall be fair market value on the date of grant; (vii) limit the term of a stock
appreciation right to 10 years; and (viii) provide that the Committee will administer and interpret the Amended Incentive Plan in a manner consistent with the intent to satisfy the requirements of Section 409A of the Internal Revenue Code
to avoid any adverse tax results thereunder to a holder of an award.

(a) Stock Options

The following table is a summary of the balances and activity for the Plans related to stock options for the thirty-nine weeks ended
October 3, 2009:



|                             |  |                 |  |                               |       |                                          |     |                                       |   |    
|---------------------------- |  | --------------- |  | ----------------------------- | ----- | ---------------------------------------- | --- | ------------------------------------- | - | ---
|                             |  | Number ofShares |  | WeightedAverageExercise Price |       | WeightedAverageRemainingContractual Term |     | AggregateIntrinsicValue(in thousands)
|Outstanding, January 3, 2009 |  | 354,772         |  | $                             | 15.98 |                                          |     |                                       |   |    
|Granted                      |  | 478,923         |  |                               | 5.04  |                                          |     |                                       |   |    
|Exercised                    |  |                |  |                               |      |                                          |     |                                       |   |    
|Forfeited                    |  | 19,442          |  |                               | 15.16 |                                          |     |                                       |   |    
|                             |  |                 |  |                               |       |                                          |     |                                       |   |    
|Outstanding, October 3, 2009 |  | 814,253         |  | $                             | 9.57  |                                          | 7.1 |                                       | $ | 132
|                             |  |                 |  |                               |       |                                          |     |                                       |   |    
|Options Exercisable As Of:   |  |                 |  |                               |       |                                          |     |                                       |   |    
|October 3, 2009              |  | 344,022         |  | $                             | 15.75 |                                          | 3.8 |                                       | $ | 113
|                             |  |                 |  |                               |       |                                          |     |                                       |   |    

No options were exercised in the thirty-nine weeks ended October 3, 2009 or
September 27, 2008. The Company generally issues new shares to satisfy option exercises.

The expense recorded related to
options granted during the thirteen and thirty-nine weeks ended October 3, 2009 was determined using the Black-Scholes option pricing model and the provisions of Staff Accounting Bulletin (SAB) 107 and 110, which allow the use of a simplified
method to estimate the expected term of plain vanilla options. The assumptions used in the option pricing model were: (a) dividend yield of 0%; (b) volatility of 65%; (c) risk-free interest rates ranging from 2.3% to 3.1%;
and (d) an expected life of 6.25 years.

(b) Restricted Stock

The following table is a summary of the balances and activity for the Plans related to restricted stock granted as compensation to employees
and directors for the thirty-nine weeks ended October 3, 2009:



|                             |  |                 |  |                                               |      
|---------------------------- |  | --------------- |  | --------------------------------------------- | -----
|                             |  | Number ofShares |  | WeightedAverage GrantDate Fair Valueper Award
|Outstanding, January 3, 2009 |  | 713,756         |  | $                                             | 13.82
|Granted                      |  | 1,037,859       |  |                                               | 5.07 
|Vested                       |  | 173,184         |  |                                               | 18.19
|Canceled or expired          |  | 85,188          |  |                                               | 10.76
|                             |  |                 |  |                                               |      
|Outstanding, October 3, 2009 |  | 1,493,243       |  | $                                             | 7.41 
|                             |  |                 |  |                                               |      

The total fair value of shares vested during the thirty-nine weeks ended
October 3, 2009 and September 27, 2008 was $0.9 million and $1.0 million, respectively.



7



---

##### Table of Contents

(c) Associate Stock Purchase Plan

In October 2004, the Company adopted an Associate Stock Purchase Plan (ASPP). Under the ASPP, substantially all full-time employees were
given the right to purchase shares of the Companys common stock, subject to certain limitations, at 85% of the lesser of the fair market value on the purchase date or the beginning of each purchase period, or calendar quarter. The ASPP was
terminated, effective December 31, 2008. The employees of the Company purchased 10,892 shares at $6.34 per share through the ASPP during the 2008 third calendar quarter, which ended September 30, 2008. The purchase occurred in the
Companys fiscal 2008 fourth quarter.

5. Earnings per Share

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



|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|---------------------------------------------------- |  | -------------------- | ---------- | - | ----------------------- | - | ---------- | -------------- |  | - | ----------------- | - |  | - | ---------- | -
|                                                     |  | Thirteen weeks ended |            |   | Thirty-nine weeks ended |  
|                                                     |  | October 3,2009       |            |   | September 27,2008       |   |            | October 3,2009 |  |   | September 27,2008 |  
|Net loss                                             |  | $                    | (4,763     | ) |                         | $ | (2,015     | )              |  | $ | (11,557           | ) |  | $ | (413       | )
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Weighted average number of common shares outstanding |  |                      | 18,876,697 |   |                         |   | 18,815,996 |                |  |   | 18,844,009        |   |  |   | 19,299,301 |  
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Effect of dilutive securities:                       |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Stock options                                        |  |                      |           |   |                         |   |           |                |  |   |                  |   |  |   |           |  
|Restricted stock                                     |  |                      |           |   |                         |   |           |                |  |   |                  |   |  |   |           |  
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Weighted average number of common sharesdilutive    |  |                      | 18,876,697 |   |                         |   | 18,815,996 |                |  |   | 18,844,009        |   |  |   | 19,299,301 |  
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Loss per share:                                      |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Basic                                                |  | $                    | (0.25      | ) |                         | $ | (0.11      | )              |  | $ | (0.61             | ) |  | $ | (0.02      | )
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  
|Diluted                                              |  | $                    | (0.25      | ) |                         | $ | (0.11      | )              |  | $ | (0.61             | ) |  | $ | (0.02      | )
|                                                     |  |                      |            |   |                         |   |            |                |  |   |                   |   |  |   |            |  

In calculating diluted loss per share for the thirteen and thirty-nine weeks ended
October 3, 2009, options to purchase 814,253 shares of common stock were outstanding as of the end of the period, but were not included in the computation of diluted loss per share due to their anti-dilutive effect. An additional 1,493,243
shares of restricted common stock were outstanding at the end of the period, but excluded from the calculation of diluted loss per share for the thirteen and thirty-nine weeks ended October 3, 2009 due to their anti-dilutive effect.

In calculating diluted loss per share for the thirteen and thirty-nine weeks ended September 27, 2008, options to purchase 368,677
shares of common stock were outstanding as of the end of the period, but were not included in the computation of diluted loss per share due to their anti-dilutive effect. An additional 691,103 shares of restricted common stock were outstanding at
the end of the period, but excluded from the calculation of diluted loss per share for the thirteen and thirty-nine weeks ended September 27, 2008 due to their anti-dilutive effect.

6. Income Taxes

The Company accounts for uncertainty in income taxes in
accordance with ASC Section 740-10. As of October 3, 2009 and January 3, 2009, the Company had approximately $0.8 million and $1.0 million, respectively, of unrecognized tax benefits. During the next twelve months, it is reasonably
possible to reduce unrecognized tax benefits by $0.4 million either because the tax positions are sustained on audit, settlements are reached or the statute of limitations expired.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of October 3, 2009 and
January 3, 2009, there was approximately $0.2 million of accrued interest related to uncertain tax positions.

7. Comprehensive Loss

Comprehensive loss for the thirteen weeks ended October 3, 2009 and September 27, 2008 was $6.4 million and $7.7
million, respectively, and for the thirty-nine week period ended October 3, 2009 and September 27, 2008 was $6.2 million and $5.4 million, respectively. The difference between comprehensive loss and net loss resulted from foreign currency
translation adjustments.



8



---

##### Table of Contents

8. Segment Information

The Companys operations are conducted through three operating segments consisting of retail, international franchising, and licensing and entertainment. The retail segment includes the operating
activities of company-owned stores in the United States, including Puerto Rico, Canada, the United Kingdom, Ireland, France and other retail delivery operations, including the Companys Web store and non-traditional store locations such as
baseball ballparks. The international franchising segment includes the licensing activities of the Companys franchise agreements with store locations in Europe, outside of France, Asia, Australia and Africa. The licensing and entertainment
segment has been established to market the naming and branding rights of the Companys intellectual properties for third party use. 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 one reportable segment. The reportable segments follow the same accounting policies used for the Companys consolidated financials statements.

