What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-13 · 218 added, 245 removed, 446 unchanged (51% of the section changed)

3 unchanged sentences

(In thousands)

September 30, 2023

March 31, 2024

December 31, 2023

32 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Royalty and license

15 unchanged sentences

Other comprehensive income, net of tax

Deferred gains on available-for-sale marketable debt securities

Realized losses on available-for-sale marketable debt securities reclassified to net income

Total other comprehensive income

Deferred gains (losses) on available-for-sale marketable debt securities

Realized gains on available-for-sale marketable debt securities reclassified to net income

Total comprehensive income

3 unchanged sentences

(In thousands, except number of shares)

Three Months Ended September 30, 2023

Three Months Ended March 31, 2024

Common Stock and Additional Paid-In Capital

3 unchanged sentences

Stockholders ’ Equity

Balances at June 30, 2023

Balances at December 31, 2023

Unrealized gain on available-for-sale securities, net of taxes

5 unchanged sentences

Stock-based compensation

Balances at September 30, 2023

Three Months Ended September 30, 2022

Balances at March 31, 2024

Three Months Ended March 31, 2023

Common Stock and

4 unchanged sentences

Stockholders’

Balances at June 30, 2022

Unrealized gains on available-for-sale securities, net of taxes

Stock repurchases

Release of restricted stock units and awards, net of shares withheld

Issuance of stock for ESPP purchase

Stock-based compensation

Balances at September 30, 2022

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

Nine Months Ended September 30, 2023

Common Stock and Additional Paid-In Capital

Accumulated Other Comprehensive Income

Accumulated Deficit

Treasury Stock

Total Stockholders’ Equity

Balances at December 31, 2022

Unrealized gain on available-for-sale securities, net of taxes

Stock repurchases

Unrealized gains on available-for-sale securities, net of taxes

Release of restricted stock units and awards, net of shares withheld

Proceeds from stock options exercises

Issuance of stock for ESPP purchase

2 unchanged sentences

Stock-based compensation

Balances at September 30, 2023

Nine Months Ended September 30, 2022

Common Stock and

Additional Paid-In Capital

Comprehensive

Income (Loss)

Treasury Stock

Stockholders’

Balances at December 31, 2021

Unrealized loss on available-for-sale securities, net of taxes

Stock repurchases

Issuance of stock for ESPP purchase

Release of restricted stock units and awards, net of shares withheld

Shares issued to an employee in lieu of cash compensation

Shares issued in connection with public offering, net of issuance costs

Stock-based compensation

Balances at September 30, 2022

Balances at March 31, 2023

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows provided by (used in) operating activities:

3 unchanged sentences

Stock-based compensation

Net (gains) losses on investment in marketable securities

Net loss on derivative instruments

Foreign currency remeasurement gains

Net gains on investment in marketable securities

Net gain on derivative instruments

Foreign currency remeasurement loss

Shares issued to an employee in lieu of cash compensation

15 unchanged sentences

Payments for settlement of derivative instruments

Purchases of property and equipment

Net cash and cash equivalents used in investing activities

Net cash and cash equivalents provided by (used in) investing activities

Cash flows provided by (used in) financing activities:

Dividend payments to stockholders

Payment for purchases of treasury stock

Proceeds from issuance of common stock under employee stock purchase plan

Proceeds from stock options exercises

Shares withheld to cover payroll taxes

1 unchanged sentence

Net cash and cash equivalents used in financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents:

5 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Supplemental disclosure of cash flow information:

2 unchanged sentences

Dividends declared but not yet paid

Leased assets obtained in exchange for new operating lease liabilities

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 unchanged sentences

All intercompany accounts, transactions, and balances have been eliminated in consolidation.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( “ U.S.

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.

7 unchanged sentences

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 nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the full year.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year.

Segment Information

8 unchanged sentences

There is only one segment that is reported to management.

Recent Account Pronouncements

We do not expect recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2023 , to have significant impact on our financial positions and results of operations.

Recent Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standard Board (“FASB”) issued ASU No.

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.

