Annual Report for Fiscal Year Ending April 30, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements, which are included in this Annual Report on Form 10-K in Item 8 and the information set forth in Part I, "Item 1A. Risk Factors." The following sections include a discussion of results for the fiscal year ended April 30, 2026, compared to the fiscal year ended April 30, 2025. The discussion contains forward-looking statements as well as estimates regarding market an industry data, which involve risks, uncertainties, and assumptions. See discussion over "Forward-Looking Statements" for additional information.

RESULTS OF OPERATIONS

Immersion

The following summarizes our results of operation for the periods ended (in thousands, except for percentages):

Revenues

Royalty and license revenue is composed of per unit royalties earned based on usage or net sales by licensees and fixed payment license fees charged for our IP and software.

Fixed fee license revenue decreased by $(59.6) million, or (95)% for the fiscal year ended April 30, 2026, compared to the fiscal year ended April 30, 2025, primarily due to $(44.1) million decrease in Mobile license revenue and $(10.4) million decrease in Gaming revenue related to one time perpetual license agreements entered into during the fiscal year ended April 30, 2025.

Per-unit royalty revenue increased by $1.4 million, or 12%, for the fiscal year ended April 30, 2026, compared to the fiscal year ended April 30, 2025. This increase was driven by higher royalty revenue from mobility licensees of $0.9 million and commercial licensees of $0.5 million.

Geographically, Immersion's revenues have historically been concentrated in Asia, primarily in Japan and Korea. The geographic distribution of revenues for Asia, Europe, and North America for the fiscal year ended April 30, 2026, represented 73%, 2%, and 25%, respectively, of our total revenue as compared to 87%, 8%, and 5%, respectively, for the fiscal year ended April 30, 2025.

Selling and administrative expenses

Immersion's selling and administrative expenses primarily consisted of employee compensation and benefits including stock-based compensation, legal and other professional fees, external legal costs for patents, office expense, travel, and facilities costs.

Selling and administrative expenses decreased by $(13.6) million for the fiscal year ended April 30, 2026, as compared to the fiscal year ended April 30, 2025, primarily due to a $(7.2) million decrease in compensation, benefits, and other personnel related costs and a $(6.0) million decrease in legal costs related to the settlement of patent litigation. The decrease in compensation, benefits, and other personnel related costs is largely attributable to higher stock-based compensation expense and higher variable compensation in fiscal year 2025.

Barnes & Noble Education

The following summarizes Barnes & Noble Education's results of operations for the period (in thousands):

Revenues

Barnes & Noble Education primarily derives its revenues from the sale of course materials, which include new, used, rental, and digital textbooks. Additionally, at college and university bookstores which Barnes & Noble Education operates, it sells general merchandise, including emblematic apparel and gifts, trade books, computer products, school and dorm supplies, convenience and cafe items and graduation products. Barnes & Noble Education's rental income is primarily derived from the rental of physical textbooks. Barnes & Noble Education also derives revenue from other sources, such as sales of bookstore management, hardware and point-of-sale software, and other services.

Total revenue was $1,714.8 million for the fiscal year ended April 30, 2026, consisting of $1,564.4 million of product and other sales and $150.4 million of rental sales. For the period from June 10, 2024 to April 30, 2025, total revenue was $1,481.8 million, including $1,342.4 million of product and other sales and $139.4 million of rental sales. The $233.0 million increase in revenue is primarily due to the prior year period being 40 days shorter, which reduced revenue by approximately $118.0 million on a linear basis. The remaining increase reflects higher comparable store sales driven by growth in Barnes & Noble Education's BNC First Day®programs and new store sales, partially offset by declines in general merchandise sales, a la carte course material sales, and lower sales as a result of closed stores

Cost of sales

Barnes & Noble Education cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to Barnes & Noble Education's college and university contracts and other facility related expenses.

Cost of sales was also 79% of total revenue for the fiscal year ended April 30, 2026, compared to 76% for the period from June 10, 2024 to April 30, 2025. Product and other cost of sales increased primarily due to the prior year period being 40 days shorter. Rental cost of sales increased compared to prior year primarily reflecting lower contract costs as a percentage of sales associated with the continued expansion of Barnes & Noble Education's BNC First Day® programs and increased participation in affordable access course material offerings.

Selling and administrative expenses

Barnes & Noble Education selling and administrative expenses consist primarily of store payroll and store operating expenses. Selling and administrative expenses also include long-term incentive plan compensation expense and general office expenses, such as merchandising, procurement, field support, and finance and accounting.