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



|                                           |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|------------------------------------------ |  | ------ | ------- | - | ------------------------ | - | ------------------------ |  | ----- | ----- |  | - | ------- | -
|                                           |  | Retail |         |   | InternationalFranchising |   | Licensing &Entertainment |  | Total |      
|Thirteen weeks ended October 3, 2009       |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|Net sales to external customers            |  | $      | 89,731  |   |                          | $ | 945                      |  | $     | 1,064 |  | $ | 91,740  |  
|Income (loss) before income taxes          |  |        | (10,764 | ) |                          |   | 515                      |  |       | 839   |  |   | (9,410  | )
|Capital expenditures, net                  |  |        | 2,805   |   |                          |   | 133                      |  |       |      |  |   | 2,938   |  
|Depreciation and amortization              |  |        | 6,906   |   |                          |   | 119                      |  |       |      |  |   | 7,025   |  
|Thirteen weeks ended September 27, 2008    |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|Net sales to external customers            |  | $      | 105,786 |   |                          | $ | 982                      |  | $     | 478   |  | $ | 107,246 |  
|Income (loss) before income taxes          |  |        | (4,234  | ) |                          |   | 526                      |  |       | 340   |  |   | (3,368  | )
|Capital expenditures, net                  |  |        | 5,513   |   |                          |   | 143                      |  |       |      |  |   | 5,656   |  
|Depreciation and amortization              |  |        | 7,197   |   |                          |   | 184                      |  |       | 2     |  |   | 7,383   |  
|Thirty-nine weeks ended October 3, 2009    |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|Net sales to external customers            |  | $      | 267,354 |   |                          | $ | 2,153                    |  | $     | 1,978 |  | $ | 271,485 |  
|Income (loss) before income taxes          |  |        | (23,597 | ) |                          |   | 1,042                    |  |       | 1,590 |  |   | (20,965 | )
|Capital expenditures, net                  |  |        | 6,422   |   |                          |   | 229                      |  |       |      |  |   | 6,651   |  
|Depreciation and amortization              |  |        | 20,773  |   |                          |   | 341                      |  |       |      |  |   | 21,114  |  
|Thirty-nine weeks ended September 27, 2008 |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|Net sales to external customers            |  | $      | 321,108 |   |                          | $ | 3,055                    |  | $     | 1,585 |  | $ | 325,748 |  
|Income (loss) before income taxes          |  |        | (3,430  | ) |                          |   | 1,733                    |  |       | 1,125 |  |   | (572    | )
|Capital expenditures, net                  |  |        | 19,679  |   |                          |   | 693                      |  |       |      |  |   | 20,372  |  
|Depreciation and amortization              |  |        | 21,053  |   |                          |   | 566                      |  |       | 7     |  |   | 21,626  |  
|Total Assets as of:                        |  |        |         |   |                          |   |                          |  |       |       |  |   |         |  
|October 3, 2009                            |  | $      | 258,403 |   |                          | $ | 3,222                    |  | $     | 3,430 |  | $ | 265,055 |  
|September 27, 2008                         |  | $      | 286,473 |   |                          | $ | 3,574                    |  | $     | 2,501 |  | $ | 292,548 |  



9



---

##### Table of Contents

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. The Company allocates revenues to 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):



|                                           |  |                  |         |            |   |           |  |       |       |  |   |        
|------------------------------------------ |  | ---------------- | ------- | ---------- | - | --------- |  | ----- | ----- |  | - | -------
|                                           |  | NorthAmerica (1) |         | Europe (2) |   | Other (3) |  | Total
|Thirteen weeks ended October 3, 2009       |  |                  |         |            |   |           |  |       |       |  |   |        
|Net sales to external customers            |  | $                | 73,224  |            | $ | 17,571    |  | $     | 945   |  | $ | 91,740 
|Property and equipment, net                |  |                  | 94,239  |            |   | 13,377    |  |       |      |  |   | 107,616
|Thirteen weeks ended September 27, 2008    |  |                  |         |            |   |           |  |       |       |  |   |        
|Net sales to external customers            |  | $                | 87,310  |            | $ | 18,955    |  | $     | 981   |  | $ | 107,246
|Property and equipment, net                |  |                  | 113,582 |            |   | 18,798    |  |       | 2     |  |   | 132,382
|Thirty-nine weeks ended October 3, 2009    |  |                  |         |            |   |           |  |       |       |  |   |        
|Net sales to external customers            |  | $                | 223,480 |            | $ | 45,852    |  | $     | 2,153 |  | $ | 271,485
|Property and equipment, net                |  |                  | 94,239  |            |   | 13,377    |  |       |      |  |   | 107,616
|Thirty-nine weeks ended September 27, 2008 |  |                  |         |            |   |           |  |       |       |  |   |        
|Net sales to external customers            |  | $                | 272,098 |            | $ | 50,595    |  | $     | 3,055 |  | $ | 325,748
|Property and equipment, net                |  |                  | 113,582 |            |   | 18,798    |  |       | 2     |  |   | 132,382



|(1) | North America includes the United States, Canada and Puerto Rico
|--- | ----------------------------------------------------------------

|(2) | Europe includes company-owned stores in the United Kingdom, Ireland and France
|--- | ------------------------------------------------------------------------------

|(3) | Other includes franchise businesses outside of the United States, Canada, Puerto Rico, the United Kingdom, Ireland and France
|--- | -----------------------------------------------------------------------------------------------------------------------------

9. Investment in Affiliate

The Company holds a minority interest in Ridemakerz, LLC (Ridemakerz), which is accounted for under the equity method. Ridemakerz is an early-stage company that has developed an interactive retail concept that allows children and families
to build and customize their own personalized cars. In 2006, the Company invested $0.6 million, which represented an ownership interest of approximately 10%. The Company invested an additional $2.4 million in 2007 and $2.5 million in 2008. The
Company has also entered into a series of agreements whereby the Company has agreed to perform advisory and operational support services for Ridemakerz in exchange for additional equity. For the thirteen and thirty-nine weeks ended October 3,
2009, the Company received $0.2 million and $0.6 million, respectively, in equity in exchange for support services provided. For the thirteen and thirty-nine weeks ended September 27, 2008, the Company received $0.2 million and $0.7 million,
respectively, in equity in exchange for support services provided. In 2007, the Company also purchased a call option from a group of other Ridemakerz investors for $150,000 for 1.25 million Ridemakerz common units at an exercise price of $1.25
per unit. The call option was immediately exercisable and expires April 30, 2012. Simultaneously, the Company granted a put option to the same group of investors for 1.25 million common units at an exercise price of $0.50 per unit. The put
option became exercisable on April 30, 2008 and expires on April 30, 2012. As of October 3, 2009, the Companys investment in Ridemakerz was approximately $3.2 million, which represented an ownership interest of approximately
25%. Under current agreements, the Company is the sole member of an equity class that is allocated losses only following the allocation of losses to all other common and preferred equity holders to the extent of their capital contributions. All of
the priority equity members capital was reduced to zero in the fiscal 2009 second quarter. As a result, for the thirteen and thirty-nine weeks ended October 3, 2009, the Company recorded non-cash pre-tax losses of $4.6 million ($0.12 per
diluted share) and $5.1 million ($0.15 per diluted share), respectively, included in Equity losses from investment in affiliate in the Consolidated Statements of Operations. No income or loss allocations were recorded in the thirteen or
thirty-nine weeks ended September 27, 2008. As Ridemakerz continues to incur losses, the Company will be required to recognize those losses as non-cash charges up to the amount of the Companys total investment, including receivables,
unless additional equity investments are made by other investors in equity classes that are allocated losses ahead of the Companys equity. Under the current agreements, the Company could own up to approximately 33% of fully diluted equity in
Ridemakerz.

As of October 3, 2009 and January 3, 2009, outstanding receivables from Ridemakerz were $1.0 million
and $0.4 million, respectively.

10. Closure of Friends 2B Made Concept

In September 2008, the Company announced plans to close its Friends 2B Made concept, a line of make-your-own dolls and related products. The
closure plan affected the Companys nine Friends 2B Made locations, all but one of which were inside or adjacent to a Build-A-Bear Workshop store, separate Friends 2B Made fixtures in approximately 50 Build-A-Bear Workshop stores, and the
concepts Web site, www.friends2bmade.com. As of October 3, 2009, all nine locations were closed and the fixtures had been



10



---

##### Table of Contents

removed from all Build-A-Bear Workshop stores. During the thirteen and thirty-nine weeks ended October 3, 2009, the Company recorded pre-tax charges of $0.3 million and $1.0 million,
respectively, related to the closures, which consisted of lease termination charges, construction costs and inventory write-offs, and are included in Store closing expenses in the Consolidated Statements of Operations. During the third
quarter of fiscal 2008, the Company recorded a pre-tax charge of $2.9 million, respectively, related to the closures, which consisted primarily of asset impairment charges. These charges are a component of net loss before income taxes in the retail
segment.

11. Subsequent Events

The Company has evaluated events and transactions subsequent to October 3, 2009 through November 12, 2009, the date the financial statements were filed with the SEC as part of Form
10-Q. Other than the credit agreement extension described below, no events require recognition in the consolidated financial statements or disclosures of the Company per the definitions and requirements of ASC Section 855-10.

On October 28, 2009, the Company amended its previous line of credit with a bank that provides borrowing capacity for the first half of
the fiscal year of $40 million and a seasonal overline of $50 million. The seasonal overline is in effect from July 1 to December 31 each year. Borrowings under the credit agreement are secured by our assets and a pledge of 65% of our ownership
interest in our foreign subsidiaries. The credit agreement expires on December 31, 2011 and contains various restrictions on indebtedness, liens, guarantees, redemptions, mergers, acquisitions or sale of assets, loans, transactions with affiliates,
and investments. It also prohibits us from declaring dividends without the banks prior consent, unless such payment of dividends would not violate any terms of the credit agreement. Borrowings bear interest at LIBOR plus 2.05%. Financial
covenants include maintaining a minimum tangible net worth, maintaining a minimum fixed charge cover ratio (as defined in the credit agreement) and not exceeding a maximum funded debt to earnings before interest, depreciation and amortization ratio.



11



---

##### Table of Contents

Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations

The following Managements Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. These risks and uncertainties include, without limitation,
those detailed under the caption Risk Factors in our annual report on Form 10-K for the year ended January 3, 2009, our quarterly reports on Form 10-Q for the quarters ended April 4, 2009 and July 4, 2009, as filed with
the SEC, and the following: general economic conditions may continue to deteriorate, which could lead to disproportionately reduced consumer demand for our products, which represent relatively discretionary spending; our consolidated financial
results may be significantly affected by changes in foreign currency exchange rates; customer traffic may continue to decrease in the shopping malls where we are located, on which we depend to attract guests to our stores; we may be unable to
generate interest in and demand for our interactive retail experience, or to identify and respond to consumer preferences in a timely fashion; our marketing and online initiatives may not be effective in generating sufficient levels of brand
awareness and guest traffic; we may be unable to generate comparable store sales growth; losses incurred by our affiliate Ridemakerz may adversely affect our financial condition and profitability; the global economic crisis could have a material
adverse effect on our liquidity and capital resources; we may be unable to open new stores or may be unable to effectively manage our growth; we may be unable to effectively manage our international franchises or laws relating to those franchises
may change; we may be unable to renew or replace our store leases, or enter into leases for new stores on favorable terms or in favorable locations, or may violate the terms of our current leases; the ability of our principal vendors to deliver
merchandise may be disrupted; the availability and costs of our products could be adversely affected by risks associated with international manufacturing and trade; high petroleum products prices could increase our inventory transportation costs and
adversely affect our profitability; we may be unable to repurchase shares at all or at the times or in the amounts we currently anticipate or the results of the share repurchase program may not be as beneficial as we currently anticipate;
fluctuations in our quarterly results of operations could cause the price of our common stock to substantially decline; we may suffer negative publicity or be sued due to violations of labor laws or unethical practices by manufacturers of our
merchandise; we may improperly obtain or be unable to protect information from our guests in violation of privacy or security laws or expectations; our products could become subject to recalls or product liability claims that could adversely impact
our financial performance and harm our reputation among consumers; we may lose key personnel, be unable to hire qualified additional personnel, or experience turnover of our management team; we may be unable to realize the anticipated benefits from
our company-owned distribution center or our third-party distribution center providers may perform poorly; we may be unable to realize some of the expected benefits of the acquisition of Amsbra and Bear Factory, and the inclusion of France as a
company-owned country; our market share could be adversely affected by a significant, or increased, number of competitors; we may fail to renew, register or otherwise protect our trademarks or other intellectual property; and we may have disputes
with, or be sued by, third parties for infringement or misappropriation of their proprietary rights. These risks, uncertainties and other factors may adversely affect our business, growth, financial condition or profitability, or subject us to
potential liability, and cause our actual results, performance or achievements to be materially different from those expressed or implied by our forward-looking statements. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are the leading, and only international, company providing a make your own stuffed animal interactive entertainment experience
under the Build-A-Bear Workshop brand, in which our guests stuff, fluff, dress, accessorize and name their own teddy bears and other stuffed animals. Our concept, which we developed primarily for mall-based retailing, capitalizes on what we believe
is the relatively untapped demand for experience-based shopping as well as the widespread appeal of stuffed animals. The Build-A-Bear Workshop experience appeals to a broad range of age groups and demographics, including children, teens, their
parents and grandparents.

As of October 3, 2009, we operated 291 stores in the United States,
Canada, and Puerto Rico, 54 stores in the United Kingdom, Ireland and France, and had 61 franchised stores operating internationally under the Build-A-Bear Workshop brand. In addition to our stores, we market our products and build our brand through
our multiple websites, which simulates our interactive shopping experience, as well as non-traditional store locations in five Major League Baseball® ballparks, one location in a zoo and one location in a science center. Seasonal locations, such as ballparks and zoos, are excluded from our store count.

On October 28, 2009, we extended our line of credit agreement with U.S. Bank, National Association. The two-year extension expires
December 31, 2011 and provides $40 million of available credit for the first half of each calendar year and a seasonal overline of $50 million. The seasonal overline is in effect from July 1 to December 31 each year. Borrowings under
the credit agreement are secured by our assets and a pledge of 65% of our ownership interest in our foreign subsidiaries. Borrowings bear interest at LIBOR plus 2.05%.

We hold a minority interest in Ridemakerz, LLC (Ridemakerz). Ridemakerz is an early-stage company that has developed an interactive retail concept that allows children and families to build and customize
their own personalized cars. We made cash investments in 2006, 2007 and 2008. We also provide advisory and operational support services for Ridemakerz in exchange for additional equity. As of October 3, 2009, our investment in Ridemakerz was
approximately $3.2 million; outstanding receivables from Ridemakerz were $1.0 million. Under current agreements, we are the sole member of an equity class that is allocated losses only following the allocation of losses to all other common and
preferred equity holders to the extent of their capital contributions. All of the priority equity members capital was reduced to zero in the fiscal 2009 second quarter at which time we began to record non-cash pre-tax losses which reduce our
investment balance. Ridemakerz incurred substantial losses during the fiscal 2009 third quarter as a result of major restructuring of its operations that included store closings. For the thirteen and thirty-nine weeks ended October 3, 2009, we
recorded non-cash pre-tax losses of $4.6 million ($0.12 per diluted share) and $5.1 million ($0.15 per diluted share), respectively. As Ridemakerz continues to incur losses, we will be required to recognize those losses as non-cash charges up to the
amount of our total investment, including receivables, unless additional equity investments are made by other investors.

On
April 2, 2006, the Company acquired all of the outstanding shares of The Bear Factory Limited (Bear Factory), a stuffed animal retailer in the United Kingdom, and Amsbra Limited (Amsbra), the Companys former United Kingdom franchisee
(collectively, the U.K. Acquisition). The results of the U.K. Acquisition operations have been included in the Companys consolidated financial statements since that date. In conjunction with those transactions, we obtained 40 retail locations
in the United Kingdom and Ireland. In 2007, the Company expanded its Company-owned store base to France, which was previously under a franchise agreement and had one store within a department store in operation that was subsequently closed. The
Company currently operates three company-owned stores in France.



12



---

##### Table of Contents

We operate in three reportable segments (retail, international franchising, and licensing
and entertainment) that share the same infrastructure, including management, systems, merchandising and marketing, and generate revenues as follows:



| |  |  | Company-owned retail stores located in the United States, Canada, Puerto Rico, the United Kingdom, Ireland, France, all non-traditional store locations
and multiple e-commerce Web sites or webstores;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | International stores operated under franchise agreements; and
| | - |  | -------------------------------------------------------------



| |  |  | License arrangements with third parties which manufacture and sell to other retailers merchandise carrying the Build-A-Bear Workshop brand.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Selected financial data attributable to each segment for the thirteen and thirty-nine weeks ended
October 3, 2009 and September 27, 2008 are set forth in the notes to our condensed consolidated financial statements included elsewhere in this quarterly report on Form 10-Q.

Store contribution, for our consolidated operations, was 10.1% for the thirty-nine weeks ended October 3, 2009 and 15.8% for the
thirty-nine weeks ended September 27, 2008 and consolidated net loss as a percentage of total revenues was 4.3% for the thirty-nine weeks ended October 3, 2009 and 0.1% for the thirty-nine weeks ended September 27, 2008. See
Non-GAAP Financial Measures for a definition of store contribution and a reconciliation of store contribution to net loss. The decrease in our store contribution over the prior year was primarily due to the decline in net retail sales
and resulting decline in gross margin as we experienced a lack of sales leverage on fixed store occupancy costs. We are protecting our store contribution through aggressive cost reduction plans. Cost reduction initiatives are now expected to result
in approximately $20 million in annualized pre-tax savings in 2009, up from a previous estimate of $18 million. Cost reduction initiatives include spending reductions in marketing and advertising, transportation, central office payroll and outside
services.