REVENUE RECOGNITION

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2023 , and 2022 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table presents the disaggregation of our revenue for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,

Fixed fee license revenue

8 unchanged sentences

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 September 30, 2023 , we recorded adjustments of $ 0.5 million to increase royalty revenue.

We recorded adjustments of $ 0.2 million to decrease royalty revenue during the three months ended September 30, 2022 .

In the three months ended March 31, 2024 , we recorded no adjustments to royalty revenue recognized in the previous quarter.

We recorded adjustments of $ 0.4 million to increase royalty revenue during the three months ended March 31, 2023 .

Contract Assets

As of September 30, 2023 , we had contract assets of $ 6.3 million included within Prepaid expenses and other current asset s, and $ 0.2 million included within Other assets on the Condensed Consolidated Balance Sheets .

As of March 31, 2024 , we had contract assets of $ 6.5 million included within Prepaid expenses and other current asset s 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 .

Contract assets decreased by $ 1.7 million from January 1 , 2023 , to September 30 , 2023 , primarily due to actual royalties billed during the nine months ended September 30, 2023.

Deferred Revenue

Contract assets decreased by $ 1.4 million from January 1 , 2024 to March 31, 2024 , primarily due to actual royalties billed during the three months ended March 31, 2024 .

Fixed Fee License Revenue

We recognize revenue from a fixed fee license agreement when we have satisfied our performance obligations, which typically occurs upon the transfer of rights to our technology upon the execution of the license agreement.

12 unchanged sentences

As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis.

Based on contracts signed and payments received as of September 30, 2023 , we expect to recognize $ 13.8 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $ 8.1 million over one to three years and $ 5.7 million over more than three years.

On February 9, 2024, we entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta , pursuant to which the parties have agreed to terms for resolving the litigation matters described above (the “Litigation”) and Meta will license, on a non-exclusive basis, our patent portfolio for use in its products.

We accounted for the License and Settlement Agreement in accordance with provisions of Accounting Standard Codification 606 , Revenue from Contracts with Cus tomers , (“ASC 606 ”), and recorded $ 0.6 million, based on the remaining performance obligations, as Deferred revenue-current on our Condensed Consolidated Balance Sheets as of March 31, 2024.

We will recognize this deferred revenue once the remaining performance obligations are met.

Contingencies of the Notes to Consolidated Financial Statements for more information on the Meta Agreement.

Deferred Revenue

On February 27, 2024, we entered into an agreement to renew of our license agreement with Nintendo Co., Ltd, (“Nintendo”).

Under the terms of this agreement, Nintendo would obtain a license with respect to certain of our patents in return for $ 8.5 million of non-refundable, non-creditable fixed royalty revenue.

The commencement date of this agreement is September 27, 2024.

We received the $ 8.5 million fixed royalty payment from Nintendo in March 2024 and reported this payment as Deferred revenue-current on our Condensed Consolidated Balance Sheets .

Based on contracts signed and payments received as of March 31, 2024 , we expect to recognize $ 20.5 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $ 17.2 million over one to three years and $ 3.3 million over more than three years.

As of December 31, 2023 , total deferred revenue was $ 12.6 million.

We recognized $ 3.6 million of deferred revenue during the nine months ended September 30, 2023 .

We recognized $ 1.2 million of deferred revenue during the three months ended March 31, 2024 .

Capitalized Contract Costs

We capitalize certain incremental costs incurred, such as commissions and legal costs in order to obtain new contracts with our customers if we expect to recover these costs.

The capitalized contract costs are amortized upon recognition of the related revenue.

We capitalized $ 0.3 million of incremental costs incurred to obtain new contracts with customers in the three months ended March 31, 2024.

INVESTMENTS AND FAIR VALUE MEASUREMENTS

1 unchanged sentence

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.

We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment.

Investments are considered impaired when a decline in fair value is judged to be other-than-temporary.

If the cost of an individual investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment.

Once a decline in fair value is determined to be other-than-temporary, we will record an impairment charge and establish a new cost basis for the investment.

