Immersion Corp 10-K, filed Mar 11, 2024

Immersion Corp (IMMR)

10-K 2024-03-11 For: 2023-12-31

Added on April 08, 2026

About this 10-K

Immersion Corp filed this 10-K on March 11, 2024, covering the fiscal year ended December 31, 2023.

Headline figures

Fiscal year ended December 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $33.92M; down 11.8% from $38.46M a year earlier
Net income: $33.98M; up 10.8% from net income of $30.66M a year earlier
Diluted EPS: $1.04; up 13.0% from $0.92 a year earlier

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Delaware						94-3180138
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	IMMR	NASDAQ Global Market
Series B Junior Participating Preferred Stock Purchase Rights	IMMR	NASDAQ Global Market

	PART I	Page
Item 1.	Business	5
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	29
Item 1C.	Cybersecurity	30
Item 2.	Properties	31
Item 3.	Legal Proceedings	31
Item 4.	Mine Safety Disclosures	34
	PART II	35
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	35
Item 6.	Reserved	36
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	44
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	84
Item 9A.	Control and Procedures	84
Item 9B.	Other Information	84
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	84
	PART III	85
Item 10.	Directors, Executive Officers and Corporate Governance	85
Item 11.	Executive Compensation	85
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	85
Item 13.	Certain Relationships and Related Transactions, and Director Independence	85
Item 14.	Principal Accounting Fees and Services	85
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	86
Item 16.	Form 10-K Summary	89
SIGNATURES		90

	•	Our business, results of operations, financial condition, cash flows, and stock price can be adversely affected by catastrophic events, such as pandemics, or other public health emergencies, such as COVID-19, or by the uncertain economic and political environment in geographies in which we operate.
	•	Our business could be materially and adversely affected if we are unable to enter new licensing arrangements (or renew existing licenses) on favorable terms. In addition, a limited number of customers account for a significant portion of our revenue, and the loss of major customers could harm our operating results. Moreover, if our customers discontinue product lines that incorporate our technology, our operating results may be negatively impacted.
	•	Our failure to develop or acquire successful innovations and obtain patents on those innovations could significantly harm our business.
	•	Shortages of electronic components may cause a decrease in production and sales of our customers’ products which could result in lower royalties payable to us.
	•	Our licenses with component manufacturers may cause confusion as to our licensing model and may prevent us from enforcing our patents based on the patent exhaustion doctrine, or other legal doctrines.
	•	We are or may become involved in litigation to enforce our IP rights (or defend against assertions that we violate a third party’s IP), or resolve conflicts over license terms in our license agreements, and the costs thereof could adversely affect our business.
	•	If we fail to protect and enforce our patent rights and other IP rights (or if there are adverse changes in patent and litigation legislation or enforcement), our ability to license our technologies and generate revenues could be impaired.
	•	If we are not able to attract, recruit and retain qualified personnel, we may not be able to effectively develop and deploy our technologies. In addition, we have experienced turnover in our senior management and our employee base, which could result in operational and administrative inefficiencies and could hinder the execution of our growth strategy.
	•	We may not maintain consistent profitability in the future.
	•	Our international operations subject us to risks and costs, and our failure to comply with complex U.S. or foreign laws could have a material adverse effect on our operations.
	•	We may incur greater tax liability than anticipated which could adversely affect our financial condition and operating results.
	•	We may not be able to continue to innovate in the gaming market or continue to derive significant revenues from third party gaming peripheral makers for video gaming platforms.
	•	We may not be able to continue to derive significant revenues from gaming peripheral makers for various reasons, including as a result of our fixed payment license with Microsoft, which could adversely affect our financial condition and operating results.