We use comparable store sales as one of the performance measures for our business. Comparable store sales
percentage changes are based on net retail sales, excluding our webstore and seasonal and event-based locations. Stores are considered comparable beginning in their thirteenth full month of operation. Comparable store sales percentage
changes for 2009 are based on net retail sales as compared to the thirteen and thirty-nine week periods ended October 4, 2008. The percentage change in comparable store sales for the periods presented below is as follows:



|              |  |                      |    |  |                         |    |  |                |    |  |                   |   
|------------- |  | -------------------- | -- |  | ----------------------- | -- |  | -------------- | -- |  | ----------------- | --
|              |  | Thirteen weeks ended |    |  | Thirty-nine weeks ended |   
|              |  | October 3,2009       |    |  | September 27,2008       |    |  | October 3,2009 |    |  | September 27,2008 |   
|North America |  | (16.0                | )% |  | (14.4                   | )% |  | (18.2          | )% |  | (15.8             | )%
|Europe        |  | 2.5                  | %  |  | 8.2                     | %  |  | 5.3            | %  |  | 8.3               | % 
|              |  |                      |    |  |                         |    |  |                |    |  |                   |   
|Consolidated  |  | (12.9                | )% |  | (11.6                   | )% |  | (15.0          | )% |  | (13.1             | )%

We believe the decline in comparable store sales was attributable primarily to the
following factors:



| |  |  | We believe that the economic recession and dramatic decrease in consumer wealth which has resulted in a significant decline in consumer sentiment and a
pullback in consumer spending has impacted our comparable store sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We believe the slowdown in North America shopping mall customer traffic during the first nine months of fiscal 2009 compared to the same period in
fiscal 2008 has impacted the number of new and returning guests visiting our stores and therefore our comparable store sales. The comparable store sales decline included both a decrease in the number of transactions and a decrease in the average
transaction value.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Company is addressing the decline in comparable store sales with the following key
initiatives:



| |  |  | We are developing new marketing programs and enhancing existing programs to communicate the value of our products and placing more emphasis on
promotions and traffic driving initiatives versus general brand building messaging. Accordingly, we are refining our communication strategies and reallocating our marketing spending to match changing consumer shopping patterns, to introduce new
guests to our concept, and to lengthen the time of key promotions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are leveraging Buildabearville.com to drive traffic to our stores and to increase brand engagement and brand loyalty through increased awareness and
conversion.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We are implementing cost reduction plans that are now expected to result in $20 million in annualized pre-tax savings in 2009, up from a previous plan
for $18 million in savings.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



13



---

##### Table of Contents

| |  |  | We are slowing new store growth in 2009 to one new store, down from 25 new stores in 2008, which allows us to refocus on our business and align all
operations around our goals of new guest acquisition and guest retention aimed at improving our comparable stores sales performance.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Expansion and Growth Potential

Retail Stores:

The table below sets forth the number of Build-A-Bear Workshop Company-owned stores in the United States, Canada, Puerto Rico (collectively,
North America), the United Kingdom, Ireland, and France (collectively, Europe) for the periods presented:



|                    |  |                         |   |  |                  
|------------------- |  | ----------------------- | - |  | -----------------
|                    |  | Thirty-nine weeks ended
|                    |  | October 3,2009          |   |  | September 27,2008
|Beginning of period |  | 346                     |   |  | 321              
|Opened              |  | 1                       |   |  | 20               
|Closed              |  | (2                      | ) |  |                 
|                    |  |                         |   |  |                  
|End of period       |  | 345                     |   |  | 341              
|                    |  |                         |   |  |                  

During fiscal 2009, we opened one Build-A-Bear Workshop store in North America and no
new stores in Europe. There is no additional planned store activity in the 2009 fourth quarter. We believe there is a market potential for at least 350 Build-A-Bear Workshop stores in North America, and approximately 70 to 75 stores in the United
Kingdom and Ireland.

In the fiscal 2008 third quarter, we announced plans to close the Friends 2B Made concept, our
proprietary line of make-your-own dolls and related products. All remaining closures were completed during the fiscal 2009 third quarter. Other than the one stand-alone store, these Friends 2B Made stores were not included in our store count, but
rather were considered expansions of existing Build-A-Bear Workshop stores.

Non-Traditional Store Locations:

In fiscal 2004, we began offering merchandise in seasonal, event-based locations such as Major League Baseball® ballparks. We expect to expand our future presence at select seasonal, event-based locations contingent on their
availability. As of October 3, 2009, we had a total of five ballpark locations, one store within a zoo and one store within a science center. Seasonal locations, such as ballparks and zoos, are excluded from our store count.

International Franchise Revenue:

Our first franchised location opened in November 2003. The number of international, franchised stores for the periods presented below can be summarized as follows:



|                    |  |                         |   |  |                   |  
|------------------- |  | ----------------------- | - |  | ----------------- | -
|                    |  | Thirty-nine weeks ended |  
|                    |  | October 3,2009          |   |  | September 27,2008 |  
|Beginning of period |  | 62                      |   |  | 53                |  
|Opened              |  | 6                       |   |  | 12                |  
|Closed              |  | (7                      | ) |  | (5                | )
|                    |  |                         |   |  |                   |  
|End of period       |  | 61                      |   |  | 60                |  
|                    |  |                         |   |  |                   |  

As of October 3, 2009, we had master franchise agreements, which typically grant
franchise rights for a particular country or countries, covering 21 countries. We anticipate signing additional master franchise agreements in the future. Due to the current global economic conditions, we expect our franchisees to open approximately
two to three stores in fiscal 2009, net of closures. We believe there is a market potential for approximately 300 franchised stores outside of the United States, Canada, Puerto Rico, the United Kingdom, Ireland and France.



14



---

##### Table of Contents

Results of Operations

The following table sets forth, for the periods indicated, selected statement of income data expressed as a percentage of total revenues, except where otherwise indicated. Percentages will not total due
to the cost of merchandise sold being expressed as a percentage of net retail sales and immaterial rounding:

BUILD-A-BEAR
WORKSHOP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)



|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|------------------------------------------ |  | -------------------- | - |  | ----------------------- | - |  | -------------- | - |  | ----------------- | -
|                                           |  | Thirteen weeks ended |   |  | Thirty-nine weeks ended |  
|                                           |  | October 3,2009       |   |  | September 27,2008       |   |  | October 3,2009 |   |  | September 27,2008 |  
|Revenues:                                  |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Net retail sales                           |  | 97.8                 | % |  | 98.6                    | % |  | 98.5           | % |  | 98.6              | %
|Franchise fees                             |  | 1.0                  |   |  | 0.9                     |   |  | 0.8            |   |  | 0.9               |  
|Licensing revenue                          |  | 1.2                  |   |  | 0.5                     |   |  | 0.7            |   |  | 0.5               |  
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Total revenues                             |  | 100.0                |   |  | 100.0                   |   |  | 100.0          |   |  | 100.0             |  
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Costs and expenses:                        |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Cost of merchandise sold (1)               |  | 63.5                 |   |  | 60.0                    |   |  | 64.6           |   |  | 59.7              |  
|Selling, general and administrative        |  | 42.8                 |   |  | 40.6                    |   |  | 41.9           |   |  | 40.1              |  
|Store preopening                           |  | 0.1                  |   |  | 0.8                     |   |  | 0.0            |   |  | 0.6               |  
|Store closing                              |  | 0.3                  |   |  | 2.7                     |   |  | 0.4            |   |  | 0.9               |  
|Equity losses from investment in affiliate |  | 5.0                  |   |  |                        |   |  | 1.9            |   |  |                  |  
|Interest expense (income), net             |  | (0.0                 | ) |  | (0.1                    | ) |  | (0.0           | ) |  | (0.2              | )
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Total costs and expenses                   |  | 110.3                |   |  | 103.1                   |   |  | 107.7          |   |  | 100.2             |  
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Loss before income taxes                   |  | (10.3                | ) |  | (3.1                    | ) |  | (7.7           | ) |  | (0.2              | )
|Income tax benefit                         |  | (5.1                 | ) |  | (1.3                    | ) |  | (3.5           | ) |  | (0.1              | )
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Net loss                                   |  | (5.2                 | ) |  | (1.9                    | ) |  | (4.3           | ) |  | (0.1              | )
|                                           |  |                      |   |  |                         |   |  |                |   |  |                   |  
|Gross Margin % (2)                         |  | 36.5                 | % |  | 40.0                    | % |  | 35.4           | % |  | 40.3              | %



|(1) | Cost of merchandise sold is expressed as a percentage of net retail sales.
|--- | --------------------------------------------------------------------------

|(2) | Gross margin represents net retail sales less cost of merchandise sold. Gross margin percentage represents gross margin divided by net retail sales.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

Thirteen weeks ended October 3, 2009 compared to thirteen weeks ended September 27, 2008

Total revenues.Net retail sales decreased to $89.7 million for the thirteen weeks ended October 3, 2009 from $105.8 million
for the thirteen weeks ended September 27, 2008, a decrease of $16.1 million, or 15.2%. This decline was primarily attributable to a $12.4 million decline in comparable store sales, a $2.9 million negative impact of foreign currency
translation and a $1.9 million impact of the shift in the weeks included in the fiscal 2009 third quarter as compared to the fiscal 2008 third quarter. These declines were partially offset by a $1.8 million increase in sales from new stores. Other
changes in net retail sales totaled $0.7 million and included decreased sales from non-comparable, non-store locations, partially offset by changes in deferred revenue.