Marketable securities as of September 30, 2023 and December 31, 2022 consisted of the following (in thousands):

September 30, 2023

Marketable securities as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):

March 31, 2024

Cost or Amortized Cost

3 unchanged sentences

Equity securities

Total marketable equity securities

Marketable debt securities

8 unchanged sentences

Equity securities

Total marketable equity securities

Marketable debt securities

2 unchanged sentences

Total marketable debt securities

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of September 30, 2023 (in thousands) are as follows:

September 30, 2023

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of March 31, 2024 (in thousands) are as follows:

March 31, 2024

Amortized Cost

Less than 1 year

As of March 31, 2024, the fair value of corporate bonds with unrealized loss position was $ 8.8 million , with an aggregated loss of $ 0.3 million.

There were no treasury securities with unrealized loss position.

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 March 31, 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 September 30, 2023 and December 31, 2022 (in thousands):

September 30, 2023

These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024

Unrealized Losses

4 unchanged sentences

A summary of realized and unrealized gains and losses from our equity securities and derivative instruments are as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Net unrealized gains (losses) recognized on marketable equity securities

9 unchanged sentences

Financial instruments valued 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 September 30, 2023 , and December 31, 2022 .

Financial instruments measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 are classified based on the valuation technique in the table below (in thousands):

September 30, 2023

We did not hold Level 3 financial instruments as of March 31, 2024 , and December 31, 2023 .

Financial instruments measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 are classified based on the valuation technique in the table below (in thousands):

March 31, 2024

Fair Value Measurements Using

13 unchanged sentences

Significant Unobservable Inputs (Level 3 )

Certificate of deposit

treasury securities

7 unchanged sentences

Cash and cash equivalents were as follows (in thousands):

September 30,

Money market funds

Certificates of deposit (1)

Cash and cash equivalents

(1) Represents certificates of deposit with initial maturity days of 90 days or less.

Investments - Current

Investments - current were as follows (in thousands):

September 30,

Certificates of deposit (2)

Marketable securities

Marketable equity securities

treasury securities

Short-term investments

(2) Represents investments with initial maturity days between 91 days and one year.

Accounts and Other Receivables

Accounts and other receivables were as follows (in thousands):

September 30,

Trade accounts receivables, net

1 unchanged sentence

Accounts and other receivables

Allowance for credit losses as of September 30, 2023 and December 31, 2022 were not material.

Allowance for credit losses as of March 31, 2024 and December 31, 2023 were not material.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets were as follows (in thousands):

September 30,

Prepaid expenses

4 unchanged sentences

Investments- noncurrent were as follows (in thousands):

September 30,

treasury securities

1 unchanged sentence

Investments- noncurrent

Other assets were as follows (in thousands):

September 30,

Contract assets - long-term

Lease right-of-use assets

Total other assets

Other Current Liabilities

Other current liabilities were as follows (in thousands):

September 30,

Derivative instruments

Lease liabilities - current

Income taxes payable

21 unchanged sentences

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 Korea 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 hearing has been scheduled for November 30, 2023.

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 hearing and the second hearing 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 .

2 unchanged sentences

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 Assessment Authority submitted its answer against the tax appeal.

On September 8, 2023, the Appellant submitted its rebuttal brief in response thereto.

As of September 30, 2023, 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.

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.

The next hearing has not yet been set .

As of March 31, 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.

7 unchanged sentences

Meta Platforms, Inc., f/k/a Facebook, Inc.

On May 26, 2022, we filed a complaint against Meta Platforms, Inc.

(formerly known as Facebook, Inc.) (“Meta”) in the United States District Court for the Western District of Texas.

On May 26, 2022, we filed a complaint against Meta in the United States District Court for the Western District of Texas.

The complaint alleges that Meta’s augmented and virtual reality (“AR/VR”) systems, including the Meta Quest 2 , infringe six of our patents that cover various uses of haptic effects in connection with such AR/VR systems.

12 unchanged sentences

On August 2, 2023, Meta filed a mandamus petition asking the Federal Circuit to reverse the district court’s order on Meta’s transfer motion.

Immersion responded on August 11, 2023, and Meta filed its reply brief on August 14, 2023.