	•	Automobiles incorporating our technologies are subject to lengthy development periods, making it difficult to predict when and whether we will receive royalties for these product types.
	•	If our licensees’ efforts fail to generate consumer demand, our revenue may be adversely affected.
	•	The rejection of our haptic technology by standards-setting organizations, or failure of the standards-setting organization to develop timely commercially viable standards may negatively impact our business.
	•	Our business and operations could suffer in the event of any actual or perceived security breaches, including breaches that compromise personal information.
	•	If we are unable to develop open-source compliant products (or our products contain undetected errors), our ability to license our technologies and generate revenues may be impaired.
	•	Our business depends in part on access to third-party platforms and technologies. If such access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change, our business and operating results could be adversely affected.
	•	If we fail to establish and maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired, which would adversely affect our business and our stock price.

Immersion Corp 10-K, filed Mar 11, 2024

About this 10-K

Headline figures

Opinion on the Financial Statements

Basis for Opinion

Critical Audit Matters

Exhibit A


☒			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	•	Our quarterly revenues and operating results are volatile, and if our future results are below expectations, the price of our common stock is likely to decline. Our stock price may fluctuate regardless of our performance.
	•	Future sales of our equity could result in significant dilution to our existing stockholders and depress the market price of our common stock. In addition, we will have broad discretion as to the use of proceeds from the “at the market” offerings that we announced in February 2022, and we may not use the proceeds effectively.
	•	We may elect to purchase marketable securities, or digital or alternative currencies, as part of our capital allocation or investment strategy; and if we determine to purchase marketable securities, or digital or alternative currencies (such as bitcoin and other cryptocurrencies,), our financial results and the market price of our common stock may be affected by the price of these alternative investments, which may be highly volatile.
	•	We may engage in the acquisition of other companies or other investments outside of our current line of business, which may have an adverse material effect on our existing business.
	•	Any stock repurchase program could affect our stock price and add volatility.
	•	Changes in financial accounting standards or policies may affect our reported financial condition or results of operations.
	•	Our business is subject to changing regulations regarding corporate governance and other compliance areas that will increase both our costs and the risk of noncompliance. Further, provisions in our charter documents and Delaware law could prevent or delay a change in control, which could reduce the market price of our common stock.
	•	Our ability to use net operating loss carryforwards to offset future taxable income for U.S. federal income tax purposes may be limited.
	•	Any decision to reduce or discontinue the payment of cash dividends to our stockholders could cause the market price of our common stock to decline significantly.

•	difficulties in persuading existing customers to renew a license to our patents or other technologies (including delays associated with existing customers questioning the scope, validity, or enforceability) without the expenditure of significant resources;
•	difficulties in persuading existing customers that they need a license to our patents as individual patents expire or become limited in scope, declared unenforceable or invalidated;
•	reluctance of existing customers to renew their license to our patents or other technologies because other companies are not licensed;
•	difficulties in renewing gaming licenses if video game console makers choose not to license third parties to make peripherals for their new consoles, if video game console makers no longer require peripherals to play video games, if video game console makers no longer utilize technology in the peripherals that are covered by our patents or if the overall market for video game consoles deteriorates substantially;
•	the competition we may face from third parties, including the internal design and development teams of existing licensees; and
•	inability of current licensees to ship certain devices if they are involved in IP infringement claims by third parties that ultimately prevent them from shipping products or that impose substantial royalties on their products.

•	difficulties in brand awareness among prospective customers, especially in markets in which we have not traditionally participated;
•	difficulties in persuading prospective customers to take a license to our patents (including delays associated with prospective customers questioning the scope, validity or enforceability of our patents) without the expenditure of significant resources;
•	reluctance of prospective customers to engage in discussions with us due to our history of litigation;
•	difficulties in persuading prospective customers that they need a license to our patents as individual patents expire or become limited in scope, declared unenforceable or invalidated;
•	reluctance of prospective customers to license our patents or other technologies because other companies are not licensed;
•	the competition we may face from third parties, including the internal design teams of prospective customers;
•	difficulties in achieving and maintaining consumer and market demand or acceptance for our products;
•	difficulties in persuading third parties to work with us, to rely on us for critical technology, and to disclose to us proprietary product development and other strategies; and
•	challenges in demonstrating the compelling value of our technologies and challenges associated with prospective customers’ ability to easily implement our technologies.

•	sales and marketing efforts;
•	the protection and enforcement of our IP; and
•	litigation.

•	compliance with multiple, conflicting and changing governmental laws and regulations;
•	laws and business practices favoring local competitors;
•	foreign exchange and currency risks;
•	changing import and export restrictions, duties, tariffs, quotas and other barriers;
•	difficulties staffing and managing foreign operations;
•	business risks, including fluctuations in demand for our technologies and products and the cost and effort to conduct international operations and travel abroad to promote international distribution and overall global economic conditions;
•	multiple conflicting and changing tax laws and regulations;
•	political and economic instability;
•	the possibility of an outbreak of hostilities or unrest in markets where major customers are located, including Korea;
•	potential economic disruption based on the United Kingdom’s recent withdrawal from the European Union, commonly referred to as Brexit; and
•	the possibility of volatility in financial markets as certain market participants transition away from the London Inter-bank Offered Rate (LIBOR).

•	the impact of disruptions in the supply of electronic components (such as integrated circuits) that our customers incorporate into their products could reduce the amount of royalties that are payable to us;
•	the establishment or loss of licensing relationships;
•	the timing and recognition of payments under fixed and/or up-front fee license agreements, as well as other multi-element arrangements;
•	seasonality in the demand for our technologies or products or our licensees’ products;
•	the timing of our expenses, including costs related to litigation, stock-based awards, acquisitions of technologies, or businesses;
•	developments in and costs of pursuing or settling any pending litigation;
•	the timing of introductions and market acceptance of new technologies and products and product enhancements by us, our licensees, our competitors, or their competitors;
•	errors in our licensees’ royalty reports, and corrections and true-ups to royalty payments and royalty rates from prior periods.

•	only a majority of our Board or stockholders of not less than 10% of all of the shares entitled to cast votes at such meeting are authorized to call a special meeting of stockholders;
•	our stockholders can only take action at a meeting of stockholders and not by written consent;
•	subject to the rights of a holder of any series of preferred stock, vacancies on our Board can be filled only by our Board and not by our stockholders;
•	our restated certificate of incorporation authorizes undesignated preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval; and
•	advance notice procedures apply for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

	•	U.S. Patent No. 7,336,260: “Method and Apparatus for Providing Tactile Sensations”
	•	U.S. Patent No. 8,749,507: “Systems and Methods for Adaptive Interpretation of Input from a Touch-Sensitive Input Device”
	•	U.S. Patent No. 9,430,042: “Virtual Detents Through Vibrotactile Feedback”
	•	U.S. Patent No. 9,116,546: “System for Haptically Representing Sensor Input”
	•	U.S. Patent No. 10,627,907: “Position Control of a User Input Element Associated With a Haptic Output Device”
	•	U.S. Patent No. 10,665,067: “Systems and Methods for Integrating Haptics Overlay in Augmented Reality”
	•	U.S. Patent No. 11,175,738: “Systems and Methods for Proximity-Based Haptic Feedback”

Periods	Total Number of Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
October 1 to October 31, 2023	—	N/A	—	43,870,000
November 1 to November 30, 2023	112,343	$6.4477	724,348	43,094,000
December 1 to December 31, 2023	206,674	$6.5530	1,354,344	41,736,000

•	Performance Obligation A - Transfer rights to our patent portfolio as it exists when the contract is executed;
•	Performance Obligation B - Transfer rights to our patent portfolio as it evolves over the term of the contract, including access to new patent applications that the licensee can benefit from over the term of the contract.

			Year Ended December 31,
					2023		2022
Revenues:
Total royalty and license revenue	99	%	99	%
Development, services, and other					1		1
Total revenues					100		100
Costs and expenses:
Sales and marketing					5		3
Research and development					1		3
General and administrative					41		30
Total costs and expenses					47		36
Operating income					53		64
Interest and other income					74		6
Income before benefit from (provision for) income taxes					127		70
Benefit from (provision for) income taxes					(26	)	10
Net income					100	%	80	%

	Years Ended December 31,
	2023		2022		$ Change			% Change
Fixed fee license revenue	$	5,283	$	11,953	$	(6,670	)	(56)%
Per-unit royalty revenue	28,498		26,225		2,273			9%
Total royalty and license revenue	33,781		38,178		(4,397		)	(12)%
Development, services, and other revenue	138		283		(145		)	(51)%
Total revenues	$	33,919	$	38,461	$	(4,542	)	(12)%

	Page
Report of Plante & Moran, PLLC, Independent Registered Public Accounting Firm (PCAOB ID 166)	46
Consolidated Balance Sheets as of December 31, 2023, and 2022	47
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2023, and 2022	48
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2023, and 2022	49
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, and 2022	50
Notes to Consolidated Financial Statements	52

	December 31, 2023			December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	56,071		$	48,820
Investments-current	104,291			100,918
Accounts and other receivables, net	2,241			1,235
Prepaid expenses and other current assets	9,847			9,347
Total current assets	172,450			160,320
Property and equipment, net	211			293
Investments-noncurrent	33,350			17,040
Long-term deposits	6,231			4,324
Deferred tax assets	3,343			7,217
Other assets	146			916
Total assets	$	215,731		$	190,110
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	47		$	86
Accrued compensation	3,127			2,029
Deferred revenue - current	4,239			4,766
Other current liabilities	11,900			11,044
Total current liabilities	19,313			17,925
Deferred revenue-noncurrent	8,390			12,629
Other noncurrent liabilities	4,926			1,856
Total liabilities	32,629			32,410
Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock and additional paid-in capital – $0.001 par value; 100,000,000 shares authorized; 47,636,273 and 46,974,629 shares issued, respectively; 31,528,977 and 32,247,047 shares outstanding, respectively	322,182			322,714
Accumulated other comprehensive income	1,702			202
Accumulated deficit	(36,040		)	(70,016		)
Treasury stock at cost: 16,107,296 and 14,727,582 shares, respectively	(104,742		)	(95,200		)
Total stockholders’ equity	183,102			157,700
Total liabilities and stockholders’ equity	$	215,731		$	190,110

	Common Stock and Additional Paid-In Capital				Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Treasury Stock					Total Stockholders’ Equity
	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	—	—			—			30,664			—		—			30,664
Unrealized losses on available-for-sale securities, net of taxes	—	—			(210		)	—			—		—			(210		)
Stock repurchases	—	—			—			—			2,542,065		(13,238		)	(13,238		)
Release of restricted stock units and awards net of shares withheld for tax liabilities	398,152	—			—			—			42,084		(229		)	(229		)
Issuance of stock for ESPP purchase	11,416	51			—			—			—		—			51
Shares issued to an employee in lieu of cash compensation	30,863	157			—			—			—		—			157
Shares issued in connection with public offering, net of offering costs	—	5			—			—			—		—			5
Stock-based compensation	—	3,417			—			—			—		—			3,417
Cash dividend declared	—	(4,212		)	—			—			—		—			(4,212		)
Balances at December 31, 2022	46,974,629	322,714			202			(70,016		)	14,727,582		(95,200		)	157,700
Net income	—	—			—			33,976			—		—			33,976
Unrealized gains on available-for-sale securities, net of taxes	—	—			1,500			—			—		—			1,500
Stock repurchases	—	—			—			—			1,217,774		(8,302		)	(8,302		)
Release of restricted stock units and awards net of shares withheld for tax liabilities	558,313	—			—			—			161,940		(1,240		)	(1,240		)
Proceeds from stock options exercises	21,222	160			—			—			—		—			160
Issuance of stock for ESPP purchase	1,298	6			—			—			—		—			6
Shares issued to an employee in lieu of cash compensation	80,811	595			—			—			—		—			595
Cash dividend declared	—	(4,688		)	—			—			—		—			(4,688		)
Stock-based compensation	—	3,395			—			—			—		—			3,395
Balances at December 31, 2023	47,636,273	$	322,182		$	1,702		$	(36,040	)		16,107,296	$	(104,742	)	$	183,102

•	Performance Obligation A: Transfer of rights to our patent portfolio as it exists when the contract is executed;
•	Performance Obligation B: Transfer of rights to our patent portfolio as it evolves over the term of the contract, including access to new patent applications that the licensee can benefit from over the term of the contract.

					Years Ended December 31,
					2023		2022
Fixed fee license revenue	$	5,283	$	11,953
Per-unit royalty revenue					28,498		26,225
Total royalty and license revenue					33,781		38,178
Development, services, and other revenue					138		283
Total revenues					$	33,919	$	38,461

	December 31, 2023
	Cost or Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Marketable equity securities
Equity securities	$	59,228	$	7,896	$	(4,146	)	$	62,978
Marketable debt securities
U.S. treasury securities	53,662		1,307		(3		)	54,966
Corporate bonds	19,422		472		(197		)	19,697
Total marketable debt securities		73,084		1,779		(200	)		74,663
	$	132,312	$	9,675	$	(4,346	)	$	137,641

	December 31, 2023
	Amortized Cost		Fair Value
Less than 1 year	$	40,129	$	41,313
1 to 5 years	32,955		33,350
Total	$	73,084	$	74,663

	December 31, 2023
	Cost		Unrealized Gains			Fair Value
Derivative instruments	$	8,797	$	(867	)	$	7,930
	$	8,797	$	(867	)	$	7,930

	December 31, 2023
	Fair Value Measurements Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
U.S. treasury securities	$	54,966	$	—	$	—	$	54,966
Equity securities	62,977		—		—		62,977
Corporate bonds	—		19,697		—		19,697
Total assets at fair value	$	117,943	$	19,697	$	—	$	137,640

Liabilities
Derivative instruments	$	—	$	7,930	$	—	$	7,930
Total liabilities at fair value	$	—	$	7,930	$	—	$	7,930

	December 31, 2023		December 31, 2022
Cash	$	14,840	$	9,630
Money market funds	41,231		13,586
Certificates of deposit ⁽¹⁾	—		25,604
Cash and cash equivalents	$	56,071	$	48,820

	December 31, 2023		December 31, 2022
Certificates of deposit ⁽²⁾	$	—	$	5,300
Equity marketable securities	62,978		73,422
U.S. treasury securities	41,313		22,196
Short-term investments	$	104,291	$	100,918

	December 31, 2023		December 31, 2022
Trade accounts receivables	$	1,743	$	1,003
Other receivables	498		232
Accounts and other receivables	$	2,241	$	1,235

	December 31, 2023		December 31, 2022
Prepaid expenses	$	1,916	$	1,576
Contract assets - current	7,740		7,671
Other current assets	191		100
Prepaid expenses and other current assets	$	9,847	$	9,347

	December 31, 2023		December 31, 2022
Contract assets - noncurrent	110		545
Lease right-of-use assets	36		360
Other assets	—		11
Total other assets	$	146	$	916

Common stock shares available for grant			4341
Stock options outstanding			—
RSUs outstanding			1,128
RSAs outstanding			75
PSUs outstanding			400

	Number of Shares Underlying Stock Options (in thousands)		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022	140		$	7.57	4.03	$	—
Granted	—		—
Exercised	(21	)	7.54
Canceled or expired	(119	)	7.57
Outstanding as of December 31, 2023	—		$	—	—	$	—
Vested and expected to vest at December 31, 2023	—		$	—	—	$	—
Exercisable at December 31, 2023	—		$	—	—	$	—