IMMERSION CORP 10-Q

Item 1 . Financial Statements IMMERSION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except for share and per share data) (Unaudited) June 30, 2024 December 31, 2023 ASSETS Current assets: Immersion Cash and cash equivalents $ 28,932 $ 56,071 Investments - current 97,614 104,291 Accounts receivable, net 18,235 2,241 Prepaid expenses and other current assets 8,647 9,847 153,428 172,450 Barnes & Noble Education Cash and cash equivalents 6,855 — Accounts receivable, net 122,797 — Merchandise inventories, net 353,454 — Textbook rental inventories, net 9,288 — Prepaid expenses and other current assets 32,819 — 525,213 — Total current assets 678,641 172,450 Immersion Property and equipment, net 166 211 Investments - noncurrent 45,163 33,350 Long-term deposits 6,310 6,231 Deferred tax assets 3,343 3,343 Other assets - noncurrent 33,775 146 88,757 43,281 Barnes & Noble Education Property and equipment, net 117,808 — Intangible assets, net 94,786 — Goodwill 14,220 — Operating lease right-of-use assets 182,292 — Other assets - noncurrent 11,162 — 420,268 — Total assets $ 1,187,666 $ 215,731 1 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited) June 30, 2024 December 31, 2023 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Immersion Accounts payable $ 81 $ 47 Accrued compensation 2,850 3,127 Deferred revenue - current 12,082 4,239 Other current liabilities 27,605 11,900 42,618 19,313 Barnes & Noble Education Accounts payable 217,173 — Accrued liabilities 69,638 — Deferred revenue - current 8,159 — Operating lease liabilities - current 100,221 — 395,191 — Total current liabilities 437,809 19,313 Immersion Deferred revenue - noncurrent 8,665 8,390 Other long-term liabilities 4,959 4,926 13,624 13,316 Barnes & Noble Education Deferred tax liabilities - net 636 — Operating lease liabilities - noncurrent 107,400 — Other long-term liabilities 12,240 — Deferred revenue - noncurrent 3,393 — Long-term borrowings 186,644 — 310,313 — Total liabilities 761,746 32,629 Commitments and contingencies (Note 14 ) Stockholders’ equity: Common stock – $ 0.001 par value; 100,000,000 shares authorized; 48,153,239 and 47,636,273 shares issued, respectively; 31,960,747 and 31,528,977 shares outstanding, respectively 48 48 Additional paid-in capital 322,692 322,134 Accumulated other comprehensive income 1,335 1,702 Accumulated earning (deficit) 11,560 ( 36,040 ) Treasury stock at cost: 16,192,492 and 16,107,296 shares, respectively) ( 105,363 ) ( 104,742 ) Total stockholders' equity attributable to Immersion Corporation stockholders 230,272 183,102 Noncontrolling interest in consolidated subsidiaries 195,648 — Total stockholders' equity 425,920 183,102 Total liabilities and stockholders’ equity $ 1,187,666 $ 215,731 See accompanying Notes to Condensed Consolidated Financial Statements. 2 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATION S (In thousands, except per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: Immersion Royalty and license $ 52,403 $ 6,983 $ 96,250 $ 14,057 Barnes & Noble Education Product and other 45,073 — 45,073 — Rental income 1,948 — 1,948 — 47,021 — 47,021 — Total revenues 99,424 6,983 143,271 14,057 Cost of sales (excludes depreciation and amortization expense): Barnes & Noble Education Product and other cost of sales 39,675 — 39,675 — Rental cost of sales 1,131 — 1,131 — 40,806 — 40,806 — Operating expenses: Immersion Selling and administrative expenses 14,175 3,870 41,408 7,685 Barnes & Noble Education Selling and administrative expenses 14,519 — 14,519 — Depreciation and amortization expense 2,140 — 2,140 — Restructuring and other charges 2,378 — 2,378 — 19,037 — 19,037 — Total operating expenses 33,212 3,870 60,445 7,685 Operating income 25,406 3,113 42,020 6,372 Interest and other income (loss), net 4,609 6,759 12,715 13,285 Interest expense ( 901 ) — ( 901 ) — Income before provision for income taxes 29,114 9,872 53,834 19,657 Provision for income taxes ( 8,178 ) ( 2,844 ) ( 14,243 ) ( 4,351 ) Net income $ 20,936 $ 7,028 $ 39,591 $ 15,306 Net loss attributable to noncontrolling interest ( 8,009 ) — ( 8,009 ) — Net income attributable to Immersion stockholders $ 28,945 $ 7,028 $ 47,600 $ 15,306 Earnings per common share attributable to Immersion stockholders Basic $ 0.91 $ 0.22 $ 1.50 $ 0.47 Diluted $ 0.89 $ 0.21 $ 1.47 $ 0.47 Weighted Average Com mon Stock Outstanding Basic 31,879 32,583 31,784 32,474 Diluted 32,525 32,810 32,407 32,839 See accompanying Notes to Condensed Consolidated Financial Statements. 3 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net income $ 20,936 $ 7,028 $ 39,591 $ 15,306 Change in unrealized gains (losses) on available-for-sale securities ( 195 ) 298 ( 367 ) 673 Comprehensive income $ 20,741 $ 7,326 $ 39,224 $ 15,979 Comprehensive loss attributable to noncontrolling interests ( 8,009 ) — ( 8,009 ) — Comprehensive income attributable to Immersion stockholders $ 28,750 $ 7,326 $ 47,233 $ 15,979 See accompanying Notes to Condensed Consolidated Financial Statements. 4 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) (Unaudited) Three Months Ended June 30, 2024 Common Stock Accumulated Other Comprehensive Income Accumulated Earnings (Deficit) Treasury Stock Total Stockholders' Equity Attributable to Immersion Stockholder Noncontrolling Interest Total Stockholders ’ Equity Shares Amount Additional Paid In Capital Shares Amount Balances at March 31, 2024 47,926,496 $ 48 $ 322,262 $ 1,530 $ ( 17,385 ) 16,144,097 $ ( 104,999 ) $ 201,456 $ — $ 201,456 Net income (loss) — — — — 28,945 — — 28,945 ( 8,009 ) 20,936 Unrealized loss on available-for-sale securities, net of taxes — — — ( 195 ) — — — ( 195 ) — ( 195 ) Barnes & Noble Education acquisition — — — — — — — — 203,657 203,657 Release of restricted stock units and awards, net of shares withheld 137,500 — — — — 48,395 ( 364 ) ( 364 ) — ( 364 ) Shares issued to an employee in lieu of cash compensation 89,243 — 762 — — — — 762 — 762 Dividends declared — — ( 1,524 ) — — — — ( 1,524 ) — ( 1,524 ) Stock-based compensation — — 1,192 — — — — 1,192 — 1,192 Balances at June 30, 2024 48,153,239 $ 48 $ 322,692 $ 1,335 $ 11,560 16,192,492 $ ( 105,363 ) $ 230,272 $ 195,648 $ 425,920 See accompanying Notes to Condensed Consolidated Financial Statements. 5 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) (Unaudited) Three Months Ended June 30, 2023 Common Stock Accumulated Other Comprehensive Income Accumulated Deficit Treasury Stock Total Stockholders' Equity Attributable to Immersion Stockholder Noncontrolling Interest Total Stockholders ’ Equity Shares Amount Additional Paid In Capital Shares Amount Balances at March 31, 2023 47,428,494 $ 48 $ 322,799 $ 577 $ ( 61,738 ) 14,825,518 $ ( 95,957 ) $ 165,729 $ — $ 165,729 Net income — — — — 7,028 — — 7,028 — 7,028 Unrealized gain on available-for-sale securities, net of taxes — — — 298 — — — 298 — 298 Release of restricted stock units and awards, net of shares withheld 54,514 — — — — 21,238 ( 190 ) ( 190 ) — ( 190 ) Proceeds from stock option exercises 21,222 — 160 — — — — 160 — 160 Shares issued to an employee in lieu of cash compensation 14,834 — 106 — — — — 106 — 106 Stock repurchases — — — — — 413,696 ( 2,852 ) ( 2,852 ) — ( 2,852 ) Dividends declared — — ( 1,003 ) — — — — ( 1,003 ) — ( 1,003 ) Stock-based compensation — — 760 — — — — 760 — 760 Balances at June 30, 2023 47,519,064 $ 48 $ 322,822 $ 875 $ ( 54,710 ) 15,260,452 $ ( 98,999 ) $ 170,036 $ — $ 170,036 See accompanying Notes to Condensed Consolidated Financial Statements. 6 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) (Unaudited) Six Months Ended June 30, 2024 C ommon Stock Accumulated Other Comprehensive Income Accumulated Earnings (Deficit) Treasury Stock Total Stockholders' Equity Attributable to Immersion Stockholder Noncontrolling Interest Total Stockholders ’ Equity Shares Amount Additional Paid In Capital Shares Amount Balances at December 31, 2023 47,636,273 $ 48 $ 322,134 $ 1,702 $ ( 36,040 ) 16,107,296 $ ( 104,742 ) $ 183,102 $ — $ 183,102 Net income (loss) — — — — 47,600 — — 47,600 ( 8,009 ) 39,591 Unrealized loss on available-for-sale securities, net of taxes — — — ( 367 ) — — — ( 367 ) ( 367 ) Barnes & Noble Education acquisition — — — — — — — — 203,657 203,657 Release of restricted stock units and awards 347,046 — — — — 85,196 ( 621 ) ( 621 ) ( 621 ) Shares issued to an employee in lieu of cash compensation 169,920 — 1,316 — — — — 1,316 1,316 Dividends declared — — ( 3,026 ) — — — — ( 3,026 ) ( 3,026 ) Stock-based compensation — — 2,268 — — — — 2,268 2,268 Balances at June 30, 2024 48,153,239 $ 48 $ 322,692 $ 1,335 $ 11,560 16,192,492 $ ( 105,363 ) $ 230,272 $ 195,648 $ 425,920 See accompanying Notes to Condensed Consolidated Financial Statements. 7 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except number of shares) (Unaudited) Six Months Ended June 30, 2023 Common Stock Accumulated Other Comprehensive Income Accumulated Deficit Treasury Stock Total Stockholders' Equity Attributable to Immersion Stockholder Noncontrolling Interest Total Stockholders’ Equity Shares Amount Additional Paid In Capital Shares Amount Balances at December 31, 2022 46,974,598 $ 47 $ 322,667 $ 202 $ ( 70,016 ) 14,727,582 $ ( 95,200 ) $ 157,700 $ — $ 157,700 Net income — — — — 15,306 — — 15,306 — 15,306 Unrealized gains on available-for-sale securities, net of taxes — — — 673 — — — 673 — 673 Stock repurchases — — — — — 413,696 ( 2,852 ) ( 2,852 ) — ( 2,852 ) Release of restricted stock units and awards, net of shares withheld 456,469 1 — — — 119,174 ( 947 ) ( 946 ) — ( 946 ) Proceeds from Stock option exercises 21,222 — 160 — — — — 160 — 160 Issuance of stock for ESPP purchase 1,298 — 6 — — — — 6 — 6 Shares issued to an employee in lieu of cash compensation 65,477 — 489 — — — — 489 — 489 Dividends declared — — ( 2,207 ) — — — — ( 2,207 ) — ( 2,207 ) Stock-based compensation — — 1,707 — — — — 1,707 — 1,707 Balances at June 30, 2023 47,519,064 $ 48 $ 322,822 $ 875 $ ( 54,710 ) 15,260,452 $ ( 98,999 ) $ 170,036 $ — $ 170,036 See accompanying Notes to Condensed Consolidated Financial Statements. 8 Table of Contents IMMERSION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 2024 2023 Cash flows from operating activities: Net income $ 39,591 $ 15,306 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 2,219 273 Stock-based compensation 2,268 1,707 Net gains on investment in marketable securities ( 4,630 ) ( 7,206 ) Net gains on derivative instruments ( 2,867 ) ( 2,044 ) Shares issued to an employee in lieu of cash compensation 1,316 490 Other ( 226 ) ( 57 ) Changes in operating assets and liabilities: Accounts and other receivables ( 24,474 ) ( 1,109 ) Merchandise inventories ( 16,713 ) — Textbook rental inventories 548 — Prepaid expenses and other current assets 4,221 2,467 Changes in lease right-of-use assets and liabilities ( 6,670 ) — Long-term deposits ( 194 ) ( 1,980 ) Other assets ( 33,200 ) 231 Accounts payable and accrued liabilities ( 44,013 ) ( 756 ) Other current liabilities 18,344 3,845 Deferred revenue 8,626 ( 2,379 ) Other long-term liabilities ( 173 ) ( 34 ) Net cash flows (used in) provided by operating activities ( 56,027 ) 8,754 Cash flows from investing activities: Purchases of marketable securities and other investments ( 82,065 ) ( 99,766 ) Proceeds from sale or maturities of marketable securities and other investments 80,985 72,442 Proceeds from sale of derivative instruments 5,595 9,487 Acquisition of business net of cash acquired ( 29,647 ) — Payments for settlement of derivative instruments ( 5,368 ) ( 4,869 ) Purchase of property and equipment ( 928 ) — Net cash flows used in investing activities ( 31,428 ) ( 22,706 ) Cash flows from financing activities: Proceeds from borrowings 101,528 — Repayment of borrowing ( 16,119 ) — Dividend payments to stockholders ( 2,992 ) ( 5,415 ) Payment for purchases of treasury stock ( 4 ) ( 2,852 ) Shares withheld to cover payroll taxes ( 617 ) ( 947 ) Other financing activities — 166 Net cash provided by (used in) financing activities 81,796 ( 9,048 ) Net decrease in cash, cash equivalents and restricted cash ( 5,659 ) ( 23,000 ) Cash, cash equivalents and restricted cash: Beginning of period 56,071 48,820 End of period $ 50,412 $ 25,820 See accompanying Notes to Condensed Consolidated Financial Statements. 