What changed in this filing

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Item 1. Financial Statements

2020-11-06 compared with 2020-08-07 · 215 added, 143 removed, 461 unchanged (44% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2020 December 31,

Current assets:

6 unchanged sentences

Long-term deposits 11,884 7,062

Other assets 8,033 9,600

Total assets $ 87,436 $ 124,848

LIABILITIES AND STOCKHOLDERS’ EQUITY

23 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Royalty and license $ 7,531 $ 10,549 $ 19,306 $ 24,264

7 unchanged sentences

Total costs and expenses 5,011 11,899 22,543 46,418

Operating loss

Interest and other income

Loss before benefit from (provision for) income taxes

Operating income (loss) 2,585 ( 1,275 ) ( 3,022 ) ( 21,929 )

Interest and other income (loss), net 174 ( 24 ) 334 1,106

Income (loss) before benefit from (provision for) income taxes 2,759 ( 1,299 ) ( 2,688 ) ( 20,823 )

Benefit from (provision for) income taxes 96 ( 88 ) 3 ( 200 )

Basic net loss per share

Shares used in calculating basic net loss per share

Diluted net loss per share

Shares used in calculating diluted net loss per share

Net income (loss) $ 2,855 $ ( 1,387 ) $ ( 2,685 ) $ ( 21,023 )

Basic net income (loss) per share $ 0.11 $ ( 0.04 ) $ ( 0.09 ) $ ( 0.67 )

Shares used in calculating basic net income (loss) per share 26,898 31,711 28,507 31,461

Diluted net income (loss) per share $ 0.11 $ ( 0.04 ) $ ( 0.09 ) $ ( 0.67 )

Shares used in calculating diluted net income (loss) per share 27,134 31,711 28,507 31,461

Other comprehensive income (loss)

1 unchanged sentence

Total other comprehensive income (loss) — ( 6 ) ( 2 ) 16

Total comprehensive loss

Total comprehensive income (loss) $ 2,855 $ ( 1,393 ) $ ( 2,687 ) $ ( 21,007 )

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except number of shares)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Common Stock and

Additional Paid-In Capital

Additional Paid-In Capital Accumulated

Comprehensive

Treasury Stock

Income Accumulated

Deficit Treasury Stock Total

Stockholders’

Balances at March 31, 2020

Stock repurchases

Shares Amount Shares Amount

Balances at June 30, 2020 39,007,576 $ 255,446 $ 122 $ ( 124,105 ) 12,143,433 $ ( 81,733 ) $ 49,730

Net income 2,855 2,855

Issuance of stock for ESPP purchases 12,394 71 71

Exercise of stock options, net of shares withheld for employee taxes 2,300 19 19

Release of restricted stock units and awards 35,821 —

Stock-based compensation 1,339 1,339

Balances at June 30, 2020

Three Months Ended June 30, 2019

Balances at September 30, 2020 39,058,091 $ 256,875 $ 122 $ ( 121,250 ) 12,143,433 $ ( 81,733 ) $ 54,014

Three Months Ended September 30, 2019

Common Stock and

Additional Paid-In Capital

Additional Paid-In Capital Accumulated

Comprehensive

Treasury Stock

Income Accumulated

Deficit Treasury Stock Total

Stockholders’

Balances at March 31, 2019

Shares Amount Shares Amount

Balances at June 30, 2019 38,488,327 $ 250,079 $ 138 $ ( 118,157 ) 6,823,147 $ ( 48,350 ) $ 83,710

Net loss ( 1,387 ) ( 1,387 )

Unrealized gain on available-for-sale securities, net of taxes ( 6 ) ( 6 )

Issuance of stock for ESPP purchases 8,262 56 56

Exercise of stock options, net of shares withheld for employee taxes 111,333 869 869

1 unchanged sentence

Stock-based compensation 1,187 1,187

Balances at June 30, 2019

Balances at September 30, 2019 38,618,922 $ 252,191 $ 132 $ ( 119,544 ) 6,823,147 $ ( 48,350 ) $ 84,429

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except number of shares)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Common Stock and

Additional Paid-In Capital

Additional Paid-In Capital Accumulated

Comprehensive

Treasury Stock

Income Accumulated

Deficit Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

Balances at December 31, 2019 38,624,784 $ 253,289 $ 124 $ ( 118,565 ) 7,210,456 $ ( 51,091 ) $ 83,757