Meta’s petition remains pending.

Fact discovery closed on October 6, 2023.

The Federal Circuit denied Meta’s mandamus petition on October 30, 2023.

On November 10, 2023, we filed a separate action in the Western District of Texas against Meta directed to its newly launched Quest 3 product, asserting the following patents:

“System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment”

“Haptically enhanced interactivity with interactive content”

“System with wearable device and haptic output device”

“Haptically enhanced interactivity with interactive content”

In addition, Meta filed inter partes reviews (“IPRs”), IPR2023-00942;

9 unchanged sentences

and 10,248,298, respectively.

The Company filed its response to IPR 2023 - 00945 on September 8, 2023, and our response to IPR 2023 - 00946 and IPR 2023 - 00947 on September 12, 2023.

The Patent Trial and Appeal Board instituted review of IPR2023-00942 on December 6, 2023;

IPR2023-00943 on December 6, 2023;

IPR2023-00944 on December 7, 2023;

IPR2023-00945 on December 6, 2023;

IPR2023-00946 on December 8, 2023;

and IPR2023-00947 on December 6, 2023.

On January 16, 2024, Immersion and Meta jointly moved to stay all deadlines in district court because they had arrived at a settlement in principle.

On January 17, 2024, the Court stayed all deadlines.

Under the Court’s order, the parties were to either move to dismiss the proceedings if they finalized the settlement agreement, or alternatively they were to provide the Court with a status update, by January 31, 2024.

On February 9, 2024 , we entered into a Patent License and Settlement Agreement (the “License and Settlement Agreement”) with Meta , pursuant to which the parties have agreed to terms for resolving the litigation matters described above (the “Litigation”) and Meta will license, on a non-exclusive basis, our patent portfolio for use in its products.

Under the License and Settlement Agreement, in consideration for the license and releases granted therein, we received approximately $ 17.3 million, after deducting for legal fees related to the Litigation (and other pending litigation) and other liabilities.

Pursuant to the License and Settlement Agreement, we and Meta agreed to terms for dismissal by them of the outstanding Litigation and the IPRs.

On February 16, 2024, the parties dismissed the district court actions and requested permission from the Patent Trial and Appeal Board to dismiss the IPRs.

The Patent Trial and Appear Board dismissed the IPRs on February 27, 2024.

The description of the License and Settlement Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the License and Settlement Agreement, which is attached to this Quarterly Report on Form 10-Q as Exhibit 10.1 and is incorporated herein by reference.

Immersion Corporation vs.

8 unchanged sentences

On June 19, 2023, Xiaomi filed an initial response to the Company’s lawsuit in India.

On July 7, 2023, the Indian litigation was listed before the Learned Joint Registrar (“JR”), Mr.

On July 7, 2023, the Indian litigation was listed before the Learned Joint Registrar, Mr.

Siddharth Mathur.

The application seeking interim injunction was set to be heard on March 21, 2024, but has been reset by the Court to be heard on July 22, 2024.

On March 21, 2024, Xiaomi indicated that it would bring a counter claim to invalidate the Indian patent.

On July 11, 2023, in the German proceeding Xiaomi filed its nullity action in the German Federal Patent Court, which was served on Immersion on July 27, 2023.

Immersion has until October 27, 2023 to respond.

In the German infringement proceeding, Xiaomi’s statement of defense is due on October 25, 2023.

Xiaomi has until December 21, 2023 to reply to Immersion’s writ of summons in the French proceeding.

The Court will hear Immersion’s application for a preliminary injunction on January 4, 2024 in the Indian proceeding.

Immersion replied on October 27, 2023, and received Xiaomi’s response on February 2, 2024, with a decision expected sometime before August of 2024, and a hearing has been set for November 13, 2024.

In the German infringement proceeding, Xiaomi’s statement of defense was due on October 25, 2023.

Immersion’s reply was due on February 26, 2024.

Xiaomi’s rejoinder is scheduled for July 25, 2024.

The oral hearing is scheduled for August 29, 2024.

The next case management hearing in the French proceeding is scheduled for June 6, 2024.

Immersion Corporation vs.

Valve Corporation

On May 15, 2023, we filed a complaint against Valve Corporation (“ Valve ”) in the United States District Court for the Western District of Washington.

Valve Corporation ( “Valve ”)

On May 15, 2023, we 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.

9 unchanged sentences

Valve responded to the complaint on July 24, 2023 with a motion to dismiss.

Valve re-noted its motion, which changed the Company’s response deadline from August 14, 2023 to August 21, 2023.

The Company timely filed its response and Valve filed its reply on August 25, 2023.

The motion remains pending, and although the parties have agreed to a case schedule, the Court has not yet entered such case schedule.

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 are directed to U.S.

7,336,260 and 9,430,042 respectively.

The Company’s response is due April 26, 2024, and April 29, 2024, respectively.

Valve filed IPR2024-00508 on January 30, 2024, which is directed to U.S.

The Company’s response is due May 9, 2024.

Valve filed IPR2024-00556 and IPR2024-00557 on February 7, 2024.

These are directed to U.S.

8,749,507 and 10,665,067, respectively.

The Company’s responses are due on May 15, 2024.

Valve filed IPR2024-00582 on February 16, 2024, which is directed to U.S.

The Company’s response is due June 27, 2024.

Valve filed IPR2024-00714 on March 22, 2024, which is directed to U.S.

The PTAB has not yet set a response due date.

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.

STOCK-BASED COMPENSATION

2 unchanged sentences

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 (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 granted under the 2011 Equity Incentive Plan.

On March 30, 2023, our stockholders approved an amendment to the 2021 Plan to increase the number of shares reserved for issuance under the 2021 Plan by 4,621,488 shares.

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.

4 unchanged sentences

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 September 30, 2023 is as follows (in thousands):

A summary of our equity incentive program as of March 31, 2024 is as follows (in thousands):

Common stock shares available for grant

Stock options outstanding

RSUs outstanding

1 unchanged sentence

PSUs outstanding

Time-Based Stock Options

The following summarizes time-based stock options activities for the nine months ended September 30, 2023 :

Number of Shares Underlying Stock Options (in thousands)

Weighted Average Exercise Price Per Share

Weighted Average Remaining Contractual Life (Years)

Aggregate Intrinsic Value (in thousands)

Outstanding at December 31, 2022

Canceled or expired

Outstanding as of September 30, 2023

Vested and expected to vest at September 30, 2023

Exercisable at September 30, 2023

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the exercise price of our common stock for the options that were in-the-money.

We did not grant stock options in the nine months ended September 30, 2023 .

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

Restricted Stock Units

The following summarizes RSU activities for the nine months ended September 30, 2023 :

The following summarizes RSU activities for the three months ended March 31, 2024 :

Number of Restricted Stock Units (in thousands)

3 unchanged sentences

Outstanding at December 31, 2023

Outstanding at September 30, 2023

Outstanding at March 31, 2024

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 nine months ended September 30, 2023 :

The following summarizes RSA activities for the three months ended March 31, 2024 :

Number of Restricted Stock Awards

3 unchanged sentences

Outstanding at December 31, 2023

Outstanding at September 30, 2023

Outstanding at March 31, 2024

Market Condition-Based Performance Stock Units

The following summarizes PSU activities for the nine months ended September 30, 2023 :

The following summarizes PSU activities for the three months ended March 31, 2024 :

Number of Market Condition-Based Performance Stock Units (in thousands)

2 unchanged sentences

Outstanding at December 31, 2023

Outstanding at September 30, 2023

Employee Stock Purchase Plan

Under our 1999 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase common stock through payroll deductions at a purchase price of 85 % of the lower of the fair market value of our common stock at the beginning of the offering period or the purchase date.

Participants may not purchase more than 2,000 shares in a six -month offering period or purchase stock having a value greater than $ 25,000 in any calendar year as measured at the beginning of the offering period.

A total of 1.0 million shares of common stock have been reserved for issuance under the ESPP.

During the nine months ended September 30, 2023 , no shares were purchased under the ESPP.

