STOCK-BASED COMPENSATION

6 Months Ended

Oct. 31, 2024

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 conditions 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 October 31, 2024 is as follows (in thousands):

Common stock shares available for grant	2,824
RSUs outstanding	1,361
RSAs outstanding	86
PSUs outstanding	50

As of October 31, 2024, we did not have any outstanding stock options.

Restricted Stock Units

The following summarizes RSU activities for the six months ended October 31, 2024:

	Number of Restricted Stock Units (in thousands)			Weighted Average Grant Date Fair Value Per Share	Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)
Outstanding at April 30, 2024	1,129		$	6.53	1.09	$	8,207
Granted	424			9.38
Released	(192	)		5.91
Forfeited	—			—
Outstanding at October 31, 2024	1,361		$	7.50	0.74	$	11,469

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 October 31, 2024:

	Number of Restricted Stock Awards (in thousands)		Weighted Average Grant Date Fair Value Per Share	Weighted Average Remaining Recognition Period (Years)
Outstanding at April 30, 2024	86	$	7.25	1.00
Granted	—		—
Released	—		—
Forfeited	—		—
Outstanding at October 31, 2024	86	$	7.25	0.49

Market Condition-Based Performance Stock Units

In the first quarter of 2022, we granted 600,000 shares of PSUs to certain members of our management team. Each PSU represents the right to one share of our common stock with vesting subject to: (a) the achievement of specified levels of the volume weighted average closing prices of our common stock during any 100 day-period between January 1, 2022 and January 1, 2027, subject to certification by the Compensation Committee (“Performance Milestones”); and (b) continued employment with us through the later of each achievement date or service vesting date, which occurs over a three (3) year period commencing on January 1, 2022.

In March 2023, the Performance Milestone of the first tranche was achieved. The second tranche Performance Milestone was achieved in the first quarter of fiscal 2025. In August 2024, the Performance Milestone of the third and final tranche was met. As of October 31, 2024, 50,000 PSUs were outstanding and will be released upon the satisfaction of the services condition.

The following summarizes PSU activities for the six months ended October 31, 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 April 30, 2024	400		$	3.63	0.42
Granted	—			—
Released	(350	)		3.63
Forfeited	—			—
Outstanding at October 31, 2024	50		$	3.63	0.17

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 month ended July 31, 2024, the three and six months ended October 31, 2024, and June 30, 2023 is as follows (in thousands):

	One Month Ended		Three Months Ended				Six Months Ended
	July 31, 2024		October 31, 2024		June 30, 2023		October 31, 2024		June 30, 2023
Stock options	$	—	$	—	$	16	$	—		$	(40	)
RSUs, RSAs and PSUs		863		2,154		744		3,685			1,747
Total	$	863	$	2,154	$	760	$	3,685		$	1,707

As of October 31, 2024, there was $5.6 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 1.2 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 & 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

The total fair value of equity award assumed was $33,000.

On June 18, 2024, Barnes & Noble Education granted 7,441 RSUs and 29,764 RSAs to the members of BNED Board. These awards vested on September 18, 2024.

On September 20, 2024, Barnes & Noble Education granted 61,290 RSUs and 81,720 RSAs to members of BNED Board. These awards vest on the earlier of one year from the date of grant or the next annual meeting of stockholders.

On September 20, 2024, Barnes & Noble Education granted 1,533,250 PSUs to employees that include both a service condition and market condition in order for PSUs to vest. The PSUs vest upon BNED Common Stock achieving a specified price per share (measured using a 100-day average volume weighted average price) for each of three tranches and continued employment through a specified date. There is a period of seven years from the grant date in order to achieve the specific target share price. We have determined the grant date fair value using the Monte Carlo simulation model and compensation expense is recognized ratably over the service derived period regardless of whether the market condition is satisfied. The fair value models for the PSUs use assumptions that include the risk-free interest rate and expected volatility. The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected PSU term. Volatility is based on the historical volatility of Barnes & Noble Education's common stock over a period of time corresponding to the expected PSU term.

		PSU Tranche #1			PSU Tranche #2			PSU Tranche #3
Performance Milestone (VWAP)	$	10.00		$	15.00		$	20.00
Valuation method utilized		Monte Carlo			Monte Carlo			Monte Carlo
Risk-free interest rate		3.53	%		3.53	%		3.53	%
Company volatility		120	%		120	%		120	%
Derived service period		1.0 year			2.0 years			3.0 years
Grant date fair value per award	$	9.74		$	9.62		$	9.46

Stock-based Compensation Expense

For the month ended July 31, 2024, the three months ended October 31, 2024, and the period from June 10, 2024, to October 31, 2024, the total stock-based compensation expense for options, RSAs, RSUs and PSUs were $0.1 million, $1.0 million and $1.1 million, respectively.

The total unrecognized compensation cost related to unvested awards as of October 31, 2024, was $15.2 million and is expected to be recognized over a weighted-average period of 1.8 years.