What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-05-07 compared with 2020-11-06 · 192 added, 315 removed, 361 unchanged (58% of the section changed)

3 unchanged sentences

(In thousands, except share and per share amounts)

September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 102,624 $ 59,522

Short-term investments — 3,019

Accounts and other receivables 2,034 2,218

33 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Royalty and license $ 7,068 $ 6,182

9 unchanged sentences

Interest and other income (loss), net ( 316 ) ( 228 )

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 )

Income (loss) before provision for income taxes 2,177 ( 4,776 )

Provision for income taxes ( 141 ) ( 52 )

Net income (loss) $ 2,036 $ ( 4,828 )

11 unchanged sentences

(In thousands, except number of shares)

Three Months Ended September 30, 2020

Three Months Ended March 31, 2021

Common Stock and

5 unchanged sentences

Shares Amount Shares Amount

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

Balances at December 31, 2020 39,161,214 $ 258,756 $ 122 $ ( 113,164 ) 12,143,433 $ ( 81,733 ) $ 63,981

Net income 2,036 2,036

2 unchanged sentences

Release of restricted stock units and awards 227,055 —

Stock-based compensation 1,339 1,339

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 Accumulated

Comprehensive

Income Accumulated

Deficit Treasury Stock Total

Stockholders’

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

Release of restricted stock units and awards 11,000 —

Stock-based compensation 1,187 1,187

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.

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

Nine Months Ended September 30, 2020

Common Stock and

Additional Paid-In Capital Accumulated

Comprehensive

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 )

Stock repurchases 4,932,977 ( 30,642 ) ( 30,642 )

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 —

Shares issued in connection with public offering, net of offering costs 3,309,811 35,937 35,937

Stock-based compensation 531 531

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

Balances at March 31, 2021 43,020,610 $ 298,037 $ 122 $ ( 111,128 ) 12,143,433 $ ( 81,733 ) $ 105,298

Three Months Ended March 31, 2020

Common Stock and

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

Issuance of stock for ESPP purchase 21,741 165 165

Exercise of stock options, net of shares withheld for employee taxes 173,131 1,240 1,240

Repurchase of stock 2,012,766 ( 11,975 ) ( 11,975 )

Issuance of stock for ESPP purchases 10,162 63 63

Release of restricted stock units and awards 189,735 —

Stock-based compensation 729 729

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

Balances at March 31, 2020 38,824,681 $ 254,081 $ 122 $ ( 123,393 ) 9,223,222 $ ( 63,066 ) $ 67,744

See accompanying Notes to Condensed Consolidated Financial Statements.

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

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:

Net income (loss) $ 2,036 $ ( 4,828 )

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

Depreciation and amortization 192 1,178

Stock-based compensation 531 729

Other ( 95 ) 467

Foreign currency remeasurement losses 280 361

Changes in operating assets and liabilities:

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Other long-term liabilities ( 367 ) 227

Net cash used in operating activities ( 2,988 ) ( 30,866 )

Net cash provided by (used in) operating activities 4,410 ( 1,316 )

Cash flows provided by (used in) investing activities:

Purchases of short-term investments — ( 8,930 )

Proceeds from maturities of short-term investments — 3,000

Purchases of property and equipment ( 57 ) ( 21 )

Net cash provided by investing activities 2,960 5,058

Net cash provided by (used in) investing activities ( 57 ) 2,979

Cash flows provided by (used in) financing activities:

Proceeds from issuance of common stock, net 35,937 —

Cash paid for purchases of treasury shares — ( 11,975 )

2 unchanged sentences

Net cash provided by (used in) financing activities 38,749 ( 11,912 )

Net decrease in cash and cash equivalents ( 30,517 ) ( 24,403 )

Net increase (decrease) in cash and cash equivalents 43,102 ( 10,249 )

Cash and cash equivalents:

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

March 31, 2021

SIGNIFICANT ACCOUNTING POLICIES

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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 for the remainder of 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.

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.

In response to certain anticipated impacts from the COVID-19 pandemic, we implemented a series of cost reduction initiatives in the first half of 2020 to further preserve financial flexibility.

These actions include:

reductions of the base salaries and cash compensation of company executives and board members;

cancellation and reduction in current year's executive and employee bonus plans;

cancellation and reduction in the 2020 executive and employee bonus plans;

renegotiated professional services fees from third-party services providers;

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

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).

During the three months ended March 31, 2021, we recorded $ 0.1 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

The accompanying condensed consolidated financial statements include the accounts of Immersion Corporation and its wholly-owned subsidiaries:

Immersion Canada Corporation;

Immersion International, LLC;

Immersion Medical, Inc.;

Immersion Japan K.K.;

Immersion Ltd.;

Immersion Software Ireland Ltd.;

Haptify, Inc.;

Immersion (Shanghai) Science & Technology Company, Ltd.;

and Immersion Technology International Ltd.

The accompanying condensed consolidated financial statements include the accounts of Immersion Corporation and our wholly-owned subsidiaries.

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

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

Use of Estimates

The preparation of condensed consolidated financial statements and related disclosures requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

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

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

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

Significant estimates include revenue recognition, useful lives of property and equipment, valuation of income taxes including uncertain tax provisions, stock-based compensation and income taxes.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full year.

Segment Information

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Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”).

This guidance requires financial assets measured at amortized cost to be presented at the net amount expected to be collected based on historical events, current conditions and forecast information.

The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2019 and early adoption is permitted.

We adopted ASU 2016-13 as of January 1, 2020.

The adoption of this new accounting standard did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Guidance Not Yet Adopted

In December 2019, the FASB issued Accounting Standard Update No.

In December 2019, the Financial Accounting Standard Board (the "FASB") issued Accounting Standard Update No.

2019-12, Income Taxes (Topic 740):

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early adoption is permitted.

We are evaluating the impact of this amendment on our condensed consolidated financial statements.

We adopted this new guidance in the first quarter of 2021.

This adoption did not have material impact on our condensed consolidated financial statements.

REVENUE RECOGNITION

Revenue Recognition Accounting Policy

Our revenue is primarily derived from fixed fee license agreements and per-unit royalty agreements, along with less significant revenue earned from development, services and other revenue.

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three months ended March 31, 2021 and 2020 (in thousands).

Three Months Ended

Fixed fee license revenue $ 1,275 $ 1,287

Per-unit royalty revenue 5,793 4,895

Total royalty and license revenue 7,068 6,182

Development, services, and other revenue 91 75

Total revenue $ 7,159 $ 6,257

Per-unit Royalty Revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur.

As we generally do not receive the per-unit licensee royalty reports for sales during a given quarter within the time frame that allows us to adequately review the reports and include the actual amounts in our quarterly results for such quarter, we accrue the related revenue based on estimates of our licensees’ underlying sales, subject to certain constraints on our ability to estimate such amounts.

We develop such estimates based on a combination of available data including, but not limited to, approved customer forecasts, a look back at historical royalty reporting for each of our customers, and industry information available for the licensed products.

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 its licensees.

We recorded $ 0.5 million and

$ 0.1 million adjustments to decrease royalty revenue during the three months ended March 31, 2021 and 2020, respectively.

Contract Assets

As of March 31, 2021, we had contract assets of $ 10.2 million included within Prepaid expenses and other current assets , and $ 3.8 million included within Other assets on the Condensed Consolidated Balance Sheets.

As of December 31, 2020, we had contract assets of $ 11.6 million included within Prepaid expenses and other current assets , and $ 4.6 million included within Other assets , on the Condensed Consolidated Balance Sheets.

Contract assets decreased by $ 2.3 million from December 31, 2020 to March 31, 2021, primarily due to actual royalties billed during the three months ended March 31, 2021.

Contract 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.

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The portion allocable to Performance Obligation B is recognized on a straight-line basis over the contract term.

For such contracts, a contract liability account is established and included within Deferred revenue on the Condensed Consolidated Balance Sheets.

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.

Some of our license agreements contain fixed fees related to past infringements.

Such fixed fees are recognized as revenue or recorded as a deduction to our operating expense in the period the license agreement is signed.

Payments for fixed fee license contracts typically are due in full within 30 - 45 days from execution of the contract.

From time to time, we enter into a fixed fee license contract with payments due in a number of installments payable throughout the contract term.

In such cases, we will determine if a significant financing component exists and if it does, we will recognize revenue and corresponding interest expense or income, as appropriate.

Per-unit Royalty revenue

We record per-unit royalty revenue in the same period in which the licensee’s underlying sales occur.

We develop such estimates based on a combination of available data including, but not limited to, approved customer forecasts, a lookback at historical royalty reporting for each of our customers, and industry information available for the licensed products.

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 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.

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.

We account for the unbilled minimum royalties as contract assets on our Condensed Consolidated Balance Sheets, and the balance of such contract assets will be reduced by the actual royalties to be reported by the licensee during the contract term until fully utilized, after which point any excess per-unit royalties reported are recognized as revenue.

For such contracts, a contract liability account is established and included within Deferred revenue on the Condensed Consolidated Balance Sheet s.

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.

Payments of per-unit royalties typically are due within 30 to 60 days from the end of the quarter in which the underlying sales took place.

Development, services, and other revenue

As the performance obligation related to our development, service and other revenue is satisfied over a period of time, we recognize such revenue evenly over the period of performance obligation, which is generally consistent with the contractual term.

Disaggregated Revenue

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

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

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

Per-Unit royalty revenue 6,288 6,434 15,485 14,155

Total royalty and license revenue 7,531 10,549 19,306 24,264

Development, services, and other revenue 65 75 215 225

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

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 $ 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 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.

Based on contracts signed and payments received as of March 31, 2021, we expect to recognize $ 25.2 million in revenue related to Performance Obligation B under our fixed fee license agreements, which is satisfied over time, including $ 13.2 million over one to three years and $ 12.0 million over more than three years.

Capitalized Contract Costs

During the three months ended March 31, 2021, we capitalized $ 0.1 million of incremental costs incurred to obtain new contracts with customers.

FAIR VALUE MEASUREMENTS

Cash, Cash Equivalents and Short-term Investments

Our financial instruments measured at fair value on a recurring basis are cash equivalents and short-term investments.

Our fixed income available-for-sale securities consist of high quality, investment grade securities.

We value these securities based on pricing from pricing vendors, who may use quoted prices in active markets for identical assets (Level 1) or inputs other than quoted prices that are observable either directly or indirectly (Level 2) in determining fair value.

Cash and Cash Equivalents

Our financial instruments measured at fair value on a recurring basis consisted of money market funds.

We value these securities based quoted prices in active markets for identical assets.

Financial instruments are valued based on quoted market prices in active markets include mostly money market securities.

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treasury securities.

We had no Level 2 instruments at March 31, 2021 and December 31, 2020.

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 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

As of March 31, 2021 and December 31, 2020, we did not hold any Level 3 instruments.

Our financial instruments consisted of money market accounts as of March 31, 2021 and December 31, 2020 are classified as cash equivalents.

Financial instruments measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 are classified based on the valuation technique in the table below (in thousands):

March 31, 2021

Fair Value Measurements Using

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Money market accounts 45,614 $ — $ — $ 45,614

Treasury securities — 3,019 — 3,019

Total assets at fair value (2)

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(2) The above table excludes $ 13.9 million of cash held in banks.

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.

Treasury securities (classified as available-for-sale securities), with maturity dates less than one year, are within short-term investments on our Condensed Consolidated Balance Sheets.

Short-term Investments

Short-term investments as of December 31, 2019 consisted of the following (in thousands):

December 31, 2019

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

Total $ 3,018 $ 1 $ — $ 3,019

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

BALANCE SHEETS DETAILS

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

September 30,

2021 December 31,

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

September 30,

2021 December 31,

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Accounts and other receivables $ 2,034 $ 2,218

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

Allowance for credit losses as of March 31, 2021 and December 31, 2020 were not material.

Prepaid Expenses and Other Current Assets

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

September 30,

2021 December 31,

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Other assets consisted of the following (in thousands):

September 30,

2021 December 31,

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Other current liabilities are as follows (in thousands):

September 30,

2021 December 31,

Accrued legal $ 124 $ 1,077

Lease liabilities - current 1,365 1,382

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Total other current liabilities $ 2,718 $ 2,457

CONTINGENCIES

From time to time, we receive claims from third parties asserting that our technologies, or those of our licensees, infringe on the other parties’ IP rights.

Management believes that these claims are without merit.

Additionally, periodically, we are involved in routine legal matters and contractual disputes incidental to our normal operations.

In management’s opinion, unless we disclosed otherwise, the resolution of such matters will not have a material adverse effect on our consolidated financial condition, results of operations, or liquidity.

In the normal course of business, we provide indemnification of varying scope to customers, most commonly to licensees in connection with licensing arrangements that include our IP, although these provisions can cover additional matters.

Historically, costs related to these guarantees have not been significant, and we are unable to estimate the maximum potential impact of these guarantees on its future results of operations.

Samsung Electronics Co.

Immersion Corporation and Immersion Software Ireland Limited

On April 28, 2017, Immersion and Immersion Software Ireland Limited (collectively, “Immersion”) received a letter from Samsung Electronics Co.

(“Samsung”) requesting that we reimburse Samsung with respect to withholding tax and penalties imposed on Samsung by the Korean tax authorities following an investigation where the tax authority determined that Samsung failed to withhold taxes on Samsung’s royalty payments to Immersion Software Ireland from 2012 to 2016.

On July 12, 2017, on behalf of Samsung, Immersion filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes and penalties.

On October 18, 2018, the Korea Tax Tribunal held a hearing and on November 19, 2018, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on Samsung.

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

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 cancelled with some litigation costs to be borne by the Korean tax authorities.

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

The first hearing in the Korea High Court occurred on November 11, 2020.

A second hearing occurred on January 13, 2021.

A third hearing occurred on March 21, 2021.

The Korea High Court indicated that a final decision is expected on May 28, 2021, but reserved the right to delay the date of the decision.

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

Samsung is requesting that we pay Samsung the amount of KRW 7,841,324,165 (approximately $ 6.9 million) plus interest from and after May 2, 2017, plus the cost of the arbitration including legal fees.

On March 27, 2019, we received the final award.

The award ordered Immersion to pay Samsung KRW 7,841,324,165 (approximately $ 6.9 million as of March 31, 2019) which we paid on April 22, 2019 and recorded in Long-term deposit on our Condensed Consolidated Balance Sheets.

The award also denied Samsung’s claim for interest from and after May 2, 2017 and ordered Immersion to pay Samsung’s cost of the arbitration in the amount of approximately $ 871,454 , which was paid in 2019.

We believe that there are valid defenses to all of the claims from the Korean tax authorities.

We intend to vigorously defend against the claims from the Korean tax authorities.

We expect to be reimbursed by Samsung to the extent we ultimately prevail in the appeal in the Korea courts.

On March 31, 2019, $ 6.9 million was recorded as a deposit included in Long-term deposits on our Condensed Consolidated Balance Sheets.

In the event that we do not ultimately prevail in our appeal in the Korean courts, the deposit included in Long-term deposits would be recorded as additional income tax expense on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), in the period in which we do not ultimately prevail.

LGE Korean Withholding Tax Matter

On October 16, 2017, we received a letter from LG Electronics Inc.

(“LGE”) requesting that we reimburse LGE with respect to withholding tax imposed on LGE by the Korean tax authorities following an investigation where the tax authority determined that LGE failed to withhold on LGE’s royalty payments to Immersion Software Ireland from 2012 to 2014.

Pursuant to an agreement reached with LGE, on April 8, 2020, we provided a provisional deposit to LGE in the amount of KRW 5,916,845,454 (approximately $ 5.0 million) representing the amount of such withholding tax that was imposed on LGE, which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korea courts.

In the second quarter of 2020, we recorded this deposit in Long-term deposits on our Condensed Consolidated Balance Sheets.

In the event that we do not ultimately prevail in our appeal in the Korean courts, the deposit included in Long-term deposits would be recorded as additional income tax expense on our Condensed Consolidated Statement of Operations and Comprehensive Loss, in the period in which we do not ultimately prevail.

On November 3, 2017, on behalf of LGE, we filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes.

The Korea Tax Tribunal hearing took place on March 5, 2019.

On March 19, 2019, the Korea Tax Tribunal issued its ruling in which it decided not to accept our arguments with respect to the Korean tax authorities’ assessment of withholding tax and penalties imposed on LGE.

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

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

A seventh hearing occurred on January 14, 2021.

An eighth hearing occurred on April 8, 2021.

A ninth hearing is scheduled for June 24, 2021.

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

We intend to vigorously defend ourselves against these claims.

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.

STOCK-BASED COMPENSATION

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Our equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for employees, consultants, officers, and directors and to align stockholder and employee interests.

We may grant time-based options, market condition-based options, stock appreciation rights, restricted stock ("RSAs"), restricted stock units (“RSUs”), performance shares, performance units, and other stock-based equity awards to employees, officers, directors, and consultants.

We may grant time-based options, market condition-based options, stock appreciation rights, restricted stock (“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.

Under this program, stock options may be granted at prices not less than the fair market value on the date of grant for stock options.

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

September 30,

Common stock shares available for grant 3,271

Stock options outstanding 521

RSAs outstanding 130

PSUs outstanding 250

RSUs outstanding 565

RSAs outstanding 130

Time-Based Stock Options

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):

The following summarizes activities for the time-based stock options for the three months ended March 31, 2021 (in thousands except for weighted average exercise price per share and weighted average remaining contractual life data):

Number of Shares

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Canceled or expired — $ —

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.

Outstanding at March 31, 2021 521 $ 7.74 5.21 $ 1,020

Vested and expected to vest at March 31, 2021 447 $ 7.76 5.18 $ 866

Exercisable at March 31, 2021 129 $ 8.32 4.69 $ 212

Aggregate intrinsic value is the difference between the closing price on the last trading day in March 2021 and the exercise price, multiplied by the number of in-the-money stock options.

Restricted Stock Units

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):

The following summarizes RSU activities for the three months ended March 31, 2021 (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

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Forfeited ( 10 ) $ 6.74

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

Outstanding at March 31, 2021 565 $ 6.78 1.08 $ 5,415

Restricted Stock Awards

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):

The following summarizes RSA activities for the three months ended March 31, 2021 (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

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Forfeited — $ —

Outstanding at September 30, 2020 130 $ 6.53 0.70

Outstanding at March 31, 2021 130 $ 6.53 0.20

Market Condition-Based Restricted Stock Units

In the fourth quarter of 2020, we granted 250,000 shares of PSUs to our executives.

Each PSU represents the right to one share of our common stock.

These equity awards will vest if the volume-weighted closing price of our common stock exceeds certain levels for a number of trading days within a specified time frame.

These awards vest over four years, with 25% eligible for vesting on the first anniversary of the grant date and remaining shares vesting on quarterly basis over the following three years.

We have 250,000 shares of PSUs outstanding as of March 31, 2021.

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 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.

During the three months ended March 31, 2021, 15,543 shares were purchased under the ESPP.

As of March 31, 2021, 215,338 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 nine months ended September 30, 2020 and 2019 (in thousands):

The following table summarizes stock-based compensation expenses recognized for the three months ended March 31, 2021 and 2020 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Stock options $ 15 $ 255

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Three Months Ended

September 30, Nine Months Ended

September 30,

2019 2020 2019

Expected life (in years) N/A 4.2

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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.

(1) There were no stock option grants in the three months ended March 31, 2021

As of March 31, 2021, there were $ 5.3 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 1.8 years.

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STOCKHOLDERS’ EQUITY

Stock Offering

On February 3, 2021, we filed an universal shelf registration statement on Form S-3 with the Securities and Exchange Commission which provided us with the financial flexibility to raise up to $ 250 million of capital.

We intend to use the net proceeds from the sale of the securities offered by this prospectus for working capital and other general corporate purposes, and we may use a portion of any net proceeds for investment in complementary businesses or alternative currencies.

On February 11, 2021, we entered into an equity distribution agreement ("Distribution Agreement") with an investment banking firm to issue and sell shares of our common stock having an aggregated offering price of up to $ 50 million.

Under the terms of the Distribution Agreement, we are obligated to pay 2.25 % commission on the gross sales proceeds from common stock sold and customary indemnification rights and the reimbursement of legal fees and disbursements.

The Distribution Agreement may be terminated by either party upon prior written notice to the other party, or at any time under certain circumstances.

We are not obligated to sell any shares under the Distribution Agreement.

During the first quarter of 2021, we sold 3.3 million shares of our common stock pursuant to the Distribution Agreement and we received net proceeds of $ 35.9 million from the offering net of $ 1.2 million of commissions and other offering costs.

We terminated the Distribution Agreement on March 5, 2021.

Stock Repurchase Program

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In addition, on October 22, 2014, the Board authorized another $ 30.0 million under the Stock Repurchase Program.

We may repurchase our common stock for cash in the open market in accordance with applicable securities laws.

The timing and amount of any stock repurchase will depend on share price, corporate and regulatory requirements, economic and market conditions, and other factors.

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 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):

As of June 30, 2020, we repurchased the maximum amount of shares of common stock available under the Stock Repurchase Program and no longer have any amount available for repurchase under the Stock Repurchase Plan.

During the first quarter of 2020, we repurchased approximately 2.0 million shares for approximately $ 12.0 million at an average cost of $ 5.95 per share.

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

Three Months Ended

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 )

Income (loss) before provision for income taxes 2,177 (4,776)

Provision for income taxes 141 52

Effective tax rate 6.5 % ( 1.1 ) %

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.

territory was included in the calculation of the year-to-date effective tax rate.

On July 27, 2015, a U.S.

Tax Court opinion (Altera Corporation et.

Commissioner) concerning the treatment of stock-based compensation expense in an intercompany cost sharing arrangement was issued.

In its opinion, the U.S.

Tax Court accepted Altera's position of excluding stock-based compensation from its intercompany cost sharing arrangement.

On February 19, 2016, the IRS appealed the ruling to the U.S.

Court of Appeals for the Ninth Circuit (the "Ninth Circuit").

On July 24, 2018, the Ninth Circuit reversed the 2015 decision of the U.S.

Tax Court that had found certain Treasury regulations related to stock-based compensation to be invalid.

On August 7, 2018, the Ninth Circuit withdrew its July 24, 2018 opinion to allow a reconstituted panel to confer on the decision.

This reconstituted panel reconsidered the validity of the cost sharing regulations at issue.

The regulations at issue require related entities to share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as “qualified cost-sharing arrangements” and to avoid potential IRS adjustment.

On June 7, 2019, the reconstituted panel of the Ninth Circuit upheld the 2018 decision of the Ninth Circuit, concluding stock-based compensation must be included in intercompany cost sharing agreements for the agreements to be classified as “qualified cost-sharing arrangements”.

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 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 earnings.

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 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 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.

In accordance with ASC 740, we will recognize any effects of the guidance in the period that such guidance is issued.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed into law.

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 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 provision for income tax for the three months ended March 31, 2021 and 2020, respectively, resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

We continue to carry a full valuation allowance on our U.S.

federal and State as well as Canada federal deferred tax assets.

The effective tax rate is lower than statutory tax rate is mainly due to the benefit recorded on deferred tax assets utilized in current year for the U.S.

federal and state jurisdictions.

As of March 31, 2021, 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 .

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

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.

As of March 31, 2021, we had net deferred income tax assets of $ 2.7 million and deferred income tax liabilities of $ 0.4 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 2001 through the current period.

We maintain a valuation allowance of $ 28.0 million against certain of our deferred tax assets, including all federal, state, and certain foreign deferred tax assets 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 our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

Currently we are under examination by the Internal Revenue Services for tax year 2018 and California Franchise Tax Board for tax years 2017 to 2019.

We maintain a valuation allowance of $ 28.5 million against certain of our deferred tax assets, including all federal, 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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Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Net income (loss) $ 2,036 $ ( 4,828 )

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Dilutive effect of potential common shares:

Stock options, RSUs, RSA and ESPP 236 — — —

Stock options, stock awards and ESPP 601 —

Total shares, diluted 29,180 31,006

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Diluted net income (loss) per share $ 0.07 $ ( 0.16 )

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.

We include the underlying market condition stock awards in the calculation of diluted earnings per share if the 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 months ended March 31, 2021, 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 (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

Three Months Ended

Stock options 14 1,370

RSUs and RSAs — 1,263

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.

We lease our office space under lease arrangements with expiration dates on or before February 29, 2024.

We recognize lease expense on a straight-line basis over the lease term.

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

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 functions.

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

During the three months ended March 31, 2020, we recorded a lease liability of $ 0.6 million, which represents the present value of the lease payments using an estimated incremental borrowing rate of 3.50 %.

We also recognized lease right-of-use assets ("ROU") of $ 0.6 million which represents our right to use an underlying asset for the lease term.

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 September 30, 2020 and December 31, 2019, respectively (in thousands):

Balance Sheets Classification September 30,

Below is a summary of our right-of-use assets (“ROU”) assets and lease liabilities as of March 31, 2021 and December 31, 2020, respectively (in thousands):

Balance Sheets Classification March 31,

2021 December 31, 2020

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Total lease liabilities $ 2,716 $ 3,059

During 2019, we began to shift general and administrative, research and development and executive functions and employees from our San Jose, California facility (“SJ Facility”) to our San Francisco, California and Montreal, Canada offices.

In the fourth quarter of 2019, we announced our decision to exit the SJ Facility by March 31, 2020.

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

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

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

This facility is used for administrative functions.

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

In the first quarter of 2020, we recorded a lease liability of $ 0.6 million, which represents the present value of the lease payments using an estimated incremental borrowing rate of 3.50 %.

We also recognized ROU of $ 0.6 million which represents our right to use an underlying asset for the lease term.

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

As a result of COVID-19, we implemented work-from-home policy in the first quarter of 2020.

Our San Francisco office has been closed since the first quarter of 2020 and we expect our San Francisco-based employees to continue to work-from-home in the foreseeable future.

We have been actively seeking a sublease tenant for the SF Facility.

In the fourth quarter of 2020, we recorded $0.3 million impairment charge to the SF Facility ROU asset.

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 (“SJ Facility”).

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

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

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

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

In accordance with provisions of ASC 842 Lease s (“ASC 842”), we treated the sublease as a separate lease as we were not relieved of the primary obligation under the original lease.

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

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

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

As of March 31, 2021, $ 0.1 million was reported in Prepaid expenses and other current assets and $ 0.1 million was reported in Other assets on our Condensed Consolidated Balance Sheets .

During the three months ended March 31, 2021, and 2020, our net operating lease expenses are as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

2020 2019 2020 2019

Operating lease cost $ 215 $ 273

Sublease income ( 257 ) —

Total lease cost $ 21 $ 301 $ 524 $ 855

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

Net lease cost (income) $ ( 42 ) $ 273

The table below provides supplemental information related to operating leases for the three months ended March 31, 2021 and 2020 (in thousands except for lease term):

Three Months Ended

Cash paid within operating cash flow $ 367 $ 349

Weighted average lease terms 2.3 years

Weighted average discount rate 3.50 %

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

Weighted average lease terms 2.2 2.9

Weighted average discount rate N/A 3.5 %

Minimum future lease payment obligations for our operating leases as of March 31, 2021 are as follows (in thousands):

For the Years Ending December 31,

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Total $ 2,843

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

Future lease payments as of March 31, 2021 from our sublease agreement are as follows (in thousands):

For the Years Ending December 31,

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Total $ 2,217

CONTINGENCIES

From time to time, we receive claims from third parties asserting that our technologies, or those of our licensees, infringe on the other parties’ IP rights.

Management believes that these claims are without merit.

Additionally, periodically, we are involved in routine legal matters and contractual disputes incidental to our normal operations.

In management’s opinion, the resolution of such matters will not have a material adverse effect on our consolidated financial condition, results of operations, or liquidity.

Historically, costs related to these guarantees have not been significant, and we are unable to estimate the maximum potential impact of these guarantees on our future results of operations.

On April 28, 2017, Immersion and Immersion Software Ireland Limited (collectively, “Immersion”) received a letter from Samsung Electronics Co.

On July 12, 2017, on behalf of Samsung, Immersion filed an appeal with the Korea Tax Tribunal regarding their findings with respect to the withholding taxes and penalties.

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

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 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.

On March 27, 2019, we received the final award.

The award ordered Immersion to pay Samsung KRW 7,841,324,165 ($ 6.9 million) which Immersion paid on April 22, 2019, and recorded in Long-term deposits on our Condensed Consolidated Balance Sheets.

The award also denied Samsung’s claim for interest from and after May 2, 2017, and ordered Immersion to pay Samsung’s cost of the arbitration in the amount of approximately $ 871,454 .