Immersion Corp 10-K, filed Mar 6, 2020

Immersion Corp (IMMR)

10-K 2020-03-06 For: 2019-12-31

Added on April 08, 2026

About this 10-K

Immersion Corp filed this 10-K on March 6, 2020, covering the fiscal year ended December 31, 2019.

Headline figures

Fiscal year ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $35.95M; down 67.6% from $110.98M a year earlier
Net loss: $20.04M; compared with net income of $54.34M a year earlier
Diluted EPS: -$0.64; compared with $1.73 a year earlier

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Delaware		94-3180138
(State or other jurisdiction of incorporation or organization)		(IRS 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



Large accelerated filer [ ]				Accelerated filer [x]
Non-accelerated filer [ ]				Smaller reporting company [ ]
				Emerging Growth Company [ ]



PART I		Page
Item 1.	Business	4
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	25
Item 2.	Properties	25
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	31
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
Item 6.	Selected Financial Data	34
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	77
Item 9A.	Controls and Procedures	77
Item 9B.	Other Information	77
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	79
Item 11.	Executive Compensation	79
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
Item 13.	Certain Relationships and Related Transactions, and Director Independence	79
Item 14.	Principal Accounting Fees and Services	79
PART IV
Item 15.	Exhibits, Financial Statement Schedules	80
Signatures		84



	December 31,
	2014		2015		2016		2017		2018		2019
Immersion Corporation	$	100	$	123	$	112	$	75	$	95	$	78
NASDAQ Composite	100		107		116		151		147		200
RDG Technology Composite	100		103		118		162		162		239



[x]	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


•	difficulties in persuading existing licensees who compensate us for including our software in certain of their touch-enabled products to also license and compensate us for our patents that cover other touch-enabled products of theirs that do not include our software;


•	difficulties in achieving and maintaining consumer and market demand or acceptance for our products;


•	any litigation we are or may be involved in may be unsuccessful or may result in one or more of our patents becoming limited in scope, declared unenforceable or invalidated.



	Years Ended December 31,
	2019			2018			2017			2016			2015
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues	$	35,953		$	110,979		$	35,013		$	57,086		$	63,393
Costs and expenses	57,404			57,878			80,435			72,349			58,674
Operating income (loss)	(21,451		)	53,101			(45,422		)	(15,263		)	4,719
Income tax provision from continuing operations	(471		)	(392		)	(480		)	(25,521		)	(1,591		)
Income (loss) from continuing operations	(20,044		)	54,343			(45,291		)	(40,030		)	2,858
Income from discontinued operations	—			—			—			649			—
Net income (loss)	$	(20,044	)	$	54,343		$	(45,291	)	$	(39,381	)	$	2,858
Basic net income (loss) per share:
Continuing operations	$	(0.64	)	$	1.78		$	(1.55	)	$	(1.39	)	$	0.10
Discontinued operations	—			—			—			0.02			—
Basic net income (loss) per share	$	(0.64	)	$	1.78		$	(1.55	)	$	(1.37	)	$	0.10
Shares used in calculating basic net income (loss) per share	31,529			30,459			29,179			28,759			28,097
Diluted net income (loss) per share:
Continuing operations	$	(0.64	)	$	1.73		$	(1.55	)	$	(1.39	)	$	0.10
Discontinued operations	—			—			—			0.02			—
Diluted net income (loss) per share	$	(0.64	)	$	1.73		$	(1.55	)	$	(1.37	)	$	0.10
Shares used in calculating diluted net income (loss) per share	31,529			31,407			29,179			28,759			29,015



CONSOLIDATED BALANCE SHEET DATA:
	As of December 31,
	2019		2018		2017		2016		2015
Cash, cash equivalents, and short-term investments	$	89,497	$	124,918	$	46,538	$	89,772	$	64,931
Working capital	95,137		120,480		28,980		73,008		53,749
Total assets	124,848		145,995		51,975		103,767		105,415
Total stockholders’ equity	83,757		99,660		9,657		55,340		86,615


•	Performance Obligation A - Transfer rights to our patent portfolio as it exists when the contract is executed;



			Change							Change
	2019		Amount			%		2018		Amount			%		2017
Fixed fee license revenue	$	12,627	$	(70,946	)	(85	)%	$	83,573	$	70,998		565	%	$	12,575
Per-Unit royalty revenue	23,016		(3,968		)	(15	)%	26,984		5,470			25	%	21,514
Total royalty and license revenue	35,643		(74,914		)	(68	)%	110,557		76,468			224	%	34,089
Development, services, and other	310		(112		)	(27	)%	422		(502		)	(54	)%	924
Total revenues	$	35,953	$	(75,026	)	(68	)%	$	110,979	$	75,966		217	%	$	35,013