Selling and administrative expenses was $288.5 million for the fiscal year ended April 30, 2026, an increase of $35.7 million compared to $252.8 million for the period from June 10, 2024 to April 30, 2025. The primary factor contributing to the increase is that the period from June 10, 2024 to April 30, 2025, was 40 days shorter, resulting in approximately $30.0 million of lower selling and administrative expense calculated on a linear basis.

Depreciation and amortization

Barnes & Noble Education depreciation and amortization expense consisted primarily of depreciation and amortization expense for property and equipment and intangible assets.

Depreciation and amortization expense was $42.5 million for the fiscal year ended April 30, 2026, an increase of $7.2 million compared to $35.3 million for the period from June 10, 2024 to April 30, 2025. The primary factor contributing to the increase is that the period from June 10, 2024 to April 30, 2025, was 40 days shorter, resulting in approximately $5.9 million of lower depreciation and amortization expense calculated on a linear basis.

Impairment loss

Barnes & Noble Education reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

During the fiscal year ended April 30, 2026, Barnes & Noble Education evaluated certain of its store-level long-lived assets for impairment. Based on the results of the impairment tests, Immersion's basis in Barnes & Noble Education's long-lived assets recognized an impairment loss of $5.1 million, comprised of $2.8 million and $2.3 million of property and equipment, net and operating lease right-of-use assets respectively, included in Impairment loss on the Consolidated Statement of Operations.

For the period from June 10, 2024 to April 30, 2025, Barnes & Noble Education's impairment expense did not have a material impact on operations.

See Note 9. Impairment of Long-Lived Assets in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.

The following table summarizes the consolidated Interest income and other income (expense), net; Interest expense; and Income tax benefit (expense) for the fiscal years ended (in thousands, except for percentages):

Interest income and other income (expense), net

Interest income and other income (expense), net consists primarily of interest and dividend income from cash and cash equivalents and marketable debt and equity securities, realized and unrealized gains (losses) on our marketable equity securities and derivative instruments, and realized gains (losses) on our marketable debt securities.

Interest income and other income (expense), net decreased $(3.2) million for the fiscal year ended April 30, 2026, compared to the fiscal year ended April 30, 2025, primarily driven by a $(3.3) million decrease in interest income during the current period due to less investment in fixed securities compared to the prior period.

Interest expense

Interest expenses primarily consisted of interest charges related to Barnes & Noble Education's credit facility. Interest expense decreased $(2.1) million primarily due to lower borrowings, lower interest rates, and a decrease in the amortization of deferred financing costs.

Income tax benefit (expense)

The changes for Immersion and Barnes & Noble Education's provision for income taxes are described below:

Immersion

Provision for income taxes for the fiscal year ended April 30, 2026, resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate. We maintain no valuation allowance against our U.S. federal deferred tax assets and maintain a valuation allowance against certain our U.S. state and Canadian federal deferred tax assets. The change in the estimated effective tax rate was mainly driven by foreign withholding taxes.

The year-over-year change in provision for income taxes resulted primarily from foreign withholding taxes and the change in income from continuing operations across various tax jurisdictions.

In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize the underlying net operating loss carryforwards.

We also maintain liabilities for uncertain tax positions. As of April 30, 2026, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $10.0 million, all of the $10.0 million could be payable in cash. In addition, interest and penalty of $1.6 million could also be payable in cash in relation to unrecognized tax benefits. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $11.6 million. We account for interest and penalties related to uncertain tax positions as a component of income tax provision. We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

Barnes & Noble Education

Barnes & Noble Education recorded an income tax provision of $3.0 million on pre-tax income of $9.9 million during the fiscal year ended April 30, 2026, which represented an effective income tax rate of 29.8%.

Barnes & Noble Education recorded an income tax provision of $6.4 million on pre-tax loss of $55.4 million during the period from June 10, 2024 to April 30, 2025, which represented an effective income tax rate of (11.5)%.

In assessing the realizability of the deferred tax assets, management considered whether it is more likely than not that some or all of the deferred tax assets would be realized. As of April 30, 2026, Barnes & Noble Education determined that it was more likely than not that it would not realize all deferred tax assets and its tax rate for the current fiscal year reflects this determination. Barnes & Noble Education will continue to evaluate this position.