We believe the decline in comparable store sales was attributable primarily to the following factors:



| |  |  | We believe that the economic recession and dramatic decrease in consumer wealth which has resulted in a significant decline in consumer sentiment and a
pullback in consumer spending has impacted our comparable store sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We believe the slowdown in North America shopping mall customer traffic during the first nine months of fiscal 2009 compared to the same period in
fiscal 2008 has impacted the number of new and returning guests visiting our stores and therefore our comparable store sales. The comparable store sales decline included both a decrease in the number of transactions and a decrease in the average
transaction value.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Revenue from franchise fees decreased to $0.9 million for the thirteen weeks ended
October 3, 2009 from $1.0 million for the thirteen weeks ended September 27, 2008, a decrease of $0.1 million. This decrease was primarily due to the decline in franchisee store sales reflecting the global economic slowdown. Licensing
revenue increased to $1.1 million for the thirteen weeks ended October 3, 2009 from $0.5 million for the thirteen weeks ended September 27, 2008, an increase of $0.6 million. This increase was primarily related to increased revenues
through our partnership with Landrys Restaurants, Inc. and the timing of licensing activities.



15



---

##### Table of Contents

Gross margin.Gross margin decreased to $32.7 million for the thirteen weeks
ended October 3, 2009 from $42.3 million for the thirteen weeks ended September 27, 2008, a decrease of $9.6 million, or 22.7%. As a percentage of net retail sales, gross margin decreased to 36.5% for the thirteen weeks ended
October 3, 2009 from 40.0% for the thirteen weeks ended September 27, 2008, a decrease of 350 basis points as a percentage of net retail sales (bps). This decrease resulted primarily from reduced sales leverage on store occupancy costs in
North America partially offset by improved sales leverage on store occupancy costs in Europe. Additionally, promotional initiatives in the quarter resulted in a product mix shift and a slight decline in North American merchandise margin.

Selling, general and administrative.Selling, general and administrative expenses were $39.3 million for the thirteen weeks
ended October 3, 2009 as compared to $43.5 million for the thirteen weeks ended September 27, 2008, a decrease of $4.2 million, or 9.7%. As a percentage of total revenues, selling, general and administrative expenses increased to
42.8% for the thirteen weeks ended October 3, 2009 as compared to 40.6% for the thirteen weeks ended September 27, 2008, an increase of 220 bps. The dollar decrease was primarily due to cost reduction efforts put into place to align our
cost structure with the downturn we are experiencing in consumer spending even though we had four more stores in operation at October 3, 2009 as compared to September 27, 2008. The increase in selling, general and administrative expenses
as a percent of revenue was primarily due to deleveraging of fixed components of overhead costs, specifically, store and central office payroll, and depreciation.

Store preopening.Store preopening expense was $0.1 for the thirteen weeks ended October 3, 2009 as compared to $0.9 million for the thirteen weeks ended September 27, 2008. The
decrease in store preopening for the period was the result of fewer store openings; we have no planned store openings during the fiscal 2009 fourth quarter as compared to five stores opened during the same period in fiscal 2008. Preopening expenses
include expenses for stores that opened in the current period as well as expenses incurred for stores that will open in future periods.

Store closing.Store closing expense was $0.3 million for the thirteen weeks ended October 3, 2009 and consisted primarily of inventory write-offs and construction costs incurred to reformat
locations for return to the landlord related to the closure of the Friends 2B Made concept. Store closing expense was $2.9 million for the thirteen weeks ended September 27, 2008 and consisted primarily of asset impairment charges related to
the closure of the Friends 2B Made concept.

Equity losses from investment in affiliate.Equity losses from investment
in affiliate was $4.6 million for the thirteen weeks ended October 3, 2009 and is the result of the allocation of losses related to our investment in Ridemakerz. Ridemakerz is an early-stage company still in its start-up
phase. Ridemakerz incurred substantial losses during the thirteen weeks ended October 3, 2009, as a result of major restructuring of its operations that included store closings. As Ridemakerz continues to incur losses, we will be required
to recognize those losses as non-cash charges up to the amount of our total investment, including receivables, unless additional equity investments are made by other investors in equity classes that are allocated losses ahead of our equity.

Interest expense (income), net.Interest income, net of interest expense, was $44,000 for the thirteen weeks ended
October 3, 2009 as compared to $0.1 million for the thirteen weeks ended September 27, 2008. This decrease was due lower interest rates in the fiscal 2009 third quarter as compared to the fiscal 2008 third quarter.

Provision for income taxes.The income tax benefit was $4.6 million for the thirteen weeks ended October 3, 2009 as
compared to $1.4 million for the thirteen weeks ended September 27, 2008. The effective tax rate was 49.4% for the thirteen weeks ended October 3, 2009 compared to 40.2% for the thirteen weeks ended September 27, 2008. We expect the
effective tax rate for full year 2009 to be approximately 46% compared to 36.8% in fiscal year 2008. This higher annual rate compared to 2008 is primarily attributable to the impact of permanent items and results in foreign operations measured
against US operations. Also, beginning in 2009 with the adoption of ASC 805, the release of pre-acquisition valuation allowances are no longer reflected as an adjustment to goodwill, but recognized through income tax expense. As a result of the
adoption, the release of the pre-acquisition valuation allowance on United Kingdom operations was reflected as a reduction to income tax expense.

Thirty-nine weeks ended October 3, 2009 compared to thirty-nine weeks ended September 27, 2008

Total revenues.Net retail sales decreased to $267.4 million for the thirty-nine weeks ended October 3, 2009 from $321.1 million for the thirty-nine weeks ended September 27, 2008, a decrease of
$53.8 million, or 16.7%. This decline was primarily attributable to a $43.1 million decline in comparable store sales, a $12.5 million negative impact of foreign currency translation and a $7.5 million impact of the shift in the weeks included
in the first three quarters of fiscal 2009 as compared to the same period in fiscal 2008. These declines were partially offset by a $10.5 million increase in sales from new stores. Other changes in net retail sales totaled $1.2 million and included
decreased sales from non-comparable, non-store locations, partially offset by deferred revenue adjustment.

We believe the
decline in comparable store sales was attributable primarily to the following factors:



| |  |  | We believe that the economic recession and dramatic decrease in consumer wealth which has resulted in a significant decline in consumer sentiment and a
pullback in consumer spending has impacted our comparable store sales.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We believe the slowdown in North America shopping mall customer traffic during the first nine months of fiscal 2009 compared to the same period in
fiscal 2008 has impacted the number of new and returning guests visiting our stores and therefore our comparable store sales. The comparable store sales decline included both a decrease in the number of transactions and a decrease in the average
transaction value.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



16



---

##### Table of Contents

Revenue from franchise fees decreased to $2.2 million for the thirty-nine weeks ended
October 3, 2009 from $3.1 million for the thirty-nine weeks ended September 27, 2008, a decrease of $0.9 million. This decrease was primarily due to the decline in franchisee store sales reflecting the global economic slowdown. Licensing
revenue increased to $2.0 million for the thirty-nine weeks ended October 3, 2009 from $1.6 million for the thirty-nine weeks ended September 27, 2008, an increase of $0.4 million. This increase was primarily related to increased revenues
through our partnership with Landrys Restaurants Inc. and the timing of licensing activities.

Gross margin.Gross margin decreased to $94.7 million for the thirty-nine weeks ended October 3, 2009 from $129.5 million for the thirty-nine weeks ended September 27, 2008, a decrease of $34.8 million, or 26.9%. As a percentage of
net retail sales, gross margin decreased to 35.4% for the thirty-nine weeks ended October 3, 2009 from 40.3% for the thirty-nine weeks ended September 27, 2008, a decrease of 490 bps. This decrease resulted primarily from reduced sales
leverage on store occupancy costs in North America partially offset by improved sales leverage on store occupancy costs in Europe. Additionally, we experienced a decline in merchandise margin driven by a shift in North American product mix and the
impact of currency on our European operations.

Selling, general and administrative.Selling, general and
administrative expenses were $113.7 million for the thirty-nine weeks ended October 3, 2009 as compared to $130.5 million for the thirty-nine weeks ended September 27, 2008, a decrease of $16.8 million, or 12.9%. As a percentage
of total revenues, selling, general and administrative expenses increased to 41.9% for the thirty-nine weeks ended October 3, 2009 as compared to 40.1% for the thirty-nine weeks ended September 27, 2008, an increase of 180 bps. The dollar
decrease was primarily due to cost reduction efforts put into place to align our cost structure with the downturn we are experiencing in consumer spending even though we had four more stores in operation at October 3, 2009 as compared to
September 27, 2008. The increase in selling, general and administrative expenses as a percent of revenue was primarily due to deleveraging of fixed components of overhead costs, specifically, store and central office payroll, and depreciation.

Store preopening.Store preopening expense was $0.1 million for the thirty-nine weeks ended October 3, 2009 as
compared to $2.0 million for the thirty-nine weeks ended September 27, 2008. We opened one store and relocated one store during fiscal 2009 as compared to 25 stores opened during fiscal 2008. Preopening expenses include expenses for stores
that opened in the current period as well as expenses incurred for stores that will open in future periods.

