Barnes & Noble Education, Inc.

Note 3. Restatement of Previously Issued Financial Statements

As previously disclosed in the Company’s annual financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended May 3, 2025 filed with the SEC on December 23, 2025 (the "Annual Report"), the Audit Committee of the Board of Directors, with the assistance of independent advisors, completed an investigation into certain accounting matters (the "Investigation"). As previously disclosed, as a result of the Investigation and additional accounting matters identified during the preparation of the Company’s consolidated financial statements for the fiscal year ended May 3, 2025, management concluded that the Company’s previously issued audited consolidated financial statements for the fiscal year ended April 27, 2024, and the unaudited interim consolidated financial statements for the quarterly and year-to-date periods within fiscal years ended May 3, 2025 and April 27, 2024 should no longer be relied upon. Accordingly, the Annual Report includes a restatement of our previously issued consolidated financial statements and related disclosures for such periods.

The restatement corrects errors related to (i) the recording of cost of digital sales, (ii) the accounting for certain store operating agreements in accordance with Accounting Standards Codification 842, Leases, and (iii) the write-off of aged textbook rental inventory, as well as certain other immaterial errors identified during the fiscal year 2025 audit process. These errors resulted in misstatements to cost of sales, depreciation and amortization expense, other (income) expense, income tax expense, operating lease right-of-use assets and liabilities, deferred income taxes, property, and equipment, other long-term liabilities, additional paid-in capital, accumulated deficit, and certain working capital balances.

The quantitative impact of the restatement on the Company’s consolidated statements of operations, balance sheets, and cash flows for the fiscal year ended April 27, 2024 is presented in Note 3, Restatement of Previously Issued Audited Consolidated Financial Statements, in the Annual Report. The quantitative impact of the restatement on the unaudited interim quarterly and year-to-date periods within fiscal years ended May 3, 2025 and April 27, 2024 are presented in Note 21, Restatement of Quarterly Financial Information (Unaudited), in the Annual Report.

The restatement did not result in any changes to the classification of cash flows among operating, investing, or financing activities. The accompanying condensed consolidated financial statements included in this Quarterly Report on Form 10-Q reflect the restated amounts for all applicable prior periods presented and are prepared on a basis consistent with the restated consolidated financial statements included in the Annual Report.

Note 4. Revenue

Revenue from sales of the Company's products and services is recognized either at the point in time when control of the products is transferred to its customers, or over time as services are provided in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products or services.

See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional information related to the Company's revenue recognition policies.

Disaggregation of Revenue

The following table disaggregates the revenue associated with the Company's major product and service offerings:

(a)Logo general merchandise sales are recognized on a net basis as commission revenue in the condensed consolidated financial statements.

(b)Service and other revenue primarily relates to brand partnership marketing and other service revenues.

Contract Assets and Contract Liabilities

Contract assets represent the sale of goods or services to a customer before the Company has the right to obtain consideration from the customer. Contract assets consist of unbilled amounts at the reporting date and are transferred to accounts receivable when the rights become unconditional. Contract assets (unbilled receivables) were $0.8 million and $0.6 million as of January 31, 2026 and May 3, 2025, respectively, on the Company's condensed Consolidated Balance Sheets.

Contract liabilities represent an obligation to transfer goods or services to a customer for which the Company has received consideration and consists of its 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 partnership marketing services, which are recognized when the contracted services are provided to the Company's 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 merchandising contracts for Fanatics and Lids as discussed in Note 6. Equity.

The following table presents changes in deferred revenue associated with the Company's contract liabilities:

Note 5. Segment Reporting

The Company identifies its segments in accordance with the way its business is managed. On October 26, 2024, management determined that a realignment of the Company's operating and reporting segments was necessary to better reflect the operations of the organization. Following the change in Chief Executive Officer and financing transactions in June 2024, the Company streamlined operations to focus on a centralized management structure to support company-wide procurement, marketing and selling, delivery and customer service. Given the change in how the overall business is managed and how the current Chief Executive Officer (the current Chief Operating Decision Maker ("CODM")) assesses performance and allocates resources, the Company combined the operating results of the priortwo segments, Retail and Wholesale, intoone operating and reporting segment. Prior period disclosures have been restated to reflect the change toone segment.

The CODM reviews financial information on a consolidated basis to evaluate operational performance, allocate resources, and assess trends over time. The CODM uses Net income (loss) as the primary measure of segment profit or loss. In evaluating performance, the CODM also reviews significant expense categories, including adjusted cost of sales, payroll expense, contract payments, direct and indirect expenses, which are considered material to understanding the segment’s financial results.

This measure provides a consistent basis for strategic decision-making, budgeting, and performance evaluation, reflecting the segment’s contribution to the Company’s overall financial results. Segment assets are not used by the CODM for evaluating performance as presented on the Company's Consolidated Balance Sheet.

The following table presents sales, profitability, and significant expense information about the Company's segment.

(a) Adjusted Cost of sales includes all cost of sales presented in the Statement of Operations, adjusted for contract payments and other various expenses.

(b) Other segment expenses, net, represents GAAP income statement line items that are not considered to be significant segment expenses. These items primarily include stock-based compensation, depreciation and amortization, impairment, other (income) expense, loss on extinguishment of debt, interest income and expense, and income tax expense (benefit).

Note 6. Equity

Stock Authorization

On June 5, 2024, the Company's stockholders approved an amendment to its Amended and Restated Certificate of Incorporation, as amended, to increase the aggregate number of authorized shares of Common Stock from 200,000,000 shares to 10,000,000,000 shares.

On June 10, 2024, the Company completed various transactions (the "Transactions"), including an equity rights offering (the "Rights Offering"), private equity investment (the "Private Investment"), a term loan debt conversion (the "Term Loan Debt Conversion"), and credit facility refinancing (the "A&R Credit Facility Refinancing"), to substantially deleverage the Company's Consolidated Balance Sheet. These transactions raised additional capital for repayment of indebtedness and provide additional flexibility for working capital needs.

On September 18, 2024, the Company'sstockholders (1) approved the Company’s Amended and Restated Certificate of Incorporation to decrease the aggregate number of authorized shares of the Company's Common Stock from 10,000,000,000 shares to 200,000,000 shares; and (2) approved an amendment to the Equity Incentive Plan to increase the number of shares available for issuance by an additional 2,000,000 shares of the Company's Common Stock, for an aggregate total of 2,179,093 shares (post-Reverse Stock Split as further described below).

At-the-Market Equity Offerings

On September 19, 2024, the Company entered into an at-the market ("ATM") sales agreement (the "September ATM Sales Agreement") with BTIG, LLC ("BTIG") under which it sold the maximum of $40,000 of the Company's Common Stock from time to time at a weighted-average price of $10.06 per share and received $39,200 in proceeds, net of commissions. BTIG, as the sales agent, sold the shares based upon the Company's instructions (including as to price, time or size limits or other customary parameters or conditions). The Company paid BTIG a commission of 2% of the gross sales proceeds of the Common Stock sold under the September ATM Sales Agreement. The Company was not obligated to make any sales of Common Stock under the September ATM Sales Agreement.

On December 20, 2024, the Company entered into an additional ATM sales agreement with BTIG (the "December ATM Sales Agreement"), under which it sold the maximum of $40,000 of the Company's Common Stock from time to time at a weighted-average price of $10.42 per share and received $39,200 in proceeds, net of commissions. BTIG, as the sales agent, sold the shares based upon the Company's instructions (including as to price, time or size limits or other customary parameters or conditions). The Company paid BTIG a commission of 2% of the gross sales proceeds of the Common Stock sold under the December ATM Sales Agreement. The Company was not obligated to make any sales of Common Stock under the December ATM Sales Agreement.

Reverse Stock Split

On June 11, 2024, the Company completed a reverse stock split of the Company’s outstanding shares of Common Stock at a ratio of 1-for-100 (the “Reverse Stock Split”), which was previously approved by stockholders at a special meeting held on June 5, 2024. In connection with the Reverse Stock Split, every 100 shares of the Common Stock issued and outstanding was converted into one share of the Company’s Common Stock. No change was made to the trading symbol for the Company’s shares of Common Stock, “BNED,” in connection with the Reverse Stock Split. The Reverse Stock Split was part of the Company’s plan to regain compliance with the minimum bid price requirement of $1.00 per share required to maintain continued listing on the NYSE.

The Reverse Stock Split reduced the number of shares of the Company’s outstanding Common Stock from approximately 2,620,495,552 shares (as of the date June 11, 2024, when including issuances pursuant to the transactions) to approximately 26,204,956 shares, subject to adjustment for rounding.

The Reverse Stock Split affected all issued and outstanding shares of Common Stock. All outstanding options and restricted stock units, and other securities entitling their holders to purchase or otherwise receive shares of Common Stock were adjusted as a result of the Reverse Stock Split, as required by the terms of each security. The number of shares available to be awarded under the Company’s equity compensation plans was also appropriately adjusted. Following the Reverse Stock Split, the par value of the Common Stock remained unchanged at $0.01 per share. The Reverse Stock Split did not change the authorized number of shares of Common Stock or preferred stock. No fractional shares were issued in connection with the reverse split; instead, any fractional shares as a result of the Reverse Stock Split were rounded up to the next whole number of post-split shares of Common Stock.

Repurchase of Shares

During the 39 weeks ended January 31, 2026, the Company did not purchase shares under the stock repurchase program. As of January 31, 2026, approximately $26,669 remains available under the stock repurchase program.

Note 7. Income (Loss) Per Share

On June 10, 2024, we completed various Transactions to substantially deleverage the Company's Consolidated Balance Sheet. Because the rights issuance was offered to all existing stockholders at an exercise price that was less than the fair value of the Company's Common Stock, as of such time, the weighted average shares outstanding and basic and diluted Net income (loss) per share were adjusted retroactively to reflect the bonus element of the Rights Offering for all periods presented by a factor of 5.03.

On June 11, 2024, the Company completed the Reverse Stock Split which was approved by stockholders at a special meeting held on June 5, 2024. In connection with the Reverse Stock Split, every 100 shares of the Common Stock issued and outstanding was converted into one share of the Company’s Common Stock.

The following is a reconciliation of the basic and diluted Net income (loss) per share calculation:

(a) During the 13 weeks ended January 31, 2026 and January 25, 2025, weighted-average shares of 3,821 and 8,456, respectively, were excluded from the diluted Net income (loss) per share calculation as their inclusion would have been antidilutive. During the 39 weeks ended January 31, 2026 and January 25, 2025, weighted-average shares of 3,934 and 333,770, respectively, were excluded from the diluted Net income (loss) per share calculation as their inclusion would have been antidilutive.

Note 8. Fair Value Measurements

In accordance with ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor.

Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1—Observable inputs that reflect quoted prices in active markets

Level 2—Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3—Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own assumptions

The Company's financial instruments include cash and cash equivalents, receivables, accrued liabilities, accounts payable, and long-term debt. The fair values of cash and cash equivalents, receivables, accrued liabilities, and accounts payable approximate their carrying values because of the short-term nature of these instruments, which are all considered Level 1 within the fair value hierarchy. The fair value of the Company's long-term debt approximates its carrying value and is classified as Level 2, as it is estimated using observable market inputs such as current interest rates and credit spreads for similar instruments. See Note 9. Derivative, for fair value information about the derivative instrument that is fair valued using Level 3 inputs.

Non-Financial Assets

The Company measures certain non-financial assets and liabilities at fair value on a nonrecurring basis in accordance with ASC 820. These assets are subject to fair value remeasurement only when specific triggering events occur, such as indicators of impairment or classification as held for sale. The Company's non-financial assets include property and equipment, operating lease right-of-use assets, and intangible assets. Such assets are reported at their carrying values and are not subject to recurring fair value measurements. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360-10, Accounting for the Impairment or Disposal of Long-Lived Assets.

Non-Financial Liabilities

We granted phantom share units as long-term incentive awards which are settled in cash based on the fair market value of a share of common stock of the Company at each vesting date. The fair value of the liability for the cash-settled phantom share unit awards is remeasured at the end of each reporting period through settlement using a Black-Scholes option-pricing model, which incorporates significant inputs including the risk-free interest rate, expected volatility, expected dividend yield, and expected term or vesting period. As of May 3, 2025, all phantom share units have been settled or forfeited. For additional information, see Note 13. Long-Term Incentive Compensation Expense.