Effective February 1, 2023, our ESPP was discontinued and 193,134 shares expired following the ESPP termination.

Outstanding at March 31, 2024

Stock-based Compensation Expense

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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 and ESPP for the three and nine months ended September 30, 2023 , and 2022 is as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The stock-based compensation related to all of our stock-based awards for the three months ended March 31, 2024 , and 2023 is as follows (in thousands):

Three Months Ended March 31,

Stock options

3 unchanged sentences

General and administrative

As of September 30, 2023 , there was $ 3.3 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, RSUs, RSAs and PSUs granted to our employees and directors.

As of March 31, 2024 , there was $ 4.6 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, 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 1.79 years.

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Stock Repurchase Program

On February 23, 2022, our Board of Directors ( the “ Board” ) approved a stock repurchase program of up to $ 30.0 million of our common stock for a period of up to twelve months (the “February 2022 Stock Repurchase Program”).

Any stock repurchases were made through open market or privately negotiated transactions, at such times and in such amounts as management deemed 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 .

Additionally, the Board authorized the use of 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 stock repurchase program was implemented as a method to return value to our stockholders.

The timing, pricing and sizes of any repurchases depended on a number of factors, including the market price of our common stock and general market and economic conditions.

The stock repurchase program did not obligate us to repurchase any dollar amount or number of shares, and the program could be suspended or discontinued at any time.

In the year ended December 31, 2022, we repurchased 1,637,566 shares of our common stock for $ 8.9 million at an average purchase price of $ 5.46 per share.

The February 2022 Stock Repurchase Program was terminated on December 29, 2022.

On December 29, 2022, 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.

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 stock repurchase program was implemented as a method to return value to our stockholders.

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 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 December 29, 2023 to December 29, 2024 .

We repurchased 898,757 shares of our common stock for $ 6.2 million at average purchase price of $ 6.8602 per share during the nine months ended September 30, 2023 .

As of September 30, 2023, we had $ 43.8 million available for repurchase under the December 2022 Stock Repurchase Program.

Dividends Payment

On November 14, 2022, our Board declared a quarterly dividend in the amount of $ 0.03 per share, which was paid on January 30, 2023, to stockholders of record on January 15, 2023.

In addition, on December 29, 2022, the Board declared a special dividend in the amount of $ 0.10 per share, which was paid on January 30, 2023 to stockholders of record on January 15, 2023.

On February 21, 2023, the Board declared a second quarterly dividend, in the amount of $ 0.03 per share, which was paid on April 28, 2023 to stockholders of record on April 13, 2023.

On May 10, 2023, the Board declared a third quarterly dividend in the amount of $ 0.03 per share which was paid on July 28, 2023, to shareholders of record on July 13, 2023.

On August 11, 2023 , the Board declared a quarterly dividend in the amount of $ 0.03 per share, which was paid on October 27 , 2023 to shareholders of record on October 16 , 2023 .

On November 13 , 2023, our Board declared a quarterly dividend in the amount of $ 0.045 per share , will be payable, subject to any prior revocation, on January 25, 2024 to shareholders of record on January 14, 2024.

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 .

During 2023 , we repurchased 1,217,774 shares of our common stock for $ 8.3 million at average purchase price of $ 6.77 per share.

We did not repurchase any stock during the three months ended March 31, 2024.

As of March 31, 2024, we had $ 41.7 million available for repurchase under the December 2022 Stock Repurchase Program.

Dividends Decl ared and Dividend Payments

On February 21, 2023, the Board declared a quarterly dividend, in the amount of $ 0.03 per share, which was paid on April 28, 2023 to stockholders of record on April 13, 2023 .

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 shareholders 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 shareholders 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 shareholders of record on July 8, 2024 .

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 nine months of 2023 , the total dividends paid was $ 6.4 million.

Provision for income taxes the three and nine months ended September 30, 2023 and 2022 consisted of the following (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

In the three months ended March 31, 2024 and 2023 , the total dividends paid was $ 1.4 million and $ 4.4 million, respectively.