9 Table of Contents IMMERSION CORPORATION RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) June 30, 2024 June 30, 2023 Cash and cash equivalents Immersion $ 28,932 $ 25,820 Barnes & Noble Education 6,855 — 35,787 25,820 Barnes & Noble Education restricted cash reported as: Prepaid and other current assets 13,625 — Other non current assets 1,000 — Total restricted cash 14,625 — Total cash, cash equivalents and restricted cash $ 50,412 $ 25,820 See accompanying Notes to Condensed Consolidated Financial Statements. 10 Table of Contents IMMERSION CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES Description of Business Immersion Corporation (“Immersion”) was incorporated in 1993 in California and reincorporated in Delaware in 1999 . Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company”, “we”, “us” and “our” refer to Immersion and our consolidated subsidiaries. Immersion generates license and royalty revenues from a wide range of intellectual property (“IP”) that more fully engage users’ sense of touch when operating digital devices. We focus on the following target application areas: mobile devices, wearables, consumer, mobile entertainment and other content; console gaming; automotive; medical; and commercial. On June 10, 2024, we acquired a controlling interest in Barnes & Noble Education, Inc., a Delaware corporation (“Barnes & Noble Education”), refer to Note 2 . Business Combination for more information. The financial results of Barnes & Noble Education have been included in our condensed consolidated financial statements from the acquisition date of June 10, 2024. Barnes & Noble Education is a contract operator of physical and virtual bookstores for college and university campuses and K- 12 institutions across the United States. Barnes & Noble Education is also a textbook wholesaler and inventory management hardware and software providers. Barnes & Noble Education operates physical, virtual, and custom bookstores, delivering essential educational content, tools and general merchandise within a dynamic omnichannel retail environment. BNC First Day Equitable and Inclusive Access Programs Barnes & Noble Education provides product and service offerings designed to address the most pressing issues in higher education, including equitable access, enhanced convenience and improved affordability through innovative course material delivery models designed to drive improved student experiences and outcomes. Barnes & Noble Education offers BNC First Day ® equitable and inclusive access programs, consisting of First Day Complete and First Day , which provide faculty required course materials on or before the first day of class. First Day Complete is adopted by an institution and includes all or the majority of undergraduate classes (and on occasion graduate classes), providing students both physical and digital materials. First Day is adopted by a faculty member for a single course, and students receive primarily digital course materials through their school’s learning management system (“LMS”). Offering course materials through Barnes & Noble Education’s equitable and inclusive access First Day Complete and First Day models is an important strategic initiative to meet the market demands of substantially reduced pricing to students, as well as the opportunity to improve student outcomes, while, at the same time, increasing Barnes & Noble Education’s market share, revenue and relative gross profits of course material sales given the higher volumes of units sold in such models as compared to historical sales models that rely on individual student marketing and sales. Relationship with Fanatics and Lids In December 2020, Barnes & Noble Education entered into relationship with Fanatics Retail Group Fulfillment, LLC (“Fanatics”) and Fanatics Lids College, Inc. D/B/A “Lids” (“Lids”) (collectively referred to herein as the “F/L Relationship”). Fanatics and Lids, acting on Barnes & Noble Education behalf as its service providers, provide unparalleled product assortment, e-commerce capabilities and powerful digital marketing tools to drive increased value for customers and accelerate growth of Barnes & Noble Education’s logo general merchandise business. Barnes & Noble Education maintains its relationships with campus partners and remains responsible for staffing and managing the day-to-day operations of Barnes & Noble Education campus bookstores. Fanatics operates as Barnes & Noble Education’s service provider, including processing consumer personal information on Barnes & Noble Education’s behalf, using their cutting-edge e-commerce and technology expertise to offer Barnes & Noble Education campus store websites expanded product selection, a world-class online and mobile experience, and a progressive direct-to-consumer platform. Coupled with Lids, the leading standalone brick and mortar retailer focused exclusively on licensed fan and alumni products, Lids manages in-store assortment planning and merchandising of emblematic apparel, headwear, and gift products for our partner campus stores, and Lids owns the inventory it manages, relieving Barnes & Noble Education of the obligation to finance inventory purchases from working capital. 11 Table of Contents Principles of Consolidation and Basis of Presentation The results of operations reflected in our condensed consolidated financial statements include the accounts of Immersion and our wholly-owned subsidiaries, as well as the accounts of Barnes & Noble Education, a consolidated variable interest entity, since June 10, 2024. All significant intercompany accounts and transactions have been eliminated in consolidation. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( “ U.S. GAAP ” ) for interim financial information and with the instructions for Form 10-Q and the applicable articles of Regulation S-X. Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S. GAAP and should be read in conjunction with our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023 . In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included. Certain prior year amounts have been reclassified to conform with the current year presentation. Due to their nonhomogeneous operations, the Company’s condensed consolidated balance sheet and statement of operations for the three and six months ended June 30, 2024, 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. All of the assets of Barnes & Noble Education, reported on the balance sheet, 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 Corporation. Use of Estimates The preparation of condensed consolidated financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of the condensed consolidated financial statements. Significant estimates include revenue recognition, fair value of financial instruments, valuation of income taxes including uncertain tax provisions, stock-based compensation and long-term deposits for withholding taxes, the determination of the incremental borrowing rate, valuation of intangible assets, and goodwill and long-lived assets impairment. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year. Actual results could differ from those estimates. Reporting Periods and Fiscal Year End Immersion reports our financial results based on a calendar year basis. For interim period reporting, we report our quarterly financial results as of March 31; June 30; September 30 and December 31 in each calendar year. Barnes & Noble Education's fiscal year is comprised of 52 or 53 weeks, ending on the Saturday closest to the last day of April. The financial information presented in this Quarterly Report on Form 10-Q includes the financial information of Barnes & Noble Education from the period of June 10, 2024 through June 30, 2024. For purposes of these consolidated financial statements, the results of Barnes & Noble Education herein have been aligned to the Company’s reporting periods. References to the “fiscal” year in relation to Barnes & Noble Education are in the context of their respective fiscal year. Segment Information Following the closing of the Transaction (as defined below) with Barnes & Noble Education, we operate as two reportable segments, Immersion and Barnes & Noble Education. We identify our segments in the manner in which our Chief Executive Officer, as our chief operating decision maker (“CODM”), allocates resources and assesses financial performance. 12 Table of Contents Earnings per Share of the Company We present both basic and diluted earnings per share (“EPS”) using the two -class method, which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two -class method, basic EPS is computed by dividing the income available to Immersion stockholders by the weighted-average number of common stock shares outstanding for the period. Basic EPS includes participating securities, consisting of unvested restricted stock that receive nonforfeitable dividends similar to shares of common stock. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, where such exercise or conversion would result in a lower earnings per share amount. Business Combinations The determination of the fair value of net assets acquired in a business combination requires estimates and judgments of future cash flow expectations for the acquired business and the related identifiable tangible and intangible assets. Fair values of net assets acquired are calculated using expected cash flows and industry-standard valuation techniques. For current assets and current liabilities, book value is generally assumed to approximate fair value. Goodwill is the amount by which consideration paid for an acquired entity exceeds the fair value of its acquired net assets. Acquisition costs are expensed as incurred and are included within general and administrative expenses in the consolidated statements of operations. Due to the time required to gather and analyze the necessary data for each acquisition, U.S. GAAP provides a “measurement period” of up to one year from the date of acquisition in which to finalize these fair value determinations. During the measurement period, preliminary fair value estimates may be revised if new information is obtained about the facts and circumstances existing as of the date of acquisition, or based on the final net assets and working capital of the acquired business, as prescribed in the applicable purchase agreement. Such adjustments may result in the recognition of, or an adjustment to the fair values of, acquisition-related assets and liabilities and/or consideration paid, and are referred to as “measurement period” adjustments. Measurement period adjustments are recorded to goodwill. Other revisions to fair value estimates, including those relating to facts and circumstances that occur subsequent to the date of acquisition, are reflected as income or expense, as appropriate. Goodwill and Indefinite-Lived Intangible Assets The Company has goodwill and indefinite-lived intangible assets that have been recorded in connection with the acquisition of Barnes & Noble Education. Goodwill and indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually. The Company monitors these assets on a quarterly basis for potential indicators of impairment. Goodwill is required to be tested for impairment at the reporting unit level, which is an operating segment, or one level below the operating segment. Impairment of Long-Lived Assets Our long-lived assets include property and equipment, operating lease right-of-use assets, and amortizable intangibles recorded in connection with our business acquisition of Barnes & Noble Education. 