Net loss ( 2,685 ) ( 2,685 )

Unrealized loss on available-for-sale securities, net of taxes ( 2 ) ( 2 )

1 unchanged sentence

Issuance of stock for ESPP purchase 22,556 134 134

Exercise of stock options, net of shares withheld for employee taxes 2,300 19 19

Release of restricted stock units and awards 408,451 —

Stock-based compensation 3,433 3,433

Balances at June 30, 2020

Six Months Ended June 30, 2019

Balances at September 30, 2020 39,058,091 $ 256,875 $ 122 $ ( 121,250 ) 12,143,433 $ ( 81,733 ) $ 54,014

Nine Months Ended September 30, 2019

Common Stock and

Additional Paid-In Capital

Additional Paid-In Capital Accumulated

Comprehensive

Treasury Stock

Income Accumulated

Deficit Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

Balances at December 31, 2018 37,652,498 $ 246,415 $ 116 $ ( 98,521 ) 6,823,147 $ ( 48,350 ) $ 99,660

Net loss ( 21,023 ) ( 21,023 )

Unrealized gain on available-for-sale securities, net of taxes 16 16

3 unchanged sentences

Stock-based compensation 4,371 4,371

Balances at June 30, 2019

Balances at September 30, 2019 38,618,892 $ 252,191 $ 132 $ ( 119,544 ) 6,823,147 $ ( 48,350 ) $ 84,429

See accompanying Notes to Condensed Consolidated Financial Statements.

IMMERSION CORPORATION

1 unchanged sentence

(In thousands)

Six Months Ended June 30,

Nine Months Ended

September 30,

Cash flows provided by (used in) operating activities:

Net loss $ ( 2,685 ) $ ( 21,023 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

1 unchanged sentence

Stock-based compensation 3,433 4,371

Other ( 95 ) 467

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other current assets 4,147 ( 2,239 )

Long-term deposit

Long-term deposits ( 4,889 ) ( 6,533 )

Other assets 1,471 ( 3,993 )

Accounts payable ( 642 ) ( 1,440 )

26 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

September 30, 2020

SIGNIFICANT ACCOUNTING POLICIES

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and the world and has resulted in authorities implementing numerous measures to combat the spread of the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns.

The COVID-19 outbreak and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, consumers, economies, and financial markets globally, leading to an economic downturn and increased market volatility.

The COVID-19 outbreak and related public health measures have adversely affected workforce, organizations, consumers, economies, and financial markets globally, leading to an economic downturn and increased market volatility.

Our compliance with these containment measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our customers and suppliers for an extended period of time.

To support the health and well-being of our employees, customers and communities, we implemented work-from-home and restricted travel policies in the first quarter of 2020, which are expected to remain in place until the end of September 2020.

In addition, many of our customers are working remotely, which may delay the timing of some orders due to their and our compliance with frequently changing government-mandated or recommended shelter-in-place orders in jurisdictions in which we, our customers and our suppliers operate.

We reported lower estimated royalties revenue in the second quarter of 2020 following the anticipated volume reductions due to delay in shipments as well as decline in general business environment due to the impact of COVID-19.

In response to certain anticipated impacts from the COVID-19 pandemic, we have also implemented a series of cost reduction initiatives to further preserve financial flexibility.

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We applied for the CEWS to the extent we met the requirements to receive the subsidy.

During the three months ended June 30, 2020, we recorded $ 0.2 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

During the three and nine months ended September 30, 2020, we recorded $ 0.3 million and $ 0.5 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

Principles of Consolidation and Basis of Presentation

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GAAP") for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.

Accordingly, these condensed consolidated financial statements

do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S.

Accordingly, these condensed consolidated financial statements do not include all information and footnotes necessary for a complete presentation of the financial position, results of operations, and cash flows, in conformity with U.S.

GAAP and should be read in conjunction with our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2019.

In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included.

The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.

Use of Estimates

1 unchanged sentence

Significant estimates include valuation of income taxes including uncertain tax provisions, and revenue recognition.

Actual results may differ materially from those estimates which were made based on the best information known to management at that time.