Provision for income taxes the three months ended March 31, 2024 and 2023 consisted of the following (in thousands):

Three Months Ended March 31,

Income before provision for income taxes

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Effective tax rate

Provision for income taxes for the three and nine months ended September 30, 2023 resulted primarily from estimated domestic and foreign taxes included in the calculation of the effective tax rate.

Provision for income taxes for the three months ended September 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

Provision for income taxes for the nine months ended September 30, 2022 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

We maintain a partial valuation allowance against our U.S.

federal deferred tax assets and maintain a full valuation allowance against our U.S.

state and Canadian federal deferred tax assets.

The change in the estimated effective tax rate was mainly driven by higher U.S.

taxable income which was a result of higher U.S.

passive income.

As of September 30, 2023 , we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $ 7.3 million and applicable interest of $ 0.1 million.

Provision for income taxes for the three months ended March 31, 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 assets, whose future realization is more likely than not and continue to maintain full valuation allowance for 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.

We continue to maintain full valuation allowance for state and certain foreign deferred tax assets in the United States and Canada as a result of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results.

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 March 31, 2024 , we had unrecognized tax benefits under Accounting Standards Certification (“ASC”) 740 Income Taxes of approximately $ 4.9 million of which $ 4.9 million could be payable in cash.

In addition, interest and penalty of $ 0.2 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.

Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision.

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 September 30, 2023 , we had net deferred income tax assets of $ 7.0 million and deferred income tax liabilities of $ 0.1 million.

As of March 31, 2024 , we had net deferred income tax assets of $ 3.3 million and deferred income tax liabilities of $ 6,000 .

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.

We maintain a valuation allowance against certain of our deferred tax assets, including certain federal, all state, and certain foreign deferred tax assets because of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results.

If we determine the deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

NET INCOME (LOSS) PER SHARE

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Diluted net income (loss) per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock.

Potential common stock, computed using the treasury stock method, includes stock options, stock awards and ESPP.

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 (loss) per share (in thousands, except per share amounts):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Weighted-average shares outstanding, basic

2 unchanged sentences

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 nine months ended September 30, 2023 and 2022 , 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 September 30,

Nine Months Ended September 30,

Stock options

RSUs, RSAs and PSUs

For the three months ended March 31, 2024, we had no outstanding stock options and awards that could potentially dilute basic earnings per share in the future.

For the three months ended March 31, 2023 , we had 140,000 outstanding stock options and 2,000 outstanding awards 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.

We lease our office space under lease arrangements with expiration dates on or before March 31, 2024.

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We apply discount rates to operating leases using a portfolio approach.

Below is a summary of our right-of-use assets and lease liabilities (in thousands):

On January 31, 2022, we entered into an agreement to lease a 1,390 square feet of office space in Aventura, Florida (“Aventura Lease”).

We use this facility as our principal executive offices and for general administrative functions.

This lease commenced in the first quarter of 2022 and expired in March 2024.

On April 4, 2024, we entered into an amendment of the Aventura Lease.

The lease amendment commenced in April 2024 and expires at the end of the first quarter of 2026.

We accounted for this lease as an operating lease in accordance with the provisions of ASC 842 Leases (“ASC 842 ”).

We expect to record a lease liability of $ 0.1 million, which represents the present value of the lease payments using an estimated incremental borrowing rate of 4.72 %.

We also recognized a right of use (“ROU”) asset of $ 0.1 million which represents our right to use an underlying asset for the lease term.

Below is a summary of our ROU assets and lease liabilities (in thousands):

Balance Sheets Classification

September 30,

Right-of-use assets

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Total lease liabilities

The table below provides supplemental information related to operating leases during the nine months ended September 30, 2023 and 2022 (in thousands except for lease term):

Nine Months Ended September 30,

The table below provides supplemental information related to operating leases during the three months ended March 31, 2024 and 2023 (in thousands except for lease term):

Three Months Ended March 31,

Cash paid within operating cash flow

1 unchanged sentence

Weighted average discount rates

On June 6, 2022, we entered into a sublease agreement with Innovobot Fund LLP for our facility located in Montreal Canada (the “ Montreal Facility ” ).