	2019		$ Change			% Change		2018		$ Change			% Change		2017
Sales and marketing	$	6,426	$	308		5	%	$	6,118	$	(7,398	)	(55	)%	$	13,516
Research and development	7,840		(1,887		)	(19	)%	9,727		(2,032		)	(17	)%	11,759
General and administrative	42,968		1,153			3	%	41,815		(11,528		)	(22	)%	53,343
Restructuring Costs	—		—			—	%	—		(1,620		)	100	%	1,620



	Years Ended December 31,
	2019		2018		2017
Revenues:
Fixed fee license revenue	35.1	%	75.3	%	36.0	%
Per-unit royalty revenue	64.0		24.3		61.4
Total royalty and license revenue	99.1		99.6		97.4
Development, services, and other	0.9		0.4		2.6
Total revenues	100.0		100.0		100.0
Costs and expenses:
Cost of revenues	0.5		0.2		0.6
Sales and marketing	17.9		5.5		38.6
Research and development	21.8		8.8		33.6
General and administrative	119.4		37.7		152.4
Restructuring costs	—		—		4.6
Total costs and expenses	159.6		52.2		229.8
Operating income (loss)	(59.6	)	47.8		(129.8	)
Interest and other income	5.0		1.7		1.0
Other expense	0.2		(0.2	)	0.9
Income (loss) before provision for income taxes	(54.4	)	49.3		(127.9	)
Provision for income taxes	(1.3	)	(0.4	)	(1.4	)
Net income (loss)	(55.7	)%	48.9	%	(129.3	)%



	2019		$ Change			% Change		2018			$ Change			% Change		2017
Interest and other income	$	1,787	$	(45	)	(2	)%	$	1,832		$	1,495		444	%	$	337
Other income (expense)	$	91	$	289		(146	)%	$	(198	)	$	(472	)	(172	)%	$	274



	Years Ended December 31,
	2019			2018		2017
Net cash (used in) provided by operating activities	$	(34,099	)	$	69,924	$	(43,829	)
Net cash provided by investing activities	$	10,920		$	8,237	$	11,068
Net cash (used in) provided by financing activities	$	(1,331	)	$	8,205	$	518



Contractual Obligations	Total		Less Than 1 Year		1-3 Years		3-5 Years		More Than 5 Years
Operating Leases	$	4,079	$	1,230	$	2,825	$	24	$	—



	Page
Report of Independent Registered Public Accounting Firm	48
Consolidated Balance Sheets as of December 31, 2019 and 2018	49
Consolidated Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2019, 2018, and 2017	50
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2019, 2018, and 2017	51
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2018, and 2017	52
Notes to Consolidated Financial Statements	53



	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Treasury Stock				Total Stockholders’ Equity
	Shares	Amount		Accumulated Other Comprehensive Income (Loss)			Accumulated Deficit			Shares	Amount			Total Stockholders’ Equity
Balances at January 1, 2017	35,555,562	$	221,098	$	115		$	(119,329	)	6,638,003	$	(46,544	)	$	55,340
Net loss							(45,291		)					(45,291		)
Unrealized loss on available-for-sale securities, net of taxes				(16		)								(16		)
Stock repurchase										48,687	(328		)	(328		)
Exercise of stock options	70,608	518												518
Release of restricted stock units and awards	275,598	2,661												2,661
Issuance of stock for ESPP purchase	48,750	328												328
Stock based compensation		3,441												3,441
Effect of change in accounting policy ⁽¹⁾							(6,996		)					(6,996		)
Balances at December 31, 2017	35,950,518	$	228,046	$	99		$	(171,616	)	6,686,690	$	(46,872	)	$	9,657
Net income							54,343							54,343
Unrealized gain (loss) on available-for-sale securities, net of taxes				17										17
Issuance of stock for ESPP purchase	26,689	218												218
Exercise of stock options, net of shares withheld for employee taxes	1,452,306	9,465								136,457	(1,478		)	7,987
Release of restricted stock units and awards, including related stock compensation	222,985	2,806												2,806
Stock based compensation for stock options		5,880												5,880
Effect of change in accounting policy ⁽²⁾							18,752							18,752
Balances at December 31, 2018	37,652,498	$	246,415	$	116		$	(98,521	)	6,823,147	$	(48,350	)	$	99,660
Net loss							(20,044		)					(20,044		)
Unrealized gain (loss) on available-for-sale securities, net of taxes				8										8
Stock repurchase										387,309	(2,741		)	(2,741		)
Issuance of stock for ESPP purchase	21,741	165												165
Exercise of stock options, net of shares withheld for employee taxes	173,993	1,245												1,245
Release of restricted stock units and awards, including related stock compensation	776,552	—												—
Stock based compensation		5,464												5,464
Balances at December 31, 2019	38,624,784	$	253,289	$	124		$	(118,565	)	7,210,456	$	(51,091	)	$	83,757