The business and economic uncertainty resulting from the COVID-19 pandemic has made such estimates and assumptions more difficult to calculate.

Accordingly, actual results and outcomes may differ from those estimates.

Actual results may differ materially from those estimates which were made based on the best information known to management at that time.

Segment Information

51 unchanged sentences

As a result of accruing per-unit royalty revenue for the quarter based on such estimates, we make adjustments in the following quarter to true-up revenue to the actual amounts reported by our licensees.

During the three months ended June 30, 2020 , we recorded a $ 20,000 adjustment to decrease per-unit royalty revenue.

This adjustment represents the difference between the actual per-unit royalty revenue for the three months ended March 31, 2020 as reported by our licensees during the three months ended June 30, 2020 and the estimated per-unit royalty revenue for the three months ended March 31, 2020 that we reported during the quarter.

During the three months ended September 30, 2020, we recorded a $ 0.3 million adjustment to increase per-unit royalty revenue.

This adjustment represents the difference between the actual per-unit royalty revenue for the three months ended June 30, 2020 as reported by our licensees during the three months ended September 30, 2020 and the estimated per-unit royalty revenue for the three months ended June 30, 2020 that we reported during the quarter.

Certain of our per-unit royalty agreements contains a minimum royalty provision which sets forth minimum amounts to be received by us during the contract term.

Under Accounting Standard Codification 606, Revenue from Contracts with Customers , (“ASC 606”), minimum royalties are considered a fixed transaction price to which we have an unconditional right

once all other performance obligations, if any, are satisfied.

Under Accounting Standard Codification 606, Revenue from Contracts with Customers , (“ASC 606”), minimum royalties are considered a fixed transaction price to which we have an unconditional right once all other performance obligations, if any, are satisfied.

We recognize all minimum royalties as revenue at the inception of the license agreement, or in the period in which all remaining revenue recognition criteria have been met.

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Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three and six months ended June 30, 2020 and 2019 (in thousands).

The following table presents the disaggregation of our revenue for the three and nine months ended September 30, 2020 and 2019 (in thousands).

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Fixed fee license revenue $ 1,243 $ 4,115 $ 3,821 $ 10,109

3 unchanged sentences

Total revenue $ 7,596 $ 10,624 $ 19,521 $ 24,489

As of June 30, 2020 , we had contract assets of $ 7.8 million included within Prepaid expenses and other current assets , and $ 6.0 million included within Other assets on the Condensed Consolidated Balance Sheets.

As of September 30, 2020, we had contract assets of $ 9.1 million included within Prepaid expenses and other current assets , and $ 5.3 million included within Other assets on the Condensed Consolidated Balance Sheets.

As of December 31, 2019, we had contract assets of $ 13.1 million included within Prepaid expenses and other current assets , and $ 6.9 million included within Other assets , on the Condensed Consolidated Balance Sheets.

Contract assets decreased by $ 6.2 million from December 31, 2019 to June 30, 2020 , primarily due to actual royalties billed during the six months ended June 30, 2020 that reduced the minimum royalties recorded in contract assets.

Contract assets decreased by $ 5.6 million from December 31, 2019 to September 30, 2020, primarily due to actual royalties billed during the nine months ended September 30, 2020.

Contract Revenue

Based on contracts signed and payments received as of June 30, 2020 , we expect to recognize $ 28.1 million in revenue related to Performance Obligation B under our fixed fee license agreements, which is satisfied over time, including $ 13.8 million over one to three years and $ 14.3 million over more than three years.

Based on contracts signed and payments received as of September 30, 2020, we expect to recognize $ 27.6 million in revenue related to Performance Obligation B under our fixed fee license agreements, which is satisfied over time, including $ 14.5 million over one to three years and $ 13.1 million over more than three years.

Revenue related to Performance Obligation B was $ 30.6 million as of December 31, 2019.

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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.

As of June 30, 2020 and December 31, 2019 , we did not hold any Level 3 instruments.

Financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 are classified based on the valuation technique in the table below (in thousands):

June 30, 2020

As of September 30, 2020 and December 31, 2019, we did not hold any Level 3 instruments.

Financial instruments measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 are classified based on the valuation technique in the table below (in thousands):

September 30, 2020

Fair Value Measurements Using

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Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

Money market accounts $ 45,612 $ — $ — $ 45,612

Total assets at fair value (1)

$ 45,612 $ — $ — $ 45,612

(1) The above table excludes $ 10.3 million of cash held in banks.

3 unchanged sentences

Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

Money market accounts $ 63,351 $ — $ — $ 63,351

1 unchanged sentence

Total assets at fair value (2)

$ 63,351 $ 3,019 $ — $ 66,370

(2) The above table excludes $ 23.1 million of cash held in banks.

The contractual maturities of our available-for-sale securities on June 30, 2020 and December 31, 2019 were all due within one year .

There were no transfers of instruments between Level 1 and 2 during the three and six months ended June 30, 2020 and the year ended December 31, 2019 .

The contractual maturities of our available-for-sale securities on September 30, 2020 and December 31, 2019 were all due within one year .

There were no transfers of instruments between Level 1 and 2 during the three and nine months ended September 30, 2020 and the year ended December 31, 2019.

Money market accounts are classified as cash equivalents and U.S.

4 unchanged sentences

Treasury securities $ 3,018 $ 1 $ — $ 3,019

We had no short-term investments as of June 30, 2020 .

Total $ 3,018 $ 1 $ — $ 3,019

We had no short-term investments as of September 30, 2020.

BALANCE SHEETS DETAILS

1 unchanged sentence

Our cash and cash equivalent balances were as follows (in thousands):

September 30,

2020 December 31,

Cash $ 10,349 $ 23,127

Money market funds 45,612 63,351

Cash and cash equivalents $ 55,961 $ 86,478

Accounts and Other Receivable

Accounts and Other Receivables

Accounts and other receivables consisted of the following (in thousands):

September 30,

2020 December 31,

Trade accounts receivable $ 846 $ 2,972

1 unchanged sentence

Accounts and other receivables $ 1,366 $ 3,385

Allowance for credit losses as of June 30, 2020 and December 31, 2019 were not material.

Allowance for credit losses as of September 30, 2020 and December 31, 2019 were not material.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

September 30,

2020 December 31,

Prepaid expenses 642 933

3 unchanged sentences

Other assets consisted of the following (in thousands):

September 30,

2020 December 31,

Contract assets - long-term $ 5,294 $ 6,928

1 unchanged sentence

Deferred tax assets 470 470

Other assets 164 —

Total other assets $ 8,033 $ 9,600

1 unchanged sentence

Other current liabilities are as follows (in thousands):

September 30,

2020 December 31,

Accrued legal $ 124 $ 1,077

13 unchanged sentences

A summary of our equity incentive program is as follows (in thousands):

September 30,

Common stock shares available for grant 2,814

3 unchanged sentences

Time-Based Stock Options

The following summarizes activities for the time-based stock options for the six months ended June 30, 2020 (in thousands except for weighted average exercise price per share and weighted average remaining contractual life data):

The following summarizes activities for the time-based stock options for the nine months ended September 30, 2020 (in thousands except for weighted average exercise price per share and weighted average remaining contractual life data):

Number of Shares

Underlying Stock Options

Weighted Average

Underlying Stock Options Weighted Average

Exercise Price

Weighted Average

Per Share Weighted Average

Remaining Contractual Life

(Years) Aggregate

Intrinsic Value

Outstanding at December 31, 2019 967 $ 8.55 5.63 $ 16

Granted 456 $ 7.58

Exercised ( 2 ) $ 8.13

Canceled or expired ( 54 ) $ 9.71

Outstanding as of June 30, 2020

Vested and expected to vest at June 30, 2020

Exercisable at June 30, 2020

Aggregate intrinsic value is the difference between the closing price on the last trading day in June 30, 2020 and the exercise price, multiplied by the number of in-the-money stock options.

Outstanding at September 30, 2020 1,367 $ 8.18 5.59 $ —

Vested and expected to vest at September 30, 2020 1,192 $ 8.23 5.53 $ —

Exercisable at September 30, 2020 393 $ 8.82 4.61 $ —

Aggregate intrinsic value is the difference between the closing price on the last trading day in September 30, 2020 and the exercise price, multiplied by the number of in-the-money stock options.

Restricted Stock Units

The following summarizes RSU activities for the six months ended June 30, 2020 (in thousands except for weighted average grant date fair value and weighted average remaining contractual life data):

Number of Restricted Stock Units

Weighted Average Grant Date Fair Value

Weighted Average

The following summarizes RSU activities for the nine months ended September 30, 2020 (in thousands except for weighted average grant date fair value and weighted average remaining contractual life data):

Number of Restricted Stock Units Weighted Average Grant Date Fair Value Weighted Average

Remaining Contractual Life

(Years) Aggregate

Intrinsic Value

Outstanding at December 31, 2019 945 $ 8.81 1.25 $ 7,020

Outstanding at June 30, 2020

Granted 515 $ 5.95

Released ( 337 ) $ 8.99

Forfeited ( 56 ) $ 8.31

Outstanding at September 30, 2020 1,067 $ 7.39 1.20 $ 7,524

Restricted Stock Awards

The following summarizes RSA activities for the six months ended June 30, 2020 (in thousands except for weighted average grant date fair value and weighted average remaining recognition period):

Number of Restricted Stock Awards

Weighted Average Grant Date Fair Value

Weighted Average Remaining Recognition Period

The following summarizes RSA activities for the nine months ended September 30, 2020 (in thousands except for weighted average grant date fair value and weighted average remaining recognition period):

Number of Restricted Stock Awards Weighted Average Grant Date Fair Value Weighted Average Remaining Recognition Period

Outstanding at December 31, 2019 91 $ 7.45 0.45

Outstanding at June 30, 2020

Granted 142 $ 6.43

Released ( 71 ) $ 7.18

Forfeited ( 32 ) $ 7.27

Outstanding at September 30, 2020 130 $ 6.53 0.70

Employee Stock Purchase Plan

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

During the six months ended June 30, 2020 , 10,162 shares were purchased under the ESPP.

As of June 30, 2020 , 243,275 shares were available for future purchase under the ESPP.

During the nine months ended September 30, 2020, 22,556 shares were purchased under the ESPP.

As of September 30, 2020, 230,881 shares were available for future purchase under the ESPP.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expenses recognized for the three and six months ended June 30, 2020 and 2019 (in thousands):

The following table summarizes stock-based compensation expenses recognized for the three and nine months ended September 30, 2020 and 2019 (in thousands):

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Stock options $ 259 $ 200 $ 812 $ 516

1 unchanged sentence

Employee stock purchase plan 15 16 38 57

Total $ 1,339 $ 1,187 $ 3,433 $ 4,371

Sales and marketing $ 205 $ 207 $ 593 $ 700

1 unchanged sentence

General and administrative 901 746 2,187 2,617

Total $ 1,339 $ 1,187 $ 3,433 $ 4,371

We use the Black-Scholes-Merton option pricing model for our time-based options, single-option approach to determine the fair value of standard stock options.

4 unchanged sentences

Three Months Ended

Six Months Ended

Expected life (in years)

Interest rate

Dividend yield

(1) There were no stock option grants in the three month ended June 30, 2020.

As of June 30, 2020 , there were $ 9.0 million of unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested stock options, RSAs and RSUs.

September 30, Nine Months Ended

September 30,

2019 2020 2019

Expected life (in years) N/A 4.3 4.2 4.3

Volatility N/A 53 % 52 % 53 %

Interest rate N/A 1.8 % 1.0 % 1.7 %

Dividend yield N/A — % — % — %

(1) There were no stock option grants in the three months ended September 30, 2020.

As of September 30, 2020, there were $ 7.5 million of unrecognized compensation costs, adjusted for estimated forfeitures, related to non-vested stock options, RSAs and RSUs.

This unrecognized compensation cost will be recognized over an estimated weighted-average period of approximately 2.1 years.

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The stock repurchase authorization has no expiration date, does not require us to repurchase a specific number of shares, and may be modified, suspended, or discontinued at any time.

During the three months ended June 30, 2020 , we repurchased 2.9 million shares for $ 18.7 million at an average cost of $ 6.39 per share.

During the six months ended June 30, 2020 .

we repurchased approximately 4.9 million for $ 30.6 million at an average cost of $ 6.21 per share.

As of June 30, 2020, we have no amount available for repurchase under the Stock Repurchase Program.

There were no stock repurchases during the three and six months ended June 30, 2019 .

Income tax provisions consisted of the following (in thousands, except for effective tax rate percentage):

During the six months ended June 30, 2020, we repurchased approximately 4.9 million for $ 30.6 million at an average cost of $ 6.21 per share.

As of September 30, 2020, we have no amount available for repurchase under the Stock Repurchase Program.

There were no stock repurchases during the three months ended September 30, 2020.

Income tax benefit (provision) consisted of the following (in thousands, except for effective tax rate percentage):

Three Months Ended

Six Months Ended

Loss before benefit from (provision for) income taxes

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Income (loss) before benefit from (provision for) income taxes $ 2,759 $ ( 1,299 ) $ ( 2,688 ) $ ( 20,823 )

Benefit from (provision for) income taxes 96 ( 88 ) 3 ( 200 )

Effective tax rate 3.5 % 6.8 % ( 0.1 ) % 1.0 %

The provision for income tax for the three and six months ended June 30, 2020 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

The benefit from income taxes for the three months ended June 30, 2019 and provision for income taxes for the six months ended June 30, 2019 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

For the three and six months ended June 30, 2019, we used a year-to-date approach to calculate the effective tax rate.

We continue to carry a full valuation allowance on its federal deferred tax assets.

The benefit (provisions) income tax for the three months and nine months ended September 30, 2020 resulted primarily from benefits for the reversal of previously recorded foreign tax contingencies due to the expiration of the applicable statutes of limitation.

For the three and nine months ended September 30, 2020, we used a year-to-date approach to calculate the effective tax rate.

We continue to carry a full valuation allowance on our federal deferred tax assets.

As a result, no benefit for losses generated from our U.S.

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On July 22, 2019, Altera filed a petition for an en banc rehearing with the Ninth Circuit which was denied.

On February 10, 2020, Altera filed an appeal to the United States Supreme Court (the “Supreme Court”) for review.

On June 22, 2020, the Supreme Court refused to hear the Altera case, leaving intact the Ninth Circuit ruling.

We had concluded that it was not more-likely-than-not that Altera would prevail with an appeal to the Supreme Court and had made corresponding provisions in previous periods.

Accordingly, there was no impact to our condensed consolidated financial statements for the three months ended June 30, 2020 arising from the Supreme Court’s refusal to hear the Altera case.

Accordingly, there was no impact to our condensed consolidated financial statements for the three and nine months ended September 30, 2020 arising from the Supreme Court’s refusal to hear the Altera case.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was passed into law.

Among other changes, the Tax Act reduced the US federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced

In addition, the Act introduced the Base Erosion and Anti-Abuse Tax (the “BEAT”), which creates a new tax on certain related-party payments.

We concluded that it has not met the threshold requirements of the BEAT.

On July 9, 2020, the Internal Revenue Service issued final regulations regarding deductions for global intangible low-taxed income (“GILTI”) and foreign-derived intangible income (“FDII”).

We concluded that we have not met the threshold requirements of the BEAT.

On July 9, 2020, the Internal Revenue Service issued final regulations regarding deductions for global intangible low-taxed income (“GILTI”)

and foreign-derived intangible income (“FDII”).

On July 9, 2020, the Treasury Department released final regulations ("TD 9901") under IRC Section 250, which allows an annual deduction to a domestic corporation for its foreign-derived intangible income ("FDII") and global intangible low-taxed income ("GILTI") inclusion.

The final guidance is not expected to have a material impact on our consolidated financial statements.

The final guidance is not expected to have a material impact on our condensed consolidated financial statements.

Although the measurement period has closed, further technical guidance related to the Tax Act, including final regulations on a broad range of other topics, is expected to be issued.

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The CARES Act includes several significant business tax provisions including modification to the taxable income limitation for utilization of net operating losses (“NOLs”) incurred in 2018, 2019 and 2020 and the ability to carry back NOLs from those years for a period of up to five years, an increase to the limitation on deductibility of certain business interest expense, bonus depreciation for purchases of qualified improvement property and special deductions on certain corporate charitable contributions.

We analyzed the provisions of the CARES Act and determined there was no effect on our provision for the current period.

As of June 30, 2020 , we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 4.8 million and applicable interest of $ 29,000 .

We analyzed the provisions of the CARES Act and determined there was no effect on our provision for the three and nine months ended September 30, 2020.

As of September 30, 2020, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 4.5 million and applicable interest of $ 0 .

The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $ 0 .

1 unchanged sentence

We do not expect to have any significant changes to unrecognized tax benefits during the next twelve months.

As of June 30, 2020 , we had net deferred income tax assets of $ 0.5 million and deferred income tax liabilities of $ 0.5 million .

As of September 30, 2020, we had net deferred income tax assets of $ 0.5 million and deferred income tax liabilities of $ 0.5 million.

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 2000 through the current period.

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Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss) $ 2,855 $ ( 1,387 ) $ ( 2,685 ) $ ( 21,023 )

Weighted-average common stock outstanding, basic 26,898 31,711 28,507 31,461

2 unchanged sentences

Total shares, diluted 27,134 31,711 28,507 31,461

Basic net loss per share

Diluted net loss per share

As of June 30, 2020 , approximately 1.4 million stock options and 1.3 million RSUs and RSAs were excluded from computation of diluted net loss per share because their effect would have been anti-dilutive.

As of June 30, 2019 , approximately 2.0 million stock options and 0.8 million RSUs and RSAs were excluded from computation of diluted net loss per share because their effect would have been anti-dilutive.

Basic net income (loss) per share $ 0.11 $ ( 0.04 ) $ ( 0.09 ) $ ( 0.67 )

Diluted net income (loss) per share $ 0.11 $ ( 0.04 ) $ ( 0.09 ) $ ( 0.67 )

For the three and nine months ended September 30, 2020 and 2019, we had stock options, RSUs 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 (loss) 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,

2020 2019 2020 2019

Stock options 1,368 2,011 1,367 2,011

RSUs and RSAs 181 1,040 1,197 1,040

1,549 3,051 2,564 3,051

We lease all of our office space pursuant to operating lease and sublease arrangements, which expire at various dates through February 29, 2024.

4 unchanged sentences

On January 31, 2020, we entered into an agreement to lease approximately 5,000 square feet of office space in San Francisco, California.

This facility is used for administrative and headquarter functions.

This facility is used for administrative functions.

The lease commenced in the first quarter of 2020 and expires in 2022.

2 unchanged sentences

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

Below is a summary of our ROU assets and lease liabilities as of June 30, 2020 and December 31, 2019 , respectively (in thousands):

Balance Sheets Classification

June 30, 2020

Below is a summary of our ROU assets and lease liabilities as of September 30, 2020 and December 31, 2019, respectively (in thousands):

Balance Sheets Classification September 30,

2020 December 31, 2019

Right-of-use assets

Operating lease liabilities - current

Other current liabilities

Operating lease liabilities - long-term

Other long-term liabilities

Right-of-use assets Other assets $ 2,105 $ 2,202

Operating lease liabilities - current Other current liabilities 1,389 1,150

Operating lease liabilities - long-term Other long-term liabilities 2,014 2,664

Total lease liabilities $ 3,403 $ 3,814

2 unchanged sentences

We accelerated the amortization of our SJ Facility leasehold improvements over their remaining estimated life.

As of March 31, 2020, the SJ Facility leasehold improvements were fully amortized.

The SJ Facility leasehold improvements were fully amortized by March 31, 2020.

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

("Neato") for the San Jose California Facility ("SJ Facility").

("Neato") for the SJ Facility.

This sublease commenced in June 2020 and ends on April 30, 2023 which is the lease termination date of the original SJ Facility lease.

5 unchanged sentences

These deferred costs will be amortized over the terms of the sublease payments.

As of June 30, 2020 , $ 0.1 million was reported in Prepaid expenses and other current assets and $ 0.2 million was reported in Other assets on our Condensed Consolidated Balance Sheets.

As of September 30, 2020, $ 0.1 million was reported in Prepaid expenses and other current assets and $ 0.2 million was reported in Other assets on our Condensed Consolidated Balance Sheets.

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

During the three and six months ended June 30, 2020 , and 2019, our net operating lease expenses are as follows (in thousands):

During the three and nine months ended September 30, 2020, and 2019, our net operating lease expenses are as follows (in thousands):

Three Months Ended

Six Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Operating lease cost $ 278 $ 301 $ 851 $ 855

1 unchanged sentence

Total lease cost $ 21 $ 301 $ 524 $ 855

The table below provides supplemental information related to operating leases for the six months ended June 30, 2020 (in thousands except for lease term):

The table below provides supplemental information related to operating leases for the nine months ended September 30, 2020 (in thousands except for lease term):

Cash paid within operating cash flow $ 1,061

Weighted average lease terms (in years)

Weighted average lease terms 2.3 years

Weighted average discount rate 3.50 %

Minimum future lease payment obligations for our operating leases as of June 30, 2020 are as follows (in thousands):

Minimum future lease payment obligations for our operating leases as of September 30, 2020 are as follows (in thousands):

For the Years Ending December 31,

Remainder of 2020 $ 373

Future lease payments as of June 30, 2020 from our sublease agreement are as follows (in thousands):

Total $ 3,571

Future lease payments as of September 30, 2020 from our sublease agreement are as follows (in thousands):

For the Years Ending December 31,

Remainder of 2020 $ 257

Total $ 2,731

CONTINGENCIES

10 unchanged sentences

On behalf of Samsung, we filed an appeal with the Korea Administrative Court on February 15, 2019.

The first hearing occurred on June 27, 2019.

A second hearing occurred on August 29, 2019.

A third hearing occurred on October 31, 2019.

A fourth hearing occurred on December 19, 2019.

A fifth hearing occurred on April 2, 2020.

A sixth hearing occurred on May 14, 2020.

A seventh hearing occurred on June 4, 2020.

There have been seven hearings with this court beginning on June 27, 2019 and as most recently as June 4, 2020.

On July 16, 2020, the Korea Administrative Court issued its ruling in which it ruled that the withholding taxes and penalties which were imposed by the Korean tax authorities on Samsung should be canceled with some litigation costs to be borne by the Korean tax authorities.

On August 3, 2020, the Korean tax authorities filed a petition of appeal with the Korea High Court indicating the Korean tax authorities’ intent to appeal the decision of the Korea Administrative Court.

On August 1, 2020, the Korean tax authorities filed an appeal with the Korea High Court.

The first hearing in the Korea High Court is scheduled for November 11, 2020.

On September 29, 2017, Samsung filed an arbitration demand with the International Chamber of Commerce against Immersion demanding that we reimburse Samsung for the imposed tax and penalties that Samsung paid to the Korean tax authorities.

16 unchanged sentences

On behalf of LGE, we filed an appeal with the Korea Administrative Court on June 10, 2019.

The first hearing occurred on October 15, 2019.

A second hearing occurred on December 19, 2019.

A third hearing occurred on February 13, 2020.

A fourth hearing occurred on June 9, 2020.

A fifth hearing occurred on July 16, 2020.

We anticipate a decision to be rendered on or about October 8, 2020.

There have been five hearings with this court beginning on October 15, 2019 and as most recently as June 9, 2020.

We anticipated a decision to be rendered on or about October 8, 2020, but the Korea Administrative Court scheduled a sixth hearing for November 12, 2020.

We believe that there are valid defenses to the claims raised by the Korean tax authorities and that LGE’s claims are without merit.

1 unchanged sentence

In the event that we do not ultimately prevail in our appeal in the Korean courts, any payments to LGE with respect to withholding tax imposed on LGE by the Korean tax authorities as described in the previous paragraph would be recorded as additional income tax expense on the Condensed Consolidated Statement of Operations and Comprehensive Income (Loss), in the period in which we do not ultimately prevail.

Subsequent Event

Effective November 3, 2020, Ramzi Haidamus departed as the Chief Executive Officer and a member of Immersion’s board of directors.

Jared Smith, our Vice President, Worldwide Sales, was appointed as interim Chief Executive Officer on November 3, 2020.

In connection with Mr.

Haidamus’ departure, we entered into Separation Agreement and General Release agreement, dated November 3, 2020.

Under the terms of this agreement, Mr.

Haidamus’ will receive a lump sum cash payment of $ 472,498 , continued health insurance benefits through December 31, 2021 and accelerated vesting of 11,208 outstanding equity awards.

In addition, Mr.

Haidamus will also receive a lump sum payment of $ 65,463 in exchange for the release of claims from Mr.

Haidamus relating to the Age Discrimination in Employment Act of 1967.

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