What changed in this filing

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Item 1A. Risk Factors

2021-11-03 compared with 2021-08-16 · 43 added, 39 removed, 474 unchanged (15% of the section changed)

50 unchanged sentences

A significant amount of our revenue is derived from a limited number of customers, and we expect that this will continue to be the case in the future.

For example, for the three months ended June 30, 2021, Samsung accounted for a significant amount of our total revenues.

For example, for the three months ended September 30, 2021, Samsung accounted for a significant amount of our total revenues.

In addition, we cannot be certain that other customers that have accounted for significant revenue in past periods, individually or as a group, will continue to generate similar revenue in any future period.

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In addition, licensing to semiconductor and actuator manufacturers increases the risk of patent exhaustion and implied licenses such that incorrectly structured licenses could negatively impact our business and financial results.

Potential patent and litigation reform legislation, potential United States Patent and Trademark Office (“USPTO”) and international patent rule changes, potential legislation affecting mechanisms for patent enforcement and available remedies, and potential changes to the intellectual property rights policies of worldwide standards bodies, as well as rulings in legal proceedings may affect our investments in research and development and our strategies for patent prosecution,

licensing and enforcement and could have a material adverse effect on our licensing business as well as our business as a whole.

Potential changes to certain U.S.

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Even if we are able to present robust compensation packages that enable us to attract and recruit new candidates for hire, we may not be able to retain our current executive officers and key employees if the structure of their compensation packages does not provide incentives for them to remain employed by us.

For instance, in June 2020, our 2020 Executive Incentive Plan was cancelled and the base salaries of our executive officers were reduced by 10%.

For instance, in August 2021, our 2021 Executive Incentive Plan was cancelled and in June 2020, our 2020 Executive Incentive Plan was cancelled and the base salaries of our executive officers were reduced by 10%.

We have experienced turnover in our senior management and our employee base, which could result in operational and administrative inefficiencies and could hinder the execution of our growth strategy.

We have experienced turnover in our senior management.

For example, on November 3, 2020, Ramzi Haidamus departed as our Chief Executive Officer and a member of our board of directors, and Jared Smith, our Vice President, Worldwide Sales, was appointed as Interim Chief Executive Officer.

In addition, effective May 21, 2021, Mike Okada departed as our General Counsel & Senior Vice President, IP Licensing and Legal Affairs.

Lack of management continuity could harm our customer

relationships, delay product development processes, adversely affect our ability to successfully execute our growth strategy, result in operational and administrative inefficiencies and added costs, and could impede our ability to recruit new talented individuals to senior management positions, which could adversely impact our results of operations, stock price and customer relationships.

For example, in November 2020 Ramzi Haidamus departed as our Chief Executive Officer and a member of our board of directors, and Jared Smith was appointed as Interim Chief Executive Officer.

In August 2021, Mr.

Smith resigned as Interim Chief Executive Officer and Francis Jose, who had replaced Mike Okada as General Counsel in May 2021, was appointed the Chief Executive Officer.

Lack of management continuity could harm our customer relationships, delay product development processes, adversely affect our ability to successfully execute our growth strategy, result in operational and administrative inefficiencies and added costs, and could impede our ability to recruit new talented individuals to senior management positions, which could adversely impact our results of operations, stock price and customer relationships.

Our success largely depends on our ability to integrate any new senior management within our organization in order to achieve our operating objectives, and changes in other key positions may affect our financial performance and results of operations as new members of management become familiar with our business.

General employee turnover also presents risks discussed in this paragraph.

We had an accumulated deficit of $105.8 million as of June 30, 2021, and we may not maintain consistent profitability in the future.

As of June 30, 2021, we had an accumulated deficit of $105.8 million.

We had an accumulated deficit of $102.0 million as of September 30, 2021, and we may not maintain consistent profitability in the future.

As of September 30, 2021, we had an accumulated deficit of $102.0 million.

We need to generate significant ongoing revenues to maintain consistent profitability.

19 unchanged sentences

The award ordered us to pay Samsung KRW 7,841,324,165 (approximately $6.9 million as of March 31, 2019), which we paid on April 22, 2019, denied Samsung’s claim for interest from and after May 2, 2017;

and ordered us to pay Samsung’s cost of the arbitration in the amount of approximately $871,454.

and ordered us to pay Samsung’s cost of the arbitration in the

amount of approximately $871,454.

In the first quarter of 2019, $6.9 million was recorded as a deposit included in Long-term deposits on our Condensed Consolidated Balance Sheets.

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

For additional background on this matter, please see Part I, Item 3 Legal Proceedings.

For additional background on this matter, please see Part II, Item 1 Legal Proceedings .

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 our Consolidated Statements of Operations and Comprehensive Income (Loss) , in the period in which we do not ultimately prevail.

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We currently have sales personnel and other personnel in Canada, the United Kingdom and Japan who may engage in various activities, including engaging our customers and prospective customers outside of the United States.

International revenues accounted for approximately 88% of our total revenues in the first six months of 2021.

International revenues accounted for approximately 87% of our total revenues in the first nine months of 2021.

International operations are subject to a number of difficulties, risks, and special costs, including:

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In addition, since we derive a significant portion of our revenues from licenses and royalties from our haptic patents in foreign countries, our ability to maintain and grow our revenue in foreign countries, such as China, will depend in part on our ability to obtain additional patent rights in these countries and our ability to effectively enforce such patents and contractual rights in these countries, which is uncertain.

Our technology licenses with customers in foreign countries subject us to an

increased risk of theft of our technology.

Our technology licenses with customers in foreign countries subject us to an increased risk of theft of our technology.

It may be more difficult for us to protect our IP in foreign countries, and as a result foreign counterparties may be more likely to steal our know-how, reverse engineer our software, or infringe our patents.

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In addition, while Microsoft, Sony, and Nintendo are among our licensees in the gaming market, a significant portion of our gaming royalty revenues comes from third-party peripheral makers who make licensed gaming products designed for use with popular video game console systems from such video game console makers.

Video game console systems are closed, proprietary systems, and video game console system makers typically impose certain requirements or restrictions on third-party peripheral makers who wish to make peripherals that will be compatible with a particular video game console system.

Video game console systems are closed,

proprietary systems, and video game console system makers typically impose certain requirements or restrictions on third-party peripheral makers who wish to make peripherals that will be compatible with a particular video game console system.

If third-party peripheral makers cannot or are not allowed to satisfy these requirements or restrictions, our gaming royalty revenues could be significantly reduced.

Furthermore, should a significant video game console maker choose to omit touch-enabling capabilities from its console systems or restrict or impede the ability of third parties to make touch-enabling peripherals, it could lead our gaming licensees to stop making products with touch-enabling capabilities, thereby significantly reducing our gaming royalty revenues.

we are unable to enter into replacement arrangements enabling us to license our software, patents, or other IP in connection with gaming on such mobile or other platforms.

Also, if the video game industry changes such that mobile or other platforms increase in popularity at the expense of traditional video game consoles, our gaming royalty revenues could be substantially reduced if we are unable to enter into replacement arrangements enabling us to license our software, patents, or other IP in connection with gaming on such mobile or other platforms.

Although we have a significant software and patent position with respect to virtual reality (or VR) peripherals and systems, the market may not become large enough to generate material revenues.

19 unchanged sentences

For the year ended December 31, 2020, 99% of our total revenues were royalty and license revenues, as compared to 99% for the year ended December 31, 2019.

We do not control or influence the design, manufacture, quality control, promotion, distribution or pricing of products that are manufactured and sold by our licensees, nor can we control consolidation within an industry which could either reduce the number of licensable products available or reduce royalty rates for the combined licensees.

We do not control or influence the design, manufacture, quality control, promotion, distribution or pricing of products that are manufactured and sold by our

licensees, nor can we control consolidation within an industry which could either reduce the number of licensable products available or reduce royalty rates for the combined licensees.