LIQUIDITY AND CAPITAL RESOURCES

As discussed in Note 2. Basis of Presentation and Summary of Significant Accounting Policies, due to their nonhomogeneous operations, our Consolidated Balance Sheets at April 30, 2026 and 2025, and Consolidated Statement of Operations for the fiscal years ended April 30, 2026 and 2025, separately present the operating assets, liabilities, and operations of Immersion's business from the operating assets, liabilities, and operations of Barnes & Noble Education's business.

In analyzing the Company's ability to generate and obtain adequate amounts of cash to meet its requirements and plans for the next 12 months and separately in the long-term beyond the next 12 months it is important to highlight the two operating segments are not legally or contractually bound to each other. All of the assets of Barnes & Noble Education, reported on the Consolidated Balance Sheets, can be used only to settle obligations of Barnes & Noble Education. None of the liabilities of Barnes & Noble Education have recourse to the general credit of Immersion.

Immersion's cash and cash equivalents, investments-current, and investments-noncurrent consist primarily of money-market funds, investments in marketable equity and debt securities, and investments in U.S. treasury securities. As of April 30, 2026, Immersion had $129.9 million in cash and cash equivalents, and $42.2 million in current investments. All marketable securities are stated at fair value. Realized gains and losses on marketable equity securities and marketable debt securities are recorded in Interest income and other income (expense), net on the Consolidated Statements of Operations. Unrealized gains and losses on marketable equity securities are reported as Interest income and other income (expense), net on our Consolidated Statement of Operations. Unrealized gains and losses on marketable debt securities reported as a component of Accumulated other comprehensive income on our Consolidated Balance Sheets.

Barnes & Noble Education's primary sources of cash are net cash flows from operating activities, funds available under its Credit Agreement, BNED Common stock sold under the ATM Sales Agreement, and short-term vendor financing. Barnes & Noble Education's liquidity is highly dependent on the seasonal nature of its business, particularly with respect to course material sales, as sales are generally highest in the second and third fiscal quarters, when college students purchase textbooks for the upcoming Fall and Spring semesters, respectively. As of April 30, 2026, Barnes & Noble Education had $8.4 million of cash on hand and $19.8 million of restricted cash, including $17.4 million related to segregated funds for commission due to Lids for logo merchandise sales as per the "Lids", and together with Fanatics relationship ("F/L Relationship") -related agreements.

On June 10, 2024, Barnes & Noble Education completed the Transactions, which included: (i) a Private Investment; (ii) a Rights Offering; (iii) a Term Loan Debt Conversion; and (iv) a A&R Agreement, to substantially deleverage its consolidated balance sheet. These transactions also raised additional capital for repayment of indebtedness and provided additional flexibility for future working capital needs. See Long-term borrowings discussion below for additional information.

On September 19, 2024, Barnes & Noble Education entered into the September ATM Sales Agreement with BTIG under which Barnes & Noble Education sold the maximum of $40.0 million of BNED Common Stock from time to time at a weighted-average price of $10.06 per share and received $39.2 million in proceeds, net of commissions. BTIG, as the sales agent, sold the shares based upon Barnes & Noble Education's instructions (including as to price, time or size limits or other customary parameters or conditions). Barnes & Noble Education paid BTIG a commission of 2% of the gross sales proceeds of BNED Common Stock sold under the September ATM Sales Agreement. Barnes & Noble Education was not obligated to make any sales of BNED Common Stock under the September ATM Sales Agreement.

On December 20, 2024, Barnes & Noble Education entered into the December ATM Sales Agreement, under which Barnes & Noble Education sold the maximum of $40.0 million of BNED Common Stock from time to time at a weighted-average price of $10.42 per share and received $39.2 million in proceeds, net of commissions. BTIG, as the sales agent, sold the shares based upon Barnes & Noble Education's instructions (including as to price, time or size limits or other customary parameters or conditions). Barnes & Noble Education paid BTIG a commission of 2% of the gross sales proceeds of BNED Common Stock sold under the December ATM Sales Agreement. Barnes & Noble Education was not obligated to make any sales of BNED Common Stock under the December ATM Sales Agreement. During the third quarter of Fiscal 2025, Barnes & Noble Education issued and sold the maximum aggregate offering of $40.0 million of BNED Common Stock under the December ATM Sales Agreement, at a weighted-average price of $10.42 per share and received $39.2 million in proceeds, net of commissions.

