IMMERSION CORP 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes forward-looking statements within the meaning of Section 27A of the Securities Act, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The forward-looking statements involve risks and uncertainties. Forward-looking statements are identified by words such as “anticipates”, “believes”, “expects”, “intends”, “may”, “can”, “will”, “places”, “estimates”, and other similar expressions. However, these words are not the only way we identify forward-looking statements. Examples of forward-looking statements include any expectations, projections, or other characterizations of future events, or circumstances, and include statements regarding: the impact of COVID-19 on our business, including as to revenue, and potential cost reduction measures, and the impact of COVID-19 on our customers, suppliers, and on the economy in general; our strategy and our ability to execute our business plan; our competition and the market in which we operate; our customers and suppliers; our revenue and the recognition and components thereof; our costs and expenses, including capital expenditures; seasonality and demand; our investment in research and technology development; changes to general and administrative expenses; our foreign operations and the reinvestment of our earnings related thereto; our investment in and protection of our IP; our employees; capital expenditures and the sufficiency of our capital resources; unrecognized tax benefit and tax liabilities; the impact of changes in interest rates and foreign exchange rates, as well as our plans with respect to foreign currency hedging in general; changes in laws and regulations; including with respect to taxes; our plans related to and the impact of current and future litigation; our sublease and the timing and income related thereto; our shelf S-3 registration statement and our plans with respect thereto, including anticipated use of proceeds; and our stock repurchase and equity distribution programs. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results could differ materially from those projected in the forward-looking statements, therefore we caution you not to place undue reliance on these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: the effects of the COVID-19 global pandemic on us and our business, and on the business of our suppliers and customers; unanticipated changes in the markets in which we operate; the effects of the current macroeconomic climate (especially in light of the ongoing adverse effects of the COVID-19 global pandemic); delay in or failure to achieve adoption of or commercial demand for our products or third party products incorporating our technologies; the inability of Immersion to renew existing licensing arrangements, or enter into new licensing arrangements for our patents and other technologies on favorable terms; the loss of a major customer; the ability of Immersion to protect and enforce our intellectual property rights; unanticipated difficulties and challenges in developing or acquiring successful innovations and our ability to patent those innovations; changes in patent law; confusion as to our licensing model or agreement terms; the ability of Immersion to return to consistent profitability in the future; the inability of Immersion to retain or recruit necessary personnel; the commencement, by others or by us, of legal or administrative action; risks related to our international operations and other factors. Any forward-looking statements made by us in this report speak only as of the date of this report, and we do not intend to update these forward-looking statements after the filing of this report, unless required to do so by applicable law. You are urged to review carefully and consider our various disclosures in this report and in our other reports publicly disclosed or filed with the SEC that attempt to advise you of the risks and factors that may affect our business. OVERVIEW We are a premier licensing company focused on the creation, design, development, and licensing of innovative haptic technologies that allow people to use their sense of touch to engage with products and experience the digital world around them. We are one of the leading experts in haptics, and our focus on innovation allows us to deliver world-class intellectual property (“IP”) and technology that enables the creation of products that delight end users. Our technologies are designed to facilitate the creation of high-quality haptic experiences, enable their widespread distribution, and ensure that their playback is optimized. Our primary business is currently in the mobility, gaming, and automotive markets, but we believe our technology is broadly applicable and see opportunities in evolving new markets, including entertainment, social content, virtual and augmented reality, sexual wellness and wearables, as well as residential, commercial, and industrial Internet of Things. In recent years, we have seen a trend towards broad market adoption of haptic technology. As other companies follow our leadership in recognizing how important tactile feedback can be in people’s digital lives, we expect the opportunity to license our IP and technologies will continue to expand. 20 Table of Contents We have adopted a business model under which we provide advanced tactile software, related tools and technical assistance designed to integrate our patented technology into our customers’ products or enhance the functionality of our patented technology, and offer licenses to our patented technology to our customers. Our licenses enable our customers to deploy haptically-enabled devices, content and other offerings, which they typically sell under their own brand names. We and our wholly-owned subsidiaries hold more than 1,700 issued or pending patents worldwide as of June 30, 2021. Our patents cover a wide range of digital technologies and ways in which touch-related technology can be incorporated into and between hardware products and components, systems software, application software, and digital content. We believe that our IP is relevant to many of the most important and cutting-edge ways in which haptic technology is and can be deployed, including in connection with mobile interfaces and user interactions, in association with pressure and other sensing technologies, as part of video and interactive content offerings, as related to virtual and augmented reality experiences, and in connection with advanced actuation technologies and techniques. We were incorporated in 1993 in California and reincorporated in Delaware in 1999. CRITICAL ACCOUNTING POLICES AND ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, stock-based compensation, short-term investments, leases, income taxes and contingencies. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates and assumptions. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. We are not aware of any specific event or circumstance that would require updates to our estimates or judgments or require us to revise the carrying value of our assets or liabilities as of August 16, 2021, the date of issuance of this Quarterly Report on Form 10-Q. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. Please refer to Management's Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 5, 2021, for a complete discussion of our other critical accounting policies and estimates. RESULTS OF OPERATIONS OVERVIEW Total revenue for the three months ended June 30, 2021 was $11.0 million, an increase of $5.3 million, or 94%, compared to $5.7 million for the three months ended June 30, 2020 primarily driven by a $4.8 million or 111%, increase in per-unit royalty revenue and a $0.5 million or 41% increase in license revenue. Total revenue for the six months ended June 30, 2021 was $18.2 million, an increase of $6.2 million, or 52%, compared to $11.9 million for the six months ended June 30, 2020 primarily driven by a $5.7 million or 61%, increase in per-unit royalty revenue and a $0.5 million or 20% increase in license revenue. Net income for the three months ended June 30, 2021 was $5.3 million, an increase of $6.1 million as compared to a net loss of $0.7 million for the three months ended June 30, 2020. The increase in net income was mainly attributable to a $5.3 million increase in total revenue and a $1.5 million decrease in total operating expenses. Net income for the six months ended June 30, 2021 was $7.4 million, an increase of $12.9 million as compared to a net loss of $5.5 million for the six months ended June 30, 2020. The increase in net income was mainly attributable to a $6.2 million increase in total revenue and a $7.7 million decrease in total operating expenses. 21 Table of Contents The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of total revenue: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Revenues: Fixed fee license revenue 17 % 23 % 17 % 22 % Per-unit royalty revenue 82 76 82 77 Total royalty and license revenue 99 99 99 99 Development, services, and other revenue 1 1 1 1 Total revenues 100 100 100 100 Costs and expenses: Cost of revenues — 1 — 1 Sales and marketing 11 22 13 25 Research and development 12 23 15 25 General and administrative 24 72 27 96 Total costs and expenses 47 119 55 147 Operating income (loss) 53 (19) 45 (47) Interest and other income 1 7 (1) 1 Income (loss) before provision for income taxes 54 (12) 44 (46) Provision for income taxes (5) (1) (3) (1) Net income (loss) 49 % (13) % 41 % (47) % 22 Table of Contents REVENUES 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. Royalty and license revenue are composed of per-unit royalties earned based on usage or net sales by licensees and fixed payment license fees charged for our IP and software. Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 A revenue summary for the three months ended June 30, 2021 and 2020 are as follows (in thousands, except for percentages): Three Months Ended June 30, 2021 2020 $ Change % Change Revenues: Fixed fee license revenue $ 1,824 $ 1,292 $ 532 41% Per-unit royalty revenue 9,057 4,301 4,756 111% Total royalty and license revenue 10,881 5,593 5,288 95% Development, services, and other revenue 129 75 54 72% Total revenues $ 11,010 $ 5,668 $ 5,342 94% Royalty and license revenue — Royalty and license revenue for the three months ended June 30, 2021 increased $5.3 million, or 95%, from $5.6 million for the three months ended June 30, 2020 to $10.9 million for the three months ended June 30, 2021. Per-unit royalty revenue increased by $4.8 million, or 111%, in the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily attributable to a $2.3 million increase in royalty revenue from our mobility licensees, a $1.7 million increase in royalties from our gaming licensees and a $0.9 million increase in revenue from our automotive licensees. Fixed fee license revenue increased $0.5 million in the three months ended June 30, 2021 compared to the same period in 2020 primarily due increased license revenue from our automotive licensees. We expect royalty and license revenue to continue to be a major component of our future revenue as our technology is included in products and we succeed in our efforts to monetize our IP. Our fixed fee license revenue could fluctuate depending upon the timing of execution of new fixed license fee arrangements. We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments. Development, services and other revenue — Development, services, and other revenue was $129,000 for the three months ended June 30, 2021 as compared to the $75,000 the three months ended June 30, 2020. Geographically, revenues generated in Asia, North America, and Europe for the three months ended June 30, 2021 represented 84%, 8%, and 8%, respectively, of our total revenue as compared to 78%, 16%, and 6%, respectively, for the three months ended June 30, 2020. 23 Table of Contents Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020 A revenue summary for the three months ended June 30, 2021 and 2020 are as follows (in thousands, except for percentages): Six Months Ended June 30, 2021 2020 $ Change % Change Revenues: Fixed fee license revenue $ 3,099 $ 2,578 $ 521 20% Per-unit royalty revenue 14,850 9,197 5,653 61% Total royalty and license revenue 17,949 11,775 6,174 52% Development, services, and other revenue 220 150 70 47% Total revenues $ 18,169 $ 11,925 $ 6,244 52% Royalty and license revenue — Royalty and license revenue for the six months ended June 30, 2021 increased $6.2 million, or 52%, from $11.8 million for the six months ended June 30, 2020 to $17.9 million for the six months ended June 30, 2021. Per-unit royalty revenue increased by $5.7 million, or 61%, in the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily attributable to a $2.4 million increase in royalty revenue from our mobility licensees, a $2.4 million increase in royalties from our gaming licensees and a $1.0 million increase in revenue from our automotive licensees. Fixed fee license revenue increased $0.5 million in the six months ended June 30, 2021 compared to the same period in 2020 primarily due increased license revenue from our automotive licensees. We expect royalty and license revenue to continue to be a major component of our future revenue as our technology is included in products and we succeed in our efforts to monetize our IP. Our fixed fee license revenue could fluctuate depending upon the timing of execution of new fixed license fee arrangements. We also anticipate that our royalty revenue will fluctuate relative to our customers’ unit shipments. Development, services and other revenue — Development, services, and other revenue was $220,000 for the six months ended June 30, 2021 as compared to the $150,000 the six months ended June 30, 2020. Geographically, revenues generated in Asia, North America, and Europe for the six months ended June 30, 2021 represented 80%, 12%, and 8%, respectively, of our total revenue as compared to 79%, 16%, and 5%, respectively, for the six months ended June 30, 2020. 24 Table of Contents OPERATING EXPENSES The following tables set forth a summary of our operating expenses for the three and six months ended June 30, 2021 and 2020 (in thousands): Three Months Ended June 30, 2021 2020 Change % Change Sales and marketing $ 1,194 $ 1,255 $ (61) (5)% % of total revenue 11 % 22 % Research and development $ 1,332 $ 1,323 $ 9 1% % of total revenue 12 % 23 % General and administrative $ 2,636 $ 4,087 $ (1,451) (36)% % of total revenue 24 % 72 % Six Months Ended June 30, 2021 2020 Change % Change Sales and marketing $ 2,300 $ 2,971 $ (671) (23)% % of total revenue 13 % 25 % Research and development $ 2,639 $ 3,012 $ (373) (12)% % of total revenue 15 % 25 % General and administrative $ 4,860 $ 11,443 $ (6,583) (58)% % of total revenue 27 % 96 % Sales and Marketing - Our sales and marketing expenses primarily consisted of employee compensation and benefits, sales commissions, advertising, trade shows, collateral marketing materials, market development funds, travel, and allocated facilities costs. Sales and marketing expenses decreased $0.1 million, or 5%, in three months ended June 30, 2021 as compared to three months ended June 30, 2020 primarily attributable to a $0.1 million decrease in facilities related costs partially offset by a $0.1 million increase in compensation, benefits and other personnel related costs. Sales and marketing expenses decreased $0.7 million, or 23%, in the six months ended June 30, 2021 as compared to the same period in 2020 primarily attributable to a $0.3 million decrease in depreciation expense, a $0.2 million decrease in facilities related costs and a $0.3 million decrease in sales and marketing and travel costs partially offset by a $0.2 million increase in compensation, benefits and other personnel related costs. The decrease in depreciation expense in the first half of 2021 compared to the same period in 2020 was primarily attributable to the accelerated depreciation in the first quarter of 2020 resulting from the shortening in estimated useful life of the leasehold improvements of the San Jose, California ("SJ Facility") to March 31, 2020 following our decision to exit this facility. The decrease in facilities expenses during the three and six months ended June 30, 2021 compared to the same periods in 2020 was largely attributable to the decrease in rent expense following the sublease of the SJ Facility in the second quarter of 2020. The increase in compensation, benefits and other personnel related costs in the three and six months ended June 30, 2021 compared to the same periods in 2020 was primarily due to increases in commissions and other variable compensation. Research and Development — Our research and development expenses are comprised of employee compensation and benefits, outside services and consulting fees, tooling and supplies, and an allocation of facilities costs. Research and development expenses was flat for the three months ended June 30, 2021 compared to three months ended June 30, 2020. Research and development expenses decrease $0.4 million, or 12%, for the six months ended June 30, 2021 compared to the same period in 2020. This decrease was primarily due to a $0.2 million decrease in consulting and outside services, a $0.2 decrease in depreciation expense and a $0.2 million decrease in facilities related costs partially offset by a $0.3 million increase compensation, benefits and other personnel related costs. 25 Table of Contents The decrease in consulting and outside services cost in the six months ended June 30, 2021 compared to the same period in 2020 was largely due to a reduction in consultant headcount. The decrease facilities expenses in the six months ended June 30, 2021 compared to the same period in 2020 was driven by factors discussed above. The increase in compensation, benefits and other personnel related costs in the six months ended June 30, 2021 compared to the same period in 2020 was primarily due to increases in variable compensation and stock-based compensation expense. We believe that continued investment in research and development is critical to our future success, and we expect to continue making targeted investments in areas of research and technology development to support future growth in key markets. General and Administrative - Our general and administrative expenses primarily consisted of employee compensation and benefits, legal and professional fees, external legal costs for patents, office supplies, travel, and allocated facilities costs. General and administrative expenses decreased $1.5 million, or 36%, in the three months ended June 30, 2021 as compared to the same period in 2020 primarily due to a $0.5 million decrease in legal expenses, a $0.3 million decrease in compensation, benefits and other personnel related costs, a $0.3 million decrease in professional services and outside services and a $0.2 million decrease in facilities costs. General and administrative expenses decreased $6.6 million, or 58%, in the six months ended June 30, 2021 as compared to the same period in 2020 primarily due to a $2.3 million decrease in compensation, benefits and other personnel related costs, a $1.8 million decrease in legal expenses, a $1.2 million decrease in professional services and outside services, a $0.5 million decrease in depreciation expense and a $0.4 million decrease in facilities costs. The decrease in compensation, benefits and other personnel related costs was primarily due to reduced headcount, lower salaries, variable compensation driven by the transition of our Accounting, Human Resources, Finance and IT functions from San Jose, California to Montreal, Canada and lower stock-based compensation expense. The decrease in legal expense was primarily attributable to reduced activities, as well as a decrease in patent maintenance and prosecution costs. The decrease in consulting and professional services fees was due to decreases in accounting and audit fees and consulting and other professional fees in the three and six months ended June 30, 2021 compared to the same periods in 2020. The decrease in depreciation expense and facilities costs were primarily driven by the factors discussed above. We expect our general and administrative expenses to remain stable in the near future as we achieve targeted reductions in consulting and professional services, and other costs. INTEREST AND OTHER INCOME (LOSS), NET Interest and Other Income (Loss), Net — Interest and other income (loss), net consists of interest income from cash equivalents and short-term investments, translation exchange rate gains (losses) and other income. Interest and other income (loss), net decreased $0.3 million during the three months ended June 30, 2021 compared to the same period in 2020 primarily driven by a $0.2 million decrease in other income and a $0.1 million increase in foreign currency exchange gains. Interest and other income (loss), net decreased $0.4 million during the six months ended June 30, 2021 compared to the same period in 2020 primarily driven by a $0.3 million decrease in investment earnings on cash and cash equivalents and a $0.3 million decrease other income and partially offset by a $0.1 million increase in foreign currency exchange gains. The decrease in investment earnings was primarily due to lower interest rates during the six months ended June 30, 2021 compared to the same period in 2020. The foreign exchange gains were primarily driven by the fluctuation in South Korean Won exchanges rates against the U.S. Dollar. 26 Table of Contents PROVISION FOR INCOME TAXES The following table sets forth a summary of our provision for income taxes for the three and six months ended June 30, 2021 and 2020 (in thousands except for percentages): Three Months Ended June 30, 2021 2020 Change % Change Income (loss) before provision for income taxes $ 5,847 $ (671) Provision for income taxes 506 41 $ 465 1,134% Effective tax rate 8.7 % (6.1) % Six Months Ended June 30, 2021 2020 Change % Change Loss before benefit from (provision for) income taxes 8,024 (5,447) Provision for income taxes 647 93 554 596% Effective tax rates 8.1 % (1.7) % Provision for income tax for the three and six months ended June 30, 2021 and 2020 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 primarily due to the benefit recorded on deferred tax assets utilized in current year for the federal and state jurisdictions. The year-over-year change in provision for income taxes resulted primarily from the change in income from continuing operations across various tax jurisdictions. We continue to 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 as a result of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results. In the event that we determine the deferred tax assets are realizable based on an assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made. The valuation allowance does not impact our ability to utilize any underlying net operating loss carryforwards. We also maintain liabilities for uncertain tax positions. As of June 30, 2021, we had unrecognized tax benefits under ASC 740 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. 27 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Our cash and cash equivalents consist primarily of cash and money market funds. The securities are stated at market value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) within stockholders’ equity. On June 30, 2021, our cash and cash equivalents totaled $107.3 million, an increase of $47.8 million from $59.5 million on December 31, 2020. Six Months Ended June 30, 2021 2020 Change % Change Net cash provided by ( used in) operating activities $ 9,054 $ (4,768) $ 13,822 (290)% Net cash provided by (used in) investing activities $ (88) $ 2,970 $ (3,058) (103)% Net cash provided by (used in) financing activities $ 38,786 $ (30,579) $ 69,365 NM 1 (1) Not meaningful. Operating Activities Cash provided by (used in) operating activities primarily consists of net income (loss), adjusted for certain non-cash items including depreciation and amortization; stock-based compensation expense and the effect of changes in operating assets and liabilities. Net cash provided by operating activities was $9.1 million during the six months ended June 30, 2021, a $13.8 million increase compared the same period in 2020. This increase in net cash provided by operating activities was primarily attributable to a $12.9 million increase in net income and $2.4 million increase in cash provided by changes in net operating assets partially offset by a $1.5 million decrease in noncash items. Investing Activities Our investing activities primarily consist of purchases of and proceeds from maturities of short-term investments and purchases of computer equipment, furniture and leasehold improvements related to facilities expansion. Net cash used in investing activities during the six months ended June 30, 2021 was $0.1 million consisting of purchases of property and equipment. Net cash provided by investing activities during the six months ended June 30, 2020 was $3.0 million primarily consisting of $3.0 million proceeds from maturities of short-term investments. Financing Activities Our financing activities primarily consist of cash from issuance of common stock, proceeds from stock option exercises and stock purchases under our employee stock purchase plan and cash paid for repurchases of our common stock. Net cash provided by financing activities during the six months ended June 30, 2021 was $38.8 million primarily consisting of $35.8 million net proceeds from common stock issuances and $2.9 million proceeds from stock option exercises. Net cash used in financing activities during the six months ended June 30, 2020 was $30.6 million, and primarily consisted of $30.6 million in cash paid for stock repurchases. Our total cash and cash equivalents were $107.3 million as of June 30, 2021, of which approximately 13%, or $14.0 million was held by our foreign subsidiaries and subject to repatriation tax effects. Our intent is to permanently reinvest all of our earnings from foreign operations, and current plans do not anticipate that we will need funds generated from foreign operations to fund our domestic operations. We may continue to invest in, protect, and defend our extensive IP portfolio, which can result in the use of cash in the event of litigation. 28 Table of Contents On February 11, 2021, we entered into an equity distribution agreement (the "February 2021 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 February 2021 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. During the first quarter of 2021, we sold 3.3 million shares of our common stock pursuant to the February 2021 Distribution Agreement and we received net proceeds of approximately $35.9 million from the offering net of $1.2 million of commissions and other offering costs. We terminated the February 2021 Distribution Agreement on March 5, 2021. During the first quarter of 2020, we repurchased approximately 2.0 million shares of our common stock for approximately $12.0 million at an average cost of $5.95 per share. On July 6, 2021, we entered into an equity distribution agreement (the "July 2021 Distribution Agreement:") with an investment banking firm to issue and sell shares of our common stock having an aggregated offering price of up to $60 million. Under the July 2021 Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitations on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. Subject to the terms and conditions of the July 2021 Distribution Agreement, the investment banker may sell the shares by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made through the Nasdaq Global Select Market or on any other existing trading market for the common stock. 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 July 2021 Distribution Agreement may be terminated by either party upon prior written notice to the other party, or at any time under certain circumstances, including but not limited to the occurrence of a material adverse change in Immersion. We are not obligated to sell any shares under the July 2021 Distribution Agreement . As of August 12, 2021, we sold 1.9 million shares of our common stock and we received net proceeds of approximately $14.5 million from the offering after deducting commissions and other estimated offering expense. We anticipate that capital expenditures for property and equipment for the year ending December 31, 2021 will be less than $1 million. While the unprecedented public health and governmental efforts to contain the spread of COVID-19 have created significant uncertainty as to general economic and capital market conditions for the first half of 2021 and beyond, as of August 16, 2021, the date of this Quarterly Report on Form 10-Q, we believe we have sufficient capital resources to meet our working capital needs for the next twelve months. Cash from operations could also be affected by various risks and uncertainties, including but not limited to the risks detailed in Part II, Item 1A Risk Factors. 29 Table of Contents RECENT ACCOUNTING PRONOUNCEMENTS See Note 1. Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements for information regarding the effect of new accounting pronouncements on our financial statements. 30 Table of Contents