Computer equipment and purchased software	3 years
Machinery and equipment	3-5 years
Furniture and fixtures	5 years


•	Performance Obligation A: transfer of rights to the Company's patent portfolio as it exists when the contract is executed;


•	Performance Obligation B: transfer of rights to the Company's 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,
	2019		2018		2017
Advertising expense	$	173	$	67	$	221



	December 31, 2019						Total
	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)
Money market funds	$	63,351	$	—	$	—	$	63,351
U.S. Treasury securities	—		3,019		—		3,019
Total assets at fair value ⁽¹⁾	$	63,351	$	3,019	$	—	$	66,370



	December 31, 2018						Total
	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)
Money market funds	$	81,425	$	—	$	—	$	81,425
U.S. Treasury securities	—		13,930		—		13,930
Total assets at fair value ⁽¹⁾	$	81,425	$	13,930	$	—	$	95,355



	December 31, 2019
	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Fair Value
U.S. Treasury securities	$	3,018	$	1	$	—	$	3,019
Total	$	3,018	$	1	$	—	$	3,019



	December 31, 2019
Common stock shares available for grant	4,214
Standard and market condition-based stock options outstanding	967
RSAs outstanding	91
RSUs outstanding	945



	Number of Shares Underlying Stock Options (in thousands)		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	1,862		$	9.44	2.85	$	751
Granted	783		$	8.25
Exercised	(174	)	$	7.15
Canceled or expired	(1,504	)	$	9.65
Outstanding as of December 31, 2019	967		$	8.55	5.63	$	16
Vested and expected to vest at December 31, 2019	967		$	8.55	5.63	$	16
Exercisable at December 31, 2019	161		$	9.80	2.12	$	0.4



	Number of Restricted Stock Units (in thousands)		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	1,091		$	10.97	0.67	$	9,773
Granted	892		$	8.54
Released	(714	)	$	11.30
Forfeited	(324	)	$	9.85
Outstanding at December 31, 2019	945		$	8.81	1.25	$	7,020



	Number of Restricted Stock Awards (in thousands)		Weighted Average Grant Date Fair Value		Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2018	55		$	13.02	0.46
Granted	114		$	7.60
Released	(62	)	$	12.63
Forfeited	(16	)	$	7.27
Outstanding at December 31, 2019	91		$	7.45	0.45



	For the Years Ended December 31,
	2019		2018		2017
Stock options	$	701	$	1,222	$	3,735
RSUs and RSAs	4,692		7,372		2,234
Employee stock purchase plan	71		92		$	133
Total	$	5,464	$	8,686	$	6,102

Sales and marketing	$	947	$	946	$	1,025
Research and development	1,304		1,948		981
General and administrative	3,213		5,792		4,096
Total	$	5,464	$	8,686	$	6,102



Time-based stock options:
	For the Year Ended December 31,
	2019		2018		2017
Expected life (in years)	4.4		4.4		4.6
Volatility	53	%	55	%	52	%
Interest rate	2.0	%	3.0	%	2.0	%
Dividend yield	—		—		—



Market condition based stock options:
	For the Years Ended December 31,
	2019 ⁽¹⁾	2018 ⁽¹⁾	2017
Expected life (in years)	N/A	N/A	7.0
Volatility	N/A	N/A	55	%
Interest rate	N/A	N/A	2.0	%
Dividend yield	N/A	N/A	—	%



	Year Ended December 31, 2019
	Unrealized Gains and Losses on Available-for Sale Securities			Foreign Currency Items		Total
Beginning balance	$	(6	)	$	122	$	116
Amounts reclassified from accumulated other comprehensive income (loss)	8			—		8
Ending balance	$	2		$	122	$	124



	Year Ended December 31, 2018
	Unrealized Gains and Losses on Available-for Sale Securities			Foreign Currency Items		Total
Beginning balance	$	(23	)	$	122	$	99
Amounts reclassified from accumulated other comprehensive income	17			—		17
Ending balance	$	(6	)	$	122	$	116



	Balance Sheets Classification	December 31, 2019		January 1, 2019
Assets
Operating lease assets	Other assets	$	2,202	$	4,048
Liabilities
Operating lease liabilities - current	Other current liabilities	1,150		1,157
Operating lease liabilities - long-term	Other long-term liabilities	2,664		3,693
Total lease liabilities		$	3,814	$	4,850



Cash paid within operating cash flow	$	1,178
Weighted average lease terms (in years)	3.35