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. 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 compared 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. 13 Table of Contents Significant Accounting Policies Related to Barnes & Noble Education A summary of the new significant accounting policies as a result of our acquisition of Barnes & Noble Education is as follows: Seasonality Barnes & Noble Education's business is highly seasonal. For example, Barnes & Noble Education’s retail business is seasonal, particularly with respect to textbook sales and rentals, with the major portion of sales and operating profit realized during the fiscal quarters when college students generally purchase and rent textbooks for the upcoming semesters and lowest in the other fiscal quarters. Barnes & Noble Education's quarterly results also may fluctuate depending on the timing of the start of the various schools’ semesters, the revenue impact of accounting principles with respect to the recognition of revenue associated with its equitable and inclusive access programs and the ability to secure inventory on a timely basis. As the concentration of digital product sales increases, revenue will be recognized earlier during the academic term as digital textbook revenue is recognized when the customer accesses the digital content compared to: (i) the rental of physical textbook where revenue is recognized over the rental period, and (ii) ala carte courseware sales where revenue is recognized when the customer takes physical possession of Barnes & Noble Education products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of products by customers for products ordered through Barnes & Noble Education’s websites and virtual bookstores. Restricted Cash As of June 30, 2024, Barnes & Noble Education had restricted cash of $ 14.6 million, comprised of $ 13.6 million in Prepaid and other current assets in the c ondensed consolidated balance sheets related to segregated funds for commission due to Lids for logo merchandise sales as per the Lids service provider merchandising agreement and $ 1.0 million in Other assets-noncurrent in the condensed consolidated balance sheet related to amounts held in trust for future distributions related to employee benefit plans. The restricted cash was part of net assets acquired as part of the Transactions (defined below). 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. Reserves for non-returnable inventory are based on our history of liquidating non-returnable inventory, which includes certain significant assumptions, including markdowns, sales below cost, inventory aging and expected demand. Cost is determined primarily by the retail inventory method for Barnes & Noble Education's retail product sales. Textbook and trade book inventories are valued using the LIFO method and the related reserve was not material to the recorded amount of inventories. There were no LIFO adjustments during the period from June 10, 2024 to June 30, 2024. For the 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. On June 10, 2024, Immersion acquired $ 336.7 million in merchandise inventory, measured at fair value, as part of the Transactions (defined below). 14 Table of Contents Textbook Rental Inventories Physical textbooks out on rent are categorized as textbook rental inventories. At the time a rental transaction is consummated, the book is removed from merchandise inventories and moved to textbook rental inventories at cost. The cost of the book is amortized down to its estimated residual value over the rental period. The related amortization expense is included in cost of sales. At the end of the rental period, upon return, the book is removed from textbook rental inventories and recorded in merchandise inventories at its amortized cost. On June 10, 2024, Immersion acquired $ 9.8 million in rental textbook inventory, measured at fair value, as part of the Transactions (defined below). Leases Barnes & Noble Education recognizes lease assets and lease liabilities on the condensed consolidated balance sheet for substantially all lease arrangements as required by the Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC ”) 842 , Leases (Topic 842 ). Its portfolio of leases consists of operating leases comprised of operations agreements which grant Barnes & Noble Education the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. Barnes & Noble Education does not have finance leases. Barnes & Noble Education recognize a right of use (“ROU”) asset and lease liability in the condensed consolidated balance sheet for leases with a term greater than twelve months. Options to extend or terminate a lease are included in the determination of the ROU asset and lease liability when it is reasonably certain that such options will be exercised. The lease terms generally range from one year to fifteen years and a number of agreements contain minimum annual guarantees, many of which are adjusted at the start of each contract year based on the actual sales activity of the leased premises for the most recently completed contract year. Payment terms are based on the fixed rates explicit in the lease, including minimum annual guarantees, and/or variable rates based on: i) a percentage of revenues or sales arising at the relevant premises (“variable commissions”), and/or ii) operating expenses, such as common area charges, real estate taxes and insurance. For contracts with fixed lease payments, including those with minimum annual guarantees, Barnes & Noble Education recognizes lease expense on a straight-line basis over the lease term or over the contract year in order to best reflect the pattern of usage of the underlying leased asset and our minimum obligations arising from these types of leases. Barnes & Noble Education's lease agreements do not contain any material residual value guarantees, material restrictions or covenants. For leases entered into after June 10, 2024, Barnes & Noble Education uses its incremental borrowing rates to determine the present value of fixed lease payments based on the information available at the commencement date, as the rate implicit in the lease is not readily determinable. Barnes & Noble Education utilizes an estimated collateralized incremental borrowing rate as of the effective date or the commencement date of the lease, whichever is later. Property and Equipment Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over estimated useful lives. Maintenance and repairs are expensed as incurred, however major maintenance and remodeling costs are capitalized if they extend the useful life of the asset. 15 Table of Contents 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 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 it expects to be entitled to in exchange for the products. Product revenue is recognized when the customer takes physical possession of its products, which occurs either at the point of sale for products purchased at physical locations or upon receipt of our products by customers for products ordered through websites and virtual bookstores. Product revenue shipped from wholesale operations are 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 sale. Revenue from the sale of digital textbooks, which contains a single performance obligation, is recognized when the customer accesses the digital content as product revenue. A software feature is embedded within the content of 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, the 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 the condensed 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. It 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 BNC First Day offerings is consistent with Barnes & Noble Education's 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 our BNC First Day equitable and inclusive access 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 its 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 sale in the period that the related sales are recorded. For sales and rentals involving third-party products, Barnes & Noble Education evaluates whether it is acting as a principal or an agent. This determination is based on Barnes &Noble Education's evaluation of whether it 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, it records revenue on a gross basis, and for those transactions where it is an agent to a third-party, it records revenue on a net basis. Barnes & Noble Education does not have gift cards or customer loyalty programs. Barnes & Noble Education does not treat any promotional offers as expenses. Sales tax collected from Barnes & Noble Education's customers is excluded from reported revenues. Barnes & Noble Education's payment terms are generally 30 days and do not extend beyond one year. 16 Table of Contents 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 physical bookstores and web properties performed on behalf of third-party customers, shipping and handling, and revenue from other programs. Brand marketing agreements often include multiple performance obligations which are individually negotiated with Barnes & Noble Education's customers. For these arrangements that contain distinct performance obligations, Barnes & Noble Education allocates the transaction price based on the relative standalone selling price method by comparing the standalone selling price (“SSP”) of each distinct performance obligation to the total value of the contract. The revenue is recognized as each performance obligation is satisfied, typically at a point in time for brand marketing service and overtime for advertising efforts as measured based upon the passage of time for contracts that are based on a stated period of time or the number of impressions delivered for contracts with a fixed number of impressions. Deferred Revenue Deferred revenue represents an obligation to transfer goods or services to a customer for which we have received consideration and consists of our deferred revenue liability (deferred revenue). Deferred revenue consists of the following: • advanced payments from customers related to textbook rental performance obligations, which are recognized ratably over the terms of the related rental period; • unsatisfied performance obligations associated with brand partnership marketing services, which are recognized when the contracted services are provided to our brand partnership marketing customers; and unsatisfied performance obligations associated with the premium paid for the sale of treasury shares, which are expected to be recognized over the term of the e-commerce and merchandising contracts for Fanatics and Lids, respectively . Cost of Sales Cost of sales primarily includes costs such as merchandise costs, textbook rental amortization, content development cost amortization, warehouse costs related to inventory management and order fulfillment, insurance, certain payroll costs, and management service agreement costs, including rent expense, related to our college and university contracts and other facility related expenses. Except as set forth herein, there are no other changes in our significant accounting policies. Please refer to Note 1 Significant Accounting Policies contained in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the SEC on March 11, 2024, for a complete discussion of our significant accounting policies. Recent Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023 - 09 : Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures that requires entities to disclose additional information about federal, state, and foreign income taxes primarily related to the income tax rate reconciliation and income taxes paid. The new standard also eliminates certain existing disclosure requirements related to uncertain tax positions and unrecognized deferred tax liabilities. The guidance will be effective for the fiscal year beginning January 1, 2025. The guidance does not affect recognition or measurement in our consolidated financial statements. We are evaluating the impact of this amendment on our consolidated financial statements. In November 2023 , the FASB issued ASU 2023 - 07 , Segment Reporting (Topic 280 ): Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. This guidance will be effective for us for the annual report for the fiscal year ending December 31, 2024 and subsequent interim periods. Early adoption is permitted, and retrospective adoption is required for all prior periods presented. We are currently assessing this guidance and determining the impact on our consolidated financial statements. 17 Table of Contents 2 . BUSINESS COMBINATION On June 10, 2024 (“Closing Date”), the Transactions (defined below) were consummated pursuant to the terms of the Purchase Agreement among Barnes & Noble Education and the Purchasers (as defined in the Purchase agreement) , following Barnes & Noble Education’s receipt of the requisite approval of its stockholders at a special meeting of its stockholders held on June 5, 2024. The f ollowing is presented on a post-reverse stock split basis, which is defined as a reverse stock split of Barnes & Noble Education’s outstanding shares of Common Stock at a ratio of 1-for-100 , effective as of June 11, 2024. Pursuant to the terms of the Purchase Agreement, Barnes & Noble Education conducted a rights offering (the “Rights Offering”), whereby Barnes & Noble Education distributed at no charge to the holders of its common stock (“BNED Common Stock”) non-transferable subscription rights (“Rights”) to purchase up to an aggregate of 9,000,000 new shares of BNED Common Stock (the “Offered Shares”) at a subscription price of $ 5.00 per share (the “Subscription Price”). On the Closing Date, Barnes & Noble Education issued the Offered Shares, which generated $ 45,000,000 in gross proceeds, including $ 10,033,507 of Offered Shares purchased by Toro 18 Holdings, LLC (“Investor”) pursuant to the Backstop Commitment (as defined in the Purchase Agreement). Pursuant to the Backstop Commitment, Immersion through Investor, purchased 2,006,701 shares of BNED Common Stock. Barnes & Noble Education reimbursed Immersion, through Investor, for reasonable legal and other expenses in connection with the Transactions in the amount of $ 2,450,000 . Barnes & Noble Education also paid an amount equal to $ 2,450,000 to Immersion, through Investor, as payment in consideration for its Backstop Commitment. In addition to the Rights Offering, Immersion, through Investor, purchased from Barnes & Noble Education an aggregate of 9,000,000 new shares of BNED Common Stock at the Subscription Price for a purchase price of $ 45,000,000 (the “PIPE Transaction”, and together with the Rights Offering, the “Transactions”). As a result of the Transactions, Barnes & Noble Education received a total of $ 95 million in gross proceeds, of which $ 80.7 million was used to reduce its outstanding debt. In connection with the closing, Barnes & Noble Education appointed Eric Singer, William C. Martin, Emily S. Hoffman, and Elias Nader to serve as members of the board of directors of BNED (the “BNED Board”) following the Closing. Messrs. Singer, Martin and Nader and Ms. Hoffman are current members of the Company’s board of directors. In addition, at the closing, Sean Madnani was appointed to the BNED Board along with two existing directors, Kathryn Eberle Walker and Denise Warren who will each continue to serve on the Barnes & Noble Education's Board following the Closing. As part of the Transactions, the Company acquired 42 % of all outstanding common shares of Barnes & Noble Education, as well as control over Barnes & Noble Education through the five Immersion-appointed board seats. The total consideration transferred was approximately $ 50.1 million, consisting of $ 52.2 million in cash consideration paid to Barnes & Noble Education less $ 2.1 million in transaction costs incurred by Immersion but reimbursed by Barnes & Noble Education. For the six months ended June 30, 2024 , Immersion incurred costs related to this acquisition of $ 1.2 million, inclusive of the expenses reimbursed by Barnes & Noble Education, that were expensed as incurred and recorded in general and administrative expenses in the accompanying consolidated statement of operations. The acquisition aims to expand Immersion's offerings, increase its customer reach, and diversify into the education sector. The acquisition was accounted for as a business combination and the total purchase price was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date with the excess recorded as goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired as of the Closing Date while the measurement period remains open, which will not exceed one year from the acquisition date. Measurement period adjustments related to the acquisition will be applied retrospectively to the Closing Date. The fair value of the noncontrolling interest of $ 203.7 million on the Closing Date was calculated using the acquisition-date fair value of $ 13.40 per share multiplied by the number of noncontrolling interest shares. 18 Table of Contents The following table presents the preliminary purchase price allocation for the acquisition (in thousands): Preliminary Amount Recognized as of the Acquisition Date Assets acquired Cash and cash equivalents $ 14,736 Accounts receivable 113,743 Merchandise inventories 336,741 Textbook rental inventories 9,835 Prepaid expenses and other current assets (including $ 4.8 million in restricted cash) 26,969 Property and equipment 118,818 Operating lease right-of-use assets 155,664 Intangible assets 95,000 Other assets noncurrent (including $ 1.0 million in restricted cash) 11,634 Total assets acquired $ 883,140 Liabilities assumed Accounts payable $ 279,456 Accrued liabilities 51,123 Deferred revenue - current 7,651 Operating lease liabilities - current 80,263 Deferred tax liabilities - noncurrent 636 Operating lease liabilities - noncurrent 107,400 Deferred revenue - noncurrent 3,393 Other long-term liabilities 12,413 Long-term borrowings 101,235 Total liabilities assumed $ 643,570 Net assets acquired 239,570 Total consideration transferred $ 50,133 Less: Net assets acquired ( 239,570 ) Plus: Noncontrolling interest 203,657 Goodwill 14,220 Identifiable intangible assets acquired were comprised of the following (in thousands except for estimated useful life): Amount Estimated Life Trade name $ 45,000 Indefinite Customer relationships 50,000 13 years Total intangible assets $ 95,000 Trade name represent Barnes & Noble Education’s right to its trade name on a perpetual, royalty-free basis as it existed on the acquisition closing date. Customer relationships consist of distinct value associated with Barnes & Noble Education's large operating footprint with direct access to students and faculty across a diverse customer base. The Company used the assistance of a third-party firm to estimate the fair value of the intangible assets acquired. The Company used an income approach to estimate the fair values of the trade names and customer relationships . The fair values assigned to identifiable intangible assets were determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earnings methods. The major assumptions used to estimate the values of identifiable intangible assets include management’s estimates of future revenue, adjusted for growth and attrition based on historical data and management's forward-looking expectations. These cash flows were discounted at a rate of 21 %, which reflects the Company’s cost of equity. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows. 19 Table of Contents Goodwill generated from this acquisition is primarily attributed to the value of Barnes & Noble Education's assembled workforce. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company’s entire goodwill balance is associated with the Barnes & Noble Education reporting unit. Goodwill is not deductible for tax purposes. The Company acquired a deferred tax asset of $ 0.7 million, recorded and a deferred tax liability of $ 1.3 million, recorded under Deferred tax liabilities, net – noncurrent, as part of this business combination, as shown in the accompanying consolidated balance sheet. The Company also engaged a third-party valuation firm to estimate the fair value of the property and equipment and inventory acquired. The fair value as of the Closing Date reflects a step-up in basis due to the highly depreciable nature of the property and equipment. No material fair value adjustments for inventory were identified, as there are minimal costs associated with procurement. Most of the net tangible assets were valued at their respective carrying amounts as of the acquisition date, as the Company believes that these amounts approximate their current fair values. The leases acquired were recorded at their respective fair values as of the acquisition date. The acquired entity’s results of operations were included in the Company's condensed consolidated financial statements from the date of acquisition, June 10, 2024, as adjusted for specific fair value adjustments discussed above. For the three and six months ended June 30, 2024, Barnes & Noble Education contributed net operating revenue of $ 47.0 million, which is reflected in the accompanying condensed consolidated statement of operations. For the three and six months ended June 30, 2024, Barnes & Noble Education contributed a net loss of $ 14.1 million, which is reflected in the accompanying condensed consolidated statement of operations. The following unaudited pro forma condensed combined financial information gives effect to the acquisition of Barnes & Noble Education as if it was consummated on January 1, 2023 (the beginning of the comparable prior reporting period), and includes pro forma adjustments related to the amortization of acquired intangible assets, stock-based compensation expense, and direct and incremental transaction costs reflected in the historical financial statements. Specifically, the following nonrecurring adjustments were made: • For the three and six months ended June 30, 2024, the Company’s direct and incremental acquisition-related expenses of $ 1.2 million and one-time severance payment of $ 1.5 million are excluded from the pro forma condensed combined net loss. • For the three and six months ended June 30, 2023 , respectively, the Company’s direct and incremental acquisition-related expenses of $ 1.2 million and one -time severance payment of $ 1.5 million are included in the pro forma condensed combined net loss. This unaudited data is presented for informational purposes only and is not intended to represent or be indicative of the results of operations that would have been reported had the acquisition occurred on January 1, 2023. It should not be taken as representative of future results of operations of the combined company. The following table presents the unaudited pro forma condensed combined financial information (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues $ 288,325 $ 221,171 $ 788,845 $ 667,299 Net income (loss) 19,433 ( 35,189 ) 36,830 ( 48,975 ) 20 Table of Contents 3. SEGMENT REPORTING We operate as two operating and reportable segments, Immersion and Barnes & Noble Education. Summarized financial information for our reportable segments is reported below (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Revenues: Immersion $ 52,403 $ 6,983 $ 96,250 $ 14,057 Barnes & Noble Education 47,021 — 47,021 — Total revenues 99,424 6,983 143,271 14,057 Cost of sales (excludes depreciation and amortization expense): Barnes & Noble Education 40,806 — 40,806 — Operating expenses: Immersion 14,175 3,870 41,408 7,685 Barnes & Noble Education 19,037 — 19,037 — Total operating expenses 33,212 3,870 60,445 7,685 Operating income (loss) Immersion 38,228 3,113 54,842 6,372 Barnes & Noble Education ( 12,822 ) — ( 12,822 ) — Operating income $ 25,406 $ 3,113 $ 42,020 $ 6,372 21 Table of Contents 4. REVENUE RECOGNITION Immersion Disaggregated Revenue The following table presents the disaggregation of our revenue of Immersion for the three and six months ended June 30, 2024 and 2023 (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Fixed fee license revenue $ 48,779 $ 1,254 $ 87,507 $ 2,404 Per-unit royalty revenue 3,624 5,729 8,743 11,653 Total revenues $ 52,403 $ 6,983 $ 96,250 $ 14,057 Per-unit Royalty Revenue As a result of accruing per-unit royalty revenue for the quarter based on such estimates, adjustments will be required in the following quarter to true up revenue to the actual amounts reported by our licensees. In the three months ended June 30, 2024 , we recorded no adjustments to royalty revenue recognized in the previous quarter. We recorded adjustments of $ 0.3 million to increase royalty revenue during the three months ended June 30, 2023 . Contract Assets As of June 30, 2024 , we had contract assets of $ 2.8 million included within Prepaid expenses and other current asset s and $ 33.7 million within Other assets on the Condensed Consolidated Balance Sheets . As of December 31, 2023 , we had contract assets of $ 7.7 million included within Prepaid expenses and other current assets , and $ 0.1 million included within Other assets on the Condensed Consolidated Balance Sheets . Based on contracts signed and payments received as of June 30, 2024 , we expect to recognize $ 20.7 million in revenue under our fixed fee license agreements, which are satisfied over time, including $ 16.7 million over one to three years and $ 4.1 million over more than three years. Contract assets increased by $ 28.3 million from January 1 , 2024 to June 30, 2024 , primarily due to increase in unbilled revenue related to the new contracts we entered into during the six months ended June 30, 2024 . Deferred Revenue The following table presents changes in deferred revenue associated with Immersion’s contract liabilities (in thousands): J une 30 , 2024 Deferred revenue at the beginning of period $ 12,629 Additions to deferred revenue during the period 10,526 Reductions to deferred revenue for revenue recognized during the period ( 2,408 ) Deferred revenue balance at the end of period: $ 20,747 22 Table of Contents Barnes & Noble Education Disaggregated Revenue The following table disaggregated the revenue associated with our major product and service offerings (in thousands): June 10 2024, to June 30, 2024 Course material sale $ 26,814 General merchandise sale 16,008 Services and other revenue 2,251 Total product and other revenue 45,073 Course material rental income 1,948 Total revenue $ 47,021 Deferred Revenue The following table presents changes in deferred revenue associated with Barnes & Noble Education's contract liabilities (in thousands): June 30, 2024 Deferred revenue as of the acquisition date $ 11,044 Additions to deferred revenue during the period 2,943 Reductions to deferred revenue for revenue recognized during the period ( 2,435 ) Deferred revenue balance at the end of period: $ 11,552 As of D ecember 31 , 2022 , total deferred revenue was $ 17.4 million. We recognized $ 2.3 million of deferred revenue during the six months ended June 30, 2023. 23 Table of Contents 5 . INVESTMENTS AND FAIR VALUE MEASUREMENTS We invest surplus funds in excess of operational requirements in a diversified portfolio of marketable securities, with the objectives of delivering competitive returns, maintaining a high degree of liquidity, and seeking to avoid the permanent impairment of principal. A summary of our investments in marketable equity and debt securities as of June 30, 2024, are as follows: Investments - current were as follows (in thousands): June 30, 2024 December 31, 2023 Marketable equity securities $ 57,171 $ 62,978 U.S. treasury securities 40,443 41,313 Short-term investments $ 97,614 $ 104,291 Investments- noncurrent were as follows (in thousands): June 30, 2024 December 31, 2023 U.S. treasury securities $ 25,333 $ 13,653 Marketable debt securities 19,830 19,697 Investments- noncurrent $ 45,163 $ 33,350 Marketable Securities Marketable securities as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands): June 30, 2024 Cost or Amortized Cost Unrealized Gains Unrealized Losses Fair Value Marketable equity securities Equity securities $ 58,530 $ 5,868 $ ( 7,227 ) $ 57,171 Marketable debt securities U.S. treasury securities 64,816 976 ( 16 ) 65,776 Corporate bonds 19,577 648 ( 395 ) 19,830 Total marketable debt securities 84,393 1,624 ( 411 ) 85,606 $ 142,923 $ 7,492 $ ( 7,638 ) $ 142,777 December 31, 2023 Cost or Amortized Cost Unrealized Gains Unrealized Losses Fair Value Marketable equity securities Equity securities $ 59,228 $ 7,896 $ ( 4,146 ) $ 62,978 Marketable debt securities U.S. treasury securities 53,662 1,307 ( 3 ) 54,966 Corporate bonds 19,422 472 ( 197 ) 19,697 Total marketable debt securities 73,084 1,779 ( 200 ) 74,663 $ 132,312 $ 9,675 $ ( 4,346 ) $ 137,641 24 Table of Contents The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of June 30, 2024 (in thousands) are as follows: June 30, 2024 Amortized Cost Fair Value Less than 1 year $ 41,622 $ 40,443 1 to 5 years 42,771 45,163 Total $ 84,393 $ 85,606 As of June 30, 2024 , the fair value of corporate bonds with unrealized loss position was $ 8.7 million , with an aggregated loss of $ 0.4 million. As June 30, 2024, the fair value of U.S. treasury securities with unrealized loss position was $ 6.6 million, with an aggregated loss of $ 16,000 . As of December 31, 2023, the fair value of available-for-sale debt securities in unrealized loss position for corporate bonds and U.S. treasury securities were $ 7.1 million and $ 2.7 million, respectively, with an aggregated loss of $ 0.2 million. For all available-for-sale debt securities that were in unrealized loss positions, we have determined that it is more likely than not we will hold the securities until maturity or a recovery of the cost basis. We had no credit-related impairment loss as of June 30, 2024 and December 31, 2023 . Derivative Financial Instruments Our derivative instruments consisted of call and put options sold at their fair value as of the balance sheet date. These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (in thousands): June 30, 2024 Cost Unrealized Losses Fair Value Derivative instruments $ 6,131 $ ( 842 ) $ 5,289 $ 6,131 $ ( 842 ) $ 5,289 December 31, 2023 Cost Unrealized Losses Fair Value Derivative instruments $ 8,797 $ ( 867 ) $ 7,930 $ 8,797 $ ( 867 ) $ 7,930 A summary of realized and unrealized gains and losses from our equity securities and derivative instruments and realized gains and losses from our marketable debt securities are as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net unrealized gains (losses) recognized on marketable equity securities $ ( 2,453 ) $ ( 1,255 ) $ ( 5,108 ) $ 759 Net realized gains recognized on marketable equity securities 3,703 4,561 9,182 6,230 Net unrealized losses recognized on derivative instruments ( 2,844 ) ( 91 ) ( 26 ) ( 194 ) Net realized gains recognized on derivative instruments 3,327 1,520 2,893 2,237 Net realized gains recognized on marketable debt securities 473 217 555 217 Total net gains recognized in interest and other income (loss), net $ 2,206 $ 4,952 $ 7,496 $ 9,249 25 Table of Contents Fair Value Measurements Our financial instruments include cash and cash equivalents, receivables, accrued liabilities and accounts payable. The fair value of cash and cash equivalents, receivables, accrued liabilities and accounts payable approximates their carrying values because of the short-term nature of these instruments, which are all considered Level 1. The fair value of long-term debt approximates its carrying value. Our financial instruments measured at fair value on a recurring basis consisted of U.S. treasury securities, equity securities, corporate bonds and derivatives. U.S. treasury securities and equity securities are classified within Level 1 of the fair value hierarchy as they are valued based on quoted market price in an active market. Corporate bonds and derivative instruments are valued based on quoted prices in markets that are less active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency are generally classified within Level 2 of the fair value hierarchy. Financial instruments value d based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy. We did not hold Level 3 financial instruments as of June 30, 2024 , and December 31, 2023 . Financial instrume nts measured at fa ir value on a recurring basis as of June 30, 2024 and December 31, 2023 are classified based on the valuation technique in the table below (in thousands): June 30, 2024 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1 ) Significant Other Observable Inputs (Level 2 ) Significant Unobservable Inputs (Level 3 ) Total Assets: U.S. treasury securities $ 65,776 $ — $ — $ 65,776 Equity securities 57,171 — — 57,171 Corporate bonds — 19,830 — 19,830 Total assets at fair value $ 122,947 $ 19,830 $ — $ 142,777 Liabilities Derivative instruments $ — $ 5,289 $ — $ 5,289 Total liabilities at fair value $ — $ 5,289 $ — $ 5,289 December 31, 2023 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets (Level 1 ) Significant Other Observable Inputs (Level 2 ) Significant Unobservable Inputs (Level 3 ) Total Assets: U.S. treasury securities $ 54,966 $ — $ — $ 54,966 Equity securities 62,977 — — 62,977 Corporate bonds — 19,697 — 19,697 Total assets at fair value $ 117,943 $ 19,697 $ — $ 137,640 Liabilities Derivative instruments $ — $ 7,930 $ — $ 7,930 Total liabilities at fair value $ — $ 7,930 $ — $ 7,930 26 Table of Contents 6 . LEASES Immersion Immersion leases office space, which is accounted for as an operating lease in accordance with the provisions of ASC Topic 842 , with expiration dates on or before March 31, 2026. Immersion recognizes lease expense on a straight-line basis over the lease term. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. Immersion combines lease and non-lease components for new and reassessed leases, and applies discount rates to operating leases under a portfolio approach. The following table summarizes additional information related to Immersion’s operating leases: June 30, 2024 2023 Weighted average remaining lease terms (in years) 1.80 0.70 Weighted average discount rate 4.7 % N/A Barnes & Noble Education Barnes & Noble Education leases the right to operate on-campus bookstores at colleges and universities, office space and vehicles under operating leases in accordance with the provisions of ASC Topic 842, with expiration dates on or before June 30, 2033. Barnes & Noble Education recognizes lease expense on a straight line basis over the lease term or over the contract year in order to best reflect the pattern of the underlying leased asset. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheets. Barnes and Noble Education combines lease and non-lease components for new and reassessed leases, and applies discount rates to operating leases under a portfolio approach. Barnes & Noble Education used its incremental borrowing rates to determine the present value of fixed lease payments based on the information available on June 10, 2024 (“Closing Date”, as discussed in Note 2, Business Combinations), as the rate implicit in the lease is not readily determinable. It utilized an estimated collateralized incremental borrowing rate as of the Closing Date. The Company also evaluated the leases for unfavorable terms and recorded an adjustment for unfavorable market terms of $ 32.0 million. Unfavorable lease liabilities are presented net of the corresponding right of use asset. The following table summarizes additional information related to Barnes & Noble Education’s operating leases: June 30, 2024 Weighted average remaining lease terms (in years) 5.0 Weighted average discount rate 10.4 % 27 Table of Contents 7. GOODWILL AND INTANGIBLE ASSETS Goodwill The Company recognized $ 14.2 million in goodwill as the result of the business combination with Barnes & Noble Education on June 10, 2024, as further described in Note 2 . Business Combination. The carrying value of goodwill as of June 30, 2024 and December 31, 2023 was $ 14.2 million and $ 0 , respectively. In accordance with ASC Topic 350 , Intangibles - Goodwill and Other, the Company did not record any goodwill impairment losses during the three and six months ended June 30, 2024. Goodwill represents the future economic benefit attributable to the Barnes & Noble Education's assembled workforce, which is not individually and separately recognized as an intangible asset. As such, the carrying value of goodwill has been allocated to the Barnes & Noble Education Segment and none of the goodwill has been allocated to the Immersion Segment. Intangible Assets, net The following is a summary of intangible assets excluding goodwill recorded as intangible assets on our Condensed Consolidated Balance Sheets as of June 30, 2024 (in thousands): As of June 30, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted-average remaining life (Years) Trade name $ 45,000 $ — $ 45,000 Infinite Customer relationships 50,000 ( 214 ) 49,786 13 Total $ 95,000 $ ( 214 ) $ 94,786 Amortization of finite-lived intangible assets is computed using the straight-line method over their estimated useful lives. Trade name is determined to have an indefinite useful life and is not subject to amortization. Amortization expense was $ 0.3 million for the three and six months ended June 30, 2024. We did not have amortization expense in the three and six month ended in June 30, 2023. Estimated amortization expense of the intangible assets to be recognized by the Company are as follows (in thousands): Year ended December 31, Remainder of 2024 $ 1,923 2025 3,846 2026 3,846 2027 3,846 Thereafter 36,325 Total $ 49,786 28 Table of Contents 8. DEBT The following is a summary of Barnes & Noble Education's outstanding borrowing as of June 30, 2024 (in thousands): Maturity Date As of June 30, 2024 Total debt - Barnes & Noble credit facility June 9, 2028 $ 186,644 Balance sheet classification: Short-term borrowings $ — Long-term borrowings 186,644 Total debt $ 186,644 On the Closing Date, Barnes & Noble Education amended and restated and extended the maturity of its existing asset-based c redit 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. Interest under the Restated ABL Facility accrues, at the election of Barnes & Noble Education, either (x) based on the Secured Overnight Financing Rate (“SOFR”) , which is subject to a floor of 2.50 % per annum, plus a spread of 3.50 % per annum or (y) at an alternate base rate , which is subject to a floor of 3.50 % per annum, plus a spread of 2.50 % per annum, provided that, in the event Barnes & Noble Education meets certain financial metrics for a consecutive six -month period beginning and ending after the one -year anniversary of the Closing Date, the foregoing spreads shall be reduced by 0.25 % per annum. The Restated ABL Facility contains customary negative covenants that limit Barnes & Noble Education's ability to incur or assume additional indebtedness, grant or permit liens, make investments, make restricted payments and other specified payments, merge with other entities, dispose of or acquire assets, or engage in transactions with affiliates, among other things. Additionally, the Restated ABL Facility includes the following financial maintenance covenants: • following the date that is six months following the Closing Date, Barnes & Noble Education is required to maintain a minimum Availability (as defined in the Restated ABL Facility agreement ) of (x ) $ 25,000 for the first thirty ( 30 ) months after the Closing Date and (y) $ 30,000 after the date that is thirty ( 30 ) months after the Closing Date; • commencing with the month ending May 31, 2025, Barnes & Noble Education is required to maintain a Consolidated Fixed Charge Coverage Ratio (as defined in the Restated ABL Facility) of not less than 1.10 to 1.00 , which will be tested monthly on the last day of each fiscal month for the trailing 12 -month period; and • commencing with the quarter ending October 31, 2024, Barnes & Noble Education is required to maintain a minimum Consolidated EBITDA (as defined in the Restated ABL Facility), which will be tested quarterly on the last day of each fiscal quarter for (a) the trailing six -month period for the first test date, (b) the trailing nine -month period of the second test date and (c) for the trailing 12 -month period thereafter 29 Table of Contents The Restated ABL Facility contains customary events of default, including for non-payment of obligations owing under the Restated ABL Facility, material breaches of representations and warranties, failure to perform or observe covenants, default on other material indebtedness, customary ERISA events of default, bankruptcy and insolvency, material judgments, invalidity of liens on collateral, change of control or cessation of business. The Credit Agreement also contains customary affirmative covenants and representations and warranties. The credit facility is secured by substantially all of the inventory, accounts receivable and related assets of the borrowers under the credit facility. This is considered an all asset lien (inclusive of proceeds from tax refunds payable to Barnes & Noble and pledge of equity from subsidiaries, exclusive of real estate). In connection with the Restated ABL Facility, the 1.00 % fee payable in connection with the eighth amendment to the Restated ABL Facility (prior to its having been restated) is due and payable (x) 50 % on September 2, 2024, and (y) 50 % on June 10, 2025. As of June 30, 2024, and through the date of this filing, Barnes & Noble Education was in compliance with all debt covenants under the Restated ABL Facility . During the period June 10, 2024, to June 30, 2024, Barnes & Noble Education borrowed $ 101.5 million and repaid $ 16.1 million under the Restated ABL Facility , with $ 186.6 million of outstanding borrowings under the Restated ABL Facility as of June 30, 2024. As of June 29, 2024, Barnes & Noble Education issued $ 3.6 million in letters of credit under the Restated ABL Facility . 9. STOCK-BASED COMPENSATION Immersion Our equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for employees, consultants, officers, and directors and to align stockholder and employee interests. We may grant time-based options, market condition-based options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares, market condition-based performance restricted stock units (“PSUs”), and other stock-based equity awards to employees, officers, directors, and consultants. On January 18, 2022, our stockholders approved the 2021 Equity Incentive Plan (as amended, the “ 2021 Plan”), which provides for a total number of shares reserved and available for grant and issuance equal to 3,525,119 shares plus up to an additional 855,351 shares that are subject to stock options or other awards previously granted under the 2011 Equity Incentive Plan. On March 30, 2023, our stockholders approved an amendment to the 2021 Plan which increased the total number of shares reserved and available for grant and issuance equal to 8,146,607 shares plus up to an additional 855,351 shares that are subject to stock options or other awards previously granted under the 2011 Equity Incentive Plan. Under our equity incentive plans, stock options may be granted at prices not less than the fair market value on the date of grant for such stock options. Stock options generally vest over four years and expire seven years from the applicable grant date. Market condition-based stock awards are subject to a market condition whereby the closing price of our common stock must exceed a certain level for a number of trading days within a specified time frame or the awards will be canceled before expiration. RSAs generally vests over one year . RSUs generally vest over three years . Awards granted other than a stock option or a stock appreciation right shall reduce the common stock shares available for grant by 1.75 shares for every share issued. A summary of our equity incentive program as of June 30, 2024 is as follows (in thousands): Common stock shares available for grant 3,541 RSUs outstanding 1,130 RSAs outstanding 86 PSUs outstanding 400 As of June 30, 2024 , we did not have any outstanding stock options. 