In addition, we generally do not have commitments from our licensees that they will continue to use our technologies in current or future products.

1 unchanged sentence

For us to generate royalty and license revenue, licensees that pay us per-unit royalties must manufacture and distribute products incorporating our touch-enabling technologies in a timely fashion and generate consumer demand through marketing and other promotional activities.

If our licensees’ products fail to achieve commercial success, or if their products are recalled

because of quality control problems or if they do not timely ship products incorporating our touch-enabling technologies or fail to achieve strong sales, our revenues could decline.

If our licensees’ products fail to achieve commercial success, or if their products are recalled because of quality control problems or if they do not timely ship products incorporating our touch-enabling technologies or fail to achieve strong sales, our revenues could decline.

Our business may suffer if third parties assert that we violate their IP rights.

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We might be unaware of any actual or potential security breach or be delayed in detecting a security breach, or, even if we are able to identify a breach, we may be unaware of its magnitude and effects.

Actual or perceived security breaches could result in unauthorized use of or access to our systems, system interruptions or shutdowns, unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data or intellectual property, may lead to litigation, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting customer or investor confidence and causing damage to our brand, indemnity obligations, disruption to our operations, damages for contract breach, and other liability, reduction in the value of our investment in research and development and other strategic initiatives, and adverse effects upon our revenues and operating results.

Actual or perceived security breaches could

result in unauthorized use of or access to our systems, system interruptions or shutdowns, unauthorized, accidental, or unlawful access to, or disclosure, modification, misuse, loss or destruction of, our or our customers’ data or intellectual property, may lead to litigation, indemnity obligations, regulatory investigations and other proceedings, severe reputational damage adversely affecting customer or investor confidence and causing damage to our brand, indemnity obligations, disruption to our operations, damages for contract breach, and other liability, reduction in the value of our investment in research and development and other strategic initiatives, and adverse effects upon our revenues and operating results.

Additionally, our service providers may suffer, or be perceived to suffer, data security breaches or other incidents that may compromise data stored or processed for us that may give rise to any of the foregoing.

43 unchanged sentences

We rely on the Swiss-U.S.

Privacy Shield programs, and the use of Standard Contractual Clauses (“SCCs”) approved by the EU Commission, to legitimize these transfers.

Privacy Shield programs, and the use of Standard Contractual Clauses (“SCCs”) approved by the EU Commission, to

legitimize these transfers.

Previously, we relied on the EU-U.S.

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At present, there are few if any viable alternatives to the Privacy Shield and the SCCs.

This CJEU decision or other legal challenges relating to cross-border data transfer may serve

as a basis for our personal data handling practices to be challenged and may otherwise adversely impact our business, financial condition and operating results.

Further, in June 2016, the United Kingdom voted to leave the European Union, commonly referred to as “Brexit,” which could also lead to further legislative and regulatory changes.

The United Kingdom ceased to be an EU Member State on January 31, 2020, but remains subject to EU law for a transition period ending on December 31, 2020.

This CJEU decision or other legal challenges relating to cross-border data transfer may serve as a basis for our personal data handling practices to be challenged and may otherwise adversely impact our business, financial condition and operating results.

Further, in June 2016, the United Kingdom voted to leave the European Union, commonly referred to as “Brexit,” and on January 31, 2020, the United Kingdom ceased to be an EU Member State.

The UK Data Protection Act that substantially implements the GDPR became law in May 2018 and was further amended to more closely align to GDPR post-Brexit.

7 unchanged sentences

In addition, ballot initiatives may also impose new or expanded privacy obligations.

For example, California voters appear to have passed Proposition 24, also known as the California Privacy Rights and Enforcement Act of 2020, a November 2020 ballot measure that, among other effects, expands or amends the provisions of the CCPA, allows consumers to direct businesses to not share their personal information, removes the time period in which businesses can fix violations before being penalized, and creates the California Privacy Protection Agency to enforce the state’s consumer data privacy laws.

For example, on November 3, 2020, California voters passed Proposition 24, also known as the California Privacy Rights and Enforcement Act of 2020, a November 2020 ballot measure that, among other effects, expanded or amended the provisions of the CCPA, allowed consumers to direct businesses to not share their personal information, removed the time period in which businesses can fix violations before being penalized, and created the California Privacy Protection Agency to enforce the state’s consumer data privacy laws.

Even the perception of privacy, data protection or information security concerns, whether or not valid, may harm our reputation, inhibit adoption of our products by current and future customers, or adversely impact our ability to hire and retain workforce talent.

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For example, in 2020 as a result of macroeconomic conditions and the related impact of COVID-19, the stock market experienced wide fluctuations.

In the past twelve months, our stock price has fluctuated from as low as $5.67 per share in June 2020 to a high of $16.64 in February 2021.

In the past twelve months, our stock price has fluctuated from as low as $6.16 per share in October 2020 to a high of $15.91 in February 2021.

This significant volatility may continue to occur in the future for reasons that are unrelated to our business or if our business experiences unexpected results.

The market price of our common stock has been, and in the future could be, significantly affected by our operations as well such as:

The market price of our common stock has been, and in the

future could be, significantly affected by our operations as well such as:

actual or anticipated fluctuations in operating results;

11 unchanged sentences

developments with respect to patents or proprietary rights;

inclusion in or exclusion from various

stock indices;

inclusion in or exclusion from various stock indices;

increased tariffs and international trade disputes;

17 unchanged sentences

We may also invest net proceeds in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S.

We could recognize losses with respect to the marketable securities in which we invest.

Factors beyond our control can significantly influence the value of the marketable securities in which we invest, and can cause potential adverse changes to the value of these marketable securities.

Relevant factors include, but are not limited to, fluctuations in market price, changes in our own analysis of the value of the security or instability in the financial markets.

Any of the foregoing factors could cause other-than-temporary impairment in future periods and result in realized losses.

The process for determining whether impairment is other-than-temporary usually requires difficult, subjective judgments about the future financial performance of the issuer.

Because of changing economic and market conditions and the financial condition of issuers of the marketable securities, we may recognize realized and/or unrealized losses in future periods, which could have an adverse effect on our financial condition and results of operations.

If we determine to purchase digital or alternative currencies as part of our capital allocation and investment strategy, our financial results and the market price of our common stock may be affected by the price of these digital or alternative currencies.

33 unchanged sentences

Under ASC 606, if a fixed fee license agreement contains both performance obligations to transfer rights to our patent portfolio as it exists when the contract is executed as well as rights to our patent portfolio as it evolves throughout the contract term, we are required to allocate the fixed fee between the two performance obligations which could result in the recognition of a substantial majority of the fixed fee as revenue upon the execution of the license agreement.

Prior to the adoption, as a historical practice applied by many

licensing companies, we recognized fixed license fees ratably over the contract term.

Prior to the adoption, as a historical practice applied by many licensing companies, we recognized fixed license fees ratably over the contract term.

In addition, our previous accounting practice was to recognize revenue from per-unit royalty agreements in the period in which the related royalty report was received from our licensees, generally one quarter in arrears from the period in which the underlying sales occurred (i.e., on a “quarter-lag”).

32 unchanged sentences

8-K 001-38334 1.1 July 6,

* Summary of Compensation Information of Francis Jose, General Counsel (1)

* Retention and Ownership Change Event Agreement, effective May 22, 2021, by and between Immersion Corporation and Francis Jose(1)

* Certification of Jared Smith, Interim Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

* Summary of Compensation Information of Aaron Akerman, Chief Financial Officer (1)

* Summary of Compensation Information of Francis Jose, Chief Executive Officer (1)

* Certification of Francis Jose, Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

* Certification of Aaron Akerman, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

+ Certification of Jared Smith, Interim Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Certification of Francis Jose, Chief Executive Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

+ Certification of Aaron Akerman, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

11 unchanged sentences

IMMERSION CORPORATION

August 16, 2021 By:

November 3, 2021 By:

/s/ AARON AKERMAN

3 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 1A. Risk Factors