Note 9. Derivative

In April 2025, the Company entered into a Participation Interest Purchase Agreement (the “Sale Agreement”) with Jefferies Leveraged Credit Products LLC (“Jefferies”), under which Jefferies paid the Company $12,625 in exchange for a participation interest in the proceeds of a specified litigation claim related to the interchange fees (the "Claim"). The Sale Agreement is non-recourse to the Company with respect to financial risk. In February 2026, the Claim was resolved pursuant to the Settlement agreement and litigation was dismissed.

The Company had continuing contractual obligations under the Sale Agreement, including remaining the plaintiff of record in the litigation, cooperating with Jefferies and its counsel, providing access to litigation-related documents, and complying with certain settlement-related provisions. With the execution of the Settlement Agreement and dismissal of the underlying litigation to which the Claim related, the Company’s contractual obligations under the Sale Agreement have been satisfied in all material respects. These obligations are protective in nature and do not require the Company to repay amounts received, provide services, or otherwise create a debt obligation.

Effective May 4, 2025, the first day of the Company’s fiscal year 2026, the Company early adopted ASU No. 2025-07, Derivatives and Hedging (Topic 815): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract. Upon adoption, the Sale Agreement no longer met the definition of a derivative under ASC 815, as the arrangement qualifies for the scope exception applicable to litigation funding arrangements that do not create or modify debt.

Accordingly, upon adoption, the previously recognized derivative liability was reclassified to deferred income within other long-term liabilities, and the Sale Agreement is accounted for under ASC 470, Debt, as deferred income. The Company will recognize the related deferred income from the proceeds of the Sale Agreement in the fourth quarter of fiscal year 2026.

The guidance was applied using a modified retrospective approach, resulting in the reclassification of the derivative liability to deferred income as of the adoption date. The cumulative-effect adjustment to retained earnings upon adoption was immaterial. No amounts related to this arrangement are subject to recurring fair-value measurement.

Note 10. Debt

Transactions

On June 10, 2024, the Company completed a series of Transactions, which together substantially deleveraged the Company’s Consolidated Balance Sheet.

In connection with the Transactions, the Company received gross proceeds of $95,000 of new equity capital, consisting of a $50,000 private investment led by Immersion Corporation and a $45,000 fully backstopped equity rights offering, resulting in approximately $85,500 of net cash proceeds after transaction costs. In addition, approximately $34,000 of outstanding principal and accrued interest under the Company’s term loan was converted into common stock. The Company also refinanced its revolving credit facility, providing access to a $325 million facility maturing in 2028.

Credit Facility

In connection with the timing of the Company’s financial statement filings, the Company entered into a series of limited consent and waiver agreements with the lenders under its asset-based revolving credit facility to extend certain financial reporting deadlines. These waivers related solely to the timing of the Company’s filings and did not arise from noncompliance with any financial covenants. The Investigation and related restatement of the Company’s previously issued financial statements have been completed.

On August 8, 2025, the Company and the administrative agent entered into a limited consent and waiver providing a 75-day extension of the applicable reporting deadlines to October 22, 2025, in exchange for a fee equal to 0.10% of the aggregate revolving commitments. On October 21, 2025, the Company exercised an additional 45-day extension option under the waiver, extending the reporting deadline to December 6, 2025, in exchange for an additional fee equal to 0.10% of the revolving commitments. On December 5, 2025, the Company entered into a Second Limited Consent and Waiver, further extending the reporting deadlines to January 20, 2026, in exchange for an additional fee equal to 0.10% of each consenting lender’s revolving commitment.

During the applicable extension periods, the Company was subject to certain customary conditions, including enhanced reporting requirements, periodic update calls with lenders, and a minimum excess availability requirement of $30,000. Failure to comply with these conditions would have constituted an event of default.

On June 10, 2024 (the “Closing Date”), the Company amended, restated and extended the maturity of its existing asset-based revolving credit facility with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and the other lenders party thereto and restated, the A&R Credit Agreement. Pursuant to the A&R Credit Agreement, the lenders committed to provide the Company with afour-year asset-based revolving credit facility with aggregate revolving commitments of up to $325 million and a maturity date of June 9, 2028 (the “Credit Facility”).

Borrowings under the Credit Facility may be used for general corporate purposes, including seasonal working capital needs. The Company has interest-only obligations under the Credit Facility until maturity, at which time all outstanding principal is due and payable. Interest accrues, at the Company’s election, either (i) at a rate based on the Secured Overnight Financing Rate (“SOFR”), subject to a floor of 2.50%, plus an applicable margin of 3.50%, or (ii) at an alternate base rate, subject to a floor of 3.50%, plus an applicable margin of 2.50%. The applicable margins may be reduced by 0.25% upon achievement of certain financial performance thresholds, as defined in the A&R Credit Agreement.

The A&R Credit Agreement contains customary negative covenants and financial maintenance covenants, including minimum availability, a consolidated fixed charge coverage ratio, and a consolidated EBITDA requirement, each as defined in the A&R Credit Agreement. The Credit Facility is secured by substantially all of the Company’s inventory, accounts receivable and related assets, constituting an all-assets lien, subject to customary exclusions.

As of January 31, 2026, and as of the issuance date this Quarterly Report on Form 10-Q, the Company was in compliance with all covenants under the A&R Credit Agreement.

Term Loan

On June 10, 2024, the Company’s existing Term Loan Credit Agreement (the "Term Loan"), dated June 7, 2022, with TopLids LendCo, LLC and Vital Fundco, LLC (the “Term Loan”), was terminated in connection with the conversion of approximately $34,000 of outstanding principal and accrued and unpaid interest into shares of the Company’s Common Stock (the “Term Loan Debt Conversion”). As a result of the Term Loan Debt Conversion, the Term Loan and all related agreements were extinguished.

The Company recognized a loss on extinguishment of debt of $55,233 in connection with the Term Loan Debt Conversion, representing the excess of the fair value of the Common Stock issued over the net carrying amount of the Term Loan, including unamortized deferred financing costs. The conversion resulted in financing noncash activity totaling $86,755. See Note 6. Equity.

The Term Loan had an original principal amount of $30,000 and was scheduled to mature on April 7, 2025. Proceeds from the Term Loan were used for working capital and related fees and expenses.

Deferred Financing Costs

The debt issuance costs have been deferred and are presented as noted below in the condensed Consolidated Balance Sheets, and are subsequently amortized ratably over the term of the respective debt.

Interest

The following table disaggregates interest expense:

Cash interest paid during the 13 weeks ended January 31, 2026 and January 25, 2025 was $3,656 and $4,633, respectively, and for the 39 weeks ended January 31, 2026 and January 25, 2025 was $9,961 and $14,499 respectively. Cash interest for the 13 weeks and 39 weeks ended January 31, 2026 includes $325 and $975, respectively, of waiver fees incurred in connection with the Investigation.

Note 11. Leases

Lease assets and lease liabilities are recognized on the condensed Consolidated Balance Sheets for substantially all lease arrangements based on the present value of future lease payments as required by ASC 842, Leases. The lease portfolio consists of operating leases comprised of operating agreements which grant the Company the right to operate on-campus bookstores at colleges and universities; real estate leases for office and warehouse operations; and vehicle leases. There is one immaterial finance lease and no short-term leases (i.e., those with a term of twelve months or less).

A right of use (“ROU”) asset and lease liability are recognized in the condensed Consolidated Balance Sheets 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. Lease terms generally range fromone year tofifteen 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, lease expense is recognized on a straight-line basis over the lease term. For variable commissions, lease expense is recognized as incurred. The Company's lease agreements do not contain any material residual value guarantees, material restrictions or covenants.

Incremental borrowing rates are used to determine the present value of fixed lease payments based on the information available at the lease commencement date, as the rate implicit in the lease is not readily determinable. An estimated collateralized incremental borrowing rate is applied as of the effective date or the commencement date of the lease, whichever is later.

The following tables summarize lease expenses:

The following table summarizes the Company's minimum fixed lease obligations, excluding variable commissions:

Future lease payment obligations related to leases that were entered into, but did not commence as of January 31, 2026, were not material.

The following summarizes additional information related to the Company's operating leases:

Note 12. Supplementary Information

Other (Income) Expense

During the 13 and 39 weeks ended January 31, 2026, the Company recognized other (income) expense totaling $1,043 and $6,654, respectively, primarily reflecting Investigation related costs.

During the 13 and 39 weeks ended January 25, 2025, the Company recognized other (income) expense totaling $(6,268) and $(2,800), respectively, comprised primarily of $(7,621) and $(9,008), respectively, related to the termination of liabilities related to a frozen retirement benefit plan; $(11) and $2,061, respectively, related to severance and other employee termination and benefit costs associated with elimination of various positions as part of cost reduction initiatives, nil and $1,963, respectively, of severance primarily related to the resignation of the former Chief Executive Officer on June 11, 2024, ($(1,789) of which is included in accrued liabilities in the condensed Consolidated Balance Sheet as of January 25, 2025), $64 and $884, respectively, for legal and advisory professional service costs for restructuring and process improvements and other charges; and $1,300 related to the settlement of a class action lawsuit and related legal fees.

Note 13. Long-Term Incentive Compensation Expense

During the 13 and 39 weeks ended January 31, 2026, the Company did not grant any long-term incentive plan awards. The Company recognizes compensation expense for long-term incentive plan awards in selling and administrative expenses as follows:

(a) The long-term incentive plan for the 13 and 39 weeks ended January 25, 2025 was impacted due to forfeitures of $1,562 resulting from the resignation of the Company's former Chief Executive Officer on June 11, 2024.

Total unrecognized compensation cost related to unvested awards as of January 31, 2026 was $5,579 and is expected to be recognized over a weighted-average period of 1.62 years.

Note 14. Income Taxes

The Company recorded an income tax expense of $3,082 on pre-tax income of $9,737 during the 13 weeks ended January 31, 2026, which represented an effective income tax rate of 31.7% and an income tax benefit of $(4,108) on pre -tax income of $13,834 during the 13 weeks ended January 25, 2025, which represented an effective income tax rate of (29.7)%. The Company recorded an income tax expense of $6,349 on pre-tax income of $19,737 during the 39 weeks ended January 31, 2026, which represented an effective income tax rate of 32.2% and an income tax benefit of $(3,230) on pre-tax loss of $(46,051) during the 39 weeks ended January 25, 2025, which represented an effective income tax rate of 7.0%. The effective tax rate for the 13 and 39 weeks ended January 31, 2026 is higher than the prior year comparable period due to the Internal Revenue Code (IRC) 382 limitation on attribute utilization, increased projections of taxable income, and decrease in the valuation allowance.

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 January 31, 2026, the Company determined that it was more likely than not that it would not realize all deferred tax assets and the Company's tax rate for the current fiscal year reflects this determination. The Company will continue to evaluate this position.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), if a corporation undergoes an “ownership change” (generally defined as a cumulative change in the Company's 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 Term Loan Debt Conversion completed on June 10, 2024, we may have experienced an ownership change as defined by Sections 382 and 383. The Company conducted a study to determine if an ownership change occurred. It was determined that an ownership change occurred under Section 382 and 383, and the corresponding annual limitations materially impacts the utilization of the Company's tax attributes including its $211,913 NOL carryforwards, $60,195 disallowed interest expense carryforwards, and $1,071 tax credit carryforwards as of May 3, 2025. The Company anticipates that $63,092 of these tax attributes may be made available during the first five years following the ownership change on June 10, 2024, which would be able to offset future taxable income.

Note 15. Subsequent Events

Subsequent to the close of the third quarter of Fiscal 2026, the Company entered into a final settlement agreement dated February 4, 2026 (the “Settlement Agreement”), resolving litigation related to interchange fees in which the Company had previously sold a participation interest to Jefferies pursuant to the Sale Agreement (see Note 9, Derivative). Pursuant to the terms of the Sale Agreement, Jefferies is entitled to all proceeds from the Settlement Agreement, and such proceeds were delivered to Jefferies in early March 2026. Because the settlement agreement was executed and funded after the close of the third quarter, the settlement represents a non-recognized subsequent event. The Company will recognize the related deferred income from the proceeds of the Sale Agreement in the fourth quarter of fiscal year 2026.