30 Table of Contents Restricted Stock Units The following summarizes RSU activities for the six months ended June 30, 2024 : Number of Restricted Stock Units (in thousands) Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2023 1,128 $ 6.57 1.05 $ 7,964 Granted 274 6.85 Released ( 272 ) 6.14 Forfeited — — Outstanding at June 30, 2024 1,130 $ 6.52 0.95 $ 10,635 The aggregate intrinsic value is calculated as the market value as of the end of the reporting period. Restricted Stock Awards The following summarizes RSA activities for the six months ended June 30, 2024 : Number of Restricted Stock Awards (in thousands) Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Outstanding at December 31, 2023 75 $ 8.31 0.24 Granted 86 7.25 Released ( 75 ) 8.31 Forfeited — — Outstanding at June 30, 2024 86 $ 7.25 — Market Condition-Based Performance Stock Units The following summarizes PSU activities for the six months ended June 30, 2024 : Number of Market Condition-Based Performance Stock Units (in thousands) Weighted Average Grant Date Fair Value Per Share Weighted Average Remaining Recognition Period (Years) Outstanding at December 31, 2023 400 $ 3.63 0.00 Granted — — Released — — Forfeited — — Outstanding at June 30, 2024 400 $ 3.63 0.38 31 Table of Contents Stock-based Compensation Expense Valuation and amortization methods Stock-based compensation is based on the estimated fair value of awards, net of estimated forfeitures, and recognized over the requisite service period. Estimated forfeitures are based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The stock-based compensation related to all of our stock-based awards for the three and six months ended June 30, 2024 , and 2023 is as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options $ — $ 16 $ ( 2 ) $ ( 40 ) RSUs, RSAs and PSUs 1,192 744 2,270 1,747 Total $ 1,192 $ 760 $ 2,268 $ 1,707 As of June 30, 2024 , there was $ 4.3 million of unrecognized compensation cost adjusted for estimated forfeitures related to unvested, RSUs, RSAs and PSUs granted to our employees and directors. This unrecognized compensation cost will be recognized over an estimated weighted-average period of approximately 1.5 years. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures. Barnes & Noble Education Barnes & Noble Education grants options, restricted stock awards and restricted stock units under the Barnes and Noble Education Equity Incentive Plan. On June 10, 2024, as part of the business combination, we assumed the following equity awards: Shares Assumed Stock options 25,191 Restricted stock award 4,853 Restricted stock unit 1,518 Total equity awards assumed 31,562 32 Table of Contents The total fair value of equity award assumed was $ 33,000 . Total stock-based expense for the period from June 10, 2024, to June 30, 2024, was not material. On June 19, 2024, Barnes & Noble Education granted 37,205 restricted stock units to various directors of Barnes & Noble Education. The restricted stock units vest on the earlier of one year from the date of grant or the next annual meeting of stockholders of Barnes & Noble Education. 10 . EMPLOYEE BENEFIT PLAN Barnes & Noble Education sponsors defined contribution plans for the benefit of substantially all of its employees. MBS Textbook Exchange, LLC (“MBS”), a subsidiary of Barnes & Noble Education, maintains a profit-sharing plan covering substantially all full-time employees of MBS. For all plans, Barnes & Noble Education is responsible to fund the employer contributions directly, if any. There was no benefit expense for these plan during the period from June 10, 2024 to June 30, 2024 . 11. STOCKHOLDERS’ EQUITY Stock Repurchase Program On December 29, 2022, our Board of Directors ( the “ 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 10 b 5 - 1 trading plans adopted in accordance with Rule 10 b 5 - 1 of the Securities Exchange Act of 1934 , as amended. 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. On August 8, 2023, the Board approved an amendment to extend the expiration date of the December 2022 Stock Repurchase Program that was set to expire on Dec ember 29 , 2023 , to December 29, 2024 . We did not repurchase any stock during the three months ended June 30, 2024 . As of June 30, 2024 , we had $ 41.7 million available for repurchase under the December 2022 Stock Repurchase Program. Dividends Declared and Dividend Payments On November 13, 2023, our Board declared a quarterly dividend in the amount of $ 0.045 per share, which was paid on January 25, 2024 to stockholders of record on January 14, 2024 . On February 28, 2024, our Board declared a quarterly dividend in the amount of $ 0.045 per share , which was paid on April 19, 2024 to stockholders of record on April 12, 2024 . On May 8, 2024, our Board declared a quarterly dividend in the amount of $ 0.045 per share, which was paid on July 26, 2024 to stockholders of record on July 8, 2024 . On August 12, 2024, our Board declared a quarterly dividend in the amount of $ 0.045 per share, payable on October 18, 2024 to stockholders of record on October 4, 2024 . 33 Table of Contents Future dividends will be subject to further review and approval by the Board in accordance with applicable law. The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews our capital allocation strategy from time to time. In the first half of 2024 and 2023 , the total dividends paid was $ 3.0 million and $ 5.4 million, respectively. 12 . INCOME TAXES Provision for income taxes for the three and six months ended June 30, 2024 and 2023 consisted of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Income before provision for income taxes $ 29,114 $ 9,872 $ 53,834 $ 19,657 Provision for income taxes ( 8,178 ) ( 2,844 ) ( 14,243 ) ( 4,351 ) Effective tax rate 28.1 % 28.8 % 26.5 % 22.1 % Provision for income taxes for the three and six months ended June 30, 2024 and 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate. We provided no valuation allowance for federal deferred tax assets, whose future realization is more likely than not and continue to maintain full valuation allowance for certain state deferred tax assets in the United States as well as federal tax assets in Canada. Changes in provision for income taxes resulted primarily from 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 June 30, 2024 , we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 7.6 million of which $ 4.9 million could be payable in cash. In addition, interest and penalty of $ 0.3 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 $ 4.9 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. As of June 30, 2024 , we had net deferred income tax assets of $ 3.3 million and deferred income tax liabilities of $ 0 . Because we have net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state, and foreign taxing authorities may examine our tax returns for all years from 2008 through the current period. Barnes & Noble Education Barnes & Noble Education recorded an income tax provision of $ 0.1 million during the period of June 10, 2024 to June 30, 2024, which represented an effective income tax rate of ( 0.1 )% . 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 June 30, 2024, 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. 34 Table of Contents Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change” (generally defined as a cumulative change in our ownership by “5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period), the corporation’s ability to use its pre-change net operating losses and certain other pre-change tax attributes to offset its post-change income and taxes may be limited. Similar rules may apply under state tax laws. As a result of the rights offering, backstop commitment, private investment, and debt term loan conversion completed on June 10, 2024, Barnes & Noble Education may have experienced an ownership change as defined by Sections 382 and 383. Barnes & Noble Education intends to perform a study to determine if an ownership change has occurred. If it is determined that an ownership change has occurred under Section 382 and 383, Barnes &Noble Education expects any corresponding annual limitations to severely impact the future utilization of its tax attributes including its $ 265.5 million NOL carryforward. 13. EARNINGS PER SHARE We use the two -class method of computing EPS, which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared. Under the two -class method, basic earnings per share is computed by dividing the income attributable to Immersion stockholders by the weighted-average number of common stock shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity. Potential common stock, computed using the treasury stock method, includes stock options and stock awards. The following is a reconciliation of the denominators used in computing basic and diluted net income per share (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator: Net income attributable to Immersion stockholders $ 28,945 $ 7,028 $ 47,600 $ 15,306 Denominator: Weighted-average shares outstanding, basic 31,879 32,583 31,784 32,474 Shares related to outstanding options, unvested RSUs, RSAs, and PSUs 646 227 623 365 Weighted average shares outstanding, diluted 32,525 32,810 32,407 32,839 We include PSUs in the calculation of diluted earnings per share if the applicable performance condition has been satisfied as of the end of the reporting period and exclude stock equity awards if the performance condition has not been met. For the three and six months ended June 30, 2024 and 2023, we had stock options, RSUs, PSUs and RSAs outstanding that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive. These outstanding securities consisted of the following (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options $ — $ 136 $ — $ 138 RSUs, RSAs and PSUs — 10 — 5 Total — 146 — 143 35 Table of Contents 14. COMMITMENTS AND CONTINGENCIES From time to time, we receive claims from third parties asserting that our technologies, or those of our licensees, infringe on the other parties’ IP rights. Management believes that these claims are without merit. Additionally, periodically, we are involved in routine legal matters and contractual disputes incidental to our normal operations. In management’s opinion, unless we disclosed otherwise, the resolution of such matters will not have a material adverse effect on our consolidated financial condition, results of operations, or liquidity. In the normal course of business, we provide indemnification of varying scope to customers, most commonly to licensees in connection with licensing arrangements that include our IP, although these provisions can cover additional matters. Historically, costs related to these guarantees have not been significant, and we are unable to estimate the maximum potential impact of these guarantees on our future results of operations. LGE Korean Withholding Tax Matter On October 16, 2017, we received a letter from LG Electronics Inc. (“LGE”) requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following an investigation where the tax authority determined that LGE failed to withhold on LGE’s royalty payments to Immersion Software Ireland, a subsidiary of the Company, from 2012 to 2014 . Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $ 5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts. In the second quarter of 2020 , we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets . In the fourth quarter of 2021 , we recorded an impairment charge of $ 0.8 million related to the long-term deposits paid to LGE. On November 3, 2017, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2012 to 2017 period. The Korea Tax Tribunal hearing took place on March 5, 2019. On March 19, 2019, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on LGE. On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019. We have had numerous hearings before the Korea Administrative Court in the years 2019 through 2022 . We had a hearing on April 27, 2023, and the Korea Administrative Court rendered a decision on this matter on June 8, 2023, in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on LGE should be cancelled with litigation costs to be borne by the Korean tax authorities. In connection with the Korea Administrative Court’s decision, the Korean tax authorities filed an appeal on June 28, 2023, with the Seoul High Court to seek the cancellation of the lower court’s decision. The appellate case is in progress at the Seoul High Court and the first and the second hearings took place on November 30, 2023, and February 1, 2024, respectively. However, the next hearing will be set at a later date. On April 25, 2023, we received notice from LGE requesting us to reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following a recent tax audit of LGE for the years 2018 through 2022 . Pursuant to an agreement reached with LGE, on June 2, 2023, we provided a provisional deposit to LGE in the amount of KRW 3,024,877,044 (approximately $ 2.3 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korean courts. In the second quarter of 2023 , we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets . On June 29, 2023, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes related to the 2018 to 2022 period. On August 7, 2023, the Korean tax authority submitted its answer against the tax appeal. On September 8, 2023, on behalf of LGE, the Company submitted its rebuttal brief in response thereto. On September 25, 2023, Korean tax authority submitted an additional response brief, and on November 23, 2023, the Korea Tax Tribunal rendered a decision against LGE, dismissing the claims of the Company on the grounds that its claims are without merit. In response thereto, on behalf of LGE, we filed an appeal with the Korea Administrative Court on December 29, 2023. On July 25, 2024, the Korea Tax Tribunal rendered a decision against LGE, and deadline for the court appeal of the local income claim is October 21, 2024. In addition, the Korea Administrative Court scheduled a hearing date of August 29, 2024. As of June 30, 2024 , we have accrued $ 0.3 million of withholding taxes, interest and penalties related to the 2018 to 2022 period for which the Korean tax authorities have recently assessed LGE. These withholding taxes have been reclassified and reported as an impairment reduction to the Long-term deposit made in the third quarter of 2023 in order to present the deposit at its estimated recoverable value. 36 Table of Contents Based on th e developments in these cases, we regularly reassess the likelihood that we will prevail in the claims from the Korean tax authorities with respect to the LGE case. To the extent that we determine that it is more likely than not that we will prevail against the claims from the Korean tax authorities, then no additional tax expense is provided for in our Condensed Consolidated Statements of Operations and Comprehensive Income . In the event that we determine that it is more likely than not that we will not prevail against the claims from the Korean tax authorities, or a portion thereof, then we would estimate the anticipated additional tax expense associated with that outcome and record it as additional income tax expense in our Condensed Consolidated Statements of Operations and Comprehensive Income in the period of the new determination. If the additional income tax expense was related to the periods assessed by Korean tax authorities and for which we recorded a Long-term deposit on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be recorded as an impairment to the Long-term deposits . If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for which we recorded in Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities . In the event that we do not ultimately prevail in our appeal in the Korean courts with respect to this case, the applicable deposits included in Long-term deposits would be recorded as additional income tax expense on our Condensed Consolidated Statements of Operations and Comprehensive Income , in the period in which we do not ultimately prevail. Immersion Corporation vs. Xiaomi Group On or about March 3, 2023, the Company initiated patent infringement lawsuits against several companies of the Xiaomi-Group in Germany, France and India (the “Xiaomi Litigation”). Immersion filed complaints against Xiaomi-Group companies and their agents in the Düsseldorf Regional Court in Germany, the Tribunal judiciaire de Paris (Paris First Instance Civil Court) in France, and the High Court of Delhi, at New Delhi, in India. The complaints alleged that the Xiaomi-Group’s devices, including the Xiaomi 12, infringed Immersion's patents that cover various uses of haptic effects in connection with such devices. On June 12, 2024, the Company entered into a Patent License Agreement (the “Xiaomi License Agreement”) with the Xiaomi Group, pursuant to which the parties have agreed to terms for resolving the Xiaomi Litigation and the Xiaomi Group will license, on a non-exclusive basis, the Company’s patent portfolio for use in its products. Pursuant to the Xiaomi License Agreement, the Company and the Xiaomi Group have agreed to terms for dismissal by them of the outstanding Xiaomi Litigation. 37 Table of Contents Immersion Corporation vs. Valve Corporation ( “Valve ”) On May 15, 2023, the Company filed a complaint against Valve in the United States District Court for the Western District of Washington. The complaint alleges that Valve’s AR/VR systems, including the Valve Index, and handheld Steam Deck, infringe seven of our patents that cover various uses of haptic effects in connection with such AR/VR systems and other video game systems. The Company is seeking to enjoin Valve from further infringement and to recover a reasonable royalty for such infringement. The complaint against Valve asserts infringement of the following patents: • U.S. Patent No. 7,336,260: “Method and Apparatus for Providing Tactile Sensations” • U.S. Patent No. 8,749,507: “Systems and Methods for Adaptive Interpretation of Input from a Touch-Sensitive Input Device” • U.S. Patent No. 9,430,042: “Virtual Detents Through Vibrotactile Feedback” • U.S. Patent No. 9,116,546: “System for Haptically Representing Sensor Input” • U.S. Patent No. 10,627,907: “Position Control of a User Input Element Associated With a Haptic Output Device” • U.S. Patent No. 10,665,067: “Systems and Methods for Integrating Haptics Overlay in Augmented Reality” • U.S. Patent No. 11,175,738: “Systems and Methods for Proximity-Based Haptic Feedback” Valve responded to the complaint on July 24, 2023, with a motion to dismiss. Valve re-noted its motion, which changed Immersion’s response deadline from August 14, 2023 to August 21, 2023. Immersion timely filed its response, and Valve filed its reply on August 25, 2023. The Court heard arguments on Valve’s motion on February 8, 2024. The Court entered a case schedule on November 21, 2023. The case schedule did not include a trial date but set the pretrial conference for May 30, 2025. Valve filed inter partes reviews (“ IPRs ”), IPR2024-00477 and IPR2024-00478 on January 19, 2024. These petitions are directed to U.S. Patent Nos . 7,336,260 and 9,430,042 respectively. The Company filed its patent owner preliminary responses to these petitions on April 26, 2024, and April 29, 2024, respectively. The Patent Trial and Appeal Board issued a decision, granting institution of these petitions on July 24, 2024, and July 25, 2024, respectively. The Company’s patent owner responses to these petitions are due on October 15, 2024 and October 17, 2024, respectively. Valve filed IPR2024-00508 on January 30, 2024, which is directed to U.S. Patent No. 9,116,546. The Company elected not to file a patent owner preliminary response to this petition. The Patent Trial and Appeal Board issued a decision, granting institution of this petition on August 6, 2024. The Company’s patent owner response to the petition is due on October 31, 2024. Valve filed IPR2024-00556 on February 7, 2024, which is directed to U.S. Patent No. 8,749,507. The Company filed its patent owner preliminary response to this petition on May 15, 2024. The Patent Trial and Appeal Board issued a decision, granting institution on August 6, 2024. The Company’s patent owner response to the petition is due on October 31, 2024. Valve filed IPR2024-00557 on February 7, 2024, which is directed to U.S. Patent No. 10,665,067. The Company filed its patent owner preliminary response to this petition on May 15, 2024. The Patent Trial and Appeal Board issued a decision, granting institution on August 13, 2024. Valve filed IPR2024-00582 on February 16, 2024, which is directed to U.S. Patent No. 11,175,738. The Company filed its patent owner preliminary response to this petition on June 27, 2024. The Patent Trial and Appeal Board’s decision on whether to institute the petition is expected to issue around September 27, 2024. Valve filed IPR2024-00714 on March 22, 2024, which is directed to U.S. Patent No. 10,627,907. The Company filed its preliminary patent owner preliminary response to this petition on July 30, 2024. The Patent Trial and Appeal Board’s decision on whether to institute the petition is expected to issue around October 30, 2024. The parties submitted their joint claim construction statement and respective positions on March 29, 2024. On March 14, 2024, Valve filed a motion to stay the district court case pending the PTAB’s decisions on the IPRs. Immersion opposed the motion on March 25, 2024, and Valve filed its reply brief on March 29, 2024. The Court granted Valve’s motion to stay on April 4, 2024. In connection with that order, the Court struck Valve’s motion to dismiss with leave to refile at a later date. 38 Table of Contents 15. SUPPLEMENTARY INFORMATION Restructuring and Other Charges During the period of June 10, 2024, to June 30, 2024, Barnes & Noble Education recognized restructuring and other charges totaling $ 2.4 million, comprised primarily of $ 2.0 million of severance costs related to the departure of Barnes & Noble Education's Chief Executive Officer on June 11, 2024, and $ 0.4 million costs associated with legal and advisory professional services. 39 Table of Contents