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Item 1. Financial Statements

2022-08-15 compared with 2022-05-13 · 215 added, 125 removed, 518 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except number of shares and per share amounts)

(In thousands)

2022 December 31,

Current assets:

Cash $ 62,958 $ 51,490

Cash and cash equivalents $ 57,390 $ 51,490

Marketable equity securities 79,476 86,431

5 unchanged sentences

Marketable debt securities 17,147 7,286

Other assets, net 4,001 4,809

Other assets 3,705 4,809

Total assets $ 174,018 $ 175,520

12 unchanged sentences

Common stock and additional paid-in capital 325,351 323,296

Accumulated other comprehensive income 653 412

Accumulated other comprehensive income (loss) ( 401 ) 412

Accumulated deficit ( 97,423 ) ( 100,680 )

4 unchanged sentences

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In thousands, except share and per share amounts)

Three Months Ended March 31,

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

Three Months Ended

June 30 Six Months Ended

2022 2021 2022 2021

Royalty and license $ 7,918 $ 10,881 $ 15,148 $ 17,949

9 unchanged sentences

Interest and other income (loss), net ( 6,099 ) 40 ( 4,065 ) ( 276 )

Income before provision for income taxes 5,637 2,177

Provision for income taxes ( 561 ) ( 141 )

Net income $ 5,076 $ 2,036

Basic net income per share $ 0.15 $ 0.07

Shares used in calculating basic net income per share 33,996 28,579

Diluted net income per share $ 0.15 $ 0.07

Shares used in calculating diluted net income per share 34,268 29,180

Income (loss) before benefit from (provision for) income taxes ( 1,993 ) 5,847 3,644 8,024

Benefit from (provision for) income taxes 174 ( 506 ) ( 387 ) ( 647 )

Net income (loss) $ ( 1,819 ) $ 5,341 $ 3,257 $ 7,377

Basic net income (loss) per share $ ( 0.05 ) $ 0.17 $ 0.10 $ 0.25

Shares used in calculating basic net income (loss) per share 33,616 30,982 33,638 29,787

Diluted net income (loss) per share $ ( 0.05 ) $ 0.17 $ 0.10 $ 0.24

Shares used in calculating diluted net income (loss) per share 33,616 31,247 33,955 30,253

Other comprehensive income, net of tax

Change in unrealized gains on available-for-sale securities $ 241 $ —

Total other comprehensive income 241 —

Total comprehensive income $ 5,317 $ 2,036

Change in unrealized losses on available-for-sale securities $ ( 1,054 ) $ — $ ( 813 ) $ —

Total other comprehensive loss ( 1,054 ) — ( 813 ) —

Total comprehensive income (loss) $ ( 2,873 ) $ 5,341 $ 2,444 $ 7,377

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except number of shares)

Three Months Ended June 30, 2022

Common Stock and

1 unchanged sentence

Comprehensive

Income (Loss) Accumulated

Deficit Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

Balances at March 31, 2022 46,658,734 $ 324,476 $ 653 $ ( 95,604 ) 13,082,214 $ ( 86,175 ) $ 143,350

Net loss — — — ( 1,819 ) — — ( 1,819 )

Unrealized loss on available-for-sale securities, net of taxes — — ( 1,054 ) — — — ( 1,054 )

Stock repurchases — — — — 281,765 ( 1,535 ) ( 1,535 )

Release of restricted stock units and awards, net of shares withheld 176,258 — — — 14,549 ( 80 ) ( 80 )

Shares issued to an employee in lieu of cash compensation 16,517 84 — — — — 84

Stock-based compensation — 791 — — — — 791

Balances at June 30, 2022 46,851,509 $ 325,351 $ ( 401 ) $ ( 97,423 ) 13,378,528 $ ( 87,790 ) $ 139,737

Three Months Ended June 30, 2021

Common Stock and

Additional Paid-In Capital Accumulated

Comprehensive

Income Accumulated

2 unchanged sentences

Shares Amount Shares Amount

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

Net income — — — 5,341 — — 5,341

Exercise of stock options, net of shares withheld for employee taxes 18,750 140 — — — — 140

Release of restricted stock units and awards 213,310 — — — — — —

Shares issued in connection with public offering, net of issuance costs — ( 104 ) — — — — ( 104 )

Stock-based compensation 1,051 — — — — 1,051

Balances at June 30, 2021 43,252,670 $ 299,124 $ 122 $ ( 105,787 ) 12,143,433 $ ( 81,733 ) $ 111,726

See accompanying Notes to Condensed Consolidated Financial Statements.

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except number of shares)

Six Months Ended June 30, 2022

Common Stock and

Additional Paid-In Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Deficit Treasury Stock Total

Stockholders’

Shares Amount Shares Amount

Balances at December 31, 2021 46,534,198 $ 323,296 $ 412 $ ( 100,680 ) 12,143,433 $ ( 81,733 ) $ 141,295

Net income 3,257 3,257

Unrealized gain on available-for-sale securities, net of taxes — — 241 — — — 241

Unrealized loss on available-for-sale securities, net of taxes — — ( 813 ) — — — ( 813 )

Stock repurchases 1,220,546 ( 5,977 ) ( 5,977 )

Release of restricted stock units and awards 116,811 — — — — — —

Issuance of stock for ESPP purchase 7,725 34 — — — 34

Release of restricted stock units and awards, net of shares withheld for employee taxes 293,069 — — — 14,549 ( 80 ) ( 80 )

Shares issued to an employee in lieu of cash compensation 16,517 84 — — — — 84

Shares issued in connection with public offering, net of issuance costs — 5 — — — — 5

Stock-based compensation 1,932 — — — — 1,932

Balances at March 31, 2022 46,658,734 $ 324,476 $ 653 $ ( 95,604 ) 13,082,214 $ ( 86,175 ) $ 143,350

Balances at June 30, 2022 46,851,509 $ 325,351 $ ( 401 ) $ ( 97,423 ) 13,378,528 $ ( 87,790 ) 139,737

Six Months Ended June 30, 2021

Common Stock and

8 unchanged sentences

Exercise of stock options, net of shares withheld for employee taxes 325,737 2,864 — — — — 2,864

Release of restricted stock units and awards 227,055 — — — — — —

Issuance of stock for ESPP purchase 15,543 89 — — — — 89

Release of restricted stock units and awards 440,365 — — — — — —

Shares issued in connection with public offering, net of issuance costs 3,309,811 35,833 — — — — 35,833

Stock-based compensation 1,582 — — — — 1,582

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

Balances at June 30, 2021 43,252,670 $ 299,124 $ 122 $ ( 105,787 ) 12,143,433 $ ( 81,733 ) 111,726

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows provided by (used in) operating activities:

3 unchanged sentences

Stock-based compensation 1,932 1,582

Net gains on investment in marketable equity securities ( 3,166 ) —

Net losses on derivative instruments 2,795 —

Realized gains on investment in marketable debt securities ( 368 ) —

Net loss on investment in marketable securities 3,644 —

Net loss on derivative instruments 2,728 —

Deferred income taxes ( 124 ) 280

Foreign currency remeasurement gains 139 32

Other ( 17 ) 24

Shares issued to an employee in lieu of cash compensation 84 —

Changes in operating assets and liabilities:

15 unchanged sentences

Purchases of property and equipment ( 8 ) ( 88 )

Net cash provided by (used in) investing activities 4,833 ( 57 )

Net cash used in investing activities ( 6,722 ) ( 88 )

Cash flows provided by (used in) financing activities:

Proceed from issuance of common stock, net of issuance costs 5 35,937

Payment for purchases of treasury stock ( 6,056 ) —

Proceeds from issuance of common stock, net of issuance costs 5 35,833

Proceeds from issuance of common stock under employee stock purchase plan 34 89

Proceeds from stock options exercises — 2,864

Cash paid for purchases of treasury stock ( 4,442 ) —

Net cash provided by (used in) financing activities ( 6,017 ) 38,786

1 unchanged sentence

Cash and cash equivalents:

Beginning of year 51,490 59,522

End of year $ 62,958 $ 102,624

Beginning of period 51,490 59,522

End of period $ 57,390 $ 107,274

See accompanying Notes to Condensed Consolidated Financial Statements.

4 unchanged sentences

Cash paid for income taxes $ 647 $ 13

Supplemental disclosure of non-cash operating, investing, and financing activities:

Supplemental disclosure of non-cash investing, and financing activities:

Release of restricted stock units and awards under company stock plan $ 1,557 $ 4,016

8 unchanged sentences

The outbreak of a novel strain of coronavirus ("COVID-19") caused governments and public health officials around the world to implementing stringent measures to help control the spread of the virus.

In response to the COVID-19 pandemic, we implemented work-from-home and restricted travel policies in the first quarter of 2020, which remained in place during the first quarter of 2022.

In response to the COVID-19 pandemic, we implemented work-from-home and restricted travel policies in the first quarter of 2020, which have remained in place.

In April 2020, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic.

1 unchanged sentence

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

During the three months ended March 31, 2021, we recognized $ 0.1 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Income and Comprehensive Income .

We did not recognize government subsidy during the three months ended March 31, 2022.

During the six months ended June 30, 2021 we recognized $ 0.2 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Operation and Comprehensive Income (Loss) .

We did not recognize for any government subsidy during the six months ended June 30, 2022.

Principles of Consolidation and Basis of Presentation

10 unchanged sentences

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

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year.

Segment Information

15 unchanged sentences

Disaggregated Revenue

The following table presents the disaggregation of our revenue for the three months ended March 31, 2022 and 2021 (in thousands):

The following table presents the disaggregation of our revenue for the three and six months ended June 30, 2022 and 2021 (in thousands):

For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Fixed fee license revenue $ 1,246 $ 1,824 $ 2,991 $ 3,099

8 unchanged sentences

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

In the three months ended March 31, 2022, we recorded adjustments of $ 0.3 million to increase royalty revenue.

We recorded adjustments of $ 0.5 million to decrease royalty revenue during the three months ended March 31, 2021.

In the three months ended June 30, 2022, we recorded adjustments of $ 0.5 million to increase royalty revenue.

We recorded adjustments of $ 2.0 million to increase royalty revenue during the three months ended June 30, 2021.

Contract Assets

As of March 31, 2022, we had contract assets of $ 10.9 million included within Prepaid expenses and other current asset s, and $ 1.0 million included within Other assets, net on the Condensed Consolidated Balance Sheets .

As of December 31, 2021, we had contract assets of $ 12.4 million included within Prepaid expenses and other current assets , and $ 1.7 million included within Other assets, net on the Condensed Consolidated Balance Sheets .

Contract assets decreased by $ 2.3 million from January 1, 2022 to March 31, 2022, primarily due to actual royalties billed during the period.

As of June 30, 2022, we had contract assets of $ 8.5 million included within Prepaid expenses and other current asset s, and $ 0.8 million included within Other assets on the Condensed Consolidated Balance Sheets .

As of December 31, 2021, we had contract assets of $ 12.4 million included within Prepaid expenses and other current assets , and $ 1.7 million included within Other assets on the Condensed Consolidated Balance Sheets .

Contract assets decreased by $ 4.9 million from January 1, 2022 to June 30, 2022, primarily due to actual royalties billed and the reduction in contact assets balance following our settlement agreement with Marquardt GmbH.

Contracted Revenue

13 unchanged sentences

As the rights and obligations in a contract are interdependent, contract assets and contract liabilities that arise in the same contract are presented on a net basis.

Based on contracts signed and payments received as of March 31, 2022, we expect to recognize $ 20.2 million revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $ 13.0 million over one to three years and $ 7.2 million over more than three years.

Based on contracts signed and payments received as of June 30, 2022, we expect to recognize $ 19.0 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $ 11.7 million over one to three years and $ 7.3 million over more than three years.

INVESTMENTS AND FAIR VALUE MEASUREMENTS

3 unchanged sentences

The marketable debt securities are classified either short-term or long-term based on each instrument’s underlying contractual maturity date.

As of March 31, 2022 and December 31, 2021, we reported $ 11.2 million and $ 7.3 million of investments in debt securities as Marketable debt securities on our Condensed Consolidated Balance Sheets, respectively , as management intends to hold these investment for more than 12 months from the reporting date.

As of June 30, 2022 and December 31, 2021, we reported $ 17.1 million and $ 7.3 million of investments in debt securities as Marketable debt securities on our Condensed Consolidated Balance Sheets, respectively , as management intends to hold these investment for more than 12 months from the reporting date.

We may sell certain marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

Our investments in marketable equity securities are classified based on the nature of the securities and their availability for use in current operations.

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 Income and Comprehensive Income .

We regularly review our investment portfolio to identify and evaluate investments that have indicators of possible impairment.

2 unchanged sentences

Once a decline in fair value is determined to be other-than-temporary, we will record an impairment charge and establish a new cost basis in the investment.

Marketable securities as of March 31, 2022 and December 31, 2021 consisted of following (in thousands):

March 31, 2022

Marketable securities as of June 30, 2022 and December 31, 2021 consisted of following (in thousands):

June 30, 2022

Cost or Amortized Cost Unrealized Gains Unrealized Losses Fair Value

9 unchanged sentences

$ 95,096 $ 290 $ ( 1,669 ) $ 93,717

As of March 31, 2022 and December 31, 2021, marketable securities are classified and reported on our Condensed Consolidated Balance Sheets as follows:

March 31, 2022

As of June 30, 2022 and December 31, 2021, marketable securities are classified and reported on our Condensed Consolidated Balance Sheets as follows (in thousands):

June 30, 2022

Marketable Equity Securities Marketable Debt Securities Total

9 unchanged sentences

$ 86,431 $ 7,286 $ 93,717

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of March 31, 2022 (in thousands) are as follows:

March 31, 2022

The amortized costs and fair value of our marketable debt securities, by contractual maturity, as of June 30, 2022 (in thousands) are as follows:

June 30, 2022

Less than 1 year $ — $ —

1 to 5 years 9,158 9,217

More than 5 years 8,512 7,930

Total $ 17,670 $ 17,147

2 unchanged sentences

When we sell call and put options, the premium received is reported as Other current liabilities on our Condensed Consolidated Balance Sheets .

When we purchase put or call options, the premium paid is reported as Marketable securities on our Condensed Consolidated Balance Sheets .

When we purchase put or call options, the premium paid is reported as Other current liabilities on our Condensed Consolidated Balance Sheets .

The carrying value of these options are adjusted to the fair value at the end of each reporting period until the options expire.

Gains and losses recognized from the periodic adjustments to fair value are recognized as Interest and other income , on our Condensed Consolidated Statements of Income and Comprehensive Income .

Gains and losses recognized from the periodic adjustments to fair value are recognized as Interest and other income , on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) .

Our derivative instruments which consisted of call and put options sold at their fair value as of the balance sheet date.

These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 (in thousands).

March 31, 2022

These derivative instruments are reported as Other current liabilities on our Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

Cost Unrealized Losses Fair Value

7 unchanged sentences

Three Months Ended

Net unrealized gains recognized on marketable equity securities $ 2,140 $ —

Net realized gains recognized on marketable equity securities 1,026 —

June 30, Six Months Ended

2022 2021 2022 2021

Net unrealized losses recognized on marketable equity securities $ ( 6,923 ) $ — $ ( 4,784 ) $ —

Net realized gains (losses) recognized on marketable equity securities ( 254 ) — 772 —

Net unrealized losses recognized on derivative instruments ( 1,943 ) — ( 4,603 ) —

Net realized loss recognized on derivative instruments ( 134 ) —

Net realized gains recognized on derivative instruments 2,009 — 1,875 —

Net realized gains recognized on marketable debt securities — — 368 —

Total net gains recognized in interest and other income (loss), net $ 739 $ —

Total net losses recognized in interest and other income (loss), net $ ( 7,111 ) $ — $ ( 6,372 ) $ —

Fair Value Measurements

3 unchanged sentences

Financial instruments valued based on unobservable inputs which reflect the reporting entity’s own assumptions or data that market participants would use in valuing an instrument are generally classified within Level 3 of the fair value hierarchy.

We did not hold Level 3 financial instruments as of March 31, 2022 and December 31, 2021.

Financial instruments measured at fair value on a recurring basis as of March 31, 2022 and December 2021 are classified based on the valuation technique in the table below (in thousands):

March 31, 2022

We did not hold Level 3 financial instruments as of June 30, 2022 and December 31, 2021.

Financial instruments measured at fair value on a recurring basis as of June 30, 2022 and December 2021 are classified based on the valuation technique in the table below (in thousands):

June 30, 2022

Fair Value Measurements Using

24 unchanged sentences

BALANCE SHEETS DETAILS

Cash and Cash Equivalents

Cash and cash equivalents were as follow (in thousands):

2022 December 31,

Cash $ 37,390 $ 51,490

Money market funds 20,000 —

Cash and cash equivalents $ 57,390 $ 51,490

Accounts and Other Receivables

4 unchanged sentences

Accounts and other receivables $ 1,923 $ 1,970

Allowance for credit losses as of March 31, 2022 and December 31, 2021 were not material.

Allowance for credit losses as of June 30, 2022 and December 31, 2021 were not material.

Prepaid Expenses and Other Current Assets

5 unchanged sentences

Prepaid expenses and other current assets $ 9,550 $ 13,432

Other Assets, Net

Other assets, net are as follows (in thousands):

Other assets are as follows (in thousands):

2022 December 31,

3 unchanged sentences

Other assets 9 36

Total other assets, net $ 4,001 $ 4,809

Total other assets $ 3,705 $ 4,809

Other Current Liabilities

15 unchanged sentences

On April 28, 2017, Immersion and Immersion Software Ireland Limited (collectively referred to as “Immersion” in this section) received a letter from Samsung Electronics Co.

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

from 2012 to 2016.

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

20 unchanged sentences

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

The award ordered Immersion to pay Samsung KRW 7,841,324,165 (approximately $ 6.9 million as of March 31, 2019) which

we paid on April 22, 2019 and recorded in Long-term deposits on our Condensed Consolidated Balance Sheets .

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

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

1 unchanged sentence

In March 2022, as a result of the Korea Supreme Court decision described above, we were reimbursed by Samsung in an amount equal to KRW 6,088,855,388 (approximately $ 5 million) representing Korea national-level taxes, penalties and interest that were canceled by the Korea Supreme Court, which amount is net of $ 1.3 million of the impairment charge previously recorded in the fourth quarter of 2021.

We expect to be reimbursed an additional KRW 608,885,000 (approximately $ 0.5 million) representing local-level taxes, penalties and interest that were canceled by the Korea Supreme Court, which amount is net of $ 0.1 million of the impairment charge previously recorded in the fourth quarter of 2021.

We were also reimbursed an additional KRW 608,885,000 (approximately $ 0.5 million) representing local-level taxes, penalties and interest that were canceled by the Korea Supreme Court, which amount is net of $ 0.1 million of the impairment charge previously recorded in the fourth quarter of 2021.

LGE Korean Withholding Tax Matter

1 unchanged sentence

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

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

which provisional deposit would be returned to us to the extent we ultimately prevail in the appeal in the Korea courts.

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

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

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

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

15 unchanged sentences

The Court had indicated that it expected to render a decision on this matter by the end of February 2022.

However, due to a reshuffling of judges, another hearing, which was originally scheduled for April 14, 2022 is currently scheduled for July 7, 2022, at which time we believe we will have a better indication as to when the Court will render a decision on this matter.

However, due to a reshuffling of judges, another hearing, which was originally scheduled for April 14, 2022 occurred on July 7, 2022.

A thirteenth hearing is scheduled for October 27, 2022.

The Court has indicated that it expects to render a decision on this matter by December 31, 2022.

Based on the developments in these cases, we regularly reassess the likelihood that we will prevail in the claims from the Korean tax authorities with respect to the LGE case.

To the extent that we determine that it is more likely than not that we will prevail against the claims from the Korean tax authorities, then no additional tax expense is provided for in our Condensed Consolidated Statements of Income and Comprehensive Income .

In the event that we determine that it is more likely than not that we will not prevail against the claims from the Korean tax authorities, or a portion thereof, then we would estimate the anticipated additional tax expense associated with that outcome and record it as additional income tax expense in our C ondensed Consolidated Statements of Income and Comprehensive Income in the period of the new determination.

In the event that we determine that it is more likely than not that we will not prevail against the claims from the Korean tax authorities, or a portion thereof, then we would estimate the anticipated additional tax expense associated with that outcome and record it as additional income tax expense in our C ondensed Consolidated Statements of Operation and Comprehensive Income (Loss) in the period of the new determination.

If the additional income tax expense was related to the periods assessed by Korean tax authorities and for which we recorded a Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be recorded as an impairment to the Long-term deposits .

If the additional income tax expense was not related to the periods assessed by Korean tax authorities and for a which we recorded in Long-term deposits on our Condensed Consolidated Balance Sheets , then the additional income tax expense would be accrued as an Other current liabilities .

In the event that we do not ultimately prevail in our appeal in the Korean courts with respect to this case, the applicable deposits included in Long-term deposits would be recorded as additional income tax expense on our Condensed Consolidated Statements of Income and Comprehensive Income , in the period in which we do not ultimately prevail.

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

In the fourth quarter of 2021, we recorded an impairment charge of $ 0.8 million related to the long-term deposits paid to LGE.

10 unchanged sentences

On August 9, 2021, the AAA confirmed receipt of our arbitration demand dated August 3, 2021.

On August 13, 2021, the AAA conducted an administrative conference call to discuss communications, mediation, tribunal appointment, place of arbitration, and other administrative topics.

On August 13, 2021, the AAA conducted an administrative conference call to discuss communications, mediation, tribunal appointment, place of

arbitration, and other administrative topics.

On September 15, 2021, Marquardt filed an answer to our arbitration demand with the AAA, in which Marquardt provided general denials of our claims and asserted a counterclaim for approximately $ 138,000 in royalties previously paid to us under the Marquardt License.

5 unchanged sentences

Additionally on April 4, 2022, we entered into an amendment to the Marquardt License to reflect such payment and other related terms.

On May 20, 2022, the parties submitted a stipulation of dismissal to the AAA dismissing with prejudice all claims brought by us against Marquardt in the arbitration.

Immersion Corporation vs.

Meta Platforms, Inc., f/k/a Facebook, Inc.

On May 26, 2022, we filed a complaint against Meta Platforms, Inc.

(formerly known as Facebook, Inc.) (“Meta”) in the United States District Court for the Western District of Texas.

The complaint alleges that Meta’s augmented and virtual reality (“AR/VR”) systems, including the Meta Quest 2, infringe six of our patents that cover various uses of haptic effects in connection with such AR/VR systems.

We are seeking to enjoin Meta from further infringement and to recover a reasonable royalty for such infringement.

The complaint against Meta asserts infringement of the following patents:

“System and method for providing complex haptic stimulation during input of control gestures, and relating to control of virtual equipment”

“Context-dependent haptic confirmation system”

“Haptically enhanced interactivity with interactive content”

“System with wearable device and haptic output device”

“Haptically enhanced interactivity with interactive content”

Meta responded to our complaint on August 1, 2022.

STOCK-BASED COMPENSATION

9 unchanged sentences

Awards granted other than a stock option or a stock appreciation right shall reduce the common stock shares available for grant by 1.75 shares for every share issued.

A summary of our equity incentive program as of March 31, 2022 is as follows (in thousands):

A summary of our equity incentive program as of June 30, 2022 is as follows (in thousands):

Common stock shares available for grant 1,873

Stock options outstanding 172

RSAs outstanding 114

RSUs outstanding 592

RSAs outstanding 119

PSUs outstanding 618

Time-Based Stock Options

The following summarizes activities for the time-based stock options for the three months ended March 31, 2022:

The following summarizes activities for the time-based stock options for the six months ended June 30, 2022:

Number of Shares

10 unchanged sentences

Canceled or expired ( 70 ) 7.27

Outstanding as of March 31, 2022 212 $ 8.14 3.25 $ —

Vested and expected to vest at March 31, 2022 212 $ 8.14 3.25 $ —

Exercisable at March 31, 2022 148 $ 8.35 2.58 $ —

Outstanding as of June 30, 2022 172 $ 8.35 4.21 $ —

Vested and expected to vest at June 30, 2022 163 $ 4.62 3.68 $ —

Exercisable at June 30, 2022 116 $ 8.50 4.05 $ —

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the exercise price of our common stock for the options that were in-the-money.

We did not grant stock options during the first quarter of 2022.

We did not grant stock options during the first six months of 2022.

Restricted Stock Units

The following summarizes RSU activities for the three months ended March 31, 2022:

The following summarizes RSU activities for the six months ended June 30, 2022:

Number of Restricted Stock Units

7 unchanged sentences

Forfeited ( 61 ) 5.91

Outstanding at March 31, 2022 665 $ 4.97 1.32 $ 3,700

Outstanding at June 30, 2022 592 $ 4.94 1.20 $ 3,163

The aggregate intrinsic value is calculated as the market value as of the end of the reporting period.

Restricted Stock Awards

The following summarizes RSA activities for the three months ended March 31, 2022:

The following summarizes RSA activities for the six months ended June 30, 2022:

Number of Restricted Stock Awards

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Granted 233 5.13

Released ( 114 ) 4.78

Forfeited — —

Outstanding at March 31, 2022 114 $ 4.78 0.12

Outstanding at June 30, 2022 119 $ 5.47 0.90

Market Condition-Based Restricted Stock Units

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Each PSU represents the right to one share of our common stock with vesting subject to:

(a) the achievement of specified levels of the volume weighted average closing prices of our common stock during any one hundred (100) day-period between January 1, 2022 and January 1, 2027, subject to certification by the Compensation Committee (“Performance Milestones”);

(a) the achievement of specified levels of the volume weighted average closing prices of our common stock during any 100 day-period between January 1, 2022 and January 1, 2027, subject to certification by the Compensation Committee (“Performance Milestones”);

and (b) continued employment with us through the later of each achievement date or service vesting date, which occurs over a three (3) year period commencing on January 1, 2022.

The following summarizes PSU activities for the three months ended March 31, 2022:

The following summarizes PSU activities for the six months ended June 30, 2022:

Number of Market Condition-Based Restricted Stock Units

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Forfeited ( 41 ) 6.20

Outstanding at March 31, 2022 641 $ 3.80 1.49

The assumptions used to value market condition based restricted stock units granted during the first quarter of 2022 under our equity incentive program are as follows:

Market condition based restricted stock units:

Three Months Ended

March 31, 2022

Outstanding at June 30, 2022 618 $ 3.71 1.37

The assumptions used to value market condition-based restricted stock units granted during the first half of 2022 under our equity incentive program are as follows:

Six Months Ended June 30, 2022

Expected life (in years) 1.2

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

During the three months ended March 31, 2022, 7,725 shares were purchased under the ESPP.

As of March 31, 2022, 198,123 shares were available for future purchase under the ESPP.

During the six months ended June 30, 2022, 7,725 shares were purchased under the ESPP.

As of June 30, 2022, 198,123 shares were available for future purchase under the ESPP.

Stock-based Compensation Expense

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Estimated forfeitures are based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The stock-based compensation related to all of our stock-based awards and ESPP for the years ended March 31, 2022 and 2021 is as follows (in thousands):

The stock-based compensation related to all of our stock-based awards and ESPP for the three and six months ended June 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Stock options $ 52 $ 179 $ 15 $ 194

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Total $ 791 $ 1,051 $ 1,932 $ 1,582

As of March 31, 2022, there was $ 5.2 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, RSUs, RSAs and PSUs granted to our employees and directors.

As of June 30, 2022, there was $ 4.5 million of unrecognized compensation cost adjusted for estimated forfeitures related to non-vested stock options, RSUs, RSAs and PSUs granted to our employees and directors.

This unrecognized compensation cost will be recognized over an estimated weighted-average period of approximately 1.8 years.

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The stock repurchase program does not obligate us to repurchase any dollar amount or number of shares, and the program may be suspended or discontinued at any time.

In the first quarter of 2022, we repurchased 34,282 shares of our common stock for $ 0.2 million at an average cost of $ 4.89 per share.

As of March 31, 2022, we have $ 29.8 million available for repurchase under the stock repurchase program.

Provision for income taxes the years ended March 31, 2022 and 2021 consisted of the following (in thousands):

In the three months ended June 30, 2022, we repurchased 281,765 shares of our common stock for $ 1.5 million at an average cost of $ 5.43 per share.

In the six months ended June 30, 2022, we repurchased 316,047 shares of our common stock for $ 1.7 million at an average cost of $ 5.37 per share.

As of June 30, 2022, we have $ 28.3 million available for repurchase under the stock repurchase program.

Provision for (benefit from) income taxes the three and six months ended June 30, 2022 and 2021 consisted of the following (in thousands):

Three Months Ended

Income before provision for income taxes $ 5,637 $ 2,177

Provision for income taxes 561 141

June 30, Six Months Ended

2022 2021 2022 2021

Income (loss) before benefit from (provision for) income taxes $ ( 1,993 ) $ 5,847 $ 3,644 $ 8,024

Benefit from (provision for) income taxes 174 ( 506 ) ( 387 ) ( 647 )

Effective tax rate ( 8.7 ) % ( 8.7 ) % ( 10.6 ) % ( 8.1 ) %

Provision for income taxes for the three months ended March 31, 2022 and 2021 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

Benefit from (provision for) income taxes for the three months ended June 30, 2022 and 2021 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

Provision for income taxes for the six months ended June 30, 2022 and 2021 resulted primarily from estimated foreign taxes included in the calculation of the effective tax rate.

We continue to maintain a full valuation allowance against all of our federal and state deferred tax assets in the United States as well as federal tax assets in Canada.

As of March 31, 2022, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 6.3 million and applicable interest of $ 0.1 million.

The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $ 1.3 million.

As of June 30, 2022, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 6.3 million and applicable interest of $ 0.1 million.

The total amount of unrecognized tax benefits that would affect our effective tax rate, if

recognized, is $ 1.3 million.

Our policy is to account for interest and penalties related to uncertain tax positions as a component of income tax provision.

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

As of March 31, 2022, we had net deferred income tax assets of $ 2.1 million and deferred income tax liabilities of $ 0.3 million.

As of June 30, 2022, we had net deferred income tax assets of $ 2.0 million and deferred income tax liabilities of $ 0.2 million.

Because we have net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state, and foreign taxing authorities may examine our tax returns for all years from 2002 through the current period.

Currently we are under examination by the Internal Revenue Services for tax year 2018.

We maintain a valuation allowance of $ 27.3 million against certain of our deferred tax assets, including all federal, state, and certain foreign deferred tax assets because of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results.

The examination by the Internal Revenue Services for tax year 2018 was completed in this quarter without any change.

We maintain a valuation allowance against certain of our deferred tax assets, including all federal, state, and certain foreign deferred tax assets because of uncertainties regarding the realization of the asset balance due to historical losses, the variability of operating results, and uncertainty regarding near term projected results.

If we determine the deferred tax assets are realizable based on our assessment of relevant factors, an adjustment to the valuation allowance may increase income in the period such determination is made.

NET INCOME PER SHARE

Basic net income per share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted net income per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period.

Diluted net income (loss) per share is computed using the weighted average number of shares of common stock, adjusted for any dilutive effect of potential common stock.

Potential common stock, computed using the treasury stock method, includes stock options, stock awards and ESPP.

The following is a reconciliation of the denominators used in computing basic and diluted net income per share (in thousands, except per share amounts):

The following is a reconciliation of the denominators used in computing basic and diluted net income (loss) per share (in thousands, except per share amounts):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Weighted-average shares outstanding, basic 33,616 30,982 33,638 29,787

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We include market condition-based performance restricted stock units in the calculation of diluted earnings per share if the performance condition has been satisfied as of the end of the reporting period and exclude stock equity awards if the performance condition has not been met.

For the three months ended March 31, 2022 and 2021, we had stock options, RSUs, PSUs and RSAs outstanding that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

For the three and six months ended June 30, 2022 and 2021, we had stock options, RSUs, PSUs and RSAs outstanding that could potentially dilute basic earnings per share in the future, but these were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

These outstanding securities consisted of the following (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Stock options 210 490 224 115

Restricted stock units, restricted stock awards and market condition-based restricted stock units 17 — 35 —

Total 227 490 259 115

We lease our office space under lease arrangements with expiration dates on or before March 31, 2024.

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Below is a summary of our ROU assets and lease liabilities (in thousands):

Balance Sheets Classification March 31,

Balance Sheets Classification June 30,

2022 December 31,

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Total lease liabilities $ 1,117 $ 1,648

The table below provides supplemental information related to operating leases during the three months ended March 31, 2022 and 2021 (in thousands except for lease term):

Three Months Ended

The table below provides supplemental information related to operating leases during the six months ended June 30, 2022 and 2021 (in thousands except for lease term):

Six Months Ended

Cash paid within operating cash flow $ 674 $ 740

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Weighted average discount rates 3.93 % N/A

On June 6, 2022, we entered into a sublease agreement with Innovobot Fund LLP (“Innovobot”) for our facility located in Montreal Canada (the "Montreal Facility").

This sublease commenced on June 8, 2022 and ends on February 27, 2024 which approximates the lease termination date of the original Montreal Facility lease.

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

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

We accounted for the sublease as a lessor of the lease.

We classified the sublease as an operating lease as it did not meet the criteria of a Sale-Type or Direct Financing lease.

At the commencement date of the sublease, we recognized initial direct costs of $ 23,000 .

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

On January 31, 2022, we entered into an agreement to lease for a 1,390 square feet of office space in Aventura, Florida (“Aventura Lease”).

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

As of March 31, 2022, unamortized balance of the deferred costs are not material.

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

During the three months ended March 31, 2022 and 2021, our net operating lease expenses are as follows (in thousands):

As of June 30, 2022, unamortized balance of the deferred costs are not material.

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

During the three and six months ended June 30, 2022 and 2021, our net operating lease expenses are as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Operating lease cost $ 155 $ 199 $ 436 $ 616

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Total lease cost $ ( 119 ) $ ( 58 ) $ ( 96 ) $ 101

Minimum future lease payments obligations as of March 31, 2022 are as follows (in thousands):

Minimum future lease payments obligations as of June 30, 2022 are as follows (in thousands):

For the Years Ending December 31,

Total $ 1,146

Future lease payments from our sublease agreement as of March 31, 2022 are as follows (in thousands):

Future cash receipts from our sublease agreements as of June 30, 2022 are as follows (in thousands):

For the Years Ending December 31,

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

What changed 10-Q

Item 1. Financial Statements