Barnes & Noble Education believes that its future cash from operations, access to borrowings under the credit facility, and short-term vendor financing will provide adequate resources to fund its operating and financing needs for the next twelve months and beyond. To the extent that available funds are insufficient to fund its future activities, Barnes & Noble Education may need to raise additional funds through public or private financing of debt or equity. Barnes & Noble Education's access to, and the availability of, financing in the future will be impacted by many factors, including the liquidity of the overall capital markets and the current state of the economy. There can be no assurances that Barnes & Noble Education will have access to capital markets on acceptable terms.

We will continue to protect and defend our extensive IP portfolio, which can result in the use of cash in the event of litigation.

At the date of this Annual Report on Form 10-K, the Company believes we have sufficient capital resources to meet our working capital needs for the next twelve months and beyond.

Cash and cash equivalents, Investments-current, and Restricted cash

At April 30, 2026, our cash and cash equivalents and investments-current totaled $180.5 million, a $19.1 million increase from $161.4 million at April 30, 2025. In addition, as of April 30, 2026, we had restricted cash of $19.8 million, comprised of $17.4 million in Prepaid expenses and other current assets on the Consolidated Balance Sheets primarily related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $2.4 million in Other assets - noncurrent on the Consolidated Balance Sheets related to amounts held in trust for future employee benefit plan distributions.

The following summarizes select cash flow information for the fiscal years ended (in thousands):

Net cash provided by (used in) operating activities

Our operating activities primarily consists of net income adjusted for certain noncash items including depreciation and amortization, stock-based compensation expense, severance expense, impairment loss, loss on disposal of property plant and equipment, deferred income taxes, net (gains) losses on investments in marketable securities, income tax expense related to write-down of long-term deposits and the effect of changes in operating assets and liabilities.

Net cash provided by (used in) operating activities was $59.1 million for the fiscal year ended April 30, 2026, a $116.6 million increase compared to the fiscal year ended April 30, 2025. This cash increase was primarily attributable to a $196.1 million increase from changes in operating assets and liabilities primarily due to favorable changes in working capital, including a $196.7 million favorable change in accounts payable and accrued liabilities, primarily reflecting the timing of payments to vendors for inventory purchases and operating expenses and a $4.9 million increase of changes in non cash items, partially offset by $84.4 million decrease from changes in net income.

Net cash provided by (used in) investing activities

Our investing activities primarily represent Immersion transactions that consist of purchases of marketable securities and other investments and proceeds from disposal of marketable securities and other investments; proceeds from issuance of derivative instruments; payments made to settle derivative instruments; payment for business acquisitions, net of cash acquired. The purchase of property and equipment and proceeds from disposals of property and equipment were related to Barnes & Noble Education.

Net cash provided by (used in) investing activities for the fiscal year ended April 30, 2026 was $51.5 million, primarily consisting of $143.1 million in cash provided by proceeds from selling marketable securities and derivatives, partially offset by $(75.4) million in cash used to purchase marketable securities and the settlement of derivative instruments; and $(16.2) million in purchase of property and equipment.

Net cash provided by (used in) investing activities for the fiscal year ended April 30, 2025 was $3.4 million, primarily consisting of $138.9 million in cash provided by proceeds from selling marketable securities and derivatives, partially offset by $(102.0) million in cash used to purchase marketable securities and the settlement of derivative instruments; $(31.4) million of cash used in business acquisition, net of cash acquired; and $(11.2) million in purchases of property and equipment.

Net cash provided by (used in) financing activities

Our financing activities were primarily related to Barnes & Noble Education and primarily consisted of cash proceeds from issuance of common stock, proceeds from and repayments of credit facility, payment of deferred financing costs and equity issuance costs. Other financing activities related to Immersion included dividend payments, shares withheld to cover payroll taxes, and cash paid for repurchases of our common stock.

Net cash provided by (used in) financing activities for the fiscal year ended April 30, 2026 was $(44.8) million primarily consisting of $812.9 million proceeds from borrowing under Barnes & Noble Education's credit facility, more than offset by $(845.0) million debt repayment, $(8.1) million in dividend payments, $(2.3) million in shares withheld for payroll taxes, and $(1.9) million in payment of deferred financing costs.

Net cash provided by (used in) financing activities for the fiscal year ended April 30, 2025 was $61.0 million primarily consisting of $836.2 million proceeds from borrowing under Barnes & Noble Education's credit facility and $78.1 million in proceeds from sale of BNED Common Stock, net of commissions and equity issuance costs, partially offset by $(834.3) million debt repayment, $(12.9) million in dividend payments, and $(3.7) million in shares withheld for payroll taxes.

Total cash, cash equivalents, and investments-current were $180.5 million and $161.4 million at April 30, 2026 and 2025, respectively, of which approximately 4.0%, or $7.2 million and 22.2%, or $35.9 million, respectively, was held by our foreign subsidiaries and subject to repatriation tax effects.

Immersion Dividends Declared and Dividend Payments

The following table summarizes the dividend declaration and payment activity for the fiscal years ended April 30, 2026 and 2025:

Future dividends will be subject to further review and approval by the Board in accordance with applicable law. The Board reserves the right to declare, adjust, or withdraw quarterly dividends in future periods as it reviews the Company's capital allocation strategy from time-to-time.

For the fiscal years ended April 30, 2026 and 2025, the total dividends paid were $8.1 million and $12.9 million, respectively.

Immersion Stock Repurchases

On December 29, 2022, our Board approved a stock repurchase program of up to $50.0 million of our common stock for a period of up to twelve months (the "December 2022 Stock Repurchase Program"), which terminated and superseded the stock repurchase program that had been approved by the Board on February 23, 2022. Any stock repurchases may be made through open market and privately negotiated transactions, at such times and in such amounts as management deems appropriate, including pursuant to one or more Rule 10b5-1 trading plans adopted in accordance with Rule 10b5-1 of the Exchange Act. Additionally, the Board authorized the use of any derivative or similar instrument to effect stock repurchase transactions, including without limitation, accelerated share repurchase contracts, equity forward transactions, equity option transactions, equity swap transactions, cap transactions, collar transactions, naked put options, floor transactions, or other similar transactions or any combination of the foregoing transactions. The December 2022 Stock Repurchase Program was implemented as a method to return value to our stockholders. The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions. The December 2022 Stock Repurchase Program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time. The program has been amended various times and the most recent amendment extended the expiration date to December 29, 2026.

During the fiscal year ended April 30, 2026, the Company repurchased 1,700 shares of our common stock for $10 thousand at an average purchase price of $6.30 per share. As of April 30, 2026, the Company has $39.3 million available for repurchase under the December 2022 Stock Repurchase Program.

Barnes & Noble Education Stock Repurchases

On December 14, 2015, Barnes & Noble Education's Board of Directors authorized a stock repurchase program of up to $50 million, in the aggregate, of outstanding BNED Common Stock. The stock repurchase program is carried out at the direction of management (which may include a plan under Rule 10b5-1 of the Securities Exchange Act of 1934). During fiscal years 2026 and 2025, Barnes & Noble Education did not purchase shares under the stock repurchase program. As of April 30, 2026, approximately $26.7 million remains available under the stock repurchase program.

During fiscal years 2026 and 2025, Barnes & Noble Education purchased 93,842 shares and 429 shares, respectively, outside of the stock repurchase program in connection with employee tax withholding obligations for vested stock awards.

Restated ABL Credit Facility

The following summarizes Barnes & Noble Education's outstanding borrowings at April 30, 2026 and 2025 (in thousands):

On the Closing Date, Barnes & Noble Education amended, restated, and extended the maturity of its existing asset-based credit facility with Bank of America, N.A., as administrative agent, collateral agent, and swing line lender, and other lenders from time to time party thereto (such amended and restated credit facility, the "Restated ABL Facility"). Pursuant to the Restated ABL Facility, the lenders thereunder have committed to provide a four-year asset-backed revolving credit facility in an aggregate committed principal amount of up to $325 million. The Restated ABL Facility has a maturity date of June 9, 2028. Barnes & Noble Education has interest only obligations until June 9, 2028, at which time the total principal is due and payable.

During the fiscal year ended April 30, 2026, Barnes & Noble Education borrowed $812.9 million and repaid $845.0 million under the Restated ABL Facility, with $71.0 million of outstanding borrowings under the Restated ABL Facility as of April 30, 2026. As of April 30, 2026, Barnes & Noble Education issued $0.7 million in letters of credit under the Restated ABL Facility.

During the period from June 10, 2024 to April 30, 2025, Barnes & Noble Education borrowed $836.2 million and repaid $834.3 million under the Restated ABL Facility, with $103.1 million of outstanding borrowings under the Restated ABL Facility as of April 30, 2025. As of April 30, 2025, Barnes & Noble Education issued $0.6 million in letters of credit under the Restated ABL Facility.

As of April 30, 2026, Barnes & Noble Education was in compliance with all debt covenants under the Credit Agreement. See Note 10. Debt in the Notes to the Consolidated Financial Statements under Item 8 of this Form 10-K for additional information.

Contractual Obligations

The following summarizes contractual obligations as of April 30, 2026 (in millions):

CRITICAL ACCOUNTING ESTIMATES

The Company's Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The preparation of these Consolidated Financial Statements and related disclosures in conformity with U.S. GAAP and our discussion and analysis of the Company's financial condition and operating results require management to make judgments, assumptions, and estimates that affect the amounts reported. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K, which describes the significant accounting policies and methods used in the preparation of our consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, marketable securities and derivative instruments, income taxes, and contingencies. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions.

Goodwill and Indefinite-Lived Intangible Assets

The Company recognized goodwill of $69.2 million and indefinite-lived intangible assets of $45 million as the result of the business combination with Barnes & Noble Education. The determination of the carrying value and recoverability of these assets requires management to make significant judgments and estimates regarding future business performance, economic conditions, and market-based assumptions. As of April 30, 2026, goodwill and indefinite-lived intangible assets were $69.2 million and $45 million, respectively.

Goodwill is tested for impairment annually during the fourth quarter of the Company's fiscal year and whenever events or changes in circumstances indicate that the carrying value of a reporting unit may exceed its fair value. Indefinite-lived intangible assets are similarly tested annually for impairment and more frequently if triggering events occur.

The fair value of our reporting units and indefinite-lived intangible assets is estimated using valuation methodologies that may include discounted cash flow analyses, market multiples derived from guideline public companies or transactions, and other appropriate valuation techniques. Significant assumptions used in these analyses include: (i) projected revenue growth rates; (ii) expected operating margins and profitability; (iii) long-term growth rates; (iv) discount rates reflecting the risks inherent in future cash flows; and (v) market-based valuation multiples.

Changes in these assumptions could materially affect the estimated fair values and the resulting impairment conclusions. The assumptions we use are based on historical experience, current business conditions, and estimates of future performance that we believe are reasonable; however, actual results may differ from these estimates.

We performed our annual impairment assessment and concluded that the estimated fair value of each reporting unit substantially exceeded its carrying value. However, if actual operating results are lower than current forecasts, if market-based valuation multiples decline, if discount rates increase, or if broader economic conditions deteriorate, future impairment charges could be required.

For example, a hypothetical increase of 100 basis points in the discount rate or a decrease of 100 basis points in the long-term growth assumptions used in our valuations would reduce the estimated fair value of our reporting units and indefinite-lived intangible assets. While such changes would not have resulted in impairment based on the assumptions used in our most recent analysis, continued adverse changes in market conditions or business performance could result in future impairment charges.

See Note 8. Goodwill and Intangible Assets in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.

Barnes & Noble Education

Revenue Recognition and Deferred Revenue

Product sales and rentals

The majority of Barnes & Noble Education's revenue is derived from the sale of products through its bookstore locations, including virtual bookstores, and its bookstore affiliated e-commerce websites, and contains a single performance obligation. Revenue from sales of Barnes & Noble Education's products is recognized at the point in time when control of the products is transferred to its customers in an amount that reflects the consideration Barnes & Noble Education expects to be entitled to in exchange for the products.

For additional information, see Note 5. Revenue in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.

Retail product revenue is recognized when the customer takes physical possession of Barnes & Noble Education's products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of Barnes & Noble Education's products by its customers for products ordered through Barnes & Noble Education's websites and virtual bookstores. Wholesale product revenue is recognized upon shipment of physical textbooks at which point title passes and risk of loss is transferred to the customer. Additional revenue is recognized for shipping charges billed to customers and shipping costs are accounted for as fulfillment costs within cost of goods sold.

Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized upon the delivery of the digital content as product revenue in Barnes & Noble Education's consolidated financial statements. A software feature is embedded within the content of Barnes & Noble Education's digital textbooks, such that upon expiration of the term the customer is no longer able to access the content. While the sale of the digital textbook allows the customer to access digital content for a fixed period of time, once the digital content is delivered to the customer, Barnes & Noble Education's performance obligation is complete.

Revenue from the rental of physical textbooks is deferred and recognized over the rental period based on the passage of time commencing at the point of sale, when control of the product transfers to the customer and is recognized as rental income in our

consolidated financial statements. Rental periods are typically for a single semester and are always less than one year in duration. Barnes & Noble Education offers a buyout option to allow the purchase of a rented physical textbook at the end of the rental period if the customer desires to do so. Barnes & Noble Education records the buyout purchase when the customer exercises and pays the buyout option price which is determined at the time of the buyout. In these instances, Barnes & Noble Education accelerates any remaining deferred rental revenue at the point of sale.

Revenue recognized for Barnes & Noble Education's BNC First Day® offerings is consistent with its policies outlined above for product, digital and rental sales, net of an anticipated opt-out or return provision. Given the growth of BNC First Day programs, the timing of cash collection from Barnes & Noble Education's school partners may shift to periods subsequent to when the revenue is recognized. When a school adopts Barnes & Noble Education's BNC First Day® affordable access course material program offerings, cash collection from the school generally occurs after the institution's drop/add dates, which is later in the working capital cycle, particularly in Barnes & Noble Education's third quarter given the timing of the Spring Term and Barnes & Noble Education's quarterly reporting period, as compared to direct-to-student point-of-sale transactions where cash is generally collected during the point-of-sale transaction or within a few days from the credit card processor.

Barnes & Noble Education estimates returns based on an analysis of historical experience. A provision for anticipated merchandise returns is provided through a reduction of sales and cost of goods sold in the period that the related sales are recorded.

For sales and rentals involving third-party products, Barnes & Noble Education evaluates whether Barnes & Noble Education is acting as a principal or an agent. Barnes & Noble Education's determination is based on its evaluation of whether Barnes & Noble Education controls the specified goods or services prior to transferring them to the customer. There are significant judgments involved in determining whether Barnes & Noble Education controls the specified goods or services prior to transferring them to the customer including whether Barnes & Noble Education has the ability to direct the use of the good or service and obtain substantially all of the remaining benefits from the good or service. For those transactions where Barnes & Noble Education is the principal, Barnes & Noble Education records revenue on a gross basis, and for those transactions where Barnes & Noble Education is an agent to a third-party, Barnes & Noble Education records revenue on a net basis.

Barnes & Noble Education recognizes revenue commissions from logo general merchandise sales, which are fulfilled by Lids and Fanatics, on a net basis in our consolidated financial statements.

As of the fiscal year ended April 30, 2026, Barnes & Noble Education did not have a customer loyalty program. In the beginning of the fiscal year ended April 30, 2027, Barnes & Noble Education launched its own gift card program, and continues to honor Barnes & Noble Booksellers gift cards and sell third-party gift cards in its stores. Barnes & Noble Education does not treat any promotional offers as expenses. Sales tax collected from Barnes & Noble Education customers is excluded from reported revenues. Barnes & Noble Education's payment terms are generally 30 days and do not extend beyond one year.

Service and other revenue

Service and other revenue is primarily derived from brand marketing services which includes promotional activities and advertisements within Barnes & Noble Education's physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, non-return rental penalty fees, and revenue from other programs.

Merchandise Inventories

Merchandise inventories, which consist of finished goods, are stated at the lower of cost or market. Market value of Barnes & Noble Education's inventory, which is all purchased finished goods, is determined based on its estimated net realizable value, which is generally the selling price less normally predictable costs of disposal and transportation.

Cost is determined primarily by the retail inventory method for Barnes & Noble Education's retail business. Barnes & Noble Education's textbook and trade book inventories, for Barnes & Noble Education's retail and wholesale businesses, are valued using the LIFO method. In Fiscal 2026, there was no required LIFO adjustment. In Fiscal 2025 Barnes & Noble Education recorded a LIFO adjustment in the amount of $6.4 million.

Reserves for non-returnable inventory represent write-downs that reduce the cost basis of the asset. These write-downs are based on Barnes & Noble Education's history of liquidating non-returnable inventory. Reserve calculations are sensitive to certain assumptions, including markdowns and inventory aging. Barnes & Noble Education does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate the non-returnable inventory reserve. However, if assumptions based on Barnes & Noble Education's history of liquidating non-returnable inventory are incorrect, Barnes & Noble Education may be exposed to losses or gains that could be material. A 10% change in actual non-returnable inventory would have affected pre-tax earnings by approximately $5.2 million in fiscal year 2026.

For Barnes & Noble Education's physical bookstores, Barnes & Noble Education also estimates and accrues shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends. Barnes & Noble Education does not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions used to calculate shortage rates. However, if Barnes & Noble Education's estimates regarding shortage rates are

incorrect, Barnes & Noble Education may be exposed to losses or gains that could be material. A change of 10 basis points of actual shortage rates would not have a material impact on pre-tax earnings in fiscal year 2026.

Evaluation of Impairment of Long-Lived Assets

As of April 30, 2026, the Company's long-lived assets include Property and equipment, net; Operating lease right-of-use assets; and Intangible assets, net of $68.2 million, $122.2 million, and $87.7 million, respectively, on the Consolidated Balance Sheets.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and consider market participants in accordance with Accounting Standards Codification ("ASC") 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets. We evaluate the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, we first compare the carrying amount of the asset group to the estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset's carrying value in excess of fair value.

During the fiscal years ended April 30, 2026 and 2025, Barnes & Noble Education evaluated certain of its store-level long-lived assets for impairment. For the fiscal year ended April 30, 2026, based on the results of the impairment tests, Immersion's basis in Barnes & Noble Education's long-lived assets recognized an impairment loss (noncash) of $5.1 million (both pre-tax and after-tax), comprised of $2.3 million and $2.8 million of operating lease right-of-use assets and property and equipment, respectively. For the from June 10, 2024 to April 30, 2025 based on the results of the impairment tests, Immersion's basis in Barnes & Noble Education's long-lived assets recognized an impairment loss (noncash) of $1.2 million (both pre-tax and after-tax), comprised of $0.6 million and $0.6 million of operating lease right-of-use assets and property and equipment, net, respectively. These impairments are presented within Impairment loss on the Consolidated Statement of Operations.

The fair value of the impaired long-lived assets was determined using an income approach (Level 3 input), using the Company's best estimates of the amount and timing of future discounted cash flows, based on historical experience, market conditions, current trends and performance expectations.

See Note 6. Investments and Fair Value Measurements in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.

The impairment analysis process requires significant estimation to determine recoverability of each asset group and to determine the fair value of asset groups that were not recoverable, as well as the fair values of certain operating right-of-use assets included within the asset groups that were not recoverable. The significant assumptions used included annual revenue growth rates, gross margin rates and the estimated relationship of selling and administrative costs to revenue used to estimate the projected cash-flow directly related to the future operation of the stores as well as the weighted average cost of capital used to calculate the fair value. Significant assumptions used to determine the fair values of certain operating right-of-use assets included the current market rent and discount rate. These assumptions are subjective in nature and are affected by expectations about future market or economic conditions.

We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions used to calculate long-lived asset impairment losses. However, if actual results are not consistent with estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to losses that could be material. A 10% decrease in our estimated discounted cash flows would not have materially affected the results of our operations for the fiscal year ended April 30, 2026.

Income Taxes

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Financial Accounting Standards Board guidance on accounting for income taxes requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent we believe a portion will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent earnings experience and expectations of future taxable income by taxing jurisdiction, the carryforward periods available to us for tax reporting purposes and other relevant factors. The actual realization of deferred tax assets may differ significantly from the amounts we have recorded.

In applying ASC 740 to our Korean withholding tax exposure related to royalties from Samsung, management exercises significant judgment in evaluating the technical merits and sustainability of the underlying tax positions, including the interpretation of Korean domestic law and the Korea-U.S. tax treaty. The adverse Regional Tax Office Appeal decision in

November 2025, and our resulting obligation to reimburse Samsung for approximately $9.7 million of withholding taxes, reflects a change in our assessment of the more-likely-than-not outcome and required us to recognize the related tax expense and liability in fiscal 2026. In addition, and due to this decision, the Company decided to discontinue litigation related to certain Korean withholding tax matters involving LGE during the third quarter of fiscal 2026. Because the recoverability of provisional deposits previously made in connection with those matters depended on successful resolution of the related proceedings, the Company concluded that the remaining carrying amount of such deposits was not recoverable and reduced the carrying amount of the related long-term deposits to zero.

Future developments in Korean administrative or judicial practice, or additional information about similar tax controversies, could require further adjustments to our income tax provision and related uncertain tax positions.

See Note 17. Income Taxes in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information.

Recent Accounting Pronouncements

See Note 2. Basis of Presentation and Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K for additional information regarding the effect of new accounting pronouncements on our Consolidated Financial Statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Not applicable