Store closing.Store closing expense was $1.0 million for the thirty-nine weeks ended October 3, 2009 and consisted primarily of lease termination charges, inventory write-offs and construction costs incurred to reformat locations for return to the
landlord related to the closure of the Friends 2B Made concept. Store closing expense was $2.9 million for the thirty-nine weeks ended September 27, 2008 and consisted primarily of asset impairment charges related to the closure of the Friends
2B Made concept.

Equity losses from investment in affiliate.Equity losses from investment in affiliate was $5.1
million for the thirty-nine weeks ended October 3, 2009 and is the result of the allocation of losses related to our investment in Ridemakerz. Ridemakerz is an early-stage company still in its start-up phase. Ridemakerz incurred
substantial losses during the thirteen weeks ended October 3, 2009, as a result of major restructuring of its operations that included store closings. As Ridemakerz continues to incur losses, we will be required to recognize those losses as
non-cash charges up to the amount of our total investment, including receivables, unless additional equity investments are made by other investors in equity classes that are allocated losses ahead of our equity.

Interest expense (income), net.Interest income, net of interest expense, was $0.1 million for the thirty-nine weeks ended
October 3, 2009 as compared to $0.8 million for the thirty-nine weeks ended September 27, 2008. This decrease was due to lower interest rates in fiscal 2009 period as compared to fiscal 2008 period.

Provision for income taxes.The income tax benefit was $9.4 million for the thirty-nine-six weeks ended October 3, 2009 as
compared to $0.2 million for the thirty-nine weeks ended September 27, 2008. The effective tax rate was 44.9% for the thirty-nine weeks ended October 3, 2009 compared to 27.8% for the thirty-nine weeks ended September 27, 2008. We
expect the effective tax rate for full year 2009 to be approximately 46% compared to 36.8% in fiscal year 2008. This higher annual rate compared to 2008 is primarily attributable to the impact of permanent items and results in foreign operations
measured against U.S. operations. Also, beginning in 2009 with the adoption of ASC 805, the release of pre-acquisition valuation allowances are no longer reflected as an adjustment to goodwill, but recognized through income tax expense. As a result
of the adoption, the release of the pre-acquisition valuation allowance on United Kingdom operations was reflected as a reduction to income tax expense.



17



---

##### Table of Contents

Non-GAAP Financial Measures

We use the term store contribution in this quarterly report on Form 10-Q. Store contribution consists of income before income tax
expense, interest, store depreciation, amortization and impairment, store preopening expense, store closing expense and equity losses from investment in affiliate and general and administrative expense, excluding franchise fees, income from
licensing activities and contribution from our webstore and seasonal and event-based locations. This term, as we define it, may not be comparable to similarly titled measures used by other companies and is not a measure of performance presented in
accordance with U.S. GAAP.

We use store contribution as a measure of our stores operating performance. Store
contribution should not be considered a substitute for net income, net income per store, cash flows provided by operating activities, cash flows provided by operating activities per store, or other income or cash flow data prepared in accordance
with GAAP. We believe store contribution is useful to investors in evaluating our operating performance because it, along with the number of stores in operation, directly impacts our profitability.

The following table sets forth a reconciliation of store contribution to net income for our company-owned stores located in the United
States, Canada and Puerto Rico (North America), stores located the United Kingdom, Ireland and France (Europe) and for our consolidated store base (Dollars in thousands):



|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|--------------------------------------------------------------------- |  | -------------------------------------- | ------- | -- | ----------------------------------------- | - | ------ | ----- |  | - | ------------ | -- |  | ------ | ------- | - | ----- | - | ------ | -- |  | - | ------- | --
|                                                                      |  | Thirty-nine weeks endedOctober 3,
2009 |         |    | Thirty-nine weeks endedSeptember 27, 2008 |  
|                                                                      |  | NorthAmerica                           |         |    | Europe                                    |   |        | Total |  |   | NorthAmerica |    |  | Europe |         |   | Total |  
|Net income (loss)                                                     |  | $                                      | (10,854 | )  |                                           | $ | (703   | )     |  | $ | (11,557      | )  |  | $      | 231     |   |       | $ | (644   | )  |  | $ | (413    | ) 
|Income tax expense (benefit)                                          |  |                                        | (9,530  | )  |                                           |   | 122    |       |  |   | (9,408       | )  |  |        | (279    | ) |       |   | 120    |    |  |   | (159    | ) 
|Interest expense (income)                                             |  |                                        | (54     | )  |                                           |   | (38    | )     |  |   | (92          | )  |  |        | (506    | ) |       |   | (268   | )  |  |   | (774    | ) 
|Store depreciation, amortization and impairment (1)                   |  |                                        | 13,243  |    |                                           |   | 1,975  |       |  |   | 15,218       |    |  |        | 13,541  |   |       |   | 2,524  |    |  |   | 16,065  |   
|Store preopening expense                                              |  |                                        | 90      |    |                                           |   |       |       |  |   | 90           |    |  |        | 1,593   |   |       |   | 453    |    |  |   | 2,046   |   
|Store closing expense (2)                                             |  |                                        | 981     |    |                                           |   |       |       |  |   | 981          |    |  |        | 2,916   |   |       |   |       |    |  |   | 2,916   |   
|Equity losses from investment in affiliate (3)                        |  |                                        | 5,125   |    |                                           |   |       |       |  |   | 5,125        |    |  |        |        |   |       |   |       |    |  |   |        |   
|General and administrative expense (4)                                |  |                                        | 28,397  |    |                                           |   | 2,440  |       |  |   | 30,837       |    |  |        | 31,690  |   |       |   | 2,750  |    |  |   | 34,440  |   
|Franchising and licensing contribution (5)                            |  |                                        | (2,972  | )  |                                           |   |       |       |  |   | (2,972       | )  |  |        | (3,431  | ) |       |   |       |    |  |   | (3,431  | ) 
|Non-store activity contribution (6)                                   |  |                                        | (1,846  | )  |                                           |   | (322   | )     |  |   | (2,168       | )  |  |        | (1,601  | ) |       |   | (269   | )  |  |   | (1,870  | ) 
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|Store contribution                                                    |  | $                                      | 22,580  |    |                                           | $ | 3,474  |       |  | $ | 26,054       |    |  | $      | 44,154  |   |       | $ | 4,666  |    |  | $ | 48,820  |   
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|Total revenues from external customers                                |  | $                                      | 225,633 |    |                                           | $ | 45,852 |       |  | $ | 271,485      |    |  | $      | 275,153 |   |       | $ | 50,595 |    |  | $ | 325,748 |   
|Franchising and licensing revenues                                    |  |                                        | (4,131  | )  |                                           |   |       |       |  |   | (4,131       | )  |  |        | (4,640  | ) |       |   |       |    |  |   | (4,640  | ) 
|Revenues from non-store activities (6)                                |  |                                        | (8,179  | )  |                                           |   | (1,213 | )     |  |   | (9,392       | )  |  |        | (10,414 | ) |       |   | (857   | )  |  |   | (11,271 | ) 
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|Store location net retail sales                                       |  | $                                      | 213,323 |    |                                           | $ | 44,639 |       |  | $ | 257,962      |    |  | $      | 260,099 |   |       | $ | 49,738 |    |  | $ | 309,837 |   
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|Store contribution as a percentage of store location net retail sales |  |                                        | 10.6    | %  |                                           |   | 7.8    | %     |  |   | 10.1         | %  |  |        | 17.0    | % |       |   | 9.4    | %  |  |   | 15.8    | % 
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   
|Total net income (loss) as a percentage of total revenues             |  |                                        | (4.8    | )% |                                           |   | (1.5   | )%    |  |   | (4.3         | )% |  |        | 0.1     | % |       |   | (1.3   | )% |  |   | (0.1    | )%
|                                                                      |  |                                        |         |    |                                           |   |        |       |  |   |              |    |  |        |         |   |       |   |        |    |  |   |         |   



|(1) | Store depreciation, amortization and impairment includes depreciation and amortization of all capitalized assets in store locations, including leasehold improvements,
furniture and fixtures, and computer hardware and software and store asset impairment charges, included in cost of merchandise sold.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Store closing expense represents asset impairment and other charges related to the closure of the Friends 2B Made concept.
|--- | --------------------------------------------------------------------------------------------------------------------------

|(3) | Equity losses from investment in affiliate represent the Companys portion of losses of Ridemakerz.
|--- | ---------------------------------------------------------------------------------------------------

|(4) | General and administrative expenses consist of non-store, central office general and administrative functions such as management payroll and related benefits, travel,
information systems, accounting, purchasing and legal costs as well as the depreciation and amortization of central office leasehold improvements, furniture and fixtures, computer hardware and software, including assets related to the virtual world,
and intellectual property. General and administrative expenses also include a central office marketing department, primarily payroll and related benefits expense, but exclude advertising expenses, such as direct mail catalogs and television
advertising, which are included in store contribution.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Franchising and licensing contribution includes franchising and licensing revenues and all expenses attributable to the international franchising and licensing and
entertainment segments other than depreciation, amortization and interest expense/income. Depreciation and amortization related to franchising and licensing is included in the general and administrative expense caption. Interest expense/income
related to franchising and licensing is included in the interest expense (income) caption.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



18



---

##### Table of Contents

|(6) | Non-store activities include our webstores, and seasonal and event-based locations as well as intercompany transfer pricing charges.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

Seasonality and Quarterly Results

Our operating results for one period may not be indicative of results for other periods, and may fluctuate significantly because of a variety of factors, including: (1) changes in general economic conditions and consumer spending
patterns; (2) increases or decreases in our comparable store sales; (3) fluctuations in the profitability of our stores; (4) changes in foreign currency exchange rates; (5) the timing and frequency of our marketing initiatives,
including national media appearances and other public relations events; (6) the timing of our new store openings and related expenses; (7) changes in consumer preferences; (8) the effectiveness of our inventory management;
(9) the actions of our competitors or mall anchors and co-tenants; (10) seasonal shopping patterns and holiday and vacation schedules; and (11) weather conditions.

The timing of new store openings may result in fluctuations in quarterly results as a result of the revenues and expenses associated with
each new store location. We typically incur most preopening costs for a new store in the three months immediately preceding the stores opening. We expect our growth, operating results and profitability to depend in some degree on our ability
to increase our number of stores.

Historically, for North American stores open more than twelve months, seasonality has not
been a significant factor in our results of operations, although we cannot assure you that this will continue to be the case. European-based store sales have historically been weighted more heavily in the fourth quarter as compared to North American
stores. In addition, for accounting purposes, the quarters of each fiscal year consist of 13 weeks, although we will have a 14-week quarter approximately once every six years. The 2008 fiscal fourth quarter had 14 weeks.

Liquidity and Capital Resources

Our cash requirements are primarily for the opening of new stores, information systems, including Web site enhancements and maintenance and working capital. Historically, we have met these requirements through cash flow provided by
operations, capital generated from the sale and issuance of our securities to private investors and through our initial public offering, and our revolving line of credit.

Operating Activities.Cash used in operating activities was $10.9 million for the thirty-nine weeks ended October 3, 2009 as compared with cash used in operating activities of
$1.8 million for the thirty-nine weeks ended September 27, 2008, or an increase of $9.1 million. Generally, changes in cash from operating activities are driven by changes in net income or loss and changes in operating assets and
liabilities. In 2009, the use of cash in operating activities was driven primarily by the increase in the net loss for the first nine months of 2009 as compared to the same period in fiscal 2008, which was primarily due to a decline in sales in the
first nine months of fiscal 2009. In the 2009 period, the change in operating assets and liabilities was driven by decreases in accounts payable and accrued expenses and offsetting decreases in inventory, primarily attributable to overall cost
reductions as compared to the year ago period, and an increase in prepaid expenses, specifically income taxes. In the 2008 period, the change in operating assets and liabilities was driven by decreases in accounts payable and offsetting decreases in
inventory, primarily attributable to a lower volume of inventory purchases and more consistent flow of inventory purchases as compared to the year ago period.

Investing Activities.Cash used in investing activities was $7.2 million for the thirty-nine weeks ended October 3, 2009 as compared to $23.6 million for the thirty-nine weeks ended
September 27, 2008. Cash used in investing activities during the thirty-nine weeks ended October 3, 2009 primarily relates to investments in central office information technology systems and the acquisition of trademarks and other
intellectual property. Cash used in investing activities during the thirty-nine weeks ended September 27, 2008 primarily relates to new store construction costs and additional investment in Ridemakerz.

Financing Activities. We had no cash flows from financing activities in the thirty-nine weeks ended October 3, 2009. Cash used
in financing activities was $13.4 million in the thirty-nine weeks ended September 27, 2008 which consisted primarily of cash used for repurchases of the Companys common stock. No borrowings were made under our line of credit in
either the thirty-nine weeks ended October 3, 2009 or September 27, 2008.

Capital Resources.As of
October 3, 2009, we had a consolidated cash balance of $27.0 million held in both domestic and foreign financial institutions. We also have a line of credit, which we can use to finance capital expenditures, and working capital needs
throughout the year. The credit agreement is with U.S. Bank, National Association and was amended effective October 28, 2009. The bank line continues to provide availability of $40 million for the first half of the fiscal year and a seasonal
overline of $50 million. The seasonal overline is in effect from July 1 to December 31 each year. Borrowings under the credit agreement are secured by our assets and a pledge of 65% of our ownership interest in our foreign subsidiaries.
The credit agreement expires on December 31, 2011 and contains various restrictions on indebtedness, liens, guarantees, redemptions, mergers, acquisitions or sale of assets, loans, transactions with affiliates, and investments. It also
prohibits us from declaring dividends without the banks prior consent, unless such payment of dividends would not violate any terms of the credit agreement. Borrowings bear interest at LIBOR plus 2.05%. Financial covenants include maintaining
a minimum tangible net worth, maintaining a minimum fixed charge cover ratio (as defined in the credit agreement) and not exceeding a maximum funded debt to earnings before interest, depreciation and amortization ratio. As of October 3, 2009:
(i) we were in compliance with these covenants, (ii) there were no borrowings under our line of credit, (iii) there was a standby letter of credit of approximately $1.1 million outstanding under the credit agreement and
(iv) there was approximately $48.9 million available for borrowing under the line of credit.



19



---

##### Table of Contents

Most of our retail stores are located within shopping malls and all are operated under
leases classified as operating leases. Our leases in North America typically have a ten-year term and contain provisions for base rent plus percentage rent based on defined sales levels. Many of the leases contain a provision whereby either we or
the landlord may terminate the lease after a certain time, typically in the third to fourth year of the lease, if a certain minimum sales volume is not achieved. In addition, some of these leases contain various restrictions relating to change of
control of our company. Our leases also subject us to risks relating to compliance with changing mall rules and the exercise of discretion by our landlords on various matters, including rights of termination in some cases.

Our leases in the U.K. and Ireland typically have terms of 10-15 years and generally contain a provision whereby every fifth year the rental
rate can be adjusted to reflect the current market rates. The leases typically provide the lessee with the first right for renewal at the end of the lease. We may also be required to make deposits and rent guarantees to secure new leases as we
expand. Real estate taxes also change according to government time schedules to reflect current market rental rates for the locations we lease. Rents are charged quarterly and paid in advance.

Our French leases each have terms of 10 years. French leases for premier retail properties frequently have entry fees and/or key money
payments required to be made in conjunction with signature of the leases. Such entry fees or key money payments may be recovered, in whole or in part, upon disposal of the leases. The leases typically provide the lessee with the first right for
renewal at the end of the lease. Rent deposits consisting of three months rent are also required to be paid on execution of the leases. Rents are negotiated on a fixed basis, but are reviewed annually in relation to an inflation index and therefore
also have a variable rent component. Rents are charged quarterly and paid in advance.

In fiscal 2009, we expect to spend
approximately $8 million on capital expenditures. Capital spending through the thirty-nine weeks ended October 3, 2009 totaled $6.7 million, on track with our full year plans. Capital spending in fiscal 2009 is primarily for the continued
installation and upgrades of central office information technology systems, continued investment in trademarks and intangible assets, the opening of one new store, relocation of one store and the cost to reformat certain Friends 2B Made locations to
Build-A-Bear Workshop space. In fiscal 2008, the average investment per new store in North America, which includes leasehold improvements, fixtures, equipment and inventory, was approximately $0.4 million.

We believe that cash generated from operations and borrowings under our credit agreement will be sufficient to fund our working capital and
other cash flow requirements for at least the next 12 months. Our credit agreement expires on December 31, 2011.

On
March 10, 2008, we announced an expanded share repurchase program. On March 3, 2009, we announced an additional twelve month extension of this share repurchase program. We currently have the ability to purchase up to $50 million of our
common stock in the open market (including through 10b5-1 trading plans), through privately negotiated transactions, or through an accelerated repurchase transaction. The primary source of funding for the program is expected to be cash on hand. The
timing and amount of share repurchases, if any, will depend on price, market conditions, applicable regulatory requirements, and other factors. The program authorizes the Company to repurchase shares over the next 12 months, does not require us to
repurchase any specific number of shares, and may be modified, suspended or terminated at any time without prior notice. Shares repurchased under the program will be subsequently retired. We did not repurchase any shares in the thirteen or
thirty-nine weeks ended October 3, 2009. As of November 9, 2009, approximately 1.9 million shares have been repurchased under this program for an aggregate amount of $19.0 million at an average price of $10.21 per share.

Off-Balance Sheet Arrangements

The Company holds a minority interest in Ridemakerz, which is accounted for under the equity method. The Company purchased a call option from a group of other Ridemakerz investors for $150,000 for 1.25 million Ridemakerz common units
at an exercise price of $1.25 per unit. The call option was immediately exercisable and expires April 30, 2012. Simultaneously, the Company granted a put option to the same group of investors for 1.25 million common units at an exercise
price of $0.50 per unit. The put option became exercisable on April 30, 2008 and expires on April 30, 2012. As of October 3, 2009, the investment in Ridemakerz was approximately $3.2 million, which represented an ownership interest of
approximately 25%. Under the current agreements, the Company could own up to approximately 33% of fully diluted equity in Ridemakerz. See Note 9  Investment in Affiliate to the Condensed Consolidated Financial Statements for additional
information.

Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the appropriate application of certain accounting policies, which require us to make estimates and assumptions about future
events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could
be material to the financial statements.

We believe application of accounting policies, and the estimates inherently required
therein, are reasonable. These accounting policies and estimates, including those related to inventory, long-lived assets, goodwill and revenue recognition, are reevaluated on an ongoing basis, and adjustments are made when facts and circumstances
dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.



20



---

##### Table of Contents

Our critical accounting policies and estimates are discussed in and should be read in
conjunction with our annual report on Form 10-K, as filed with the SEC on March 19, 2009, which includes audited consolidated financial statements for our 2008, 2007 and 2006 fiscal years. There have been no material changes to the critical
accounting policies and estimates disclosed in the 2008 Form 10-K.

Recent Accounting Pronouncements

There are no new accounting pronouncements for which adoption is expected to have a material effect on the Companys financial
statements in future accounting periods.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our market risks relate primarily to changes in interest rates, and we bear this risk in two specific ways. First, our
revolving credit facility carries a variable interest rate that is tied to market indices and, therefore, our results of operations and our cash flows can be impacted by changes in interest rates. Outstanding balances under our credit facility bear
interest LIBOR plus 2.05%. We had no borrowings outstanding during the first nine months of fiscal 2009. Accordingly, a 100 basis point change in interest rates would result in no material change to our annual interest expense. The second
component of interest rate risk involves the short term investment of excess cash in short term, investment grade interest-bearing securities. These investments are considered to be cash equivalents and are shown that way on our balance sheet. If
there are changes in interest rates, those changes would affect the investment income we earn on these investments and, therefore, impact our cash flows and results of operations.

We conduct operations in various countries, which expose us to changes in foreign exchange rates. The financial results of our foreign
subsidiaries and franchisees may be materially impacted by exposure to fluctuating exchange rates. Reported sales, costs and expenses at our foreign subsidiaries, when translated into U.S. dollars for financial reporting purposes, can fluctuate due
to exchange rate movement. While exchange rate fluctuations can have a material impact on reported revenues, costs and expenses, and earnings, this impact is principally the result of the translation effect and does not materially impact our
short-term cash flows.

Although we enter into a significant amount of purchase obligations outside of the U.S., these
obligations are settled primarily in U.S. dollars and, therefore, we believe we have only minimal exposure at present to foreign currency exchange risks for our purchase obligations. Historically, we have not hedged our currency risk and do not
currently anticipate doing so in the future.

We do not engage in financial transactions for trading or speculative purposes.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures: The Companys management, with the participation of the Companys Chief Executive Bear
and Chief Operations and Financial Bear, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the
Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, the Companys management, including the Chief Executive Bear and Chief Operations and Financial Bear, have concluded that the Companys
disclosure controls and procedures were effective as of October 3, 2009, the end of the period covered by this quarterly report.

It should be noted that our management, including the Chief Executive Bear and the Chief Operations and Financial Bear, does not expect that the Companys disclosure controls and procedures or internal controls will prevent all error
and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally,
controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance
with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting: The Companys management, with the participation of the Companys
Chief Executive Bear and Chief Operations and Financial Bear, also conducted an evaluation of the Companys internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) to determine whether any changes
occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting. Based on that evaluation, there has been no such change
during the period covered by this report.



21



---

##### Table of Contents

PART II  OTHER INFORMATION

Item 1A. Risk Factors

There have been no changes to our Risk Factors as disclosed in our Annual Report on Form 10-K for the year ended January 3, 2009 and our Quarterly Reports on Form 10-Q for the quarters ended
April 4, 2009 and July 4, 2009 as filed with the SEC on March 19, 2009, May 14, 2009 and August 13, 2009, respectively.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER
PURCHASES OF EQUITY SECURITIES



|                                 |  |                                              |  |                                        |      |                                                                                                 |   |                                                                                                                      |   |           
|-------------------------------- |  | -------------------------------------------- |  | -------------------------------------- | ---- | ----------------------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------------------- | - | ----------
|Period                           |  | (a)Total Number ofShares (or Units)Purchased |  | (b)AveragePrice PaidPer Share(or Unit) |      | (c) Total Number ofShares (or Units)Purchased as Part ofPublicly
AnnouncedPlans or Programs (2) |   | (d)Maximum Number(or ApproximateDollar Value) ofShares (or Units)that May
Yet BePurchased Under thePlans or Programs
|Jul. 5, 2009  Aug. 1, 2009 (1)  |  |                                             |  | $                                      |     |                                                                                                 |  |                                                                                                                      | $ | 30,987,972
|Aug. 2, 2009  Aug. 29, 2009 (1) |  |                                             |  | $                                      |     |                                                                                                 |  |                                                                                                                      | $ | 30,987,972
|Aug. 30, 2009  Oct. 3, 2009 (1) |  | 116                                          |  | $                                      | 5.38 |                                                                                                 |  |                                                                                                                      | $ | 30,987,972
|                                 |  |                                              |  |                                        |      |                                                                                                 |   |                                                                                                                      |   |           
|Total                            |  | 116                                          |  | $                                      | 5.38 |                                                                                                 |  |                                                                                                                      | $ | 30,987,972
|                                 |  |                                              |  |                                        |      |                                                                                                 |   |                                                                                                                      |   |           



|(1) | Represents shares of our common stock delivered to us in satisfaction of the tax withholding obligation of holders of restricted shares which vested during the quarter.
Our equity incentive plans provide that the value of shares delivered to us to pay the withheld to cover tax obligations is calculated as the closing price of our common stock on the date the relevant transaction occurs.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On March 3, 2009, we announced an extension of our $50 million share repurchase program of our outstanding common stock over the next twelve months. The program
was authorized by our board of directors. Purchases may be made in the open market or in privately negotiated transactions, with the level and timing of activity depending on market conditions, applicable regulatory requirements, and other factors.
Purchases may be increased, decreased or discontinued at any time without notice. Shares purchased under the program were subsequently retired.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



22



---

##### Table of Contents

Item 6. Exhibits

The following is a list of exhibits filed as a part of the quarterly report on Form 10-Q:



|            |  |                                                                                                                                                                                                                                                                                                                                                                                 
|----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                     
|            | 
|2.1         |  | Agreement and Plan of Merger dated April 3, 2000 between Build-A-Bear Workshop, L.L.C. and the Registrant (incorporated by reference from Exhibit 2.1 to our Registration
Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142)                                                                                                                         
|            | 
|3.1         |  | Third Amended and Restated Certificate of Incorporation (incorporated by reference from Exhibit 3.1 of our Current Report on Form 8-K, filed on November 11,
2004)                                                                                                                                                                                                              
|            | 
|3.2         |  | Amended and Restated Bylaws (incorporated by reference from Exhibit 3.4 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No.
333-118142)                                                                                                                                                                                                       
|            | 
|4.1         |  | Specimen Stock Certificate (incorporated by reference from Exhibit 4.1 to Amendment No. 3 to our Registration Statement on Form S-1, filed on October 1, 2004, Registration No.
333-118142)                                                                                                                                                                                     
|            | 
|4.2         |  | Stock Purchase Agreement by and among the Registrant, Catterton Partners IV, L.P., Catterton Partners IV Offshore, L.P. and Catterton Partners IV Special Purpose, L.P. and the
Purchasers named therein dated as of April 3, 2000 (incorporated by reference from Exhibit 4.2 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142)
|            | 
|4.3         |  | Stock Purchase Agreement by and among the Registrant and the other Purchasers named therein dated as of September 21, 2001 (incorporated by reference from Exhibit 4.3 to our
Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142)                                                                                                        
|            | 
|4.4         |  | Amended and Restated Registration Rights Agreement, dated September 21, 2001 by and among Registrant and certain stockholders named therein (incorporated by reference from
Exhibit 4.5 to our Registration Statement on Form S-1, filed on August 12, 2004, Registration No. 333-118142)                                                                                       
|            | 
|31.1        |  | Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the Chief Executive Bear)                                                                                                                                                                                                                                        
|            | 
|31.2        |  | Rule 13a-14(a)/15d-14(a) certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, executed by the Chief Financial Bear)                                                                                                                                                                                                                                        
|            | 
|32.1        |  | Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Chief Executive Bear)                                                                                                                                                                                                                                                    
|            | 
|32.2        |  | Section 1350 Certification (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by the Chief Financial Bear)                                                                                                                                                                                                                                                    



23



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Date: November 12, 2009



BUILD-A-BEAR WORKSHOP, INC. (Registrant)By:

/s/ Maxine ClarkMaxine ClarkChairman of the Board and Chief Executive BearBy:

/s/ Tina KlockeTina KlockeChief Operations and Financial Bear, Treasurer and Secretary




24