This sublease commenced on June 8, 2022, and ends on February 27, 2024 which approximates the lease termination date of the original Montreal Facility lease.

On November 12, 2014, we entered into an amendment to the lease of approximately 42,000 square feet office space in San Jose, California facilities (the “SJ Facility” ).

The lease commenced in May 2015 and expired as of April 2023.

We vacated the SJ Facility in the first quarter of 2020 .

On March 12, 2020, we entered into a sublease agreement with Neato Robotics, Inc.

(“Neato”) for the SJ Facility.

This sublease commenced in June 2020 and ended on April 30, 2023, which is the lease termination date of the San Jose Facility.

Both SJ Facility lease and related sublease expired in April 2023.

In accordance with provisions of ASC 842 , we treated each sublease as a separate lease as we were not relieved of the primary obligation under each original lease.

We continue to account for each original lease as a lessee, in the same manner as prior to the commencement date of the sublease.

We accounted for each sublease as a lessor of such lease.

We classified each sublease as an operating lease as it did not meet the criteria of a Sale-Type or Direct Financing lease.

We recognize operating lease expense and lease payments from the sublease, on a straight-line basis, in our Condensed Consolidated Statements of Income and Comprehensive Income over the lease terms.

During the three and nine months ended September 30, 2023 and 2022 , our net operating lease expenses were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

During the three months ended March 31, 2024 and 2023 , our net operating lease expenses were as follows (in thousands):

Three Months Ended March 31,

Operating lease cost

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Total lease cost

Minimum future lease payments obligations as of September 30, 2023 were as follows (in thousands):

For the Years Ending December 31,

Total lease payments

Total lease liability

Future cash receipts from our sublease agreements as of September 30, 2023 were as follows (in thousands):

For the Years Ending December 31,

As of March 31, 2024, we have no future lease obligation.

SUBSEQUENT EVENT

On November 10, 2023 , we filed an additional complaint against Meta in the United States District Court for the Western District of Texas, alleging that Meta’s AR/VR systems, including the Meta Quest 3, infringe five of our patents that cover various uses of haptic effects in connection with such AR/VR systems.

We are seeking to enjoin Meta from further infringement and to recover a reasonable royalty for such infringement.

The complaint against Meta asserts infringement of the following patents:

“System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment”

“Haptically enhanced interactivity with interactive content”

“System with wearable device and haptic output device”

“Haptically enhanced interactivity with interactive content”

Following the fiscal quarter

ended March 31, 2024, Toro 18 Holdings LLC (“Investor”), a Delaware limited

liability company and wholly owned subsidiary of Immersion, entered into a

Standby, Securities Purchase and Debt Conversion Agreement (the “Purchase Agreement”),

dated April 16, 2024, with Barnes & Noble Education, Inc., a Delaware corporation (“BNED”), and certain other parties.

Pursuant to the Purchase

Agreement, BNED will conduct a rights offering (the “Rights Offering”), whereby

(i) BNED will distribute 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 900,000,000 new shares of BNED Common Stock at a

subscription price of $ 0.05 per share (the “Subscription Price”);

stockholders will have oversubscription rights;

and (iii) if the Rights

Offering is not fully subscribed, Immersion, through Investor, has agreed to

purchase up to $ 35.0 million in unsubscribed Rights (the “Backstop Commitment”).

to the Purchase Agreement, Immersion, through Investor, will also purchase

900,000,000 new shares of BNED Common Stock at the Subscription Price in a

private placement transaction.

The Purchase Agreement further provides for a

conversion of certain of BNED’s outstanding debt into shares of BNED Common Stock at the

Subscription Price.

closing of the transactions contemplated by the Purchase Agreement is also

subject to the approval of BNED stockholders at a special meeting to be held by

I n connection with these transactions, BNED has

agreed to reimburse Immersion, through Investor, for its reasonable legal and

other expenses, up to a maximum of $ 2.5 million, and will pay Immersion, through

Investor, $ 2.5 million as consideration for its Backstop Commitment.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements