What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-03 compared with 2021-08-16 · 106 added, 85 removed, 160 unchanged (54% of the section changed)

18 unchanged sentences

capital expenditures and the sufficiency of our capital resources;

our investment of surplus funds and sales of marketable debt securities;

unrecognized tax benefit and tax liabilities;

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including with respect to taxes;

our plans related to and the impact of current and future litigation;

our plans related to and the impact of current and future litigation and arbitration;

our sublease and the timing and income related thereto;

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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.

We and our wholly-owned subsidiaries hold more than 1,700 issued or pending patents worldwide as of September 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 believe that IP protection is crucial to our business.

We rely on a combination of patents, copyrights, trade secrets, trademarks, nondisclosure agreements with employees and third parties, licensing arrangements, and other contractual agreements with third parties to protect our IP.

Parties licensed to our IP regard that act as an investment-one which is devalued when unlicensed parties use our IP.

Litigation against unlicensed third parties is a last step after all other avenues for resolution have been exhausted.

If unlicensed parties continue to ship products that use our IP without fairly remunerating us, litigation may be a proper step to protect our IP and assets, as well as inform existing licensees that we are protecting their investment.

As haptics gains wider acceptance in the market, the likelihood of unlicensed use of our IP increases.

This could result in ongoing dispute resolution and litigation efforts, as we seek to protect the investment that we and our valid licensees have made in our technology.

We were incorporated in 1993 in California and reincorporated in Delaware in 1999.

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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.

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 November 3, 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

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.

Total revenue for the three months ended September 30, 2021 was $7.2 million, a $0.4 million, or 6%, decrease compared to $7.6 million for the three months ended September 30, 2020 primarily driven by a $0.5 million or 7%, decrease in per-unit royalty revenue.

Total revenue for the nine months ended September 30, 2021 was $25.3 million, an increase of $5.8 million, or 30%, compared to $19.5 million for the nine months ended September 30, 2020 primarily driven by a $5.2 million or 33%, increase in per-unit royalty revenue and a $0.5 million or 14% increase in license revenue.

Net income for the three months ended September 30, 2021 was $3.8 million, an increase of $0.9 million as compared to a net income of $2.9 million for the three months ended September 30, 2020.

The increase in net income was mainly attributable to a $1.5 million decrease in cost and operating expenses partially offset by a $0.4 million decrease in total revenue.

Net income for the nine months ended September 30, 2021 was $11.1 million, an increase of $13.8 million as compared to a net loss of $2.7 million for the nine months ended September 30, 2020.

The increase in net income was mainly attributable to a $5.8 million increase in total revenue and a $9.2 million decrease in cost and operating expenses.

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

September 30, Nine Months Ended

September 30,

2021 2020 2021 2020

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Operating income (loss) 51 34 47 (16)

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)

Interest and other income (loss), net 7 2 1 2

Income (loss) before benefit from (provision for) income taxes 58 36 48 (14)

Benefit from (provision for) income taxes (5) 1 (4) —

Net income (loss) 53 % 37 % 44 % (14) %

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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 September 30, 2021 Compared to Three Months Ended September 30, 2020

A revenue summary for the three months ended September 30, 2021 and 2020 are as follows (in thousands, except for percentages):

Three Months Ended

September 30,

2021 2020 $ Change % Change

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Total revenues $ 7,173 $ 7,596 $ (423) (6)%

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.

Royalty and license revenue — Royalty and license revenue for the three months ended September 30, 2021 decreased $0.5 million, or 6%, to $7.1 million from $7.5 million for the three months ended September 30, 2020.

Per-unit royalty revenue decreased by $0.5 million, or 7%, in the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily attributable to a $1.2 million decrease in royalty revenue from mobility licensees and a $0.1 million decrease in revenue from automotive licensees partially offset by a $0.9 million increase in royalties from gaming licensees.

Fixed fee license revenue was flat in the three months ended September 30, 2021 compared to the same period in 2020.

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.

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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.

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

Development, services and other revenue — Development, services, and other revenue was $0.1 million for the three months ended September 30, 2021 as compared to the $65,000 the three months ended September 30, 2020.

Geographically, revenues generated in Asia, North America, and Europe for the three months ended September 30, 2021 represented 80%, 15%, and 5%, respectively, of our total revenue as compared to 77%, 14%, and 9%, respectively, for the three months ended September 30, 2020.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

A revenue summary for the nine months ended September 30, 2021 and 2020 are as follows (in thousands, except for percentages):

Nine Months Ended

September 30,

2021 2020 $ Change % Change

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Total revenues $ 25,342 $ 19,521 $ 5,821 30%

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.

Royalty and license revenue — Royalty and license revenue for the nine months ended September 30, 2021 increased $5.7 million, or 30%, to $25.0 million from $19.3 million to for the nine months ended September 30, 2020.

Per-unit royalty revenue increased by $5.2 million, or 33%, in the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily attributable to a $3.3 million increase in royalties from gaming licensees, a $1.1 million increase in royalty revenue from mobility licensees and a $0.9 million increase in revenue from automotive licensees.

Fixed fee license revenue increased $0.5 million in the nine months ended September 30, 2021 compared to the same period in 2020 primarily due to increased license revenue from 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.

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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.

Development, services and other revenue — Development, services, and other revenue was $0.3 million for the nine months ended September 30, 2021 as compared to the $0.2 million the nine months ended September 30, 2020.

Geographically, revenues generated in Asia, North America, and Europe for the nine months ended September 30, 2021 represented 80%, 13%, and 7%, respectively, of total revenue as compared to 78%, 15%, and 7%, respectively, for the nine months ended September 30, 2020.

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):

The following tables set forth a summary of our operating expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended

September 30,

2021 2020 Change % Change

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% of total revenue 31 % 39 %

Six Months Ended

Nine Months Ended

September 30,

2021 2020 Change % Change

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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.

Sales and marketing expenses decreased $0.7 million, or 60%, in three months ended September 30, 2021 as compared to three months ended September 30, 2020 primarily attributable to a $0.6 million decrease in compensation, benefits and other personnel related costs.

Sales and marketing expenses decreased $1.3 million, or 33%, in the nine months ended September 30, 2021 as compared to the same period in 2020 primarily attributable to a $0.4 million decrease in compensation, benefits and other personnel related costs;

a $0.3 million decrease in facilities related costs;

a $0.3 million decrease in depreciation expense and a $0.3 million decrease in advertising and travel costs.

The decrease in compensation, benefits and other personnel related costs primarily attributable to lower headcount in three and nine months ended September 30, 2021 compared to the same periods in 2020.

The decrease in depreciation expense in the first nine months of 2021 compared to the same period in 2020 was largely due 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 nine months ended September 30, 2021 compared to the same period in 2020 was largely attributable to lower rent expense following the sublease of the SJ Facility in the second quarter of 2020.

The decrease in advertising and travel related costs in the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to reduced business activities and travel restrictions during COVID 19 pandemic.

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.

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.

Research and development expenses decreased $0.1 million or 13% for the three months ended September 30, 2021 compared to three months ended September 30, 2020 primarily attributable to a $0.1 million decrease in compensation, benefits and other personnel related costs due to lower stock-based compensation expense.

Research and development expenses decreased $0.5 million, or 12%, for the nine months ended September 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 million decrease in facilities related costs and a $0.2 million decrease in depreciation expense partially offset by a $0.2 million increase compensation, benefits and other personnel related costs.

The decrease in consulting and outside services cost in the nine months ended September 30, 2021 compared to the same period in 2020 was largely due to lower consultant headcount.

The decrease facilities and depreciation expenses in the nine months ended September 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 nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to an increase in severance costs.

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.

General and administrative expenses decreased $0.7 million, or 24%, in the three months ended September 30, 2021 as compared to the same period in 2020 primarily due to a $0.9 million decrease in compensation, benefits and other personnel related costs partially offset by a $0.3 million increase in professional services and outside services fees.

The decrease in compensation, benefits and other personnel related costs due to lower general and administration headcount and a decrease in stock-based compensation costs.

General and administrative expenses decreased $7.3 million, or 51%, in the nine months ended September 30, 2021 as compared to the same period in 2020 primarily due to a $3.2 million decrease in compensation, benefits and other personnel related costs, a $1.8 million decrease in legal costs, a $1.0 million decrease in consulting and professional services fees, 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 and lower salaries 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 consulting and professional services fees was due to decreases in accounting and audit fees and consulting and other professional fees in the nine months ended September 30, 2021 compared to the same period 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.

While we currently expect our general and administrative expenses to remain stable or decrease in the near future as we achieve targeted reductions in consulting and professional services, headcount, and other costs, we may be required to engage in litigation to protect our IP, in which case our general and administrative expenses could substantially increase to reflect such litigation 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.

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):

Interest and other income (loss) for the three months ended September 30, 2021 decreased $0.3 million compared to the same period in 2020 primarily due to a $0.5 million increase in unrealized gain on equity marketable securities, a $0.3 million increase in interest income partially offset by a $0.5 million increase in unrealized foreign currency translation loss.

Interest and other income (loss) for the nine months ended September 30, 2021 decreased $0.2 million compared to the same period in 2020 primarily due to a $0.5 million increase in unrealized foreign currency translation loss, a $0.3 million increase in other income partially offset by a $0.5 million increase in unrealized gains on equity marketable security.

The increase of unrealized gains on equity marketable securities was largely attributable in unrealized gains on equity

marketable security we invested in the third quarter of 2021.The increase in unrealized foreign currency translation loss was attributable to the depreciation of South Korean Won against the U.S.

The increase in interest income is primarily due to an increase in cash and cash equivalents balances and higher effective interest rates in the three and nine months ended September 30, 2021 compared to the same periods in 2020.

The following table sets forth a summary of our provision for income taxes for the three and nine months ended September 30, 2021 and 2020 (in thousands except for percentages):

Three Months Ended

September 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

Income before benefit from (provision for) income taxes $ 4,111 $ 2,759

Benefit from (provision for) income taxes (340) 96 $ (436) NM 1

Effective tax rates (8.3) % 3.5 %

Nine Months Ended

September 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%

Income (loss) before benefit from (provision for) income taxes 12,135 (2,688)

Benefit from (provision for) income taxes (987) 3 (990) NM 1

Effective tax rates (8.1) % (0.1) %

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.

(1) Not meaningful.

Provision for income tax for the three and nine months ended September 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 effective tax rate is lower than the statutory tax rate primarily due to the benefit recorded on deferred tax assets utilized in the current year for 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.

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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.

As of September 30, 2021, we had unrecognized tax benefits under ASC 740 of approximately $4.3 million and applicable interest of $0.

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

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

Our cash, cash equivalents and short-term investments consist primarily of cash, money market funds and short-term investments in equity securities.

The marketable equity securities are measured at fair value with gains and losses recognized in Interest and other income (loss), net on our Condensed Consolidated Statements of Operations.

On September 30, 2021, our cash and cash equivalents and short-term investments totaled $118.6 million, an increase of $59.1 million from $59.5 million on December 31, 2020.

Nine Months Ended

September 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) operating activities $ 10,722 $ (2,988) $ 13,710 NM 1

Net cash provided by (used in) investing activities $ (32,775) $ 2,960 $ (35,735) NM 1

Net cash provided by (used in) financing activities $ 53,132 $ (30,489) $ 83,621 NM 1

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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.

Net cash provided by operating activities was $10.7 million during the nine months ended September 30, 2021, a $13.7 million increase compared the same period in 2020.

This increase in net cash provided by operating activities was primarily attributable to a $13.8 million increase in net income and $2.1 million increase in cash provided by changes in net operating assets partially offset by a $1.8 million decrease from 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.

Our investing activities primarily consist of purchases of and proceeds from maturities of short-term investments, purchases of marketable securities, proceeds from sale of derivative instruments and purchases of computer equipment, furniture and leasehold improvements related to facilities expansion.

Net cash used in investing activities during the nine months ended September 30, 2021 was $32.8 million consisting of $34.4 million of purchases of marketable securities partially offset by $1.8 million of proceeds from sale of derivative instruments.

Net cash provided by investing activities during the nine months ended September 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.

Net cash provided by financing activities during the nine months ended September 30, 2021 was $53.1 million primarily consisting of $50.1 million net proceeds from common stock issuances and $2.9 million proceeds from stock option exercises.

Net cash used in financing activities during the nine months ended September 30, 2020 was $30.5 million, and primarily consisted of $30.6 million in cash paid for stock repurchases.

Our total cash and cash equivalents were $90.6 million as of September 30, 2021, of which approximately 16%, or $14.5 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.

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.

During the third quarter of 2021, we sold 1.9 million shares of our common stock pursuant to the July 2021 Distribution Agreement and we received net proceeds of approximately $14.2 million from the offering after deducting commissions and other estimated offering expense.

On February 3, 2021, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission which provided us with the 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 (the "February 2021 Distribution Agreement") with Craig-Hallum 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 were obligated to pay a 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 $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.

On July 6, 2021, we entered into an equity distribution agreement (the "July 2021 Distribution Agreement") with Craig-Hallum Capital Group LLC (“Craig-Hallum”), as sales agent, 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.

Subject to the terms and conditions of the July 2021 Distribution Agreement, Craig-Hallum 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.

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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, 2021will 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.

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 2021 and beyond, as of November 3, 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.

2 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis