What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 208 added, 149 removed, 584 unchanged (38% of the section changed)

3 unchanged sentences

(In thousands)

2022 December 31,

September 30, 2022 December 31,

Current assets:

Cash and cash equivalents $ 36,767 $ 51,490

Marketable equity securities 79,476 86,431

Investments - current 96,779 86,431

Accounts and other receivables 3,343 1,970

2 unchanged sentences

Property and equipment, net 362 444

Investments - noncurrent 18,520 7,286

Long-term deposits 4,425 9,658

Marketable debt securities 17,147 7,286

Other assets 3,290 4,809

4 unchanged sentences

Accrued compensation 1,270 555

Deferred revenue 4,649 4,826

Deferred revenue - current 4,763 4,826

Other current liabilities 7,729 11,247

Total current liabilities 13,776 16,630

Long-term deferred revenue 14,334 16,699

Deferred revenue - noncurrent 13,808 16,699

Other long-term liabilities 479 896

10 unchanged sentences

IMMERSION CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(In thousands, except per share amounts)

Three Months Ended

June 30 Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

10 unchanged sentences

Interest and other income (loss), net ( 2,348 ) 438 ( 6,413 ) 162

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

Income before provision for income taxes 8,582 4,111 12,226 12,135

Provision for income taxes ( 877 ) ( 340 ) ( 1,264 ) ( 987 )

Net income $ 7,705 $ 3,771 $ 10,962 $ 11,148

Basic net income per share $ 0.23 $ 0.12 $ 0.33 $ 0.36

Shares used in calculating basic net income per share 33,201 32,474 33,601 30,693

Diluted net income per share $ 0.23 $ 0.12 $ 0.32 $ 0.36

Shares used in calculating diluted net income per share 33,682 32,612 34,035 31,065

Other comprehensive income, net of tax

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

Change in unrealized gains (losses) on available-for-sale securities $ 344 $ 531 $ ( 469 ) $ 531

Total comprehensive income $ 8,049 $ 4,302 $ 10,493 $ 11,679

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except number of shares)

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

Common Stock and

5 unchanged sentences

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 )

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

Net income — — — 7,705 — — 7,705

Unrealized gain on available-for-sale securities, net of taxes — — 344 — — — 344

Stock repurchases — — — — 954,247 ( 5,304 ) ( 5,304 )

Release of restricted stock units and awards, net of shares withheld 51,875 — — — 13,768 ( 74 ) ( 74 )

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

Issuance of stock for ESPP purchase 3,691 16 — — — — 16

Stock-based compensation — 730 — — — — 730

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

Balances at September 30, 2022 46,907,075 326,097 $ ( 57 ) $ ( 89,718 ) 14,346,543 $ ( 93,168 ) $ 143,154

Three Months Ended September 30, 2021

Common Stock and

5 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

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

Net income — — — 3,771 — — 3,771

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

Unrealized gain on available-for-sale securities, net of taxes — — 531 — — — 531

Issuance of stock for ESPP purchase 9,490 61 — — — — 61

Release of restricted stock units and awards 8,407 — — — — — —

1 unchanged sentence

Stock-based compensation — 415 — — — — 415

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

Balances at September 30, 2021 45,167,893 $ 313,885 $ 653 $ ( 102,016 ) 12,143,433 $ ( 81,733 ) $ 130,789

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands, except number of shares)

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

Common Stock and

14 unchanged sentences

Stock-based compensation 2,661 — — — — 2,661

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

Balances at September 30, 2022 46,907,075 $ 326,097 $ ( 57 ) $ ( 89,718 ) 14,346,543 $ ( 93,168 ) 143,154

Nine Months Ended September 30, 2021

Common Stock and

7 unchanged sentences

Net income — — — 11,148 — — 11,148

Unrealized gain on available-for-sale securities — — 531 — — — 531

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

3 unchanged sentences

Stock-based compensation — 1,997 — — — — 1,997

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

Balances at September 30, 2021 45,167,893 $ 313,885 $ 653 $ ( 102,016 ) 12,143,433 $ ( 81,733 ) 130,789

See accompanying Notes to Condensed Consolidated Financial Statements.

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows provided by (used in) operating activities:

Net income $ 10,962 $ 11,148

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 421 389

Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities:

Depreciation of property and equipment 95 75

Reduction in carrying value of right of use assets 524 500

Stock-based compensation 2,661 1,997

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

Net (gain) loss on investment in marketable securities 13,288 ( 490 )

Net (gain) on derivative instruments ( 3,393 ) —

Foreign currency remeasurement losses 161 612

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

Shares withheld to cover payroll taxes ( 154 ) —

Other ( 29 ) 68

Changes in operating assets and liabilities:

8 unchanged sentences

Other long-term liabilities ( 950 ) ( 1,116 )

Net cash provided by operating activities 18,639 9,054

Net cash and cash equivalents provided by operating activities 32,080 10,722

Cash flows provided by (used in) investing activities:

Purchases of marketable securities ( 71,959 ) —

Purchases of marketable securities and other investments ( 131,100 ) ( 34,443 )

Proceeds from sale or maturities of marketable securities and other investments 95,225 —

2 unchanged sentences

Purchases of property and equipment ( 29 ) ( 89 )

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

Net cash and cash equivalents used in investing activities ( 35,578 ) ( 32,775 )

Cash flows provided by (used in) financing activities:

3 unchanged sentences

Proceeds from stock options exercises — 2,864

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

Net increase in cash and cash equivalents 5,900 47,752

Net cash and cash equivalents provided by (used in) financing activities ( 11,225 ) 53,132

Net increase (decrease) in cash and cash equivalents ( 14,723 ) 31,079

Cash and cash equivalents:

5 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Supplemental disclosure of cash flow information:

11 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 have remained in place.

In response to the COVID-19 pandemic, we implemented work-from-home and restricted travel policies in the first quarter of 2020, but have since lifted our travel restriction and our employees now work both from the office and from home.

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 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.

During the nine months ended September 30, 2021 we recognized $ 0.3 million in government subsidies as a reduction to operating expenses in the Condensed Consolidated Statements of Income and Comprehensive Income .

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

Principles of Consolidation and Basis of Presentation

6 unchanged sentences

In the opinion of management, all adjustments consisting of only normal and recurring items necessary for the fair presentation of the financial position and results of operations for the interim periods presented have been included.

Certain prior year amounts have been reclassified to conform with the current year presentation.

Use of Estimates

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

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

Segment Information

1 unchanged sentence

We focus on the following target application areas:

mobile devices, wearables, consumer, mobile entertainment and other content;

mobile devices, wearables, consumer, mobile

entertainment and other content;

console gaming;

4 unchanged sentences

There is only one segment that is reported to management.

Certificates of Deposit

Certificate of deposits are reported at fair value on the Condensed Consolidated Balance Sheets based on their initial and remaining maturity days.

Initial or Remaining Maturity Days Balance Sheets Classification

90 days or less Cash and cash equivalents

Between 91 days and 1 year Investments - current

Greater than 1 year Investments - noncurrent

Recently Adopted Accounting Pronouncements

5 unchanged sentences

Disaggregated Revenue

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

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

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

9 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 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.

In the three months ended September 30,

2022, we recorded adjustments of $ 0.2 million to decrease royalty revenue.

We recorded adjustments of $ 0.5 million to decrease royalty revenue during the three months ended September 30, 2021.

Contract Assets

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 September 30, 2022, we had contract assets of $ 6.9 million included within Prepaid expenses and other current asset s, and $ 0.7 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.

Contract assets decreased by $ 6.5 million from January 1, 2022 to September 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 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.

Based on contracts signed and payments received as of September 30, 2022, we expect to recognize $ 18.6 million in revenue related to Performance Obligation B under our fixed fee license agreements, which are satisfied over time, including $ 12.2 million over one to three years and $ 6.4 million over more than three years.

Total deferred revenue was $ 21.5 million as of December 31, 2021, of which $ 3.7 million was recognized during the nine months ended September 30, 2022.

INVESTMENTS AND FAIR VALUE MEASUREMENTS

1 unchanged sentence

We invest surplus funds in excess of operational requirements in a diversified portfolio of marketable securities, with the objectives of delivering competitive returns, maintaining a high degree of liquidity, and seeking to avoid the permanent impairment of principal.

Our investments in marketable debt securities are classified and accounted for as available-for-sale.

Our investments in marketable debt securities, including U.S.

treasury securities and corporate bonds are classified and accounted for as available-for-sale.

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

As of September 30, 2022 and December 31, 2021, we reported $ 40.6 million and $ 7.3 million of investments in debt securities as Investments - noncurrent 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.

The marketable debt securities are measured at fair value with realized gains

and losses reported as Interest and other income (loss), net on our Condensed Consolidated Statements of Income and Comprehensive Income .

Unrealized gains and losses on marketable debt securities are reported as Accumulative Other Comprehensive Income (loss) on our Statements of Stockholders' Equity.

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 Operations and Comprehensive Income (Loss) .

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

June 30, 2022

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

September 30, 2022

Cost or Amortized Cost Unrealized Gains Unrealized Losses Fair Value

Mutual funds $ 30,400 $ — $ ( 3,265 ) $ 27,135

treasury securities 25,640 19 ( 24 ) 25,635

Corporate bonds 15,095 277 ( 457 ) 14,915

7 unchanged sentences

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

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

As of September 30, 2022 and December 31, 2021, marketable securities are as follows (in thousands):

September 30, 2022

Marketable Equity Securities Marketable Debt Securities Total

Mutual funds $ 27,135 $ — $ 27,135

treasury securities — 25,635 25,635

Equity securities 42,347 — 42,347

7 unchanged sentences

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

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

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

September 30, 2022

Less than 1 year $ — $ —

7 unchanged sentences

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 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 June 30, 2022 and December 31, 2021 (in thousands):

June 30, 2022

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 .

Our derivative instruments 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 September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022

Cost Unrealized Losses Fair Value

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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

Net unrealized gains (losses) recognized on marketable equity securities $ ( 9,278 ) $ 490 $ ( 14,062 ) $ 490

Net realized gains (losses) recognized on marketable equity securities ( 555 ) — 218 —

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

Net unrealized gains ( losses) recognized on derivative instruments 3,907 ( 2 ) ( 696 ) ( 2 )

Net realized gains recognized on derivative instruments 2,214 9 4,089 9

Net realized gains recognized on marketable debt securities 188 — 556 —

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

Total net gains (losses) recognized in interest and other income (loss), net $ ( 3,524 ) $ 497 $ ( 9,895 ) $ 497

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 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

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

Financial instruments measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 are classified based on the valuation technique in the table below (in thousands):

September 30, 2022

Fair Value Measurements Using

4 unchanged sentences

(Level 3) Total

Certificates of deposit $ — $ 21,061 $ — $ 21,061

treasury securities — 25,635 — 25,635

Mutual funds 27,135 — — 27,135

20 unchanged sentences

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

September 30,

2022 December 31,

Cash $ 15,567 $ 51,490

Certificates of deposit (1)

Money market funds 5,406 —

Cash and cash equivalents $ 36,767 $ 51,490

(1) Represents certificates of deposit with initial or remaining maturity days of 90 days or less.

Investments - Current

Investments - current were as follows (in thousands):

September 30,

2022 December 31,

Certificates of deposit (2)

treasury securities 22,030 —

Marketable securities 69,482 86,431

Short-term investments $ 96,779 $ 86,431

(2) Represents investments with remaining maturity days between 91 days and one year.

Accounts and Other Receivables

Accounts and other receivables were as follows (in thousands):

September 30,

2022 December 31,

2 unchanged sentences

Accounts and other receivables $ 3,343 $ 1,970

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

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

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets were as follows (in thousands):

September 30,

2022 December 31,

3 unchanged sentences

Prepaid expenses and other current assets $ 7,731 $ 13,432

Investments - noncurrent

Investments- noncurrent are as follows (in thousands):

September 30,

2022 December 31,

treasury securities $ 3,605 $ —

Marketable debt securities 14,915 7,286

Investments- noncurrent $ 18,520 $ 7,286

Other assets are as follows (in thousands):

September 30,

2022 December 31,

6 unchanged sentences

Other current liabilities are as follows (in thousands):

September 30,

2022 December 31,

13 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.

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.

18 unchanged sentences

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

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

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

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

2 unchanged sentences

In the fourth quarter of 2021, we recorded an impairment charge of $ 1.4 million related to long-term deposits paid to Samsung.

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.

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 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.

2 unchanged sentences

(“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.

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

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

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

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

16 unchanged sentences

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.

A thirteenth hearing occurred on October 27, 2022.

A final hearing is scheduled for November 24, 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 Operations and Comprehensive Income (Loss) .

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.

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.

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 Operations and Comprehensive Income (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 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 fourth quarter of 2021, we recorded an impairment charge of $ 0.8 million related to the long-term deposits paid to LGE.

2 unchanged sentences

On August 3, 2021, we filed an arbitration demand with the American Arbitration Association (the “AAA”) against Marquardt GmbH (“Marquardt”), one of our licensees in the automotive market.

The arbitration demand arises out of that certain Amended and Restated Patent License Agreement (the “Marquardt License”), effective as of January 1, 2018, between us as licensor and Marquardt, as licensee.

Pursuant to the arbitration demand, we are demanding that Marquardt cure its breach of the Marquardt License and pay all royalties currently owed under the Marquardt License.

The last royalty report we have received from Marquardt was for the third quarter of calendar year 2020 in which Marquardt reported approximately $ 0.5 million in royalties but did not pay such royalties.

Further, since that date, we have not received any other royalty reports or royalty payments from Marquardt.

The term of the Marquardt License expires by its terms on December 31, 2023.

As a result of Marquardt’s breach of the Marquardt License, per unit royalties relating to past royalty periods, and applicable interest fees, are currently past due.

The arbitration demand had arisen out of that certain Amended and Restated Patent License Agreement (the “Marquardt License”), effective as of January 1, 2018, between

us as licensor and Marquardt, as licensee.

Pursuant to the arbitration demand, we demanded that Marquardt cure its breach of the Marquardt License and pay all royalties currently owed under the Marquardt License.

Pursuant to the terms of the Marquardt License, we requested arbitration by a single arbitrator in Madison County, New York.

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.

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Meta responded to our complaint on August 1, 2022.

On September 12, 2022, Meta filed a motion to transfer the lawsuit to the Northern District of California or, in the alternative, to the Austin Division of the Western District of Texas.

Meta’s motion remains pending during venue discovery.

Our response is due December 5, 2022.

STOCK-BASED COMPENSATION

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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 June 30, 2022 is as follows (in thousands):

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

Common stock shares available for grant 1,873

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Time-Based Stock Options

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

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

Number of Shares

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Canceled or expired ( 99 ) 8.47

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 $ —

Outstanding as of September 30, 2022 143 $ 7.74 4.21 $ —

Vested and expected to vest at September 30, 2022 137 $ 7.74 4.21 $ —

Exercisable at September 30, 2022 96 $ 7.77 4.17 $ —

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 six months of 2022.

We did not grant stock options in the nine months ended September 30, 2022.

Restricted Stock Units

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

The following summarizes RSU activities for the nine months ended September 30, 2022:

Number of Restricted Stock Units

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Forfeited ( 62 ) 5.90

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

Outstanding at September 30, 2022 541 $ 4.95 2.11 $ 2,972

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 six months ended June 30, 2022:

The following summarizes RSA activities for the nine months ended September 30, 2022:

Number of Restricted Stock Awards

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Forfeited — —

Outstanding at June 30, 2022 119 $ 5.47 0.90

Outstanding at September 30, 2022 119 $ 5.47 0.64

Market Condition-Based Restricted Stock Units

In the first quarter of 2022, we granted 600,000 shares of PSUs to members of our management team.

In the first quarter of 2022, we granted 600,000 shares of PSUs to certain members of our management team.

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

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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 six months ended June 30, 2022:

The following summarizes PSU activities for the nine months ended September 30, 2022:

Number of Market Condition-Based Restricted Stock Units

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Forfeited ( 41 ) 6.20

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

Outstanding at September 30, 2022 617 $ 3.70 1.24

The assumptions used to value market condition-based restricted stock units granted during the nine months ended September 30, 2022 under our equity incentive program are as follows:

Nine Months Ended

September 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 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.

During the nine months ended September 30, 2022, 11,416 shares were purchased under the ESPP.

As of September 30, 2022, 194,432 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 three and six months ended June 30, 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 nine months ended September 30, 2022 and 2021 is as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Total $ 730 $ 415 $ 2,661 $ 1,997

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.

As of September 30, 2022, there was $ 5.6 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 1.6 years.

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The stock repurchase program was implemented as a method to return value to our stockholders.

The timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions.

timing, pricing and sizes of any repurchases will depend on a number of factors, including the market price of our common stock and general market and economic conditions.

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 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):

In the three months ended September 30, 2022, we repurchased 954,247 shares of our common stock for $ 5.3 million at an average purchase price of $ 5.55 per share.

In the nine months ended September 30, 2022, we repurchased 1,270,294 shares of our common stock for $ 7.0 million at an average purchase price of $ 5.50 per share.

As of September 30, 2022, we have $ 23.0 million available for repurchase under the stock repurchase program.

Provision for income taxes the three and nine months ended September 30, 2022 and 2021 consisted of the following (in thousands):

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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 )

Income before provision for income taxes $ 8,582 $ 4,111 $ 12,226 $ 12,135

Provision for income taxes ( 877 ) ( 340 ) ( 1,264 ) ( 987 )

Effective tax rate ( 10.2 ) % ( 8.3 ) % ( 10.3 ) % ( 8.1 ) %

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.

Provision for income taxes for the three and nine months ended September 30, 2022 and 2021 resulted primarily from estimated domestic and 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 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.

As of September 30, 2022, we had unrecognized tax benefits under ASC 740 Income Taxes of approximately $ 6.4 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 June 30, 2022, we had net deferred income tax assets of $ 2.0 million and deferred income tax liabilities of $ 0.2 million.

As of September 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.

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.

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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.

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.

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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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 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.

For the three and nine months ended September 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

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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

Balance Sheets Classification June 30,

Balance Sheets Classification September 30

2022 December 31,

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Total lease liabilities $ 817 $ 1,648

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

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

Nine Months Ended

September 30,

Cash paid within operating cash flow $ 982 $ 1,115

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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”).

We plan to use this facility for administrative functions.

We use this facility as our principal executive offices and for general administrative functions.

This lease commenced in the first quarter of 2022 and expires in the first quarter of 2024.

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

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):

As of September 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 Income and Comprehensive Income over the lease terms.

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

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

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Sublease income ( 306 ) ( 257 ) ( 837 ) ( 772 )

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

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

Total lease cost (income) $ ( 70 ) $ ( 48 ) $ ( 165 ) $ ( 149 )

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

For the Years Ending December 31,

Total $ 1,146

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

Total lease payments 933

Total lease liability $ 817

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

For the Years Ending December 31,

Total $ 1,244

SUBSEQUENT EVENT

On November 14, 2022, our Board of Directors declared a quarterly dividend.

The first dividend, in the amount of $ 0.03 per share, will be payable, subject to any revocation, on January 30, 2023, to stockholders of record on January 15, 2023.

Future dividends will be subject to further review and approval by the Board in accordance with applicable law.

The Board reserves the right to adjust or withdraw the quarterly dividend in future periods as it reviews the capital allocation strategy from time-to-time.

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